The Court held (dismissing the appeals):
As to Issue (i):
1. The primary judge did not err in rejecting the respondents' contention that the expression "financial position" in the MAE Representation should be construed narrowly so as to be limited to changes in Arrium's financial position as disclosed in its balance sheet: [162]; and once that construction is rejected, little may turn on whether the primary judge erred in preferring an intermediate construction of the expression as opposed to the broad construction for which the appellants had contended: [168].
2. To the extent necessary, the Court would, like the primary judge, have adopted the intermediate construction for the reason that the provision's purpose was to protect a lender from a change that would have been disclosed to it if accounts at the date of the relevant drawdown notice and respective drawdown date, such that the term is concerned with the financial position as represented in the accounts: [169]. If unconfined to the Accounts, the term would be so vague and potentially extensive that its scope would be indeterminable; the parties would have been unlikely to have intended this: [169].
3. The primary judge did not err in finding that the failure to achieve the desired price of MolyCop itself was not a material change in financial position for the purposes of the MAE Representation: [186]. The conclusion of a sale price less the value of which it was carried in the accounts, might well have been a change in financial position, as similarly might be a devaluation of the MolyCop asset, since this would affect the net asset position (changes in which his Honour accepted would fall within the concept of a change in financial circumstances as they would be reflected in the accounts). However, it was not until after final bids were received (on 3 February 2016) that the concerns as to the viability of the sale materialised, and the value of the MolyCop business was not written down at any relevant time: [186].
4. The primary judge did not err in finding that there was a change in financial position that constituted a MAE by reason of the Arrium Board considering the Going Concern Note on 11 February 2016 ([200]); the Note represented a change in Arrium's financial position when the directors became aware of material uncertainties casting significant doubt upon the entity's ability to continue as a going concern: [200]-[203]. It makes no difference even if, as contended by both sets of appellants, the factors or circumstances that gave rise to the inclusion of the Going Concern Note subsisted as at 31 December 2015 (noting that the Going Concern Note speaks as to the position at that date) or even earlier, because the directors had not at that stage formed the requisite state of awareness: [201].
5. It follows from the finding by the primary judge that there was a change in financial position constituting a MAE from 11 February 2016 that, at the date of the last of the impugned drawdown in the BBVA case on 16 February 2016, and not in respect of the drawdown notice pursuant to which it was made, which was dated 10 February 2016: [207]. Thus, BBVA ground 23 is made good, however, the Court's conclusions on the issues of reliance and causation apply a fortiori to a deemed representation given automatically, with the consequence that BBVA's success on this ground is immaterial: [208].
6. The primary judge did not err in finding that the MAE Representation was not shown to be false on each occasion it was given before 11 February 2016; even if there was a MAE, it cannot render the MAE Representation(s) false before the relevant change of financial position occurred (which was on 11 February 2016): [209]-[210].
7. The MAE Representation was not confined to monetary obligations under the facility agreements but included other obligations, including the ratio covenants. However, the mere fact that the ratio covenants had less "headroom" to operate does not establish a significantly increased risk of breaching the ratio. Therefore, the primary judge did not err in finding that the changes in the Gearing Ratio and ICR did not constitute a change in financial position that was a MAE at least before 11 February 2016: see [225].
As to Issue (ii):
1. As the primary judge recognised, there is a distinction between proof of the relevant fact (present insolvency) and the prediction of the prospect of an inability to pay a future debt when it falls due: [245]. Whether a company is insolvent concerns a company's present inability to pay all debts, as and when they become due and payable; it is only insolvent when it is unable to pay its debts as and when they fall due: [244].
2. The primary judge did not err in finding that Arrium was not shown to be insolvent, and therefore that the Solvency Representation was not shown to be false: [263]. Long-term debts could be of little significance in the assessment of solvency as at January and February 2016: Arrium's debts in question would not mature for another 16 months; they were also of the kind that were typically rolled-over or refinanced upon becoming due; Arrium was still trading and paying its debts when they fell due; the market they operated in was cyclical and volatile and it was anticipated that the prices for commodities, including iron ore, would improve: [248]. None of the traditional indicia of insolvency was present for Arrium in January or February 2016: [253]; [263].
Insurance Commissioner v Associated Dominions Assurance Society Proprietary Limited (1953) 89 CLR 78; [1953] HCA 94, distinguished.
1. One of the purposes of s 436A of the Corporations Act is to enable the directors to appoint administrators before a company becomes insolvent, and therefore ensure that the company does not trade whilst insolvent: [257]. The Arrium Board resolving to appoint administrators on 7 April 2016 establishes no more than that the directors were of the opinion that Arrium was likely to become insolvent at some future time: [257]. This conclusion is supported by the fact that on 1 April 2016, the lenders had lost confidence in the Board: [258].
As to Issue (iii):
1. The primary judge did not err in finding that the Arrium Entities did not owe the lenders a duty of care in making the impugned representations: [272]. The lenders had minimal vulnerability given their capacity to take measures for their own protection, with the reasonable expectation that they would do so; their reliance on Arrium was minimal, given their position to make their own informed and independent judgment as to their commercial interests; there was not proximity in a relational sense - the lenders to Arrium had adverse interests; and conformance and coherence in the structure and fabric of common law favours leaving the rights and obligations of commercial parties to the contractual terms by which they agree that their relationship was to be governed: [268]; [270].
