Crowley v Worley Limited

The appellant, Larry Crowley, commenced a proceeding in this Court pursuant to Pt IVA of the Federal Court of Australia Act 1976 (Cth) on his own behalf and on behalf of other persons who purchased shares in the respondent, Worley Limited (WOR), in the period 14 August 2013 to 19 November 2013 (Relevant Period) and who alleged they suffered loss because of WOR’s conduct as pleaded in a fourth further amended statement of claim (4FASOC). WOR, a publicly listed company, is a provider of services in the resources, energy and infrastructure sectors.

By the 4FASOC Mr Crowley alleged that WOR contravened its continuous disclosure obligations under s 674 of the Corporations Act 2001 (Cth) and r 3.1 of the ASX Listing Rules and the prohibition on misleading or deceptive conduct in s 1041H of the Corporations Act, s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) and s 18 of the Australian Consumer Law, being Sch 2 to the Competition and Consumer Act 2010 (Cth) (ACL): see Crowley v Worley Limited (No 2) [2023] FCA 1613 (Crowley (No 2) or RJ) at [3].

The proceeding below concerned the following announcements made in 2013 by WOR to the then Australian Stock Exchange (now the Australian Securities Exchange) (ASX):

In the 4FASOC Mr Crowley alleged that WOR:

On 22 October 2020 the primary judge made orders dismissing the originating application and the 4FASOC: see Crowley v Worley Limited [2020] FCA 1522 (Crowley (No 1) or PJ).

Mr Crowley appealed from those Orders. On 11 March 2022 a Full Court of this Court (Perram, Jagot and Murphy JJ) (which we will refer to as the First Full Court) made orders allowing the appeal and remitting the proceeding to a single judge for such further hearing as that judge decides and for determination: see Crowley Appeal.

Upon its remitter, there was a further hearing before the remitter judge. On 19 December 2023 the remitter judge made orders, among others, answering questions in a “Joint List of Issues for Determination” provided by the parties. The effect of those answers was to find that:

Definitions of terms relevant to the questions and answers in the Joint List were appended to the Orders made by the remitter judge. Relevantly the term “Contraventions” was defined to mean:

On 7 March 2024 the remitter judge made orders dismissing the originating application and 4FASOC and for Mr Crowley to pay WOR’s costs of and incidental to the proceeding, including the costs of the trial before the primary judge: see Crowley v Worley Limited (Costs) [2024] FCA 211 (Crowley (Costs)).

For ease, in the balance of these reasons we adopt definitions used by the remitter judge set out under the heading “Glossary” at RJ[4]. The relevant definitions, including terms defined above, are included in Annexure A to these reasons.

Before turning to the reasons of the remitter judge, it is useful to set out a summary of the reasons in Crowley Appeal. The orders made by the First Full Court resulted in the remittal and their Honours’ reasons are relevant to understanding the remitter judge’s reasons and have prominence in WOR’s grounds of cross-appeal.

The principal reasons of the First Full Court were given by Jagot and Murphy JJ with whom Perram J agreed. Their Honours set out a summary of the key facts, many of which they observed were not in dispute: Crowley Appeal at [10]-[38]. While some of these key facts are recorded in other parts of these reasons, it is convenient to record them here. Relevantly:

As Jagot and Murphy JJ observed “having represented to the market that it expected to achieve NPAT in excess of $322 million in FY14 and that it had reasonable grounds to so expect, WOR in fact achieved NPAT of only $263 million”: Crowley Appeal at [38].

After summarising the primary judge’s key findings, Jagot and Murphy JJ considered Mr Crowley’s misleading and deceptive conduct case. In doing so their Honours set out Mr Crowley’s submissions commencing with the contention that the primary judge made all necessary findings to support the conclusion that WOR lacked reasonable grounds for the August 2013 Earnings Guidance Statement which conveyed the FY14 Guidance Representation other than the ultimate finding to that effect. This failure was said to result from four fundamental errors on the part of the primary judge, namely:

The First Full Court accepted Mr Crowley’s contention that the primary judge’s process of reasoning miscarried: AJ[53]. Their Honours explained how they had reached that conclusion.

First, the issue was not whether the Board acted reasonably or unreasonably given the information made available to it by WOR’s officers. In the 4FASOC Mr Crowley pleaded (at [51]) that WOR made the FY14 Guidance Representation and Mr Crowley’s submissions before the primary judge did not suggest otherwise: AJ[54]-[55].

The primary judge’s erroneous focus on the conduct and knowledge of the Board, as opposed to that of WOR, was most evident in the way in which her Honour dealt with her finding that the FY14 Budget was not a P50 Budget (at PJ[428]). The relevant issues were that the FY14 Budget was not a P50 Budget and whether WOR knew that to be so or knew the facts from which it should be inferred to have known that was so: AJ[56]-[57].

The First Full Court rejected WOR’s submission that Mr Crowley did not contend before the primary judge that the FY14 Budget did not provide reasonable grounds for the making of the FY14 Guidance Representation having regard to his pleaded case. The First Full Court also rejected WOR’s contention that it was no part of Mr Crowley’s case that there was no reasonable basis for the FY14 Budget because it was not a P50 Budget. As to that:

Given Mr Crowley’s pleaded case, his submissions and the way in which WOR ran its defence, WOR could not now complain that it was not part of Mr Crowley’s case before the primary judge that the FY14 Budget was unreasonable and not fit for use to prepare the August 2013 Earnings Guidance Statement because of “(a) WOR’s history of material budget underperformance, (b) WOR having to twice downgrade its earnings forecasts in 2013, (c) the fact that the [FY14 Budget] was not a [P50 Budget] and should have been known by WOR (and, it must be inferred, was known by some WOR employees) not to be such when it was adopted, (d) the fact that the [FY14 Budget] did not result from a risk-adjusted approach to forecasting, (e) the fact that WOR’s markets were not growing or were deteriorating when the [FY14 Budget] was being prepared, and (f) the fact that WOR maintained the 19% [Blue Sky] revenue, the same as 2013 when markets were buoyant, given that [Blue Sky] performance was a function of market buoyancy”: AJ[67].

It was not to the point that WOR asserted that it held Mr Crowley to his pleading. Mr Crowley was entitled to respond to WOR’s positive case that its FY14 Budget was the result of a robust and reasonable budgeting process, was reasonable as a matter of substance and was a P50 Budget which, by definition, was suitable for budgetary purposes and, by implication based on WOR’s case, was suitable to support the making of the August 2013 Earnings Guidance Statement: AJ[68].

The primary judge referred to Mr Crowley’s contentions to this effect (at PJ[52]) as the core factual matters on which he relied to establish that the FY14 Budget did not provide reasonable grounds for the August 2013 Earnings Guidance Statement. WOR did not file a notice of contention to the effect that her Honour erred in identifying Mr Crowley’s case in those terms: AJ[69].

For these reasons the First Full Court rejected many of WOR’s submissions made in the appeal in relation to whether certain matters were raised by the 4FASOC. Their Honours concluded that: the 4FASOC pleaded the facts from which it was open to Mr Crowley to prove that the FY14 Budget was not a P50 Budget and that WOR (not its Board) should be inferred or taken to have been aware of this before the FY14 Budget was adopted; as WOR positively asserted that the FY14 Budget was a P50 Budget and therefore was reasonable and by extension, a reasonable foundation for the August 2013 Earnings Guidance Statement, it was open to Mr Crowley to rebut that assertion by seeking to prove that the FY14 Budget was not a P50 Budget and that relevant persons within WOR knew this to be so before the August 2013 Earnings Guidance Statement was made; and it was also open to Mr Crowley to seek to prove that WOR’s reliance on the alleged robust budget process did not establish the reasonableness of the FY14 Budget or provide reasonable grounds for the August 2013 Earnings Guidance Statement: AJ[71]-[74].

Secondly, in the context of the cases put forward by the parties the primary judge was required to decide whether Mr Crowley had established the facts set out at [22] above and whether, as a result, Mr Crowley was correct in his contention that WOR’s defence, being principally that the evidence established the reasonableness of the FY14 Budget and provided reasonable grounds for the August 2013 Earnings Guidance Statement, should be rejected. The First Full Court accepted that the primary judge found all of the underlying facts but failed to draw the relevant inferences from those facts for the four reasons it had identified (see [17] above). Their Honours set out the relevant findings made by the primary judge, noting that WOR had not filed a notice of contention to the effect that her Honour erred in making those findings: AJ[75]-[76].

The First Full Court observed that the primary judge’s reasons had not brought all of the facts together in assessing whether WOR’s defence, and Mr Crowley’s rebuttal of it, should be accepted. Rather, her Honour (erroneously) focused on each piece of evidence explaining why, of itself, it did not support Mr Crowley’s rebuttal: AJ[77].

In addition, while the primary judge’s reasons referred to Blatch v Archer and Jones v Dunkel, it was not apparent that she had regard to: the fact that the inferences Mr Crowley submitted that her Honour should draw were available on the whole of the evidence including the facts as found by her; and, whether or not to draw those inferences should be informed by the principles in Blatch v Archer at 970, that “all evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted”, and Jones v Dunkel at 321, that when a party who is capable of testifying fails to give evidence without explanation “it may lead rationally to an inference that his evidence would not help his case”. The First Full Court went on to explain why these principles were important in the context of the evidence before the primary judge: AJ[78]-[86].

Their Honours analysed the evidence before the primary judge, in particular the Holt Memorandum and the positions of Messrs Daly and Allen. As to the former Jagot and Murphy JJ observed at AJ[90]:

As to the latter, their Honours found that the same kind of reasoning was applicable to Messrs Daly and Allen and explained why that was so having regard to the available evidence and noting that neither was called to give evidence: AJ[91]-[92].

Having regard to those findings, Jagot and Murphy JJ rejected the primary judge’s observation (at PJ[69]) that Mr Crowley’s case was “mostly hindsight and is not supported by detail that might have contradicted the evidence of WOR’s witnesses in substantial respects”. Their Honours accepted Mr Crowley’s submission that “[t]he Holt Memorandum ought to have been given significant weight in considering the reliability of WOR’s budget process” and that “[i]f WOR wished to suggest it did not reflect the facts, it could have called Mr Holt or the executives he interviewed”: AJ[93].

Justices Jagot and Murphy concluded at AJ[95]-[96]:

Justices Jagot and Murphy also considered and rejected the balance of WOR’s submissions in relation to this aspect of Mr Crowley’s appeal, to the extent they had already not been considered. It is not presently necessary to set out the Court’s reasoning in that respect. Their Honours concluded that the appeal must be allowed insofar as it concerned the misleading and deceptive conduct case: AJ[143].

The First Full Court next considered Mr Crowley’s continuous disclosure case. Mr Crowley relied on the same facts to support his claim that WOR had contravened its continuous disclosure obligations under s 674 of the Corporations Act. Accordingly, given the errors which had been identified in the primary judge’s process of reasoning in respect of the inferences to be drawn from the facts as found, Jagot and Murphy JJ expressed the view that it could not be concluded that the primary judge would have reached the same conclusions as she did about the continuous disclosure case had those errors not been made, referring in particular to PJ[617]-[618]. For that reason alone, their Honours concluded that the primary judge’s dismissal of the continuous disclosure case had to be set aside: AJ[144].

Justices Jagot and Murphy continued at AJ[145]:

Their Honours referred to the submissions made by the parties on the appeal, resolving some of the issues raised but not all in circumstances where they considered that an issue would need to be decided in the remitted hearing.

One of the issues raised which was addressed was whether, as WOR submitted on appeal, the alleged Material Information that was allegedly not disclosed to the ASX in breach of WOR’s continuous disclosure obligations – that WOR did not have reasonable grounds for the FY14 Guidance Representation – was an opinion. WOR submitted that where the information which is required to be disclosed is an opinion, s 674 of the Corporations Act and Listing Rule 3.1 only require disclosure of “opinions actually held or possessed by the company” and do not require “disclosure of opinions not actually held – even if it could be said that they ought to have been”. WOR said that the question for the Court on appeal was “not what opinion Messrs Holt, Allen, Daly or anyone else within WOR ought to have formed – but whether in fact they did form those opinions”: AJ[154].

Justices Jagot and Murphy rejected WOR’s submissions explaining their reasons for doing so. Their Honours concluded at AJ[177]:

Their Honours went on to explain that if the evidence shows that the information in fact existed, reasonable information systems or management procedures ought to have brought the information to the attention of a relevant company officer, and acting reasonably the company officer ought to have discerned the significance of the information, then s 674 of the Corporations Act and the Listing Rules deem the company to have had the information: AJ[178].

The remitter judge first considered the nature of the remitter made by the First Full Court. His Honour proceeded on the basis that the remitter was made pursuant to s 28(1)(c) of the Federal Court Act and that the further hearing and determination was a continuation of a trial that had begun although interrupted by a final order which had been set aside: RJ[6].

The remitter judge referred to the Joint List prepared by the parties for the remitter. His Honour noted that it was common ground between the parties that the questions in the Joint List should be answered by reference to the evidence adduced at the hearing before the primary judge. The remitter judge then referred to the principles in Harvard Nominees Pty Ltd v Tiller (No 4) [2022] FCA 105; (2022) 403 ALR 498 at [45]-[47] (Jackson J), approved in Harvard Nominees Pty Ltd v Nicoletti [2022] FCAFC 179 (Harvard Nominees Appeal) at [96] (Banks-Smith, Colvin and O’Sullivan JJ), which the parties accepted applied to the remitter. But, as his Honour noted, there was significant controversy between the parties about the application of the principles to the questions that arose for determination: RJ[8].

The remitter judge considered that a further exception could be added to the principles in Harvard Nominees to permit a remitter judge to deal with an obvious slip or clerical error by a primary judge or appellate court, which would not be inconsistent with the reasons in Harvard Nominees as approved in Harvard Nominees Appeal. However, this exception would not extend to circumstances where either the primary judge or the appellate court made a finding which was clearly intentional, but which appeared to be wrong or even plainly wrong: RJ[9].

The remitter judge addressed the questions in the Joint List by category of claim, commencing with misleading and deceptive conduct. His Honour first summarised the reasons of the First Full Court in relation to Mr Crowley’s misleading and deceptive conduct case (at RJ[11]-[46]) before turning to consider the questions in the Joint List relating to that part of Mr Crowley’s case.

There was no dispute about Question 1: was the FY14 Guidance Representation a representation as to a future matter and, if so, in what respects? The parties agreed that question 1 should be answered consistently with the primary judge’s conclusion at PJ[687] as follows:

The parties agreed that the finding at PJ[688] (which answered the above question “No”) was disturbed on appeal but did not agree on the answer to be given to it.

The remitter judge identified two preliminary issues that arose between the parties.

The first was reflected in WOR’s proposed answer to question 2 and concerned whether the scope of the remitter was confined to the primary judge’s findings which could be shown to be affected by the four kinds of error identified in Crowley Appeal at [75], or more precisely the first two: an erroneous focus on the conduct of the Board rather than of WOR; and a search for a level of detail to enable the primary judge to decide what would have been a reasonable forecast of FY14 NPAT. His Honour said at RJ[50]:

The second preliminary issue concerned what WOR submitted was a lack of conformity between Mr Crowley’s submissions on the remitter and the case pleaded in the 4FASOC: RJ[51]. WOR submitted that Mr Crowley’s submissions in relation to his misleading and deceptive conduct case as at 14 August 2013 were structured around matters referred to at AJ[67], [69] and [102] and involved an impermissible departure from the 4FASOC in relation to the allegations and particulars of the lack of reasonable grounds for the FY14 Guidance Representation. WOR submitted that there was no pleaded allegation that the following matters deprived it of reasonable grounds:

The remitter judge rejected WOR’s submissions. That was because, as his Honour explained (at RJ[51]), the First Full Court:

Before the remitter judge, WOR made a number of submissions about the Holt Memorandum and the Holt Memo Interview Notes. The focus of those submissions was that the Holt Memorandum was written from a hindsight perspective, after WOR had revised its guidance, and there is well established authority which demonstrates that the existence of reasonable grounds for the purpose of s 4(1) of the ACL and s 12BB(1) of the ASIC Act is to be judged at the date of the representation. The examination of later events is only relevant insofar as it sheds light on the position at the time of the representation.

The remitter judge referred to some of the First Full Court’s findings in relation to the Holt Memorandum and noted that “[t]he Full Court said that there was an obvious question as to whether Mr Holt should be inferred to have known that the FY14 Budget (and earlier budgets) were not P50 Budgets at all, but that was a matter to be considered in light of the whole of the evidence”: RJ[55]. The remitter judge concluded in relation to the Holt Memorandum at RJ[56] that:

The remitter judge then turned to consider the question of whether there was a reasonable basis for the FY14 Guidance Representation as at 14 August 2013 by reference to seven topics identified and addressed by the parties.

The first topic was WOR’s historical performance against budget. After setting out the parties’ submissions the remitter judge found (at RJ[62]) that the history of WOR’s material underperformance against budget from FY09 to FY13 provided a basis for senior management to be sceptical about the FY14 Budget and at least raised an issue about systemic forecasting problems in WOR (as found by the primary judge at PJ[410]-[415] and recorded at AJ[76(2)-(3)]). His Honour continued:

The remitter judge did not attribute any significant weight to WOR’s announcements of downgrades to earnings guidance on 13 February 2013 and 17 May 2013 in the context of the evidence as a whole, noting that WOR had provided sufficient and cogent explanations for those downgrades being attributable to specific market conditions rather than demonstrating a systemic flaw in the budgeting process used to prepare the FY13 budget.

The second topic was that “the FY14 Budget was not a P50 Budget”. The remitter judge expressed the view that “a budget which is not broadly in line with the parameters for a P50 Budget does not provide a reasonable basis for earnings guidance announced to the market” and that “a reasonably based budget requires that the relevant company has reasonable grounds to think that, in broad terms but not necessarily with the precision of a bookmaker, the company is at least as likely to exceed its estimate as it is to perform below it”: RJ[68].

As to the evidence, the remitter judge found that comments recorded by Messrs Holt and Bradie provided a strong basis for finding that there was a commonly held view among WOR senior management at the time of preparing the FY14 Budget that it did not meet the parameters of a P50 Budget. While those comments were recorded after the event his Honour was of the view that it was unlikely that they were formed only after the FY14 Budget had been approved and the FY14 Guidance Representation communicated. His Honour observed that the comments Messrs Holt and Bradie recorded “were expressed as referring to matters which were experienced and thought of in the period when the FY14 Budget was being prepared and before it was adopted by the Board” and, given the heavy involvement of those gentlemen in the process of preparing the FY14 Budget, it was likely that they were aware of those views about systemic problems at the time, i.e. before 14 August 2013.

The third topic was “Management Adjustments to the Draft Budget”. This concerned the adjustments made to the 27 May 2013 Draft Budget which led to an increase in WOR’s projected FY14 NPAT from $252 million to $352.1 million. The process that resulted in the increased projected FY14 NPAT was first described by the primary judge at PJ[47] (also referred to by the First Full Court at AJ[33]) and is recorded at [15(k)] above.

The remitter judge observed that the primary judge later made findings to similar effect, although the figures at PJ[47(2) and (3)] for operational EBIT (see [15(k) at (2) and (3)]) changed to $31.046 million and $14.093 million respectively: RJ[72]. The term Management Adjustments as used by the remitter judge is defined having regard to the adjusted figures found by the primary judge (see Annexure A).

In summary Mr Crowley submitted that it was not necessary for him to identify whether any individual adjustment was unjustifiable, what the reasonable forecast range would have been, or any counterfactual budget NPAT (referring to AJ[115] and AJ[136]-[138]). Mr Crowley’s complaint concerned the forecast in the FY14 Budget of an additional $100 million in NPAT on top of the already “ambitious” budget forecast of 27 May 2013: RJ[73]. In response, WOR submitted that the primary judge found that the additional $100 million in NPAT which was added to the FY14 Budget between 27 May 2013 and 14 August 2013 was reasonable and that finding was undisturbed: RJ[75].

The remitter judge concluded on this topic at RJ[76]:

The fourth topic was that “the FY14 Budget did not result from a risk-adjusted approach to forecasting”. The remitter judge appears to have accepted Mr Crowley’s submissions on this topic and thus the proposition that the FY14 Budget did not result in a risk adjusted approach to forecasting. His Honour rejected WOR’s submission that the evidence relied on by Mr Crowley in relation to this topic post-dated the November 2013 Revised Earnings Guidance and formed part of a review after the event into the budget process generally, the ultimate result of which was that the budget process remained “largely” unaltered. The remitter judge found that the comments referred to in the Holt Memo Interview Notes were expressed as matters of which the various members of WOR’s senior management whose views were recorded were aware at the time of the preparation of the FY14 Budget, and Mr Holt’s own observations in the Holt Memorandum reflected his views at that time. The remitter judge also observed that WOR’s submission was contrary to the First Full Court’s finding at AJ[89] that the Holt Memorandum conveyed Mr Holt’s assessment as to why the FY14 Budget miscarried and identified things said to be known about the budget process, not matters which were uncovered or discovered: RJ[79].

In relation to the meeting of the A&RC on 11 December 2013, the primary judge found that the statements in issue were “recorded immediately after Mr Holt advised the meeting ‘that a common query from analysts and investors was why we had not known of the issues affecting our outlook earlier than 20 November’” and that the comments about the lack of a risk-adjusted view and a risk-based analysis appeared to refer to known shortcomings in the budget process as it existed in the preparation of the FY14 Budget, even if the quantification of adjustments required by a risk-based analysis were brought to light only on about 19 November 2013 in light of the then known circumstances. WOR submitted that the comment in the A&RC minutes about the “budgeting process currently … lacking a risk adjusted view” was specifically for “public commentary purposes”. However, the remitter judge found that the statement, that “a risk-based analysis, such as was carried out overnight on 18 and 19 November, should be a standard part of the process”, indicated that the proposition had a wider and more fundamental application: RJ[79].

The fifth topic was that “WOR’s markets were not growing or were deteriorating when the FY14 Budget was prepared”. Mr Crowley referred to the primary judge’s finding that, when the FY14 Budget setting process began, WOR’s major markets were either not growing or were deteriorating. Mr Crowley attributed to the First Full Court an acceptance of the proposition that the fact that WOR’s markets were flat and falling was sufficient to permit a conclusion that the FY14 Budget did not provide reasonable grounds for the August 2013 Earnings Guidance Statement. The remitter judge did not read the First Full Court’s reasons as having gone so far. His Honour said at RJ[81]:

The remitter judge considered WOR’s submissions before concluding that, on the whole of the evidence, he did not think that WOR had established that it had reasonable grounds to forecast a 13.8% increase in earnings. His Honour did so in circumstances which he was bound to accept involved the First Full Court’s findings as to the state of the market in FY13 and FY14 and, on the basis on which the remitted hearing was to be conducted, his Honour regarded “this aspect of the case as another demonstration of the lack of reasonable grounds for the FY14 Guidance Representation”: RJ[86].

