Brosnan v Katke

THE COURT: Introduction [1] The background [7] The appellants' claims at trial [46] The primary judge's decision [51] The 2009 Settlement Deed [51] The 2005 Representations [55] The grounds of appeal [60] The first group of appeal grounds: the Business Plan Representation [62] The second group of appeal grounds: the 2005 IPO Representation [63] The first group of appeal grounds: the Business Plan Representation [64] Mr Katke did not represent that the projections "would be achieved" (grounds 9 and 17) [64] There was a reasonable basis for the financial projections (ground 11) [84] The appellants did not rely on the financial projections (ground 15) [95] Another reason why the first group of appeal grounds might still have failed [112] The second group of appeal grounds: the 2005 IPO Representation [115] Conclusion and the notice of contention [126]

Introduction 1 At the heart of this appeal were a number of challenges to findings of fact by the primary judge. In broad summary, the events with which the trial was concerned began with an agreement between the appellants and the respondents in 2005. That agreement involved the sale of shares by the appellants in exchange for millions of dollars and shares in the company, Metagenics. A dispute arose. Negotiations for settlement began. The parties eventually settled their dispute in a 490 page Settlement Deed on 31 July 2009. 2 The claim before the primary judge involved the appellants' attempt (i) to rescind the 2009 Settlement Deed, and (ii) to rescind the 2005 Agreement. The appellants wanted both agreements rescinded so that they could revest the shares that they sold in 2005 and which had appreciated in value at a much greater rate than the Metagenics shares that the appellants acquired. Alternatively the appellants claimed damages for loss of a chance in the amount of more than four times the price that they obtained in the 2005 Agreement. 3 The appellants' claim to rescind the 2009 Settlement Deed was for alleged misleading or deceptive conduct. The allegations of misleading or deceptive conduct which were relied upon for this appeal concerned financial projections in a Business Plan produced in January 2009. Those financial projections turned out to be incorrect. The appellants alleged that the respondents had represented that the projections "would be achieved". The primary judge concluded that the alleged representation that the projections "would be achieved" had not been made, but that even if it had been made, the respondents would not have relied on it in entering the Settlement Deed six months later. The appellants had doubted the predictions at the time that they were made, they had doubted them subsequently, and the appellants' accountant had received detailed actual financial statements for the six months prior to the Settlement Deed. 4 The primary judge also rejected the appellants' claims of misleading or deceptive conduct in relation to the 2005 Agreement on the basis that (i) the representations that had been made concerned the state of mind of the maker, and that the representations accurately reflected that state of mind because they had been genuinely believed by the maker, and (ii) the appellants had not relied upon those representations. 5 This appeal is an example of the advantages enjoyed by a primary judge who sees the witnesses and carefully considers all the evidence. The relevant facts spanned a time period of nearly a decade, with the critical period ranging over four years. There were more than a thousand exhibits, some of which ran to hundreds of pages. The primary judge's decision ran to 295 pages. In contrast, the appeal book contained only a selection of evidence from some of the witnesses. We were taken only to a very small part of that evidence. This was the proper approach to conduct an appeal of this nature; it is not a retrial. But the necessarily abbreviated overview of the primary judge's conclusions reveals not only the advantages of the primary judge in reaching the factual conclusions that he did, but also that, on our overview, the irresistible nature of several factual conclusions reached by the primary judge which mean that the appeal cannot succeed. 6 For the reasons below, the appeal must be dismissed. Unless otherwise indicated, paragraph references in the reasons below are to the primary judge's judgment.

