Commonwealth Bank of Australia v ZYX Learning Centres Limited

Collier v Lancer (No 2) [2013] NSWCA 186 Concrete Constructions (NSW) v Nelson [1990] HCA 17; 169 CLR 594 Dey v Victorian Railway Commissioners [1949] HCA 1; 78 CLR 62 Ford v Nagle and Ors [2004] NSWCA 33 Forrest v Australian Securities and Investments Commission [2012] HCA 39; 247 CLR 486 General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; 112 CLR 125 Guglielman v Trescowthick [2004] FCA 326 Hawkins v Clayton [1988] HCA 15; 164 CLR 539 Ingot Capital Investments v Macquarie Equity Capital Markets [2003] NSWSC 1012 Ingot v Macquarie (No 3) [2005] NSWSC 255 Ingot v Macquarie [2004] NSWSC 1219 Jensen v the State of New South Wales [2014] NSWSC 682 Karl Suleman Enterprizes Pty Ltd (in liq) v Pham [2013] NSWSC 110 Ke Qin Ren v Hong Jiang; Yi Cheng Jiang v Wan Ze Property Development (Aust) Pty Ltd (in liq) [2014] NSWCA 388 MGICA (1992) Ltd (formerly MGICA Ltd) v Kenny & Good Pty Ltd [1996] FCA 766; 140 ALR 313 State of New South Wales v Williams [2014] NSWCA 177 Northern Territory v GPAO [1999] HCA 8; 196 CLR 553 Shafron v ASIC [2012] HCA 18; 247 CLR 465 Simmons v Henwood [2013] NSWCA 184 Simmons v Protective Commissioner of NSW [2012] NSWSC 455 Spencer v The Commonwealth [2010] HCA 28; 241 CLR 118 University of Wollongong v Metwally [1984 ] HCA 74;158 CLR 447 Village Building Co v Canberra International Airport [2004] FCAFC 240; 139 FCR 330 Wardley Australia Ltd v Western Australia [1992] HCA 55; 175 CLR 514 Wickstead v Browne [1992] NSWCA 272; 30 NSWLR 1 Yorke v Lucas [1985] HCA 65; 158 CLR 661 Texts Cited: Ritchie's Uniform Civil Procedure Category: Interlocutory applications Parties: Commonwealth Bank of Australia (Plaintiff) Commonwealth Securities Limited (Plaintiff) Jillian Glenda Bannan (3rd Defendant) Sallyanne Atkinson (5th Defendant) William Eric Bessemer (6th Defendant) David James Ryan (7th Defendant) Lawrence James Anthony (8th Defendant) Representation: Counsel: AJ Sullivan QC; JJ Hutton (26 September) and I Pike SC; JJ Hutton(10-11 November) (Plaintiffs) D L Williams SC; K J Williams (3rd Defendant) R Rydge (4th Defendant) RA Dick SC & D Barnett (5th - 8th Defendant)T M Dowling (10th Defendant) N Andrew (11th -18th Defendants, 34th - 38th Defendant) Solicitors: Jones Day (Plaintiffs) DLA Piper (3rd Defendant) Quinn Emanuel Urquhart & Sullivan (5th - 8th Defendant) File Number(s): 2013/165057 Publication restriction: Nil

Judgment 1On 28 May 2013 the Commonwealth Bank of Australia and Commonwealth Securities Limited (respectively the first and second plaintiffs) commenced proceedings by statement of claim against 38 nominated defendants. 2On 18 February 2014 the plaintiffs sought and obtained leave to file an amended statement of claim ("ASOC"). 3By notice of motion dated 4 June 2014 the plaintiffs seek leave to file and serve a further amended statement of claim ("FASOC"). The FASOC was annexed to the notice of motion. 4By notice of motion filed 13 June 2014 the 5th to 8th defendants seek orders for summary dismissal or the striking out of the whole of the ASOC. In the alternative, they seek that particular paragraphs (77-98 and 121-124) be struck out. 5By notice of motion filed 1 September 2014, the 3rd defendant seeks an order summarily dismissing the proceedings against her or, in the alternative, an order striking out the amended statement of claim. 6The 5th to 8th defendants opposed the application for amendment of the ASOC. Initially, the 10th defendant also opposed the application. 7Submissions had been filed in advance of a hearing which was listed before me on Friday, 26 September 2014. In response to those submissions the plaintiffs filed submissions in reply on 18 September 2014. Annexed to those reply submissions was a second version of the FASOC. The 3rd defendant indicated its objection to orders allowing the plaintiff to rely on the second version of the FASOC. 8On 26 September 2014, the 4th defendant appeared represented by lawyers and indicated that it neither consented to nor opposed the amendment. Similarly the 11th to 18th and 34th to 38th defendant indicated that they neither consented to nor opposed the application to amend. The 3rd defendant, the 5th to 8th defendant and the 10th defendant maintained their opposition to leave being granted to the plaintiff to rely on the proposed FASOC. 9On 26 September 2014, some of the defendants, and in particular the 5th to 8th defendant, articulated a number of their objections to the FASOC, including the second version annexed to the plaintiffs' reply submissions. 10It was anticipated that the plaintiffs would file a further version of the FASOC. I made orders directing that to happen and on 16 October 2014 a third version of the FASOC was received in my chambers and (I assume) served on the defendants. 11The 10th defendant has now withdrawn its opposition to the plaintiffs having leave to rely on the FASOC. The 3rd defendant and the 5th to 8th defendants maintain their opposition to the granting of leave to rely on the FASOC. 12As I have said, the 3rd and 5th to 8th defendants also seek either summary dismissal of the plaintiffs' claim against them or that the ASOC be struck out. As I understand it, the opposition to leave to rely on the FASOC is based on the contention that it does not cure the inadequacies in the ASOC and that neither pleading adequately identifies the cause of action against them or is embarrassing in the relevant sense. In other words, there is no suggestion, as best as I can tell, that there is some other relevant prejudice that would lead me to conclude that leave should be refused. For that reason, this judgment will primarily focus on the FASOC.

