Clifford v Vegas Enterprises Pty Ltd

The Facts - an Overview 9 The trial judge arranged his reasons for judgment in the following way. First, he made a number of findings about the dealings between the parties. He did that because he considered that the dealings between the parties and the relationship between them were relevant to the question of whether, in connection with the share transactions, the respondents owed disclosure obligations to the appellant such that a failure to disclose was misleading or deceptive conduct. Secondly, he considered the sales representations and in the course of that consideration he made a number of specific findings of fact and expressed his conclusions. Thirdly, he then did the same thing in relation to the alleged non-disclosure of material facts. I will adopt a broadly similar structure, that is to say, after a very brief description of the parties and the key transactions, I will set out an overview of the facts in chronological order and then outline the trial judge's key findings with respect to the alleged sales representations and the alleged non-disclosure of material facts. I will then deal with the matters raised on the appeal. 10 The details of the share transactions which were at the centre of the appellant's case were as follows. On 19 December 2006, Sheraz Pty Ltd ('Sheraz') a company associated with the appellant, acquired 600,160 newly issued shares in Vegas (about 8 per cent of the company) for $2,370,986.57 and a further 41,229 shares from an existing shareholder (C Breeze Pty Ltd) for $170,000. The allotment by Vegas to Sheraz followed an invitation from Mr Hart to the appellant in October 2006 to become an investor in Vegas' business. 11 Immediately prior to the share transactions the appellant was a barrister who provided legal services directly to the first respondent. 12 Vegas was a company which carried on a business of designing and marketing surfing apparel and surfing-related products and the wholesale distribution of surfing apparel and surfing-related products. It had carried on business since at least 1983 (albeit under a different name) and initially it was primarily a surfboard manufacturer. 13 Mr Hart was a director and company secretary of Vegas and he was the sole director of a company that owned shares in Vegas. Mr Backshall was a director, the chief executive officer of Vegas and the owner of shares in Vegas in his capacity as trustee of a family trust. Between them Messrs Hart and Backshall controlled Vegas. 14 From 1999, Mr Chris Rayney was the chief financial officer of the first respondent and a shareholder in the company. 15 In the early days of the operation of Vegas' business, when it operated primarily as a surfboard manufacturer, it was supported by a licence from Mr Rusty Preisendorfer to use the 'Rusty' brand in Australia. Mr Preisendorfer was a respected United States surfboard shaper and designer. 16 In 2006 a corporation in California, called R … And Everything Else Inc ('Rdot') was the ultimate owner of the 'Rusty' trademarks and associated intellectual property and the global licensor for the Rusty brand. 17 In July 2006 Vegas purchased a controlling stake in Rdot from Mr Preisendorfer and it entered into a transaction which had the effect of terminating a royalty stream that it was then required to pay to interests associated with Mr Preisendorfer for the use of the Rusty brand in Australia. In addition, Mr Preisendorfer acquired a small stake in Vegas. The appellant was, to use the trial judge's words, 'deeply involved' in these transactions. 18 From about 1991 to April 2008 the appellant was the sole lawyer providing legal advice to Vegas and its associated companies, other than some advice from other law firms regarding small debt collections and some leasing work. When the appellant joined the independent bar he provided his services directly to Vegas. When he became a shareholder in Vegas in December 2006 he accepted a role as in-house counsel for Vegas as an agreed part of the share allocation, although he also maintained his practice as a barrister. The appellant's role as in-house counsel of Vegas was terminated in April 2008. 19 After the appellant began advising Vegas on a regular basis he became close to Messrs Hart and Backshall and was trusted by them. The appellant and Mr Backshall socialised regularly and they surfed together. Messrs Hart and Backshall came to place considerable reliance on the appellant's advice. However, by mid 2007 the relationship between the appellant on the one hand, and Messrs Hart and Backshall on the other, soured after they disagreed as to the future plans for Rdot and Vegas. 20 From either 2006 or 2007 the appellant was involved in proceedings brought by his former wife in the Family Court of Western Australia. As a result of an order of that Court made in late 2008, 224,486 of the shares in Vegas registered in Sheraz' name were transferred to the appellant's former wife. 21 Vegas conducted a capital raising in 2009 and in March of that year a new shareholder, New Force Holdings Pty Ltd, took a controlling interest of approximately 53 per cent in Vegas. This had the effect of diluting the shareholding of all the existing shareholders. 22 I turn now to set out an overview of the facts in chronological order. Most of the facts are not challenged on appeal. I will indicate where there is a challenge. 23 In 1986 Vegas held the exclusive rights to design, market, manufacture and sell products bearing the Rusty trademark in Australia and New Zealand. 24 In 1989 C&C Partners LLC (C&C) entered into an agreement with Rdot to become the worldwide master licensee for the Rusty brand. This allowed C&C to grant sub-licences in countries around the world and to collect royalties for the use of the Rusty trademark. C&C retained the rights for North America. At about this time Vegas entered into an agreement with C&C whereby it remained the exclusive sub-licensee in Australia and New Zealand. 25 Vegas' licence arrangements with C&C were renegotiated in the early 1990s, in 1998 and again in 2000. 26 In the early 1990s, C&C acquired equity up to 42 per cent in Rdot. 27 In June 2007 Vegas replaced C&C as the global master licensee of the Rusty trademarks. In March 2009 Vegas acquired C&C's remaining interests in Rdot to take its interest to around 99.66 per cent and in November 2009 it acquired the remaining interests in Rdot so that by the time of trial it wholly owned it. 28 From 1992 when Mr Backshall became managing director of Vegas, the appellant advised Vegas concerning its sub-licence from C&C and he told Mr Backshall that getting control of the Rusty trademarks and global licence was the only way to truly secure Vegas' future and the investments he (Mr Backshall) and others had made in Vegas. 29 In February 2004 there was a meeting at Eagle Bay in Western Australia between Messrs Hart and Backshall, the appellant, Mr Preisendorfer and his advisers. There was a discussion at the meeting about a buy-out of a controlling stake in Rdot and the world wide master licence. The discussions were based in part on the appellant's advice in December 2003 regarding potential breaches by C&C of its sub-licence agreement with Rdot. 30 In April 2004 the appellant prepared a memorandum, draft letter and draft confidential deed in connection with due diligence of the potential purchase of a controlling stake in Rdot and he drafted letters for Mr Backshall to send to Rdot and C&C. This advice was in addition to commercial legal advice which the appellant continued to provide to Vegas from time to time. 31 In June 2004 Messrs Hart and Backshall, the appellant and senior Vegas accounting staff went to the United States of America. They undertook due diligence regarding the financial records of Rdot and C&C and they engaged in negotiations with Mr Preisendorfer and C&C. The appellant's travel was arranged by Vegas and paid for by it. The appellant reviewed the Rdot and C&C sales and the financial figures for the United States and Europe. He was provided with copies of all relevant documents. In the same month, he drafted a heads of agreement regarding the proposed purchase and he assisted Mr Backshall with a draft business plan for Vegas. 32 In July 2004 the appellant prepared a memorandum for Messrs Hart and Backshall entitled 'Working Capital, Debt and Equity Funding Alternatives'. Also in this month, he prepared a memorandum for Messrs Hart and Backshall regarding financial options for Vegas. In the memorandum, he included a suggestion that he take a management role in Vegas. The appellant had not been instructed by Vegas to undertake these investigations or to prepare the memorandum. The trial judge found that the appellant was taking a proactive role and his role was moving between that of a traditional commercial lawyer providing legal advice on matters requested by a client to that of a strategic adviser providing strategic commercial advice that he considered Messrs Hart and Backshall would appreciate. 33 In August 2004 the appellant organised for advice to be obtained from lawyers in the United States regarding the possible termination of C&C's worldwide master licence. In the same month, the appellant provided Vegas with advice as to whether it could provide Rdot with information obtained from C&C during the due diligence process. In the same month, the appellant updated Mr Backshall regarding his discussions with Mr Preisendorfer's lawyer on the potential value of the 'Rusty brand asset' held by C&C and Rdot, excluding the Australian sub-licence to Vegas. 34 In December 2004 the appellant prepared a further memorandum regarding the Rusty transaction and a further draft heads of agreement. He also settled letters to go from Mr Backshall to Rdot and C&C. 35 In early 2005 the appellant engaged in correspondence with Mr Preisendorfer's lawyers regarding the Rusty transaction. In March 2005 he advised Mr Backshall regarding a potential new purchase of the Rusty assets and the Australian sub-licence. In May 2005 he advised Vegas regarding a variation of the sub-licence agreement with C&C to include Singapore in Vegas' territory. In September 2005 he provided a memorandum to Vegas regarding the funding options for Rdot. From that month onwards he worked closely with a business adviser brought in to assist Vegas with the negotiations between it and C&C and Mr Preisendorfer. In October 2005 he organised tax advice for Vegas regarding the proposed Rusty transaction. 36 By mid December 2005 Mr Backshall had negotiated a price with Mr Preisendorfer regarding Vegas' potential purchase of his shares in Rdot and the royalty stream to Rusty Inc which he owned. 37 The appellant continued to provide advice regarding the negotiations with Mr Preisendorfer. Throughout this time, Mr Backshall updated the appellant on all correspondence and information received from C&C and this included an email from C&C regarding Rdot's debt. It also included an email from C&C regarding a 10 per cent drop in sales at Vegas in the first half of the calendar year 2006. 38 The funds for the purchase of Mr Preisendorfer's shares in Rdot and the buy-back of the royalty stream were provided to Vegas by the Westpac Banking Corporation ('Westpac') through the medium of two commercial bills. At the time the bills were provided, namely, July 2006, Vegas had a number of other facilities with Westpac and those facilities included an overdraft facility of $1.5 million. In the same month the shareholders of Vegas provided guarantees to Westpac for varying percentages of the moneys owing by Vegas to Westpac under the finance arrangements. Mr Backshall obtained the appellant's advice regarding the Westpac documentation for this transaction and the appellant also provide a letter of undertaking to Westpac in respect of the transaction. 39 On 7 July 2006 the appellant provided a closing checklist to Vegas in respect of the purchase of Mr Preisendorfer's shares in Rdot. 40 In June and July 2006 the appellant attended at least two of the weekly budget meetings that were generally held on Thursdays at the offices of Vegas and attended by all the shareholders of Vegas. The executive management team was comprised of all of the shareholders of Vegas. At these meetings, the appellant updated the shareholders on the progress of negotiations with Mr Preisendorfer. 41 Messrs Hart and Backshall and the appellant travelled to the United States in July 2006 and undertook a further due diligence of Rdot as part of the final closing of the purchase from Mr Preisendorfer. They were given access to the books and records of Rdot including bids that Rusty and C&C had received for their assets in 2005. These bids included a bid from Mitsui which valued Rdot and the global licence and royalty stream at USD26 million. 42 While in the United States the appellant sought taxation advice for Vegas and Rdot from KPMG on 18 July 2006. As part of that request he noted that C&C had threatened litigation against Rusty Inc to prevent the sale to Vegas. 43 On 19 July 2006 the transaction between Vegas and Mr Preisendorfer was settled at the offices of the lawyers for Mr Preisendorfer, Sheppard Mullin, in San Diego. The appellant was present for the closing negotiations. The purchase price for Mr Preisendorfer's shares in Rdot and the buy-back of the royalty stream that Vegas paid to Mr Preisendorfer's personal interests was USD6.5 million plus 2 per cent of Vegas and an option to acquire a further 5 per cent of Vegas. The strike price of Mr Preisendorfer's option was based on a valuation of Vegas that had been prepared by Sheppard Mullin some time previously. Mr Backshall was informed by Sheppard Mullin that it valued Vegas at USD26.66 million and Mr Clifford was present when this valuation was discussed with Sheppard Mullin. 44 On 26 July 2006 meetings of the directors and shareholders of Rdot were held. Messrs Hart and Backshall and the appellant were appointed to the board representing Vegas and Messrs Dac Clarke and Paul Carr were re-elected as directors representing C&C. Messrs Hart and Backshall asked the appellant to be a director and chairman of Rdot and he accepted. Mr Backshall was appointed the president of Rdot and the trial judge found that that was the equivalent of a managing director in the Australian corporate governance system. The appellant acted in his roles until 2008. During the Rdot board meetings, the directors discussed the need for Rdot to raise about USD1 million in working capital. 45 During their trip to the United States, Messrs Hart and Backshall met with C&C to discuss how Vegas and C&C could work together cooperatively. While the appellant did not attend the meeting with C&C, Mr Backshall kept him informed of the discussions with C&C. 46 In July 2006 Vegas approached Westpac to increase its overdraft facility to meet an anticipated shortfall in its cashflow in August. Westpac would provide only a further $500,000. Mr Backshall approached the shareholders asking them to lend a total of $1 million to Vegas. On 2 August 2006 Westpac agreed to a variation to Vegas' finance arrangements to increase the limit on the overdraft facility by $500,000 to $2 million on the basis that the limit was reduced to $1.5 million by 8 September 2006. Between 4 and 23 August 2006 all of the shareholders of Vegas provided shareholder loans to Vegas in the total sum of $1 million to provide the company with working capital. On 5 August 2006 the company secretary of Rdot sent a message by email to the appellant and Mr Backshall to advise them that Rdot had little cash and required additional funds to pay team contracts and payroll. In August 2006 all of the shareholders of Rdot provided the company with loan funds of USD500,000 pro rata to their respective interests in Rdot. The total contribution from Vegas was $339,746 with one instalment being paid on 15 August and another on 24 August 2006. 47 On around 10 August 2006 the monthly board package was sent out to shareholders of Vegas for the August board meeting. It showed Vegas' actual sales figures from 1 July 2006 to the end of July 2006. Total income was $2.011 million against a budget of $2.632 million. Total expenses were $1.322 million against a budget of $1.362 million. There was then a net loss before tax and interest of $619,000 against a budgeted loss of $405,000. 48 The trial judge found that the appellant did not receive the monthly board packages for Vegas in the latter part of 2006 leading up to 9 December 2006. He accepted that after that date and into 2007 board packages were made available to the appellant as a representative of Sheraz. 49 In early September 2006 Vegas reduced the overdraft facility with Westpac to $1.5 million as they had agreed to do on 2 August 2006. 50 On about 10 September 2006 the monthly board package was circulated which contained the Vegas actual sales figures from 1 July 2006 to the end of August 2006. The total income was $6.398 million against a budget of $9.366 million. The total expenses were $3.202 million against a budget of $3.289 million. There was a net loss before tax and interest of $681,000 against a budgeted profit of $476,000. 51 On 14 September 2006 Mr Backshall received an email from Mr Clarke at C&C regarding a proposal to purchase all of C&C's Rusty assets for USD15 million. Mr Backshall forwarded this email to the appellant. During this period the appellant provided legal advice in relation to what the trial judge called C&C's performance issues. 52 In late September 2006 Messrs Hart and Backshall and the appellant met at the offices of Vegas to discuss capital raising for Vegas. On 29 September 2006 the appellant sent to Mr Backshall a memorandum summarising the discussion. In the memorandum the appellant noted, among other things, that there were two primary sources of capital raising from an equity investor. He referred first to private likeminded individuals and secondly to equity markets, meaning seed capital investors prior to a full float. The appellant discussed structures which included obtaining a publicly unlisted shell with sufficient capital in it into which ultimately the Vegas business would be sold. The structures discussed in the memorandum prepared by the appellant were designed to ensure a public float of a new company that Vegas controlled. The trial judge found that on all counts the 'issue of concern' continued to be the performance of the organisation holding the US sub-licence, as well as performance in Europe. 53 On 29 September 2006 Westpac agreed a further variation to increase the limit on the Vegas overdraft facility to $2 million, on the basis that it was reduced to $1.5 million on 30 November 2006. The shareholders of Vegas provided updated guarantees in respect of the liability to Westpac. The reason Vegas requested the increase in the overdraft facility was the delay in the shipping of product in the July-September period which was predicted to have the consequence of reducing the October-December receivables. The delays were in part caused by the fact that in June 2006 Vegas had implemented a new computer operating system responsible for the management of inventory and sales and it had experienced teething problems associated with the implementation. At that stage, it was anticipated that Vegas may have to contribute further loan funds to Rdot in the event that C&C and other shareholders failed to contribute. The cheque for shareholder loan funds payable to Rdot from Mr Carr of C&C had bounced in August and C&C had subsequently provided Rdot with the funds. 54 On about 10 October 2006 the next monthly board package was circulated which contained Vegas' actual sales figures from 1 July 2006 to the end of September 2006. Total income was $11.042 million against a budget of $12.213 million. Total expenses were $4.436 million against a budget of $4.627 million. There was therefore a net loss before tax and interest of $102,000 against a budgeted profit of $319,000. 55 On about 16 October 2006 forward orders for January-April 2007 received by Vegas were up 7.8 per cent from the orders received for the same period in 2006. On 17 October 2006 the appellant advised Messrs Hart and Backshall that C&C 'wanted to be carried along on an IPO [initial public offering] to cash in on the success of Vegas'. At about this time, Mr Backshall was copying the appellant into all emails regarding Rdot and C&C. On 18 October 2006 Mr Backshall copied the appellant into an email to Mr Clarke at C&C in which he proposed that the shareholders of Rdot provide further loan funds to Rdot. The appellant settled the wording of the email. In late October 2006, the appellant advised Vegas regarding correspondence with C&C. 56 In order to identify the trial judge's findings as to the circumstances leading up to the appellant's decision to make the share purchases I need to return to September 2006. In early September 2006 the appellant telephoned Mr Hart and said that he wanted to have a conversation with him without Mr Backshall being present. They met at a café in Cottesloe and the appellant advised Mr Hart that he believed that he had ten good working years left in him. He told Mr Hart that '[t]he logical path for him would be to become a judge, but that was not his choice. Nor was the option of him turning his focus to business in a large public company as had previously been offered to him'. He said that he was interested in investing in and joining Vegas. Mr Hart said that he was open to the idea and thought it was a positive move for Vegas. He said he would speak to Mr Backshall and the other shareholders regarding the appellant's potential investment. 