The background 7 Mr Katke, the first respondent, is the founder of a United States company called Metagenics. Although Metagenics was the product of the merger of two other United States companies called Metagenics ([16]), this appeal proceeded on the basis that the three companies could all be treated interchangeably. Metagenics also had a wholly owned subsidiary in Australia called Metagenics Australia Pty Ltd (MAPL). 8 One of the employees of Metagenics is Mr Morey, who gave evidence but was not a party to these proceedings. He held various positions in Metagenics including as the Corporate Controller, the Chief Financial Officer, the Chief Operating Officer, and as Secretary on the Board of MAPL ([22]). Another employee, who is a respondent, is Dr Bland. Dr Bland is the Chief Science Officer of Metagenics. 9 Mr Katke was close friends with Mr Michael Brosnan, who regarded Mr Katke as a "mentor" ([154]). Mr Michael Brosnan's father is Mr Leon Brosnan who is also an appellant. 10 The appellants all held shares in Health World Limited (HWL). Apart from Mr Michael Brosnan and Mr Leon Brosnan, the appellants include Mr Gee and Mr A B Grant. Since 1998, Mr Gee, who is a qualified accountant, has been the Managing Director of HWL. He took over the role from Mr A B Grant, who is also a qualified accountant. Mr A B Grant had also been the General Manager of HWL until 1997. He had also been the Company Secretary and had attended Board meetings in that capacity. 11 In September 2003, the appellants entered an agreement with Metagenics which included three of the appellants (Michael Brosnan, Leon Brosnan, and Mary Brosnan) selling to Metagenics 10% of their shares in HWL for $1,249,951, as well as the grant of various options by the appellants for Metagenics to acquire further HWL shares ([25]-[42]). 12 The appellants began negotiating with the respondents for the merger of Metagenics and HWL by the sale of the remainder of the HWL shares. Relevant to those negotiations was whether, and when, Metagenics would have an Initial Public Offering (IPO) in the United States. In the course of the negotiations, Mr Gee put two "protective options" for the HWL shareholders. The first was that the merger transaction ought to occur simultaneously with the IPO and the other was a call option enabling the appellants to repurchase their HWL shares if an IPO did not occur within two years ([493]). Neither of these protective options was agreed by the respondents. 13 On 17 November 2004, Mr Leon Brosnan, Mr Michael Brosnan, Mr A B Grant, and Mr Gee attended a presentation at Metagenics in the United States. The presentation was from Mr Schechner from an investment bank. Mr Schechner described the IPO process in detail ([254] onwards). Mr Schechner explained a twelve week timeline ([260]) which was "dependent upon SEC review, accountant's review, and legal review" ([266]). Mr Schechner also explained that the regulatory framework in the United States called SarbanesOxley made it more difficult to go public and that since the Enron scandal, more rigour was being applied by the auditors to public companies ([269]). 14 Mr Gee's evidence about this presentation included the following ([272]): Q: You're not suggesting that Mr Schechner, an experienced investment banker, by anything he said, gave you to understand that there would be an IPO and that it would be successful, are you? You're a chartered accountant, many years' experience. You're surely not suggesting that anybody was representing that there would be an IPO as opposed to that there was an intention to have an IPO? A: There was an intention to have an IPO. 15 Mr Gee and Mr Morey also knew of another obstacle to an IPO. On 11 November 2004, Mr Morey had told Mr Gee that Metagenics "required audited accounts" for the Belgium Metagenics companies ([238]). In order to complete audited accounts, the auditor needed to be satisfied as to the opening balance of the inventory because the opening balance affects the determination of the profit. However, because the auditors had not attended the opening balance stocktake they could not be sure that the procedure had been undertaken correctly and thus they had no confidence in the opening value. In the United States it was common practice to take the "closing" inventory value and "roll back" from that determination so as to identify the opening inventory value at the beginning of the financial year. Because a roll back valuation could not be done in Europe (from an accounting standards point of view), the auditors could not establish a robust opening value for the inventory ([236]-[239]). 16 On 8 February 2005, Mr A B Grant and Mr Gee had a conversation with Mr Katke by conference call from the boardroom of HWL ([326]). Mr Grant said that the extension of the time for the IPO without protective mechanisms in place left the Australian shareholders "exposed" ([329]). Mr Katke said "Guys, we're going to an IPO in 2005" ([329]). 17 On 15 February 2005, Mr Katke repeated this statement in a conference call from the HWL boardroom with Mr Gee, Mr A B Grant, Mr Leon Brosnan, and Mr Michael Brosnan. Mr Gee says that after that conversation the four appellants had a conversation following which each of the four appellants affirmed their trust in Mr Katke and decided to proceed with the merger transaction although the final terms of the transaction were still a matter of negotiation ([331]). 18 The statement by Mr Katke about an IPO had been made previously, with qualifications. Mr Michael Brosnan's evidence about this was as follows ([291]): A: I spoke to [Mr Katke] regularly, and it was that, "Mate, we're - we're going to an IPO next year". That was in December [2004]. And most of the discussion about the actual merger and agreement with Health World were done through Alan Gee, but for me the phone calls were - were far less formal, to say the least. They were far more casual, but with an emphasis that, you know, we're - we're going to IPO as fast as we possibly can. Q: Can? A: Markets - markets permitting. 19 In the 15 February 2005 conversation there was also some discussion about an initial delay in the IPO date. Mr Katke said that the IPO had been delayed from May to November 2005 and Mr Grant said that this gave rise to uncertainty for the appellants because they had thought that the IPO "was going to be in May 2005" but suddenly it had become November 2005 ([333]). 20 On 27 April 2005, the appellants entered into the 2005 Agreement in which they sold all of their remaining HWL shares to MAPL for $39,600,000 ([43]). $6.5 million of the price was cash. Another component of the price was comprised of the transfer to the appellants of shares in Metagenics ([45]). 21 At the time of the 2005 Agreement, Mr Michael Brosnan and Mr Katke were friends. One of the other appellants, Mr Gee, an accountant, gave evidence that the appellants entered the agreement because they took a decision that they trusted Mr Katke "to do … the IPO" of Metagenics stock ([452], ts 189). 22 In November 2006, when Mr Katke was holidaying with Mr Michael Brosnan, Mr Brosnan expressed concern to Mr Katke that HWL had grown much faster than the North American business of Metagenics. Mr Brosnan complained that his shareholding in Metagenics did not reflect the contribution HWL was making and he said that the IPO would not now be completed until 2007 ([438]). 23 On 20 December 2006, Mr Katke agreed to sell Mr Michael Brosnan shares in Metagenics at a price which Mr Katke described as a substantial undervalue, and with a delay for payment and without interest ([438]). Mr Michael Brosnan later explained that he "appreciated" the extra shares which had "helped very much" and that he was "okay to finally move on from this discussion" ([450]). 24 On 27 December 2006, Mr Michael Brosnan emailed Mr Katke saying that he (Mr Brosnan) felt that "I have made a bad deal for myself. At least in the short term" ([445]). Mr Katke responded with an apology for Mr Brosnan's feelings, saying that he had made a bad deal and observed that when Mr Brosnan had made the deal he "felt it was a good deal" ([449]). Some exchanges continued between the two men including an allegation by Mr Brosnan on 8 February 2007 that the values of HWL and Metagenics were "out of whack" ([456]) because, as "time [went] by", the value of HWL had increased at a greater rate than the value of Metagenics ([457]). Mr Brosnan wanted to get the HWL shares back and to give back his Metagenics shares and the $6.5 million ([459]). 25 The dispute grew and grew. 26 On 26 January 2009 at a Metagenics Board meeting (the Australia Day 2009 meeting), Mr Michael Brosnan and Mr Gee were provided with a "North American Business Plan" (Business Plan). The executive directors attending the Australia Day 2009 meeting were Mr Katke, Dr Bland, and Mr Michael Brosnan. The directors were Mr Chu, Mr Hovee, Mr Krajanowski, Mr Leiner, and Mr Zaepfel. Also present as observers were Mr Konney, Mr Morey, Mr Gee, and a paralegal, Ms Baker. Mr Katke acted as Chairman of the meeting ([663]). 27 The Business Plan was said by the appellants to contain 21 representations (the 2009 representations). The representations concerned the following projections ([139]). 28 The following gross revenues and growth rates from its core business: Revenue Year Gross Revenue US$ Growth Rate 2008 $189M - 2009 $193M 2% 2010 $233M 20.7% 2011 $284M 21.9% 2012 $348M 22.5% 2013 $430M 23.3%

29 The following gross revenue and earnings before interest, tax, depreciation and amortisation (EBITDA): Financial Year Gross Revenue US$ EBITDA US$ 2009 $193M $20.7M 2010 $233.3M $30.6M 2011 $283.8M $52.8M 2012 $348.4M $68.7M 2013 $429.7M $93.1M

30 The following number of new Medical Doctor (MD) customers with the following increase in sales: Calendar Year New Customers Increase in Sales in US$ 2009 233 $3.1M 2010 562 $11.9M (including 2010 growth from the new 2009 customers) 2011 719 $27.1M (including 2011 growth from the new 2009 and 2010 customers) 2012 941 $48.5M (including 2012 growth from the new 2009, 2010 and 2011 customers) 2013 1,223 $57.7M (including 2013 growth from the new 2009, 2010, 2011 and 2012 customers)

31 The website called StopChronicDisease would be launched to attract the following new patients resulting in the following increase in revenue so attributable to the new website: Calendar Year New Customers through SCD website Revenue Increase in US$ 2010 7,000 $3.8M 2011 20,000 $10.9M 2012 40,000 $21.9M 2013 60,000 $32.8M

32 The following revenue and net income growth from completing and integrating "accretive acquisition candidates": Year Revenue Growth Net Income Growth 2010 35% 20% 2011 35% 20% 2012 35% 20% 2013 35% 20%

