Babscay Pty Ltd v Pitcher Partners

The scheme of arrangement and Hall proceeding settlement deed 20 The Applicants in each proceeding previously brought shareholder class actions against S&G. Those claims were settled by the entering into of a deed of settlement executed on 21 September 2017 between Mr Hall and S&G and others ('Settlement Deed') and a scheme of arrangement between S&G and shareholder claimants ('Scheme'). The Settlement Deed and the Scheme contain, for present purposes, the same rights and obligations. 21 The Scheme relevantly contains the following definitions, many of which appear in similar terms in the Settlement Deed: "Permitted Claims" means Claims brought against a Third Party other than a Released Person in the Federal Court of Australia arising out of or in connection with a Shareholder Claim and are apportionable Claims by operation of the Proportionate Liability Provisions. "Proportionate Liability Provisions" means (a) Part 2, Division 2, Subdivision GA of the Australian Securities and Investments Commission Act 2001 (Cth); (b) Part 7.10, Division 2A of the Corporations Act; (c) Part VIA of the Competition and Consumer Act 2010 (Cth); (d) Part 4 of the Civil Liability Act 2002 (NSW); (e) Part IVAA of the Wrongs Act 1958 (Vic); (f) Chapter 2, Part 2 of the Civil Liability Act 2003 (Qld); (g) Part 3, Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA); (h) Part 1F of the Civil Liability Act 2002 (WA); (i) Part 9A of the Civil Liability Act 2002 (Tas); (j) Chapter 7A of the Civil Law (Wrongs) Act 2002 (ACT); and (k) Proportionate Liability Act 2005 (NT). "Released Claim" means any Claim against any Released Person … "Released Person" means: (a) the Company [S&G], its Related Bodies Corporate and their Related Entities; and (b) any present or past Officer, employee, servant or agent of any of the entities referred to in (a) above. "Shareholder Claim" means any Claim against Released Persons arising from or in connection with any fact, matter, circumstance or event occurring at any time in the 6 year period on or before the Proof Lodgement Date and which arises: (a) in a person's capacity as: (i) a member of the Company (including as a Shareholder); or (ii) a holder or beneficiary (whether directly or indirectly) of any Security or Financial Product in the Company; or (b) from a person buying, acquiring, holding, selling, transferring, converting or otherwise dealing (whether directly or indirectly) in any Shares, Security or other Financial Product in the Company. "Shareholder Claimant" means any person who has a Shareholder Claim … "Third Party" means any person who is not a Released Person. 22 The following aspects of the Settlement Deed and the Scheme should be noted. 23 The Shareholder Claimants released the Released Persons (which includes the Directors) from any Released Claims and released all Third Parties from any Shareholder Claims other than Permitted Claims. Shareholder Claimants could pursue Permitted Claims. 24 A Shareholder Claimant who pursues a Permitted Claim must proffer an undertaking to the Court to the effect that: (a) the Permitted Claim is subject to the operation of the Proportionate Liability Provisions; and (b) if a Court determines that any Permitted Claim is not subject to the operation of the Proportionate Liability Provisions or those provisions are not taken into account in the exercise of the Court's discretion, claimants will only seek damages or compensation in an amount not exceeding that which they would receive if the Proportionate Liability Provisions applied to the making of any such award (the 'Undertakings'). 25 Then, if a Permitted Claim against a Third Party gave rise to any claim against a Released Person, the Shareholder Claimants would indemnify the Released Person from any loss or damage arising therefrom to the extent of the amount actually paid or to be paid by the Third Party to the Shareholder Claimants in satisfaction of the claim. Further, the Shareholder Claimants would assign the benefit of any recovery against a Third Party to the Released Persons as security for that indemnity and unconditionally and irrevocably direct the Third Party to make payment in respect of any such recovery to the Released Person. 26 The Undertakings have been given purportedly under the Settlement Deed. I say purportedly, because there was some suggestion that the Undertakings ought not to be received by the Court. This matter was left to be dealt with at another time if the issue of the appropriateness of the Undertakings was to be further agitated. The appropriateness or otherwise of the Undertakings does not impact upon the Court's determination of the summary dismissal application. No party suggested otherwise. 27 One other matter to recall at the outset is that Pitcher Partners was not a party of the Settlement Deed and is not bound by its terms.

Statement of claim 28 Babscay alleges that Pitcher Partners made various representations to the Directors and to the investing market in respect of financial reports prepared for the 2012 to 2015 financial years, including that Pitcher Partners had formed the opinion that those financial reports gave a true and fair view of S&G's financial position and performance. Babscay alleges that these representations were misleading or deceptive because the relevant financial reports contained errors, and that had these representations not been made, S&G would not have published those financial reports, and also would not have formulated or published revenue guidance (which allegedly overstated S&G's forecast revenue) based on the same (erroneous) approach to revenue recognition contained in the financial reports. 29 The "causation chain" pleaded by Babscay is that Pitcher Partners' misleading or deceptive representations caused S&G to publish erroneous financial statements and erroneous revenue guidance to the market, which in turn caused the market price of the S&G shares acquired by Babscay and the group members to be inflated. That is, the causation aspect underpinning the Babscay claim is a combination of indirect reliance and market based causation that Pitcher Partners' wrongful conduct was relied on by S&G and thereby caused S&G to publish erroneous financial statements and guidance to the market (indirect reliance), which resulted in the market price of S&G shares being inflated and Babscay and group members acquiring their S&G shares at an inflated price (market based causation). There is no allegation that Babscay or any group member relied directly on: (a) Pitcher Partners' representations; (b) S&G's financial reports or revenue guidance; or (c) the directors' reports and directors' declarations in S&G's financial statements for the financial years 2012 to 2015 or in S&G's financial statements for the half-years ending 31 December 2012, 31 December 2013 and 31 December 2014 (the 'Directors' Reports and Declarations'). There is also no allegation in Babscay's statement of claim that any of the Directors' Reports and Declarations caused the market price of S&G shares to be inflated.

Amended defence and cross-claims 30 Pitcher Partners denies the allegations but says that, if it is liable to Babscay under the statement of claim, then each of the claims is an apportionable claim and that (inter alia) the Directors are concurrent wrongdoers and any liability of Pitcher Partners should therefore be limited. The amended defence also raises the independent claim referred to above, and significantly, also raises another matter which is separate and distinct from the apportionment defence, which is relevant to the cross-claims (which I will come to later). 31 Just looking at the apportionment defence, it invokes indirect reliance and market based causation as the basis for the alleged liability of the Directors to Babscay for Babscay's loss. As the Directors contended, the causation chain relied on is that: (1) two directors signed each of the Directors' Reports and Declarations, which were misleading; (2) after which (and in reliance on which) Pitcher Partners issued its audit and review reports; (3) which (as alleged by Babscay in its statement of claim) caused S&G to publish erroneous financial statements and erroneous revenue guidance to the market; and (4) which (as also alleged by Babscay in its statement of claim) caused the market price of the S&G shares acquired by Babscay to be inflated. 32 I will return to the amended cross-claims later.