57 In early October 2006 Mr Hart contacted the appellant by telephone and told him that the shareholders had approved his investment and that he could have a minor shareholding in Vegas equal to the shareholding then held by Mr Sutton, Mr Whiteman and Mr Rayney at a price in line with the recent valuation prepared for the transaction with Mr Preisendorfer. He said that Vegas would also like him to come on board as in-house counsel and help with any future IPO. He said that the appellant should deal with Mr Backshall 'regarding the numbers'. 58 In summary, the trial judge found that there was 'some preliminary sounding out' by the appellant and that then Mr Hart ascertained that there was support for the appellant's proposal. Messrs Hart and Backshall and the appellant met on 24 October to settle the details of the investment. 59 The trial judge's findings with respect to the events between 24 and 26 October 2006 are set out below in the section of these reasons dealing with the trial judge's specific findings with respect to the sales representations. 60 On about 25 October 2006 Vegas received a reservation of rights letter from lawyers acting for C&C. The letter was addressed to the appellant. On 26 October 2006 Mr Backshall also sent an email to Mr Clarke regarding the shareholder loans into Rdot. He did this after taking the appellant's advice on the terms of the email and he copied the appellant into the response. On 28 October 2006 Mr Backshall and the appellant received an email from Mr Clark. On 30 October 2006 Mr Backshall received further correspondence via the appellant from C&C as well as advice regarding that correspondence. 61 Some time in late October 2006 Mr Backshall asked the appellant whether he was interested in buying a half a per cent of Vegas from Mr Mark Sutton. Mr Sutton controlled the company C Breeze Pty Ltd. The appellant said that he was definitely interested. Mr Backshall told the appellant that Mr Sutton wanted to reduce his personal debt. The appellant asked what the deal was and Mr Backshall said that the purchase would be at the same value as he was paying to come into Vegas. He then left it to the appellant and Mr Sutton to deal with that part of the transaction. 62 Again, the trial judge's findings with respect to the conversations with Mr Sutton are set out below in the section of these reasons dealing with the trial judge's specific findings with respect to the sales representations. 63 On 30 October 2006 Mr Rayney and Mr Backshall completed a draft profit and loss statement for the purpose of discussions with Deloitte on funding options, as the trial judge put it, 'to hypothetically allow Vegas to acquire from C&C both the shares it held in Rdot that Vegas did not already own and the global master licence'. This is the document that was referred to as the spreadsheet and it contained what the appellant alleged were the sales representations. Part of the proposed plan at that stage was that following the hypothetical acquisition, Vegas would on-sell the US sub-licence and the US operating business acquired from C&C to a new licensee. Mr Backshall said that he did not prepare the draft profit and loss statement or spreadsheet for the purpose of providing the appellant with any forecasts regarding Vegas' sales or profitability. The trial judge found that at no time did the appellant ever request that Mr Backshall provide him with any forecasts regarding Vegas' sales or profitability. That finding is not challenged on the appeal. 64 In preparing the draft profit and loss statement or spreadsheet Mr Backshall assumed a hypothetical acquisition of the Rdot shares and the global master licence in 2007 and that additional sub-licences would be granted in China, India and the Arab States in 2009/10. The document was eventually sent to Deloitte on 17 November 2006. Mr Backshall explained in his evidence the information he used to prepare the document and why he considered its forecasts to be based on reasonable grounds. 65 In early to mid November Mr Backshall provided the draft profit and loss statement or spreadsheet to the appellant. The trial judge's findings with respect to this event are set out below in the section of these reasons dealing with the trial judge's specific findings with respect to the sales representations. 66 In late October or early November 2006 the shareholders of Vegas provided further interest free shareholder loans to Vegas in the total sum of $500,000 to be used as working capital. The trial judge found that this was required because of a $500,000 overpayment made by Vegas to the Australian Taxation Office in June 2006. The overpayment occurred as a result of an error made by the chief financial officer of Vegas. Despite requests, it had not been possible to recover this sum promptly, although the refund was made later on 16 November 2006. 67 On 1 November 2006 Mr Backshall received a further email from Mr Clarke of C&C and in that email Mr Clarke threatened litigation unless certain issues were addressed. The appellant assisted Mr Backshall in drafting a response. 68 In November 2006, all the shareholders of Rdot provided Rdot with further loan funds that were pro rata to their interests. Vegas contributed loan funds on behalf of itself and two minor shareholders of Rdot. The total contribution from Vegas was $457,000 paid in three tranches. Two tranches were paid on 9 November and one on 21 November 2006. 69 On 7 November 2006 Mr Backshall forwarded to the appellant his email of the same date to Mr Clarke regarding a 25 to 30 per cent drop in C&C sales in the United States. 70 On or about 10 November 2006, the monthly board package for Vegas was circulated to shareholders. It contained Vegas' actual sales figures from 1 July 2006 to the end of October 2006. Total income was $15.903 million against a budget of $15.849 million. Total expenses were $5.462 million against a budget of $5.788 million. Net profit before tax and interest was $992,000 against a budget of $772,000. 71 On 14 November 2006 Mr Backshall caused his personal assistant to email the appellant's secretary in order to remind the appellant that he was going to provide Vegas with a list of requirements for Vegas to put a package together for another lawyer to review the deal that Vegas had offered the appellant. This came about because the appellant had previously advised Mr Backshall that it would be appropriate for Vegas to take independent advice in relation to the proposed transaction with the appellant given that the appellant had such a longstanding relationship with Vegas. 72 On 14 November 2006, the Vegas overdraft facility was varied to increase the limit from $2 million to $3 million for a period of two weeks to assist with working capital requirements. Vegas did not use this increased limit other than for a short period from 14 November 2006 during which it peaked at $2.3 million. By 28 November 2006 the overdraft had reduced to $1.5 million. 73 During this time Mr Backshall continued to update the appellant on the situation with C&C and the appellant continued to settle Mr Backshall's correspondence with C&C. 74 On 28 November 2006 Vegas released its annual report for year ended 30 June 2006. 75 The appellant sent a letter dated 29 November 2006 to Mr Backshall and that letter dealt with the proposed share transaction between the appellant and Vegas. The terms of that letter are set out below in the section of these reasons dealing with the trial judge's specific findings with respect to the sales representations. 76 On 1 December 2006 Mr Backshall sent the letter to an independent lawyer. 77 During this period the appellant continued to advise Mr Backshall regarding correspondence with C&C. He also reviewed Rdot cashflow documents which showed a poor cashflow. 78 On about 10 December 2006 the monthly board package for Vegas was circulated. It contained Vegas' actual sales figures from 1 July 2006 to the end of November 2006. Total income was $22.153 million against a budget of $21.977 million. Total expenses were $6.959 million against a budget of $7.125 million. Net profit before tax and interest was $2.348 million against a budget of $2.037 million. The trial judge found that after a shaky start on these figures sales as against budget had been restored during the first five months of the 2006-2007 financial year. 79 On 13 December 2006 Mr Backshall sent the appellant a memorandum he had prepared regarding potential breaches by C&C of its licence agreement with Rdot. On 14 and 15 December 2006 Vegas repaid the shareholder loans of around $500,000 that had been made in October or November 2006. 80 On 15 December 2006 Mr Backshall received a telephone call from the appellant while Mr Backshall was at the Vegas Christmas party. The appellant said that he had some 'great news' and said that the litigation threatened by C&C had been commenced and that was the 'worst thing' C&C could have done thereby implying that this would suit Vegas' ends. On the same day, Mr Backshall received an email which was copied to the appellant and which attached a letter and a copy of a writ that had been filed in the Orange County Superior Court of California, United States of America, by C&C which named Rdot, Vegas, Mr Hart, Mr Backshall and the appellant as defendants. 81 Mr Backshall obtained independent legal advice from Phillips Fox as to the appellant's proposed purchase of Vegas shares. On or about 18 December 2006 he advised the appellant by telephone that the advice had been received and that the transaction could proceed. On 18 December 2006 the appellant signed a loan agreement with the ANZ Bank to borrow the funds necessary to purchase the shares to be issued by Vegas. 82 On 19 December 2006 the appellant paid the funds by cheque to Mr Rayney. Vegas then issued 600,160 newly issued ordinary shares in the capital of Vegas to Sheraz. The share certificate was issued in the name of Sheraz. On that day Mr Sutton arranged for C Breeze Pty Ltd to transfer 41,229 ordinary shares to Sheraz. 83 Immediately prior to Vegas receiving the funds from Sheraz, Vegas' overdraft facility was in credit. 84 On 20 December 2006 Mr Backshall sent a letter to C&C announcing that the appellant had joined Vegas as a new shareholder. In January 2007 the appellant signed an agreement to become in-house counsel of Vegas, although he would continue to be based at Francis Burt Chambers where he conducted his independent practice as a barrister. 85 On about 10 January 2007 the monthly board package for Vegas was distributed. It contained Vegas' actual sales figures from 1 July 2006 to the end of December 2006. Total income was $23.722 million against a budget of $24.640 million. Total expenses were $8.164 million against a budget of $8.231 million. Net profit before tax and interest and before an extraordinary item was $1.775 million against a budget of $2.096 million. The extraordinary item was a royalty termination expense of $7.378 million which represented the one-off expense associated with the purchase of the royalty stream from Mr Preisendorfer. Taking into account this extraordinary item there was a loss for the period of $5.603 million. 86 Also in about January 2007 Vegas provided further funds to Rdot. The other shareholders of Rdot, including C&C, did not make a contribution. Vegas contributed $10,691.98 on 9 January 2007, $274,169.89 on 29 January 2007 and $11,619.26 on 8 February 2007. In February 2007 the appellant travelled to the United States regarding the dispute with C&C. 87 On 11 June 2007 the appellant and Mr Backshall attended a meeting of directors of Rdot by telephone. This was after the discharge of a preliminary injunction C&C had obtained against Rdot and the appellant. The board of Rdot resolved to appoint Vegas as the interim global master sub-licensee, and the appellant was instructed to draft the new global licence between Rdot and Vegas. Also in June 2007, Messrs Hart and Backshall and the appellant travelled to the United States for meetings with prospective North American sub-licensees. Ultimately they negotiated an agreement in principle with La Jolla who were Vegas' preferred sub-licensee of the Rusty brand. On the final day of the trip, Mr Hart and Mr Backshall met with La Jolla without the appellant. After the meeting, Messrs Hart and Backshall tried to contact the appellant to discuss the terms and progress of the deal but he did not respond. Mr Backshall tried to contact the appellant a further twelve times over the following ten days but the appellant failed to respond. 88 On 19 July 2007, the appellant sent by email a long memorandum to Mr Hart and the shareholders of Vegas in which he opposed the La Jolla transaction and advocated the sale of the Vegas business. In his memorandum he said that on any view of Vegas 'it is worth between two and three times more than it was on 5 June 2007', that being the date on which the interim injunction obtained by C&C was discharged. The appellant argued that if the brand was successfully relaunched in the United States and Europe in five years, the value of the current partners' equity would be many multiples higher than it was then. He said the key to this was 'discipline and cohesion'. 89 On 23 July 2007 Mr Backshall and the appellant attended an informal meeting of the shareholders of Vegas during which the appellant said that he was strongly opposed to the appointment of La Jolla and that he wanted Vegas to own and operate the North American business and float the company on the London Stock Exchange. However, the majority of the shareholders, other than the appellant and Mr Rayney, wanted to proceed with the La Jolla deal and did not want to own and operate the United States business. The difference of opinion regarding the timing of the float of Vegas and the appointment of a US licensee caused a major rift in the relationship between Mr Backshall and the appellant. From that time onwards the appellant refused to speak to Mr Backshall other than as was required in a shareholders' or board meeting and refused to respond to any of his emails or telephone calls. When the appellant did return emails, it was only as part of a group email. Nevertheless because of the appellant's importance to the defence of the C&C litigation, Mr Backshall endeavoured to re-engage with him. 90 Mr Backshall was obliged to negotiate the heads of agreement between Vegas and La Jolla regarding the grant of the North American sub-licence without the appellant's assistance. The appellant subsequently criticised the draft terms sheet. Mr Backshall suggested he would take advice from Deloitte. On 30 July 2007 the appellant sent a memorandum copied to shareholders of Vegas in which he resigned as general counsel and put forward a proposition that he be appointed head of the 'international division' of the Vegas/Rdot business at an annual salary of USD300,000 plus a USD750,000 parachute payment paid on early termination of his employment for any reason. This proposal did not come to anything. 91 In August 2007 the board resolved to appoint La Jolla as the US sub-licensee. 92 On 19 October 2007 the appellant emailed Mr Backshall and said that as a director of Rdot he could not agree to the La Jolla sub-licence as it would create a problem for any IPO that might occur in the next few years. Mr Backshall became frustrated with the refusal of the appellant to respond to his requests for assistance regarding the La Jolla sub-licence and other sub-licences. 93 In March 2008 the appellant travelled to the United States and negotiated with the lawyers for La Jolla regarding the North American sub-licence. The appellant undertook this trip without authorisation or instructions. Mr Backshall was away in Fiji at the time and did not find out about the appellant's trip until 25 March 2008 when the appellant gave him a memorandum documenting his meetings with La Jolla and the terms agreed. In early April 2008 Messrs Hart and Backshall travelled to the United States and negotiated terms with La Jolla. The appellant provided advice regarding those terms. 94 On 14 April 2008 the appellant issued a notice of directors meeting in respect of Rdot. On 22 April 2008 Mr Backshall responded to the appellant's memorandum on the topic. On 23 April 2008 Vegas asked the appellant to make all of his Vegas files concerning the C&C litigation available to a firm of solicitors, Mallesons Stephen Jaques. The appellant did not make any of his files or any material available as requested. Vegas then informed the appellant that he was not authorised to undertake any further legal work for Vegas unless expressly authorised in writing. 95 By memorandum dated 27 May 2008 from the appellant to Messrs Hart and Backshall with a copy to Mr Rayney, the appellant addressed the continuing C&C litigation and noted that he had been asked to accept instructions to assist Rdot and others with C&C litigation. He indicated that he would not lend his time and expertise if the work was not done 'carefully, fully, competently and to a plan'. He then set out conditions on which he was prepared to undertake the work. One of those conditions was that he would not take instructions directly from either Mr Backshall or Mr Hart. He also specified a requirement that the instructions to Mallesons Stephen Jaques be terminated immediately and a requirement for a termination fee in the event that his services were terminated for any reason. This proposal was not taken up by Vegas. 96 In September 2008 Messrs Hart and Backshall met with the appellant and Mr Rayney at the appellant's barristers chambers in Perth. Mr Backshall took with him some notes to make a presentation to update them regarding the capital-raising proposed through Deloitte. He started to make a presentation when the appellant said that what he and Mr Rayney wanted was to be bought out of the company for a total of $6.9 million. The appellant wanted $3.7 million and Mr Rayney wanted $3.2 million. Mr Rayney had resigned from his position earlier that year. The appellant said that he did not agree with the direction in which the company was going and wanted a clear separation from Vegas. He said that his investment had not gone the way he had envisaged and that he would now like to put his experience in Vegas behind him and move on with life. He said that if they could settle quickly then they could see their way to assisting Vegas with the evidence required for the depositions in the United States litigation with C&C. Mr Backshall said that he and Mr Hart were due to fly out in a few days and that what was proposed would not happen. Mr Backshall indicated that they were not prepared to 'write up a deal' over the weekend. Mr Hart said that they would use their best endeavours to facilitate the needs of the appellant and Mr Rayney as part of the capital-raising process but that they could not do anything at that point. 97 In late September 2008 Messrs Hart and Backshall flew to the United States in connection with the C&C litigation. On 26 September Vegas settled the litigation and purchased from C&C its shares in Rdot and the global master licence. The legal and accounting costs incurred by Vegas in the United States in connection with the C&C litigation in 2007 and 2008 totalled around USD1.5 million. 98 In late November 2008 Mr Backshall and Mr Marcus Gracey, the chief operating officer of Vegas, met with the appellant at a café in Cottesloe. The appellant wanted an update regarding the Vegas capital-raising process as he was still looking to sell his shares. Mr Backshall gave him an update. He said that it had been a difficult process but that they would look after each shareholder as best they could. He asked the appellant if he knew of anyone who would be interested in investing in Vegas. The meeting came to an inconclusive end. In early December 2008 Mr Backshall was subpoenaed by lawyers acting for the appellant's former wife to appear in the Family Court of Western Australia for a hearing regarding the value of the appellant's shares in Vegas. Ultimately he was not required to give evidence. 99 On 18 December 2008, Vegas received a letter from the appellant asking that certain shares registered in the name of Sheraz be transferred to his former wife in consequence of orders made by the Family Court of Western Australia. 100 On 12 January 2009 Mr Backshall and Mr Hart and Vegas' lawyers met with the appellant and his lawyer at the offices of Mallesons Stephen Jaques and held without prejudice discussions regarding the matters which subsequently became the subject of these proceedings. 101 On 18 February 2009 the appellant commenced these proceedings. The trial judge found that at no time prior to the without prejudice discussions held on 12 January 2009 did the appellant raise with Mr Backshall, Mr Hart or Vegas, either verbally or in writing, the alleged representations which were the subject of the proceeding before him.