The rise and fall of ABC Learning 13Before embarking upon a detailed analysis of the FASOC and the case that the plaintiffs hope to establish against the 3rd and 5th to 8th defendants, it may be helpful to the reader if I set out in very general terms the background to the litigation. This is taken substantially from the FASOC itself, a chronology provided by the plaintiff which is, at least for the purpose of this application, not in dispute and documents which were contained in a bundle of documents exhibited to an affidavit of the plaintiffs' solicitor ("PB", the plaintiffs bundle). 14The 1st defendant ("ABC") was a corporation that owned or ran a large number of childcare centres both in Australia and overseas. Its annual report in 2006 boasted that with a recent acquisition of childcare centres in the United States, ABC became "the world's largest listed childcare provider". In late September 2006, ABC lodged its financial report for the financial year ending June 30, 2006 with the Australian Stock Exchange ("ASX"). On 27 October 2006 it lodged its annual report for that financial year with the ASX. On 19 February 2007 it lodged its interim financial report for the half year ending 31 December 2006 with the ASX. 15I pause to note that the financial reports for the year ending 30 June 2006 and the half year ending 31 December 2006 are critical documents in the plaintiffs' action against the 5th to 8th defendants. The 5th to 8th defendants signed a director's declaration in relation to each of those reports. It is the plaintiffs' case that the statements or opinions made in those reports and associated declarations were false and/or misleading in a material respect and that the plaintiff relied upon those documents in entering into the transactions which followed. 16On 17 May 2007 ABC engaged the 2nd plaintiff as the "lead manager" and underwriter in relation to a proposed offer of "approximately $600 million of reset convertible notes" (the "notes issue") (PB 1). 17On 22 May 2007 ABC made an announcement to the ASX in which it indicated that its expected EBITDA and earnings per share were more substantial than had been anticipated as a result of its "strong first half result" and other matters (PB 619). 18As part of the process leading to the plaintiffs' underwriting (in the case of the 1st plaintiff) or sub-underwriting (in the case of the 2nd plaintiff) the notes issue, management interviews were held with three officers of ABC (PB 316-331). The management interviews were conducted in the aftermath of the provision of a management questionnaire directed to those officers (PB 275-315). The officers in question were Edmund Groves, the founder of ABC and a director and Chief Executive Officer ("CEO") of ABC (the 2nd defendant), James Black, the Chief Financial Officer ("CFO") of ABC (the 4th defendant) and Jillian Bannan, the company secretary and general counsel of ABC (the 3rd defendant). 19The management questionnaire and the minutes of the management interviews are critical documents in the plaintiffs' proposed case against the 3rd defendant. The plaintiffs' case is that statements or opinions were provided in the course of both the questionnaire and the interviews that were false and/or misleading in a material respect. 20It will be necessary to consider the terms and content of both the management questionnaire and the interviews in considering the application by the 3rd defendant for the proceedings to be summarily dismissed or the pleading struck out. Equally, from the perspective of the 5th to 8th defendants, it is necessary to consider the contents and details of the director's declaration contained in the end of year financial report for 30 June 2006 and the half yearly report for 2007 (that is, the period ending 31 December 2006). 21On 27 May 2007, a meeting of the Board of Directors of ABC resolved to proceed with the offer of 6,000,000 notes at an issue price of $100 each. A prospectus was issued and the plaintiffs entered into underwriting and sub-underwriting agreements. A group of auditors, Pitcher Partners, verified the financial information that was contained in the prospectus. 22On 8 June 2007 a replacement prospectus was lodged with the ASX. 23The notes issue closed on 12 June 2007. 24On 13 June 2007, the 1st plaintiff paid the sum of $600 million to the trust company for ABC and settlement of the notes occurred for the 1st series of investors (tranche A). 25On 5 July 2007 ABC resolved to approve the notes issue and settlement for a second group of investors (tranche B) occurred between 6-9 July 2007. 26On 13 July 2007 the ABC notes commenced trading on the ASX. 27On 13 August 2007 ABC made an announcement to the ASX relating to its acquisition of a group of nurseries and associated properties in the United Kingdom known as the Leapfrog Nursery Group. 28On 21 December 2007 the 3rd defendant ceased to be an employee or officer of ABC. 29On 22 April 2008 ABC made an announcement to the ASX ("ABC Learning Centres Limited: So much more than childcare") in which significant restructuring of the company was explained. This included "significant de-gearing" and reduction of debt levels. Certain information was provided in relation to matters that have been referred to by the parties and in the pleadings as "developer contracts" and the "new developer's model". These are said by the plaintiff to be relevant to the question of whether the earlier financial statements and relevant representations relied upon were false and/or misleading. The announcement also referred to the retirement from the board on the 5th, 6th and 10th defendants (PB 332-359). 30On 31 July 2008 ABC made another announcement to the ASX ("ABC Adjusts 2008 FY Guidance and Carrying Value of Assets"). This announcement relayed to the market that the accounting treatment of certain matters for earlier financial years was to be adjusted "based on accounting advice received". In particular, it was announced that income for various receipts from an organisation known as "123 Careers" "will be recorded over the 10 year term of the agreement rather than during 2006FY, 2007FY and 2008FY." Again, the plaintiffs seek to rely on this announcement as being relevant to the fact that the financial statements for June and December 2006 were false and/or misleading. 31On 25 August 2008 trading in shares and securities of ABC was suspended by the ASX. In November of that year administrators were appointed and in June 2010 liquidators were appointed. In June 2010 ABC changed its name to ZYX learning Centres Ltd and in April 2012 the Federal Court made orders winding up the ABC group.

The plaintiffs' case and procedural history 32To put the matter in the simplest terms possible, it is the plaintiffs' case that they relied upon certain representations concerning ABC's financial position in deciding to underwrite (or sub-underwrite) the notes issue. The plaintiffs say that the representations upon which they relied were false and/or misleading. It calls into aid relevant provisions of the Corporations Act 2001 (Cth), the Trade Practices Act 1974 (Cth) ("TPA") [now the Competition and Consumer Act 2010 (Cth)], the Australian Securities and Investments Commission Act 2001 (Cth) ("ASIC Act") and the Fair Trading Act 1987 (NSW) ("FTA"). 33The plaintiffs assert that they suffered a "primary loss of $445,580,192, being the difference between the value of the consideration paid for the ABC notes ($600 million) and the value of payments received by the first plaintiff from tranche A and tranche B investors ($154,419,808)". They put their loss in the alternative form of "the difference between the consideration paid for the ABC Notes and their true value" at the time of the investment. 34As I have said, on 28 May 2013 the plaintiffs commenced proceedings by statement of claim against some 38 defendants. Those defendants included the company itself, the founder of ABC, the CFO, the company secretary and legal counsel, a number of non-executive directors and the various partners of Pitcher Partners, being the auditors responsible for the financial reports and prospectus to which I have briefly made reference. 35It is unnecessary to detail the various procedural matters that followed except to note that some of the defendants were struck from the statement of claim when the plaintiff realised that a number of the nominated defendants were not partners of the auditors at the relevant time. More or less concurrently with that, additional defendants were nominated who were in fact partners of the auditors at the relevant time. On 18 February 2014 an amended statement of claim was filed. 36The detail of the plaintiffs' various amendments insofar as they concern correctly naming the defendants who were part of the partnership of auditors is not relevant. The auditors and various other defendants have played no part in these interlocutory proceedings. Presumably, the claim against them will continue. Similarly, the case against the founder (the 2nd defendant) and the CFO (the 4th defendant) and other nominated defendants will proceed. 37On 4 June 2014 the plaintiffs made another application to amend the statement of claim. It was this proposed FASOC which precipitated the current interlocutory proceedings. As I have said, the 5th to 8th defendants and the 10th defendant (at that stage) opposed the amendments sought to be made. At that stage the 3rd defendant did not oppose the application because the amendments did not touch upon the case against her. However, with the revised versions of the FASOC, the 3rd defendant also opposes leave to amend the pleading. 38On 13 June 2014 the 5th to 8th defendant filed a notice of motion seeking orders that the proceedings be dismissed (as against each of them). In the alternative, they sought orders striking out all, or part, of the ASOC. On 1 September 2014, the 3rd defendant filed a notice of motion in which she sought an order dismissing the proceedings summarily pursuant to rule 13.4 of the Uniform Civil Procedure Rules 2005 (NSW)("UCPR") or, in the alternative, an order pursuant to rule 14.28 UCPR striking out the amended statement of claim. 39Again, at the risk of repetition, the 10th defendant originally opposed leave to rely on the FASOC and filed submissions in support of its opposition. Those submissions also suggested that the proceedings ought to be dismissed. However, he now takes the same position as the defendants other than the 3rd and 5th to 8th defendant. That is he neither consents to, nor opposes, the proposed amendment. 40The matters that are left for determination on this interlocutory hearing are these: (1)The plaintiffs' application to file and rely on the FASOC which is opposed by the 3rd and 5th to 8th defendants. (2)The 3rd defendant's application to have the proceedings against her summarily dismissed or to have the whole of the relevant parts of the ASOC struck out. (3)The 5th to 8th defendants' application to have the proceedings against them summarily dismissed or to have the ASOC struck out.