Statement of claim 33 Mr Hall alleges Pitcher Partners represented to S&G shareholders, and to the market, that it had formed the opinion that S&G's 2015 financial report gave a true and fair view of S&G's financial position and performance and complied with the accounting standards, and that its opinion was based on reasonable grounds. Mr Hall alleges that Pitcher Partners' representations were incorrect and Pitcher Partners thereby engaged in misleading or deceptive conduct. 34 The "causation chain" pleaded by Mr Hall is that Pitcher Partners' misleading or deceptive representations caused the market price of the S&G shares acquired by Mr Hall and the group members to be inflated. There is an alternative causation allegation that Mr Hall and some group members relied directly on Pitcher Partners' representations in making their decisions to acquire or retain S&G shares. There is no allegation in Mr Hall's statement of claim that he or any group member relied directly on the Directors' Reports and Declarations. Nor is there any allegation in Mr Hall's statement of claim that any of the Directors' Reports and Declarations caused the market price of S&G shares to be inflated.

Amended defence and cross-claims 35 As in respect of the Babscay proceeding, Pitcher Partners denies the allegations in Mr Hall's statement of claim but says that, if it is liable to Mr Hall for any loss or damage alleged in the statement of claim, then each of the claims is an apportionable claim and that (inter alia) the Directors are concurrent wrongdoers and any liability of Pitcher Partners should therefore be limited. Again, as with the Babscay proceeding, the amended defence also raises the independent claim referred to above, and significantly, raises another matter which is separate and distinct from the apportionment defence which is relevant to the cross-claims (which I will come to later). 36 Again, just looking at the apportionment defence, it invokes indirect reliance and market based causation as the basis for the alleged liability of the Directors to Mr Hall for Mr Hall's loss. As the Directors contended, the causation chain relied on is that: (1) two directors signed the Directors' Report and Declaration for the financial year ended 30 June 2015, which were misleading; (2) after which (and in reliance on which) Pitcher Partners issued its audit report for that financial year; and (3) which (as alleged by Mr Hall in his statement of claim) caused the market price of the S&G shares acquired by Mr Hall to be inflated and/or induced Mr Hall to acquire his S&G shares. 37 I will come to the amended cross-claims in this proceeding later. 38 Before embarking on a discussion of the apportionment regime, I do observe that the Hall proceeding has a smaller compass to the Babscay proceeding, the former being concerned with the audit of the financial year 2015 only. The Babscay proceeding spans the period ranging from financial years 2012 to 2015. In addition, whilst the Babscay proceeding concerns breaches of revenue recognition standards, in relation to 'Work in Progress' (or WIP, as it is abbreviated), these allegations are not contained in the Hall proceeding. Whilst then the claims against Pitcher Partners in the Hall proceeding are of a somewhat narrower scope, and seek to place sole responsibility on Pitcher Partners as having certain non-delegable responsibilities as auditor, the amended cross-claims in the Hall proceeding at least have utility in going forward in respect of the independent claim made against the Directors and in view of the overlap of issues in the two proceedings.

APPORTIONMENT 39 Before I consider the amended cross-claims, I should outline the principles of the apportionment regime, which did not appear to be in dispute between the parties. 40 As explained by the High Court in Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd (2013) 247 CLR 613 ('Hunt & Hunt') at 624 [10] and 626 [16] (per French CJ, Hayne and Keifel JJ), the regime represents: [10] … a departure from the regime of liability for negligence at common law (solidary liability), where liability may be joint or several but each wrongdoer can be treated as the effective cause and therefore bear the whole loss. Under that regime, a plaintiff can sue and recover his or her loss from one wrongdoer, leaving that wrongdoer to seek contribution from other wrongdoers. The risk that any of the other wrongdoers will be insolvent or otherwise unable to meet a claim for contribution lies with the defendant sued. By comparison, under a regime of proportionate liability, liability is apportioned to each wrongdoer according to the court's assessment of the extent of their responsibility. It is therefore necessary that the plaintiff sue all of the wrongdoers in order to recover the total loss and, of course, the risk that one of them may be insolvent shifts to the plaintiff. … [16] The evident purpose of [the apportionment regime] is to give effect to a legislative policy that, in respect of certain claims … a defendant should be liable only to the extent of his or her responsibility. The court has the task of apportioning that responsibility where the defendant can show that he or she is a "concurrent wrongdoer", which is to say that there are others whose acts or omissions can be said to have caused the damage the plaintiff claims, whether jointly with the defendant's acts or independently of them. If there are other wrongdoers they, together with the defendant, are all concurrent wrongdoers. (Citations omitted) 41 I take the Corporations Act 2001 (Cth) ('Corporations Act') as an example, the apportionable claims made here being similar. Among other things, s 1041N of the Corporations Act provides that: (1) In any proceedings involving an apportionable claim: (a) the liability of a defendant who is a concurrent wrongdoer in relation to that claim is limited to an amount reflecting that proportion of the damage or loss claimed that the court considers just having regard to the extent of the defendant's responsibility for the damage or loss; … 42 A 'concurrent wrongdoer' is defined in relation to a claim, as a 'person who is one of two or more persons whose acts or omissions (or act or omission) caused, independently of each other or jointly, the damage or loss that is the subject of the claim': s 1041L(3). 43 Two questions are relevant: (1) what is the damage or loss the subject of the plaintiff's claim; and (2) is there another person (aside from the defendant) whose act or omission also caused that damage or loss? In that context, it is important to note the following matters: the phrase 'damage or loss' in the apportionment regimes means the 'harm suffered to the plaintiff's economic interests' and 'is not to be equated with what is ultimately awarded by the court, which is to say the "damages" which are … awarded' (Hunt & Hunt at 628-9 [24]); 'there is no express limitation on the nature of the claim that might have been brought by the plaintiff against a concurrent wrongdoer, except the requirement … that the acts or omissions of all concurrent wrongdoers have caused the same damage' (Hunt & Hunt at 627 [18]); it is not necessary 'that one wrongdoer contribute to the wrongful actions of the other wrongdoer in order that they cause the same damage', and there may be wrongdoers whose acts occur successively rather than simultaneously, and who may be liable for the same damage even though one may be liable for only part of the damage (Hunt & Hunt at 634 [41]); and the acts of a concurrent wrongdoer may cause the damage the plaintiff claims, whether jointly with the defendant's acts or independently of them (Hunt & Hunt at 626 [16]). 44 However, it is not enough that a person has contributed in fact to loss or damage suffered by a plaintiff to become a concurrent wrongdoer; that person must also have (or have had) legal liability to the plaintiff for that loss. 45 There is thus a distinction between causation in fact and causation giving rise to legal liability to a claimant for the same loss and damage. A critical aspect of the relevant enquiry is whether the acts or omissions by which the Directors misled Pitcher Partners resulted in legal liability to the Applicants. 