The Facts - the Sales Representations and Non-disclosure of Material Matters

The Sales Representations 102 The trial judge made a number of findings which were specific to the sales representations. 103 The trial judge found that there was a meeting at Vegas' offices involving the appellant, Mr Hart and Mr Backshall on the evening of 24 October 2006. The matter of the appellant's investment was discussed in detail and Mr Backshall said to the appellant that he could come in at the same price as Mr Preisendorfer and at the same percentage as Mr Sutton, Mr Rayney and Mr Whiteman. The appellant mentioned his desire to do due diligence. Mr Backshall told the appellant that he should contact Mr Rayney for any financial information he required for his due diligence. 104 On 25 October 2006 Mr Backshall sent an email to the appellant in the following terms: Hi Phil As per our discussions last night please find attached a copy of the new share register for your reference. As you are coming in at the same price as Rusty we've checked the consulting agreement and the correct calculation is $2,553,894.60 for 7.2786%. This calculation is done at 76c. As discussed last night you were going to draft a letter showing your acceptance to come on board as a new shareholder subject to due diligence. We would prefer settlement to be Nov 30, 2006 for the reasons discussed last night. If you need any bridging finance whilst you are waiting for settlement on the sale of your assets our bank is happy to [sic] you out. If you have any queries give me a call, I'm in the office all day today. Regards, Geoff 105 On 26 October 2006 the appellant sent the following letter to Vegas, for the attention of Mr Backshall: Dear Geoff Re: Equity in Vegas Thank you and the other shareholders for inviting me to acquire an equity interest in Vegas. In particular the invitation to acquire 600,160 shares for the sum of $2,553,894.60. Please take this letter as notice of my intention to take up that invitation subject to due diligence work on the last 3 years audited accounts with a focus on use to be made of the funds, revenues, expenditures and the history of dividend payments to shareholders. If you could provide me with a copy of the audited accounts and financial statements for the last 3 years that will expedite the process. Also to meet the 30 November 2006 date it may, and probably will, be necessary to secure bridging finance for a period. To this end if you could give me a reference to your bank's account manager I will discuss the options with him. Also subject to taxation advice from my accountant (Mr Grant Boyce) the share purchase will either be in my name or the name of my trustee, Sheraz Pty Ltd. (Emphasis added.) 106 At some time in early November 2006 Mr Backshall gave to the appellant the audited accounts of Vegas for the financial years 2003 to 2005 and the unaudited accounts of Vegas for the financial year 2006. 107 On 29 November 2006 the appellant sent the following letter to Vegas for the attention of Messrs Backshall and Hart: Dear Geoff and Rod Re: Equity Purchase in Vegas Enterprises Pty Ltd ("Vegas") This is to confirm your invitation to acquire between 7% and 8% of Vegas. The purchase price of that percentage is to be finally set measured against the value of the Australian dollar to the US dollar on settlement. For present purposes the price of the equity acquisition will be approximately AUD $2.6 million. In due diligence you have provided me with substantial information relating to the last 3 years operation of Vegas. In addition as a provider of legal services to you for the last 15 plus years I have acquired a reasonable historical knowledge of the company. I have discussed this information, with your permission, with my accountant, Mr Grant Boyce of Montrose Partners (Unit 4, 105 Broadway, Nedlands). Mr Boyce has advised me, depending on the method of valuation, that the value of the equity interest being considered is between AUD $1.8million (bare dividend expectations over 2005 to 2006 years) and AUD $3.3million (projected income upon the acquisition of the Global license and a moderately improved performance by C&C in the North American market). Because I have been a provider of legal services to you for many years it is important that you take independent legal advice on the question of whether or not Vegas enter into the agreement to sell to me an equity interest in Vegas. As a matter of law I am not permitted to enter into the transaction unless and until you have taken independent advice on the transaction. To assist in the provision of that independent advice I also set out the following: 1. There will be no dividend declared by Vegas to its shareholders for this financial year; 2. I will become a part time employee of Vegas providing advice on matters such as structure of acquisition of the 'Rusty assets'; 3. I will be assisting in the negotiations related to those acquisitions; 4. I will be advising on the structure and timing of an IPO of the Rusty assets; 5. I will advise Vegas generally on 'governance' issues; 6. I will remain as Chairman of Rdot, the holder of the Trademark rights and the rights to receive royalties; 7. My income for this work as an employee will be, initially set at around $100 per hour rather than charged at approximately $400 per hour as an independent provider of legal services; 8. I will make myself available to Vegas in priority to other work and wherever possible on short notice to undertake Vegas work. Yours sincerely Philip Clifford (Emphasis added.) 108 As can be seen from the overview, in mid November 2006 Vegas and Mr Backshall were considering a capital raising through Deloitte for the purpose of the possible acquisition of the global master licence and C&C's interest in Rdot and the appellant, as Vegas' legal adviser, was closely involved in dealing with C&C. The trial judge found that Mr Backshall and the appellant had a discussion about this matter probably in mid November 2006 and that it was in the course of, or at the end of, the discussion that the appellant observed the spreadsheet document. The appellant and Mr Backshall discussed the spreadsheet and the appellant asked if he could take the spreadsheet with him. Mr Backshall said that he could. These were important findings by the trial judge because, among other things, in making them he expressly rejected the appellant's evidence that he had been given the spreadsheet by Mr Backshall at the same time as he was given Vegas' audited accounts for the financial years 2003-2005 and its unaudited accounts for the financial year 2006. The trial judge found that the provenance and the purpose of the spreadsheet, and the reason Mr Backshall allowed the appellant to have a copy was 'not directly linked' to the appellant's due diligence process and that the appellant understood that fact. 109 The trial judge identified five reasons for reaching the conclusions set out in the previous paragraph. First, he said that it was inconsistent with his finding that the respondents did assume and were entitled to assume that the appellant would ask for the information he required, to conclude that Mr Backshall should suddenly have provided the sales information and projections in the spreadsheet as part of the appellant's due diligence when the appellant had not asked for it. Secondly, he said that the appellant's letter dated 29 November 2006 made no express mention of such a document being material to the advice the independent lawyer should be asked to give and he was left uncertain as to whether any passage in the letter was, as he put it, drawn from the spreadsheet. Thirdly, he referred to Mr Backshall's evidence that the spreadsheet was discussed with the appellant in the context of a discussion about Deloitte's assistance with capital raising and said that his evidence was to be preferred. Fourthly, he said that having regard to the appellant's evidence 'overall' the appellant's testimony '(both here and generally)' was to be approached 'with caution, particularly where his evidence is not corroborated by some documentary or other cogent evidence'. Finally, he said that his conclusion about the circumstances in which Mr Backshall provided the spreadsheet to the appellant was fortified by the appellant's failure to call his accountant, Mr G Boyce. 110 The second and third respondents made a submission to the trial judge to the effect that having regard to the circumstances in which the spreadsheet was provided to the appellant he was not entitled to rely on the spreadsheet in connection with the proposed share transaction with Vegas. The trial judge rejected that submission but said that it was quite a separate and different question as to whether the appellant did in fact rely on the spreadsheet. 111 The trial judge then turned to examine whether there was any documentary evidence which supported the appellant's case that he relied on the information in the spreadsheet. It is important to appreciate that this approach followed from the trial judge's conclusion about the reliability of the appellant's evidence. The trial judge examined whether there was any reference, either express or implied, to the information in the spreadsheet in the appellant's letter dated 29 November 2006. That was the only documentary evidence that was possibly relevant. He considered the appellant's argument that the reference in the following passage in the letter was based on information in the spreadsheet: Mr Boyce has advised me, depending on the method of valuation, that the value of the equity interest being considered is between AUD $1.8 million (bare dividend expectations over 2005 to 2006 years) and AUD $3.3 million (projected income upon the acquisition of the Global license and a moderately improved performance by C&C in the North American market). (Emphasis added.) 112 The trial judge considered what inference could be drawn from this passage. He noted the appellant's failure to call Mr Boyce as a witness. He said that that failure added to his doubt that the appellant received the spreadsheet at the time he received the audited and unaudited accounts of Vegas (see [108]). It also left him doubting that Mr Boyce had access to the spreadsheet when he gave the appellant advice and 'critically' it left him in real doubt that it could be said that the appellant actually relied on the spreadsheet when he proceeded to acquire the shares. It supported an inference that the appellant did not rely on the information in the spreadsheet when deciding to enter into the share transactions even if the reference to 'proposed income' owed itself to the content of the spreadsheet. 113 In the result, the trial judge said that he was not satisfied that the appellant relied on the information in the spreadsheet in deciding to enter into the share transactions. 114 The trial judge went on to consider whether, in any event, the respondents had reasonable grounds for making the representations in the spreadsheet. He accepted Mr Backshall's evidence as to the following matters: 1. The information and considerations Mr Backshall took in to account in formulating the 'Forecast Sales Growth'; 2. The extent to which the sales figures in the spreadsheet were actual, budget and forecast; 3. The basis of the calculation of various figures and the assumptions made including the hypothetical acquisition of assets by Vegas, the sale of the US sub-licence and the granting of sub-licences in China, India and the Arab States; and 4. The various unforeseen factors which Mr Backshall identified as affecting the forecasts, viz., 4.1 Floods and unseasonal weather conditions on the east coast of Australia in December 2006 and January 2007; 4.2 From January 2007, C&C refused to make any shareholder loans to Rdot, so Vegas had to fund Rdot entirely; 4.3 Vegas met all of its and Rdot's costs associated with the C&C litigation; 4.4 Sales during the 2007/2008 financial year were adversely affected by the Global Financial Crisis; 4.5 Vegas did not obtain clear title to the global master licence and the remaining shares in Rdot until the C&C litigation was settled and final payment of the settlement sum made in March 2009; 4.6 Vegas did not sell the US sub-licence as was envisaged in the spreadsheet; 4.7 As a consequence of the Global Financial Crisis, no sub-licences were granted in China, India or the Arab States as had been incorporated into the spreadsheet; and 4.8 Negative movements in the Australian dollar as compared with the US dollar which increased the money required in Australian dollars to pay the C&C settlement sum. 115 The trial judge concluded that even if he had been satisfied that the appellant had relied on the information in the spreadsheet, he would also have been satisfied that the respondents had reasonable grounds for the projections contained in the spreadsheet.

Vegas' Sales Figures 116 The appellant's case at trial was that between July 2006 and December 2007 the respondents received information in the normal course of Vegas' business that showed Vegas' sales were falling well below budget and information about forward orders for January to June 2007 that indicated that sales would be well below budget. The appellant's case was that this information was material to his decision to enter into the share transactions and should have been disclosed to him by the respondents. 117 As to the alleged non-disclosure of falling sales figures, the trial judge made the following specific findings. The appellant did not receive the monthly board packages issued to shareholders at material times during the period from July to December 2006. The monthly board package for July 2006 showed sales for June 2006 were $1,069,319 under budget and sales for January to June 2006 were $2,639,239 under budget. The monthly board package of 10 August 2006 showed sales for July 2006 were $621,166 under budget and sales for January to July 2006 were $3,260,455 under budget. These figures were not disclosed to the appellant. Sales for August 2006 were $2,348,115 under budget and sales for January to August were $5,607,893 under budget. The monthly board package for 10 December 2006 showed that sales to November 2006 were only $155,809 (or 0.75%) ahead of sales to November 2005. 118 However, the trial judge found that by 10 December 2006 actual sales for July to November 2006 were ahead of budget. Total income was $22.153 million against a budget of $21.977 million. Total expenses were $6.959 million against a budget of $7.125 million. Net profit before tax and interest was $2.348 million against a budget of $2.037 million. The apparent underperformance of sales against budget in the period July through to November 2006 was, on the face of it, arrested by November and a decline in sales was improving. 119 As I have said, Mr Backshall gave the appellant the last three years audited accounts of Vegas and the unaudited accounts for the 2006 financial year as requested in early November 2006. He gave the appellant the spreadsheet in November 2006 'probably about mid November'. At no time did the appellant ask for sales data in September or October 2006 or at any time up to 19 December 2006. 120 In the accounts provided to the appellant the figure for sales for the 2006 financial year was $38.9 million whereas the figure for sales for the 2005 financial year was $41.8 million. The consolidated net profit was $2.1 million in the 2006 financial year, compared with $3.9 million in the 2005 financial year. The franked dividends were $2.5 million in the 2006 financial year compared with $2 million in the previous year. The appellant was aware of this information and that sales had fallen in the 2006 financial year compared with the previous year. 121 The trial judge noted that he had already found that the appellant did not rely on the information in the spreadsheet he was given in mid November 2006. The sales information the appellant submits should have been provided to him 'would not have been material to his decision to invest'. There was nothing to suggest that the appellant wanted any more sales information than he had. 122 The sales position improved so that immediately prior to the date of the share transactions on 19 December 2006, the monthly board package circulated around 10 December suggested that the position had been arrested. 123 At trial the appellant contended that there was a document (exhibit 221) which was known to the respondents and which showed updated sales orders for six months in advance. This document showed sales orders for the period from January to June 2007 and showed, on the appellant's case, that sales would fall well below budget. The appellant's case was that this information should have been disclosed to him by the respondents. The trial judge found that the provenance of exhibit 221 was uncertain and should be accorded little weight. The trial judge found that the evidence did not support the unequivocal contention made by the appellant that by about 10 December 2006 Vegas knew it was going to fall short of 'represented sales'. 124 In conclusion, the trial judge found that the nature of the relationship between the parties and the manner in which the investment proposal initially broached by the appellant had developed meant that the appellant was not entitled to expect that the respondents would provide him with sales information and Vegas was under no duty to disclose to the appellant the progressive sales performance of Vegas during the 2007 financial year. 125 Furthermore, the trial judge found that the actual upward movements in the sales figures over the period between 24 October and 19 December 2006 were such that there was no reasonable entitlement to expect that such figures would be disclosed. 126 Finally, the trial judge found that having regard to his findings concerning the spreadsheet, he was not satisfied that in light of such knowledge as the appellant had, he could be satisfied that the sales information was, or would have been, material to the appellant's investment decision.