The evidence and submissions 41The bulk of the evidence is contained in the PB. The plaintiff also read an affidavit of John Mark Caton and its exhibit (JMCE-3) but no submissions were addressed to that material. The 5th to 8th defendants read an affidavit of Penelope Abdiel along with documents annexed to that affidavit. 42I received three sets of written submissions from the plaintiff. These were dated 13 June 2014, 18 September 2014 and 7 November 2014. 43I received three sets of written submissions from the 3rd defendant. These were dated 3 September 2014, 25 September 2014 and 30 October 2014. 44I received three sets of written submissions from the 5th to 8th defendants. These were dated 25 July 2014, 25 September 2014 and 30 October 2014. 45I also received submissions from the 10th defendant dated 25 July 2014 but I understand that these are no longer pressed. 46I heard oral submissions from the relevant parties on 26 September 2014 and 10-11 November 2014.

THE CORRECT TEST FOR SUMMARY DISMISSAL 47An important, if not fundamental, issue arose on the arguments of the parties as to the appropriate test when a party seeks summary dismissal of the statement of claim. The issue arose from reply submissions filed on behalf of the 5th to 8th defendants on 25 September 2014. The 5th to 8th defendants submitted that the strength of the allegations is relevant to the question of summary dismissal and also to an application for leave to amend the pleadings. The defendants relied upon a passage in a judgement at first instance of Hammerschlag J in Simmons v Protective Commissioner of NSW [2012] NSWSC 455 at [64]. The submission included: "The Court might be persuaded that the legal contentions made by the plaintiffs in their submissions are not certain to fail (although the non-executive directors would contend otherwise). But, as Hammerschlag J makes plain, that is not enough." 48While not conceding that it is necessary on the facts of her case to do so, the 3rd defendant adopted the submissions made by the 5th to 8th defendants. 49In its reply to those submissions the plaintiff relied on more recent authorities of the Court of Appeal: Collier v Lancer (No 2) [2013] NSWCA 186 at [9]-[11] (Ward and Leeming JJA) and State of New South Wales v Williams [2014] NSWCA 177 at [71] (Emmett JA with whom Macfarlan JA and Simpson J agreed). The plaintiff submitted that it was "somewhat surprising" that the defendants should rely on the decision of Hammerschlag J and that his Honour's statement "is not good law and the court would err if it applied it". The plaintiff points out that the decision of Hammerschlag J was overturned by the Court of Appeal: see Simmons v Henwood [2013] NSWCA 184. It submitted that the defendants should withdraw their reliance on the decision in Simmons v Protective Commissioner. 50In oral argument, the defendants pressed the submission and declined the invitation of the plaintiff to withdraw its submission. Counsel for the 5th to 8th of defendants took me carefully through the judgment of Hammerschlag J and the authorities upon which his Honour relied in coming to the final and, according to the plaintiff, highly controversial, statement of principle. 51The relevant passage of Hammerschlag J's judgment in Simmons v Protective Commissioner is in the following terms at [64]: "It should no longer be the case, if it ever was, that court resources may be properly utilised in permitting a plaintiff to prosecute proceedings where a defendant demonstrates that those proceedings do not have reasonable prospects of success and all the plaintiff is able to do is demonstrate that the proceedings meet the bare threshold of not being certain to fail." 52In the analysis leading up to paragraph 64 his Honour referred in detail to the provisions in s 56 of the Civil Procedure Act 2005 (NSW), the relevant parts of the UCPR and the judgment of the High Court in Spencer v The Commonwealth [2010] HCA 28; 241 CLR 118. The defendants pointed out that Hammerschlag J had at the outset of his discussion at [46] referred to the orthodox tests for summary determination of a case. Those tests include that the case must be "so obviously untenable that it cannot possibly succeed", "manifestly groundless" or "hopeless": see for example Dey v Victorian Railway Commissioners [1949] HCA 1; 78 CLR 62 at 91; General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; 112 CLR 125 at 129. 53For what it is worth, I had occasion to consider the appropriate test for summary dismissal in Jensen v the State of New South Wales [2014] NSWSC 682 and Boscolo v Consumer Trader and Tenancy Tribunal [2014] NSWSC 997. In each of those cases I applied what I understood to be the orthodox, uncontroversial and extremely stringent tests referred to in Dey and General Steel. I also referred to the decision in Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27; 226 CLR 256. In Batistatos v RTA the High Court reiterated the stringency of the tests referred to in the earlier authorities and noted that the words employed in the earlier cases should be given their full effect and urged upon courts exercising the kind of jurisdiction that I am here invited to invoke the proposition that cases ought not to be decided in a summary way other than in the clearest of cases: see Boscolo v Consumer, Trader and Tenancy Tribunal (supra) at [30]. In neither Jensen nor Boscolo was I referred to Simmons v The Protective Commissioner or the decision of the High Court in Spencer v The Commonwealth. 54In deference to the careful arguments advanced on behalf of the defendants and in order to protect the defendants' position, it is appropriate that I state a concluded view in relation to the controversy (assuming that there is one) and the test that I am applying in determining these applications. The reason that I have placed those words in parentheses in the last sentence is that the defendants have argued that, on one view, the statement by Hammerschlag J in [64] does not suggest a different test to the one that has traditionally been employed when a party seeks summary dismissal. Further, I should emphasise that the defendants' position is that whatever be the appropriate test, and however high the bar is set, it comfortably meets that test. 55I am unable to accept that the proposition of Hammerschlag J in Simmons v The Protective Commissioner does not water down to a significant degree the stringency of tests hitherto employed. 56I accept the defendants' submission that the decision of the Court of Appeal overturning the decision of Hammerschlag J did not in terms confront paragraph 64. However, while he did not address the particular passage in Hammerschlag's judgment to which exception is taken by the plaintiffs, Emmett J used language more consistent with the older authorities providing for a more stringent test. For example his Honour said at [95]: 'Ordinarily a party should not be denied the opportunity to put his case before the court in the ordinary way, after taking advantage of available interlocutory processes. Before a party will be deprived of that opportunity, the court must have a high degree of certainty about the ultimate outcome of the proceeding, if it were to be allowed to go to trial in the ordinary way (see Agar v Hyde [2000] HCA 41; 201 CLR 552 at 575 - 576, [57]). The power to order summary dismissal should only be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried (see Fancourt v Mercantile Credits Ltd [1983] HCA 25; 154 CLR 87 at 99). The defendants have taken me to a number of recent authorities in the Court of Appeal where the Court made reference to and applied the decision of the High Court in Spencer (Collier v Lancer (No 2) [2013] NSWCA 186, State of New South Wales v Williams [2014] NSWSC 177). 57In Simmons v Protective Commissioner Hammerschlag J placed significant reliance upon what the High Court said in Spencer v The Commonwealth. In particular, his Honour relied upon a passage in the judgment of French CJ and Gummow J at [25]: "Section 31A(2) requires a practical judgment by the Federal Court as to whether the applicant has more than a "fanciful" prospect of success. That may be a judgment of law or of fact, or of mixed law and fact. Where there are factual issues capable of being disputed and in dispute, summary dismissal should not be awarded to the respondent simply because the Court has formed the view that the applicant is unlikely to succeed on the factual issue. Where the success of a proceeding depends upon propositions of law apparently precluded by existing authority, that may not always be the end of the matter. Existing authority may be overruled, qualified or further explained. Summary processes must not be used to stultify the development of the law. But where the success of proceedings is critically dependent upon a proposition of law which would contradict a binding decision of this Court, the court hearing the application under s 31A could justifiably conclude that the proceedings had no reasonable prospect of success (emphasis added by Hammerschlag J)." 