33 The Business Plan document, containing these projections, was replete with references such as the "Mission" of Metagenics, its "Vision", and seven pages each entitled "Objectives" for the forthcoming financial years. 34 The Business Plan said that the "operating strategies" will generate the "core business" representations in [28] above. Those operating strategies were described as follows (Exh 1/867, p 4): Company Operating Strategies: 1. Metagenics will continue to build its position as the leading functional medicine company in the world. 2. Achieve a compounded annual organic growth of at least 15% in revenue and 20% in net income over the next five years by: • Expanding the number of CAM healthcare professionals that effectively use our products • Increasing new MD customers that implement FLT protocols and use our products in their practices • Increasing retails sales of our nutraceuticals and natural OTC medicines 3. Build revenue in the medical market through the development of: • MD opinion leaders who will support Metagenics' mission and vision in their respective categories • MD feeder program that will generate more than 1,220 and MD accounts and generate more than $57.7 Million of annual new business by 2013 • FLT training program designed specifically for MDs • Insurance reimbursement for key Metagenics products • CME accreditation for Metagenics educational initiatives targeted to MDs 4. Build the commercial value of MetaProteomics SKRM nutraceutical and pharmaceutical technology by conducting in vitro, in vivo and human clinical trials for nutraceuticals to commercialize our technology through Metagenics distribution and conduct phase I and phase IIa drug trials for pharmaceuticals so as to commercialize our new drug technology through pharmaceutical licencing and/or spinning off and selling new biotech entities. 5. Raise capital, through a liquidity event, to fund accretive acquisitions and reduce debt. The implementation of the acquisition strategy will start after the liquidity event. The combined growth rate goal from organic growth and acquisitions is 35% growth in revenue and 20% growth in net income. 35 The reference to First Line Therapy (FLT) programmes, as the primary judge explained at [923], is to two programmes developed by Metagenics between 2006 and 2008. The programmes involved medical doctors (MDs), who are the customers of Metagenics, recommending products of Metagenics. The first programme involved teaching the doctors a system for integrating therapeutic lifestyle programmes, including the products of Metagenics, into their practices. The second program was aimed at teaching conventional doctors "the economic benefits of therapeutic lifestyle programs involving the use of the products of Metagenics". 36 The appellants' case at trial was that at the Australia Day 2009 meeting Mr Katke said that "the projections in the [Business Plan] would be achieved". In contrast, Mr Katke's evidence was that "I didn't guarantee they would be achieved. I said there was a good chance they would be achieved" ([704]). 37 Mr Michael Brosnan says that at the Australia Day 2009 meeting, he asked a few questions, supported by Mr Leiner, to the effect that Metagenics had seen "some pretty robust economic years, and they weren't meeting their targets then, how could they expect to achieve this sort of growth and the 20% over the next three or four years" ([692]). Dr Bland also gave evidence that Mr Leiner had said that the projections "looked ambitious" ([705]). 38 The uncertainty about the projections was also evident because Mr Michael Brosnan and Mr Gee proceeded on the footing that if Mr Katke was able to achieve, for Metagenics, 75% or even 50% of the projections reflected in the plan, they would be "ok" ([699]). 39 Metagenics launched its StopChronicDisease website on 25 February 2009 ([710]). As the primary judge explained (at [922]), the StopChronicDisease programme "involved doctors through whom Metagenics distributed its products, posting videos and other commentary on the website demonstrating the effect of various Metagenics products. It was intended that a social dialogue would be created between consumers and the doctors in relation to the Metagenics products which would in turn promote both the doctors selling those products and the products themselves". 40 For the months that followed the Australia Day meeting and the launch of StopChronicDisease, Mr Gee was sent monthly financial reports. In broad summary those reports included the following: (1) for the two months ended 28 February 2009, Metagenics' net revenue for the United States decreased by 5.6% from the same period in the previous year and the annual external budget had overestimated revenue by 10.5%; Metagenics' consolidated EBITDA was $3.371M (Exh 1/875; [725]-[726]); (2) for the three months ended 31 March 2009, Metagenics' net revenue for the United States increased by 0.8% from the same period in the previous year but the annual external budget had overestimated revenue by 5.4% (Exh 1/889; [728]-[729]); (3) for the four months ended 30 April 2009, Metagenics' net revenue for North America increased by 0.8% from the same period in the previous year but the annual external budget had overestimated revenue by 3.7%; Metagenics' consolidated EBITDA was $7.951M ([736]); (4) for the five months ended 31 May 2009, Metagenics' net revenue for North America increased by 2.1% from the same period in the previous year but the annual external budget had overestimated revenue by 2.5% ([739]); and (5) for the six months ended 30 June 2009, Metagenics' net revenue for North America increased by 0.8% from the same period in the previous year but the annual external budget had overestimated revenue by 9.7% ([743]). 41 In summary, by the end of June 2009, Mr Gee would have been aware that revenues had increased only 0.8% from the previous year and the United States business was 9.7% below the external budget. In contrast, the Australian business, which Mr Michael Brosnan had complained to be "out of whack", had grown 34.5% and was 21.8% above budget. 42 By May 2009, Mr Michael Brosnan was concerned that the predictions in the Business Plan would not be achieved ([741]). He gave evidence that he "raised the issue of the predicted figures" and asked Mr Katke "What if you don't do - achieve those numbers?" Mr Brosnan said that Mr Morey told him that Metagenics was "not worried about what we're doing" but that they were worried about what Mr Brosnan was going to do. Mr Brosnan took that as a commitment that the Business Plan numbers "would be achievable" ([741]). 43 In early July 2009, Mr Gee's view was that the United States sales were still struggling and the United States business was not achieving its budget, although there was an opportunity for the business to "grow better than it was" ([746]). 44 On 31 July 2009, the appellants entered into the 2009 Settlement Deed with the respondents. The Settlement Deed was 490 pages. 45 Ultimately, at the end of 2009, the gross revenue projections were achieved but the EBITDA projection fell far short. The actual financial performance of Metagenics over the course of the predictive years was this: Year Projected Gross Revenue US$ Actual Gross Revenue US$ Projected EBITDA US$ Actual EBITDA US$ 2009 $193M $205M $20.7M $1.3M (which is said to include $16.5M being the expense of the HWL settlement) 2010 $233M $238M $30.6M $31.1M 2011 $284M $273M $52.8M $28.6M 2012 $348M $280M $68.7M $28.5M 2013 $430M $287M $93.1M $31.2M

The appellants' claims at trial 46 The primary relief sought by the appellants was to rescind the 2005 Agreement based on allegations of misleading or deceptive conduct. They could not do this without setting aside the 2009 Settlement Deed. Hence, they also alleged that entry into the 2009 Settlement Deed was caused by misleading or deceptive conduct by the respondents. 47 The misleading or deceptive conduct relevant to this appeal concerning the 2009 Settlement Deed was alleged representations in the Australia Day 2009 meeting that the financial projections in the Business Plan "would be achieved". The appellants pleaded that this was a representation with respect to a future matter within s 51A of the Trade Practices Act 1974 (Cth) ("Trade Practices Act") (as it was then). 48 The misleading or deceptive conduct relevant to this appeal concerning the 2005 Agreement was the representation by Mr Katke that Metagenics "would be going to an IPO in 2005". 49 The appellants sought to: (1) set aside the 2009 Settlement Deed; (2) set aside the 2005 Agreement; and (3) obtain a re-transfer of the HWL shares that they transferred under the 2005 Agreement. 50 Alternatively, the appellants sought damages of $175,562,090 based on the alleged misleading or deceptive conduct by the respondents which was said to have caused a loss of an opportunity to seek orders to which they "would have been entitled" in an action for rescission of the 2005 Agreement and damages. Curiously, the appellants never pleaded that they would have brought an action on the 2005 Agreement. And the appellants led almost no evidence at all to support that causal requirement.

The 2009 Settlement Deed 51 As to the representation concerning the 2009 Settlement Deed, the appellants' case at trial was that at the Australia Day 2009 meeting Mr Katke said that "the projections in the [Business Plan] would be achieved". In contrast, Mr Katke's evidence was that "I didn't guarantee they would be achieved. I said there was a good chance they would be achieved" ([704]). The primary judge held that the appellants were not liable for the alleged misrepresentation for three reasons. 52 First, the primary judge concluded that Mr Katke did not make the representation that the projections "would be achieved". Instead, "Mr Katke was conscious of the challenging economic and market conditions and seemed to focus his answers at the Board meeting not on guarantees of achieving the projections but personally re-engaging with the business" ([1042]). 53 Secondly, the primary judge concluded that the evidence in relation to First Line Therapy and StopChronicDisease, described earlier in these reasons, provided a reasonable basis for the projections ([1081]). 54 Thirdly, the primary judge held that the appellants did not rely on the financial projections. They "made their own judgment about this very matter" and the only matter as to financial projections upon which they relied was the warranty as to the Annexure C accounts. Further, the evidence from Mr Michael Brosnan and Mr Gee was not that they would not have entered into the 2009 Settlement Deed if they had known that there was no reasonable basis for the projections adopted in the five year Business Plan ([1082]-[1084]).