Shareholders' Loans to Vegas 127 The appellant's case at trial was that the shareholders of Vegas made loans to Vegas during the period from August 2006 to November 2006. He submits that they were material to his decision to enter into the share transactions and should have been disclosed to him by the respondents. 128 As to the alleged non-disclosure of the shareholders' loans the trial judge made the following findings. In August 2006 the shareholders of Vegas provided loans to it in the total sum of $1 million. That was done to provide the company with working capital. In October and November 2006 the shareholders of Vegas provided further loans to it in the total sum of $500,000. That was done to provide further working capital. Vegas repaid the $500,000 to shareholders on 14 December 2006. Vegas did not use $500,000 of the sum of $2,370,986.57 paid by the appellant to it on 19 December 2006 to repay the shareholders' loan. The balance of the shareholders' loans in the amount of $1 million remains outstanding. 129 It was not a condition of Westpac's agreement to extend Vegas' overdraft facility that the shareholder loans be made. 130 The trial judge found that the appellant visited Mr Mark Sutton in his office at Vegas in around late October or early November 2006. Mr Sutton told him that he wanted to sell some shares because in the last six months he had put money back into Vegas' loan funds and was not sure when he was going to get that money back. After some discussion as to the reasons Mr Sutton wanted cash, the appellant and Mr Sutton agreed to a share transfer for the sum of approximately $170,000 and, at that stage, a settlement in mid November. Settlement was delayed and ultimately occurred on 19 December 2006. 131 The trial judge said that from what Mr Sutton had told the appellant it was reasonable to infer that other shareholders had made loans to Vegas and that the appellant would have understood that. He found that at no time did the appellant make any inquiries of Vegas or anyone associated with it concerning the position with shareholders' loans. 132 The trial judge found that the respondents were under no practical duty to inform the appellant of the making and repayment of shareholders' loans in the period leading up to the share acquisition on 19 December 2006 and that the appellant had no reasonable entitlement to expect this information would be given to him. He said that in light of Mr Sutton's evidence, the appellant had sufficient knowledge of the shareholders' loans if he was materially interested in the details, 'to have made inquiries for further details concerning those loans'. The shareholders' loans were not or would not have been, if more information had been provided about them, 'material to the investment decisions made by [the appellant]'. Finally, the trial judge found that the funds paid by the appellant on the share acquisition were not used to pay down the 'undisclosed increase in Vegas' loans'.

Vegas' Overdraft Facility with Westpac 133 The appellant's case at trial was that during the period from July to November 2006 Vegas increased its overdraft limit with Westpac and, from time to time, exceeded its overdraft limit. That information was material to his decision to enter into the share transactions and should have been disclosed to him by the respondents. 134 As to the alleged movements in Vegas' overdraft facility with Westpac, the trial judge made the following findings. Vegas had various financing facilities with Westpac including an overdraft facility which had a limit of $1.5 million. The shareholders had provided guarantees to Westpac in respect of these facilities. 135 The appellant was not lacking in knowledge about the general financing position and he had given advice regarding the Westpac documentation and signed documents associated with the Vegas acquisition. However, the trial judge said that it could not be inferred that in July 2006 the appellant knew of the guarantees provided by Vegas shareholders to Westpac in relation to the overdraft facility. He was aware that shareholders had provided guarantees in respect of the funds provided for the acquisition of a controlling interest in Rdot and the termination of the royalty stream paid to interests associated with Mr Preisendorfer. 136 The trial judge found that Vegas needed working capital in August 2006 and that on 2 August 2006 Westpac agreed to an increase in the overdraft limit by $500,000 on condition that it be reduced to $1.5 million by 8 September 2006. This increase in the overdraft limit was not conditional on the making of shareholders' loans. By early September 2006 the limit on the overdraft facility was reduced back to $1.5 million. 137 In early September 2006 Westpac agreed to a further variation to increase the limit of the overdraft facility by $500,000 on the basis that it was reduced to $1.5 million by 30 November 2006. In early November Westpac agreed to a further variation to increase the limit by $500,000 to $2.5 million. 138 On 14 November 2006 Westpac agreed to a further variation to increase the limit on the overdraft facility by a further $500,000 to $3 million on the basis that it would be reduced to $1.5 million by 30 November 2006. 139 Vegas drew down on the overdraft facility to a maximum of around $2.3 million. By 28 November 2006 the limit of the overdraft facility had been reduced to $1.5 million. 140 At 18 December 2006 the amount drawn down by Vegas from the overdraft facility was only $74,732.94. On 19 December 2006 and immediately prior to the receipt of the proceeds of the share transaction with Vegas, the overdraft facility had a positive balance of $368,088.73. The proceeds of the share transaction with Vegas were paid to its overdraft facility account on 19 December 2006. 141 The trial judge found that it could not be inferred that the appellant had knowledge of the fluctuations or variations to the overdraft facility during the second half of 2006. However, the trial judge said that because of the particular circumstances of the case the respondents 'could not have been, or expected or assumed that they were under any obligation to consider what the appellant might or might not know or what he might or might not be interested in or need to know, for the purpose of his investment decision'. 142 The trial judge said that in late October or into November 2006 the appellant was aware that Mr Sutton had made shareholders loans to Vegas around that time and it followed that he was 'on notice' that the operations of Vegas required some cash injections. 143 The trial judge said that the respondents were not required to disclose variations in the overdraft facilities because, as was the case with the other alleged issues of non-disclosure, the circumstances were such that the respondents were entitled to expect that the appellant would raise with them any issues concerning the operation of the company that might touch on his decision to invest. He did not do that. Furthermore, the trial judge found that the appellant had not established that the fluctuations in the overdraft facility were, or would have been, material to his decision to invest in Vegas. 144 In his general discussion of the significance of the relationship between the parties and the circumstances surrounding the share transaction to the question of whether there was an obligation of disclosure, the trial judge said that the respondents were entitled to assume that the appellant was knowledgeable about Vegas in all respects relevant to his proposed purchase of shares in it and would ask for whatever information was required to complete his due diligence. The reasonable expectation was that the appellant would ask for whatever information he needed. He said that the respondents were not under any practical duty to disclose any of the matters that the appellant alleges they should have disclosed.

The Sales Representations 145 The starting point is the appellant's case as to the representations conveyed by the information in the spreadsheet. The appellant's pleaded case and case at trial was that the spreadsheet conveyed the following false representations: 2007 Financial Year (Budget) 1. Sales would be $45,512,163 and they were in fact $40,926,448. 2. Taking account of costs, selling expenses and other items, the operating income (before interest, tax and depreciation) (EBITDA) would be $4,068,809 and it was in fact no more than negative $306,000. 2008 Financial Year (Forecast) 1. Forecast sales were $48,400,000 and they were in fact $40,245,091. 2. Forecast international royalties received by Vegas were $3,290,000 and they were in fact $1,895,616. 3. Allowing for the costs of sales and receipt of royalties, the EBITDA would be $9,324,200 and in fact it was significantly less than that figure. 146 Mr Backshall gave evidence that the revenue earned by Vegas from the sale of goods for the 2007 financial year was $42,910,741 ($260,422 below budget) and for the 2008 financial year was $42,329,571 ($6,070,429 below forecast). The trial judge proceeded on the basis that the budgeted and forecast figures in the spreadsheet were not achieved. 147 The trial judge approached this aspect of the appellant's case by considering whether the appellant relied on the representations and if he did whether, as the representations were representations as to future matters, there were reasonable grounds for them to be made. There was a suggestion by the appellant on the appeal that the representations as to the 2007 financial year were representations as to actual sales and were false because there was evidence that the actual sales for the early months of the financial year were well below budget. That is not a contention dealt with by the trial judge and, in any event, must be rejected. The figures in the spreadsheet for the 2007 financial year were for the whole year and did not include figures for each month. There was a faint suggestion by the respondents that the representation as to the 2007 financial year was no more than a representation that it was Vegas' budget and that it has not been shown that it was not Vegas' budget. I reject that submission. A budgeted sales figure like a forecast sales figure involves a prediction. In fact, a budgeted sales figure implies a greater degree of confidence in a forecast because it has been adopted as the sales figure the company reasonably expects to achieve. 148 There was a dispute at trial as to which party bore the onus of either proving or disproving that the respondents had reasonable grounds for making the representation. The principal claim against Messrs Hart and Backshall was made under the FTA and here the position was clear. They needed to establish that they had reasonable grounds for making the representations. The principal claim against Vegas was made under the TPA or the Corporations Act. Under the TPA Vegas bore the onus whereas the trial judge held, following Australian Securities and Investments Commission (ASIC) v Cycclone Magnetic Engines Inc [2009] QSC 58; (2009) 71 ACSR 1, that under the Corporations Act the appellant bore the onus of establishing that the respondents did not have reasonable grounds. As I have said, the appellant does not challenge the trial judge's conclusion that, in the case of Vegas, the relevant Act is the Corporations Act. Nor is there any challenge to his Honour's conclusion that the appellant bore the onus under that Act. 149 To succeed with respect to the sales representations the appellant must show that the trial judge erred in not accepting his evidence that he relied on information in the spreadsheet in deciding to enter into the share transactions and that the trial judge could not be satisfied on all the evidence that the appellant relied on the pleaded sales representations. He must also show that the trial judge erred in concluding that Mr Backshall, and therefore the other respondents, had reasonable grounds for making the representations conveyed by the spreadsheet. 150 Before examining the challenges to the trial judge's findings with respect to reliance it is convenient to note some well-established propositions about reliance in the context of a misleading or deceptive conduct claim. 151 The appellant was not required to establish that the information in the spreadsheet was 'the' cause of his decision to enter into the share transactions; it was sufficient for him to establish that it was 'a' cause (Henville v Walker (2001) 206 CLR 459 ('Henville v Walker') at 469 [14] per Gleeson CJ; at 480-481 [62] per Gaudron J; at 490 [97] per McHugh J; at 509 [163] per Hayne J). Furthermore, had the appellant been able to establish that the statements in the spreadsheet were intended by the respondents to cause the appellant to act on them and were of a nature that the appellant was likely to act on them then he may have done enough to shift an evidentiary onus onto the respondents to negate inducement or reliance (Gould v Vaggelas (1985) 157 CLR 215). On the other hand, evidence of reliance after the event and after the transaction has failed to meet expectations or evidence of what a party would have done had he or she known the true position is to be scrutinised with care (Campbell v Backoffice Investments (2009) 238 CLR 304 at 353 [146] per Gummow, Hayne, Heydon and Kiefel JJ). 152 In a case where A provides financial information to B prior to a transaction and a question arises as to whether B relied on the information in entering into the transaction a court may examine a number of matters including the following: 1. The credibility and reliability of B's evidence of reliance or inducement. 2. The nature of the information. 3. The knowledge of A and B respectively as to the matters which are the subject of the information and of other matters relevant to the transaction entered into. 4. The circumstances in which the information was provided to B. In many cases, those circumstances will be clear; the information will have been provided by A to B for, or in the context of, the proposed transaction. This case is perhaps unusual on the trial judge's findings; the trial judge found that the information was provided to the appellant in a different context. 5. Any requests by B for information of a similar nature. This is not to suggest that there is an obligation on B to request information. It is simply to make the obvious point that if B does seek similar information then that may suggest that the information was important to him. 6. Evidence of other matters which might have influenced B to enter into the transaction and the relative significance of those matters. 7. The actions of B upon learning that the information given to him by A is incorrect or may be incorrect. 153 In his written Reply to Vegas' Outline of Responsive Submissions the appellant dealt with (among other matters) submissions concerning the trial judge's findings about reliance and the appellant's credibility. He wrote that he: … relies on the findings of the Trial Court and unchallenged evidence consistent with contemporary documentary evidence, so does not need to overturn any credibility findings; 154 As I understood the submission it was that the trial judge did not reject the appellant's evidence on reliance. The most he did was to reject the appellant's 'assertions' to the effect that he relied on information in the spreadsheet. 155 For reasons I will give, I do not accept that submission and it seems to me that in order to succeed with respect to the issue of reliance, the appellant must show that the trial judge erred in not accepting his evidence with respect to reliance. 156 The appellant made two major submissions. First, he submitted that his evidence that he relied on the representations conveyed by the spreadsheet should have been accepted by the trial judge because it was not challenged by the respondents. In the context of that submission the Court was taken to the appellant's written statement dated 19 October 2009 which was part of his evidence-in-chief and to various passages in the statement which were relevant to reliance. It was submitted that those passages were not challenged by the respondents in cross-examination. The lack of challenge was not only a failure to comply with the rule in Browne v Dunn (1894) 6 R 67, but it meant that the trial judge should have accepted the appellant's evidence. 157 Secondly, the appellant submitted that the trial judge made a number of particular errors, some or all of which together mean that the trial judge erred in his approach to reliance. Those errors were as follows. 158 First, the appellant submits that the trial judge erred in failing to be satisfied of reliance in circumstances where he did not at any point say in his reasons that he disbelieved the appellant. 159 Secondly, the appellant submits that the trial judge erred in failing to place sufficient weight on his conclusion that the appellant was 'entitled' to rely on the information in the spreadsheet. The respondents had argued that the spreadsheet was a confidential document provided to the appellant in his capacity as Vegas' legal adviser in connection with discussion about funding the possible acquisition of the master licence and C&C's shares in Rdot. Although the trial judge found that this was so he rejected the submission by the respondents that the appellant was therefore not entitled to rely on the spreadsheet in connection with the share acquisition in Vegas. He held that in the circumstances he identified the appellant was entitled to rely on the information in the spreadsheet because 'it may be assumed the spreadsheet document was of general interest to him and that Mr Backshall understood this to be so'. The appellant submits that the trial judge subsequently erred in not recognising the force of this finding when drawing his conclusions as to reliance. 160 Thirdly, the appellant submits that the trial judge erred in 'doubting' whether the appellant's adviser, Mr Boyce, had access to the spreadsheet at the time he gave advice to the appellant. The appellant contended that at least as far as the second and third respondents were concerned there was an admission in their pleadings that the appellant had given the spreadsheet to Mr Boyce. 161 Fourthly, the appellant submits that in considering reliance the trial judge erred in not placing weight or sufficient weight on the reference in the appellant's letter dated 26 October 2006 to his 'focus on use to be made of the funds, revenues, expenditures and the history of dividend payments to shareholders' (emphasis added). 162 Fifthly, the appellant submits that the trial judge erred in drawing any adverse inference from the appellant's 'failure' to call Mr Boyce. 163 Finally, the appellant submits that the trial judge failed to recognise or recognise sufficiently that the spreadsheet was the only document which could have been the basis of the appellant's projected income calculations as referred to in his letter dated 29 November 2006 and his written statement and that in itself, or with other matters, established that he relied on the information in the spreadsheet. 164 I reject the appellant's submissions. The trial judge did not err in concluding that he could not be satisfied that in deciding to enter into the share transactions the appellant relied on the pleaded sales representations in the spreadsheet. 165 I reject the contention that there was no challenge to the appellant's evidence that he relied on the information in the spreadsheet. The appellant was cross-examined for nearly six days. The respondents referred to a number of passages in the appellant's cross-examination where his evidence that he relied on the information in the spreadsheet in entering into the share transactions was challenged. It is necessary for me to refer to some of those passages. 166 First, the appellant was cross-examined by counsel for the second and third respondents about his letter dated 29 November 2006 and the occasion and circumstances in which Mr Backshall gave him the spreadsheet. In the course of that cross-examination the following exchange took place: And you write to Vegas, and you say, in the fourth paragraph: In due diligence, you have provided me with substantial information relating to the last three years' operation of Vegas. ?---Yes. No mention of a spreadsheet with forecast information in it, Mr Clifford?---It's not written in there. No, and that's because you were not given a spreadsheet for due diligence purposes, were you?---That's not correct. If you had, and if you had relied upon it, you would have mentioned it, wouldn't you?---No, not necessarily. You have made up, yet again, because it's expedient to do so, the assertion---?---That's not correct. Let me finish, please. You have made up evidence that you were given the spreadsheet in the was in which you have described, simply because you think it helps you, not because it's true?---That is not correct. You say, in the next paragraph: I have discussed this information. You see that?---Yes. That is the information relating to the last three years' operation of Vegas, and the reasonable historical knowledge you have of the company, having been a provider of legal services for the past 15 plus years?---Yes. This is quite clearly demonstrating, in writing, what you relied upon, Mr Clifford - historical information?---Yes. Nothing forecast, never a spreadsheet - that's the case, isn't it?---That's not correct. I suggest to you that the spreadsheet was in exactly the same position as the 2004 proposal. It was a confidential and privileged document that you had no permission to use, in any way, shape, or form, for your own purposes. That is why it is not mentioned in the 29 November '06 letter?---That is not correct. 167 Secondly, the appellant was cross-examined about an affidavit he had sworn in the proceeding between himself and his former wife in the Family Court of Western Australia. Among other things that affidavit addressed his acquisition of shares in Vegas in December 2006. He described the due diligence he undertook and he referred to a valuation of Vegas undertaken by Sheppard Mullin in 2006 and its valuation of a minimum USD26.666 million. The suggestion was put to the appellant that in undertaking the share acquisition he had relied on the Sheppard Mullin valuation among other matters. During cross-examination the following exchanges took place: The 2nd and 3rd respondents, Messrs Hart and Backshall make some positive allegations in (c) of paragraph 17 of what you actually relied on for the purposes of the acquisition by Sheraz of the shares?