46 In Hunt & Hunt, Bell and Gageler JJ at 649 [91] (on this point, the majority did not express any different view) described the requirement that a person identified as a "concurrent wrongdoer" must have a legal liability to the plaintiff, as follows: To answer the description of "a person … whose acts or omissions (or act or omission) caused" that damage or loss or harm, C (in common with B) must be (or have been) legally liable to A for the damage or loss that is the subject of the claim. The reference in the definition to "acts or omissions (or act or omission)" is to one or more legally actionable acts or omissions. The reference in the definition to acts or omissions having "caused … the damage or loss that is the subject of the claim" is not, as has correctly been held, merely to causation in fact. "Questions of causation are not answered in a legal vacuum" but "are answered in the legal framework in which they arise". The reference here is to causation that results, or would result, in legal liability. (Citations and original emphasis omitted) 47 This passage reflects the established legal position, as previously set out in Shrimp v Landmark Operations Ltd (2007) 163 FCR 510 at 521-3 [59]-[62] per Besanko J, St George Bank Ltd v Quinerts Pty Ltd (2009) 25 VR 666 at 681-2 [57]-[59] per Nettle JA, and subsequently in Latteria Holdings Pty Ltd v Corcoran Parker Pty Ltd (2014) 224 FCR 519 ('Latteria Holdings') at 523 [16] per Mortimer J. 48 The Court undertakes a statutory task of apportioning responsibility for the plaintiff's loss between the concurrent wrongdoers based on what is 'just'. In undertaking that task, the Court applies the law of apportionment developed in the context of contributory negligence. That requires the Court to make findings about: (1) the degree of departure from the standard of care of the reasonable person, as regards the causative conduct of the concurrent wrongdoers; and (2) the relative importance of the acts of the concurrent wrongdoers in causing the economic loss suffered by the plaintiff: Reinhold v New South Wales Lotteries Corporation (No 2) (2008) 82 NSWLR 762 ('Reinhold') at 778 [60] per Barrett J (citing Podrebersek v Australian Iron and Steel Pty Ltd (1985) 59 ALJR 492 ('Podrebersek') at 494). The Court then conducts a 'comparative examination of the whole conduct' of each concurrent wrongdoer 'in relation to the circumstances in which the loss was sustained': Reinhold at [60] per Barrett J (again citing Podrebersek at 494). The total amount separately determined in respect of each concurrent wrongdoer will together equal the plaintiff's established entitlement. 49 Significantly, section 1041P of the Corporations Act prevents claims for contribution and indemnity being made by the defendant against a person who has been found liable by the court as a concurrent wrongdoer. As stated in Dymocks Book Arcade Pty Ltd v Capral Ltd [2010] NSWSC 195 at [9] per McDougall J: The purpose of contribution … is to adjust rights and liabilities between, on the one hand, defendants to suits who are adjudged to be liable, and, on the other, those who are joined as cross-defendants and are adjudged also to have been liable for the loss in respect of which the defendant is adjudged liable. By contrast, the purpose of [the apportionment regime] is to enable that apportionment of liability to occur in the action brought by the plaintiff, whether or not those responsible for any damage suffered by the plaintiff have been joined as concurrent wrongdoers. Thus, as [the apportionment regime] works its way out, the judgment given against a concurrent wrongdoer who is a defendant will represent only that concurrent wrongdoer's proportion of responsibility. It will not reflect any proportion of responsibility that the court attributes to any other concurrent wrongdoer. It follows, in my view necessarily, that when a judgment is given against a concurrent wrongdoer in respect of an apportionable claim, that judgment is not one in respect of which the concurrent wrongdoer is entitled to contribution or indemnity from any other concurrent wrongdoer. That is because, on the hypothesis that [the apportionment regime] requires to be considered, no other concurrent wrongdoer has contributed to the particular loss which is the particular or apportioned responsibility of the concurrent wrongdoer who is sued and against whom a judgment is given.

THE AMENDED CROSS-CLAIMS 50 It is now necessary to consider the cross-claims as amended. Pitcher Partners responds to the claims made by the Applicants (in both proceedings) against it in various ways in order to account for various potential alternative outcomes. 51 Pitcher Partners primarily denies that it is liable to the Applicants in the circumstances alleged by them. It is said that if Pitcher Partners succeeds in defending all or part of the Applicants' claims, then Pitcher Partners will seek to have the Directors and S&G compensate Pitcher Partners for the expense incurred in having been exposed to the claims now made by the Applicants. 52 It is then said that if the Applicants succeed in establishing that Pitcher Partners is liable to them in respect of representations made by Pitcher Partners, the Directors and S&G are said to have made the same material representations (as to 'true and fair view', and compliance with accounting standards) to the relevant market. The Applicants do not make claims against the Directors or S&G (because the Scheme prevents them), nor do they seem to allege that the Directors made relevant representations in the Directors' Reports and Declarations. 53 The defences have been amended to make clear that there is an alternative defence to Pitcher Partners' primary denial, namely that if the Applicants succeed in establishing a legal liability for claimed losses as against Pitcher Partners, then the Directors and S&G also have a concurrent legal liability to the Applicants in respect of the making of the representations in the financial statements. Accordingly, it is said that Pitcher Partners' liability should be limited having regard to the Directors and S&G's culpability. 54 Then, significantly, the amended cross-claims allege that if the Applicants succeed in establishing that Pitcher Partners made representations and caused the Applicants' loss, the Directors and S&G are said to have owed a discrete legal liability to Pitcher Partners because of discrete representations made, or duties owed, by the Directors and S&G to Pitcher Partners directly. Those discrete representations are described collectively as the 'Representation Letter Conduct' in Babscay's amended cross-claim, a sample of which from financial year 2012 is extracted in the paragraphs below (similar conduct is also pleaded by Pitcher Partners in the Babscay proceeding in respect of financial years 2013 through 2015): 22. On or about a date prior to 7 September 2012 which is presently unknown to Pitcher Partners, each of Grech, Fowlie, Court, Skippen, Brown and/or Lane approved and authorised Slater & Gordon (through each of Grech and Brown) to issue a representation letter to Pitcher Partners in the terms pleaded in paragraph 23 below. 