58The defendants also point to a passage in the decision of French CJ and Gummow J at [24]: "The exercise of powers to summarily terminate proceedings must always be attended with caution. That is so whether such disposition is sought on the basis that the pleadings fail to disclose a reasonable cause of action or on the basis that the action is frivolous or vexatious or an abuse of process. The same applies where such a disposition is sought in a summary judgment application supported by evidence. As to the latter, this Court in Fancourt v Mercantile Credits Ltd said [48]: 'The power to order summary or final judgment is one that should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried.' More recently, in Batistatos v Roads and Traffic Authority (NSW) Gleeson CJ, Gummow, Hayne and Crennan JJ repeated a statement by Gaudron, McHugh, Gummow and Hayne JJ in Agar v Hyde which included the following: 'Ordinarily, a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways, but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way. There would seem to be little distinction between those approaches and the requirement of a 'real' as distinct from 'fanciful' prospect of success contemplated by s 31A. That proposition, however, is not inconsistent with the proposition that the criterion in s 31A may be satisfied upon grounds wider than those contained in pre-existing Rules of Court authorising summary dispositions." (Citations and footnotes omitted) 59The plaintiff says that the authorities can be reconciled by reference to that paragraph. 60In considering the applicability of these passages, and their relevance to a decision to summarily dismiss proceedings in New South Wales pursuant to the provisions in Part 13 of the UCPA, it is very important to remember the legislative basis of the decision in Spencer v The Commonwealth. The decision involved consideration of s 31A of the Federal Court of Australia Act 1976 (Cth). The relevant part of the provision is set out in the judgment of Hayne, Crennan, Kiefel and Bell JJ at [50]: "(2)The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if: (a) the first party is prosecuting the proceeding or that part of the proceeding; and (b) the Court is satisfied that the other party has no reasonable prospect of successfully defending the proceeding or that part of the proceeding. (3) For the purposes of this section, a defence or a proceedings or part of a proceeding need not be: (a) hopeless; or (b) bound to fail: for it to have no reasonable prospect of success." 61French CJ and Gummow J made reference to sub-s (3) at [17]. 62The defendants contend that there is no relevant distinction between a test that allows for summary dismissal when a cause of action has "no reasonable prospect of success" and the test under rule 13.4 which requires (relevantly) that there is "no reasonable cause of action". I disagree with that submission. A majority of the High Court in Spencer v The Commonwealth observed that s 31A of the Federal Court of Australia Act 1976 (Cth); "..departs radically from the basis upon which earlier forms of provisions permitting the entry of summary judgement have been understood and administered." (Paragrpah [53] (Hayne, Crennan, Kiefel and Bell JJ)) 63Their Honours analysed the expression "reasonable prospects" and noted in particular the "negative admonition in sub-s (3) that a defence, a proceeding, or a part of a proceeding may be found to have no reasonable prospect of successful prosecution even it if it cannot be said that it is 'hopeless' or 'bound to fail'. 64Their Honours acknowledged at [59] that in many cases where a plaintiff has no reasonable prospect of success, the proceedings could be described (with or without intensifying adjectives) as untenable, frivolous or groundless but went on to acknowledge "that none of those expressions (alone or in combination) should be understood as providing a sufficient chart of the metes and bounds of the power given by s 31A". Nor could the content of the power be illuminated by contrast with those terms. 65The judgment of the majority of the High Court in Spencer v The Commonwealth supports the proposition that s 31A of the Federal Court of Australia Act constitutes a radical departure from the traditional tests applying to applications for summary judgement or summary dismissal. It requires the engagement of a different test. 66The provision in rule 13.4 of the UCPR has not, as far as I am aware, been held to constitute such a fundamental departure. The provision uses words such as frivolous and vexatious, abuse of process and (relevantly) no reasonable cause of action being disclosed. The adjective "reasonable" in rule 13.4 attaches to the cause of action not to the prospects of success of the case. In so far as reliance is placed upon the overriding purposes of the Civil Procedure Act 2005 (NSW) as set out in s 56, I do not accept that that section or any of the surrounding sections which are calculated to ensure the "just, quick and cheap resolution of the real issues in the case" in any way affects the fundamental and orthodox approach to applications by a party to have a proceeding summarily dismissed or summary judgment entered. Nothing in the Act, as far as I can tell, displaces the fundamental rule that a party to litigation is entitled to a full hearing except in the clearest of cases. 67I accept that where some discretion is enlivened in such an application, it may be that s 56 has some work to do. But this does not affect the fundamental test to be applied on an application for summary dismissal of a proceeding. This approach accords with the judgment of Basten JA in Bott v Carter [2012] NSWCA 89 where his honour said at [14]: "It has been suggested that s 56 might warrant courts striking out proceedings on 'less substantial grounds' than those stated in General Steel: Commonwealth v Griffiths [2007] NSWCA 370, at [155] (Young CJ in Eq). In the present case, the primary judge referred to this possibility, but did not rely upon it. Another view might be that s 56 does not reduce the conditions for the engagement of the power conferred by r 13.4, but limits the circumstances in which the court, satisfied that the power is available, might be inclined to refuse relief on discretionary grounds." 68After the conclusion of argument, the Court of Appeal decided yet another case where the power to summarily dispose of a case was considered: Ke Qin Ren v Hong Jiang; Yi Cheng Jiang v Wan Ze Property Development (Aust) Pty Ltd (in liq) [2014] NSWCA 388. Again, the Court referred to Spencer v The Commonwealth and, again, the Court confirmed the stringency of the appropriate test. There is nothing in that judgment, or in any of the judgments to which I have been referred, that supports the defendants' implicit suggestion that the test for summary disposition has been watered down. The Honours (Barrett, Gleeson and Leeming JJA) said at [49]: "The test to be applied before entering summary judgment has been variously stated, and little is to be gained by reiterating those formulations; cf General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129. There is no controversy that the power must be exercised with 'great care' and 'exceptional caution': Spencer v Commonwealth [2010] HCA 28; 241 CLR 118 at [24] and [55] (noting that this was said of the lesser standard made applicable by s 31A of the Federal Court of Australia Act 1976 (Cth)). In Spencer, Hayne, Crennan, Kiefel and Bell JJ referred to the (unamended) test as 'requiring formation of a certain and concluded determination that a proceeding would necessarily fail': at [53]. Repeatedly, it has been said that the court must be so certain of the outcome that to permit the proceeding to go forward would amount to an abuse of process: Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 90; Spencer at [54]; O'Brien v Bank of Western Australia Ltd [2013] NSWCA 71; 16 BPR 31,705 at [3] and [67]." 69Their Honour's reference to the "lesser standard" arising under s 31A of the Federal Court of Australia Act confirms my understanding of the distinction between the appropriate test under the UCPR and that created by the Federal Court of Australia Act. 70In light of the foregoing analysis, I do not accept and am not prepared to act upon the analysis or statement of principle in the decision of Hammerschlag J in Simmons v the Protective Commissioner. I will apply the principles and formulations referred to in Dey v Victorian Railways, General Steel v Commissioner of Railways, Batistatos v RTA and a number of decisions of the NSW Court of Appeal. 71Finally, the fact that a case raises complex and difficult questions of law is not an "insuperable barrier" to an application for summary judgment or dismissal although the more complex the question of law, the more likely that it will involve resolution of complex factual issues: see the discussion of authorities in Ritchie's Uniform Civil Procedure [13.1.65].