The 2005 Representations 55 The second representation with which this appeal is concerned is the 2005 representations concerning when Metagenics would go to an IPO. Mr Katke denied making the representations that Metagenics would go to an IPO in 2005. The primary judge held that Mr Katke was in error (but not untruthful) and that Mr Katke said in the February 2005 conversations that Metagenics would be going to an IPO in 2005. However, the primary judge characterised the meaning of Mr Katke's remarks, in the context of all of the events up to February 2005 (as to which see some of those events described above at [12]-[15]), as a statement of an intention he then held and not a promise or guarantee or irreducible unequivocal commitment to a particular future outcome in 2005 ([1030]). 56 The appellants' case in relation to the 2005 representations was dismissed by the primary judge for three reasons. 57 First, the primary judge concluded that Mr Katke's statements did not rise above a statement by Mr Katke that he then held an intention that Metagenics would proceed to an IPO in 2005. The primary judge held, in a finding which is not challenged, that Mr Katke and Mr Morey did genuinely hold that intention ([1156]). The primary judge also explained that there can be no doubt that Metagenics was genuinely working towards an IPO and seeking to confront and address things thought to be necessary or alternatively desirable in progressing the attractiveness of an IPO ([1158]). 58 Secondly, the primary judge implicitly held that insofar as the statements concerned future matters, there was a reasonable basis for those statements. 59 Thirdly, the primary judge held that the appellants did not rely upon any representation by Mr Katke. They decided to go ahead with the sale of their HWL shares on the strength of their belief in Mr Katke and a collective view formed after the second conference call that they could trust Mr Katke to make good his intentions about going to an IPO in 2005, markets permitting ([1154], [1156]).

The grounds of appeal 60 Initially, the appellants' grounds of appeal were wide ranging, seeking to impugn many of the primary judge's findings of fact. The appellants later reduced those grounds of appeal substantially. One of the grounds of appeal that was removed were the grounds (numbers 7 and 15) concerning the failure of the primary judge to find that the appellants relied on the 2005 representations and the 2009 representations. At the commencement of this appeal, by leave, the appellants reinstated those two grounds of appeal. 61 The grounds of appeal can be divided into two groups. The first group concern the Business Plan in 2009. The second group concern the 2005 IPO Representation. If the first group of appeal grounds is dismissed then the appeal must be dismissed. In order to succeed on this appeal, the appellants must succeed on both the first and the second groups of appeal grounds.

The first group of appeal grounds: the Business Plan Representation 62 The Business Plan grounds are as follows: 9. The learned trial judge erred in not finding on a proper construction of the North American Business Plan (the business plan) and in the circumstances of its representation that the respondents represented that the financial predications therein would be achieved. 11. The learned trial judge erred in finding there was a reasonable basis for making the predictions in the business plan in circumstances where: (a) no or no sufficient evidence was adduced as to how the predictions in the business plan were calculated; (b) the initiatives referred to in the business plan as stopchronicdisease.com and First Line Therapy provided no or no sufficient justification for the predictions in the business plan. 15. The learned trial judge erred in not finding that the appellants relied upon the 2009 representations. 17. The learned trial judge erred in preferring Mr Katke's evidence over the appellants' in relation to the statement alleged to have been made by him when presenting the business plan.

The second group of appeal grounds: the 2005 IPO Representation 63 The 2005 IPO Representation grounds of appeal are as follows: 1. The learned trial judge erred in not finding that the respondents represented that the third respondent would proceed to an initial public offering (IPO) on a recognised US Stock exchange during 2005 markets permitting (the IPO representations) in circumstances where the learned trial judge found that the first respondent made a statement to that effect to the applicants. 2. The learned trial judge erred in finding that the statement of the first respondent referred to in paragraph 1 was a statement of intention, that the applicants knew that to be the case and so the statement was thereby a representation as to future matters. 3. The learned trial judge erred in finding that insofar as the IPO representations were as to future matters there was a reasonable basis for making such representation in circumstances where: (a) the learned trial judge accepted the expert evidence of Mr Huber that the third respondent could not proceed to an IPO in 2005; (b) the third respondent had not put any or any sufficient measures in place to enable it to proceed to an IPO in 2005; and (c) the third respondent had not been informed by its external advisors that it could definitely proceed to an IPO in 2005. 7. The learned trial judge erred in not finding that the appellants relied upon the 2005 representations.