23. On or about 7 September 2012, Slater & Gordon (through each of Grech and Brown) issued a representation letter to Pitcher Partners which contained the following terms (the FY12 SGH Representation Letter), inter alia: a. that the financial report prepared by Slater & Gordon for the year ended 30 June 2012 was "free of material misstatements, including omissions"; b. that, to the best of their knowledge and belief, having made such enquiries that were considered necessary for the purpose of appropriately informing themselves: i. "We have fulfilled our responsibilities, as set out in the terms of the audit engagement letter dated 11 April 2012, for the preparation of the financial report in accordance with Australian Accounting Standards, the Corporations Act 2001, and other mandatory professional reporting requirements in Australia; in particular the financial report is fairly represented in accordance therewith."; ii. "Significant assumptions used by us in making accounting estimates, including those measured at fair value, are reasonable."; iii. "We have provided you with: • Access to all information of which we are aware that is relevant to the preparation of the financial report such as records, documentation and other matters; • Additional information that you have requested from us for the purpose of the audit; and • Unrestricted access to persons within the entity from whom you determined it necessary to obtain audit evidence."; iv. in relation to WIP: A. "There have been no events since 30 June 2012 that would indicate WIP is stated at an amount in excess of net realisable value"; B. "We believe that the WIP valuation methodology and provisioning procedures for all entities are sufficient in identifying and capturing any non-recoverable work in progress"; C. "Carrying value of work in progress had been calculated using consistent methodologies with those adopted in prior years and has been applied by all entities in the Group"; and D. "We have considered the value of self funded major project litigation and considered the current status and recoverability of each of these projects. We believe that the valuation of this work in progress was not stated in excess of the net realisable value"; and v. "We have provided you with all requested information, explanations and assistance for the purposes of the audit". 24. By reason of the matters pleaded in paragraph 22 to 23 above, each of the Cross-Respondents (other than O'Donnell) represented to Mr Pringle and Pitcher Partners that: a. significant assumptions used by Slater & Gordon in making accounting estimates, including those measured at fair value, were reasonable (the FY12 SGH Significant Assumptions Representation); and b. i. there had been no events since 30 June 2012 that indicated WIP was stated at an amount in excess of net realisable value; ii. the WIP valuation methodology and provisioning procedures for all entities were sufficient in identifying and capturing any non-recoverable work in progress; iii. carrying value of work in progress had been calculated using consistent methodologies with those adopted in prior years and had been applied by all entities in the Slater & Gordon Group; and iv. the valuation of work in progress for self-funded major project litigation work was not stated in excess of net realisable value, (together, the FY12 SGH WIP Representations). 55 The Representation Letter Conduct is also described in the amended cross-claims in the Hall proceeding, as extracted in the paragraphs below (as with other claims made in the Hall proceeding, the allegations of the Representation Letter Conduct is only made in the amended cross-claims in respect of financial year 2015): 25. On or about 29 September 2015, SGH (through each of Grech and Brown) issued a representation letter to Pitcher Partners which contained the following terms (the FY15 SGH Representation Letter), inter alia: (a) that, to the best of their knowledge and belief, having made such enquiries that were considered necessary for the purpose of appropriately informing themselves: (i) "We have fulfilled our responsibilities, as set out in the terms of the audit engagement letter dated 6 May 2015, for the preparation of the financial report in accordance with Australian Accounting Standards and the Corporations Act 2001, in particular the financial report gives a true and fair view in accordance therewith"; (ii) "Significant assumptions used by us in making accounting estimates, including those measured at fair value, are reasonable. In particular, we believe the value attributed to identifiable intangibles for the PSD acquisition are complete and have been valued using appropriate valuation assumptions and models"; (iii) "For business acquisitions in the period, appropriate consideration has been given to the identifiable assets acquired and the liabilities assumed at their acquisition-date fair values, including the consequential goodwill or bargain purchase gain recognised within each such transaction"; (iv) "We have provided you with: (A) "Access to all information of which we are aware that is relevant to the preparation of the financial report such as records, documentation and other matters"; (B) "Additional information that you have requested from us for the purpose of the audit; and" (C) "Unrestricted access to persons within the entity from whom you determined it necessary to obtain audit evidence"; (v) in relation to WIP: (A) "There have been no events since 30 June that would indicate WIP is stated at an amount in excess of net realisable value"; (B) "We believe that the WIP valuation methodology and provisioning procedures for all entities are sufficient in identifying and capturing any non-recoverable work in progress"; (C) "Carrying value of work in progress has been calculated using consistent methodologies with those adopted in prior years and has been applied by all entities in the group"; (D) "We acknowledge that the actual amounts billed may vary from the estimated amounts recognised in the financial report, however, we do not anticipate any material variations to the amounts recognised"; (E) "We have considered the value of self-funded major project litigation and considered the current status and recoverability of each of these projects. We believe that the valuation of this work in progress is not stated in excess of net realisable value"; (vi) "The integrity of the underlying work in progress data at QLS [Quindell Legal Services] is considered appropriate by senior management after adjustment for a representative sample of the underlying data issues within the population"; (vii) "The review of the percentage of completion assumption in the valuation of QLS work in progress by Compass Costs (a part of the QLS business) was sufficient and objective to produce reliable results for the valuation of work in progress"; (viii) "The forecasts, and underlying assumptions utilised in the goodwill impairment calculations of the cash generating units, being PSD… and the assumptions in relation to growth rates and working capital improvements represent management's reasonable estimate and have been adopted/approved by senior management"; (ix) "Further, the discounting applied to the forecasts to determine value in use adequately allows for expectations about possible variations in the amount or timing of those future cash flows, the time value of money, and the price for bearing the uncertainty inherent in the CGU's"; and (x) "The results of the PSD business and our increased understanding of the business since acquisition has not materially altered our expectations of the future results of the business and hence has not led to an impairment of the goodwill on acquisition". 26. By reason of the matters pleaded in paragraphs 24 to 25, each of the Cross-Respondents represented to Mr Fitzpatrick and Pitcher Partners, inter alia, that: (a) significant assumptions used by SGH in making accounting estimates, including those measured at fair value, were reasonable and that, in particular, the value attributed to identifiable intangibles for the acquisition of PSD were complete and had been valued using appropriate valuation assumptions and models (the FY15 SGH Significant Assumptions Representation); (b) the forecasts, and underlying assumptions utilised in the goodwill impairment calculations of the cash generating units, including relevantly, PSD, and the assumptions in relation to growth rates and working capital improvements represented management's reasonable estimate and had been adopted and approved by senior management (the FY15 SGH Goodwill Impairment Assumptions Representation); and (c) the results of the PSD business and SGH's increased understanding of the business since acquisition had not materially altered SGH's expectations of the future results of the business and hence had not led to an impairment of the goodwill on acquisition (the FY15 SGH PSD Goodwill Impairment Representation). THE COMPLAINT OF THE DIRECTORS 56 By the time of the hearing on 15 March 2019, the main thrust of the Directors' argument was that all of the allegations of wrongful conduct (apart from the independent claim) made against the Directors in the amended cross-claims would inevitably fail and would therefore be futile, only because the available relief would be at best nominal or of nil monetary value. As I have said, the Directors do not contend that there is no available reasonable cause of action pleaded by Pitcher Partners in the amended cross-claims. 