---Yes. And (iv) they say positively that you relied upon a confidential valuation of Vegas provided by Sheppard Mullin?---Yes. In the context of the acquisition we were just discussing?---Yes. Now, at paragraph 17 of your reply which is at page 87?---Yes. See 17.6 on 88?---Yes. You join issue with that paragraph?---Yes. At 17.1 on 87 you repeat paragraph 11.2.2 of your reply?---Yes. Which is the paragraph I'm about to take you to at paragraph 84?---Yes. You make a positive allegation there at 11.2.2 that the valuation was based on representations set out there at (a) through to (e)?---Yes. Which you had no basis for asserting, did you?---I did have a basis for asserting that. No, you just told me what you understood to be the basis of the valuation?---Yes. In no way, shape or form did you suggest that the valuation was based on certain representations?---In answer to your question, I said the valuation itself was on a one-time sales. I suggest to you, Mr Clifford, that yet again you have just inserted there at 11.2.2 something that is expedient in the circumstances but not truthful?---That is not correct. The reason, I suggest, that you thought it was expedient was because you want to now distance yourself from the Sheppard Mullin valuation because the respondents are relying upon it?---That's not correct. And: Yes; then 137 is the same as (u) on page 19?---Yes. You omit paragraph 133 from your witness statement?---A hundred and thirty-three? Yes?---Yes. You did that deliberately, didn't you?---Well, it would have been a deliberate decision to leave it out of that part of my witness statement. Because it didn't suit your purposes in these proceedings?---No. Well, yes, Mr Clifford, because (r) - I'm sorry, I take that back - (u) brings all of the material that goes before, in paragraph 40, into account in terms of your assessment of the purchase of the shares just as 137 does in the Family Court affidavit but it omits to refer to any reliance upon the Sheppard Mullin valuation. That was deliberate, wasn't it?---No. You did that in order to attempt to rebut the allegation that you had relied on the Sheppard Mullin valuation?---No. You swore in this court, when you attested to the truth of this witness statement of 19 October 2008, that it reflected the whole truth?---Yes. That's just not so, is it?---That's not correct. You have deliberately taken out of the Family Court affidavit - you have deliberately refrained from referring to a matter which you swore on oath in the Family Court was true, which was that you took into account the Sheppard Mullin valuation?---That's not correct. This is yet another example, Mr Clifford, of how you are reckless with the truth; you refrain from telling the whole truth when it does not suit your purposes. Isn't that the case?---That is not correct. 168 Thirdly, the appellant was cross-examined about an expert's report he had obtained for the purpose of the proceeding in the Family Court. He agreed that he was seeking to show in that proceeding that his purchase of the shares in Vegas was not reckless. The expert's report was prepared by a Mr Harvey Pickup. During the cross-examination the following exchange took place: Thank you, and the same goes in respect of any meetings that you had, both correspondence and meetings that you had with Mr Backshall or Mr Hart, either together or singularly. You never raised specifically with them the misrepresentations that are the subject of these proceedings, through 2008?---The misleading conduct and not - that is right. Thank you. Now, I also want to put it to you that you didn't raise those matters with Mr Pickup when obtaining obstructions, or giving instructions to him, for the Family Court?---Well, I don't know. I didn't give him the instructions. 169 In addition to these passages it is clear that the appellant's credit in a number of other areas was strongly challenged by the respondents in the course of cross-examination either on the basis that it was in conflict with the evidence of one of the respondents' witnesses or for other reasons. I have no hesitation in rejecting the submission that the appellant's evidence that he relied on the information in the spreadsheet was not challenged. 170 I also reject the more limited submission made by the appellant that he was not challenged on his evidence that he gave the spreadsheet to Mr Boyce. I do not think, as was submitted by the appellant, that the second and third respondents' Further Amended Substituted Defence contains a clear admission that the appellant provided the spreadsheet to Mr Boyce. Nor do I think that the appellant would have had any doubt that his evidence was under challenge when it is borne in mind that his evidence about the circumstances in which Mr Backshall gave him the spreadsheet was under strong challenge (and ultimately rejected by his Honour) and that there was a challenge to his evidence on reliance. During cross-examination of the appellant the following exchanges took place: Now, what you're putting here is just - what you have set out here is just not correct, is it? You're suggesting that Mr Backshall gave you audited accounts and a spreadsheet, together, in the one meeting. That never happened, did it?---That did happen. No, Mr Backshall never provided you with the audited accounts, did he?---Yes, he did. What he in fact did was provided you with the spreadsheet in the context of a solicitor/client meeting, didn't he?---He did not. He provided me the spreadsheet, but not in the context of a solicitor/client meeting. Now, you say that, a day or so after he provided you with both the accounts and the spreadsheet - this is paragraph 37 of your witness statement - that you forwarded them on to your accountant, Mr Grant Boise [sic]?---Yes. So, presumably, you forwarded them on as a bundle, spreadsheet and financial accounts?---Yes. And Mr Boise [sic] would be the obvious person to tell us whether or not he actually ever received a bundle of spreadsheet and financial accounts, together, on or about that date, wouldn't he?---He could do. He could tell us that, couldn't he?---Yes. 171 I also reject the appellant's submission that the trial judge should not have rejected the appellant's case on reliance in circumstances where he did not at any stage say that he disbelieved the appellant. That is not a fair summary of his Honour's findings and conclusions. Although the trial judge did not use the words that he disbelieved the appellant he found that the appellant's evidence was unsatisfactory in a number of areas and he rejected it. It seems to me clear enough that in the area of reliance, if not in other areas as well, the trial judge took the view that he would not accept the appellant's evidence unless it was corroborated by documentary or other cogent evidence. 172 The following are examples of areas in which the trial judge found that the appellant's evidence was unsatisfactory and rejected it. 173 First, in the context of whether the appellant received monthly board packages from about December 2006 to about mid 2008 the trial judge said (at [111]): There is an issue whether this and other monthly 'board packages' were sent to Mr Clifford. Mr Backshall explained in his evidence, which I accept, that it was standard practice at Vegas for shareholders to collect their monthly shareholder packs containing management accounts from the offices of Vegas. To the best of his knowledge, from the time of Sheraz's investment in Vegas, until around early 2008, shareholders packs were made available to Mr Clifford. There is no suggestion, however, or evidence to ground the submission that prior to the Sheraz acquisition, Mr Clifford had ordinarily received the monthly board pack. Mr Clifford says that he only received the monthly shareholder packs from mid 2008. In the light of the evidence as a whole, I find Mr Clifford did not receive the monthly board packs at material times in the latter part of 2006 leading up to 19 December 2006. However, I am inclined to accept that after that into 2007, once Sheraz had become a shareholder, the board packages were made available to all shareholders including Mr Clifford (as representative of Sheraz) and that he did take advantage of this access. I find Mr Clifford's evidence to the contrary implausible in light of his overall diligence in relation to his oversight of his interests, through Sheraz, in the affairs of Vegas at material times. 174 Secondly, in the context of the appellant's early dealings with Mr Hart, the trial judge said (at [198]): As to the evidence of the applicant concerning his early dealings with Mr Hart in September/October 2006, I have already found that I prefer the evidence of Mr Hart to that of Mr Clifford. I do not accept that Mr Clifford made the literal statements he says he made to Mr Hart, such as he wanted 'to look at things like the financials, sales, past and present and the use to be made of any investment monies'. What I have found was a much more important meeting on the evening of 24 October 2006, the substance of which was confirmed by an email on 25 October from Mr Backshall to Mr Clifford, which was followed in turn by Mr Clifford's letter accepting in a formal way the invitation to become an investor and raising, amongst other things, the question of his due diligence. At the meeting on 24 October, Mr Clifford was specifically advised to contact Mr Rayney, the CFO, for financial information. 175 Thirdly, in the context of whether the respondents ever took steps to prevent the appellant or to make it more difficult for the appellant to obtain financial information from Vegas through Mr Rayney, the trial judge said (at [333]): At this point, I should also deal with an evidentiary matter that bears on the question whether the respondents ever took any steps, at material times, to prevent Mr Clifford or to make it more difficult for Mr Clifford to obtain financial information from Vegas through Mr Rayney, the CFO. In the course of cross-examination of the applicant by senior counsel for Vegas (transcript 431-433) Mr Clifford suggested that he had been told in January 2009 by Mr Rayney that he had been "dissuaded" from giving financial information to the applicant by Mr Backshall. However, there was no reference to any such advice in the applicant's witness statement. Nor in cross-examination of Mr Backshall did the applicant put such allegations to Mr Backshall. The allegations made by the applicant in the course of cross-examination were simply not corroborated by any other evidence. In my view they indeed run counter to the evidence and were made gratuitously. In fact, Mr Backshall expressly invited Mr Clifford in his email on 25 October 2006 to approach Mr Rayney. There is no evidence to support the allegations made by Mr Clifford in cross-examination that at some point Mr Rayney had been dissuaded by Mr Backshall from giving any financial information if it were requested by Mr Clifford. I discount Mr Clifford's evidence in this regard completely. 176 Fourthly, in the course of dealing with the important question of the conflict between the appellant and Mr Backshall as to the circumstances in which the latter provided the spreadsheet to the appellant, the trial judge said (at [223]): Thirdly, I prefer Mr Backshall's evidence that the draft P&L or spreadsheet was discussed with Mr Clifford in the context of a discussion about Deloitte's assistance with capital raising. Mr Clifford was closely involved in matters to which the capital raising related - acquiring control of Rdot and paying out C&C. Fourthly, I am left with a concern, having considered Mr Clifford's evidence overall, that Mr Clifford at times displayed a heightened sense of the significance of parts of his evidence to the ultimate success of his case, and that this is one such example. The evidence of the applicant concerning being told that Mr Backshall had "dissuaded" Mr Rayney from providing financial information to the applicant at material times, which I deal with in detail later and totally discount, is another. It serves Mr Clifford's case immeasurably to contend that the spreadsheet information was given to him by Mr Backshall as part of the due diligence process. This leads me to approach Mr Clifford's testimony (both here and generally) with caution, particularly where his evidence is not corroborated by some documentary or other cogent evidence. In the end, I am not satisfied that the spreadsheet or draft P&L was given to Mr Clifford at the same time he received the company's accounts, or as part of his due diligence. Finally, the fact that Mr Clifford's accountant was not called to give evidence - as discussed below - fortifies my conclusion in this regard. 177 As can be seen from the passage in the previous paragraph the trial judge took the approach that he would not, or might not, accept the appellant's evidence where it was not corroborated by documentary or other cogent evidence. In my opinion, bearing in mind the trial judge's strong reservations about the appellant's evidence in a number of areas he was entitled to take that approach. 178 As to the appellant's submission that the trial judge failed to place sufficient weight on his own finding that the appellant was entitled to rely on the spreadsheet, it is important to have regard to the context in which that finding was made. The respondents submitted to the trial judge that if he accepted Mr Backshall's evidence as to the occasion and circumstances in which he provided the spreadsheet to the appellant in preference to that of the appellant (which he did and which finding is not challenged on appeal) then the appellant was not entitled to rely on it because it was a confidential and privileged document obtained in the context of providing legal assistance. The trial judge rejected the submission that the appellant was not entitled to have regard to the spreadsheet bearing in mind the appellant's letter dated 26 October 2006, the fact that he asked Mr Backshall if he could retain a copy of the spreadsheet and the fact that, as the trial judge put it, '[n]o immediate professional use of the document by [the appellant] in relation to capital raising issues [was] indicated by the evidence' (at [224]). However that is as far as the finding went and, as the trial judge observed, it still left open the question whether the appellant had in fact relied on the information in the spreadsheet. I reject the submission that the trial judge in some way failed to place sufficient weight on his conclusion that the appellant was entitled to rely on the information in the spreadsheet. 179 I turn now to consider the appellant's submission that the trial judge erred in drawing an adverse inference from the appellant's failure to call Mr Boyce and his submission that the trial judge failed to recognise or recognise sufficiently that the reference to 'projected income' in his letter dated 29 November 2006 could only have been based on the spreadsheet. It is convenient to deal with these submissions together. 180 In circumstances where the trial judge said that he was not prepared to act on the appellant's evidence alone it was appropriate for him to examine whether there was any documentary evidence which supported the appellant's case. He examined the passage in the appellant's letter dated 29 November 2006 which referred to the advice given by Mr Boyce. He referred to the appellant's submission that the advice could only have been based on the spreadsheet, but he appears to have taken the view that this was not necessarily so and asked himself what inference should be drawn. It was in this context that he considered the fact that the appellant had not called Mr Boyce. Mr Boyce was the appellant's accountant and he had provided him with advice. The issue was, the trial judge put it, 'plain for all to see' (at [228]) and the appellant provided no explanation as to why Mr Boyce was not called. In the circumstances the trial judge was entitled to infer that Mr Boyce's evidence would not have been of assistance to the appellant's case. There was no misapplication of the process of reasoning identified in Jones v Dunkel (1959) 101 CLR 298 (see also Payne v Parker (1976) 1 NSWLR 191 at 200-202 per Glass JA). This is particularly so when it is borne in mind that the trial judge's ultimate conclusion was that he could not be satisfied that the appellant relied on information in the spreadsheet. 181 Finally, there was a reference by the appellant to the fact that the trial judge had said that he did not accept the appellant's assertions of reliance and that this may be a reference to something other than the appellant's evidence. However, I think the context is clear and that in referring to 'assertions' the trial judge meant the appellant's evidence of reliance. 182 I reject the appellant's challenge to the trial judge's conclusion that he could not be satisfied that the appellant had relied on the sales representations conveyed by the spreadsheet. 183 This conclusion is sufficient to dispose of the aspect of the appellant's appeal which relates to the sales representations. However, in case there is a further appeal I will also deal with the appellant's challenge to the trial judge's conclusion that even if the appellant relied on the sales representations conveyed by the spreadsheet, nevertheless the respondents had reasonable grounds for making them. 184 The appellant submits that whether there were reasonable grounds for making the representations conveyed by the spreadsheet was to be assessed either at the time of its preparation on 30 October 2006, or at the time it was given to him. The trial judge found that Mr Backshall gave the spreadsheet to the appellant 'probably mid November'. Earlier in his reasons he had said he estimated it to be 'early to mid November'. Either way the appellant submits that Mr Backshall could not have had reasonable grounds for making the representations conveyed by the spreadsheet at either 30 October 2006 or early to mid November 2006 because he knew (and the appellant did not) that: 1. For the three-month period from 1 July 2006 - 30 September 2006, Vegas' actual sales were about $1,171,000 below budget. Messrs Backshall and Hart knew this because the information was in the monthly board package they received on or about 10 October 2006; and 2. Although on or around 16 October 2006, forward orders received by Vegas for the period from January to April 2007 were up 7.8% from the orders received for the same period in 2006 the budgeted increase for this period was about $1,227,012.21 above this figure. 185 The appellant submits that it followed from these facts that at the time Mr Backshall prepared the spreadsheet he knew that the sales figures for seven of the twelve months of the 2007 financial year were almost $2.4 million ($2,398,012.21) below budget. In those circumstances he submits that it cannot be said that Mr Backshall had reasonable grounds for the representations as to future matters conveyed by the spreadsheet. 186 I would not place any weight on the forward orders for the period from January to April 2007 as negating reasonable grounds. The trial judge did not refer to any evidence and this Court was not referred to any evidence which suggested that the forward orders for a period meant that budget could not be achieved for the same period. What seems to have been a sudden 'spike' in sales between late October 2006 and early December 2006 suggests otherwise. 187 In considering whether knowledge of the actual sales figures for the period from July to September 2006 should have negated a finding of reasonable grounds, the following circumstances are relevant. 188 Mr Backshall swore a witness statement consisting of 211 paragraphs. It constituted his evidence-in-chief at the trial. In his statement Mr Backshall dealt with the grounds upon which he formulated the budget and forecast figures in the spreadsheet and his opinion as to the reasons Vegas did not achieve the figures he had forecast or predicted. He said that at the time he prepared the spreadsheet, 'sales were consistent with the 06-07 budget'. In essence, the trial judge accepted that evidence. 189 Mr Backshall was not challenged in cross-examination about the grounds upon which he formulated the figures for budget and forecast or his opinions as to the reasons the figures were not achieved or on his evidence to the effect that at the time he prepared the spreadsheet sales were consistent with the budget for the 2007 financial year. This makes the appellant's attempt to show error in the trial judge's finding of reasonable grounds a very difficult one. For example, Mr Backshall was not cross-examined to the effect that the forward orders for the period from January to April 2007 should have alerted him to a likely deficit in terms of budget or at least they were such that he could not have reasonable grounds for the budget figures. 190 Another relevant circumstance is that it would appear that it was open to the appellant to withdraw from the transaction with Vegas at any time before 19 December 2006. On 10 December 2006 Mr Backshall received the monthly board package which contained the Vegas actual sales figures from 1 July 2006 to the end of November and at that time income was ahead of budget by $176,000. 191 It seems to me that if the relevant date is on or around 19 December 2006 then it cannot be said that at that date the respondents did not have reasonable grounds for the sales representations by reason of the fact that sales were below budget for the period from July to September 2006. Actual sales for the five-month period from July to November 2006 were then ahead of budget. If it is appropriate to take an earlier date of say early to mid November then the absence of cross-examination of Mr Backshall is telling because it is not really known what Mr Backshall did or did not know about actual sales at that time. What is known is that there must have been a 'spike' in sales some time between late October and early December 2006. 192 The trial judge found that the respondents had reasonable grounds for making the sales representations based on the evidence of Mr Backshall which was, for the most part, unchallenged. I am not satisfied that he erred in doing so.