The first group of appeal grounds: the Business Plan Representation

Mr Katke did not represent that the projections "would be achieved" (grounds 9 and 17) 64 The central finding of the primary judge in relation to the North American Business Plan (at [1042]) was that he was "not satisfied that Mr Katke made a representation to Mr Gee on or about 26 January 2009 that Metagenics would achieve the projections in the Business Plan". Instead, the primary judge implicitly accepted Mr Katke's evidence that his statements at the Australia Day 2009 meeting were only statements that there was a "good chance" that the projections would be achieved ([703]-[704]). 65 There was no challenge on this appeal to the primary judge's conclusion that Mr Katke believed that there was a good chance that the projections would be achieved ([1040]). The challenge in grounds 9 and 11 was to the primary judge's acceptance of Mr Katke's evidence about what he had said at the Australia Day meeting, when understood in the context of the Business Plan and surrounding circumstances. 66 There are seven reasons why the primary judge's reasoning on this point should not be disturbed. 67 First, the appellants' approach to the appeal on this point was flawed. As has been iterated and reiterated, "[i]t is not appropriate to treat the appeal as though it were a new trial on the evidence and constrained merely by the unassailable factual findings. Error must be demonstrated". Further, "[t]he views and conclusions of the trial judge ultimately have to be shown to be wrong. They should not be laid to one side and a simple re-argument of the case take place": Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833; (2001) 117 FCR 424, 438 [30] (Allsop J); quoted with approval in Australian Competition and Consumer Commission v Australia and New Zealand Banking Group Limited [2015] FCAFC 103 [169] (the Court). 68 Almost the entirety of the appellants' written submissions concerning appeal grounds 9 and 17 was devoted to the "credibility or reliability of Mr Katke". The appellants asserted that the evidence of Mr Gee should have been preferred by the primary judge over the evidence of Mr Katke. The appellants did not refer to any contemporaneous document that supported Mr Gee's account. For instance, the minutes of the meeting did not contain any statement that supported Mr Gee's account of the Australia Day meeting. Instead, the appellants re-ran, over pages of written submissions, the same criticisms of Mr Katke that had been raised before the primary judge. Those submissions had been rejected by the primary judge in reasons which senior counsel for the appellants properly described as a "very elaborate section" of reasons (ts 41). The primary judge's assessment had taken place against the background of a large volume of material that was not before this Court, and with the benefit of four weeks of hearing including a "very lengthy, pressing and difficult cross-examination [of Mr Katke] on almost every aspect of all of the events" ([1012]). 69 Secondly, there are the natural limitations of an appeal court in interfering with the factual findings made by a trial judge. In Fox v Percy [2003] HCA 22; (2003) 214 CLR 118, 125-126 [23], Gleeson CJ, Gummow and Kirby JJ spoke of the natural limitations that exist in the case of any appellate court proceeding wholly or substantially on the record. These limitations include: the disadvantage that the appellate court has when compared with the trial judge in respect of the evaluation of witnesses' credibility and of the "feeling" of a case which an appellate court, reading the transcript, cannot always fully share. Furthermore, the appellate court does not typically get taken to, or read, all of the evidence taken at the trial. Commonly, the trial judge therefore has advantages that derive from the obligation at trial to receive and consider the entirety of the evidence and the opportunity, normally over a longer interval, to reflect upon that evidence and to draw conclusions from it, viewed as a whole. 70 On this appeal, the appeal book before this Court contained only a fraction of the record before the primary judge. Even more importantly, the written and oral submissions referred only to a fraction of that fraction. The primary judge's assessment had taken place against the background of a large volume of material that was not before this Court, and with the benefit of four weeks of hearing. 71 Another example of the neglect of these limitations by the appellants was their submissions concerning Mr Michael Brosnan's evidence. The appellants asserted that the primary judge's summary of Mr Brosnan's evidence showed that Mr Brosnan was effectively saying that Mr Katke had said that Metagenics would achieve the projections. But the primary judge had concluded that Mr Brosnan did not "say that Mr Katke said that he would achieve the numbers in the Business Plan, as Mr Gee recalled things" ([695]). This finding must be understood in the context of the primary judge's overall assessment of Mr Brosnan's evidence (at [1009]) that "he seems to see things in emphatic and black and white terms or in absolutes", that he did not "engage on financial questions and chose to leave these matters to Mr Gee", that he "paid no real attention at all to Mr Colman's presentation" and that "he leaves the details of other matters, particularly financial and structural corporate matters, to others". 72 Perhaps conscious of issues concerning a trial judge's advantage in seeing and hearing witnesses, the appellants pointed to delay in the primary judge's reasons. The primary judge's reasons were delivered on 12 March 2015, about seven months after the trial. The reasons ran to 295 pages. On any view, the reasons were a necessarily comprehensive examination of a large amount of material. 73 The appellants alleged that the seven month "substantial delay" in the delivery of the primary judge's 295 page written reasons would have made it difficult for the trial judge to base his decision on credibility on demeanour issues. The appellants relied on the decision of Kirby J in the High Court in CSR Ltd v Della Maddalena [2006] HCA 1; (2006) 224 ALR 1, 14-15 [47]. In that case, Kirby J remarked of the primary judge's "substantial delay (8 months) between the conclusion of the hearing and the delivery of his reasons" and observed that this delay "rendered the impact of any judicial recollection of the respondent's demeanour unlikely to be such as would 'justify any credibility findings on that basis'". 74 This observation must be placed into context. CSR was a case in which the trial ran for a little over a week. The question was whether the plaintiff had suffered physical or psychological injury arising from exposure to asbestos. The plaintiff was the only lay witness. And the primary judge's summary of the factual background to the case required only three paragraphs: Della Maddalena v CSR Ltd [2002] WADC 260. 75 In contrast, in this case the trial ran for four weeks. The relevant facts spanned a time period of nearly a decade, with the important period ranging over four years. There were more than a thousand exhibits. Some of the exhibits ran to hundreds of pages. The appeal book contained only a selection of evidence from eight lay witnesses, running to hundreds of pages. The appellants themselves said that the evidence of the respondents' lay witnesses "typically ran to hundreds of paragraphs and were often accompanied by many volumes of annexures" (submissions [48]). 76 In the context of a case of this nature, the delivery of reasons by the primary judge within seven months cannot be described pejoratively as a "delay", still less as a "substantial delay". 77 Not only was there no substantial delay in this case, but the appellants' assertion concerning judicial recollection of witnesses after seven months assumes that the primary judge's credibility findings in the 295 page judgment were not written until months after the hearing. This is obviously wrong. A judgment of that size is obviously an iterative work, and the credibility findings must have been part of that process. 78 Thirdly, the primary judge's conclusion that Mr Katke had not represented that the projections would be achieved was consistent with his findings that Mr Brosnan considered whether "the numbers in the Business Plan were achievable" ([698], emphasis added) not whether they would be achieved. 79 Fourthly, the evidence of Dr Bland about the Australia Day 2009 meeting was inconsistent with a representation by Mr Katke that the financial projections "would be achieved". As the primary judge explained, Dr Bland's evidence was that when concerns were raised about the time that Mr Katke was spending on other matters, Mr Katke "said that he would be able to refocus on the Metagenics business once the Alticor transaction was concluded and therefore hoped to turn the business around" ([705], emphasis added). 80 Fifthly, the text of the Business Plan did not represent that the financial projections "would be achieved". The Business Plan contemplated a reasonably long range horizon extending through 2009, 2010, 2011, 2012 and 2013. As the primary judge emphasised, it was a business plan which contained objectives and a vision for the company extending to an end of a financial year horizon for 2013 ([1042]). 81 Sixthly, although the representation that the projections "would be achieved" was alleged by the appellants to have been made on 26 January 2009, the primary judge noted at [1078] that the appellants did not attempt to include such a representation as a warranty in the 490 page Settlement Deed that they negotiated in the period leading up to 31 July 2009. The Deed had been negotiated with the assistance of legal advice to both sides ([752]). In contrast, the Deed included, in cl 9.1(c), a warranty from Metagenics and MAPL concerning the completeness and accuracy, to the best of their knowledge and belief, of their financial accounts. The appellants had also sought a general warranty regarding accuracy of information provided to them, but with no reference to any detail (Exh 1/870). When this was rejected, the detail provided (which was also rejected) was a representation in relation to the completeness and accuracy of "[t]he most recent monthly management financial statements" (Exh 1/870). 82 Seventhly, as the primary judge observed at [1043], it is inherently unlikely that a person in the position of Mr Katke on or about 26 January 2009 would readily or without any qualification or reservation assert that the company would achieve throughout 2009 to 2013 the projections set out in a business plan. Mr Katke was conscious of the challenging economic and market conditions and focused in his answers at the Australia Day 2009 meeting on reengaging with the business. 83 The primary judge's conclusion of fact on this matter is unassailable. These grounds of appeal are dismissed.