57 For the purposes of argument, the Directors asked the Court to assume the following scenario: (a) the Applicants are successful at trial; (b) all of the wrongful conduct of the Directors alleged in the amended cross-claims, including the Representation Letter Conduct (which in its amended cross-claims Pitcher Partners alleges it relied on), was also alleged in the apportionment defences so that the allegations of wrongdoing against the Directors made in the apportionment defences mirrored those made against the Directors in the amended cross-claims (which is in fact the case since the amendments); and (c) the Directors did mislead Pitcher Partners (the 'Assumed Scenario'). 58 It was submitted that on the Assumed Scenario, the Court would first determine Pitcher Partners' liability for the Applicants' loss in the primary proceedings. In undertaking that task the Court would, in the context of the apportionment defences, consider all the conduct of the Directors (including the Representation Letter Conduct) and allocate responsibility for the Applicants' loss between each of Pitcher Partners, the Directors, and the other concurrent wrongdoers. Having done so, the Court would then turn to the amended cross-claims and consider whether the Directors were liable to Pitcher Partners for Pitcher Partners' liability to the Applicants (as determined by the Court in the primary proceedings). 59 It was submitted that, in undertaking that task, the Court would determine: (1) whether the Directors' wrongful conduct was a cause (at law) of Pitcher Partners' liability to the Applicants; and (2) if it was, whether the liability of the Directors for its wrongful conduct should be reduced (perhaps to $0 or to a nominal value, such as $1) by reason of Pitcher Partners' contributory negligence - i.e. its share of the responsibility for causing the loss claimed in the amended cross-claims, being Pitcher Partners' liability to the Applicants as determined by the Court in the primary proceedings. That would involve a second apportionment exercise in which the Court would have regard to identical facts and legal principles which it would have already considered in the context of the apportionment defences. 60 On the Assumed Scenario, it was submitted that the Directors could not be liable to Pitcher Partners under the amended cross-claims. This was because the allegations of wrongdoing on the part of the Directors made in the amended cross-claims would have already been considered in the context of the apportionment defences, for the purpose of determining Pitcher Partners' share of responsibility for the Applicants' loss relative to the share of responsibility for that same loss of the Directors and the other alleged concurrent wrongdoers. The apportionment regime will ensure that any judgment (damages) awarded against Pitcher Partners will represent only its proportion of responsibility for the Applicants' loss, and that any damages awarded against Pitcher Partners will not reflect any proportion of responsibility for that loss that the Court attributes to the Directors or any other concurrent wrongdoer. Accordingly, it was submitted that the claims made by Pitcher Partners against the Directors in the amended cross-claims to recover the damages awarded against it in the primary proceedings must fail, because the sole cause (at law) of Pitcher Partners' liability to pay those damages to the Applicants will be strictly Pitcher Partners' own wrongful conduct. In other words, the result of the anterior apportionment exercise conducted by the Court for the purposes of Pitcher Partners' apportionment defences will be that Pitcher Partners' liability for damages to the Applicants is exclusively referable to Pitcher Partners' own wrongful conduct, not the wrongful conduct of the Directors. 61 Alternatively, it was submitted that the amended cross-claims made by Pitcher Partners against the Directors to recover that liability would, in any event, be reduced to $0 or a nominal amount (such as $1) by reason of the contributory negligence of Pitcher Partners. 62 To summarise, it was submitted that the result of the anterior apportionment exercise conducted in the context of Pitcher Partners' apportionment defences would lead to the inevitable finding in the amended cross-claims that it is just that all (or all but a nominal amount) of responsibility for that liability should be attributed to Pitcher Partners given the relative contributions of Pitcher Partners' contributory negligence and the Directors' wrongful conduct to Pitcher Partners' liability to the Applicants. It was submitted that any other outcome could only arise if, based on identical facts and legal principles, the Court apportioned responsibility between the Directors and Pitcher Partners differently in the primary proceedings and the amended cross-claims. Given that the apportionment exercises will be conducted by the same judge hearing the primary proceedings and the amended cross-claims together, it was submitted that such a risk was not a real one, but merely theoretical. 63 On the Assumed Scenario, it was also submitted that both analyses set out above apply equally in relation to the head of loss in the amended cross-claims comprising any costs order made against Pitcher Partners in favour of the Applicants in the primary proceedings. Any judgment given against Pitcher Partners in the primary proceedings will represent only its proportion of responsibility for the Applicants' loss, and will not reflect the proportion of responsibility for that loss that the Court attributes to the Directors or any other concurrent wrongdoer. Any costs order against Pitcher Partners in favour of the Applicants in the primary proceedings can only be in respect of the judgments obtained by the Applicants against Pitcher Partners in those proceedings. It was submitted that those judgments will represent only Pitcher Partners' proportion of responsibility for the Applicants' loss. It was then submitted that any costs order against Pitcher Partners in the primary proceedings will be wholly occasioned by, and solely attributable to, its own wrongful conduct. No part of that costs order will be occasioned by, or attributable to, the wrongful conduct of the Directors. Accordingly, the claims made by Pitcher Partners in the amended cross-claims to recover any costs awarded against it in favour of the Applicants in the primary proceedings must fail, because the sole cause (at law) of Pitcher Partners' liability to pay those costs will be Pitcher Partners' own wrongful conduct. 64 Alternatively, if contrary to this submission, the Directors' wrongful conduct is properly regarded as a "cause" at law of Pitcher Partners' liability to pay the Applicants' costs of the primary proceedings on the Assumed Scenario, the claims made by Pitcher Partners against the Directors in the amended cross-claims to recover that liability would, in any event, be reduced to $0 or a nominal amount (such as $1) by reason of the contributory negligence of Pitcher Partners. 