The sixth topic was that “WOR maintained the 19% Blue Sky revenue, being the same as FY13 when markets were buoyant”. The remitter judge observed that the FY14 Budget made significant allowance for Blue Sky revenue and that it stated that FY14 had been budgeted with, among other things, “19% [Blue Sky]”: RJ[87]. The remitter judge referred to the reasons at AJ[129], on which Mr Crowley relied, and while expressing reservations about two aspects of the First Full Court’s analysis of the evidence therein, accepted that he was bound by that reasoning. The remitter judge noted Mr Crowley’s reliance on the Holt Memorandum and the Holt Memo Interview Notes, which referred to “optimistic” and/or “unrealistically high” Blue Sky numbers. After summarising WOR’s submissions, the remitter judge concluded at RJ[95]:

The remitter judge turned to the parties’ submissions about the 27 May 2013 Draft Budget and the amount of Blue Sky added to it by Management Adjustments up to 14 June 2013. His Honour observed that while the First Full Court disturbed the primary judge’s reasoning that Mr Crowley had implicitly accepted that there was a reasonable basis for the Blue Sky revenue forecast in the 27 May 2013 Draft Budget, it did not ultimately decide the point in relation to the reasonableness of the amount of Blue Sky in the FY14 Budget and thus the issue was open for him to decide: RJ[100]. Ultimately the remitter judge found that $6.294 million of the additional Blue Sky which arose between 27 May 2013 and 14 August 2013 was not reasonably based. Accordingly, there was a lack of reasonable grounds for incorporating that amount of Blue Sky in the revenue component of the FY14 Budget. That amount was calculated based on the additional Blue Sky figure of $7.831 million net of the Blue Sky for MENAI and ASCH, the Management Adjustments for which the remitter judge found were reasonably based: RJ[101]. The remitter judge observed at RJ[101]:

The seventh and final topic was the “[a]wareness of WOR as to defects in its FY14 Budget process and FY14 Budget”. The remitter judge referred to findings made by the First Full Court and observed (at AJ[118]) it “accepted that a relevant issue is whether the representor was aware of matters that falsified the representation of opinion” which was “a question to be answered by reference to the knowledge properly attributable to WOR according to orthodox principles, not merely knowledge of the Board”: RJ[102].

The remitter judge identified the real issue to be whether Messrs Holt, Bradie, Daly and Allen, each of whom was a senior employee of WOR and on whom Mr Crowley focused his submissions in relation to awareness of defects in the FY14 Budget process and FY14 Budget, were aware of the alleged defects: RJ[103]. Noting that WOR did not call any of them to give evidence his Honour relevantly observed at RJ[103]:

The remitter judge considered the available evidence in relation to the knowledge of each of Messrs Holt, Bradie, Daly and Allen. In summary, his Honour:

The remitter judge concluded, based on his analysis, that as at 14 August 2013 WOR lacked reasonable grounds for the FY14 Budget and thus it lacked reasonable grounds for the FY14 Guidance Representation, and that lack of reasonable grounds persisted throughout the Relevant Period. Despite the latter finding, his Honour dealt with the evidence about matters which arose during the Relevant Period.

In relation to the Relevant Period, the primary judge considered the 2+10 forecast which compared the results of the first two months of the financial year against the full year budget and provided a high level reappraisal of expectations for the remaining 10 months of the year. WOR commenced preparation of the 2+10 forecast in early September 2013. Upon reviewing the evidence, the remitter judge concluded at RJ[124]:

The remitter judge concluded that Question 2 should be answered “Yes, at all times throughout the Relevant Period”.

Given the answer to Question 2, the remitter judge answered this question: “Yes, during all of the Relevant Period”.

In light of the answers to Questions 2 and 3, the remitter judge also answered this question “Yes, during all of the Relevant Period”.

The remitter judge next moved to consider the continuous disclosure case, once again commencing with a summary of the reasons of the First Full Court before addressing Questions 5 to 12 in the Joint List which concerned that aspect of Mr Crowley’s case.

The remitter judge found that Question 5 was essentially the same as Question 2 and should be answered in the same way, namely “Yes, at all times throughout the Relevant Period”.

The remitter judge noted that the First Full Court had made clear that the knowledge of WOR’s employees is generally attributable to WOR for the purpose of the misleading and deceptive conduct case but noted that the definition of “aware” in Listing Rule 19.12 refers to “an officer” of the entity coming into “possession of the information in the course of the performance of their duties as an officer of that entity”. WOR admitted that Messrs Wood and Bradie were officers of WOR and the primary judge found that Mr Holt was an officer of WOR from at least 1 February 2013. As no findings had been made by the primary judge in relation to Messrs Allen and Daly, the remitter judge was required to determine if they were officers of WOR: RJ[145].

Before determining that question of fact, the remitter judge said at RJ[146]:

The remitter judge reviewed the available evidence in relation to each of Messrs Allen and Daly.

In relation to Mr Allen, his Honour concluded that the evidence demonstrated that he was a senior manager who participated in the making of decisions by the Board that affected at least a substantial part of WOR’s business and that he participated in WOR’s decisions concerning its financial performance and forecasts, despite not being a decision-maker himself. The remitter judge was able to draw those inferences more confidently by reason of Mr Allen’s unexplained failure to give evidence: RJ[149].

In relation to Mr Daly, the remitter judge found that he appeared to have been the most senior head office operational finance manager, responsible for managing the operational finance of WOR’s business, and was responsible for presenting financial information in relation to the business as a whole to the most senior members of WOR’s executive management. The remitter judge also found that Mr Daly played a significant role in WOR’s decisions in relation to formulating, maintaining and revising budget forecasts. Accordingly, his Honour inferred that Mr Daly did participate in the making of decisions that affected a substantial part of WOR’s business, and once again, was able to draw that inference more confidently by reason of his unexplained failure to give evidence: RJ[151].

It followed that the remitter judge answered Question 6 “Yes, at all times throughout the Relevant Period”.

The remitter judge was of the view that the answer to Question 7 raised important issues about the proper interpretation to be given to the reasons of the primary judge and the First Full Court. After undertaking an analysis of the relevant aspects of Crowley (No 1) and Crowley Appeal, the remitter judge concluded at RJ[162]:

The remitter judge therefore answered Question 7 “No” but did so with “very considerable reservations”.

Question 8, which was “[i]f the answer to Question 7 above is “Yes”, by 14 August 2013, was WOR aware of the FY2014 Earnings Expectation”, did not arise for consideration given the answer to Question 7: RJ[164]. Similarly, Questions 9 and 10 did not arise: RJ[165]-[166]. For completeness we note that those questions were in the following terms:

The remitter judge answered Question 11 in the following way at RJ[167]:

Finally, Question 12 was:

The answers to Questions 12.1 and 12.2 were “yes” and “no” respectively: RJ[168].

Having found in favour of Mr Crowley on the question of liability, the remitter judge turned to address causation, loss and damage and questions 13 to 15 in the Joint List which were concerned with those topics.

The remitter judge recorded that Mr Crowley’s “primary damages claim is that he and Group Members have suffered loss applying market-based causation, and that, for the purposes of the relevant statutory provisions, it is not necessary to prove direct reliance on a misrepresentation or non-disclosure”: RJ[170]. His Honour observed at RJ[171] that the “concept of market-based causation in this context was the subject of thorough analysis by Beach J” in TPT Patrol Pty Ltd as trustee for Amies Superannuation Fund v Myer Holdings Limited [2019] FCA 1747 (2019) 293 FCR 29, and that he was “in complete agreement with Beach J’s analysis of the relevant principles”: RJ[172]. It followed that the remitter judge rejected WOR’s submission that Beach J’s endorsement of market-based causation was plainly wrong.

The remitter judge also rejected WOR’s attempt to distinguish Myer on the basis that there was no evidence in these proceedings that the disclosure failures caused or induced buyers and sellers in the market to inflate the trading price. His Honour said that argument wrongly assumed that an “inflated” trading price could not “include a case where wrongful earnings guidance confirms what market participants were (wrongly) expecting, and thus where they had already factored that erroneous expectation into the market price”: RJ[175].

The remitter judge then turned to consider Question 13, which was:

The remitter judge summarised the evidence of Mr Torchio and Mr Holzwarth, economists who had prepared event studies upon which Mr Crowley and WOR, respectively, relied. His Honour observed that at the level of principle and methodology, there was no real dispute between the parties: RJ[177].

The remitter judge then considered what the correct “counterfactual” NPAT guidance by WOR on 14 August 2013 and thereafter during the Relevant Period would have been. Between RJ[225] and RJ[255], the remitter judge rejected the three specific counterfactual NPAT guidances that had been advanced by Mr Crowley. His Honour’s ultimate conclusion in this regard was that the correct figure for counterfactual NPAT for FY14 was $317 million: RJ[255].

From RJ[256], the remitter judge considered whether counterfactual earnings guidance for FY14 of NPAT of $317 million as at 14 August 2013 and subsequently during the Relevant Period would have had an adverse effect on the market price of WOR shares. His Honour said that while the fact that the average of analysts’ forecasts for FY14 NPAT throughout the Relevant Period varied within a range of about $352 million to $368 million might provide a basis for concluding that guidance of $317 million would have caused a decline in the share price, he was unable to conclude, on the balance of probabilities, that that would actually have occurred. The remitter judge held at RJ[256]:

The remitter judge said, however, that he would have reached a different conclusion in that regard if he had accepted the counterfactual propounded by Mr Crowley that guidance of NPAT of $284 million was appropriate. His Honour said at RJ [257] that he :

Even then, however, the remitter judge considered that there was insufficient evidence to enable the quantification of loss. His Honour said that Mr Crowley had “sought to calculate damages with great precision” by reference to a particular schedule based on an aspect of the evidence of Mr Torchio, but that the schedule was only valid “in circumstances where it has been demonstrated that the counterfactual disclosure has economic equivalence with the actual corrective disclosure”: RJ[259]. His Honour said that there was no expert evidence before him that would enable him to draw the necessary conclusion of economic equivalence, and “no basis upon which I could infer economic equivalence in the absence of any expert evidence”: RJ[259]. His Honour went on to say at RJ[260]:

The reference to approaches other than event studies to prove the value of shares was a reference to so-called fundamental analysis or valuations (most commonly performed by way of a discounted cash flow methodology, or a capitalisation of maintainable earnings methodology): RJ[260].

In light of those conclusions, the remitter judge thus found that Question 13 should be answered “no” in relation to both Questions 13.1 and 13.2, and said that the “question as to how much does not arise, but if it had arisen then the evidence would not have enabled me to provide an answer to that question”: RJ[263].

The parties agreed that question should be answered: “Yes, in relation to the FY2014 Guidance Representation and the FY2014 Earnings Guidance Statement, but not in relation to its repetition on 9, 10 and 15 October 2013”: RJ[264].

Given the answer to Question 13, the remitter judge concluded that this question should be answered “no”.

The notice of cross-appeal challenges a number of the remitter judge’s findings on liability. Accordingly, it is necessary to address it before turning to Mr Crowley’s appeal and WOR’s notice of contention. In particular, WOR challenges his Honour’s answers to Questions 2 to 6 and 12.1 of the Joint List and the reasons of the remitter judge in Crowley (No 2) insofar as they support those answers.

Grounds 1 to 6 of the notice of cross appeal concern WOR’s contention that the remitter judge failed properly to determine the scope of the remitter and the findings that were binding on him.

By way of introduction to these grounds, WOR submits, having regard to the relevant authorities, that where a proceeding is remitted for further hearing after an appeal, not everything that falls from an appellate court in its judgment is binding on the remitter court. It contends that the issues for decision by the First Full Court were defined by the notice of appeal before it (First NOA) and that, in construing which parts of the First Full Court’s reasons were binding on the Court on remittal and which parts were collateral observations or reasoning, the remitter judge was obliged to consider what was before the Court for determination, by reference to the context of the appeal, and whether any finding informed part of the reasoning of the First Full Court. WOR contends that the remitter judge was required to determine whether any particular utterance of the First Full Court formed a necessary or operative part of its determination of a ground of appeal identifying an asserted error for its review.

WOR submits that the First Full Court found that the primary judge’s reasoning miscarried for the reasons it gave at AJ[75], all of which were matters which were the subject of asserted errors in the First NOA. To the extent the First Full Court strayed beyond determining the issues arising for determination in the First NOA, or made comments extraneous to those issues, it could not be taken to have disturbed findings of the primary judge and the remitter judge was not bound by what the First Full Court said. Rather, the remitter judge was bound by the (necessarily undisturbed) findings of the primary judge.

WOR submits that, despite this, the remitter judge regarded himself bound by virtually all that the First Full Court said, even when it was “plainly wrong” or outside the scope of what that Court had been called upon to adjudicate. WOR submits that the remitter judge also held that he was bound by all that “intentionally” fell from the First Full Court even where it was plainly wrong with the result that he felt himself beholden to “follow and adopt that erroneous reasoning” (RJ[9]), an error which was compounded by the remitter judge’s failure to address himself adequately, or at all, to whether the particular statement formed a necessary or operative part of the First Full Court’s reasoning on a matter which fell for its determination.

In order to address those submissions, it is necessary to make some observations about the appellate process, the findings of the First Full Court in Crowley Appeal and the role of a court on remittal.

It is well understood that when exercising its appellate jurisdiction, the Court conducts an appeal by way of rehearing: see Aldi Foods Pty Ltd v Moroccanoil Israel Ltd [2018] FCAFC 93; (2018) 261 FCR 301 at [45] (Perram J with Allsop CJ and Markovic J agreeing). Further, an appeal is against orders, not reasons for judgment: see AZC20 v Minister for Immigration [2023] HCA 26; (2023) 278 CLR 512 at [34] (Kiefel CJ, Gordon and Steward JJ).

Section 28 of the Federal Court Act sets out the Court’s powers when exercising its appellate function. Those powers, which are exercisable where the appellant can demonstrate, having regard to all of the evidence before the appellate court, that the order the subject of the appeal is the result of some legal, factual or discretionary error, include the power to set aside the orders the subject of the appeal, in whole or in part, and to remit the proceeding for further hearing subject to such directions as the appellate court thinks fit: see Allesch v Maunz [2000] HCA 40; (2000) 203 CLR 172 at [23] (Gaudron, McHugh, Gummow and Hayne JJ); s 28 (1)(c), Federal Court Act. A remitted trial is the continuation of a trial that has already begun which is to be conducted having regard to the judgment and reasons of the appellate court: see [125] below.

In Crowley Appeal the First Full Court relevantly made orders allowing the appeal, setting aside the primary judge’s orders and for “the matter [to] be remitted to a single judge for such further hearing as that judge decides and for determination”.

The First Full Court found that the primary judge’s reasoning in relation to both the misleading and deceptive conduct case and the continuous disclosure case had miscarried: AJ[53], [144]. Their Honours’ reasons are summarised above.

Justices Jagot and Murphy set out a summary of their conclusion (with which Perram J agreed) at AJ[8] as follows:

More particularly, as to the former Jagot and Murphy JJ said at AJ[75]:

At AJ[95]-[96] their Honours summarised how the primary judge’s process of reasoning about whether the FY14 Budget provided WOR with reasonable grounds to make the August 2013 Earnings Guidance Statement miscarried (see [32] above) and why the matter had to be remitted. Relevantly at AJ[101] their Honours went on to observe that:

As to the latter, at AJ[144] the First Full Court held that, as Mr Crowley had relied on the same facts to support the claim that WOR had contravened its continuous disclosure obligations and, in light of the errors already identified in relation to the misleading and deceptive conduct case in relation to the inferences to be drawn from the facts as found, it could not be concluded that the primary judge would have reached the same conclusions as she did about the continuous disclosure case had those errors not been made. It followed that the primary judge’s dismissal of the continuous disclosure case had to be set aside.

The principles which guide a judge upon remittal of a matter for further hearing by an appellate court were not in dispute. They were considered and summarised by Jackson J in Harvard Nominees at [45]-[47], approved on appeal in Harvard Nominees Appeal at [96]. In Harvard Nominees a Full Court of this Court had remitted a proceeding to the primary judge pursuant to s 28(1)(c) of the Federal Court Act. Having regard to the principle that a remitted trial is a continuation of a trial that has already begun, albeit interrupted by a final order subsequently set aside, Jackson J observed that the remitter was to be approached as a continuation of the original trial but conducted in light of the decision of the Full Court in which the remitter is ordered: Harvard Nominees at [43]-[45]; see too Community and Public Sector Union v Telstra Corp Ltd (No 2) (2001) 112 FCR 324 at [15]. His Honour identified the following implications for the conduct of the remitted proceeding at [45]-[47]:

Justice Jackson noted that these implications of an appellate court’s judgment make it important for the court on remitter to understand both the precise scope of what was remitted and the meaning and effect of the appellate court’s judgment more generally: Harvard Nominees at [50].

The remitter judge was aware of and referred to these principles, adding a further uncontroversial exception, to deal with “an obvious clerical error slip” by either the primary court or the appellate court which the remitter judge can correct.

The First Full Court set aside the orders made by the primary judge and remitted the proceeding to a single judge for further hearing in the manner that judge saw fit but having regard to its reasons and issues for determination. WOR suggests that the remitter judge was required to construe the reasons of the First Full Court to identify those aspects which were binding on his Honour, having regard to the grounds of appeal and that court’s findings. That proposition unnecessarily confines the role of a court on remitter. The remitter judge’s role was as set out in Harvard Nominees. That is to determine that part of the proceeding that was remitted, which in this case was the primary judge’s findings on both categories of claim made by Mr Crowley, and to determine those issues afresh having regard to the reasons of the appellate court. As the remitter judge accepted in undertaking that task, the reasons of the First Full Court were binding on him.

We now turn to consider the grounds raised by WOR in its notice of cross appeal in this category.

Grounds 2, 4 and 6 are in similar terms. In each case WOR contends that, having regard to matters pleaded in the immediately preceding ground, the First Full Court was wrong. In other words, these grounds are a direct attack on findings of the First Full Court in Crowley Appeal. They do not contend that the remitter judge erred in any way. In each case WOR says that the First Full Court was plainly wrong and thus the remitter judge was not bound to follow its findings.

As Mr Crowley submits the premise of grounds 2, 4 and 6, that a remitter judge can depart from the findings and reasoning of the Full Court if sufficiently convinced of error, is contrary to the hierarchy of courts, the doctrine of legal precedent, s 28(1)(c) of the Federal Court Act, the nature and function of a remitter and the principle of finality.

Nor is this appeal a vehicle by which WOR can challenge the findings and reasoning of the First Full Court directly and ask this Court to find them to be wrong. WOR has sought and been refused special leave to appeal from decision in Crowley Appeal: Worley v Crowley [2022] HCATrans 182 (Kiefel CJ and Gordon and Steward JJ). The role of this Court is to determine whether there is any error in the orders and reasons of the remitter judge.

It follows that grounds 2, 4 and 6 cannot succeed.

By ground 1 WOR contends that:

WOR submits that at RJ[121], the remitter judge held that “[t]he use of $322 million as the relevant benchmark for questions of liability was clearly rejected by the [First] Full Court”, referring to AJ[136]. It observes that at AJ[136] the First Full Court refers to an earlier discussion in Crowley Appeal (at AJ[114]) where it asserted that $322 million could not be the relevant benchmark for determining whether the FY14 Guidance Representation lacked reasonable grounds because it amounted to a “representation (and reasonable grounds for it) of achieving an NPAT of materially in excess of $322 million” (emphasis in original). WOR submits that in proceeding on this basis, the remitter judge erred because the First Full Court’s comment with respect to what was conveyed by the FY14 Guidance Representation was gratuitous and not binding upon him.

WOR submits that the question of what was conveyed by the pleaded representation did not fall for determination by the First Full Court because Mr Crowley’s pleaded case, which it admitted and which the primary judge found, was that WOR expected to achieve “NPAT in excess of $322 million”. That was the representation for which Mr Crowley alleged WOR did not have reasonable grounds. WOR contends that there was no challenge before the First Full Court to the correctness of the primary judge’s findings or her Honour’s answer to the common question about what was conveyed by WOR’s guidance (question 9). Before the remitter judge the parties jointly submitted that the answer given by the primary judge about what the representation conveyed should remain unchanged and therefore that question did not fall for determination by the First Full Court, and could not be regarded as a binding justification for a conclusion by the remitter judge that he was bound not to use $322 million in NPAT as the benchmark for the purposes of determining WOR’s liability.

WOR submits that because Mr Crowley had contended that WOR represented to the market that it expected to achieve “in excess of” $322 million NPAT in FY14, he did not, in the First NOA, raise a ground of appeal to the effect that the primary judge ought to have found that any discrepancy between the budgeted NPAT of $352 million and reasonably budgeted NPAT necessarily deprived the FY14 Guidance Representation of reasonable grounds, regardless of the size of the discrepancy and the existence of reasonable grounds for NPAT in excess of $322 million. Rather, he contended that the primary judge erred in her approach by requiring him to identify particular integers within the FY14 Budget that were overstated and what would have been a counterfactual budget. WOR submits that while these contentions were upheld by the First Full Court, they did not require antecedent acceptance of the unarticulated proposition that $322 million was not the relevant benchmark created by the FY14 Guidance Representation.

WOR submits that the remitter judge’s finding that the First Full Court had found that $322 million was not the relevant benchmark for liability questions led him directly into error when assessing the existence of reasonable grounds for the FY14 Guidance Representation after 13 August 2013. WOR says that is apparent from RJ[122]-[124] which, on the evidence, expose that while WOR was behind budget, its forecast NPAT remained comfortably above $322 million prior to revision of its guidance in November 2013. WOR submits that the remitter judge’s view (at RJ[121]) that the First Full Court’s finding foreclosed any enquiry as to whether NPAT of in excess of $322 million was achievable prior to the guidance revision (leading to the adverse answer to Question 2 in the Joint List at RJ[125]) demonstrates the significant impact of the error.

WOR submits that, even if the First Full Court’s opinion about the content of the FY14 Guidance Representation, and the consequential issue of whether something in excess of $322 million in NPAT was the relevant benchmark for determining whether it was misleading, did form part of its operative reasoning, the First Full Court’s conclusion at AJ[136]), to the effect that WOR could not defend the claim by showing that, on the material before it, there were reasonable grounds to forecast NPAT in excess of $322 million, was plainly wrong having regard to the undisputed and unambiguous content of the FY14 Guidance Representation itself (a matter which was not referred to by the First Full Court or the remitter judge in this context). WOR contends that it follows that the remitter judge was not, upon a proper application of the principles in Harvard Nominees, bound to follow this aspect of the First Full Court’s reasoning.

In considering this ground and WOR’s submissions, it is convenient to commence with Mr Crowley’s pleaded case.

In the 4FASOC Mr Crowley contended at [51] that:

At [51(c)] of its further amended defence WOR admitted that “on 14 August 2013, 9 October 2013, 10 October 2013 and 15 October 2013, by making and repeating the August 2013 Earnings Guidance Statement, WOR represented to the Affected Market that it had a basis for expecting that it would achieve NPAT in excess of $322 million in the financial year ending 30 June 2014”.

The primary judge found that the FY14 Guidance Representation was a representation as to a future matter “to the extent only that it conveyed the representation that WOR expected to achieve NPAT in excess of $322 million in FY14”: PJ[687]. WOR contends that this finding was not the subject of a ground of appeal in the First NOA. It says that the remitter judge erred in finding at RJ[121] that he was precluded from accepting that the relevant benchmark for questions of liability was any figure in excess of $322 million because the statement at AJ[136], by which his Honour says he was bound, was not the subject of any controversy. For the reasons that follow we would reject those submissions and, it follows, ground 1.