Non-Disclosure of Material Matters 193 The appellant submits that the trial judge erred in three major respects in not concluding that the respondents engaged in misleading or deceptive conduct by not disclosing to the appellant information about the decline in sales as against budget in the early months of the 2007 financial year, the shareholders' loans to Vegas and the movements in Vegas' overdraft facility with Westpac. 194 First, the appellant submits that the trial judge did not apply the correct legal test and the result of his reasoning was that the appellant was under an obligation to ask for information rather than the respondents being under a duty to provide information. He focused, incorrectly it was submitted, on the expectations of the respondents and overlooked the expectations of the appellant. It was submitted that his approach did not give full effect to the consumer protection purpose of the sections he was considering. 195 In the course of his reasons the trial judge said the following (at [331]): In my view, in the circumstances, the directors were entitled to assume that Mr Clifford was knowledgeable about Vegas in all respects relevant to the proposed purchase and would ask for whatever information he required to complete his due diligence. He knew about its past. He was a complete authority on its intellectual property rights. He understood perhaps better than they did exactly what IPO options lay ahead of the company - and like them he was motivated to exploit the opportunities that might enable all shareholders to reap the rewards of an IPO. He knew generally about the company's recent trading history, and that generally speaking its sales were down in the 2005/2006 financial year compared with the previous financial year. As chairman of Rdot, he well knew what financial demands Rdot was placing on Vegas and the difficulties this created for Vegas. He also knew (at least constructively) from what Mr Sutton had told him around November 2006, when he was discussing the purchase of the shares Mr Sutton controlled in Vegas, that the existing shareholders had recently made loans to Vegas. In my view, if there was anything in particular that Mr Clifford felt he needed to know about Vegas that he considered material to the proposed investment, then the directors were entitled to assume that he would make it known to Vegas through them as part of his due diligence. …The reasonable expectation in the circumstances was not that the respondents would disclose anything in particular to him, but that they would respond to Mr Clifford's reasonable requests for information in the course of his due diligence. 196 There are a number of similar passages in the trial judge's reasons in which he makes reference to the relationship between the appellant on the one hand and the second and third respondents on the other (which at one point he describes as 'unusual' and 'developed over 15 or 17 years' (at [346]) and as 'so unlike a case where an unrelated, uninvolved third party seeks to buy a business or a share of a business whose profits depend on sales and revenue') (at [341]). He also refers to the appellant's knowledge of Vegas and its circumstances and the assumptions the respondents were entitled to make or the expectations they were entitled to hold. At no point did the trial judge say that the appellant had a duty or obligation to ask for information. He did at several places in his reasons refer to matters the respondents were 'entitled to assume', see [223], [331], [335], or 'entitled to expect' at [375], [7], [323]. However, I do not think that the use of such phrases indicates that the trial judge misunderstood the legal test under the relevant legislation. 197 The trial judge gave careful consideration to the authorities dealing with the circumstances in which a party will be held liable under s 52 of the TPA or its State Fair Trading Act counterparts for a failure to disclose matters. He referred to the leading case of Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 ("Demagogue Pty Ltd v Ramensky") and to the decisions in Winterton Constructions Pty Ltd v Hambros Australia Ltd (1992) 39 FCR 97 and Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 39 FCR 546. He then said ([323]): More recent authorities, such as Townsend v Roussety & Co (WA) Pty Ltd (2007) 33 WAR 321 (Buss JA at [89] - [90]) and Vitek v Estate Homes Pty Ltd [2010] NSWSC 237 (Vitek) (Barrett J at [34] - [40]) survey the authorities and confirm this same approach has consistently been taken over time in 'silence' cases. In Vitek, at [40], Barrett J considered that the test is one of 'reasonable expectation'. That is to say, an entitlement to expect or infer that the other party will disclose, if it exists, will be found in the whole of the circumstances in which the parties dealt with one another. I respectfully agree this test may be drawn from the authorities. In the end though, whether or not particular conduct complained of is misleading or deceptive, or likely to mislead or deceive, is to be determined by reference to all the relevant circumstances. 198 I adhere to what I said in Slinger v Southern White Pty Ltd (2005) 92 SASR 303. In order to determine whether a failure to disclose a matter is misleading or deceptive conduct all of the circumstances must be examined. If having regard to the circumstances assessed objectively a person in the appellant's position would be entitled to expect or infer (has a reasonable expectation) that a particular matter would be disclosed and the respondent does not disclose that matter then that may well constitute misleading or deceptive conduct or conduct likely to mislead or deceive. It is true that it is important not to overlook the fact that the ultimate question is whether the respondent's conduct is misleading or deceptive or likely to mislead or deceive. 199 A short time after the trial judge delivered his decision in this case the High Court delivered its decision in Miller. One allegation made in that case was that the appellant, a broker, had engaged in misleading or deceptive conduct in relation to a lender by failing to disclose that the policy for which the premium funding loan was sought was not cancellable. There was a joint judgment of Heydon, Crennan and Bell JJ and a joint judgment of French CJ and Kiefel J. 200 Heydon, Crennan and Bell JJ said that whether a failure to disclose a matter was misleading depended on all the circumstances. The factors which their Honours considered were relevant in rejecting the lender's argument that the alleged non-disclosure was misleading included the fact that both parties were commercially sophisticated and experienced in their respective fields; the fact that the transaction under consideration involved a substantial loan by the proposed lender and the fact that the proposed lender was on notice that the transaction might be an unusual one and yet it made no further inquiry. Their Honours said (at 384-385 [91]): Was Miller's conduct in failing to inform BMW, in terms, that the policy to be funded was not cancellable, or that the policy in the bundle was the policy to be funded, misleading? That question requires close analysis of all of the circumstances of the transaction. The parties were commercially sophisticated. They were experienced in their respective fields. The transaction involved the assessment by BMW of an application to lend Miller's client $3.975 million. The only document that Miller supplied in support of the application which appeared to relate to the policy to be funded did not disclose the nature of the risks insured. But it did put BMW on notice that the underlying policy may be an unusual one. BMW made no further inquiry. BMW's failure to make reasonable inquiries would not automatically defeat its statutory claim for damages for misleading conduct. However, given the history of this transaction, it is a circumstance that is relevant to whether Miller's conduct in failing to disclose its knowledge of the policy is correctly characterised as misleading. 201 Their Honours said that the state of knowledge of the respective parties was also important as were any circumstances suggesting that the undisclosed matters were important to the decision to be made. Their Honours referred to the concept of a reasonable expectation in the following passage (at 385-386 [95]): The December 2000 loan application related to the same insurance as the earlier application which BMW had approved. It was for the same amount. There was nothing in the conduct of the parties between November 2000 (when Mr Merton contacted Mr Reynolds and negotiations were resumed) and 12 December 2000 (when the application was approved) to convey that cancellability was important to the determination of this later application. The request for directors' guarantees suggested that it was not. There was no foundation for the conclusion that the known importance of cancellability gave rise to a reasonable expectation, in the circumstances of this transaction, that Miller would not supply the HIH certificate in response to BMW's request without disclosing at that time or later that the policy was not cancellable. 202 Their Honours expressed their conclusions as follows (at 386 [96]-[97]): The requirement of the provision of 'full policy information', contained in BMW's quotation dated 8 December 2000, did not make Miller's failure to advise BMW that the policy was not a cancellable property policy misleading. Miller had supplied BMW with a copy of the policy. BMW was an experienced premium lender. The policy was not a lengthy document. It was apparent that it did not insure the holders against loss or damage to property. It did not contain a cancellation clause. Miller's failure to draw to BMW's attention a circumstance that the document itself disclosed was not misleading or deceptive. The finding that Miller engaged in misleading conduct cannot be sustained. 203 Clearly, the facts in Miller were quite different from the facts in this case. Nevertheless, it is of assistance to note the factual matters which their Honours considered to be relevant. 204 In their reasons French CJ and Kiefel J referred to Demagogue Pty Ltd v Ramensky and their Honours made some observations on the approach of considering whether the circumstances gave rise to a reasonable expectation of disclosure. Their Honours said (at 369-370 [19]-[20]): The language of reasonable expectation is not statutory. It indicates an approach which can be taken to the characterisation, for the purposes of s 52, of conduct consisting of, or including, non-disclosure of information. That approach may differ in its application according to whether the conduct is said to be misleading or deceptive to members of the public, or whether it arises between entities in commercial negotiations. An example in the former category is non-disclosure of material facts in a prospectus. In commercial dealings between individuals or individual entities, characterisation of conduct will be undertaken by reference to its circumstances and context. Silence may be a circumstance to be considered. The knowledge of the person to whom the conduct is directed may be relevant. Also relevant, as in the present case, may be the existence of common assumptions and practices established between the parties or prevailing in the particular profession, trade or industry in which they carry on business. The judgment which looks to a reasonable expectation of disclosure as an aid to characterising non-disclosure as misleading or deceptive is objective. It is a practical approach to the application of the prohibition in s 52. 205 Their Honours cautioned against taking too expansive a view of the statutory prohibition in s 52 and then said (at 371 [22]): However, as a general proposition, s 52 does not require a party to commercial negotiations to volunteer information which will be of assistance to the decision-making of the other party. A fortiori it does not impose on a party an obligation to volunteer information in order to avoid the consequences of the careless disregard, for its own interests, of another party of equal bargaining power and competence. Yet that appears to have been, in practical effect, the character of the obligation said to have rested upon Miller in this case. 206 In the present case the trial judge said that he needed to consider all the circumstances of the case. As can be seen from the above passage he identified the fact that one approach was to consider whether, in all the circumstances, there was a reasonable expectation of disclosure of a particular matter or matters. When his reasons are read as a whole and in light of the factual circumstances before him I do not think he misunderstood the relevant legal test. He addressed the question of reasonable expectation objectively and he considered the matter from the point of view of both parties. With respect, I do not think he was saying anything more than that there was no reasonable expectation of disclosure by the respondents and that in the particular circumstances there was a reasonable expectation that if the appellant wanted information he would ask for it. There is no error in that approach. 207 The appellant's second major challenge to the trial judge's analysis of his non-disclosure case involved the identification of what were said to be a number of errors of fact some or all of which taken together mean that his conclusion with respect to the appellant's non-disclosure case cannot stand. 208 First, the appellant submits that the trial judge made inconsistent findings in that he found on the one hand, that the appellant asked for a copy of the spreadsheet and on the other hand, that he did not ask for sales information. I reject that criticism. It seems to me quite clear that in the passage dealing with the second finding the trial judge was referring to information other than the spreadsheet. 209 Secondly, the appellant submits that the finding that the appellant was entitled to rely on the spreadsheet should have led to a finding of reliance on the spreadsheet. The provision of the spreadsheet and reliance thereon by the appellant in turn gave rise to an obligation on the part of the respondents to disclose information which would qualify or at least provide the appellant with accurate information with respect to sales. This argument must be rejected because the trial judge found that the appellant did not rely on the spreadsheet and I have reached the conclusion that he did not err in making that finding. 210 Thirdly, the appellant submits that the trial judge erred in finding that the appellant knew of the shareholders' loans. It was submitted that the trial judge relied on a doctrine of constructive knowledge and that this was an error of law. In other words, it was submitted that if the respondents were obliged to disclose the shareholders' loans it was no answer to say that the appellant had constructive knowledge of the shareholders' loans. 211 The trial judge's findings were based on the evidence of Mr Sutton. Mr Sutton's witness statement was provided to the appellant late in the proceeding. At the trial the appellant objected to the respondents relying on it but that objection was overruled by the trial judge who delivered reasons for his ruling: Clifford v Vegas Enterprises Pty Ltd (No 4) [2010] FCA 326. The appellant's written submissions suggested that he challenged the trial judge's ruling on the appeal. However, counsel for the appellant made it clear in the course of his oral submissions that he was not challenging the trial judge's decision to allow Mr Sutton's evidence to be tendered. 212 The trial judge accepted Mr Sutton's evidence. A summary of his conclusions is set out above (at [130]-[132]). 213 The thrust of the trial judge's reasoning is that the appellant knew that Mr Sutton had made a shareholders' loan to Vegas and that it was reasonable to infer that other shareholders had been asked to do the same thing and that the appellant understood that. In my opinion, that was a conclusion open on the evidence. It is not a finding that the appellant knew the precise details of the shareholders' loans. It seems to me that the significance of the matter in terms of the trial judge's reasons was that it led him to conclude that the fact of the shareholders' loans was not material to the appellant's decision to purchase the Vegas shares. With respect, that is a permissible line of reasoning. 214 The appellant pointed to an earlier passage in the trial judge's reasons where he seems to have referred to constructive knowledge. That passage is set out above (at [195]). 215 With respect, it is not entirely clear what the trial judge had in mind when he referred to what the appellant knew constructively. On appeal neither counsel for the first respondent nor counsel for the second and third respondents, made submissions in support of a doctrine of constructive knowledge in this area of the law. The finding in the later passage in the trial judge's reasons is a finding of actual knowledge. It seems to me that that is a correct finding and if there is error in the trial judge's earlier statement it is not an error which, having regard to how the trial judge used the finding, was material to his conclusions. 216 Fourthly, the appellant pointed out that it was no defence to a claim for misleading or deceptive conduct that a claimant has been negligent or has not adequately protected his or her own interests. That is undoubtedly true: Henville v Walker at 468-469 per Gleeson CJ; 505 [140] per McHugh J (with whom Gummow J agreed). The difficulty is that this point does not appear to go anywhere. It is true that at a number of points in his reasons the trial judge referred to the fact that the appellant did not ask for various types of information; however, he was not doing so in the context of a plea or finding of contributory negligence. He was doing so in the context of considering whether the various types of information he identified would have been material or relevant to the appellant's decision to proceed with the share transactions. 217 Fifthly, the appellant submits that the trial judge erred in taking into account information about an improvement in sales which came to the attention of the respondents on or about 10 December 2006. It was submitted that this fact was irrelevant because by then the appellant had decided to proceed with his purchase of Vegas' shares. The appellant submits that the trial judge had made a finding that the appellant decided to proceed with the purchase in mid November 2006. 218 The trial judge did not analyse the obligations by reference to when the appellant made his decision to purchase Vegas shares or when he was finally committed to do so. He rejected the submission that the respondents were under any obligation to disclose the progressive sales performance of Vegas during the 2007 financial year to the appellant on a number of grounds one of which was as follows (at [347]): But I also consider that the actual (upward) movements in the sales figures over the period between 24 October and 19 December 2006, was such that there was no reasonable entitlement to expect such figures would be disclosed. 219 That was the conclusion the trial judge drew, not that the improvement in sales only became known to the respondents on 10 December 2006. It has not been shown that the trial judge's conclusion was wrong and that, to my mind, is sufficient answer to the appellant's challenge. 220 The appellant has not established the particular errors he identified and therefore his second major challenge to the trial judge's analysis of his non-disclosure case must be rejected. 221 The appellant's third major challenge was that even accepting the trial judge's findings of fact he nevertheless erred in the inferences and conclusions he drew from those facts. It was submitted that this Court was in as good a position to draw inferences from the primary facts as was the trial judge (Warren v Coombes (1979) 142 CLR 531). In advancing his argument the appellant relied principally on two matters. First, he relied on the fact that in his letter dated 26 October 2006 he had referred to, among other things, 'revenues' in the passage which reads as follows: Please take this letter as notice of my intention to take up that invitation subject to due diligence work on the last three years' audited accounts with a focus on use to be made of the funds, revenues, expenditures and the history of dividend payments to shareholders. (Emphasis added.) 222 Secondly, he relied on the fact that the trial judge found that he had asked Mr Backshall if he could take a copy of the spreadsheet. That was significant (submitted the appellant) even though the trial judge rejected the appellant's evidence as to the occasion and circumstances in which he was given the spreadsheet. 223 The appellant submits that these matters were to be assessed in light of what the information would have disclosed, which counsel for the appellant described as 'debts ballooning, sales falling'. 224 There is force in these submissions but in the end I am not persuaded that the trial judge erred. He had regard to all the circumstances and his principal conclusions were as follows: 1. For a variety of reasons which he sets out, the appellant was very pleased to take up the invitation to invest in Vegas when it was offered to him by Vegas' directors in October 2006. 2. The appellant was an astute lawyer, a good judge of a commercial opportunity and a disciplined and resolute person. 3. The appellant knew Vegas' business well and he was not commercially naïve. He was going to do his own due diligence and he wanted 'to take his own steps to evaluate the proposed share acquisition'. The second and third respondents reasonably assumed that the appellant would raise any queries he had as part of his own due diligence. 4. The appellant did ask for information as part of his 'due diligence work' and that was 'the audited accounts and financial statements for the last 3 years'. 5. With respect to the progressive sales information the appellant did not rely on the spreadsheet, and the sales information he claims should have been disclosed to him would not have been material to his decision. 6. With respect to the shareholders' loans, they, or more information about them, were not, or would not have been, material to the appellant's decision to acquire shares in Vegas. 7. With respect to the variations in the overdraft limit and borrowings from Westpac the fluctuations would not have been material to the appellant's decision to acquire shares in Vegas. 225 It seems to me that these matters are similar to a number of the matters Heydon, Crennan and Bell JJ addressed in Miller and that, with respect, the trial judge has examined them carefully. 226 I am not persuaded that there is any error in the trial judge's reasoning and the appellant's challenge to the trial judge's conclusion with respect to his non-disclosure case must fail. 227 Before leaving the non-disclosure case I should mention that the appellant submits that the trial judge overlooked his evidence of the materiality of the information which was not disclosed to him. That submission must be rejected. The trial judge did not overlook the evidence; he rejected it as he was entitled to do.