TWO MATTERS COMMON TO THE THIRD AND FIFTH TO EIGHTH DEFENDANTS 72The application of the 3rd defendant raises substantially different considerations to the matters raised on behalf of the 5th to 8th defendants. However, there are two common features of the submissions. First, each of the defendants complains about the form of the pleading in which each plaintiff asserts that it entered into the underwriting agreement in reliance on the various representations. Secondly, each of the defendants asserts that the causes of action are statute barred because the proposed amendments are brought outside of the limitation periods provided for by the relevant statutes. 73I will deal with the "reliance" pleading first. I will then deal with the cases of the 3rd defendant and the 5th to 8th defendants in turn. Finally, I will deal with the limitation issue.

THE RELIANCE PLEADING 74A specific objection to both the FASOC and ASOC that preceded it that is taken by both the 3rd defendant and the 5th to 8th defendants concerned what has been described variously as the pleading with respect to "causation" or "reliance". The impugned part of the pleading comes in section I of the FASOC under the heading "LOSS AND DAMAGE". The complaint is that the pleading sets out some 31 representations or sources of those representations and asserts that the plaintiffs entered into the underwriting agreement in reliance on one "and/or" the other. It is the use of the disjunctive "and/or" that is the subject of the complaint. 75It is submitted in written submission for the 5th to 8th defendants filed 25 July 2014 that the "and/or" formulation is "not a permissible pleading" and that: "The plaintiffs have not alleged that they relied on any representations by the non-executive directors. By the use of the disjunctive, their pleaded case may or may not actually make that allegation." 76Paragraph 121 is the pleading relating to the 2nd plaintiff while paragraph 122 is the pleading relating to the 1st plaintiff. For present purposes, there is no relevant distinction between those paragraphs. They are as follows: "121. CommSec entered into the Underwriting Agreement in reliance on:- (a) the First Representation; and/or (b) the Second Representation; and/or (c) the Third Representation; and/or (d) the Fourth Representation; and/or (e) the Fifth Representation; and/or (f) the Sixth Representation; and/or (g) the FY06 Financial Report Representation; and/or (h) the FY06 Directors' Accounts Representation; (i) the September Representations; and/or (j) the Annual Report Representation; and/or (k) the October Representations; and/or (l) Interim Report Representation; and/or (m) 1H07 Directors' Accounts Representation; and/or (n) February Representations; and/or (o) the Implied FY06 Financial Report Representation; and/or (p) the Implied Annual Report Representation; and/or (q) the Implied Listing Rule Representation; and/or (r) the May 2007 Profit Representation; and/or (s) the Prospectus; and/or (t) the Financial Information; and/or (u) the First Pitcher Partners Representation; and/or (v) the Second Pitcher Partners Representation; and/or (w) the First Opinion Representation; and/or (x) the Second Opinion Representation; and/or (y) the Third Opinion Representation; and/or (z) the Fourth Opinion Representation; and/or (aa) the Fifth Opinion Representation/ and/or (bb) the Sixth Opinion Representation; and/or (cc) the Implied FY06 Directors' Accounts Representations; and/or (dd) the Implied October Representations; and/or (ee) the Implied 1H07 Directors' Accounts Representations. 122. The Commonwealth Bank entered into the Sub-Underwriting Agreement and thereafter subscribed for the ABC Notes, in reliance on:- (a) the First Representation; and/or (b) the Second Representation; and/or (c) the Third Representation; and/or (d) the Fourth Representation; and/or (e) the Fifth Representation; and/or (f) the Sixth Representation; and/or (g) the FY06 Financial Report Representation; and/or (h) the FY06 Directors' Accounts Representation; (i) the September Representations; and/or (j) the Annual Report Representation; and/or (k) the October Representations; and/or (l) Interim Report Representation; and/or (m) 1H07 Directors' Accounts Representation; and/or (n) February Representations; and/or (o) the Implied FY06 Financial Report Representation; and/or (p) the Implied Annual Report Representation; and/or (q) the Implied Listing Rule Representation; and/or (r) the May 2007 Profit Representation; and/or (s) the Prospectus; and/or (t) the Financial Information; and/or (u) the First Pitcher Partners Representation; and/or (v) the Second Pitcher Partners Representation.; and/or (w) the First Opinion Representation; and/or (x) the Second Opinion Representation; and/or (y) the Third Opinion Representation; and/or (z) the Fourth Opinion Representation; and/or (aa) the Fifth Opinion Representation/ and/or (bb) the Sixth Opinion Representation; and/or (cc) the Implied FY06 Directors' Accounts Representations; and/or (dd) the Implied October Representations; and/or (ee) the Implied 1H07 Directors' Accounts Representations." 77The 3rd and 5th to 8th defendants complain that casting the reliance pleading in this form means that the particular defendant is unable to determine precisely what case they are to meet. In other words, it is submitted that they are not aware of which representation the plaintiffs are ultimately relying upon in mounting their claim. They rely on the fact they are not alleged to be responsible for all of the representations or documents in which those representations are alleged to have been made. They say that, read literally, the pleading does not actually assert reliance in respect of any representation made by them. 78The plaintiffs submit that the pleading is in an orthodox form and that there is no ambiguity in the pleading. Rather, the plaintiffs submit that it is not in a position to know in advance which of the representations the court might find were made, or which of those representations the court might find were false, or which of those representations the court might find to have been relied upon by the respective plaintiffs in entering the underwriting and sub-underwriting agreements. 79For the sake of clarity, senior counsel for the plaintiff indicated that his clients will conduct the case on the basis of an assertion that the plaintiffs relied on each and every one of the representations particularised in paragraphs 121 and 122 and earlier in the FASOC. 80Senior counsel for the 3rd defendant submitted (T 30-31) that: "If it relied on all of them, the pleading should be 'and'. That's the problem. What it seeks to do by this is to suggest that any one of those things was causative, in circumstances where it also is pleading an 'and'. So the fact that any one of them - it relied on any one of them, means that on this pleading, it is not tying its colours to the mast and saying it relied on what they complain about in our conduct, which is only a small part of the overall and why this is particularly important is that this is not a case where any one defendant is said to have made all of the representations. There is all sorts of differential treatment depending upon whether it's the audited accounts, as one might more realistically think were relied upon rather than some management questionnaire." 81Senior counsel for the plaintiffs also made the point that he did not want to use the conjunctive "and" lest it be asserted at the hearing that the plaintiffs' case was predicated on establishing each and every one of the representations, their falsity and reliance by his clients. 82If there was any doubt that the plaintiffs' case is that they relied on all of the representations therein particularised, any such doubt has now been dispelled by the clear and unambiguous stance articulated by senior counsel on the hearing of this notice of motion. 83I accept the plaintiffs' submission on this subject. While senior counsel said (T 73-74) that he was not "overly fussed" if he is required to delete the "or" from the pleading, he did so only on the basis that it was recorded "in memoriam" that the case will not necessarily fail if the plaintiffs fail to establish every single one of their representations, the falsity of those representations or the plaintiffs' allegation of reliance. 84I have concluded that the plaintiffs are entitled to plead their case in this way. I do not propose to make an orders or conditions in relation to this part of the pleading.