At RJ[121] the remitter judge, in considering whether WOR lacked reasonable grounds for maintaining the FY14 Guidance Representation after 14 August 2013, said:

As set out above, commencing at AJ[97] the First Full Court considered WOR’s submissions contrary to its conclusion (at AJ[95]) that the primary judge’s process of reasoning miscarried. Relevantly, at AJ[136] the First Full Court observed that WOR’s focus on the need for a counterfactual budget NPAT reflected the second error identified by Mr Crowley. Their Honours explained that Mr Crowley’s “fundamental case was that the FY14 NPAT forecast of $352.1 million was unreasonable and thus did not provide reasonable grounds for the [FY14 Guidance Representation]” and “[a]s discussed, the fact that the [FY14 Guidance Representation] was that [WOR] expected to achieve NPAT exceeding $322 million in FY14 is not really to the point”. The First Full Court then continued as extracted at RJ[121] (see above).

Contrary to WOR’s submission, there is no basis on which to conclude that in making its findings at AJ[136] the First Full Court relied on its earlier observations at AJ[114]. That is not apparent from a reading of the First Full Court’s reasons. At AJ[136] the First Full Court considered whether WOR had reasonable grounds for a NPAT forecast in excess of $322 million. Its finding depended, in turn, on its finding that WOR relied on the FY14 Budget in making the FY14 Guidance Representation: see for example AJ[104], [106], [111].

In contrast, at AJ[112] the First Full Court considered WOR’s contention that Mr Crowley had to quantify errors that were made to show that a reasonable FY14 NPAT did not exceed $322 million and, in that context, WOR’s contention that the Board gave itself $30 million “headroom” between the forecast NPAT in the FY14 Budget of $352 million and the FY14 Guidance Representation by referring to NPAT in excess of $322 million. The First Full Court observed that “[e]ither the [FY14 Budget] provided reasonable grounds for the [FY14 Guidance Representation] or it did not”.

At AJ[114] the First Full Court returned to the “headroom” argument saying:

The remitter judge referred to and relied on the First Full Court’s reasons at AJ[136]. There was no error in his Honour doing so.

We would reject Ground 1.

By ground 3 WOR contends that:

Ground 3 challenges aspects of Crowley (No 2) where the remitter judge made or adopted factual findings by which he considered himself to be bound because of the First Full Court’s reasons in Crowley Appeal. WOR submits that in doing so his Honour erred because: the findings contradicted findings made by the primary judge that were not challenged before or set aside by the First Full Court; and having regard to the whole of the evidence, including matters not referred to by the First Full Court, those findings were plainly wrong.

WOR submits that the terms upon which the proceeding was remitted for further hearing are encapsulated in AJ[96] (see [32] above) and AJ[101]. It contends that, subject to one matter, in his First NOA Mr Crowley did not seek to overturn any of the primary judge’s factual findings. His complaints centred on the inferences drawn by the primary judge by reference to the facts as found. WOR submits that the First Full Court expressly eschewed undertaking for itself the overall evaluative exercise of balancing all of the available evidence so as to make findings about the proper inferences to be drawn. That being so, the remitter judge ought not to have found himself bound to follow findings made by the First Full Court, particularly given his views on their correctness.

As to the specific matters raised by ground 3, WOR makes the following submissions:

We turn to address those submissions.

First, at RJ[74] the remitter judge said:

The remitter judge did not err in finding that he was bound to follow the First Full Court’s findings at AJ[76(5)] that the 27 May 2013 Draft Budget was ambitious.

The primary judge considered the 27 May 2013 Draft Budget at PJ[196] and [423] where she said:

At AJ[76(5)] the First Full Court said:

The First Full Court again referred to that finding at AJ[85(2)] where it considered the ways in which a party might prove that a forecast lacked reasonable grounds. The First Full Court observed that one such method was for Mr Crowley to prove, among other things, that the 27 May 2013 Draft Budget with an NPAT of $252 million was itself ambitious, which their Honours observed he did.

In the circumstances, there can be no error in the remitter judge following AJ[76(5)].

Further to the extent there is any tension between PJ[196] and PJ[423], as Mr Crowley submits, the finding at PJ[423] should be preferred. It was in that part of the primary judge’s reasons, commencing at PJ[409], that her Honour made findings on the “eight core factual matters” relied upon by Mr Crowley to support a conclusion that the FY14 Budget did not provide reasonable grounds for WOR’s earnings guidance.

Secondly, at RJ[85] the remitter judge considered WOR’s challenge to the First Full Court’s observation at AJ[127] and [129] that the FY13 market had been buoyant. His Honour said:

At RJ[87]-[88] the remitter judge considered the allowance for Blue Sky revenue in the FY14 Budget. His Honour said:

WOR challenges the remitter judge following the findings at AJ[129] that “FY13 was a buoyant market” and that “[Blue Sky] revenue is a function of market buoyancy”. Like definitions of “Blue Sky” were adopted by the First Full Court and the remitter judge with both describing Blue Sky as “estimated revenue from expected projects not identified at the time of forecasting”.

At PJ[187] and PJ[360]-[362] the primary judge referred to the evidence of Robert Ashton, at the relevant time the budget regional managing director, including that “[Blue Sky] revenue is a function of market buoyancy”. Mr Crowley relied on that evidence before the First Full Court. Senior counsel for Mr Crowley submitted (at T12.27-43) that:

As Mr Crowley observes, this submission, which was directed to market conditions and outlook at the time Blue Sky was included in the FY13 budget as compared to the FY14 Budget, was made good by reference to WOR’s 29 August 2012 media release. Contrary to WOR’s submission, the findings at AJ[129] were not a matter of unsubstantiated assertion by senior counsel for Mr Crowley.

Even if this was not the case, at RJ[95] the remitter judge observed that “… if [he] were impermissibly to disregard the First Full Court’s reasoning at AJ[129], viewing the evidence as a whole, there is force in the contention that WOR did not have reasonable grounds for the estimate of Blue Sky revenue in the FY14 Budget” and gave reasons for why that was so.

Lastly, at RJ[86], among other things, the remitter judge said:

WOR submits that the remitter judge erred in finding that he was bound to follow the finding at AJ[129] that FY14 was a flat or falling market. However, there was a finding and evidence to that effect before the primary judge. For example, at PJ[418] her Honour found that Mr Wood’s evidence, recorded earlier in the reasons (e.g. at PJ[193], [195], [216] and [219]), supported Mr Crowley’s contention that “as the [FY14 Budget] setting process began, WOR’s major markets were ‘either not growing or were deteriorating’”. WOR did not file a notice of contention in the first appeal challenging the primary judge’s finding to this effect (see AJ[76(4)]), a matter which was acknowledged by the remitter judge (see RJ[81]).

In short, as Mr Crowley submits, WOR’s complaint concerns a finding made by the primary judge that WOR’s major markets were either not growing or were deteriorating which was referred to by the First Full Court, albeit in different but synonymous terms, i.e. “flat or falling”.

Ground 3 is not made out.

By ground 5 of its notice of cross-appeal WOR contends that in circumstances where the remitter judge was required to determine the scope of the remitter, what was and was not decided by the First Full Court and the extent to which, in the relevant context, statements contained in the First Full Court’s reasons were binding on the Court on remitter, his Honour erred in finding at RJ[51] that he was bound on the remitter to accept that:

WOR refers to its insistence that Mr Crowley be held to his pleaded case and notes, in relation to Mr Crowley’s central allegation that WOR did not have a reasonable basis for making the FY14 Guidance Representation, that the particulars of “no reasonable grounds” at [46] of the 4FASOC refer to and repeat the particulars in relation to “WOR’s budget process” at [22B] of the 4FASOC. Those particulars concern the following aspects of the FY14 Budget: the Management Adjustments case, and the no critical review of any Locations’ Blue Sky prior to 13 August 2013; and unreasonable Blue Sky in ANZ Region and SWO Location, which can be put to one side as Mr Crowley confined himself to the Management Adjustments case before the primary judge. Mr Crowley accepted that the 27 May 2013 Draft Budget presented by the Regions and Locations was reasonable. WOR observes that was the case that Mr Crowley opened and ran at trial and maintained on the remitter and, submits that, having confined himself to the Management Adjustments case, and conceded in the course of running that case that the 27 May 2013 Draft Budget was reasonable, Mr Crowley also conceded that the Blue Sky estimates in the ANZ Region and SWO Location budgets were not overstated and the FY14 Budget could not have been defective due to lack of critical review of the Locations’ budgeted Blue Sky.

WOR submits that none of this was challenged on appeal, and even though the First Full Court suggested at AJ[109] that Mr Crowley’s contentions were not inconsistent, the remitter judge ultimately found, upon consideration of all of the evidence, that they were (at RJ[100]).

WOR submits that notwithstanding that Mr Crowley’s pleaded lack of reasonable grounds (at 4FASOC[46]) did not include any allegation that the FY14 Guidance Representation lacked reasonable grounds by reason of the matters listed below, the remitter judge found, based on comments of the First Full Court, that he was obliged to allow Mr Crowley to press those allegations. The relevant matters were:

WOR submits that these matters were relied upon by Mr Crowley for the first time in closing (in the case of the Historical Performance Case) and in submissions before the First Full Court (in the case of the Blue Sky Case).

In relation to the Historical Performance Case (RJ[57]-[63]), WOR submits that the First Full Court was plainly wrong to hold that it formed part of Mr Crowley’s case and, in any event, the primary judge made findings that were not challenged by Mr Crowley on appeal but, rather, were embraced by him (First NOA [1(c)]). At PJ[414] the primary judge found that WOR’s historical performance against budget did not of itself provide a sound basis for concluding that the FY14 Budget lacked reasonable grounds. WOR submits that, even if bound to accept the First Full Court’s finding that Mr Crowley was entitled to rely on this matter in the context of his “lack of reasonable grounds” submission, there was no occasion for the remitter judge to revisit matters that were the subject of unchallenged findings by the primary judge. WOR submits that, whilst his Honour did not attribute significant weight to these matters (RJ[63]), it appears that he felt himself able to determine whether they contributed to a conclusion that the FY14 Budget did not provide reasonable grounds for the FY14 Guidance Representation. WOR contends that, even if it was open to conclude that the First Full Court’s reasons foreclosed any argument that Mr Crowley had failed properly to make these matters part of his case, it was not open to the remitter judge to revisit findings made by the primary judge that had been embraced by Mr Crowley.

In relation to the Blue Sky Case, WOR submits that it is apparent that the First Full Court was plainly wrong in holding (at AJ[130]) that Mr Crowley’s pleading with respect to inflated Blue Sky was not confined to the USAC and ANZ Regions. Mr Crowley specifically identified only those Locations in his surviving particulars of no reasonable grounds at 4FASOC [46(c)]. The First Full Court did not advert to this pleading or to the way Mr Crowley opened and ran his case, which involved no specific challenge to Blue Sky estimates other than in those two Locations (and positively posited that all of the Blue Sky estimates included by the Locations and Regions in the 27 May 2013 Budget were reasonable). WOR submits that, as the remitter judge found, the amount of $7.831 million in Blue Sky gross margin was added to the total Location budgets by the Locations themselves (PJ[324], [327]) between 27 May 2013 and 13 August 2013 (RJ[101]) and the only deduction his Honour made from the figure of $7.831 million was in respect of the MENAI and ASCH Regions, where he was bound by unchallenged findings of the primary judge in relation to the evidence of Messrs Ashton and Lucey. WOR submits that the only evidence the remitter judge relied on in finding that adjustments to Blue Sky made after 27 May 2013 (other than in relation to MENAI and ASCH) were not reasonable was:

WOR submits that none of this evidence supported the finding that Blue Sky had been inflated in Locations across the board. It only supports a finding for the MENAI and ASCH Locations after 27 May 2013. WOR raises as an anterior point that, because Mr Crowley both pleaded and ran his case in this way, the remitter judge should not have considered this submission at all.

WOR submits that because Mr Crowley had not amended his pleading prior to the remitter and it held Mr Crowley to his pleading, the remitter judge was bound to decide the remitter within the confines of the pleaded case and was not obliged to follow the First Full Court’s comments at AJ[67] and [102]-[103].

In short, by these submissions WOR complains that Mr Crowley went beyond his pleaded case before the primary judge and that the remitter judge also permitted that to occur.

At RJ[51] the remitter judge identified as a preliminary question WOR’s submission that there was a lack of conformity between Mr Crowley’s submissions on the remitter and the case pleaded in the 4FASOC. As articulated by the remitter judge:

His Honour referred to AJ[67], [102]-[103] and [130] noting that:

The remitter judge observed that it followed from those findings that he was bound to accept that those issues arose as part of Mr Crowley’s case and rejected WOR’s submissions on the preliminary pleading point. WOR cavils with the position taken by the remitter judge and, by its prolix submissions, seeks to argue that the First Full Court was wrong to find as it did in relation to the ambit of Mr Crowley’s pleaded case and thus the remitter judge was wrong to follow those findings.

As we have already pointed out, the role of this Court is not to consider alleged error by the First Full Court. Any complaint about the orders and findings made by that Court was by an application for special leave to appeal to the High Court of Australia which, as noted above, was pursued and refused. The role of this Court is to consider any alleged error on the part of the remitter judge. There can be no complaint and no error in circumstances where the remitter judge followed the findings of the First Full Court, as he was bound to do.

More particularly, submissions were made by WOR to the First Full Court that Mr Crowley’s misleading and deceptive conduct case was “vastly different” from that which was run before the primary judge. The First Full Court (at AJ[102]) referred to the detailed submissions filed by the parties in relation to the question of what was or what was not in issue before the primary judge. Their Honours felt it was unnecessary to reiterate “the minutiae” of those submissions. However, they considered them and, having done so, rejected WOR’s submissions that certain things were not in contention before the primary judge. Those findings remain in place.

Ground 5 is not made out.

Grounds 7 and 8 of the notice of cross-appeal concern what WOR refers to as the Management Adjustments case.

By ground 7 WOR contends that the remitter judge erred in finding at RJ[76] that the adjustments of $68 million in NPAT (that is, $100 million less the uncontroversial foreign exchange adjustment of $32 million) (i.e. the Management Adjustment) made to the 27 May 2013 Draft Budget were prima facie unreasonable, and impermissibly shifted the onus of proof to WOR to dispositively prove that the Management Adjustments were reasonable when it had already discharged the evidentiary onus with respect to the existence of some reasonable grounds.

WOR submits that Mr Crowley had the burden of proving that the FY14 Guidance Representation was made without reasonable grounds and, to the extent that WOR had an evidentiary burden to adduce evidence of reasonable grounds, that burden was to show that it had some reasonable grounds for the representation that it made. WOR submits that it discharged its evidentiary burden given that it led copious evidence of the budget process and outcome (namely, budgeted NPAT of $352 million, well in excess of the FY13 NPAT), and Mr Crowley accepted that “it was not in dispute” that Mr Wood as CEO and the rest of the Board relied on the outcome of the FY14 Budget process as the basis for the August 2013 Earnings Guidance Statement and the FY14 Guidance Representation. WOR contends that this evidence necessarily satisfied its evidentiary burden, and Mr Crowley did not claim otherwise before the First Full Court.

WOR submits that the dispositive burden then lies on Mr Crowley to establish that the FY14 Guidance Representation in fact lacked reasonable grounds, which was the question that was remitted. Despite this, the remitter judge’s analysis impermissibly inverted the dispositive onus of proof.

WOR submits that, having regard to the way in which Mr Crowley ran his case, the remitter judge correctly focused on the Management Adjustments in terms of whether reasonable grounds existed but, notwithstanding that, his Honour commenced on the wrong foot by erroneously opining that (despite his reservations) he was bound by the First Full Court’s incorrect holding to the effect that the primary judge had found the May 2013 Draft Budget was “ambitious”, when the primary judge had in fact rejected a submission to that effect at PJ[196]. The remitter judge held (at RJ[76]) that, as a consequence, any adjustments made after that point “would prima facie be likely to lack reasonable grounds”. WOR submits that, by shackling himself to an incorrect proposition, being that he was bound to assume that the 27 May 2013 Draft Budget was already “ambitious”, the remitter judge ventured into further error by assuming that any and every adjustment made to the 27 May 2013 Draft Budget thereafter was prima facie unreasonable and effectively requiring WOR to prove that it was not. According to WOR, that was not its burden.

WOR submits that, nevertheless, the remitter judge proceeded to find that all of the Management Adjustments were unreasonable, other than those that: (a) had been the subject of unchallenged findings by the primary judge based on the evidence of Messrs Ashton and Lucey, (PJ[332] and [334]; RJ[253]); (b) had been the subject of unchallenged findings by the primary judge in relation to Overhead Adjustments (PJ[336]; RJ[250]); (c) explicit concessions made by Mr Crowley with respect to the reasonableness of the foreign exchange adjustment (RJ[99], [100], [249]–[252]); and (d) explicit concessions made by Mr Crowley with respect to the reasonableness of the acquisition stretch embedded in the 27 May 2013 Draft Budget (RJ[254]). WOR submits that there was simply no justification for that finding. Mr Crowley was required to prove that the adjustments were unreasonable, failing which the FY14 Budget amply justified the guidance.

Commencing at RJ[70] the remitter judge considered the Management Adjustments. His Honour first referred to the observations and findings of the First Full Court in relation to the 27 May 2013 Draft Budget and the adjustments made to it which led to the FY14 Budget, particularly at AJ[85]. The remitter judge then set out Mr Crowley’s and WOR’s respective submissions before expressing his views at RJ[76]. In short, his Honour found that an increase in NPAT of $68 million would prima facie be likely to lack reasonable grounds. The remitter judge explained why in his view certain adjustments to the FY13 Draft Budget were not justified. WOR complains that in making his findings in that way the remitter judge impermissibly shifted the onus of proof to WOR such that it was required to prove that the adjustments were reasonable.

The findings at RJ[76] must be viewed in context, including that the remitter judge was bound by the findings of the First Full Court. To that end in considering the misleading and deceptive conduct case, among other things, the First Full Court:

In making his findings at RJ[76] the remitter judge did not shift the onus of proof to WOR. His Honour applied the reasoning of the First Full Court to reach his conclusion that the Management Adjustments were unreasonable. His Honour expressly noted that Mr Crowley was not required to identify whether any individual adjustment was unreasonable or what figure should have been put in its place, as the First Full Court held to be the case.

Like the First Full Court the remitter judge adopted as his starting point the finding that the 27 May 2013 Draft Budget, forecasting NPAT of $252 million, was “ambitious”. Despite expressing reservations his Honour was bound to do so given the finding of the First Full Court. There was no error in the remitter judge proceeding in this way.

The remitter judge expressed his view about the lack of reasonable grounds as “prima facie”. It is perhaps the use of that tentative expression that gives rise to WOR’s contention that the remitter judge shifted the onus to it. However, as Mr Crowley submits the use of that language does no more than reflect that, while the remitter judge followed the First Full Court’s holding that it was not necessary for Mr Crowley to identify whether any individual adjustment was unreasonable, or what figure should have been put in its place on the question of liability, he was not bound to do so in relation to questions of causation, loss and damage. At RJ[76] his Honour considered that such analysis was required in considering those questions, referring to RJ[249]-[255].

Ground 7 is not made out.

Ground 8 also concerns the findings at RJ[76]. It raises similar issues to those arising in connection with Ground 5 of the Notice of Contention (save in relation to the proposed amendment to that Ground, that we consider below). Fundamentally, the issue concerns the remitter judge’s finding that the first and second round Management Adjustments (other than the adjustments made in relation to the MENAI and ASCH Regions) lacked reasonable grounds on and from 14 August 2013. WOR submits that the remitter judge failed to have proper regard and give appropriate weight to some or all of the following matters:

WOR submits that the remitter judge’s finding at RJ[76] that the Management Adjustments were not reasonable is not supported by any reasoning that could have grounded the liability case against it. WOR notes that the remitter judge refers to his discussion at RJ[249]-[255] and said that his conclusion was fortified by comments in the Holt Memorandum about overly optimistic expectations of growth but contends that the remitter judge did not tie those comments to any aspects of the Management Adjustments that could, by reason of those expectations, have been found to have been unreasonable. Rather, the remitter judge simply held that the Management Adjustments, save in relation to MENAI and ASCH, supported a lack of reasonable grounds.

WOR submits that it is clear that at RJ[249]-[255], which concern the reasonable budget counterfactual necessary to ground causation, the remitter judge in fact found that all of the Management Adjustments were reasonably based, other than the “first round” and “second round” Management Adjustments in relation to Regions outside MENAI and ASCH. WOR contends that in relation to those adjustments that the remitter judge found to be unreasonable, his Honour identified no evidentiary basis capable of supporting that conclusion, and furthermore that the conclusion was contrary to undisturbed findings of the primary judge.

At RJ[249]-[255] the remitter judge addressed one of three counterfactuals of reasonable guidance proposed by Mr Crowley, that is reasonable guidance having been approximately $284 million made up of the 27 May 2013 Draft Budget NPAT figure of $252 million and the foreign exchange benefit of $32 million. The remitter judge observed that a counterfactual of $284 million was consistent with Mr Crowley’s concessions before the primary judge and before him that such guidance would have been reasonably based as at 14 August 2013 and during the Relevant Period. The remitter judge also observed that the figure of $284 million presupposed that the Management Adjustments (other than the $32 million for foreign exchange movements) were not reasonably based and thus it was necessary to analyse those Management Adjustments to ascertain whether there were amounts in them which were reasonably based and accordingly should be added to the figure of $284 million. His Honour did so at RJ[250]-[255] finding:

WOR makes the following submissions about the findings at RJ[250]-[255]:

The starting point for consideration of these arguments must be the remitter judge’s finding, to which we have already referred, that once it was accepted that the 27 May 2013 Draft Budget was “ambitious”, then an increase of $68 million NPAT would prima facie be likely to lack reasonable grounds: (RJ[76]). As the First Full Court observed, that “might be sufficient, in and of itself, to prove that the FY14 budget did not provide reasonable grounds for the August 2013 earnings guidance statement”: AJ[85(2)]. To that finding, of course, must be added the effect of the Holt Memorandum and the Holt Interview Notes, to which the remitter judge referred. It is against that background, and not a clean slate, that the “undisturbed findings” of the primary judge upon which WOR relied must be considered.

We do not see how the findings upon which WOR relies (being the ones specified in Ground 8, and Ground 5 of the Notice of Contention, set out at [201] above), with one possible exception, could be capable of undermining, in that context, the remitter judge’s conclusion that, save in certain respects, the first and second round Management Adjustments were unreasonable. The possible exception is that identified in sub-paragraph (a)(iv), which says that the primary judge found that “Locations were not “pushed too hard” in any single location or more generally”. That was a reference to a finding made by the primary judge at PJ[329].