Notices of Contention 228 The second and third respondents filed and served a notice of contention as did the first respondent. Except for one ground which is only raised by the second and third respondents, the notices of contention are identical. In the circumstances I need only address the second and third respondents' notice of contention. 229 The appellant submits that the notices of contention are incompetent, although the precise basis for that submission was never made clear. By the notices the respondents seek to uphold the orders made by the trial judge on grounds argued before him but rejected by him. The grounds if upheld would be a basis for the orders made by the trial judge. The notices of contention are competent. 230 The first ground in the second and third respondents' notice of contention is as follows: 1. The learned trial Judge erred in finding that the Third Respondent's conduct in preparing and disseminating the spreadsheet should be treated as the Second Respondent's conduct in the circumstances. Reasons [242] The learned trial Judge should have found that the Second Respondent had not engaged in any relevant conduct in respect of the spreadsheet. 231 In the course of dealing with the appellant's case that the respondents had engaged in misleading or deceptive conduct by providing the spreadsheet to the appellant, the trial judge said (at [242]): For the sake of completeness, as to the misleading and deceptive conduct claims advanced under the FTA, the second and third respondents submit there is no evidence that Mr Hart was involved in the preparation and dissemination of the spreadsheet. While that is so in a physical sense (in that Mr Hart did not prepare the document), I accept a submission made on behalf of the applicant that it was understood by Mr Hart that Mr Backshall, as managing director, would deal with Mr Clifford on his behalf and on behalf of the company following Mr Hart's initial conversations with Mr Clifford and particularly the meeting on 24 October. In my view, Mr Backshall's conduct should be treated as Mr Hart's in such circumstances. 232 The contention is that had the trial judge found Vegas and Mr Backshall engaged in misleading or deceptive conduct by providing the spreadsheet to the appellant, he nevertheless erred in concluding that he would also have found that Mr Hart was liable in relation to that conduct. The contention does not relate to the appellant's non-disclosure case. 233 With respect to the appellant's claim against Vegas under s 1041H of the Corporations Act, the appellant pleaded that the second respondent was involved in the contravention within the meaning of s 79 of that Act. However, as is clear from the above passage, that was not the basis upon which the trial judge found that Mr Hart would have been liable. With respect to the appellant's claim under the FTA, the appellant pleaded that both Mr Hart and Mr Backshall were liable under s 10 of that Act. It was not pleaded that Mr Hart was in some way 'involved' in Mr Backshall's contravention under s 68 of the FTA. I think it is clear from the trial judge's reasons that he would have found Mr Hart liable on the basis that Mr Backshall acted on his behalf. In other words, Mr Backshall acted as Mr Hart's agent in providing the spreadsheet to the appellant. 234 There was no dispute that had the provision of the spreadsheet by Mr Backshall to the appellant constituted misleading or deceptive conduct then Mr Backshall might have been held liable under s 10 of the FTA, and, on the basis that he was also acting on Vegas' behalf, Vegas might have been held liable under s 1041H of the Corporations Act. However, the trial judge found that Mr Backshall was not only acting on behalf of Vegas but he was also acting on behalf of Mr Hart. In my respectful opinion, he erred in doing so. 235 Mr Hart was not selling to the appellant shares which he held in Vegas. The proposal was that Vegas would issue shares to the appellant, and that the appellant would purchase shares from C Breeze Pty Ltd. From 1992 onwards Mr Hart was an executive director and the company secretary of Vegas. The trial judge found that since 1992 his role in Vegas has been focused on the company's business culture and philanthropic programs. At the same time it is true that at the time the appellant was considering whether to enter into the share transactions Messrs Hart and Backshall controlled Vegas and were its directors. 236 The way in which the proposal developed whereby the appellant became an investor in Vegas is set out above ([56]-[58], [103]). 237 There was no evidence that Mr Hart was involved in any way in the preparation of the spreadsheet. I am unable to see how the fact that he told the appellant that he should speak to Mr Backshall regarding the numbers and the fact that he attended the meeting on 24 October 2006 means that he had such an interest in the proposed share transactions that it should be concluded that Mr Backshall's subsequent conduct in providing the spreadsheet to the appellant was carried out not only on behalf of Vegas but also on behalf of Mr Hart. Mr Hart was acting for the benefit of Vegas and not on his own behalf. These conclusions are supported by the trial judge's finding that this was not a case where Messrs Hart and Backshall responded to the appellant's interest in becoming an investor in Vegas because they considered Vegas to be in straitened financial circumstances and they could take the appellant for a business novice whose investment of around $2.4 million would help them out of a financial hole. Rather, they responded to the appellant's proposal because the appellant 'was a person with the legal expertise, commercial savvy, personality and drive to help Vegas take the next steps towards an IPO'. The trial judge also said (at [329]): To accept Mr Clifford's proposal would result in Mr Clifford having the motivation to work hard to achieve his own interests and, in doing so, advance their own. In such a commercial setting I have little doubt that the directors treated Mr Clifford's proposal as a fair proposal. 238 I would uphold the contention that the trial judge erred in finding that Mr Backshall's conduct in preparing and giving the spreadsheet to the appellant was also to be considered as conduct carried out on behalf of Mr Hart. 239 The other grounds in the second and third respondents' notice of contention relate to the relief the trial judge said that he would have granted had he found that the respondents had been guilty of misleading or deceptive conduct and that the appellant had relied on that conduct in entering into the share transactions. In view of his conclusions against the appellant on those issues it was not strictly necessary for him to consider the question of relief but, as I have said, he did so 'for completeness'. 240 The relief sought by the appellant was a refund of the price paid for all the shares acquired by Sheraz on 19 December 2010 being the sum of $2,553,894.60, upon payment of which the appellant would deliver a properly executed transfer of 641,389 shares in Vegas in favour of such transferee as the respondents direct. The appellant also sought interest, stamp duty and bank fees in the sum of $206,964.39 to March 2010 on the moneys borrowed from the ANZ Bank to pay the investment moneys to Vegas and interest on the sum of $2,553,894.60 pursuant to s 51A of the Federal Court of Australia Act 1976 (Cth). 241 The trial judge set out the relief he would have granted had the appellant made out his case of the misleading or deceptive conduct as follows (at [381]): (1) I would have effectively ordered the refund of the price paid for total number of shares acquired by the applicant (those allotted by Vegas and those acquired from C Breeze Pty Ltd), being 641,389, on the applicant's production of a properly executed transfer or transfers of that number of shares in favour of such transferee or transferees as the respondents may nominate, but on the condition that the applicant's former spouse be the transferor of 224,486 of such shares, that is to say of the parcel she now holds following the execution of the Family Court of WA order; (2) I would have ordered that the respondents pay the applicant damages in respect of the amounts particularised in [1.3] and [1.4] of Schedule A to the further particulars of claim dated 18 September 2009 up until judgment, without deduction on account of taxation advantages or deductions the applicant may have obtained during the period of the loan to purchase the shares referred to in those particulars; (3) I would also have allowed the applicant interest on the total purchase share price of $2,553,894.60 from 19 December 2006 (the date of payment) until judgment at a fixed rate under O 35 r 8 of the Federal Court Rules; (4) I would have invited the applicant to bring forward a minute of orders to give effect to these orders. 242 The focus of the respondents' attack on the orders the trial judge said he would have made was on the 'refund' order in paragraph (1). Later in his reasons the trial judge made it clear that the refund order would have been made against Messrs Hart and Backshall as well as Vegas. 243 A number of points may be made about the hypothetical refund order. The first is that it goes beyond a refund order in that it includes the 41,229 shares the appellant purchased from C Breeze Pty Ltd for $170,000. None of the respondents received the sum of $170,000 paid for those shares. Secondly, the order requires the appellant to transfer the shares to such transferee or transferees as the respondents may nominate. That assumes the appellant is able to effect the transfer and indeed at the trial he set out to prove that he could do so because he was the beneficial owner of the shares. He established that fact to the satisfaction of the trial judge. Accepting that finding for present purposes it is at least fairly arguable that the legal owner of the shares, Sheraz, should have been a party to the proceeding. Thirdly, the order itself is conditional on a third party, the appellant's former wife, transferring her 224,486 shares. The trial judge said that the transfer of those shares 'would necessarily need to be part of the refund'. Accepting that finding, it is strongly arguable that the Court would need to be satisfied that those shares would be transferred before an order of the type identified in paragraph (1) was made. Put another way the consequences if the condition was not met are by no means clear. The appellant's former spouse was not a party to the proceeding and the trial judge does not make any finding or refer to any evidence about her attitude to a transfer of the shares she holds. 244 These observations address without expressing any final conclusions the following ground in the second and third respondents' notice of contention: Neither Sheraz Pty Ltd nor the Applicant's former wife (being the person in whose name the shares the subject of the proposed refund order were registered at the time of trial and judgment) had been joined to the proceeds [sic] or heard in relation to the relief sought. 245 I do not need to express any final conclusions with respect to this ground because there is a more fundamental reason why the hypothetical refund order could not have been made. 246 The first ground in the second and third respondents' notice of contention relating to the relief the trial judge said he would have granted is as follows: The learned trial judge erred in finding that the applicant was at all material times the beneficial owner of the shares in the First Respondent registered in the name of Sheraz Pty Ltd. Reasons [383]-[422]. 247 In order to provide the context for a consideration of this ground it is convenient to recapitulate some key facts: 1. The share transactions were effected by the first respondent issuing 600,160 newly-issued shares to Sheraz for a consideration of $2,370,986.57 and C Breeze Pty Ltd selling 41,229 shares to Sheraz for a consideration of $170,000. 2. The appellant wrote in his letter dated 26 October 2006: Also subject to taxation advice from my accountant (Mr Grant Boyce) the share purchase will be either in my name or in the name of my trustee, Sheraz Pty Ltd. 3. On 18 December 2006 the appellant entered into a loan agreement with the ANZ Bank to borrow the funds to purchase the shares issued by the first respondent. The trial judge appears to have accepted that the appellant paid stamp duty of $4,744.60 on the loan agreement with the ANZ Bank. 4. On 19 December 2009 settlement took place and the appellant handed to Mr Rayney an ANZ Bank cheque obtained through the appellant's ANZ borrowing in the sum of $2,370,986.57. On the same day the appellant deposited a Commonwealth Bank cheque in the sum of $170,000 into Mr Mark Sutton's account. 5. The appellant was required to pay interest on his loan from the ANZ Bank and he did so on a monthly basis at least during the period from January 2007 to September 2009. On occasions the interest payments were made through Sheraz's only bank account which was a bank account in the name of Terranora Family Trust. 6. From 2006 or 2007 the appellant was the respondent to proceedings brought by his former wife in the Family Court of Western Australia. In December 2009 an order was made as part of a property settlement between the parties that the appellant transfer to his former wife 224,486 shares 'owned by him' in Vegas. That transfer was effected with the appellant signing the transfer form as the transferor. 7. In December 2009 the appellant completed a statement of financial position for the ANZ Bank in connection with what appears to be an unrelated transaction. In the statement he was asked to indicate the present value of any 'shares' held by him. He placed a dash in the relevant box. 8. In 2009 Vegas engaged in a capital raising and that resulted in March 2009 in a new shareholder (New Force Holdings Pty Ltd) taking a controlling interest of approximately 53 per cent in the company and in a dilution of the shareholding of all the existing shareholders. The trial judge recorded the shareholdings in Vegas as at the date of the hearing as follows: • New Force Holdings Pty Ltd - approximately 53%. • A company associated with Mr Hart - approximately 17.4%. • Mr Backshall's family trust - approximately 8.7%. • Mick Button and associated interests - approximately 6.95%. • A company associated with Mr Rayney - approximately 3.53%. • A company associated with Mr Whiteman - approximately 3.53%. • C Breeze Pty Ltd, a company associated with Mr Mark Sutton - approximately 3.27%. • Sheraz - approximately 1.97%. • Mr Clifford's former spouse - approximately 1%. • A trust associated with Mr Preisendorfer - approximately 0.9%. 9. The appellant commenced this proceeding in February 2009. In his pleading he alleged that he was the beneficial owner of 641,389 shares in Vegas. 10. The appellant filed and served a witness statement dated 19 October 2009 and in it he said: Sheraz Pty Ltd was appointed trustee of my family trust on 3 July 1985. Attached and marked 'B' is a copy of the Terranora Family Trust Deed dated 3 July 1985. Sheraz also acts as my agent in paying my bills. This is achieved by a monthly payment made from my Commonwealth Banks savings account to the ANZ Sheraz account mentioned below in an amount equal to the total of monthly bills I have to pay (subject to some minor adjustments for petty cash, etc) at which time Sheraz draws cheques (all signed by me) in payment of each bill I am paying. Some of my bills are paid by a Commonwealth Bank Mastercard I have. The Terranora Family Trust is a discretionary trust. 11. After the appellant's witness statement had been filed and served, the respondents' solicitors sought particulars from the appellant's solicitors of the appellant's beneficial interest in the shares in Vegas. The upshot of that correspondence was that the appellant alleged that the trust relationship between him and Sheraz was a bare trust, that it was not a trust that was in writing or oral, or partly oral or partly written, and that the trust arose 'upon the purchase of the relevant shares by the Applicant, where the shares were registered in the name of Sheraz Pty Ltd by the First Respondent'. As I understand it, there was no attempt to depart from these particulars at trial and they preclude a claim by the appellant of an express trust and a claim that a trust relationship arose by reason of events after 19 December 2006. 12. At trial, the appellant contended that the trust relationship between him and Sheraz arose as a result of a common intention constructive trust. He did not contend that there was a resulting trust by reason of the fact that he provided the purchase moneys for the shares. 13. Sheraz was the trustee of the appellant's family trust which was a discretionary trust known as the Terranora Family Trust. The appellant gave evidence that he and his brother were the two directors and two shareholders of Sheraz and that his brother held his share on trust for him. The trial judge found that the appellant controlled Sheraz. 14. Sheraz was not a party to the proceeding. None of its financial records and, in particular, the records identified in s 286 of the Corporations Act were put in evidence. 