There was a reasonable basis for the financial projections (ground 11) 84 The appellants submitted that the alleged representations in the Australia Day 2009 meeting were with respect to a future matter within s 51A of the Trade Practices Act so that the respondents, at trial, bore an evidentiary onus to adduce evidence of reasonable grounds for the representation, failing which they would be deemed not to have had reasonable grounds for making the representation: s 51A(2), see Re McGrath; Pan Pharmaceuticals Ltd (in liq) v Australian Naturalcare Products Pty Ltd [2008] FCAFC 2; (2008) 165 FCR 230, 242 [44] (Emmett J), 283 [192] (Allsop J). 85 The appellants submitted that the respondents had adduced no evidence at all of any information that could amount to reasonable grounds even for a representation that there was a "good chance" that the financial projections would be achieved. 86 The conclusion of the primary judge that there were reasonable grounds for the financial projections relied on the evidence of Mr Morey and Mr Katke. His Honour said at [1081]: …the evidence given by Mr Morey and for that matter Mr Katke, as to the manner in which the Business Plan projections were assembled and adopted demonstrates that there was a reasonable basis for the financial projections as to the core business. Further, the evidence in relation to First Line Therapy and StopChronicDisease as described earlier in these reasons provided a reasonable basis for the projections derived from the deployment of those programs. It is not necessary to repeat the essential content of the evidence about those matters that I have already recited earlier in these reasons. 87 Mr Morey and Mr Katke both gave evidence about the process by which the financial projections were obtained. 88 As the primary judge observed at [919], Mr Morey said that his role was the "verification" and "compilation" of the numbers developed by the various business units throughout the Metagenics business. He consolidated and verified (in an "arithmetical" sense) the numbers in the Business Plan although he did not challenge the numbers (Exh 49, para 268). 89 Mr Katke's evidence (Exh 32, paras 320-321) was as follows: 320. In preparing the North American Business Plan for 2009-2013, Metagenics used a combination of CEO guidance, bottom-up and top-down forecasting which I elaborate upon below. (a) First, the "CEO guidance" was developed by me in consultation with Morey, Bellin and Bland based upon our review of market growth trends, the competitive landscape, and our targets for profit growth. This guidance, which I was principally responsible for developing, was provided to management of Metagenics setting out what we were striving to achieve in terms of revenue (and profit) growth for the forthcoming period. (b) Second, a "bottom-up" forecast was prepared by each sales person in each of the sales territories in North America, overseen by the responsible district manager. In this regard, the North American market was divided into specific sales territories and there were 6-8 such territories in a particular district (overseen by a district manager). The sales persons in each of the sales territories, under the supervision of the relevant district manager, conducted an account-by-account analysis of sales for the preceding period and forecast sales for forthcoming periods based on the sales person's specific experience and knowledge of the customers and market trends for his or her territory. (c) Third, the district manager reviewed each sales person's forecast for accuracy totalled the forecasts for the 6-8 sales territories in his or her district and added, if appropriate, additional forecast revenue growth based on new "hires" (or recruitment) that was planned for the forthcoming period. (d) Fourth, regional managers (who oversaw a number of districts) and the national sales manager (who oversaw the entire North American territory) discussed the district forecasts with the relevant district managers and reviewed them for accuracy and the assumptions that underpinned them. Following this consultation and any amendments to forecasts that were made as a result of it, a "bottom-up" national revenue growth forecast was prepared. (e) Fifth, the Vice President of Marketing (then, Doug Gaynor), Vice President of Sales (then, Tim Katke), and President, who had also taken over the role of COO for North American (Belin), would consider proposed marketing initiatives and consider the likely effect of those initiatives on the individual sales territories, each district and then "rolled these estimates up" into a national "top down" revenue forecast referred to above. (f) Sixth, the Vice President of Marketing, Vice President of Sales, and President, would review the sales driven "bottom up" forecast and the marketing driving "top down" forecast and resolve any discrepancies and then present to both Morey and me their recommended national revenue growth forecast. We would discuss the forecasts, the assumptions underpinning them, the potential effect of new proposed marketing initiatives, planned increases in the sales force (and the like) and attempt to reach a consensus target for revenue growth. (g) Seventh, after those discussions, Bellin and Morey would prepare a final forecast and budget which would be presented to me and then the Metagenics Board for considerations, discussion and approval. The final North American Business Plan for 2009-2013 that was approved by the Board was in turn used for final budgeting of expenses for 2009. 321. The North American Business Plan for 2009-2013 adopted by Metagenics (referred to at paragraph 355 below) contains various "Company Objectives" for financial years 2009, 2010, 2011, 2012 and 2013. The process set out above was applied to determine the objectives for 2009 and 2010. Determination of the objectives for 2011 to 2013 did not involve "bottom up" sales force account by account forecasts. Instead, these longer term forecasts were the result of collaboration between Vice President of Sales, Vice President of Marketing, Chief Operating Office (North America), Morey and me. In summary, that collaboration involved: (a) Considering the results of various marketing or sales initiatives Metagenics had either commenced implanting or tests, and considering the capabilities of each sales representative and their capacity to implement marketing and/or sales initiatives referred to above. For example: i. MDs: The 2009-2013 North American Business Plan ultimately adopted by Metagenics contained objectives concerning the penetration of the MD (medical doctor) market with a view to adding new MD customers that implemented what was called "First-Line-Therapy (FLT). FLT was a system for implementing therapeutic lifestyle programs (involving the recommendation of Metagenics products) into MDs clinical practice - both that of "functional medicine" MDs and conventional medicine MDs. Previous to developing the 2009-2013 business plan, a test had been conducted in Texas designed to determine the success rate in promoting FLT to MDs. The test involved assessing the "success" rate (i.e. MDs who decided to implement FD) for the FLT program. Once we determined the success rate of the program, we estimated a success rate for each of the sales representatives that approached MDs, as well as an assessment of the rate of increase in sales of Metagenic products that were sold to the MDs implementing FLT. From these estimates we produced our MD sales forecast. ii. Stopchronicdisease.com: The 2009-2013 North American Business Plan ultimately adopted by Metagenics contained objectives concerning the deployment of this website and the attraction of new customers and consequent increase in sales. Stopchronicdisease.com was a social network website that Metagenics implemented. It was designed to help healthcare professionals (who were selling Metagenics' products) to engage with patients suffering from chronic diseases by, among other things, enabling them to post success stories about patients which the member health care professionals had successfully treated (thus fostering engagement with existing and new patients). A key matter influencing the projected success of this initiative was the number of healthcare professionals that would be convinced to engage the website. In determining this, Doug Gaynor spoke to individual sales representatives about their success-rates to date in convincing health care professionals to engage the website. From this past success they prepared a model for projecting the number of new customers that might arise depending on the number of healthcare professionals engaged with the website, and the consequent increase in sales. It was my understanding from discussions with Doug Gaynor and others that other social network websites had experienced very rapid growth translating into rapid sales growth and our forecast was a small fraction of the growth experiences by the other social networks. (b) Extrapolation from the considerations above forecast growth in the relevant new initiative(s) and the financial consequences that flow from them. 90 Mr Katke was cross-examined in considerable detail about this evidence. Some of this cross-examination was set out in the primary judge's reasons at [711]-[716]. The primary judge weighed that evidence, and the cross-examination, in his assessment of whether there were reasonable grounds. 91 As to the StopChronicDisease programme upon which some of the Business Plan was based (described above at [31]), the primary judge described Mr Morey's evidence as being that the objectives in the Business Plan were "determined by an initial deployment and test of the website. The results of that initial deployment were then extrapolated on the basis that the website would be "rolled out" across further sales territories" ([922]). On this appeal, we were not referred to any cross-examination of Mr Morey in relation to any of these matters. 92 As to the FLT programmes (described above at [34]-[35]), the primary judge explained at [924] that Mr Morey's evidence was that in order to identify the numbers adopted for the Medical Doctor program, Metagenics had undertaken a test to determine the level of sales of products that could be expected after the doctors went through the program as compared with sales to doctors before they had undertaken the FLT programs. Again, on this appeal, we were not referred to any cross-examination of Mr Morey in relation to any of these matters. 93 The evidence of Mr Morey and Mr Katke to which we were referred on the appeal is more than an adequate foundation for the primary judge's conclusion that there were reasonable grounds for the financial projections or, if the matter were expressed in terms of Mr Katke's evidence, that there was a "good chance" that the financial projections would be achieved. 94 This ground of appeal is dismissed.