The primary judge’s finding was, however, more nuanced. The full statement of her Honour’s conclusions in that paragraph is as follows:

The primary judge’s ultimate conclusion in that paragraph, we think, comprises an instance of the second class of error identified by the First Full Court at AJ[75]; that is, her Honour’s “search for a level of detail in the evidence enabling her Honour to decide on what would have been a reasonable forecast of FY14 NPAT, which was misguided”. But even on its own terms, the available inference that some Locations may have “submitted to pressure” to accept unrealistic budgets, or proposed budgets that they themselves considered to be unrealistic, is consistent with and reinforces the broader inference available from the fact that increases were being made to an already “ambitious” budget. Especially when the evidence is weighed in accordance with the principles in Blatch v Archer and Jones v Dunkel, but even without that, the conclusion at which the remitter judge arrived was amply supported by the evidence.

In those circumstances, the fact that the specific adjustments relating to MENAI and ASCH were found to be reasonably based, did not involve any tension with the more general inferences that were available on the evidence as a whole, and did not deprive the Holt Memorandum or the Holt Interview Notes of their force. The fact that some particular Locations did not succumb to the pressures to which the primary judge referred, does not mean that the inference may not be drawn that others did.

Similarly, the fact that over 50% of the second round adjustments were made to the MENAI and ASCH regions, and that Mr Crowley did not establish that that portion of the adjustments was reasonable, says nothing as to the reasonableness of the balance. It is not that there was a “presumption” that the adjustments were unreasonable, and that WOR proved that MENAI and ASCH were reasonable by calling Messrs Ashton and Lucey. Rather, the fact that Messrs Ashton and Lucey gave evidence was significant, because, in relation to MENAI and ASCH, it meant that, because of their evidence, Mr Crowley was unable to prove that those adjustments were unreasonable. However, when the evidence as a whole was considered in relation to the other Locations, a different conclusion was reached: see RJ[253].

Nor can the finding that the adjustment to overheads made in June 2013 was reasonable, even if combined with the evidence of Mr Wood to which the primary judge referred at PJ[226], operate to undermine the force of the inference otherwise available on the evidence as a whole. The matters to which WOR referred certainly did not “positively prove” that “all (or at least the vast bulk) of the adjustments made to the 27 May 2013 Draft Budget were reasonable”. WOR’s submissions simply do not take account of the effect of the evidence as a whole and, in particular, the need to weigh that evidence in accordance with the principles in Blatch v Archer and Jones v Dunkel.

It is not the case, as WOR submitted, that the remitter judge provided “simply no reasoning underpinning his conclusions”. The remitter judge’s reasons between RJ[70]-[76] constitute a more than adequate explanation of his Honour’s reasons for concluding that the first and second round Management Adjustments were not reasonable, on the basis of a consideration of the evidence as a whole, save for the particular individual adjustments that he accepted had been proven reasonable and with which he dealt later in the judgment.

It follows that we would reject Ground 8 of the Notice of Cross Appeal and, for the same reasons, Ground 5 of the Notice of Contention (other than in relation to the proposed amendments, which we consider below) must also fail.

Grounds 9 to 18 concern alleged errors on the part of the remitter judge in making findings about WOR’s awareness of the reasonableness of the FY14 Budget.

By these grounds WOR contends, in summary, that the remitter judge erred in finding that certain officers’ knowledge (Messrs Holt, Bradie, Allen and Daly) was properly attributable to WOR in circumstances where there were other committees, that is the Board or management committees, which had relevant responsibility in relation to the FY14 Budget. In failing to find whose knowledge was properly attributable to WOR for the purposes of determining whether it was aware of matters that falsified the opinion constituted by the FY14 Guidance Representation, the remitter judge erred. As WOR puts it, grounds 13 and 16 to 18 raise the question of whose state of mind is properly attributable to it.

WOR submits that there can be no dispute that the Board, including Mr Wood, subjectively formed the view that the August 2013 Earnings Guidance Statement was reasonable and was not aware of any matter which falsified that opinion at the time the FY14 Guidance Representation was made. WOR notes that the primary judge found that to be the case in unchallenged and undisturbed findings and that the First Full Court’s criticism (at AJ[57], [90], [93], [123]-[124], [182] and [184]) was that the primary judge did not adequately consider the state of mind of certain other WOR employees.

WOR submits that the remitter judge gave no reasoning for the finding at RJ[103] that each of Messrs Holt, Bradie, Daly and Allen was a senior employee of WOR whose knowledge is to be attributed to WOR and that the finding begged a critical question with which his Honour did not grapple but rather assumed against WOR. According to WOR the question is: “where employees whose state of mind might properly be attributable to the company in accordance with ordinary principles have differing opinions on a given question, whose state of mind becomes that of the company and liable to disclosure under the Listing Rules”?

WOR contends that once the remitter judge made a finding that Messrs Holt, Bradie, Daly and Allen’s states of mind were attributable to it, and that one or more of them was aware of matters that contradicted the opinion of the Board about the reasonableness of the FY14 Budget, he was required to go further and resolve what the implications of that finding were for WOR’s state of mind in circumstances where the most senior officers of the company – the CEO and the Board – considered that the FY14 Budget and the guidance based on it, were reasonable. WOR submits that the remitter judge did not do so. Rather, he ignored the opinion of Mr Wood and the Board and assumed that opinions of subordinate officers (which he inferred they held) were attributable to WOR and falsified the reasonable grounds for the FY14 Guidance Representation. WOR submits that in proceeding that way the remitter judge erred.

WOR submits that in the context of the Court ascribing knowledge to a company of “information” of which it was “aware”, the issue of competing opinions has been adverted to as one of considerable complexity, without any concluded view having yet been expressed by the Courts but it is clear the issue does, and in this case did, need to be resolved. WOR submits that a recognised method of resolving the issue of conflict of opinions within a company is to attribute to the company the opinion of the most closely and relevantly connected person, referring to Krakowski v Eurolynx Properties Ltd [1995] HCA 68; (1995) 183 CLR 563 at 582-583 (Brennan, Deane, Gaudron and McHugh JJ) and that most “closely and relevantly connected” in this context requires a consideration of the “relevant decision-making” authority, referring to Lee v Westpac Banking Corporation [2015] FCA 467 at [19]–[23] (Dowsett J).

WOR submits that in this case only the Board had authority to give earnings guidance to the market and speak on behalf of the company, the Board approved all earnings guidance, it was within the clear responsibility of the Board to do so and the Board closely considered the draft FY14 Budget and the wording of any guidance to be provided to the market, with care and close attention paid to each. WOR observes that the FY14 Guidance Representation was only released to the market after it was amended and approved by the Board, reflecting the views of the Board, not those of management, and the Board was the decision-maker when it came to determining whether to maintain or revise guidance. Thus, the Board was the most “closely and relevantly connected” person in relation to the publication of earnings guidance to the market, including the August 2013 Earnings Guidance Statement (and the FY14 Guidance Representation). WOR says that resolving the question of conflicting opinions within WOR must therefore be addressed by attributing to WOR the opinion of the Board rather than allowing that opinion to be “trumped” by the opinions of subordinate members of management.

WOR submits that to the extent that any opinions of subordinate employees in relation to the FY14 Budget or August 2013 Earnings Guidance Statement conflicted with the information provided to the Board by Mr Holt as CFO, Mr Wood as CEO, and other senior members of management who put the FY14 Budget and August 2013 Earnings Guidance Statement to the Board for approval, then at most those opinions could only form part of the total universe of information possessed by the Board at the time the budget was approved and the guidance given. WOR submits that follows from the proposition explained in Botany Bay City Council v Jazabas [2001] NSWCA 94; (2001) ATPR 46-210 at [83]-[85] (Mason P) and accepted by the First Full Court to the effect that, in determining whether reasonable grounds for a representation exist, the inquiry is limited to those matters that were actually within the knowledge of the person making the representation and not what a person should or could have known. In this case, while WOR was the “person” making the FY14 Guidance Representation, it was the Board who determined whether and in what terms it should do so.

WOR submits that the question then becomes: “assuming the Board, including Mr Wood as CEO, had been aware of some contradictory opinion on the part of one or more employees, would it have been enough to render it unreasonable for WOR to form the opinion it formed and published – namely, that WOR expected to achieve increased NPAT in FY14” or, put another way, “would the existence of that contradictory opinion necessarily deprive the FY14 Guidance Representation of reasonable grounds”. WOR contends that the answer to these questions is “no” for the reasons it outlines in its submissions in support of grounds 9 to 12 and 14 to 15 of its notice of cross-appeal (addressed below).

Finally, WOR submits that these submissions do not cut across the findings in Crowley Appeal to the effect that the representor was WOR, not the Board. That is because the First Full Court specifically left open the question of whether, upon consideration of the entirety of the evidence, the opinion of the Board or more junior officers, was the relevant opinion to attribute to WOR.

We do not accept these submissions.

The remitter judge concluded that WOR was aware that it did not have a reasonable basis for making the August 2013 Earnings Guidance Statement: at RJ[104]-[115], [146]. WOR challenges that finding by asking this Court to revisit the findings and conclusions of the First Full Court.

The First Full Court held that:

For the purposes of Mr Crowley’s misleading and deceptive conduct case, the remitter judge found that each of Messrs Holt, Bradie, Daly and Allen, none of whom WOR called to give evidence, was a senior employee of WOR whose knowledge is to be attributed to it: RJ[102]-[103]. For the purposes of Mr Crowley’s continuous disclosure case, WOR admitted that Messrs Holt and Bradie were “officers” and, after considering their respective roles, the remitter judge found that Messrs Daly and Allen each participated in the making of decisions that affected a substantial part of WOR’s business.

Despite the First Full Court’s reasons, WOR seeks to make the Board the relevant entity for the purposes of considering WOR’s liability. It does so by raising for resolution the question of the manner in which a court should resolve differing opinions as between the decision-making entities or persons within a company for the purposes of attribution of knowledge. It seeks that this Court answer that question, relying on Krakowski, to say that the determinative opinion is that of the most closely and relevantly connected person which it says, applied to the facts, is the Board. That approach is rejected.

The relevant principle is one of attribution of knowledge. The First Full Court summarised the approach to be taken to the question of determining whether WOR had reasonable grounds for making the FY14 Guidance Representation at AJ[105]-[107] as follows:

As is apparent the question of attribution is not one of ranking and reconciling conflicting knowledge of a company’s directors and officers. Rather the knowledge of each is attributed to the company and, as the First Full Court made clear, it is sufficient to establish lack of reasonable grounds if at least one of those persons knew of facts and circumstances which were inconsistent with the reasonableness of the representation, even if another person was not aware of those same facts and circumstances. In this case the relevant persons include Messrs Holt, Bradie, Daly and Allen who were members of WOR’s senior management and were involved in the budget setting process for the FY14 Budget. An acceptance of WOR’s submissions would neutralise operation of the statutory provisions. As Mr Crowley submits a company could make representations to the market about its financial position which were inconsistent with knowledge held by, for example, its CFO and other members of senior management involved in the development of the information, with impunity.

WOR relies on Krakowski to support its position. That case does not advance WOR’s position.

Krakowski concerned a contract for the sale of retail premises between Eurolynx Properties Pty Ltd as vendor and Mr and Mrs Krakowski as purchasers. The sale was negotiated by Norman Mermelstein, Mr Krakowski’s nephew, on behalf of Mr and Mrs Krakowski and Mark Cini, a selling agent, on behalf of Eurolynx. Mr Mermelstein informed Mr Cini of Mr and Mrs Krakowski’s requirement that any property they purchased was to render a 10% return. Mr Cini subsequently informed Mr Mermelstein that a tenant, Swaeder Sales Pty Ltd, had been found for the premises paying rent of $156,000 per annum at the commencement of the lease and that a 10% return was agreeable. On that basis the purchase price was $1.56 million. Mr Mermelstein passed that information on to Mr Krakowski who instructed him to go ahead with the purchase. Mr Mermelstein also spoke with a Eurolynx director, Adam Ryan, about the purchasers’ requirement for a 10% return and was given assurances by Mr Ryan about the tenant.

In negotiating the lease for the premises Eurolynx agreed to give Sweater a three month rent free period and a payment of $156,000 for fit out and stock. That arrangement was the subject of a separate agreement between Eurolynx and Swaeder in the form of a “letter of understanding”. Neither Mr and Mrs Krakowski nor Mr Mermelstein were aware of this separate agreement and it was not referred to in answers to relevant requisitions on title. The sale of the premises to Mr and Mrs Krakowski settled on 20 November 1989. Thereafter, Swaeder failed to pay the rent due on 1 January 1990, defaulted on payment of the rent in February 1990 and vacated the premises in April 1990. It was during this period that Mr Mermelstein and Mr and Mrs Krakowski learnt of the side agreement with Swaeder.

Mr and Mrs Krakowski sought to rescind the contract for sale because of misrepresentations in relation to the terms of the lease with Swaeder. Eurolynx refused to meet their demands. Accordingly, Mr and Mrs Krakowski commenced a proceeding against Eurolynx alleging deceit and misleading or deceptive conduct in contravention of s 52 and s 53 of the Trade Practices Act 1974 (Cth) (now repealed) and cognate provisions of the Fair Trading Act 1985 (VIC).

The question of whether Eurolynx had committed a fraud was considered by the High Court. In doing so a majority of the Court (Brennan, Deane, Gaudron and McHugh JJ) observed that the mind of Eurolynx did not depend on the acceptance of a single employee of Eurolynx alone about his appreciation of the relevance of the side agreement. Account also needed to be taken of the evidence that Mr Cini, Eurolynx’s agent, and Mr Ryan, Eurolynx’s officer, who had procured the agreement to sell the premises, knew that Mr and Mrs Krakowski were willing to buy at a price ten times the amount the property would yield. Their Honours held that their knowledge was Eurolynx’s knowledge as they were responsible for the initial negotiations and had set the scene in which the representation was made: at 582. In that context their Honours said at 582-583:

As two agents of Eurolynx had knowledge of the relevant facts which constituted the fraud, Eurolynx could not escape liability because one of its officers did not.

WOR also relies on SSABR Pty Ltd v AMA Group Ltd [2024] NSWCA 175. Likewise, we do not think it assists WOR. That case concerned the construction of cl 5.1 of a business sale agreement between the respondent, AMA Group Ltd, as purchaser and the appellant, SSABR Pty Ltd, as vendor. The clause provided for a formula to calculate an amount to be paid by AMA as deferred consideration within 90 days of the second anniversary of completion of the business sale agreement. A dispute arose about the manner in which the calculation was to be undertaken pursuant to cl 5.1. SSABR commenced a proceeding seeking, among other things, declaratory relief in relation to the proper construction of cl 5.1. AMA filed a cross summons seeking, among other things, rectification of cl 5.1 either as a matter of law or in equity. At first instance AMA was successful in its claim for rectification of cl 5.1. SSABR appealed.

In considering whether the primary judge erred in making the order for rectification, Stern JA (with whom Ward P and Price AJA agreed) considered whether the primary judge erred in finding that the intention of one board member, Mr Nicholson, could be attributed to AMA at the time it entered into the business sale agreement. In doing so Stern JA referred (at [149]) to Krakowski at 582-583. At [151]-[152] her Honour set out further relevant principles including those concerning rectification in equity. WOR relies in particular on [153]-[154] where Stern JA applied the principles to the facts. Her Honour found that completion of the transaction was conditional on the AMA board’s consent, that the board was the substantive decision-maker in relation to the decision to enter into the business sale agreement, that the primary judge had erred in attributing Mr Nicholson’s intention to the AMA board and that “the intention of AMA should have been inferred from the terms of the Circular Resolution which each of the AMA directors approved”.

Given the nature of the claim for equitable rectification and the finding that the entry into the transaction was conditional on board approval, it is understandable that, in the context of that case, the intentions of one director could not be attributed to the whole of the board and thus to AMA. The decision similarly does not advance WOR’s case.

Grounds 9 and 10 of the notice of cross-appeal concern Mr Holt’s knowledge.

By ground 9 WOR contends that the remitter judge erred in finding at RJ[105] that Mr Holt was aware of defects in the FY14 Budget and the process adopted in preparing it which meant that the chance of achieving the FY14 Budget was substantially less than a 50% likelihood, because he failed to have proper regard, or give appropriate weight, to some or all of the following undisturbed findings of the primary judge:

By ground 10 WOR contends that, by reason of the matters relied on in ground 9, the remitter judge erred at RJ[146] in finding that Mr Holt was aware, and held the opinion throughout the Relevant Period, that WOR did not have a reasonable basis for making the August 2013 Earnings Guidance Statement.

WOR submits that the remitter judge’s conclusion that Mr Holt was aware that the FY14 Budget and budget process did not provide reasonable grounds for the FY14 Guidance Representation was reliant on the finding at RJ[105] that the Holt Memorandum and Holt Memo Interview Notes exposed reasons for that conclusion. WOR contends that, in effect, the remitter judge held that Mr Holt held the views set out in those documents, and did so by 14 August 2013, when he presented the FY14 Budget to the Board for approval. WOR submits that the inference drawn by his Honour was not open to him on the totality of the evidence, regardless of the application of the rule in Jones v Dunkel.

WOR submits that the Holt Memo Interview Notes captured a variety of views and perspectives from a number of WOR employees which Mr Holt used to compile the Holt Memorandum which was a general review of WOR’s budget process over the preceding six years and was not specific to the FY14 Budget. WOR contends that there would have been no need for Mr Holt to undertake a fact finding exercise if he already knew the facts and held the views set out in the Holt Memorandum. WOR submits that on any sensible reading of the Holt Memorandum it conveys what Mr Holt learned in the course of the review he conducted after the November earnings downgrade, not what he already knew, and the remitter judge ought to have found that to be the case. WOR contends that this construction is consistent with Mr Wood’s evidence, which was accepted and the subject of undisturbed findings by the primary judge, and the contemporaneous documentary evidence.

WOR submits that Messrs Lucey and Ashton have comments attributed to them in the Holt Memo Interview Notes, and made comments which, while often unclear in their meaning, were not necessarily flattering. Notwithstanding, the primary judge found, and Mr Crowley and the remitter judge accepted, that Messrs Lucey’s and Ashton’s budgets were reasonable. Accordingly, it cannot axiomatically follow from critical comments being recorded in the Holt Memo Interview Notes that the people who made them regarded the budget as lacking reasonable grounds.

WOR submits that the inference drawn by the remitter judge goes further than Mr Crowley’s submissions at the initial trial or on remittal. Having regard to the way the Holt Memorandum is expressed and the manner in which Mr Holt conducted himself, the proposition that he already knew of the matters and held the views set out in the Holt Memorandum, and had done so since prior to presenting the FY14 Budget and draft August 2013 Earnings Guidance Statement wording to the Board for approval, is consistent only with him being a dissembler of comprehensive proportions. There was no evidence to support such a conclusion.

WOR submits, having regard to a substantial number of key facts which it says the remitter judge glanced over (see [258] below), that there was no sound basis for the remitter judge to find that Mr Holt was aware, and held the opinion throughout the Relevant Period that WOR lacked a reasonable basis for making the August 2013 Earnings Guidance Statement and he erred in doing so.

Commencing at RJ[102] the remitter judge considered WOR’s awareness of defects in the FY14 Budget process and the FY14 Budget. In that context the remitter judge considered Mr Holt’s awareness and in doing so had regard to the Holt Memorandum and the Holt Memo Interview Notes. At RJ[105] the remitter judge accepted Mr Crowley’s submission that those documents exposed why the FY14 Budget and budget process did not provide reasonable grounds for the FY14 Guidance Representation. His Honour drew a number of inferences based on those documents before concluding that:

We do not accept that the remitter judge erred in reaching that conclusion.

First, the primary judge found, based on the Holt Memorandum, that the FY14 Budget was not a P50 Budget. Her Honour made that finding at PJ[197] where she said:

The primary judge repeated that finding at PJ[426] where she accepted, based on Mr Holt’s conclusion in the Holt Memorandum, that the FY14 Budget “was not a true [P50 Budget]”. Mr Holt’s conclusion in the Holt Memorandum on which the primary judge relied was:

The First Full Court referred to this finding, which WOR did not challenge in the appeal from Crowley (No 1), at AJ[41], [76(1)] and [83(2)].

In light of the primary judge’s undisturbed finding and its affirmation by the First Full Court, the remitter judge also found that the FY14 Budget was not a P50 Budget. His Honour said at RJ[64]:

Secondly, WOR’s contention that the “sole” basis identified by the remitter judge for finding that Mr Holt held the views in the Holt Memorandum by 14 August 2013 was the absence of anything in the Holt Memorandum or the Holt Memo Interview Notes which indicated that Mr Holt regarded it as appropriate to distance himself from the views expressed or to suggest that they were not shared by him at the time of preparation of the FY14 Budget is incorrect. The remitter judge considered Mr Holt’s knowledge of the information and issues canvassed in the Holt Memorandum and the subject of the Holt Memo Interview Notes in earlier parts of his reasons:

It is clear, having regard to those findings, that the remitter judge carefully considered the evidence and made a number of findings before stating his ultimate finding at RJ[105] about the time by which Mr Holt held the views in the Holt Memorandum.

WOR’s suggestion that the Holt Memorandum was the result of hindsight reflection was addressed and rejected by the remitter judge at RJ[53] and [55]. As his Honour pointed out the First Full Court addressed that question and found that the Holt Memorandum identified things “said to be known about the budget process” and not things uncovered or discovered about that process: at AJ[89]. His Honour correctly observed that he was bound to follow that finding. Any suggestion to the contrary is rejected.

WOR contends that the remitter judge “glossed over” the following “key facts”:

It is not the case that the remitter judge glossed over these facts. As recorded at RJ[54] WOR referred to these very facts, among others, before the remitter judge in support of its submission that any inference to the effect that Mr Holt was aware that the FY14 Budget included an unreasonable NPAT figure could not be drawn having regard to the totality of the evidence. At RJ[55] the remitter judge referred to some of the First Full Court’s findings about the Holt Memorandum. At RJ[56] the remitter judge made findings about the Holt Memorandum and expressly addressed WOR’s submission (and implicitly the evidence on which it was based) that Mr Holt would not have put forward a proposed budget which he did not regard as having a reasonable basis. His Honour reasoned:

There was no error in the remitter judge’s findings about Mr Holt’s knowledge. Grounds 9 and 10 are not made out.

By ground 11 WOR contends that the remitter judge erred at RJ[110] in finding that Mr Bradie thought it was more likely than not that the FY14 Budget would not be achieved because he failed to have proper regard to, or give appropriate weight to, some or all of the following:

By ground 12 WOR contends that by reason of the matters relied on in ground 11 the remitter judge erred at RJ[146] in finding that Mr Bradie was aware, and held the opinion throughout the Relevant Period, that WOR did not have a reasonable basis for making the August 2013 Earnings Guidance Statement.

At RJ[110] the remitter judge made the following findings about Mr Bradie:

WOR submits that the remitter judge’s finding appears to have been influenced almost solely by the generic comments attributed to Mr Bradie in the Holt Memo Interview Notes, none of which specifically concerned the FY14 Budget, or actually suggest that Mr Bradie considered that budget, or any earlier WOR budget in which he had been involved, was more likely than not to be achieved. It contends that the remitter judge did not explain how these or the other general comments attributed to Mr Bradie supported the inference at RJ[110], or the critical inference at RJ[146], that Mr Bradie was aware throughout the Relevant Period that WOR lacked a reasonable basis for making the FY14 Guidance Representation of earnings in excess of $322 million. WOR submits that they could not reasonably do so.