248 The trial judge dealt with the question of whether the appellant was the beneficial owner of the shares registered in the name of Vegas. He analysed the authorities and the facts. He then said (at [421]: While I entertain some doubt about the matter, I am satisfied on the balance of probabilities that at the time the Vegas shares were registered in the name of Sheraz on 19 December 2006, Sheraz held the shares beneficially for Mr Clifford on a bare common intention constructive trust. The reasons why ultimately, with some misgivings, I have come to this conclusion on the balance of probabilities, are: (1) There is nothing on the face of the letter from Mr Clifford to Vegas dated 26 October 2006, to suggest that Sheraz, if it held the shares, would be holding them as the trustee of the family trust. The statement was simply made that if Sheraz were to hold the shares it would do so as "my trustee". (2) The context, revealed by the applicant's letter dated 26 October 2006, was that it was either he, or his trustee, Sheraz, who would hold the shares. It was simply a matter of accounting advice. The primary indication that Mr Clifford was buying the shares is an important one. It is confirmed by the facts that right up until this point, the invitation to become an investor or 'partner' in Vegas was made to Mr Clifford, not some other entity. While it no doubt was expected that tax and commercially effective arrangements ought to be made concerning the shareholding (as was the case with most if not all other directors and persons with management functions within the company) the offer was to Mr Clifford. Given that Mr Clifford controlled Sheraz (as he did), Sheraz understood this too. (3) In the Family Court proceedings, Mr Clifford, as husband, was personally ordered to effect a transfer of shares to his former spouse. While this may be considered a little equivocal, there was no doubt that Mr Clifford was understood to be the person who controlled Sheraz in relation to the shares. This is at least consistent with Mr Clifford having represented in those proceedings he was the beneficial owner of the shares. That Mr Clifford was invited by senior counsel for the second and third respondents during cross examination to produce his Family Court documents that might shed some light on this issue and did not do so, is, in all the circumstances, not a factor that causes me not to draw an unfavourable inference that such documents might not have helped the applicant's case. (4) When pressed by the solicitors for the second and third respondents about the nature of the trust, eventually it was clarified as a "bare trust". While this suggests that it took Mr Clifford and his solicitor a little time to understand precisely what sort of trust was being pressed in the circumstances of this case, it must be remarked that at no time in the course of the pleadings and particulars was it squarely put that the beneficial interest arose by virtue of the applicant being the beneficiary of a discretionary family trust of which Sheraz was the trustee. The reference in [2] of Mr Clifford's witness statement dated 19 October 2009, does not support the inference that this was his argument. The fact that Mr Clifford, through his solicitor, eventually firmly asserted a bare trust, following the second and third respondents' solicitors identifying a problem with claiming beneficial interests through a discretionary trust, is relevant, but in the end in light of the primary facts I have identified, is not sufficiently compelling for me to be not satisfied on the balance of probabilities that Sheraz held the shares on a bare trust for Mr Clifford. He did not approbate and reprobate. (5) Similarly, while the absence of any documentation held by Sheraz produced by the applicant to corroborate the bare trust and to negative the holding through the family trust by Sheraz indicates a ground for not being satisfied about the applicant's claim of beneficial ownership, again, in the end, having regard to the way the transaction was developed and completed, and the fact that the applicant plainly considered at all times his actions were the actions of Sheraz and the actions of Sheraz were his actions, and as inadequate as his conduct or the conduct of Sheraz might be said to be by not keeping some records of this transaction, in the end the absence of records does not dissuade me from finding on the balance of probabilities that Sheraz held the shares for Mr Clifford on a bare trust. (6) I consider the fact that the payment of interest on the applicant's borrowings to fund the purchase of the shares had been made from a bank account styled 'Sheraz Pty Ltd as Trustee for the Terranora Family Trust', is equivocal. The evidence does not suggest Sheraz had the need for any other account. As Mr Clifford in [2] of his written statement explains, he also used it. 249 In my respectful opinion there are two difficulties with the trial judge's reasoning. First, the appellant's case was that there was a common intention constructive trust and that must involve an intention common to both the appellant and Sheraz. Where a corporate body such as Sheraz is no more than the alter ego of an individual then it is appropriate to examine the intention of the individual: Austin v Keele (1987) 10 NSWLR 283. As the appellant controlled Sheraz it is his intention which is relevant. The difficulty is that his intention is the intention of both the property owner and the person asserting the beneficial interest. I cannot see how in those circumstances the particular form of trust alleged by the appellant - a common intention constructive trust - can arise. 250 Secondly, and assuming a common intention constructive trust can arise in the circumstances, I do not think that the evidence before the trial judge was sufficient to justify a finding on the balance of probabilities that a common intention constructive trust arose. Although a common intention may be inferred from conduct, it must be an actual intention, not an intention that a Court thinks the parties would have had had they turned their minds to the question. Subsequent conduct or events might throw light on the intention of the parties, but, in view of the basis upon which the appellant formulated his case, it is the intention at 19 December 2006 which is critical. 251 The background in this case is that Sheraz was the trustee of the appellant's family trust and so it is possible that it was nominated to receive the shares in that capacity. 252 The matters relied on by the trial judge in reaching the conclusion that Sheraz held the shares on a bare trust for the appellant are set out above (at [248]) and I will consider each of these matters in turn. 253 I do not think the matters identified in paragraphs (1) and (2) take the matter very far. They might if the case involved two independent parties. However, even accepting that there was a general intention that the appellant was to take some benefit in relation to the shares, the family trust was his family trust and he controlled it and was a potential beneficiary under the trust. 254 The matter in paragraph (3) supports the appellant's argument to a point, but it must be assessed in the knowledge that the appellant controlled the family trust. 255 The matter in paragraph (4) is not a positive reason to accept that Sheraz held the shares on a bare trust for the appellant. Even if one accepts the trial judge's finding that the appellant did not approbate and reprobate, the matters arising from the witness statement and solicitors' correspondence would lead a court to consider carefully the other evidence relevant to the issue. 256 Again, the matter in paragraph (5) even if accepted is not a positive reason to accept that Sheraz held the shares on a bare trust for the appellant. Again, the matters in that paragraph would lead a court to consider carefully the other evidence relevant to the issue. 257 The matter in paragraph (6) is not a positive reason to accept that Sheraz held the shares on a bare trust for the appellant. 258 The trial judge expressed his conclusion in the following paragraph ([422]): In the result, (although finely balanced) I am satisfied by the preponderance of the evidence, and the absence of sufficiently persuasive evidence to negative the inference that it must have been Mr Clifford's and Sheraz's (inferred) intention that Sheraz should hold the shares on a bare trust for the applicant. Mr Clifford and Sheraz have acted throughout as though this were so. It would be unconscientious for Sheraz to assert otherwise now. In fact, Sheraz has not done so. I therefore find that, at all material times, the applicant was the beneficial owner of the Sheraz shares. 259 It would seem that the trial judge was strongly influenced by the fact that the appellant paid for the shares issued by the first respondent. That in itself is not sufficient to establish a common intention constructive trust. It would be highly material to an allegation of a purchase moneys resulting trust but such a trust was not alleged by the appellant. In case it is thought that even though not alleged this was clearly a case of a purchase moneys resulting trust, it should be remembered that it would still have been necessary to examine whether there were any circumstances rebutting the presumption of a resulting trust. 260 With respect to the trial judge's statement that the appellant and Sheraz had acted throughout as though Sheraz held the shares on a bare trust for the appellant the only finding in the trial judge's reasons which seems to support that conclusion is the finding concerning the transfer of the shares to the appellant's former wife (that is, paragraph 3). I do not think that fact by itself is sufficient to support the conclusion that the subsequent conduct of the appellant and Sheraz is only consistent with a finding that Sheraz held the shares on bare trust for the appellant. 261 In my respectful opinion, the trial judge erred in concluding that the appellant had established on the balance of probabilities that Sheraz held the shares on a bare trust for him. 262 Some reference appears to have been made at the trial to an alternative argument to the effect that the appellant, as the person who paid the purchase price, could recover even if he was not the owner of the shares. The trial judge dealt with this argument in the following passages in his reasons ([384]-[387]): The applicant contends that the issue raised by the respondents is beside the point. The applicant says the respondents do not plead a positive case such that the Terranora Family Trust (of which Sheraz is the trustee) is the beneficial owner of the Vegas shares. The applicant says the starting point is to look to see if the applicant suffered loss and damage in reliance upon the respondents' conduct. In this regard the applicant says, to his detriment, he provided all the monies for the Vegas share acquisition. It is enough for him to establish detrimental reliance on the misleading and deceptive conduct and thereby make good the cause of action, no matter in whose name the Vegas shares are registered. The applicant submits that the position is analogous to a parent purchasing a motor vehicle in reliance on misleading and deceptive conduct but registering the motor vehicle in the child's name for the child's use. The loss is the loss of the parent acting in detrimental reliance on the impugned conduct. It is not the child in whose name the registered motor vehicle is registered who has suffered the detriment. In broad terms, I accept the applicant's submission. At all material times, the respondents fully understood that it was Mr Clifford, who one way or another, was proposing to arrange funds in order to take up an investment of equity in Vegas. In his letter to Vegas, dated 26 October 2006, he indicated his acceptance of the offer to invest and that he was taking advice on the entity to hold the shares and that either he or 'my trustee', Sheraz, would hold the shares. Throughout the course of dealings over the share acquisition from September/October 2006 through to their closing on 19 December 2006, the respondents dealt with Mr Clifford. If Mr Clifford can demonstrate that he, himself, has suffered loss and damage, in reliance on proven misleading or deceptive conduct, in the course of the process by which the shares were acquired, then it seems to me it should not matter who in fact holds the shares acquired. However, in such circumstances, the applicant would need to establish that he himself in fact suffered loss. He cannot simply point to loss suffered by the entity holding the shares, unless of course the shares acquired were beneficially owned by him. 263 With respect, it is not entirely clear to me what the trial judge is saying in these passages. However, he appears in the result to have concluded that the beneficial ownership issue was important because the appellant framed his case on the basis of loss sustained on the acquisition of the shares. In his Amended Statement of Claim the appellant claimed the following loss or damage: Particulars of Loss and Damage 40.1 The cost and expense the Applicant has incurred to 17 February 2009 is $2,713,871.47. 40.2 Minority shareholdings in Vegas are unsaleable. 264 I agree with the trial judge's conclusion. The difficulty is that if the appellant has framed his damages claim as one based on moneys paid out rather than loss sustained on the purchase of shares then an inquiry would have been necessary as to whether he had a right of action against Sheraz in the nature of a claim for the recovery of a loan and if so the value of that right of action. The value of the right of action would in turn depend on the value of the Vegas shares held by Sheraz (Gould v Vaggelas (1985) 157 CLR 215 at 225-227 per Gibbs CJ; at 254 per Brennan J). Furthermore, the hypothetical refund order is based on the premise that the appellant is able to effect a transfer of the shares. He claimed that he could do so because he was the beneficial owner of the shares. I do not think he established that on the balance of probabilities, and, in my opinion, the hypothetical refund could not have been made. 265 The second and third respondents raised the following grounds in their notice of contention. The learned trial judge erred in concluding that it was appropriate for the Second and Third Respondents to bear a liability in relation to the refund order in circumstances where they had not received any part of the price paid by the applicant for the shares. The learned trial judge erred in concluding that the proposed refund order should be fashioned so as to enable the Second and Third Respondents to indicate who ultimately should receive a transfer of particular shares tendered. 266 As to the first of these grounds, on the face of it there is something to be said for the contention, particularly in so far as the hypothetical refund order is based on s 1325(5)(d) of the Corporations Act and s 77(3)(d) of the FTA. Both those sections refer to a 'refund' of money or a 'return' of property and, as a matter of fact, the second and third respondents did not receive the purchase moneys (see Haydon v Jackson [1988] ATPR 40-845). I considered a similar issue in Rafferty v Time 2000 West Pty Limited (No 5) [2010] FCA 873; 87 IPR 593 ('Rafferty') although the facts in that case were quite different. Rafferty is on appeal and the appeal has been heard and judgment has been reserved. This case can be disposed of on the grounds previously identified and without addressing this point and in the particular circumstances I think that is the course which should be taken. It follows that it is also unnecessary for me to address the separate point raised in the second ground set out in the previous paragraph. 267 The second and third respondents raise grounds of contention relating to whether, even if he was the beneficial owner of the shares, the appellant had established loss or damage. The learned trial judge erred in finding that the Applicant had discharged the onus he bore to prove that he had suffered loss and damage as a result of a contravention of the Fair Trading Act 1987 (WA), the Corporations Act 2001 (Cth) or the Trade Practices Act 1974 (Cth), Reasons [423]-[439]. The learned trial judge erred in finding that the shares registered in the name of Sheraz Pty Ltd were unsaleable. Reasons [423] - [439]. The learned judge should have found that the Applicant had not demonstrated (nor attempted to demonstrate) that there was any difficulty in this case in assessing loss or damage based on his retention of the shares, or why the refund order sought by the Applicant was the preferable, alternatively, only available remedy. 268 At trial, the appellant did not call any expert evidence which sought to place a value on the shares. His case was that the shares were unsaleable and therefore it was difficult to prove their value. He contended that proof that the shares were unsaleable was not only sufficient proof of loss or damage but also proof that it was difficult to quantify the loss or damage. He contended that having regard to the latter circumstance, the appropriate form of relief was a refund order (Donald Financial Enterprises Pty Ltd v APIR Systems Ltd [2008] FCA 1112; APIR Systems Limited v Donald Financial Enterprises Pty Ltd [2009] FCAFC 45). I did not understand the appellant to conduct his case on the basis that for the purpose of rescission it was sufficient proof of loss or damage to establish that he would not have entered into the share transactions but for the misleading or deceptive conduct: Demagogue Pty Ltd v Ramensky. 269 The trial judge held that the shares were unsaleable in the hands of the appellant and that was proof of loss or damage and a sufficient reason to engage an alternative form of relief in the nature of a refund order. The respondents' attack on the trial judge's conclusions is in fact an attack on his conclusion that the shares were unsaleable. I do not need to express a final conclusion on this point but there appears to be a good deal to be said for the submission that the evidence was not sufficient to support such a conclusion. There was little evidence on the point and the opinion of Mr Pickup, upon which the trial judge placed some reliance, seems to have been formulated having regard to the then financial circumstances of Vegas, rather than the size of the appellant's shareholding. 270 Finally, the second and third respondents allege in their notice of contention that: The learned trial judge should have found that the Appellant had affirmed the share purchase. 271 The trial judge rejected this argument and I am disposed to think that he was correct to do so.

Conclusions 272 For these reasons the appeal must be dismissed. The appellant must pay the costs of the appeal of the first respondent and the costs of the appeal of the second and third respondents. It was neither inappropriate nor unreasonable for the respondents to advance the notices of contention and some of the grounds have been successful. The costs of the appeal should include the costs of the notices of contention. I certify that the preceding two hundred and seventy (270) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko.

Associate: Dated: 3 November 2011 IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION WAD 231 of 2010

AND: VEGAS ENTERPRISES PTY LTD (ACN 009 078 148)

JUDGES: NORTH, BESANKO & JESSUP JJ DATE: 3 November 2011 PLACE: Adelaide via Video Link with Perth

Jessup J 273 I agree that the appeal should be dismissed for the reasons given by Besanko J, and desire to add only a brief observation with respect to one aspect of the Notices of Contention. 274 Where the relief sought by the appellant necessarily carried with it the need either for Sheraz Pty Ltd to re-transfer its shares to the first respondent, or for those shares to be cancelled, I cannot, with respect to the primary Judge, understand how such an outcome might be contemplated in the absence of Sheraz Pty Ltd as a party to the proceeding. The problem is not overcome by a finding that it was the appellant who beneficially owned the relevant shares. That such a finding should be made in the absence of the presumptive trustee - the entity whose interests would be affected by the finding - strikes me, with respect, as all the more unconventional. I certify that the preceding two (2) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jessup.