The appellants did not rely on the financial projections (ground 15) 95 Independently of all the other grounds of appeal, the first group of appeal grounds must fail unless the appellants can establish that the primary judge erred in concluding that the appellants did not rely on the financial projections. 96 The primary judge held that the 2009 Settlement Deed was important to the appellants because a settlement needed to be reached for the Alticor transaction to take place. The Alticor transaction was the means by which they would dispose of their shares. The primary judge held that although the financial performance of the company, and its EBITDA was of particular interest to the appellants, they "made their own judgement about this very matter" and the only matter as to financial projections upon which they relied was the warranty as to the Annexure C accounts ([1084]). 97 The primary judge also observed that although Mr Brosnan and Mr Gee said that the future EBITDA was important to them and hence material, they did not go so far as to say that they would not have entered into the Settlement Deed had they known (i) that the future projections would not come to pass, or (ii) that there was no reasonable basis for the projections adopted in the five year Business Plan. 98 There are five reasons why the primary judge's conclusions about the appellants' lack of reliance upon the Business Plan should be accepted. 99 First, as the primary judge explained at [1015], this was not a case where the appellants and respondents were strangers and where a respondent had "said something about the subject matter of an entirely unfamiliar enterprise which, by later events, was shown to be wrong". Instead, the commercial relationship occurred over a long time, was deep, enduring, characterised by constant exchanges of very detailed information and, after the 2005 Agreement, both sides had become equity owners in Metagenics and shared a common interest in securing an initial public offering of securities on a United States Stock Exchange in that entity (or in a listed entity controlling that entity). 100 To reiterate, it is unlikely that the appellants would rely on statements by the respondents when the appellants had their own considerable independent knowledge and, particularly, where the statements at the Australia Day 2009 meeting were in the context of settlement of a dispute in which the appellants alleged that the respondents had misled them. 101 Secondly, as we have explained above at [37]-[38] and as the primary judge concluded, even at the time when Mr Katke made the statement at the Australia Day 2009 meeting, it was met with doubts and estimations concerning the percentage of the projections that might be achieved. Doubts were again expressed in May 2009 (see [42] above). 102 Thirdly, as we have explained above at [40]-[41] and as the primary judge concluded, between February and July 2009, Mr Gee had been receiving financial reports with actual figures. To reiterate: the actual figures showed that Metagenics' revenues had increased only 0.8% from the previous year and the United States business was 9.7% below the external budget. In contrast, the Australian business, which Mr Brosnan had complained to be "out of whack", had grown 34.5% and was 21.8% above budget. 103 Mr Gee gave evidence that he considered these documents and that he discussed them with other appellants at monthly board meetings. He said that the other appellants looked to him for his best judgement about where Metagenics was heading and that he gave that opinion (trial ts 248). Mr Gee had thought that there was "opportunity", but he thought that "to achieve the opportunity we had to do the right things". He considered that while one key individual remained at Metagenics he "didn't know whether … that could be achieved" (trial ts 249). 104 These findings by the primary judge provide a strong foundation for the primary judge's conclusion (at [1084]) that the appellants "made their own judgement about this very matter. They formed their own investment view and took a calculated decision to regulate their future affairs". 105 Fourthly, there is a further matter relied upon by the primary judge which also supports his conclusion about the absence of reliance by the appellants on the financial projections in the Business Plan. This is the absence of any negotiation concerning a warranty in the 2009 Settlement Deed of the accuracy of the financial projections. That absence is a matter that militates against any reliance by the appellants. 106 The 2009 Settlement Deed was extremely comprehensive. This is not the type of case where matters are not recorded in a formal document because a party would have been content with the strength of an oral representation. For instance, as we have mentioned, in cl 9.1(c), Metagenics and MAPL warranted the completeness and accuracy, to the best of their knowledge and belief, of their financial accounts. As the primary judge explained (at [1079]), "[i]f the projections in the Business Plan had loomed large in the thinking of the applicants as a seminal factor in forming their willingness to enter into the Settlement Deed, it would have been a simple matter for them to have raised that issue (important to them if it was so) in the negotiations and to have pressed for a warranty about it as part of the Settlement Deed". 107 The absence of a request for inclusion in the Settlement Deed of a warranty concerning whether the Business Plan projections would be achieved contrasts with the request, and rejection for a warranty in relation to the completeness and accuracy of "[t]he most recent monthly management financial statements" (Exh 1/870). 108 Fifthly, there is again on this point the natural advantages of the primary judge. The primary judge reached his conclusion about the absence of any reliance by the appellants in the context not merely of the four matters above, but also of (i) the significant lapse in time between the Australia Day 2009 meeting and the effect of that lapse on the appellants who gave evidence, (ii) the independence and expertise of Mr Gee and the extent to which the other appellants relied on Mr Gee, and (iii) the uncertainty of the financial projections and the appellants' scepticism about them. 109 For completeness, we note that it appeared that at some points the appellants submitted that the primary judge had erred by applying an approach to causation and reliance that was not correct in his Honour's statement in the last sentence of the passage that follows (at [1084]): I have already found that the applicants made their own judgement about this very matter. They formed their own investment view and took a calculated decision to regulate their future affairs by reference to the Alticor transaction and as a precondition to the investment, entered into the Settlement Deed on the basis that the only matter as to financial projections upon which they relied was the warranty as to the Annexure C accounts. However, more fundamentally, although Mr Brosnan and Mr Gee say that the future EBITDA earnings were important to them and thus material, their evidence does not go so far as to say that they would not have entered into the Settlement Deed if either, they had known that the future projections would not come to pass, or had they known that, as they contend, there was no reasonable basis for the projections adopted in the five year Business Plan. 110 We do not understand his Honour to have been saying in the final sentence that his finding of the absence of reliance by the appellants was based upon whether "but for" any projections in the Business Plan they would not have entered the 2009 Settlement Deed. Whether or not that approach would even have been an error (as to which see below at [121]-[124]), his Honour was adding this point to the conclusion that he had already reached that the appellants did not rely on the financial projections. Although the future EBITDA earnings were important to the appellants, they did not rely on the financial projections in the Business Plan when assessing future EBITDA earnings. 111 This ground of appeal is dismissed.

Another reason why the first group of appeal grounds might still have failed 112 Even if the appellants had succeeded in overturning the primary judge's factual findings and had established that (i) the 2009 Business Plan Representation had been made in the terms claimed, (ii) there were no reasonable grounds upon which it was made, and (iii) the appellants relied upon it in entering the 2009 Settlement Deed, the appeal would still have failed. 113 The reason why the appeal might still have failed is because the primary judge held that the discussion at the Australia Day 2009 meeting did not involve any representations to the appellants in their capacity as shareholders. His Honour characterised the discussions as "intra-company discussions within the Director group … and management for the purpose of trying to set the direction, expectations and targets for the years 2009 to 2013" ([1038]). The primary judge concluded that the discussions were not representations but were discussions ([1072]-[1073]): within the participant group about the content of the company's Business Plan for the period of the plan looking into an uncertain future taking into account the core business activities and those programs the company had introduced and intended to place reliance upon in trying to build the business. 114 No ground of appeal specifically challenged these findings. And no submissions were made by the appellant on the appeal concerning whether these findings could have precluded a finding that any representation in that context could amount to misleading or deceptive conduct, in trade or commerce. It is unnecessary to consider that issue further.