WOR submits that those inferences were less available once one considers the objective evidence:

In making its submissions WOR focuses on the remitter judge’s reasons at RJ[107]-[110]. However, at RJ[65] the remitter judge referred to the comments of WOR’s senior management recorded in the Holt Memo Interview Notes as supporting the proposition that WOR knew or ought to have known that the FY14 Budget was not a P50 Budget and did not provide reasonable grounds for the August 2013 Guidance Representation. His Honour observed that:

The remitter judge found that the comments recorded by, relevantly, Mr Bradie provided a strong basis for finding that there was a commonly held view among WOR’s senior management at the time of preparing the FY14 Budget that it did not meet the parameters of a P50 Budget, that the comments recorded by Mr Bradie (and Mr Holt) were expressed as referring to matters which were experienced and thought of in the period when the FY14 Budget was being prepared and before it was adopted by the Board and, given Mr Bradie’s (and Mr Holt’s) heavy involvement in the preparation of the FY14 Budget, it is likely, that Mr Bradie (and Mr Holt) was aware of the views as to systemic problems at the time, i.e. before 14 August 2013: RJ[68].

Having regard to these earlier findings and the remitter judge’s consideration of the evidence about “phasing” as between the first and second half of the financial year (at RJ[108]), WOR’s submission that the remitter judge’s finding at RJ[110] was influenced solely by comments attributed to Mr Bradie in the Holt Memo Interview Notes is rejected.

There is no inconsistency between the remitter judge’s finding that Mr Bradie is likely to have thought that the FY14 Budget was achievable and drawing the inference that Mr Bradie thought that it was more likely than not that the FY14 Budget would not be achieved. Both are available when one considers the nature of a P50 Budget, which the FY14 Budget was intended to be. As described by the remitter judge at RJ[68]:

Finally, the “objective” evidence relied on by WOR does not lead us to conclude that the inferences drawn by the remitter judge were not open. As we have already observed in relation to a similar submission made about Mr Holt, the remitter judge found that there was substantial pressure on Mr Holt and other WOR senior management to present a budget which showed year on year growth. That Mr Bradie attended the two day Board, ExCo and CEOC meeting and participated in discussion about the draft FY14 Budget is not antithetical to the inferences ultimately drawn by the remitter judge.

We reject grounds 11 and 12.

By ground 14 WOR contends that the remitter judge erred at RJ[113] in finding that Mr Daly was aware that there was a lack of reasonable grounds for the FY14 Budget because he failed to have proper regard, or give appropriate weight, to some or all of the following:

Mr Daly was the Global Director of Operations and Communications Support, reporting directly to Mr Holt. After referring to his role in WOR, the primary judge described him as “the financial lead for Mr Bradie”: PJ[101]. At RJ[112]-[113] the remitter judge made the following findings about Mr Daly:

WOR submits that Mr Daly’s comment in his 7 August 2013 email cannot justify the conclusion drawn by the remitter judge that Mr Daly was aware that there was a lack of reasonable grounds for the FY14 Budget. It contends that a “stretch” target is not necessarily one that is unlikely to be achieved and, on the contrary, the evidence showed that the Locations were expected to set stretch targets that were nonetheless achievable. WOR submits that Mr Crowley’s repeated embrace of the 27 May 2013 Draft Budget as a “reasonable” budget accepts the proposition that “stretch” targets can necessarily be reasonable and achievable. The same applies to the remitter judge’s acceptance of the $12 million in acquisition stretch as a reasonable integer of the FY14 Budget.

WOR submits that the Court must also be aware of the context in which Mr Daly sent his email on 7 August 2013. That is, it was sent prior to the FY14 Budget being presented by Mr Holt to the Board for approval. WOR contends that, even if Mr Daly’s email could be construed as reflecting a view that the FY14 Budget lacked reasonable grounds and was unlikely to be achieved, it is evident, for the same reasons relied on in connection with Mr Holt, that the CFO, as Mr Daly’s superior, did not agree.

WOR submits that Mr Daly was not senior enough to attend the Board meetings at which the FY14 Budget was discussed and, even if he held the opinion attributed to him, it could hardly falsify the opinion of the CEO, the CFO, and the members of ExCo and CEOC, all of whom had endorsed the budget, or the Board which approved it after careful scrutiny. WOR contends that on no view could Mr Daly’s opinion be regarded as WOR’s opinion and yet that is the corollary of the remitter judge’s conclusion that WOR lacked reasonable grounds for the FY14 Guidance Representation because Mr Daly, along with Messrs Holt, Bradie and Allen, was aware that statement lacked reasonable grounds.

The remitter judge’s findings were not based solely on Mr Daly’s 7 August 2013 email. His Honour expressly referred to Mr Daly’s 5 August 2013 email. As explained by the remitter judge, by reference to findings made by the primary judge, at RJ[108]:

In addition, the Holt Memorandum lent support to Mr Daly’s views expressed in his 7 August 2013 email where Mr Holt said, among other things:

Mr Crowley submits that Mr Daly’s evidence must also be understood in the context of his concerns about Blue Sky in the FY14 Budget and his role in stripping out $120 million of Blue Sky overnight on 18 November 2013. The remitter judge referred to this evidence in relation to Mr Crowley’s contention that the allowance for Blue Sky revenue in the FY14 Budget was overly optimistic. However, his Honour did not regard Mr Daly’s email sent on 31 May 2013 to Messrs Holt and Allen, in which he expressed concern about Blue Sky revenue being “very high” in ANZ but also “referred to the Secured Work of approximately 53% being ‘about right’ and Blue Sky of approximately 19% being ‘ok’”, as evidence of a belief by Mr Daly that the FY14 Budget overall lacked reasonable grounds: RJ[114]. In light of this finding, which Mr Crowley does not seek to challenge, we do not think that the evidence about Mr Daly’s view in relation to Blue Sky in the FY14 Budget can take the matter any further.

Putting that to one side, as Mr Crowley submits, Mr Daly was in WOR’s camp and if WOR wished to contend that Mr Daly did not, by his email, mean that the FY14 Budget was unlikely to be achieved, it should have called him to give evidence about what his email and any other relevant documents meant. It did not.

WOR has not established any error in the remitter judge’s approach to the evidence concerning Mr Daly or his findings about Mr Daly’s awareness. Ground 14 is not made out.

By ground 15 WOR contends that the remitter judge erred at RJ[115] in finding that Mr Allen was aware by 14 August 2013 that the FY14 Budget lacked reasonable grounds because he failed to have proper regard, or give appropriate weight, to some or all of the following:

The remitter judge considered Mr Allen’s role and drew his inference in relation to Mr Allen’s awareness about the FY14 Budget at RJ[115]:

WOR submits that in making his findings at RJ[115] the remitter judge failed to have proper regard to the fact that the email relied on was sent on 11 June 2013, at a time when the FY14 Budget had not been finalised and the ASX announcement containing earnings guidance had not been drafted. It contends that Mr Allen could not, at that time, have done any more than speculate about what a final budget might look like and what guidance might be given. Whatever view Mr Allen held at that time, prior to having a discussion with Mr Holt, as foreshadowed in the email, the remitter judge could not find that he necessarily continued to hold that view after speaking with Mr Holt or when the FY14 Budget was finalised. WOR further submits that, importantly, the email predates the “second round” Management Adjustments, and the Overhead Adjustments, which the remitter judge held were reasonably based.

WOR submits that, even if Mr Allen held that opinion, the remitter judge does not grapple with how his opinion as a subordinate officer could falsify the overall existence of reasonable grounds for the FY14 Guidance Representation. WOR observes that in cross-examination Mr Wood said that he “absolutely” disagreed with the sentiments expressed by Mr Allen in the email (T495.40-41). WOR submits that, self-evidently, if Mr Allen had expressed the view to Mr Wood at the time, it would not have changed Mr Wood’s view about the reasonableness of the FY14 Budget.

WOR submits that there is no reason to suppose Mr Allen’s email would have altered anyone else’s view; the email foreshadows that Mr Allen was going to discuss it with his superior, Mr Holt, who nevertheless proceeded to finalise a budget incorporating the adjustments made up to 11 June 2013 and further adjustments, and then to recommend to the Board that it provide more robust guidance than the FY14 Earnings Guidance Statement ultimately sanctioned by the Board. WOR submits that whatever Mr Allen’s reservations as expressed to Mr Holt, they did not persuade him, as CFO, that the FY14 Budget was either unreasonable or provided an unreasonable foundation for the guidance given. It contends that the available evidence did not allow the remitter judge to draw the inferences he did with respect to Mr Allen’s state of mind, and it could not, in any event, justify the conclusion that Mr Allen’s opinion meant WOR lacked reasonable grounds.

We can discern no error as alleged in the remitter judge’s finding that Mr Allen was aware by 14 August 2013 that the FY14 Budget lacked reasonable grounds.

Mr Allen’s 11 June 2013 email to Ms Wallace, WOR’s Group Financial Controller, was referred to by the First Full Court. At AJ[91] Jagot and Murphy JJ said:

At AJ[123] their Honours relevantly said:

In considering the continuous disclosure case their Honours said at AJ[184]:

The remitter judge considered the whole of the evidence, as the First Full Court said must be done, and having done so, drew the same inferences. As the First Full Court observed (see above) the significance of Mr Allen’s 11 June 2013 email is that, irrespective of whether he conveyed his views to Mr Holt or Mr Wood, Mr Allen, a person directly involved in the FY14 Budget process, “can be inferred to have held the view that the result of [the Management Adjustments] process would be an unrealistic budget and involve the real risk of the need for forecast earnings to be downgraded”.

That the email predates the “second round” Management Adjustments and the Overhead Adjustments does not undermine the remitter judge’s findings. As Mr Crowley submits, that more revenue was added and overhead reduced in the FY14 Budget, in accordance with Mr Bradie’s original request, underscores the relevance of Mr Allen’s concerns.

Ground 15 is not made out.

By ground 19 WOR contends that:

This ground of appeal concerns the remitter judge’s reasons at RJ[124] where his Honour concluded that, even if he had been persuaded that WOR had established reasonable grounds for the FY14 Guidance Representation as at 14 August 2013, he would have concluded that there was a lack of reasonable grounds for maintaining the FY14 Guidance Representation on 9, 10 and 15 October 2013.

At RJ[116] the remitter judge concluded, based on his analysis, that WOR lacked reasonable grounds for the FY14 Budget and accordingly for the FY14 Guidance Representation and that the lack of reasonable grounds persisted throughout the Relevant Period. His Honour reached that conclusion having considered and made findings about each of the matters identified by the First Full Court at AJ[67] (see [22] above).

At RJ[117]-[123], for completeness, the remitter judge addressed the evidence about matters that arose during the Relevant Period. Having considered that evidence, at RJ[124] the remitter judge concluded that even if he had been satisfied that WOR had established reasonable grounds for the FY14 Guidance Representation as at 14 August 2013, he would have concluded that it lacked reasonable grounds for maintaining the FY14 Guidance Representation on 9,10 and 15 October 2013. WOR attacks this conclusion. That is so despite the observation of the First Full Court that the fact that WOR was tracking materially below the FY14 Budget later in 2013 was “highly relevant to the continued existence of reasonable grounds or otherwise”: at AJ[136].

In support of this ground WOR relies on the 2+10 forecast and the draft 3+9 forecast as demonstrating that reasonable grounds continued to exist throughout the Relevant Period up until ExCo met on 19 November 2013 and agreed, having regard to events that had occurred since the FY14 Budget was set and the revised NPAT calculation circulated earlier that day, to recommend to the Board that revised guidance should be given. WOR submits that the finance reports and forecasts referred to at RJ[117]-[123] demonstrate that the forecasts prepared by WOR and presented to senior management forecast NPAT for FY14 “in excess of $322 million”.

However, the remitter judge found, having regard to the evidence, that those forecasts were unlikely to be achieved. At RJ[118] in discussing the 2+10 forecast the remitter judge referred to comments made to CEOC at its meeting on 4 and 5 October 2013 which his Honour interpreted to mean that Mr Holt was of the view that the required second half performance was unlikely to be achieved. At RJ[123] the remitter judge considered the draft 3+9 forecast which, based on the evidence, showed that EBIT and NPAT were down against budget and the 2+10 forecast. His Honour referred to an email from Mr Holt where he relevantly commented that based on “this assessment” he could not “see how we are going to get there” and felt “extremely uncomfortable” that WOR was “likely to achieve growth on last year”.

The Holt Memorandum also considered “Re-forecasts”. As the First Full Court noted, Mr Holt said under that heading:

In any event, as Mr Crowley observes the 2+10 forecast and draft 3+9 forecast were not relevant to his case. Mr Crowley obtained his shares in WOR on 4 October 2013. The 2+10 forecast was distributed to the Board on 4 October 2013 and work commenced on the 3+9 forecast in late October.

WOR also seeks to rely on the primary judge’s findings at PJ[463]. In that part of Crowley (No 1) the primary judge was considering the “EBIT Improvement Program” which was described as a “program of redundancies”: see PJ[449(3)]. At PJ[462] the primary judge referred to Mr Crowley’s submission that “senior management ought reasonably to have been aware by 21 September 2013 that WOR was no longer tracking in line with the [FY14 Budget] but rather at a level very materially below it”. At PJ[463] her Honour said:

WOR submits that, contrary to RJ[120], the primary judge’s finding at PJ[463] was not disturbed and the remitter judge was wrong to dismiss it. WOR contends that, properly construed, PJ[463] embodied a finding that there were reasonable grounds as at 21 September 2013 to expect that WOR would meet its FY14 Budget. The primary judge’s finding could not sensibly be characterised as being that it was only “within the realm of possibilities” that WOR was capable of getting the budget back on track; she must be understood to have found that it was reasonable for Messrs Wood and Bradie to consider that WOR was able to take “positive action” to achieve the projected NPAT. A reading of PJ[463] in that way is consistent with the remitter judge’s finding at RJ[117].

At RJ[120] the remitter judge referred to the primary judge’s finding at RJ[463] and WOR’s submission that it was not disturbed on appeal. His Honour’s interpretation of the primary judge’s finding at PJ[463] was that “Mr Crowley had not established that it was beyond WOR’s ability to achieve an NPAT in the order of $352 million” and not that “there were reasonable grounds to think that WOR was likely actually to do so”. There is no error in that interpretation of the primary judge’s finding. The primary judge’s finding could not be understood as a finding that there was an equal chance of WOR either exceeding or falling below an NPAT of $352 million, which the remitter judge correctly identified to be the issue: see RJ[118].

WOR has not established any error as alleged in ground 19 of the cross-appeal.

WOR has not made out any of the grounds in its notice of cross-appeal. It follows that the answers given by the remitter judge to questions 2 to 6 and 12.1 in the Joint List are not disturbed and the notice of cross-appeal must be dismissed.

Mr Crowley’s appeal, and WOR’s notice of contention, each raise various issues concerning the remitter judge’s findings in relation to causation, loss, and damages.

It is appropriate to commence with an issue raised by WOR in its notice of contention that is fundamental to the issue of causation generally. In particular:

A reference to market-based causation is a reference to a particular form of the second of three well-established mechanisms for causation in cases of this kind to which Beach J referred in Myer; namely, “active indirect causation” (at [1659]). That was a “scenario where a respondent’s misleading conduct induces some reaction in X, and the applicant would have acted differently but for that reaction by X. There is no additional requirement that the applicant was aware of or relied on the respondent’s conduct. It is enough that X relied, and that the applicant would have acted differently but for that reliance by X” (at [1659]).

The argument of the applicant in Myer, as summarised by Beach J, provides a useful illustration of the application of that paradigm to the circumstances of proceedings involving a failure to disclose price-sensitive information about listed securities. His Honour said (at [1662]):

By the second ground of its notice of contention, WOR disputes that causation could ever be established by way of such an argument. It is, in the words used by Beach J to describe a similar argument put to him in Myer, a challenge to “the availability, as distinct from proof in an individual case, of market-based causation under Australian law” (at [1630]) (emphasis in original). WOR submitted that the reason, or reasons, that market-based causation could never work was because it is “a causal model which … is grounded on the fragile underpinning of assumed fundamental efficiency, is onus-reversing and allows compensation to investors who knew or did not care about the true state of affairs at the time of purchase”.

In relation to the first of those objections, that market-based causation necessarily depends upon an unproven assumption of fundamental efficiency, it is convenient to commence with the remitter judge’s summary of a portion of the evidence of Mr Torchio, Mr Crowley’s event study expert, that was not subject to challenge and which explains the relevant concepts (RJ[180]):

As his Honour there recorded, in terms that we did not understand to be in contest, a market for a particular security is fundamentally efficient if the price at which the security trades accords with its true, or fundamental, value.

To the extent that WOR’s contention was that the remitter judge proceeded on an assumed basis that the market in WOR’s securities was fundamentally efficient, we reject it. His Honour made quite clear that he did not assume the market had that quality (RJ[173]):

To the extent that that paragraph does not make it sufficiently clear, his Honour’s cross-reference to RJ[180] (from which we have quoted above) removes any doubt that the remitter judge proceeded only on the basis that the market in WOR’s shares was informationally efficient.

To the extent that WOR’s contention was that market-based causation could only work if fundamental efficiency was proven (or assumed), we also reject that.

It may be accepted, as WOR submitted, that different market participants may have access to, or regard to, different information, may interpret the same information in different ways, and may form different opinions about the value of a security in light of the information available to them. We do not regard it as helpful, or even meaningful, to describe the different views held by different individual traders, much less the equilibrium created by their collective trading decisions, as correct or incorrect by reference to a standard of “true value”. Indeed, to speak of “true value” as something that exists, for all purposes, objectively and independently of a transaction between two parties, seems to us to be problematic.

The market price of a security that is traded in a semi-strong, informationally efficient, market is an acceptable proxy for its true value. That is because in such a market all publicly available information is taken to be fully reflected in current prices. It is not necessary to make any assumption that the market has, as WOR submitted, “got it right”. Once it has been proven that the market is informationally efficient, it will follow axiomatically that the market price will reflect the available information. Or, to put it the other way around, “public information generally affects stock prices”: Halliburton Co v Erica P John Fund Inc 573 US 258 at 272 (2014). Whether it does so in a way that corresponds with some particular theory about how that information should have affected value is not relevant to the question whether a respondent’s contravention in fact caused a share’s price to be different. As Beach J said in Myer at [753]:

Or, as the remitter judge summarised Mr Torchio’s evidence (RJ[195]):

The fundamental purpose of the statutory regime that WOR has been held to have contravened is to ensure a well-informed market leading to greater investor confidence: Grant-Taylor v Babcock & Brown Ltd (in liq) [2016] FCAFC 60; (2016) 245 FCR 402 at [92] (Allsop CJ, Gilmour and Beach JJ). It does so by ensuring that the trading of securities occurs on the basis of all material information of which the company is aware (unless an exception applies). The statute is unconcerned with the value of securities, save to the extent it is concerned that investors ought to be able to make their own decisions about value on a fully informed basis. If trading does not occur on such a basis, then it is possible that the securities will trade at a price different from that which they would have traded in a fully informed market. If they do, then that difference in price is properly regarded as being produced by the company’s breach, whether or not the breach has caused the securities in question to trade at a price different to their (howsoever it might be determined) “correct” value.

Turning then to the second objection, in no sense does recognition of the possibility of market-based causation involve a reversal of onus. WOR’s submission was that it did so because a respondent will be liable “unless it can disprove assumptions as to informational efficiency, fundamental efficiency and the attitudes of investors in a given market”.

The burden of proving the facts by reference to which market-based causation might be proved will always rest on the applicant. Those facts, of course, may be proved, in the usual way, by evidence or inference.

There is no “assumption”, let alone presumption, of informational efficiency. If an applicant wishes to rely on the fact that a market has certain qualities, then they are required to prove it. In this case, Mr Crowley adduced evidence from Mr Torchio to establish that fact (and Mr Holzwarth gave his evidence on the basis of an assumption to that effect): RJ[173]. That he did so is consistent with the legal burden that lay upon him. We cannot detect the “implication” that WOR submitted was to be found in the remitter judge’s reasons at RJ[173], citing Myer at [1629], that it was for a respondent to disprove that a market was efficient. Neither his Honour, nor Beach J in Myer, said any such thing.

Insofar as fundamental efficiency is concerned, we have already explained why that concept does not play a necessary role in proving causation. Recognition of the availability of market-based causation certainly involves no assumption as to its existence.

The submission that there is a reversal of onus, such that a respondent will be liable unless able to disprove the attitudes of individual investors, is in substance the same as the third objection, which is that to allow market-based causation is to allow compensation to “investors who knew or did not care about the true state of affairs at the time of purchase”.

The reason why that submission should not be accepted was explained by Beach J in Myer at [1654]:

In other words, the fact that individual investors knew, or did not care, about the non-disclosed information does not change the fact that the price of securities in an informationally efficient market does reflect all publicly available information. If the non-disclosure of information caused the market price to be different than it would have been, then that fact is true whether or not there were individual investors of the kind postulated participating in the market.

That is not to say, of course, that an investor of that kind would be entitled to recover. An on-market purchase of securities alone would not establish that an applicant would not have acquired those securities, or not at that price, but for the contravening conduct. That said, in nearly every case, absent some other relevant circumstance, an inference to that effect may well be easy to draw from the mere fact of purchase. But so to observe is not to suggest that there is any kind of reversal of onus at play: cf. Re HIH Insurance [2016] NSWSC 482; (2016) 335 ALR 320 at [72] (Brereton J); Masters v Lombe (Liquidator); In the matter of Babcock and Brown Limited (In Liq) [2019] FCA 1720 at [390]-[392] (Foster J). It simply reflects the reality that most market participants do trade on the basis of an assumption that all material information has been disclosed to the market: see Myer at [1530]. To the extent the issue has practical dimensions in a class action, we agree with the observations of Beach J in Myer at [1671]:

In these proceedings, Mr Crowley gave detailed evidence about the process by which he came to invest in WOR shares. On no view could it be said that the issue arises in connection with Mr Crowley’s claim.

Overall, it may be observed that the availability of market-based causation has now been considered and accepted in a number of first instance decisions: Re HIH Insurance at [73], [77] (Brereton J); Grant-Taylor v Babcock & Brown Ltd (in liq) [2015] FCA 149; (2015) 322 ALR 723 at [211]-[222] (Perram J); Myer at [20] (Beach J); Zonia Holdings Pty Ltd v Commonwealth Bank of Australia Limited (No 5) [2024] FCA 477 at [1149] (Yates J); McFarlane as Trustee for the S McFarlane Superannuation Fund v Insignia Financial Ltd [2023] FCA 1628 at [656]-[673] (Anderson J); Davis v Wilson [2025] FCA 108 at [1669] (Shariff J); and Southernwood v Brambles Limited (No 3) [2026] FCA 418 at [4004]-[4007], [4018] (Murphy J). That broad acceptance reflects its fundamental orthodoxy. The seminal, and detailed, consideration of the issue in Myer by Beach J is one with which we agree entirely.

For all these reasons, we would reject Ground 2 of the Notice of Contention.