65 Then an alternative argument was put by the Directors. It was submitted that the situation in relation to all of the heads of loss claimed by the Pitcher Partners in its amended cross-claims (i.e. it liability to the Applicants in the primary proceedings for damages and costs, and its costs of defending those proceedings) is analogous to that which occurred in Pow v Davis (1861) 1 B & S 220; 121 ER 697 ('Pow v Davis'). In that case, the claimant was let into possession of a third party's property under a purported seven year lease which the defendant agent had incorrectly said he had authority from the third party to conclude. Ejectment actions were commenced by the third party, who relied on: (a) the agent's lack of authority; and (b) the fact that the purported seven year lease was not in writing as required by the statute of frauds and was therefore unenforceable. The third party was successful in the ejectment proceedings (i.e. the claimant unsuccessfully disputed both (a) and (b)). The claimant was ordered to pay the third party's costs of the ejectment action, and he also incurred significant costs in defending that action. He claimed by way of damages against the defendant agent both his own costs in defending the ejectment action and the costs he was ordered to pay the third party in that action. 66 Recovery of both was denied, because even if the defendant agent had the purported authority, the defence maintained by the claimant in the ejection action would have failed as the agreement for lease was oral only. In other words, by reason of the claimant's conduct in (wrongly) resisting ejectment - including on grounds 'beyond the warranty' given by the defendant agent - both the claimant's costs of defending the ejectment action and the costs he was ordered to pay the third party in that action were regarded in law as being caused by the claimant's own wrongful conduct. 67 Cockburn CJ said: Can [the claimant], then, hold the defendant responsible for the erroneous course he has himself adopted? No … Can it be said that a man is entitled, under these circumstances, to call on another person to indemnify him against the consequences in a manner on which he was bound to exercise his own discretion? 68 His Lordship answered this question in the negative, holding that the claimant's costs in defending the ejectment action and the costs he was ordered to pay the third party in that action were not 'comprehended in [and did not] naturally flow out of the warranty given by the defendant'. The conclusion was reached notwithstanding that, had the defendant agent not misrepresented his authority, the claimant would never had been a party to the ejectment action and would not have incurred the costs of defending that action or been subject to a costs order in favour of the third party. 69 The Directors submitted that on the Assumed Scenario, notwithstanding that the Directors misled Pitcher Partners, Pitcher Partners' subsequent wrongful acts and omissions in the conduct of its audits and reviews of S&G's financial statements (which acts and omissions directly or indirectly caused loss to the Applicants) have caused Pitcher Partners to be sued by the Applicants in the primary proceedings for damages and costs. Pitcher Partners' exposure to a judgment for damages and to adverse costs orders at the suit of the Applicants in the primary proceedings, and its costs of defending those proceedings, are not 'comprehended in and do not flow naturally out of' the 'warranty' given by the Directors in their representations made to Pitcher Partners. Pitcher Partners, as S&G's auditors, had statutory and contractual obligations in the conduct of the relevant audits and reviews conducted by it, which required it to do more than simply assume, and act on, the truth and correctness of the representations made to it by the Directors. 70 Adopting the language of Cockburn CJ in Pow v Davis, it was then rhetorically asked by the Directors: 'Can it be said that [Pitcher Partners] is entitled, under those circumstances, to call on [the Directors] to indemnify [it] against the consequences in a matter on which it was bound to exercise [its] own discretion?' The Directors said the answer is clearly 'No'. It was contended that applying the 'common sense' test of causation, the real and proximate cause of each of the heads of loss claimed by Pitcher Partners in its amended cross-claims is its own wrongful conduct. And further, it was contended this is so even if 'but for' the Directors wrongful conduct, Pitcher Partners would not have incurred any liability for damages or costs to the Applicants, or incurred the costs of defending the primary proceedings.

CONSIDERATION 71 In light of the amendments to the cross-claims I consider all the complaints of the Directors can be dealt with compendiously. The Court should not foreclose the possibility of Pitcher Partners cross-claiming in respect of the independent claim, the Representation Letter Conduct and the other representations made to Pitcher Partners by the Directors, where there is a very real chance that during an apportionment analysis links within the causation chain are found to be missing or the apportionment regime does not 'cover the field' of all the allegations made in the cross-claims. 72 There is no authority directly dealing with the situation confronting the Court in these proceedings, even on an 'indirect causation' chain. The representations of the Directors, the opinions of Pitcher Partners, and the 'indirect causation' chain and market based causation raise issues of law and fact upon which no definitive answer can be given at this stage of the proceedings. 73 There are a number of different layers of responsibility that might be attributed to the various parties, and this will involve an analysis of direct and indirect causation. The Directors' responsibilities are different from the responsibilities of Pitcher Partners, which form part of the chain of causation. It may well be that Pitcher Partners reliance on the Directors was reasonable, and this will need to be considered in assessing whether any liability should be placed upon Pitcher Partners in favour of the Applicants. After all, Pitcher Partners was dependent to a certain extent on the Directors for information and evaluation of the transactional matters and risk. There will be an issue as to whether Pitcher Partners was a cause of S&G and the Directors publishing erroneous financial statements. It is to be accepted that if the Applicants succeed against Pitcher Partners then the element of causation on the part of Pitcher Partners must have been established by the Applicants. This is part of the Assumed Scenario put forward by the Directors. However, there are still claims by Pitcher Partners relating to the liability of the Directors to Pitcher Partners and not to the Applicants. 74 The parties referred me to a number of authorities relevant to causation. These included Digi-Tech (Australia) Ltd v Brand (2004) 62 IPR 184 and ABN AMRO Bank NV v Bathurst Regional Council (2014) 224 FCR 1 ('ABN AMRO Bank'). Neither authority is directly on point having regard to their facts. To determine at this stage of the proceedings the authoritative legal position on causation and more significantly the application of the law to the facts is not appropriate. Even on the approach undertaken in ABN AMRO Bank, there will need to be an analysis of the representations of each party as to whether their representations were material to the decisions made by the Applicants: see, e.g. the discussion in ABN AMRO Bank at 271-3 [1374]-[1380]. 75 As Mortimer J said in Latteria Holdings at 525 [23]: Minds may differ on the application of the causation analysis required by the proportionate liability provisions, as the departures in characterisation between the majority and minority in Hunt & Hunt demonstrate. The essential nature of the causation inquiry is one of fact, and this emphasises the need for careful examination of the evidence in order to reach a conclusion about whether a person is or is not a "concurrent wrongdoer" for the purposes of the proportionate liability provisions. (Citations omitted) 76 One way or another, the amended cross-claims could raise separate issues to the questions that arise in the apportionment analysis, even on the Assumed Scenario. 77 In the event that the Applicants succeed, in whole or in part, against Pitcher Partners, Pitcher Partners could be exposed to a liability to compensate the Applicants because of the Directors' and S&G's conduct. It may not follow that the sole cause of Pitcher Partners' claimed losses would be Pitcher Partners' own wrongful conduct. 