As to Issue (iv):
1. In obiter. As to whether a person is liable as an accessory to a tort, the question is whether a person is liable as a joint tortfeasor, such that the cause of action against each joint tortfeasor is the same, such as where the tort has been committed by one on behalf or in concert with another: [276]-[290]. Therefore, the liability for each tortfeasor is principal, not accessorial, in nature: [290].
The Koursk [1924] P 140; Petrie v Lamont (1842) Car & M 93; 174 ER 424; Townsend v Haworth (1875) 48 LJ Ch 770n; Innes v Short & Beal (1898) 15 RPC 449; XL Petroleum (NSW) Pty Ltd v Caltex Oil (Australia) Pty Ltd (1985) 155 CLR 448; [1985] HCA 12; CBS Songs Ltd v Amstrad Consumer Electronics Plc [1988] AC 1013; Myers Stores Ltd v Soo [1991] 2 VR 597; Sabaf v Meneghetti [2002] EWCA Civ 976; Generics (UK) Ltd v H Lundbeck A/S [2006] EWCA Civ 1261, considered.
1. In obiter. The primary judge did not err in finding that neither Mr Bakewell nor Ms Sparkes could be jointly liable with Arrium for any breach of duty by Arrium, nor as accessories for any such breach: [300]. The liability of a director for procuring a tort of the company is a form of joint liability, the director and the company being joint tortfeasors, with the director having been so personally involved in directing or procuring the tort as to "make it his or her own" tort; above and beyond reasonably and in good faith directing the company's decision-making as a director: [293]. A doctrine of accessorial liability in negligence would serve no purpose because the circumstances which would potentially attract liability on that basis would attract liability as a principal in any event: [293]-[299]. The mere fact that the director or officer or employee is the instrument by which the breach of the company's duty is initiated or committed does not, in the absence of a personal duty of care, render the director, officer or employee liable: [299].
JR Consulting & Drafting Pty Ltd v Cummings [2016] FCAFC 20; (2016) 329 ALR 625, considered.
Yuille v B & B Fisheries (Leigh) Ltd [1958] 2 Lloyds Rep 596; Australian Executor Trustees Limited v Propell National Valuers (WA) Pty Ltd [2011] FCA 522, distinguished.
As to Issue (v):
1. The primary judge erred in holding that Ms Sparkes owed a personal duty of care in respect of the 31 December conversation; rather, Ms Sparkes was acting only in her capacity as an officer of Arrium such that Morgan Stanley would have understood she was acting in said capacity; there was nothing she did to represent that she was acting in a personal capacity: [303]-[304].
As to Issue (vi):
1. In obiter. The primary judge did not err in finding that the Bakewell Direction was first raised by Bakewell before 18 December 2015, and in a manner which was not intended to nor understood to have mandatory or immediate effect, and no action was taken to implement it until it was restated on 8 February 2016 to Ms Pearce: [326]. On balance, the objective evidence favours the view that the initial conversation occurred before 18 December: [319]. The absence of reaction to the Bakewell Direction before February 2016, the absence of communication regarding this instruction and the repetition of the instruction in February 2016 all tell against any understanding that the Bakewell Direction was to be implemented immediately: [321]-[323]. Further, there was nothing to show that those who had authorised an impugned notice before 8 February 2016 were aware of the Bakewell Direction (especially given that Ms Sparkes was on leave) and therefore they were not acting upon it: [324]
As to Issue (vii):
1. The primary judge was correct to find that if Ms Sparkes or Mr Bakewell were liable as accessories, it was necessary that they be shown to have actual knowledge of the falsity of the relevant representation: [343]. As to whether an individual is liable as an accessory, the starting point is the language used in the statute: [330]. Where a contravention is of the prohibition on engaging in misleading or deceptive conduct, one can be "knowingly concerned" in it only if one knows that the conduct is misleading or deceptive; knowledge of facts which, had one thought about it, might have led one to conclude that the conduct was misleading or deceptive, does not equate to knowledge that the conduct was misleading or deceptive: [330]. Further, a person who knows that another is going to make certain representations, but does not know that they are misleading, cannot be said to be knowingly concerned in the other engaging in misleading conduct: [342].
Australian Competition and Consumer Commission v IMB Group Pty Ltd [2003] FCAFC 17; Australian Securities and Investments Commission v Rent 2 Own Cars Australia Pty Ltd [2020] FCA 1312; (2020) 147 ACSR 598; Butt v Tingey [1993] FCA 530; (1993) ATPR (Digest) 46-110, considered.
Yorke v Lucas (1985) 158 CLR 661; [1985] HCA 65, discussed.