THE THIRD DEFENDANT 85The 3rd defendant submits that the case pleaded against her by the plaintiff is untenable and destined to fail. Her arguments in this regard are many but can be encapsulated in the following propositions: (1)The plaintiffs' case that her position and qualifications are such that relevant knowledge of certain events might be inferred is unarguable. (2)The representations of fact or opinion attributed to her cannot be established to have been made by her. (3)The plaintiff has not, and cannot, properly contend that the representations alleged to have been made by her are other than opinions held on reasonable grounds. (4)The plaintiffs have not, and cannot, assert that she was aware of the materiality of the matters relevant to the plaintiffs' asserted reliance in entering into the underwriting agreement. Further, the pleading is defective as it fails to assert the state of knowledge (in relation to materiality) that the plaintiffs assert. (5)The plaintiff has not clearly pleaded the representations upon which it relies. (6)There are particular problems in relation to each of the six representations upon which the plaintiffs rely. 86I acknowledge that the foregoing summary of the 3rd defendant's position does not do justice to the careful, cogent and thorough submissions made both in writing and in oral argument. Accordingly, it is necessary to expand upon the arguments made by the 3rd defendant and to set out in some detail the case that the plaintiffs seek to make against her.

The management questionnaire and management interviews and the five representations pressed against the 3rd defendant 87In bringing its case against the 3rd defendant, the plaintiff relies upon two particular documents forming part of its bundle. As far as I can tell, the plaintiffs place no reliance upon any other statement of fact, representation or omission on the part of the 3rd defendant. The relevant documents are a management questionnaire bearing a date of May 2007 but otherwise unsigned or undated and a document entitled "minutes of management interviews" dated 25 May 2007 at 9am. 88The plaintiffs will assert that the management questionnaire and interviews failed to disclose critical information bearing upon the performance of ABC. It will assert that those interviews were conducted specifically for the purpose of the plaintiffs' understanding the nature of the business in which they were proposing to invest a very large sum of money. Accordingly, and without at this stage referring to the terms of the documentation, the plaintiffs will assert that representations made in the questionnaire and subsequent interview were going to be relied upon and that the 3rd defendant knew or must have known this. 89The 3rd defendant places particular reliance upon the purpose of the management questionnaire as set out at PB 275-276. She refers to the fact that the document on its face required the officers to whom it was directed to do no more than to provide information that was "correct to your knowledge and belief". The plaintiff says that there is nothing, either pleaded or in evidence, that supports the suggestion that the 3rd defendant did not believe the matters for which she was responsible for in the questionnaire. She also says that this part of the document highlights the precariousness of the plaintiffs' case and shows that any representation was clearly no more than an opinion. 90To understand the significance of the words upon which the plaintiffs rely, it is necessary to consider them in their context. Part 1 of the management questionnaire is entitled Purpose and is in the following terms: "Purpose This management questionnaire is to be completed by senior management of A.B.C. Learning Centre Limited (ABN 93 079 736 664) (ABC) as part of the process of ensuring that the prospectus (Prospectus) for the proposed issue of unsecured, subordinated convertible reset notes (Notes) by ABC (Offer) contains all the information required by law. The senior managers who complete this questionnaire must be all of the senior managers who are responsible for the operational (including licensing), legal, tax and accounting functions of the business as well as all executive directors. The offer of Notes is to be made using a short form Prospectus pursuant to section 713 of the Corporations Act. Accordingly, the Prospectus must contain all the information that investors and their professional advisers would reasonably require to make an informed assessment of: (1) the effect of the Offer on ABC; and (2) the rights and liabilities attaching to the securities that are being offered. The Prospectus must also contain certain material information which has been excluded from ASX continuous disclosure notices - namely, Information about the Offer that: - has been excluded from a continuous disclosure notice in accordance with the ASX listing rules; and - is information that investors and their professional advisers would reasonably require for the purpose of making an informed assessment of: - the assets and liabilities, financial position and performance, profits and losses and prospects of ABC; and - the rights and liabilities attaching to the ABC Notes and the underlying ordinary shares. This questionnaire is to assist the due diligence committee to ensure that the Prospectus meets the above content requirements. By completing this questionnaire you acknowledge that the answers provided to these questions will be relied on as being correct to your knowledge and belief, which you have obtained in the course of performing your responsibilities in respect of ABC. You also acknowledge that the performance of those responsibilities includes making due enquiries from time to time of the persons who report to you. Materiality and relevance For the purposes of the Prospectus and this questionnaire, by agreement with ABC, the following materiality guidelines have been adopted: - Balance Sheet items will be considered material if they have a value of $93 million or more. - Profit and loss items will be considered material if they impact individually on the annual operating profit by $4 million or more. In addition to the above quantitative guidelines, a matter will be material if, because of its nature, it is a matter which is relevant to an investor or their professional adviser for the purposes of making an informed assessment of ABC, its financial position and its prospects." 91It is also relevant to consider the people to whom the management questionnaire was directed. Those people were the CEO (Mr Groves, the 2nd defendant) and the CFO (Mr Black, the 4th defendant). The only other senior manager asked to be involved in the completion of the questionnaire was the 3rd defendant. 92The purpose set out at the beginning of the questionnaire indicated that those who completed it must all be "senior managers who are responsible for the operational including licensing legal tax and accounting functions" of ABC. The "purpose" specifically stated that the questionnaire was designed to assist the "due to diligence committee to ensure that the prospectus meets" the relevant content requirements. The document also indicated that by completing the questionnaire, the relevant officers acknowledged that the questions were "correct to [their] knowledge and belief" and that the information provided had been obtained in the course of performing their responsibilities at ABC including information obtained from the making of due enquiries from persons who reported to them. The final matter to note, in view of the nature of the case that the plaintiffs plead against the defendants, is that the "purpose" specifically referred to the fact that matters which remained in existence at the time of completion of the questionnaire should be reported even if they came into existence before 10 January 2006. 