78 Assuming for example that Pitcher Partners is liable to pay the Applicants $10 out of the $100 loss suffered (as being the proportion of the Applicants' loss for which Pitcher Partners was "exclusively responsible"), the issues and facts giving rise to the apportionment for responsibility under the Proportionate Liability Provisions will only concern the relative responsibilities of Pitcher Partners and the Directors insofar as each has a legal liability to the Applicants. The resultant apportionment exercise will be based on the relative culpability of each wrongdoer for the losses that the Applicants are legally entitled to recover from them. At the end of that apportionment analysis, Pitcher Partners may have a legal liability to the Applicants as to $10. However, that is not the end of the matter. There are causes of action pleaded in the amended cross-claims against the Directors not available to the Applicants, but are available to Pitcher Partners, and they may enable Pitcher Partners to turn to the Directors and assert a claim that they should compensate Pitcher Partners for that $10 liability (plus any defence costs). 79 It is also to be recalled that Pitcher Partners allege it has been exposed to defending the primary proceedings by the conduct of the Directors. This constitutes a separate head of loss: a loss arising from a legal liability owed by the Directors to Pitcher Partners, not to the Applicants. Assuming that Pitcher Partners successfully defends the primary proceedings on the basis of liability, not merely apportionment, then Pitcher Partners will be entitled to an award of costs against the Applicants, but such an award would not be sufficient to compensate Pitcher Partners completely and may never be recovered from the Applicants. Pitcher Partners' costs will be significant. This gives rise to the independent claim. 80 Putting aside the above analysis, the Court has a discretion whether to accede to an application for summary judgment. 81 I am mindful of a number of aspects of case management relevant to addressing the amended cross-claims, specifically whether to dismiss them. The Directors and the Applicants submitted that there was substantial utility in the Court determining the status of the original cross-claims now (rather than at the conclusion of trial) and acting now to dismiss or permanently stay them. 82 It was submitted that the pursuit of the original cross-claims would add significant complexity and time to the proceedings. Should the original cross-claims be permitted to continue, the Directors will file defences to the cross-claims, which, among other things, will allege contributory negligence on the part of Pitcher Partners and potentially raise apportionment defences amongst the Directors as concurrent wrongdoers. It was also suggested that not only will new and complicated issues require determination within the proceedings, but the participation of the Directors as additional parties will inevitably require the Directors to provide discovery and adduce evidence and make submissions. This would complicate case management and settlement negotiations, and would increase the potential for further interlocutory disputation throughout the proceedings. Each of these steps would increase costs and ultimately reduce any sum to be made available to group members should the Applicants' claims be successful, or a settlement achieved. 83 The Directors had indicated an intention to make claims against Mr Hall for the costs of defending the cross-claims under the indemnity contained within cl 14.4 of the Scheme and cl 10.2 of the Settlement Deed. In light of the fact that the Directors may raise proportionality defences against each other (possibly requiring the Directors to obtain separate representation), to the extent such costs cannot be recovered from Pitcher Partners at the conclusion of trial, Mr Hall could be exposed to the cost of a further seven sets of separate legal teams. It was thus submitted that Mr Hall and the group members ought not to be burdened by longer and more complex proceedings, and the risk of a greatly reduced judgment or settlement sum net of costs, through Pitcher Partners' prosecution of the original cross-claims which are misconceived and of no utility. 84 In this regard, the Directors relied upon affidavits from Mr Leon Zwier, a very experienced litigation practitioner, addressing the impact on the Directors in actively defending the amended cross-claims. 85 Mr Zwier deposed in his affidavit sworn 4 March 2019: In my opinion, based on my professional experience, my clients will incur significant costs, likely millions of dollars, if they were to actively defend the Amended Cross-claims. I am informed by my clients, and believe, that if the cross-claims were confined to the Proposed Further Claim, then subject to further legal advice it is likely that, notwithstanding that they would be bound by the outcomes of the Proceedings, they would decide: (a) not to actively defend the Proposed Further Claim, on the basis that the Pitcher Partners' Amended Cross-claims do not identify a feasible basis for the Proposed Further Claim to be successful; and (b) (to the extent possible) not to participate in the Proceedings, adopting instead a largely passive role in the Proceedings. Such a decision would be made on the basis that the risk of the Directors being found liable under the Proposed Further Claim is so low as not to warrant the significant costs that would be incurred by them in actively defending that claim. Such a largely passive role might result in my clients deciding: (a) not to obtain expert evidence relating to the issue of whether the financial statements of the First Cross-respondent for the 2012 lo 2015 financial years gave a true and fair view and were prepared in accordance with Australian Accounting Standards. Given that the Proposed Further Claim is premised on the Applicants being wholly unsuccessful (presumably on the basis that the relevant financial statements did give a true and fair view and were prepared in accordance with Australian Accounting Standards), there would appear to be little or no utility in my clients incurring the significant cost of obtaining such expert evidence if the only claim they are subject to on the cross-claims is the Proposed Further Claim; (b) not to include in their defences to the cross-claim in each Proceeding an allegation of contributory negligence by Pitcher Partners; (c) not to include in their defences to the cross-claim in each Proceeding apportionment defences based on each of the other Cross-respondents to that cross-claim being concurrent wrongdoers (Apportionment Defences); (d) not to make claims against the Applicant in each Proceeding for an indemnity under clause 14.4 of the scheme (being exhibit LZ-1 to my 26 November 2018 affidavit); and (e) not to obtain separate representation by reason of any potential conflicts that may arise by reason of the Apportionment Defences. 86 It was on the basis of this evidence that counsel for the Directors contented that there was a real utility in dismissing the original cross-claims, notwithstanding that the independent claim will go forward. 87 There is no doubt that the claims in the amended defences and the amended cross-claims will involve an analysis of similar legal and factual material - to that extent no appreciable advantage is gained by dismissing some of the cross-claims. However, that is not the end of the enquiry. The real complaint is that the Directors are joined as parties and will be subject to the Court's interlocutory processes and will need to participate at trial. 