The first, third and fourth grounds of WOR’s notice of contention were concerned with whether, assuming market-based causation was available in theory, Mr Crowley had sufficiently proved the facts necessary to support its existence or operation in this particular case. The arguments advanced in relation to these grounds overlapped, in various ways, with issues to which we will turn in due course in considering Mr Crowley’s appeal (and we will consider WOR’s arguments, to the extent necessary, in that context).

One issue, however, can be usefully addressed at this point.

WOR submitted that the remitter judge had misunderstood the submission recorded at RJ[174], and rejected at RJ[175]:

It was submitted that his Honour had wrongly understood the point to be that the contravention did not “inflate” the share price, in the sense of cause it to increase from the level it had been prior to the contravention. WOR did not dispute that his Honour was correct to find that the relevant question is whether the contraventions caused the share price to be inflated relative to the price that would have obtained in a fully informed market. Thus, in circumstances where a contravention serves to “confirm” existing information, share price inflation may in fact be found in a stable share price.

WOR’s real point, it was said, was that recorded by the remitter judge in the final sentence of RJ[174]: “that an analysts’ consensus does not evidence what caused buyers and sellers in the market to act”. It followed, in WOR’s submission, that the remitter judge erred in the following passage at RJ[175], which WOR said showed his Honour had found “that there did not need to be evidence of this causal link where guidance was ‘confirmatory’” (emphasis in original):

We do not agree that the remitter judge accepted that no causal link was required to be demonstrated. He was explaining that Mr Torchio’s statement that, on its face, might have appeared to deny the existence of a causal relationship, in fact bore a more limited meaning: namely, that no movement in price had been caused. In any event, his Honour was dealing with the submission he described, whether or not that accorded with WOR’s intended meaning. It is plain that his Honour recognised the need for Mr Crowley to prove causation. At the end of RJ[175] he said this:

Insofar as the broader proposition about whether a sufficient evidentiary foundation existed upon which a causal link between WOR’s guidance to the market, and the behaviour of market participants (i.e., buyers and sellers) is concerned, it is sufficient for now to observe that the conclusions that we have reached in relation to causation are not based on a simple assumption that the views of analysts are a proxy for the views of buyers and sellers in the market. The role of analysts, and their reaction to WOR’s guidance, is but one matter from which inferences as to critical facts may be drawn. Certainly, we reject any suggestion that the influence of WOR’s contravening conduct on market participants, or the question of whether they traded in reliance on the integrity of the market, could only be proven by calling direct evidence from buyers and sellers.

We turn, then, to consider the appeal. By his first ground, Mr Crowley contends that the remitter judge erred in failing to find that WOR’s contraventions caused him “some loss or damage”.

This ground of appeal is thus concerned with the fact of loss, rather than the quantification of it. They are separate issues (see, e.g., I & L Securities Pty Limited v HTW Valuers (Brisbane) Pty Limited [2002] HCA 41; (2002) 210 CLR 109 at [50] (Gaudron, Gummow and Hayne JJ), citing Marks v GIO Australia Holdings Limited [1998] HCA 69; (1998) 196 CLR 494 at [95] (Gummow J)), and courts approach the determination of each in different ways (see, e.g., Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at 355 (Mason CJ, Dawson, Toohey and Gaudron JJ), and at 364 (Brennan J)).

In relation to the first issue, “the general standard of proof in civil actions will ordinarily govern the issue of causation and the issue whether the applicant has sustained loss or damage. Hence the applicant must prove on the balance of probabilities that he or she has sustained some loss or damage”: Sellars at 355 (Mason CJ, Dawson, Toohey and Gaudron JJ) (emphasis in original). Loss or damage, in this sense, is “detrimental difference”: R Lawyers v Mr Daily [2025] HCA 41; (2025) 99 ALJR 1504 at [42] (Gageler CJ, Jago and Beech-Jones JJ), citing Tabet v Gett [2010] HCA 12; (2010) 240 CLR 537 at [69] (Hayne and Bell JJ). In other words, Mr Crowley must prove that WOR’s contraventions probably, and not merely possibly, caused him to suffer some detriment constituting loss or damage within the meaning of s 236 of the ACL, s 1041I and s 1317HA of the Corporations Act, and s 12GF of the ASIC Act. That said, it should be borne in mind that the general standard of proof required by the common law and applied to causation is “relatively low”, and “admits of some uncertainty”: Tabet at [145] and [148] (Kiefel J) (see also R Lawyers at [42] (Gageler CJ, Jagot and Beech-Jones JJ)).

When it comes to the assessment of damages, however, (a topic to which we will return in more detail below) courts will proceed “by reference to the probabilities or possibilities of … what would have happened”: Sellars at 349-350 (Mason CJ, Dawson, Toohey and Gaudron JJ). In particular, the civil standard of proof will not apply to the determination of past hypothetical situations for the purposes of the assessment of damages. That difference in approach was (at 355):

(We pause to interpolate that, whatever the difficulties involved in the proof of past hypothetical fact situations where the critical fact in issue concerns the state of mind or actions of a single, or confined group, of known individuals, they are likely to pale in comparison to those associated with scenarios involving very large numbers of anonymous actors. It would simply never be feasible to prove what the outcome of the individual counterfactual trading decisions of all those actual and potential buyers and sellers of shares in a heavily traded listed company would be.)

While an applicant must always prove the existence of some loss on the balance of probabilities, that does not mean that the nature of the contraventions, and the circumstances in which they occur, are not relevant to the nature and quality of the proof required. As Bowen LJ observed in Ratcliffe v Evans [1892] 2 QB 524 at 532-33:

In Ratcliffe, the example was given (at 533) of a case involving slander of title at an auction, as a result of which bidders simply left. The fact that the identity of the bidders could not be proved was irrelevant; that would be an inevitable consequence of the injury alleged. As was said:

The relevance of these observations to the present circumstances ought to be obvious. To require an applicant to prove, on the balance of probabilities, the precise consequence of thousands of individual, hypothetical, trades of a publicly listed stock in consequence of a market disclosure that was never in fact made, will, in many cases, be to demand the impossible. The degree of confidence and precision with which conclusions may be capable of being drawn about such an outcome in different cases will, to state the obvious, depend on the individual circumstances of the case in question. The more closely that the hypothetical scenario resembles some scenario that has later in fact occurred, then the degree of precision that is possible is likely to be increased. With an increase in the differences between the hypothetical scenario and actual events there is likely to be a corresponding reduction in the certainty and particularity of the proof that is possible. We emphasise again, that none of that is to suggest that an applicant will ever be able to succeed on anything less than the proof of some loss and damage on the balance of probabilities. It is simply to observe that whether something has been proved cannot be considered independently of the nature of what it is that was required to be proved.

With that point in mind, it is convenient to address WOR’s submission that Mr Crowley was “bound by the way in which he ran the case below”, and, in particular, what was said to have been his acceptance that “the method for determining whether WOR’s alleged Contraventions caused any, and if so, what, increase in the prices at which its shares traded was by conducting an event study” (emphasis in original). In that way, WOR submitted that Mr Crowley had confined himself to proving both the existence of causally connected loss, and the quantum of that loss, by reference to an event study and three specific counterfactuals. According to WOR, if Mr Crowley could not prove “the appropriate counterfactual on the balance of probabilities”, then he would necessarily fail to have proved that WOR’s contraventions caused any loss or damage at all.

The short answer to that submission is that it does not accurately state the way that Mr Crowley ran his case below.

To commence with the way that the case was pleaded, Section G.2 of the 4FASOC was entitled “Contraventions caused loss to the applicant and the Group Members”, and Section G.3 was headed “Loss or damage suffered by the applicant and Group Members”.

The first of those sections pleaded the existence of a causally connected loss, but did not do so in a way that tied the existence of loss and damage to a specific counterfactual. In particular, it was pleaded that:

It may be observed that the basis upon which the existence of loss was pleaded was not tied to any specific or defined counterfactual, and relevantly alleged simply that the contravening conduct caused WOR shares to trade at a higher price than they would otherwise have done.

The quantum of the loss and damages suffered was then pleaded in Section G.3. In particular, the 4FASOC alleged:

Although those particulars referred to the expert report describing the event study performed by Mr Torchio, they did not in terms confine Mr Crowley’s case to one of the specific counterfactuals considered within it (and, indeed, as will become apparent, Mr Torchio’s reports were not confined to a consideration of specific counterfactuals in any event). That said, it was, of course, necessarily implicit that the “calculation” in question would require the identification of two prices for WOR shares (that is, the “price at which [Mr Crowley] acquired an interest in WOR securities and the market price that would have prevailed had the Relevant Subsisting Contraventions not occurred”), and in that regard Mr Crowley “relied upon” Mr Torchio’s report.

Nor do we think that Mr Crowley’s case was confined during the hearing in the way WOR contended. It is certainly true that, before the remitter judge, WOR submitted that Mr Crowley could only prove that he had suffered some loss by proving, by reference to Mr Torchio’s event study, one of the three specific counterfactuals on the balance of probabilities. In closing submissions, counsel for WOR said this:

In response, counsel for Mr Crowley made plain that his case, insofar as proving some loss was concerned, was not limited to proof of a specific counterfactual on the balance of probabilities. He referred to the passage of transcript recording WOR’s submission above, and said:

WOR submitted, however, that Mr Crowley accepted, and that the remitter judge found, that in order to prove loss he needed to prove the outcome of a particular counterfactual on the balance of probabilities. The remitter judge said this (RJ[220]):

The relevant passage in the transcript was as follows:

We do not consider that the effect of that exchange was to confine Mr Crowley’s case in the way suggested by WOR, and apparently accepted by the remitter judge:

This understanding of Mr Crowley’s case is consistent with the observation of the Full Court in the Crowley Appeal that the relevance of “a counter-factual budget number or range … may well be confined to the quantification of damages only”: AJ[138].

It follows from the above that the remitter judge erred in proceeding on the basis that Mr Crowley’s case, whether as pleaded or run, was limited to proving the existence of some loss by way of proof of the impact of a specific counterfactual guidance on the balance of probabilities. That error played out as follows:

It may be observed that the remitter judge thus determined Mr Crowley’s case that he had suffered some loss on a very specific basis. He identified the highest NPAT guidance that Mr Crowley had failed to prove would have been unreasonable, and asked whether Mr Crowley had proved that that guidance would have caused a decline in the price of WOR’s shares. Expressed differently, his Honour translated the question “Did the contravention cause share price inflation?” into “Would particular non-contravening counterfactual guidance have caused a drop in the share price?”.

While it may be accepted that, as a matter of strict logic, those two questions could be regarded as equivalent, we think that there is a risk, which was realised in this case, that approaching the question of loss through the latter may encourage an excessively narrow or rigid analysis, with a corresponding deflection from the critical statutory question. In particular, by framing the issue in terms of the impact of a hypothetical counterfactual disclosure, rather than the impact of the contravention that had been established, a range of relevant considerations are liable to be (and here were in fact) left out of account.

Mr Crowley had expressly declined to put his case in relation to some loss by reference to a specific counterfactual. He said that the existence of some loss could be inferred on a more general basis. The remitter judge failed to engage with that broader argument and in doing so erred in failing to find that Mr Crowley had proven, on the balance of probabilities, that he had suffered some loss.

The starting point is the recognition that causation in a legal context is always purposive, and the application of a causal term in a statutory provision is always to be determined by reference to the statutory text construed and applied in its statutory context in a manner which best effects its statutory purpose: Comcare v Martin [2016] HCA 43; (2016) 258 CLR 467 at [42] (French CJ, Bell, Gageler, Keane and Nettle JJ); Legal Services Board v Gillespie-Jones [2013] HCA 35; (2013) 249 CLR 493 at [137] (Bell, Gageler and Keane JJ); Allianz Australia Insurance Limited v GSF Australia Pty Limited [2005] HCA 26; (2005) 221 CLR 568 at [42] (McHugh J), [99]-[100] (Gummow, Hayne and Heydon JJ).

We have already referred to the fact that the fundamental purpose of the statutory provisions that WOR has been held to have contravened is the promotion of a well-informed market: Grant-Taylor at [92] (Allsop CJ, Gilmour and Beach JJ). They are all provisions that may be described as “fundamental piece[s] of remedial and protective legislation which give[] effect to ‘matters of high public policy’” which should be construed so as “to give the fullest relief which the fair meaning of [their] language will allow”: Marks at [99] (Gummow J), citing ICI Australia Operations Pty Limited v Trade Practices Commission (1992) 38 FCR 248 at 256 (Lockhart J) and Bull v Attorney-General (NSW) (1913) 17 CLR 370 at 384 (Isaacs J).

In the circumstances of the contraventions found in the present case, that statutory purpose requires a steady focus on the actual effects of the actual conduct of WOR in misinforming the market. It is that conduct that constituted the contraventions, and it is in the consequences of that conduct that any statutory entitlement to damages must be found. To focus only on a different, albeit related, question (namely, the hypothetical effect on the market of a disclosure that WOR did not release) risks losing sight of the central statutory concern.

Also of relevance is the context in which that statutory regime operates, and in which the contraventions found to have been established occurred. The statutory provisions have their relevant operation on and in relation to markets for publicly listed securities. They will commonly be, and the market in which WOR shares were traded was, comprised of a large number of individual and effectively anonymous participants, engaged in a large number of discrete transactions, with the result that the identification of the precise causal mechanisms operating to produce an effect on the price of those shares is inherently challenging. Those challenges increase exponentially when the inquiry is directed, not to the actual operation of the market, which if nothing else has the quality of being observable, but to hypothetical market activity.

To frame the matter required to be proven in order to establish the existence of some loss solely in terms of a hypothetical market reaction to a hypothetical release, is to impose an unwarranted additional burden on an applicant. It does so, if for no other reason, because it effectively excludes from the analysis those matters which pertain to the contraventions themselves. The inquiry becomes one that is concerned only with how the market would have reacted if WOR had complied with its obligations in some particular hypothetical way. It thus deprives the applicant of the benefit of a number of inferences that naturally arise in connection with a material misstatement of a company’s guidance in relation to future earnings. To proceed in that way is to fail to have regard to an important part of the case that Mr Crowley ran.

The analysis of the question of loss should have commenced with the fact that the relevant contraventions had been established. One consequence of that finding was that it had been established that WOR had published to the market information about its future financial performance that was misleading or deceptive, and for which there was not a reasonable basis.

The subject matter of the information that had been so published was squarely relevant to the market’s assessment of the value of WOR’s shares. If nothing else, that conclusion was inherent in the finding that WOR had contravened s 674(2) of the Corporations Act; that is, that the information in question was information that would be expected to have a material effect on the price or value of WOR’s shares. But more generally, the conclusion that the information would be price sensitive accorded with both the evidence and common sense. It was information concerning WOR’s expected future earnings, and it was not in dispute that, as Mr Torchio had described, “modern finance theory holds that the market price of a share equals the discounted present value of the market’s consensus of expected future profits available to shareholders” (RJ[178]). In those circumstances, as Brereton J held in Re HIH Insurance, “it is a reasonable and logical hypothesis that the ordinary and natural consequence of an overstatement to the market of a listed company’s financial performance would be to inflate its share price” (at [105]).

Those inferences were reinforced by the evidence in the proceedings:

The combined effect of that evidence is to confirm the natural inference that there was a connection between WOR’s guidance to the market about its future earnings and its share price. WOR regarded itself as good at guiding the market to its internally budgeted forecast number. WOR released guidance that was heeded by analysts, with the result that the consensus of analysts’ estimates tended to align with WOR’s actual budgeted number. As a general proposition, the market’s expectations concerning a company’s future earnings may be inferred from the consensus of analysts in that regard. Given the centrality of future earnings to the valuation of a company, and thus its share price, it would be expected that changes in guidance, once the threshold of 5% was crossed, and with increasing certainty as the magnitude of the variation increased, would affect analyst and market assessment of likely future earnings, and would thus affect the share price of WOR.

Although Mr Torchio and Mr Holzwarth were not agreed on the full explanation for the fall in WOR’s share price after the November 2013 Revised Earnings Guidance, it is important to observe that Mr Holzwarth did agree that “the amount of the revised guidance” was one factor explaining the drop. Even if it the reduction in guidance did not explain, in Mr Holzwarth’s opinion, all of the decrease in price, it shows that the price of WOR’s shares were sensitive to changes in the assessment of the company’s future earnings. In circumstances where it is only necessary for an applicant to prove that a contravention was a cause of loss, that is important. The precise extent of the so-called “economic equivalence” between the November 2013 Revised Earnings Guidance, and the extent of the overstatement effected by WOR’s contraventions, need not be resolved in order to answer the present question. It is sufficient for now to observe that it demonstrates that which all of the other circumstances to which we have referred make plain in any event: that WOR’s share price was sensitive to changes in market expectations concerning its future earnings.

Of course, to a point, the remitter judge accepted all of that. So much can be inferred from the fact that his Honour would have been prepared to infer some loss if the counterfactual disclosure by reference to which he performed his analysis was $284 million, instead of $317 million: RJ[257]. Indeed, with respect, in light of the evidence to which we have referred, it would have been very difficult to come to any other conclusion. The very substantial drop that occurred following a change in guidance to a range of $260-$300 million (midpoint $280 million) points irresistibly to an inference that counterfactual guidance of $284 million would have resulted in at least some reduction in the share price.

But in declaring himself to be unpersuaded that counterfactual guidance of $317 million would have resulted in some decrease in WOR’s share price, we consider that the remitter judge failed to recognise the combined force of all of the evidence. Given the central importance of the market’s expectations about future earnings to the price of WOR’s shares (and given WOR’s skill and effectiveness at guiding the market to its budgeted number), and the resulting inference that the analysts’ consensus is a solid basis from which to infer the market’s consensus, we consider that it is more likely than not that a misrepresentation of the magnitude that occurred would have had some impact on the price of WOR’s shares. It is not necessary to have expert evidence to prove that fact. The inference arises powerfully from the evidence as a whole.

In that regard, it is important to bear in mind that, “although a claimant bears the burden of proof in the sense of the ultimate burden of establishing its case on the balance of probabilities, the burden of proof in the sense of introducing evidence is liable to shift constantly ‘according as one scale of evidence or the other preponderates’”: Berry v CCL Secure Pty Ltd [2020] HCA 27; (2020) 271 CLR 151 at [39] (Bell, Keane and Nettle JJ), citing Purkess v Crittenden (1965) 114 CLR 164 at 168 (Barwick CJ, Kitto and Taylor JJ). The inferences that arose from the evidence as a whole were of a sufficient strength to require WOR, if it wished to contend that those inferences should not be drawn in the particular circumstances of this case, to adduce evidence explaining why.

Nor is it necessary, in order to draw the conclusion at which we have arrived, to have regard to a specific or precise counterfactual disclosure. That is to say, the evidence sustains an inference that the price of WOR shares was higher by reason of the contraventions without needing to identify and isolate the precise contours of what a world without the contraventions in question would have looked like. The inference that those contraventions would have caused the price of WOR’s shares to be inflated to some extent at least is irresistible.

That conclusion would stand even if the highest non-contravening guidance that WOR might have given was $329.5 million. That is the figure that WOR has sought to contend, in the alternative, by way of a proposed amended notice of contention that it has filed, that the remitter judge ought to have found was the correct counterfactual guidance. (We consider that application below.) That amount was still between about 5% and 10% lower than the analysts’ consensus during the Relevant Period. Viewed from the opposite perspective, it was only $7.5 million higher than the 2013 earnings of $322 million (or just over 2%). In circumstances where WOR’s contravening guidance to the market was that it expected “increased earnings”, by which it must be taken to have meant materially increased earnings (see First Full Court at [114]), we consider that, in light of the totality of the evidence, there was still an overstatement of sufficient magnitude to have caused some inflation of WOR’s share price. So much is also confirmed by the evidence of Mr Torchio, who said, in evidence to which we have already referred:

Furthermore, for the reasons we give below in relation to the quantification of damages, the analysis in Mr Torchio’s reports that identified a linear relationship between the counterfactual NPAT guidance and the attributable excess return it would produce, also provides support for the conclusion that counterfactual NPAT guidance of $329.5 million would have caused some loss.

It is “undoubtedly true” that “mere difficulty in estimating damages [does] not relieve a tribunal from the responsibility of assessing them as best it [can]”: McRae v Commonwealth Disposals Commission [1951] HCA 79; (1951) 84 CLR 377 at 411 (Dixon and Fullagar JJ); see also, e.g., Sellars at 349 (Mason CJ, Dawson, Toohey and Gaudron JJ); HTW Valuers (Central Queensland) Pty Ltd v Astonland Pty Ltd [2004] HCA 54; (2004) 217 CLR 640 at [47] (Gleeson CJ, McHugh, Gummow, Kirby and Heydon JJ). Indeed, “the assessment of damages … does sometimes, of necessity, involve what is guess work rather than estimation”: Jones v Schiffmann (1971) 124 CLR 303 at 308 (Menzies J), cited with approval in The Commonwealth v Amann Aviation Pty Limited [1991] HCA 54; (1991) 174 CLR 64 at 83 (Mason CJ and Dawson J).

As always, the particular nature and characteristics of that which is required to be proved will define the court’s task. We have already referred to Sellars, and the High Court’s holding that the civil standard of proof does not apply to proof of “future possibilities and past hypothetical situations for the purpose of assessing damages”, by reason of the “peculiar difficulties associated with the proof and evaluation” of such matters “as contrasted with proof of historical facts” (at 350 and 355, per Mason CJ, Dawson, Toohey and Gaudron JJ; see also at 368 per Brennan J).

We have also already referred to the particular challenges of proving what the specific, or precise, response of a market to a hypothetical disclosure would have been. The particular price at which WOR’s shares trade at any given point in time is a product of the interactions between a large number of actual and potential buyers and sellers. To require an applicant to prove that it is more likely than not that, had a particular hypothetical disclosure been made, at a particular point in time, WOR’s shares would have traded at some particular price, is to demand the impossible.

The remitter judge, however, said that he did “not accept that this is a case where Mr Crowley was unable to adduce precise evidence of what had been lost, in the sense referred to by Hayne J in Placer”: RJ[260]. That was a reference to the following passage from Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd [2003] HCA 10; (2003) 77 ALJR 768 at [38]:

Indeed, the remitter judge observed that “Mr Crowley has sought to calculate damages with great precision”, in that a “schedule showing counterfactual FY14 NPAT guidance ranges and proportional calculations of share price inflation (MFI 2) calculates percentage inflation per WOR share to two decimal places, and dollar inflation per WOR share to the nearest cent”: RJ[259]. That was a reference to a document prepared by Mr Crowley that showed in numerical terms the results of a particular analysis performed by Mr Torchio (Mr Crowley’s event study expert) to which we will come in due course.

While it may be accepted that Mr Crowley propounded calculations at such a level of precision, that fact (and the related fact that the Court can only express an award of damages in a specific dollar amount) cannot be permitted to obscure the inherent uncertainty of the subject matter of the inquiry. It was, quite simply, not possible for Mr Crowley to adduce precise evidence of his loss. The following observations of Brereton J in Re HIH Insurance at [99] are equally applicable to the present circumstances:

We will return below to explain in more detail why that is so. But because it is so, we think that this is a case where the so-called “facilitation principle” is enlivened, and has work to do.