The second group of appeal grounds: the 2005 IPO Representation 115 Since we have dismissed the appeal in relation to the 2009 Business Plan Representation, it is not necessary to deal with the appeal grounds concerning the 2005 IPO Representation. As we have explained, this appeal could only succeed if it were successful on both the 2009 Business Plan Representation and the 2005 IPO Representation. 116 We might not have abstained from dealing with the 2005 IPO Representation merely because it was not necessary to do so on this appeal. There are, however, three reasons why we consider that it is undesirable for us to seek to adjudicate upon these grounds of appeal. 117 First, it is, at best for the appellants, unclear whether the characterisation of the 2005 IPO Representation at trial was the same as that which was advanced on appeal. If it was not, then an unpleaded case which had not been addressed at trial should not be permitted to be run on appeal. 118 During the appeal, questions were raised by the Court concerning the manner in which the 2005 IPO Representation had been characterised by counsel at trial. The broad impression that the Court had was that the trial had been run on the basis that the appellants had contended that the 2005 IPO Representation was a promise that an IPO would occur and the respondents had contended that it was only a statement of intention. 119 Senior counsel for the appellants properly acknowledged that trial counsel below had used the word "promise" throughout the record at first instance and that if the issue were to be determined on that basis then "we should be rejected" (ts 11). Nevertheless, apart from an assertion by senior counsel for the respondents that this was indeed the manner in which the trial below had been run, there was no examination by either the appellants or the respondents in any detail of the manner in which the case was run at trial. Subsequent to the appeal, following a request by the Court, the parties delivered a copy of the trial transcript. There are some suggestions in the transcript that the trial was run on the basis that the issue was whether the respondents had promised that an IPO would occur. Ultimately, however, in the absence of any submissions on this point it is undesirable to descend into the detail of the extent to which the submissions on appeal departed from those run at trial. 120 Secondly, as we have explained, these questions of characterisation are necessarily contextual. A statement that "if you want to stay healthy, you should get out of town" will mean something very different if spoken by a masked gunman or a medical practitioner. But, perhaps unsurprisingly with hundreds of paragraphs of relevant context, on this short appeal there was no sustained examination on this appeal of all of the detail of the context surrounding the 2005 IPO Representation. 121 Thirdly, if the appellants had succeeded in relation to the 2009 Business Plan Representation then difficult questions of causation might have arisen but those questions were only touched upon briefly in oral submissions. These questions of causation arise in determining what is "loss or damage by an act of another person" for the purposes of s 82 of the Trade Practices Act. 122 For instance, would it be sufficient to allow the appeal if the appellants would still have entered the 2005 Agreement even without the 2005 IPO Representation provided that the 2005 IPO Representation played a part in (ie made a "material contribution" to) the decision making process of the appellants? Senior counsel for the appellants submitted that this would be sufficient. He made a powerful submission that sought to draw a distinction between "mental events" and "events in the natural world" (ts 67) for the purposes of the test. 123 The two tests ("but for causation" and "material contribution") are "different beasts": Clements v Clements [2012] SCC 32; [2012] 2 SCR 181, 189-190 [14] (McLachlin CJ). In some areas of the law, such as the tort of deceit, the necessity (or "but for") test for causation is relaxed in favour of a "material contribution test". It is sometimes said that this is because of the difficulty involved in weighing the potency of different contributions to mental decision making: Reynell v Sprye (1852) 1 De GM & G 660, 708-709; (1852) 42 ER 710, 728-729 (Lord Cranworth ); Smith v Kay (1859) 7 HLC 750, 759; (1859) 11 ER 299, 303 (Lord Chelmsford LC); Arnison v Smith (1875) 41 Ch D 348, 369 (Lord Halsbury LC). But cf Mills v Mills [1938] HCA 4; (1938) 60 CLR 150, 185-186 (Dixon J); Eclairs Group Ltd and Glengary Overseas Ltd v JKX Oil & Gas plc [2015] UKSC 71 [20]-[21] (Lord Sumption), [54] (Lord Mance). 124 Before a material contribution approach could be applied to s 82 of the Trade Practices Act, there would need to be close attention to each of the following: the terms and context of that provision, the validity of taking a different approach to mental decision making, and the authorities. Such a material contribution approach may not be consistent with the reasoning of Gummow, Hayne, Heydon and Kiefel JJ in Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304, 353 [146]-[147]. And it may be that the same "but for" reasoning might apply to s 82 as that adopted by the Full Court in relation to negligence in Merck Sharp & Dohme (Australia) Pty Ltd v Peterson [2011] FCAFC 128; (2011) 196 FCR 145, 171 [104]: The rule that a plaintiff must establish as a necessary condition of recovery that he or she would not have suffered loss but for the defendant's actionable misconduct is deeply rooted in the policy of the common law that one person should not be liable for the loss suffered by another unless the plaintiff can establish that the defendant's actionable conduct caused the plaintiff's loss. It is not open to this Court to decide that we should no longer adhere to this rule and that a different and "better" rule should henceforth be applied. 125 In the absence of full submissions on this point it would not be desirable to attempt to resolve it.

Conclusion and the notice of contention 126 The appeal must be dismissed. Subject to any reasons why the usual order should not be made, the appellants should pay the respondents' costs. 127 A notice of contention was filed (with leave) on the first morning of the appeal which raised two issues. 128 The first issue concerned whether the 2009 Business Plan Representation was made in trade or commerce. Since we have concluded that the representation was not made, and since no oral submissions were made on this issue, it is undesirable to consider whether any representations, if made, were made in trade or commerce. 129 For the same reason, it is undesirable to consider the second issue which concerned whether, if those representations had been made, and if they were in trade or commerce, the appellants suffered any loss or damage because they did not prove that they would have pursued the opportunity to seek rescission of the 2005 Agreement or damages. It suffices to make two observations about this issue. 130 First, it was common ground that the appellants were required to prove at trial that but for the alleged representation they would not have entered the 2009 Settlement Deed and they would instead have commenced legal proceedings to recover damages: see Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332, 355 (Mason CJ, Dawson, Toohey and Gaudron JJ), 365 (Brennan J); Price Higgins & Fidge v Drysdale [1996] 1 VR 346, 354-355 (Winneke P with whom Ormiston and Charles JJA agreed) and the recent discussion in Wellesley Partners LLP v Withers LLP [2015] EWCA Civ 1146 [94]-[108] (Floyd LJ). 131 Secondly, it is relevant that (i) the appellants never pleaded that they would have brought an action on the 2005 Agreement, and (ii) it appears (although we were not taken to the evidence at trial in depth on this issue) that there was no direct evidence led on this point. The only evidence to which the appellants could point to satisfy that causal requirement was one indirect statement in a position paper that "Australian shareholders are minded to rescind the April 2005 transaction and intend to do so if an acceptable outcome is not achieved" (Exh 1/658, p 6) (see ts 102). I certify that the preceding one hundred and thirty-one (131) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Court.

SCHEDULE OF PARTIES QUD 142 of 2015 Appellants Fourth Appellant: LEON BROSNAN Fifth Appellant: ALAN BAWDEN GRANT Sixth Appellant: MARY BROSNAN Seventh Appellant: ALAN GEE Eighth Appellant: MICHAEL CURLEY Ninth Appellant: GRAEME JOINER Respondents Fourth Respondent: JEFFREY BLAND Fifth Respondent: HEALTH WORLD LIMITED