88 I accept that in some circumstances there may be a practical utility in striking out certain paragraphs of a pleading even though the proceeding will otherwise continue to trial; where for instance the task of discovery or other interlocutory steps is significantly increased by reason of the allegations made in a pleading: see, e.g. Brown v Forest Hill Shopping Centre Pty Ltd (unreported, Ryan, Heerey and Sackville JJ, 25 March 1996) ('Brown'). However, it is to be recalled that Brown was a case where the Full Court found that there was "no tenable basis" for the pleading eventually struck out, based upon then recent High Court authority directly in point, specifically Bryan v Maloney (1995) 182 CLR 609. This is to be contrasted to the position before me. 89 Despite the submissions made by the Applicants and the Directors, I am not convinced of the dire consequences that will result if the Directors are left to defend the whole of the amended cross-claims at trial. The Court has a wide range of powers available to it to accommodate the interests of all parties and the efficient progression to trial of litigation and the efficient conduct of a trial itself. 90 The Directors are receiving legal advice and can determine on the basis of that advice, particularly in view of the position taken on the summary dismissal application, how to defend the claims now made against them. By that I mean, there is always a choice to be made by every represented litigant on how to defend a claim. The Directors are currently in a position to decide whether to take a largely passive role based on legal and expert advice, and predictions as to the role taken by other parties in defending the claims made by the Applicants. The decisions that are suggested in Mr Zwier's affidavit that the Directors will take or could take can all be made now based upon this information. In addition, as to costs, there are various procedures whereby the Directors can seek to protect themselves from the cost consequences they fear in bearing joined as cross-respondents. 91 In any event, even if the Directors do wish to obtain expert evidence, plead certain matters in their defences as mentioned by Mr Zwier, and make claims against the Applicants, these are matters that can be case managed so that there is a reduced impact on future interlocutory steps and the trial itself. 92 For instance, depending on what expert evidence is filed by other parties, a further expert may not be required, or may not be permitted by the Court, to avoid duplicating existing evidence. Defences of contributory negligence and apportionment will not necessarily add any complexity. If there are claims for indemnity against the Applicants, these would also not add to the complexity of the proceedings, although such claims would be unwelcomed by the Applicants. 93 In the event that potential conflicts exist or may arise by reason of the apportionment defences, these can be also be managed. It may be that separate representation will be asked for by a particular director. However, if the Directors are fully informed of the conflict and its extent, or otherwise all the Directors' interests align in fact, the potential of conflict may not eventuate in the need for separate representation for each director. 94 As to discovery, the Court can control its extent as it is a discretionary procedure. The discretion must be exercised in a way that best promotes the overarching purpose of the civil practice and procedure provisions set forth in s 37M of the Federal Court Act and the Rules: Power Infrastructure Pty Ltd v Downer EDI Engineering Power Pty Ltd (No 4) [2012] FCA 143 at [14] per Katzmann J. On applications for discovery, the Court has a broad discretion and will balance the costs, time and possible oppression to the producing party against the importance and likely benefits to the applying party: United Salvage Pty Ltd v Louis Dreyfus Armateurs SNC [2006] FCA 116 at [3] per Tamberlin J. If discovery orders are made, they can be tailored to suit the particular circumstances of the case: Taylor v Saloniklis [2013] FCA 679 at [7] per Besanko J. 95 In addition, the party seeking discovery bears the onus of satisfying the Court that the documents sought are necessary: Trade Practices Commission v CC (New South Wales) Pty Ltd (No 4) (1995) 58 FCR 426 at 436 per Lindgren J. If ordering discovery from cross-respondents has "the very real potential to duplicate the discovery already provided by [another party]", the discovery may be oppressive and be refused or limited in operation: BrisConnections Finance Pty Ltd (Receivers and Managers Appointed) v Arup Pty Ltd [2015] FCA 1077 at [60] per Flick J. 96 As I have mentioned, the responsibilities of the Directors will need to be addressed in any event by reason of the amended defences, and there are now potential claims made outside the apportionment regime. By reason of Pitcher Partners' amended defences, the Directors cannot avoid being embroiled in this litigation putting aside the allegations in the amended cross-claims. 97 As I have indicated, in the course of the determination of the Directors' responsibilities, there will be complicated issues of fact and law relevant to issues of causation which cannot be addressed summarily. There will be complexities in a consideration of the apportionment regime already apparent in the amended defences and in the amended cross-claims brought by Pitcher Partners. 98 Therefore, in light of my views above, including the fact that the amended cross-claims will proceed in any event in relation to the independent claim and the fact that the amended defences raise similar issues with respect to the Directors' responsibilities (as raised in the amended cross-claims), I would not summarily dismiss or permanently stay the cross-claims even if I was persuaded that the prosecution of some element of the cross-claims was of no utility on the basis submitted by the Directors. 99 I return to one final matter. It is to be recalled that by 15 March 2019, the Directors were contending that the Court ought to dismiss summarily the original cross-claims notwithstanding the independent claim could go forward. It was then suggested that the Court should temporarily stay the independent claim. The Directors indicated through counsel that if that course were taken they would agree to be bound by all findings of fact made at trial. If it eventuated then that Pitcher Partners were wholly successful and obtain costs orders against the Applicants, and there was a shortfall between the costs orders and the costs incurred, the independent ground could then be re-enlivened by the Pitcher Partners. 100 This matter was not debated by the parties. Whilst I have not dismissed the original cross-claims, consideration could be given to the possibility of a temporary stay of the amended cross-claims after defences have been filed to the amended cross-claims. The Directors may then be in a position to re-consider how they wish to participate in the proceedings. However, as I have said, the amended defences will in any event raise issues relating to the Directors' responsibilities, some going to the applicability of the apportionment regime. 101 In addition, in view of the narrower compass of the Hall proceeding, the Court will be mindful to accommodate the efficient conduct of interlocutory steps and the hearing of the two proceedings. For instance, it may be possible to excuse certain parties from participation in specific interlocutory hearings and for part of the trial itself. Again, once the defences to the cross-claims have been filed, the Court and the parties will be in a better position to address the future case management of these proceedings. 102 At the next case management hearing, or at another appropriate time, the Court will need to consider the future conduct of the amended cross-claims, keeping in mind the possible ramifications as indicated by Mr Zwier, and the Court's ability to manage the future conduct of the proceedings in their entirety pursuant to s 37M of the Federal Court Act. I certify that the preceding one hundred and two (102) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Middleton.

SCHEDULE OF PARTIES VID 1188 of 2017

VID 918 of 2018 Cross-Respondents Second Cross-Respondent ANDREW ALEXANDER GRECH Third Cross-Respondent KENNETH JOHN FOWLIE Fourth Cross-Respondent IAN ROBERT COURT Fifth Cross-Respondent RAYMOND JOHN SKIPPEN Sixth Cross-Respondent ERICA MAREE LANE Seventh Cross-Respondent RHONDA O'DONNELL Eighth Cross-Respondent WAYNE BROWN