The “facilitation principle” “is not confined to circumstances where it is impossible to assess damages, or to intentional acts of a defendant, but has been applied in particular categories of case where the wrongdoing of the defendant has resulted in uncertainty that has made the assessment more difficult”: Cessnock City Council v 123 259 932 Pty Ltd [2024] HCA 17; (2024) 281 CLR 39 at [131] (Edelman, Steward, Gleeson and Beech-Jones JJ) (footnotes omitted). Indeed, it has been observed that the principle operates where the wrongdoing of the other party “made quantification difficult”: Murphy v Overton Investments Pty Limited [2004] HCA 3; (2004) 216 CLR 388 at [74] (Gleeson CJ, McHugh, Gummow, Kirby, Hayne, Callinan and Heydon JJ), cited with approval in Cessnock City Council at [132] (Edelman, Steward, Gleeson and Beech-Jones JJ). It is an example of courts doing the “best they can not to allow difficulty of estimation to deprive the claimant of a remedy, particularly where that difficulty is itself the result of the defendant’s wrongdoing”: Yam Seng Pte Ltd v International Trade Corporation Ltd [2013] 1 Lloyd’s Rep 526 at 553 [188] (Leggatt J, quoted with approval in Cessnock City Council at [139] (Edelman, Steward, Gleeson and Beech-Jones JJ)).

In Zonia Holdings Pty Ltd v Commonwealth Bank of Australia Limited [2025] FCAFC 63, the Full Court described the principle in the following terms (at [607] (Murphy, Moshinsky and Button JJ)):

Here, for reasons we have explained, we consider that the difficulty, if not impossibility, of proving what the reaction of the market would have been to a hypothetical disclosure, was caused by WOR’s contraventions. Put another way, that difficulty is inherent in the task required to be undertaken as a result of WOR’s contraventions.

None of this is to say that it is permissible to “resort to irrational bases” in quantifying damages: Zonia at [614] (Murphy, Moshinsky and Button JJ). But the fact that “a degree of speculation and guess work is involved” is not inconsistent with that proscription: Enzed Holdings Ltd v Wynthea Pty Ltd [1984] FCA 416; (1984) 57 ALR 167 at 183 (Sheppard, Morling and Wilcox JJ). Indeed, in some cases, of which the present is an example, to pretend otherwise is to ignore the fundamentally imponderable nature of that which is required to be determined.

The first step in quantifying Mr Crowley’s damage is to identify the terms in which non-contravening disclosure would have been given. That is because, to calculate the impact on the market of contravening disclosure it is necessary to establish a baseline against which to measure it. The parties correctly approached this topic on the basis that it was necessary to identify a “real world” counterfactual, and that that would consist of the disclosure to the market of reasonably based NPAT guidance for FY14, along with accompanying reasons.

There was something of a division between the parties, however, as to how precisely, or to what standard, the content (as distinct from the consequences) of the counterfactual disclosure needed to be proved. Mr Crowley’s position was that, as part of a past hypothetical, the counterfactual guidance did not need to be proved on the balance of probabilities; WOR contended to the contrary.

We consider that WOR’s position is correct. The identification of the baseline against which the damage caused by WOR’s contravening conduct is not part of the “past hypothetical” in relation to which the Court will proceed “by reference to the probabilities or possibilities of what would have happened” (to use the language of Sellars). Fundamentally, that is because the relevant question is not what WOR would, as a matter of fact, have done, but rather what it ought to have done in the circumstances of the actual facts which are capable of proof in the ordinary way. There is thus an important distinction. First, there is the question of what non-contravening conduct by WOR would have looked like. Secondly, there is the question what the differential impact of WOR’s contravening conduct compared to that non-contravening conduct would have been. The former is a question required to be, and capable of being, determined with reasonable precision. It is in relation to the latter that considerations of the difficulty of proof of hypothetical past facts come into play.

Grounds 2 and 3 of the notice of appeal challenge the remitter judge’s finding that counterfactual earnings guidance of $317 million NPAT would have been reasonably based, and his corresponding rejection of the counterfactuals advanced by Mr Crowley.

Relatedly, by Ground 5 of its notice of contention, WOR says that the remitter judge ought to have found that reasonable counterfactual NPAT for FY14 was $352.1 million, or alternatively an amount between $322.1 million and $352.1 million. We have already explained, when addressing Ground 8 of WOR’s Notice of Cross Appeal, why we would reject those aspects of Ground 5 of the Notice of Contention. WOR also applied, however, shortly before the hearing of the appeal, to amend Ground 5 of its notice of contention to raise a new alternative argument, that the correct counterfactual guidance was, if its primary contention of $352.1 million were not accepted, $329.494 million. We deal with that issue below.

We will consider Mr Crowley’s challenge first, before turning to consider that of WOR.

Mr Crowley’s primary case was that reasonably based NPAT guidance for FY2014 to the market on and from 14 August 2013 would have been in the same amount as the disclosure in fact made on 20 November 2013 (i.e., between $260 million and $300 million): RJ[220]. In the alternative, he contended for counterfactual disclosures of either $284 million (being WOR’s 27 May 2013 Draft Budget plus allowance for foreign exchange movements), or $289 million (which was the highest amount materially less than the prior years’ earnings ($322 million) using a 10% materiality threshold): RJ[220]. On each counterfactual scenario, it was Mr Crowley’s case that the reasons accompanying the revised guidance would have been economically equivalent to those provided by WOR alongside its November 2013 Revised Earnings Guidance.

A further alternative possibility was built into Mr Crowley’s case in this respect, in that he submitted that, even if one of his counterfactuals was not accepted as at 14 August 2013, they ought to have been accepted on and from 27 September 2013.

Mr Crowley made a general submission that his three counterfactuals “were closely interrelated and mutually reinforced an NPAT of less than $300M for quantification purposes”. That was said to be for the following reasons:

To the extent that it was being submitted that the three counterfactuals are capable of reinforcing one another, or any particular conclusion, absent a demonstration of independent support for each one, that plainly cannot be accepted. On the other hand, if the point was simply that different analyses all lead to the same broad conclusion, then it may be accepted that the various strands might fortify each other. On any view, though, it would always remain necessary to assess the merits of each postulated counterfactual disclosure on its own terms.

WOR submitted, however, that an insurmountable hurdle standing in the way of acceptance of any of Mr Crowley’s counterfactual disclosures was the fact that each was lower than the sum of the amounts that he had conceded were reasonable (or had conceded he was bound to accept had been determined to be reasonable). That is to say, Mr Crowley conceded that:

The total of those amounts is $316.8 million which, of course, produced the rounded figure of $317 million that the remitter judge held had not been demonstrated by Mr Crowley to have lacked a reasonable basis: RJ[255].

The first aspect of Mr Crowley’s response to that submission related to the first and third integers (that is, the 27 May 2013 Draft Budget, and the later $33 million reduction in overheads). It was submitted that the Blue Sky revenue forecast in the 27 May 2013 Draft Budget cannot be considered independently of the projected overhead costs that accompanied it. To put it simply, it is necessary to incur costs in order to earn revenue, and it would not be reasonable to reduce overhead expenses without recognising the consequential impact on revenue. The First Full Court had acknowledged that an argument to this effect formed part of Mr Crowley’s case: AJ[102(4)]. It followed, it was said, that reducing overheads by $33 million would inevitably affect the reasonableness of the 27 May 2013 Draft Budget. Mr Crowley’s concessions as to the reasonableness of the two integers individually thus could not be understood to extend to their combined effect.

It is important to be clear as to the precise scope of Mr Crowley’s submission in this regard. The remitter judge acknowledged that the First Full Court (at AJ[109]) had disturbed the primary judge’s finding that Mr Crowley had implicitly accepted that there was a reasonable basis for the Blue Sky revenue forecasts in the 27 May 2013 Draft Budget: RJ[100]. Whether that component of the 27 May 2013 Draft Budget was reasonable was thus a matter for the remitter judge to decide. In that regard, the remitter judge said (RJ[100]):

Mr Crowley did not challenge that conclusion before us. That is to say, even if the Blue Sky embedded in the 27 May 2013 Draft Budget could be described as “aggressive” (AJ[129]), “ambitious” or “optimistic” (RJ[99]), it was not disputed that there existed reasonable grounds for it as part of that draft budget. Mr Crowley’s point was only that the amount of the Blue Sky projections in the 27 May 2013 Draft Budget would cease to be reasonably based if downward adjustments were made to forecast overhead expenses. As the submission was articulated in argument before us:

We are not persuaded that the retention of the amount of Blue Sky in the 27 May 2013 Draft Budget was unreasonable in light of the subsequent reduction in overheads. While it may be accepted as a general proposition that it is necessary to incur expenses in order to earn revenue, the relationship between the two is not invariably directly proportional. There may be no obvious or direct connection between some overhead expenses and the generation of revenue. Other overhead expenses may involve waste or inefficiency, with the result that a reduction may not produce any impact on revenues. Here, we consider that the evidence about the process that led to this specific reduction in forecast overheads does not support the conclusion that the reduction could only have been achieved at the expense of revenue, and that it was accordingly unreasonable to maintain the existing Blue Sky projections:

Furthermore, the remitter judge quoted extensively from the Holt Memo Interview Notes, the effect of which was to demonstrate that, as stated in the Holt Memorandum, WOR had “allowed additional overhead to creep into the organisation”: RJ[251].

Mr Crowley pointed to certain features of the evidence that he said weakened the strength or quality of the inference that the full amount of the reduction in overheads could have been achieved with no impact on revenues. For example:

It follows that we are not persuaded that the evidence as a whole, especially once the evidence of Messrs Ashton, Lucey and Wood is taken into account, demonstrates that the reduction in forecast overhead expenses meant that it was no longer reasonable, in the context of a P50 Budget, to maintain the Blue Sky forecasts that had been built into the 27 May 2013 Draft Budget.

There is, in any event, another reason why we do not consider that Mr Crowley’s arguments in this regard should be accepted. We have already mentioned that Mr Crowley accepted that the remitter judge was bound by the primary judge’s finding that the $33 million reduction in overheads was reasonably based: RJ[250].

The primary judge, of course, considered all of the evidence concerning the process by which the $33 million reduction in overheads came to be included in the FY14 Budget (see PJ[248]-[257], [279]-[281], [297] and [336]-[340]). It is clear that her Honour’s consideration of the reasonableness of the reduction in overheads of $33 million took into account the connection between the reduction and the Blue Sky that remained in the budget. It would, quite simply, not be possible to find that the reduction in overheads was reasonable if the effect of it was to remove expenses necessary to earn income that remained in the budget. It is, therefore, necessarily implicit in her Honour’s finding that the reduction in overheads was reasonable, that it was reasonable in the context of the budget as a whole.

It follows that we do not see how Mr Crowley’s concession that the remitter judge was bound by the primary judge’s finding that the $33 million reduction in overheads was reasonable, could be understood to leave open room to contend that the effect of the reduction was to remove costs necessarily required to be incurred in order to earn budgeted Blue Sky.

The second facet to Mr Crowley’s response to WOR’s overarching submission was a more general statement of the objection underlying the first submission we have just rejected. That is, Mr Crowley submitted that the critical question was whether the FY14 Budget as a whole was reasonable as a P50 Budget, and that it was not possible to reach a state of positive satisfaction in that regard simply by adding together various individual amounts (even if they were each, independently, reasonable). Such an approach, it was submitted, failed properly to take into account the way that those different amounts may interact with one another in the context of a single budget.

Mr Crowley said that the inappropriateness of the “build up” approach undertaken by the remitter judge was exposed by the reasoning of the First Full Court (at, for example, AJ[75(b)], [85], [112], and [115]). The relevant aspect of the First Full Court’s reasoning was that it was not necessary for Mr Crowley, in order to demonstrate the unreasonableness of the August 2013 Earnings Guidance Statement, to impugn any particular budget input, or quantify the amount in which reasonable guidance should have been given. So much may be accepted in the context of establishing liability (and, indeed, for the reasons we have given, in the context of proving the existence of some loss). But at the point of attempting to quantify the loss suffered, it may be necessary to identify the terms in which non-contravening guidance would have been given. That is no doubt why the First Full Court said that “the resolution of any issue requir[ing] a counter-factual budget number or range … may well be confined to the quantification of damages only”: AJ[138].

More fundamentally, though, we do not consider that Mr Crowley has demonstrated that there was any reason why the particular adjustments that the remitter judge aggregated (other than the reduction in overheads) might, notwithstanding that they were each individually reasonable, interact in such a way as to deprive the budget overall of its P50 quality. We have already explained why, in relation to overheads, we do not consider that that potential, although it existed, was realised. But in relation to the remaining two integers (the foreign exchange effect, and the ASCH and MENAI adjustments) we do not understand how, even as a matter of theory, that effect might be brought about.

The foreign exchange effect was simply an objective benefit that had accrued to WOR. There was no suggestion that that benefit would have any impact on other items in the budget, or that it might somehow reduce the likelihood of the budget as a whole being achieved. Similarly, in relation to the adjustments to the ASCH and MENAI Locations, there was no explanation as to how those changes might affect other Locations, or the company’s prospects more generally. The remitter judge considered whether the adjustments were consistent with the parameters of a P50 Budget (at RJ[253]):

Having reached that conclusion, we do not see how it might be argued that the budget as a whole could, as a result, have some lower probability of being achieved. Some reason would need to be identified (such as was done in relation to overheads and revenue) as to why that might be so. In the absence of any such reason being identified, the fact that two individual Locations’ budgets were found to have been adjusted in a way that was reasonable cannot alter the fact, as was conceded to be the case, that the individual budgets for other Locations submitted as part of the process for determining the 27 May 2013 Draft Budget were each reasonably based.

Overall, we do not consider that there is anything conceptually flawed in the approach of aggregating individually reasonable adjustments where no failure to consider their interaction with other elements of the budget has been identified.

For those reasons, we consider that WOR was correct to submit that Mr Crowley’s three counterfactual scenarios could not be adopted in light of the conceded reasonableness of the four integers identified above. It follows that it is not necessary to consider Mr Crowley’s arguments in support of each of those counterfactuals. By definition, in light of the conclusions we have reached, those arguments were not capable of justifying the adoption of any counterfactual disclosure below $317 million.

In relation to Mr Crowley’s submission that, if his counterfactuals could not be supported as at 14 August 2013, then at least one of them ought to have been found applicable from a later date, the remitter judge said this (RJ[241]):

Mr Crowley submitted that, contrary to that reasoning, there were contemporaneous documents that indicated that the guidance in fact given on 20 November 2013 should have been given on and from 27 September 2013. In particular, Mr Crowley relied on the following matters:

In relation to the August Finance Report, Mr Crowley submitted that it had been recognised by senior management to demonstrate that a “major reset” of the FY14 Budget was needed. The basis for that submission was an exchange of emails between Mr Bradie and Mr Wood, in which both had acknowledged the need for “a major reset”: RJ[117]; PJ[446]-[447]. WOR submitted, however, that the required “reset” was to WOR’s business operations. The remitter judge preferred WOR’s construction, for the following reasons (RJ[117]):

We do not consider that error has been demonstrated in relation to that conclusion.

But, in any event, it may be accepted that the financial performance disclosed by the August Finance Report, particularly when considered with the draft 2+10 forecast, showed that WOR’s budgeted FY14 NPAT was looking highly doubtful. In relation to the 2+10 forecast, for example, the remitter judge referred to the primary judge’s findings that Mr Wood had accepted that there was a “significant shift” in HOH phasing early in the year, and that Mr Holt had said to the Board in early October that it made the “required second half a big ask”: RJ[118]; PJ[482], [488]). His Honour said that he interpreted “that latter comment as meaning that in Mr Holt’s view, the required second half performance was unlikely to be achieved”: RJ[118]. That was all important evidence in support of his Honour’s conclusion that, at least from this time, WOR lacked a reasonable basis for the FY14 Budget.

But it does not follow from the conclusion that WOR lacked a reasonable basis for its budget, that the counterfactual guidance that it ought to have given at the time was the same as the guidance it in fact gave on 20 November 2013. It was for Mr Crowley to prove the amount of reasonable guidance that was required to be given at particular points in time; that is a different task to proving that the guidance that had been given was not reasonably based at those same points in time. For the reasons given by the remitter judge that we have quoted above (RJ[241]), we are not persuaded that Mr Crowley has positively established that guidance in accordance with one of his three counterfactuals ought to have been given on and from 27 September 2013.

Shortly before the hearing of the appeal, WOR applied for leave to amend its notice of contention to amend Ground 5(c) so that it read as follows:

Consequential amendments were then sought to be made to Ground 5(d), to contend that the remitter judge ought, in the alternative, to have found that a reasonable counterfactual NPAT for FY14 was $329.494 million. Mr Crowley opposed the grant of leave.

The issue was as follows.

WOR’s overall budget was comprised of two broad streams; one in respect of “Local Operations” and one in respect of “Global Functions”. Those two components combined to produce the overall “Group” budget. For the most part, Global Functions involved expenses rather than revenues: it was where the group-wide functions that facilitated the delivery of services for the group as a whole were located. It is that stream to which the references to “Global Function Costs, Corporate Costs and Restructuring Costs” in the proposed amendments refer. The outward facing, revenue generating, activities of the Group (along with their associated direct costs) were located within Local Operations.

Mr Crowley’s pleaded case in relation to the absence of a reasonable basis for WOR’s FY14 earnings guidance was concerned only with the Local Operations side of the budget. That is to say, the specific complaints he made about the process by which approximately $100 million in NPAT was added to the 27 May 2013 Draft Budget were concerned with particular changes that came to be referred to as the “Management Adjustments”. A summary of the way that Mr Crowley put his case in this respect may be seen in the primary judge’s summary of his opening submissions at PJ[47]. The remitter judge summarised the Management Adjustments case at RJ[70]-[76] (see also RJ[249]). Mr Crowley did not, in other words, make any complaint about any adjustments that were made to the Global Functions stream of the budget process.

That is relevant because the evidence demonstrates that the increase in forecast FY14 NPAT from that contained in the 27 May 2013 Draft Budget was a function of movements in both the Local Operations and Global Functions streams. That is to say, in the 27 May 2013 Draft Budget, Global Functions contributed total costs of $418 million. By 7 August 2013, that amount had reduced to $402.2 million. The evidence did not explore, and no attempt was made in submissions, to translate that $15.8 million reduction in costs into an effect on forecast NPAT, but it must inevitably have had some impact.

It will be recalled that the process of reasoning by which the remitter judge arrived at his counterfactual non-contravening guidance figure was to add to the amount of NPAT forecast by the 27 May 2013 Draft Budget each of the Management Adjustments that he had found were reasonably based. WOR’s conceptual point was that by proceeding in that way, his Honour left out of account the impacts of the changes in the Global Functions stream that had not been challenged. WOR submitted, therefore, that in circumstances where the remitter judge had identified which aspects of the Management Adjustments were unreasonable, he ought to have deducted those amounts from the total budgeted NPAT figure. If his Honour had done so, then the counterfactual NPAT figure would have been $329.5 million.

Mr Crowley opposed leave being granted on several grounds.

First, he submitted that WOR had never previously raised the argument, and should not be permitted to do so for the first time on appeal.

The following circumstances are relevant to place this submission in context:

Overall, we consider that it is relevant that both parties were engaging with an issue that had been raised for the first time in oral argument by the remitter judge. Fundamentally, his Honour was exploring and testing Mr Crowley’s case in relation to the amount of counterfactual guidance by reference to the integers that would have been included in a reasonable NPAT figure. The real debate, as a matter of substance, was whether it was legitimate to construct counterfactual NPAT guidance by reference to a consideration of the reasonableness or unreasonableness of individual items. Mr Crowley’s position was that such an approach was not available, because even if a budget was comprised solely of individually reasonable items, it might nonetheless be unreasonable when considered as a whole. WOR’s position, on the other hand, was that except to the extent that Mr Crowley demonstrated some aspect of the budget was unreasonable, it should be found to be reasonably based.

So, while it may be accepted that WOR did not specifically identify to the remitter judge that the changes referable to the Global Functions budget should be included in any process of the kind being considered by the remitter judge, we think that it was necessarily implicit in WOR’s position that they should have been. WOR’s failure was a failure to draw to attention a particular integer to be included in a calculation, rather than a failure to identify in concept and substance what its argument was as to how the calculation should be performed.

Mr Crowley also submitted that the new argument was devoid of merit. In that regard:

Next, Mr Crowley submitted that there was no satisfactory explanation for why the argument was not identified sooner than it was. There is some force to that submission. The point was raised for the first time very shortly before the hearing of the appeal, and thus after all preparatory steps, including the filing of written submissions, had concluded. WOR’s explanation is simply that its lawyers had not appreciated the point sooner. It may be accepted that they should have done. But WOR has candidly accepted that that is the explanation. If there was any element of prejudice to Mr Crowley, that fact may have provided a powerful basis upon which to exercise the discretion against WOR. But in the absence of real prejudice (a topic to which we turn next), we do not consider that the quality of WOR’s explanation provides a reason not to grant leave.

Overall, we are persuaded that it is appropriate to grant leave to WOR to amend its notice of contention. In those circumstances, for the reasons we have given, we are persuaded that the correct counterfactual NPAT guidance, in accordance with which the quantification of loss is to be performed, is $329.5 million.

We have referred many times already to the difficulty of discerning the likely response of a market in shares to the disclosure of a piece of information. In saying that, we do not, of course, deny that there are sophisticated means by which the behaviour of markets in response to particular events may be studied, with a corresponding ability to make informed deductions or inferences about how they may have responded to a relevant hypothetical event. Event studies have become a familiar part of litigation in Australia where the impact of information on the price at which a company’s securities trade is in issue. A thorough description of the general nature of such studies was set out by the remitter judge in his summary of Mr Torchio’s evidence (see RJ[177]-[197]), and may be found in many other Australian cases including Beach J’s summary in Myer at [661]-[774].

There are, of course, a range of factors that will influence the reliability of, or confidence with which, conclusions may be drawn about the likely cause or causes of any price movement following the disclosure of information (or, to look at it from the other direction, about the price movement that was caused by the disclosure of particular information). In most real-world situations, there will be an inherent challenge in identifying and disentangling the multitude of factors that influence market behaviour at any point in time and isolating the effects of the disclosure of a particular piece of information of interest. These sorts of issues will be always be relevant to any assessment of the quality and persuasive power of an event study. Not by any means, however, do they exhaust the range of issues that are likely to attend a Court’s consideration of the evidentiary utility of such studies.

In some cases, the actual disclosure that is studied may consist of, or at least include, precisely the same piece of information that is the subject of the relevant hypothetical inquiry being undertaken by the Court. In such a case, the Court may be asked to infer that the response of the market in the relevant hypothetical would be substantially the same as the observed response. Whether the Court would draw such an inference may depend on a range of considerations over and above the inherent quality of the observations in question. To take an obvious example, it is not self-evidently true that the response to the same piece of information will always be the same at two different points in time. The circumstances and conditions in which a disclosure is made may potentially affect the market’s response to it.