93The questionnaire is relied upon in respect of five of the six representations set out in paragraph 33 of the FASOC. 94The first representation arose or arises from the answer "no" to the question whether there were "any other issues that may materially affect ABC's future performance" (PB 277). 95The second representation, set out in paragraph 33 (b) of the FASOC, arose from question 4(b) of the questionnaire (PB 278). This evoked a negative response to the question of whether there are "any material contracts currently being considered or negotiated (details of which have not been disclosed to the ASX) which may have a material impact on the way ABC's business is conducted or its prospects". In addition to the box indicating "no" to that question, there is also a response referring to the ongoing negotiations in relation to its "underwritten term facility" and the fact that ABC was "considering a purchase of 10 centres in Singapore which is not material that may be announced to the market due to a new geographic area". 96The third representation is found in question 5A of the management questionnaire whereby a negative answer was provided to the question of whether "ABC is giving serious consideration to any significant acquisitions, divestments, new projects, change in capital or changes in strategy" (PB 281, FASOC [33(c)]). 97The fourth representation is no longer relevant as it derives from a part of the management questionnaire which was directed specifically to the CFO, Mr Black. 98The fifth representation arises from a negative response to question 11(d) whether there "was any reason to expect a significant increase in labour costs which might potentially affect managements EBITDA forecasts over the term of the notes" and whether any "labour relations issues" were anticipated (PB 298, FASOC [33(e)]). 99The sixth representation, about which there is a preliminary controversy, arises from an answer recorded in the minutes of the management interviews (PB 327): "Q.6(q): What are the key earnings sensitivities in the next 2 years? ABC answered: ABC's business doesn't have many earnings sensitivities. In terms of labour cost, ABC has an agreement with unions which means its labour costs will not increase by more than 2% over the next 2 years. Rental is a fixed and known cost and variances to variable costs, such as telephone are not material. In relation to revenue, birth rates in the US and Australia have increased. From a funding perspective, if the Australian economy experiences a downturn, it is unlikely to affect earnings due to government funding arrangements in place for unemployed parents. In the past when there has been a downturn in the economy, ABC's earnings have not fallen off. Similarly, in the US, which is driven [on a] more State by State basis, downturns in individual State economies are unlikely to reduce earnings. In Michigan, which has been 7.9% negative growth centre earnings, whilst they were previously tracking at about 5.5% growth, centre numbers have not fallen, but are static. ABC also hedges debt to protect itself from against (sic) exchange rate fluctuations." 100The preliminary controversy concerns proof of whether the 3rd defendant played any role in providing this answer. The minutes of the management interviews nominate the interviewees as James Black, Jillian Bannan and Edmund Groves. There are also "other attendees" recorded including two other representatives of ABC. On its face, as the defendants correctly point out, it is not always clear who provided the particular answers in each of the sections of the document. It is also not clear from the document whether there was one interview or a number of separate interviews although on one interpretation of the document it seems that there were a number of people present in the course of one or more interviews. The fact that the document is headed interviews (noting the use of the plural) could give rise to an inference that there was more than one interview. 101In terms of the application to summarily dismiss the whole of the plaintiffs' case against the 3rd defendant, the controversy surrounding the 6th representation is not determinative. However, for the purpose of an application to strike out that part of the pleading relating to the sixth representation, it is potentially a matter of some moment. Accordingly, I will explain the controversy as clearly as I can. 102As I have said, the sixth representation arises from an answer given in the course of the management interviews. The interviews were, or appear to be, a follow-up to the management questionnaire. The answer at 6(q) (PB 327) set out above at [99] was a follow-up from a question addressed in the part of the management questionnaire specifically directed to the CFO, Mr Black. The 3rd defendant contends that the fact that the question in the interview arose from a question in the management questionnaire directed to Mr Black, and Mr Black only, leads to the inevitable conclusion that the 3rd defendant is not responsible for the answer recorded in the management interviews. She further contended that there is no evidence capable of establishing that she was even present when that answer was given. 103She points to the fact that on a number of occasions the name of the 3rd defendant is recorded as the one who gave the answer (see for example Q 2.3 at PB 319) which records that "ABC (Jillian Bannan) answered". 104The plaintiffs counter that the minutes of the interviews are somewhat ambiguous as to who provided answers in a number, if not most, cases. At times a specific officer is nominated. For example, as I have just said Q 2.3 refers to Ms Bannan. Q 2.4 records "ABC (Eddy Groves) answered" (PB 319). See also the answers in Section 1 (PB 317) where both Ms Bannan and Mr Groves are recorded as answering specific questions. 105In the overwhelming majority of questions, the minutes record that "ABC answered". No specific interviewee was nominated. 106It is worth observing that the CFO (Mr Black) is not recorded as having specifically answered any of the questions during the interview. That is a significant matter in evaluating the 3rd defendant's submission that the sixth representation should be struck out of the FASOC as against her because it falls in part of the interview that derives from questions in the questionnaire directed to Mr Black. 107The plaintiffs also submit that the answer to section 6(q) contains material that may be expected to be within the province of the company secretary or legal counsel. 108I am not satisfied that the proceedings should be summarily dismissed or that the sixth representation should be struck out at the interlocutory stage on the basis that the plaintiffs may have difficulties in establishing the person who provided the answer at Q 6(q) of the minutes of the management interviews. Each of the parties is in a position to make opposing submissions but the plaintiffs' submission is not so obviously untenable that it should not have the opportunity to litigate the matter.