1. The primary judge did not err in finding that it was not established that either Ms Sparkes or Mr Bakewell was wilfully blind to the falsity of the MAE Representation: [354]. Wilful blindness equivalent to actual knowledge may be found from a combination of suspicious circumstances and a failure to make inquiry, but constructive knowledge does not suffice: [346]. Although Ms Sparkes knew that there had been a negative change in Arrium's financial position, there was no evidence that she knew this amounted to a MAE: [348]. Further, if Ms Sparkes was not negligent in making enquiries; she was not wilfully blind: [351]. Similarly, there was no evidence which suggested that Mr Bakewell had turned his mind to the accuracy of the MAE Representation(s): [352].
Australian Competition and Consumer Commission v IMB Group Ltd [2003] FCAFC 17; Butt v Tingey [1993] FCA 530; (1993) ATPR (Digest) 46-110, applied.
As to Issue (viii):
1. Although the status of an individual as an employee does not divest them of personal liability for contraventions committed as an employee, it is not sufficient for one to be liable for a corporation's contravention merely that they are an officer or employee: [356]. In cases of misrepresentation, the question is whether the representee would reasonably regard the representation as being made by the director or employee as well as the corporation, or in other words, to whom the conduct is in law attributable: [362].
Cassidy v Saatchi & Saatchi Australia Pty Ltd (2004) 134 FCR 585; [2004] FCAFC 34; Gardam v George Wills & Co Ltd [1988] FCA 289; (1988) 82 ALR 415, discussed.
Australian Securities and Investments Commission v Narain (2008) 169 FCR 211; [2008] FCAFC 120, distinguished.
1. The primary judge did not err in finding that neither Mr Bakewell nor Ms Sparkes personally engaged in misleading or deceptive conduct, even if the representations were false: [371]. The representations made through the use of "We" in the impugned notices were required by the underlying facility agreements, and made by the "Authorised Officer" of Arrium as an agent, rather than in any personal capacity; the readers of the notices would not have understood Ms Sparkes or Mr Bakewell as making any representations beyond their purely ministerial positions within the company: [370].
As to Issue (ix):
1. The primary judge did not err in finding that causation occasioning loss was not made out: [395]. Where contravening conduct involves misrepresentations, the ultimate inquiry is one of causation, not reliance, and the "but for" test which is inherent in counterfactual analysis, while often useful, is not the entire inquiry as to causation; the fundamental question is whether the (assumed) misleading character of the representations caused loss: [381]. The lenders had to have relied on the truthfulness of the representation itself, not the mere fact that the impugned notice was issued: [394(1)].
2. The lenders failed to adduce evidence that anyone on behalf of any lender adverted to the content of the relevant representations so as to rely on their truthfulness, rather, there was substantial evidence that the lenders did not read the representations in the notices: [388]-[390]; [394(3)]. Rather, there was evidence adduced that the lenders were carefully monitoring and making their own assessment of Arrium's financial circumstances, rather than relying on what was represented by Arrium: [391]; [394(4)].
As to Issue (x):
1. In obiter. The primary judge did not err in finding that, if Ms Sparkes did owe Morgan Stanley a personal duty of care, there was no reliance on her representations so as to occasion loss: [399]. Evidence suggested that Morgan Stanley probably made its own assessment of Arrium's financial circumstances and the risks of honouring or not honouring the relevant drawdown notice, and did not rely on anything Ms Sparkes said: [398].
As to Issue (xi):
1. The Anchorage appellants did not require leave to appeal from the indemnity costs order against Ms Sparkes or Mr Bakewell, as they had substantive grounds of appeal as of right, and had the right to challenge the indemnity costs order; the appeal raised bona fide substantive grounds and challenged the indemnity costs order and is not an appeal as to "costs only" within the meaning of s 101(2)(c) of the Supreme Court Act 1970 (NSW): [416]. Conversely, the Anchorage appellants did require leave to appeal against the Signatories, as it was a costs only judgment: [417].
Housman v Camuglia [2021] NSWCA 106, followed.
1. As a general rule, leave to appeal will only be granted where there is an issue of principle or general importance, or an injustice can be demonstrated with reasonable clarity: [418]. Where leave to appeal is required in respect of an order made in the exercise of judicial discretion, the applicant for leave must identify an arguable error of the kind described in House v The King: [418].
Ross v Lane Cove Council [2017] NSWCA 299, considered.
House v The King (1936) 55 CLR 49; [1936] HCA 40, applied.
As to Issue (xii):
1. The primary judge, in exercising discretion to award indemnity costs, was entitled to consider, as a matter of the relevant fact, whether a party who has been provided a genuine offer of compromise sought an extension of time before the offer expired, as each case will turn on its own facts: [422].
2. The primary judge was entitled to determine what weight to give to unchallenged evidence regarding a party's assertion that it had little time to consider the strengths and weaknesses of its case, and it may be inferred that the primary judge considered factors including the size and strength of a party's legal team: [423].
As to Issue (xiii):
1. The Signatories failed to demonstrate any House v The King error to warrant a grant of leave: [429]. The objective evidence demonstrated that the Anchorage appellants were not hoping for a better offer to be made in the future, as opposed to whether a joint or global offer were to be made on behalf of multiple opposing parties; the latter is a relevant consideration for a judge to take into account when making an order as to costs: [430].