In other cases, the precise information that is relevant to the parties’ dispute may not ever have been disclosed to the market. The reasons why that is so are likely to be infinitely varied. If nothing else, the passage of time may mean that information that was in fact disclosed to the market could never have been disclosed at an earlier point in time. To take an example close to the present case: the disclosure of forecast earnings for a particular financial year in a certain amount half-way through the year is information that could never have been disclosed at an earlier point in time. Even if the actual disclosure and the hypothetical disclosure are in precisely the same amount, the passage of time will mean that the actual disclosure is inevitably supported by greater experience, and will involve a correspondingly lesser element of prediction. In a fundamental sense, different information is being disclosed to the market at the two points in time. In cases of this kind, in addition to the issues that may arise as to the strength of the inference available to be drawn from an observed event in relation to a hypothetical event involving the same information, there will be a range of additional issues arising out of the degree of similarity or dissimilarity of the information in the actual and hypothetical events.

In truth, we think it is unhelpful to speak as if there are distinct categories of case. In all instances, the same fundamental issue is presented: what are the similarities and differences between the actual, observed, event, and the hypothetical event that the Court is called upon to decide? And, having regard to those similarities and differences, what inferences from the observed event may be drawn in relation to the hypothetical event under consideration? Viewed in that way, of course, the issues arising in connection with the use of event studies are but a specific manifestation of an aspect of the task of fact-finding that Courts have been performing for many years.

In any event, it follows that, in some cases, an event study analysis may provide a secure foundation to predict, with a high degree of confidence, the precise impact that the disclosure of particular information would have had on the price of a company’s securities. In other cases, an event study may do no more than shed light, potentially even only dim or diffuse light, on the question required to be answered by the Court. But simply because some piece of evidence does not conclusively determine an issue does not, of course, make it useless. The question is always what to make of the evidence as a whole in the context of the particular task in which the Court is engaged. Here, of course, that task is the assessment of the “probabilities and possibilities” of what would have happened to the share price of WOR, had WOR not contravened the law as it did.

A recent example of the kinds of issues that may arise in relation to the consideration of event studies is provided by Zonia. It is an example of the first kind of case that we discussed above. That is to say, the problem confronting the applicant in that case was that the “event” the subject of the event study in question included the “market reaction to the disclosure of information that was equivalent to the pleaded information, and its reaction to the other matters that were the subject of the … announcement, but went beyond the pleaded information”: at [585]. The Full Court there held that, in such circumstances, a party was required to take steps “to attempt to arrive at a principled basis upon which a price decline that is plainly referable to a raft of ‘bad news’ going well beyond the pleaded information, can be attributed to the alleged contraventions”: [593]. That extra information is often referred to as “confounding information”: at [595]. Their Honours referred (at [594]) to Beach J’s observation in Myer that where “two or more items of information are released to the market on the same day” and it is, as a result, “difficult to separate their respective effects on a share price”, then, in order “to estimate the likely separate price effect of each item of news, other techniques must be employed”: Myer at [727].

The failure of the applicant in Zonia to attempt to distinguish between the real-world price effects of the disclosure of the information of interest and confounding information, was held to be fatal to its submission that the Court should infer that the full amount of the price inflation observed following the actual disclosure would also have occurred after the narrower disclosure in the relevant hypothetical. The Full Court held that recourse to the facilitation principle could not assist in circumstances where the one thing that was clear was that the full amount of the abnormal return was attributable in part to other information, and where the applicant could have, but chose not to, adduce evidence separating out the relevant impact. Their Honours said (at [608]):

The Zonia applicant also had a fall-back case, which sought to justify an adjustment of the full amount downwards by reference to a particular academic study (the “Lieser paper”): see at [609]. The Full Court simply found that that paper did not provide any rational basis upon which to quantify the applicant’s loss: see at [613].

In Zonia, therefore, there was simply no attempt to grapple with the particular problem presented by the facts of that case. As the Full Court said (at [599]):

Here, of course, Mr Crowley faced a different problem. The “event” that was studied was the reaction of the market to the November 2013 Revised Earnings Guidance. It was no part of the information released on that day that WOR’s expected earnings for FY14 would be $329.5 million. (Indeed, that information was never released to the market.) The reasons accompanying the downgrade in expected earnings that was made were necessarily different to those that would have accompanied an earlier, different, downgrade. We will return to the similarities and differences in due course, but if nothing else the actual reasons were inevitably framed by reference to another three months of actual experience.

This was thus not a case, like Zonia, where the relevant counterfactual information was disclosed, albeit along with a raft of other information unrelated to the contravention. The problem here was not the presence of confounding information in that sense, but rather the fact that the actual disclosure, although “economically linked”, was worse than (and different from) the hypothesised disclosure (Mr Torchio called it an “overcorrection” relative to the counterfactual disclosure. The remitter judge summarised the evidence relevant to this distinction at RJ[187]-[191].) Mr Torchio explained the difference in his cross-examination:

We would simply note, in this regard, that the use of different labels (confounding information compared to overcorrection, for example) should not be allowed to conceal the fundamental similarity of the issue being grappled with; namely, the existence of differences between the actual and hypothetical disclosures. In all cases, it is necessary to have regard to the nature of the particular differences, and to discern what impact they may have on the ability to reason from observations of an actual event to conclusions about a hypothetical one.

In any event, the actual disclosure on 20 November 2013, the effects of which were studied, bore some obvious similarities to the relevant hypothetical disclosure. Perhaps most significantly, they both concerned an estimate, in dollar terms, of WOR’s NPAT for FY14. The amount of the estimate was, however, different. The reasons that accompanied, or would have accompanied, the two disclosures involved, as we shall explain, a significant substantive overlap. But they were not the same.

Given the nature and extent of the similarities, it would seem highly probable that some useful inferences would be capable of being drawn from observations of the effect of the November 2013 Revised Earnings Guidance. But, equally, there would always, necessarily, be an element of estimation, or guesswork, involved in translating those observations to conclusions about the relevant hypothetical. So much follows inexorably from the fact that an event on all fours with the event required to be hypothesised has never occurred, and where the contours of such an event are inherently incapable of any empirical proof.

To some extent, the significance of the differences between the actual and hypothetical disclosures is a topic upon which expert evidence may shed some light. It may be, for example, that expert evidence is capable of illuminating the financial consequences to a company of particular differences in disclosure, or the way that such differences would be analysed by market participants. In some cases, such evidence will be necessary to enable the Court to understand the significance of the differences. There is a danger, though, we think, in assuming that the judgments required to be made about the extent to which the observed event may provide a guide to the outcome of the hypothetical analysis must in all cases inevitably be made by an expert witness. The sophistication of the methods used to prepare event studies should not be permitted to conceal what may be little more than ordinary inferential reasoning.

It follows that the fact that an applicant has chosen not to use other methods which seek to address the same inherently uncertain subject matter in different ways, invariably by making contestable assumptions of their own, cannot require the conclusion that the applicant must necessarily fail. The remitter judge here, for example, referred to the failure of Mr Crowley to undertake a “fundamental analysis or valuation of shares in WOR”: RJ[260]. There are several reasons why the decision not to obtain evidence of that kind was not fatal to Mr Crowley’s case. For one thing, the relevant way in which Mr Crowley advanced his case on loss and quantum was by reference to the market price (and not the “true value”) of WOR shares. For another, the assumptions required to be made for the purposes of performing an intrinsic valuation of the kind to which his Honour referred seem to us to substitute one form of estimation for another. Approaches of the kind to which his Honour referred are different ways of approaching the same, ultimately unknowable, question. The critical question is whether Mr Crowley has adduced a sufficient evidentiary basis for the quantification of his loss; not whether some other approach, with its own limitations, might have been taken. The reference in the decision in Zonia to the availability of other methods, and the significance of the fact that the applicant had not availed itself of them, was in the context of the Court determining that no basis had been established for the rational estimation of quantum. That is not, as will be seen, this case.

In this case, the experts used the language of “economic correspondence” and “economic equivalence” to describe a lack of difference in quality and degree between actual and hypothetical disclosures that are “economically linked”. (As we have mentioned already, the term “confounding information” was used to describe different information that was wholly unrelated to the contraventions. An actual disclosure that was not economically equivalent to, and worse than, the required hypothetical disclosure is an “overcorrection”.) The remitter judge summarised this aspect of the evidence at RJ[187]-[189], but then said that (at RJ[190]):

This concept assumed some significance in the remitter judge’s rejection of Mr Crowley’s case on loss and quantification. That is because, at least in relation to a hypothetical disclosure of $317 million (and, of necessity, any higher amount) Mr Crowley accepted (as was obvious) that the actual disclosure on 20 November 2013 was not economically equivalent (on any definition) to a hypothetical non-contravening disclosure on 14 August 2013. The question was, thus, what significance that fact had to the analysis.

Unlike in Zonia where no attempt was made to deal with the presence of “confounding” information in the observed event, in this case, Mr Crowley did advance evidence designed to deal with the issue of “overcorrection”; that is, the possibility that the Court would find that the relevant counterfactual disclosure was higher than the November 2013 Revised Earnings Guidance, and with different accompanying reasons. He did so by “apportioning” the observed excess return along a range of hypothetical reasonable NPAT guidances.

The remitter judge described the relevant aspect of Mr Torchio’s evidence as follows (by reference to a hypothetical example of reasonable earnings guidance having been $290 million) (RJ[218]):

Mr Torchio prepared a graph that showed the results of his calculations as follows:

Mr Holzwarth did not disagree with Mr Torchio’s methodology or calculations. In their joint expert report, they each responded to the question: “Does Torchio’s event study analysis provide a reliable and reasonable estimate of the losses (excess return) attributed to a counterfactual guidance anywhere in the range of $260 million to $352 million … ?”. Mr Holzwarth’s answer was:

The reference to the underlying assumptions being correct was explained more fully in Mr Holzwarth’s report, where, critically, he said:

The remitter judge appeared to accept the validity of the methodology and calculations propounded by Mr Torchio, subject to the need to demonstrate “economic equivalence”. His Honour said (RJ[219]):

It is important to be clear about precisely what was meant by an assumption of “economic equivalence” in this context. It is apparent that when Mr Torchio and Mr Holzwarth were speaking of a need to demonstrate economic equivalence between the 20 November 2013 disclosure and the counterfactual disclosure before resort could be had to the apportionment methodology proposed by Mr Torchio, they were referring to economic equivalence between the underlying reasons that accompanied the November 2013 Revised Earnings Guidance and those that would have accompanied any counterfactual NPAT guidance. As Mr Holzwarth said in the passage from his report that we have quoted above, this part of Mr Torchio’s reasoning “assumes that the ‘underlying reasons’ for these counterfactual disclosures would have been ‘economically equivalent’” (emphasis added). They were not suggesting that the linear relationship plotted in Figure 3 was only valid where the amount of the guidance in the two disclosures was also economically equivalent.

The remitter judge, however, appears to have taken a different view. After referring to the fact that the analysis in Figure 3 depended on economic equivalence, his Honour said that it was “common ground between the parties that economic equivalence and economic correspondence require that the counterfactual and the actual corrective disclosure are sufficiently qualitatively and quantitatively similar so as to have driven in the minds and actions of market participants the same (or substantially the same) conclusion as to the foreseeable cash flow consequences”: RJ[259]. The reference to “quantitative” similarity was plainly intended to be a reference to the amount of the earnings guidance. His Honour thus went on to say that there was “no basis on which I could infer economic equivalence in the absence of any expert evidence, given the significant difference in the figures pertaining to the two disclosures”: RJ[259]. The point was repeated at RJ[262]:

We do not think that that accurately reflects the substance of the evidence. For one thing, the very purpose of the linear relationship exercise was to deal with a lack of quantitative similarity between the actual and the counterfactual guidance. That is to say, the whole point was to examine what the price effect of a different level of NPAT guidance would be. If the entire exercise was underpinned by an assumption of both quantitative and qualitative economic equivalence, it is difficult to see why the price impact would vary at all. In other words, if the disclosure of NPAT guidance of either $260 million or $340 million (and accompanying reasons) would have “driven in the minds and actions of market participants the same (or substantially the same) conclusion as to the foreseeable cash flow consequences”, presumably the impact on the price of WOR’s securities would have been the same.

It follows that we agree with Mr Crowley’s submission that “the issue of economic equivalence concerned the reasons accompanying the corrective disclosure … and that any difference between the NPAT in the counterfactual and the corrective disclosure was to be addressed through the apportionment exercise”. We therefore conclude that the remitter judge was wrong to reject Mr Torchio’s apportionment analysis on the ground that the actual NPAT guidance on 20 November 2013 ($260 million to $300 million) was not demonstrated to be economically equivalent to the hypothetical counterfactual guidance of $317 million (or, on our findings, $329.5 million).

The remitter judge would also, however, have rejected the analysis on the additional ground that economic equivalence had not been demonstrated between the reasons that accompanied the November 2013 Revised Earnings Guidance, and those that would have accompanied hypothetical non-contravening disclosure on 14 August 2013 (RJ[259], see also RJ[262]):

The remitter judge set out the text of the 20 November 2013 disclosure at RJ[199] as follows:

Mr Crowley submitted that those reasons were economically equivalent to those that the Court should find would have accompanied non-contravening guidance in August 2013. The remitter judge accepted that “the subject-matter of the various bullet points in the 20 November 2013 announcement corresponded to matters which were known to pose problems for WOR before 14 August 2013”: RJ[240]. He did so as part of his consideration of Mr Crowley’s case that non-contravening guidance in August 2013 would have been in the amount of $260-$300 million (that is, his primary counterfactual). Mr Crowley had submitted that the fact that there was a correspondence in subject matter between what was known in August, and what was disclosed in November, supported a finding that the amount of the guidance disclosed in November was the amount that should have been disclosed in August. The remitter judge’s reasons for rejecting that submission were as follows (RJ[240]):

The remitter judge’s conclusion that the correspondence between problems known to exist in August 2013, and the explanation accompanying the November 2013 Revised Earnings Guidance, was insufficient to support a conclusion that the amount of the guidance that should have been offered at those different times may be accepted. But that conclusion does not, we think, dispose of the question whether there was sufficient correspondence to justify recourse to Mr Torchio’s linear relationship analysis.

To begin, it is important to be clear about what is required to be shown to demonstrate “economic equivalence” between the actual and counterfactual reasons in order to satisfy the assumption upon which Mr Torchio’s linear analysis was based. For analogous reasons to those we gave above concerning why it was not necessary to demonstrate economic equivalence between the amount of actual and counterfactual NPAT guidance, we do not consider that it was necessary for Mr Crowley to prove that the accompanying reasons (either alone, or in combination with the amount of NPAT guidance) would have “driven in the minds and actions of market participants the same (or substantially the same) conclusion as to the foreseeable cash flow consequences”: RJ[190], [259]. That is, it would have been inconsistent with the very purpose of the analysis to have to prove, before resort could be had to it, that market participants would have reached the same conclusions as to its impact on the company’s future cash flows in all circumstances.

If there was economic equivalence in the sense used by the remitter judge between the actual and counterfactual disclosures, then it follows that there would have been no need to adjust the excess return computed by the event study to account for any “overcorrection” (see Mr Torchio’s first report, at Figure 6). The premise of the apportionment exercise is that the “minds and actions of market participants” would have been driven by the counterfactual disclosure to a different conclusion as to the foreseeable cash flow consequences. So what did Mr Torchio and Mr Holzwarth mean when they said that the linear analysis depended on an assumption of economic equivalence in relation to the reasons accompanying the NPAT guidance number?

The answer is revealed in Mr Holzwarth’s explanation of the basis upon which he agreed with Mr Torchio’s analysis, set out above, where he said that it was necessary that “this assumption of ‘economically equivalent’ underlying reasons would scale with the level of assumed revised NPAT guidance”. We understand Mr Holzwarth’s reference to the reasons “scaling” with the level of assumed revised NPAT guidance to mean that the economic impact would be qualitatively equivalent, but with a varying quantitative significance in proportion to the change in guidance.

The potential for the reasons accompanying a downgrade in expected earnings to affect the market’s perception of the company’s value is obvious. The exact same guidance in dollar terms may signify quite different things about the company’s expected future cash flows. To take an example given by the remitter judge (RJ[190]):

Such an example would be one instance of the kind of lack of economic equivalence that would deny resort to Mr Torchio’s linear analysis; the difference in the explanation for the same dollar amount of a downgrade would imply substantially different consequences for the company’s prospects.

That seems to us to be very different from explaining two quantitatively different reductions in expected earnings by reference to, for example, the “soft global minerals and metals market”. It may be accepted that the “softness” of the market that explains a $100 million downgrade is likely to be substantively different to the “softness” that would explain a downgrade of only $10 million. But the substance of the explanation, being an economic connection between conditions in a particular market and expected revenue, is the same.

So, when Mr Holzwarth said that it was necessary for the underlying reason to “scale” with the level of NPAT guidance, we understood him to be referring to the concept we have just explained. That is to say, the qualitative nature of the factor needs to be the same, albeit with a different quantitative effect reflected in the changed level of guidance.

With that understanding of the concept in question, it is possible to see why we said earlier that the remitter judge’s conclusion at RJ[240] was an insufficient basis upon which to deny the possibility of recourse to Mr Torchio’s linear relationship analysis. In fact, we consider that his Honour’s reasoning and conclusions should have led him to the conclusion that it was appropriate to do so. In our view, his Honour’s findings demonstrate that there was a high degree of economic equivalence (in the relevant sense) between the reasons for the downgrade disclosed on 20 November 2013, and those that would have been disclosed in connection with non-contravening guidance on 14 August 2013.

As the remitter judge recorded at RJ[226], Mr Crowley “sought to distil the reasons provided in the 20 November 2013 corrective disclosure into four essential propositions, and compared those propositions to the evidence indicating WOR’s knowledge of those matters existing before 14 August 2013”. His Honour then set out that analysis, including by reference to evidence, between RJ[227]-[230], and we respectfully adopt that summary. His Honour then said this (at RJ[231]):

So much may be accepted. What his Honour was saying was that there was a qualitative correspondence between the subject matter of the actual and counterfactual releases, but no basis upon which they could be inferred to be quantitatively equivalent. We agree with both aspects of that conclusion; it is comfortably demonstrated by the summary of the evidence at RJ[227]-[230].

His Honour then went on, between RJ[232]-[236], to examine the evidence concerning events shortly before the publication of the November 2013 Revised Earnings Guidance. Between RJ[237]-[239], his Honour explained why the effect of that evidence was to demonstrate that the quantum of the downgrade disclosed in November was very much a product of the actual experience of the preceding months. Again, so much may be accepted.

What must also be appreciated from that evidence, however, is that the quantitative deterioration in WOR’s prospects that was appreciated in November 2013, was attributable to the same issues that had been known in August 2013. It is sufficient to refer to the ExCo meeting that was held on 19 November 2013. The minutes of that meeting recorded (see RJ[235]):

It is plain that WOR considered the fundamental cause of the downgrade disclosed in November to have been that experience had been worse than expected, but not in a way that was unforeseen. There is no indication that some new, unforeseen, issue had arisen. WOR had appreciated the issues, it had simply not anticipated that they would cause a reduction in NPAT to the extent that had become apparent by November 2013. In that context, it is worth repeating the critical part of the remitter judge’s ultimate conclusion at RJ[240]:

Once the sense in which Mr Torchio and Mr Holzwarth were using the term “economic equivalence” in relation to the reasons accompanying any particular figure of forecast NPAT is appreciated, that conclusion should have led his Honour to recognise that it was legitimate to have regard to the linear relationship analysis. That is to say, his Honour had accepted that there was correspondence between the “subject-matter” of the reasons in the two disclosures, and that the explanation for the quantitative difference between the two disclosures was the “worsening of the company’s position” (and not the introduction of some new cause or issue). Because the causes were qualitatively the same, albeit differing in degree, the economic relevance of the reasons to an assessment of WOR’s future cash flows was the same. It was not as if, to use his Honour’s example at RJ[190], there was an isolated one-off event, as opposed to a systemic problem for ongoing cashflows. The magnitude of the problem might have increased, but it retained its essential character. In substance, his Honour had found that the “underlying reasons would scale with the level of assumed revised NPAT guidance”, to use Mr Holzwarth’s phrase.

None of that is to deny, of course, that there are a number of other differences between the reasons that actually accompanied the November 2013 Revised Earnings Guidance, and those that would have accompanied the hypothetical non-contravening disclosure. Some of those differences are inevitable given the passage of time between WOR’s contraventions and its resumption of compliance with its legal obligations on 20 November 2013. The disclosure on 20 November 2013 was made, as WOR and the remitter judge emphasised, with the benefit of knowledge of an additional three months’ actual trading conditions. To that extent, there was necessarily a translation from risk to experience. The passage of time means that the disclosure in fact made on 20 November 2013 could never have been equivalent in all material respects to that which ought to have been made on 14 August 2013.

We accept that some of the differences between the November 2013 Revised Earnings Guidance and any counterfactual non-contravening disclosure would be such as to deny strict economic equivalence. The additional certainty provided by an extra three months of actual trading experience is a sufficient example. Such differences, though, we think, are examples of the sort of difficulties that make precise quantification difficult, if not impossible, and justify application of the facilitation principle.

The existence of some differences of that kind, though, does not destroy the overall impression of strong economic equivalence (albeit “scaled” in the sense described by Mr Holzwarth). In those circumstances, we think that the appropriate approach is to begin with Mr Torchio’s linear analysis, but to apply a discount to the loss figures suggested by it to reflect the difficulties we have identified. That is consistent with the observations of the Full Court in Generic Health Pty Ltd v Bayer Pharma Aktiengesellschaft [2018] FCAFC 183; (2018) 267 FCR 428 at [186]-[187] (Allsop CJ, Yates and Beach JJ):

Mr Crowley’s MFI-2 set out in numerical form the results of Mr Torchio’s linear analysis. As the remitter judge pointed out, there are two basic methods to compute artificial inflation, being percentage and dollar methods: RJ[196] (see also Myer at [757]-[774] (Beach J)). MFI-2 set out calculations of Mr Crowley’s loss on both bases. In Myer, Beach J said (at [760]-[763]):

With counterfactual disclosure of $329.5 million, the calculation methodology in MFI-2 is as follows:

Taking a broad-brush approach, so as to reflect the lack of precise economic equivalence between the reasons that would have accompanied the actual and hypothetical disclosures, we consider that it is appropriate to apply a discount of 15% to the losses that would otherwise have been indicated by Mr Torchio’s linear analysis. Applying that discount:

As to which of the constant percentage or constant dollar methods is appropriate, Mr Crowley argued for the former, while WOR contended for the latter. We consider that Mr Crowley is correct. This case falls comfortably within the rationale for the use of the constant percentage method, as described by Beach J in the passage to which we have referred above.

For the foregoing reasons, we would allow the appeal and dismiss the cross-appeal. The answers given by the remitter judge to questions 13 and 15 set out in the Joint List should be answered:

In those circumstances, it is apparent that Mr Crowley has enjoyed substantial success on the initial trial (including remitter), with the result that the orders made by the remitter judge in Crowley (Costs) dismissing the proceedings, and ordering Mr Crowley to pay WOR’s costs cannot stand. In their place, we would order that WOR pay Mr Crowley’s costs of and incidental to the initial and remitted trials. It is also appropriate that, subject to considering any contrary submission that the parties may make, WOR pay Mr Crowley’s costs of the appeal and cross-appeal. Any broader question of costs in relation to the proceedings generally is appropriately left to the remitter judge to deal with in the context of the resolution of all outstanding issues in the proceedings.