The pleading and the plaintiffs' case that the representations were false or misleading 109It is then necessary to consider in a little more detail the case of the plaintiffs against the 3rd defendant as it is pleaded in the FASOC. Because of the number of defendants, the FASOC is a somewhat cumbersome and disjointed document. That is not meant as a criticism of the document per se. Rather, it is the result of the fact that the plaintiffs are required to plead a case against a number of different defendants whose liability (according to the plaintiffs) arises as a result of different actions, statements and representations. 110Part D of the FASOC is headed "Representations Made by ABC, Groves, Bannan and Black to Commsec and the Commonwealth Bank". Paragraph 33 sets out the representations upon which it relies. It is in the following terms: 33. On or about 24 May 2007, and continuing thereafter at all material times up to and including 9 July 2007, each of ABC Learning, Groves, Bannan and Black made the following representations to CommSec and the Commonwealth Bank: (a) that each was not aware of any issues other than those which had been disclosed to the Due Diligence Committee of ABC Learning that may materially affect ABC's future performance (the First Representation); Particulars The representation was made in writing in answer to question 2(a) of a document entitled "ABC Learning Centres Limited Project Stuart Mark IV ABC Notes Issue Management Questionnaire" (the Management Questionnaire). (b) that apart from ABC Learning's underwritten term facility and the proposed purchase of ten childcare centres in Singapore, there were no material contracts currently being considered or negotiated (details of which have not been disclosed to the ASX) which may have a material impact on the way ABC Learning's business is conducted or its prospects (the Second Representation); Particulars The representation was made in writing in answer to question 4(b) of the Management Questionnaire. (c) that apart from the proposed acquisition of ten childcare centres in Singapore, ABC Learning was not giving serious consideration to any significant acquisitions, divestments, new projects, capital expenditures, changes in capital or changes in strategy (the Third Representation); Particulars The representation was made in writing in answer to question 5(a) of the Management Questionnaire. (d) that each was not aware of any matter likely to materially impact on ABC Learning's results for the then current financial year or the next financial year (the Fourth Representation); Particulars The representation was made in writing in answer to question 6(e) of the Management Questionnaire. (e) that there was no reason to expect significant increases would occur which might potentially affect the ability to meet ABC Learning management's EBITDA forecasts over the term of the ABC Notes (the Fifth Representation); Particulars The representation was made in writing in answer to question 1d) of the Management Questionnaire. (f) that ABC Learning's labour costs would not increase by more than 2% over the financial years ending 30 June 2008 and 30 June 2009 (the Sixth Representation). Particulars The representation was oral and made in answer to question 6(q) of the management interview on 25 May 2007. 111Thereafter, the FASOC sets out a number of matters which the plaintiffs assert ought to have been disclosed and, the failure of disclosure constitutes misleading conduct for the purpose of its claim against the various defendants.

Developer contracts 112From [35] to [41] the plaintiffs assert facts relevant to what have been described in argument (and in the FASOC) as "developer contracts". The plaintiffs complain that the developer contracts ought not to have been included in ABC's accounts as revenue. This is because, according to the case the plaintiffs hope to establish, the amount of money received by ABC was ultimately to be set off against the consideration to be paid by ABC Learning to acquire the relevant childcare centres. 113In paragraph 38 of the FASOC the plaintiffs assert that the recording of the payments in relation to the developer contracts as income resulted in overstatements in the relevant financial reports in relation to the profits of ABC, its earnings per share, its EBITDA, its revenue and its net assets. 114By paragraph 39 of the FASOC, the plaintiffs assert that by no later than 24 May 2007 and at all material times thereafter the 3rd defendant (and others) were aware of the existence of the developer contracts and the treatment of the fees received from the developers in the company's accounts. The knowledge so alleged is particularised in the FASOC as being inferred from the qualifications, senior positions and the roles that the relevant defendants played in the company as well as the significance of the developer contracts. 115By paragraph 40 the plaintiffs assert that the developer contracts and the treatment of its fees was a matter that may materially affect ABC's future performance. 116By paragraph 41 the plaintiffs assert that at no time prior to 22 April 2008 did Ms Bannan (or other nominated defendants) disclose to the plaintiffs the existence of the developer contracts or the treatment of the fees. 117Thus, it is alleged that the first representation - that the 3rd defendant was not aware of any issue that may affect ABC's future performance - was a false representation.

New Developers Model 118The FASOC goes on to refer in paragraph 42 to the "fact" that ABC decided to enter into what is described as "a new developers model". The FASOC asserts at [43] that by 24 May 2007 the new developers model was either finalised or close to finalisation. Paragraph 44 alleges knowledge in the part of Groves, Bannan and Black and asserts that such knowledge "is to be inferred from:- (a)the qualifications of each, the senior positions which each occupied, and the roles which each played within ABC learning; and (b)the fact that the new developers model was a significant part of the business of ABC learning." 119Paragraph 45 asserts that the new developers model was a matter that may have materially affected ABC's future performance, its results for the following financial year, that it involved material contracts currently being considered (and which had not been disclosed to the ASX) and was a significant new project or change in strategy. 120Paragraph 46 asserts (relevantly) that the 3rd defendant did not disclose the new developers model.

123 Careers 121Paragraph 46A to 50 of the FASOC adopts a similar approach to ABC's entry into a contract with a company known as 123 Careers Pty Ltd. 122It is asserted in [46A] that this contract was entered into in around 2006. The paragraph also asserts that payments were made to ABC in FY2006 ($30 million), FY2007 ($14million) and FY2008 ($2 million) even though the contract involved the right (in 123 Careers) to provide labour to ABC over a 10 year period. 123In [46B] it is asserted that the income was recorded as income in the FY06 Financial report and Annual report and in the half year results for the period ending 31 December 2006. 124Paragraph 47 asserts that on 31 July 2008 ABC announced that its pre-tax earnings for FY06 were to be reduced by $30 million as a result of its revised treatment of the cash received from 123 Careers. The earnings for FY07 were to be reduced by $14 million. Paragraph 47A asserts that the income received from 123 Careers "should not have been recorded as income". Paragraph 48 asserts that the treatment of the receipts in this way resulted in significant overstatements in net profit after tax, earning per share, EBITDA, revenue and net assets. 125Paragraph 49 asserts that these matters were issues that may materially affect ABC's future performance, a significant change in strategy and a matter likely to materially impact on ABC's results. 126Paragraph 50 asserts that the 3rd defendant failed to disclose the accounting treatment relating to the 123 Careers agreement.

Leapfrog acquisition 127Paragraph 51 asserts that on 13 August 2007 ABC announced that its UK subsidiary had agreed to acquire a group of childcare centres known as the "Leapfrog Nurseries Group" for a sum of £31.2 million. This involved the acquisition of 88 childcare centres as well as freehold and leasehold interests in 41 centres said to be valued at in excess of £40 million. 128The subsequent paragraphs assert that the acquisition was in contemplation by no later than 24 May 2007 [52] and that the 3rd defendant was aware of the acquisition [53]. Once again, it is asserted that the knowledge of (relevantly) the 3rd defendant is to be inferred from her qualifications, her senior position, the role she played within ABC and the size of the acquisition. 129Paragraph 54 asserts that the Leapfrog acquisition was a matter that may materially affect ABC's future performance and impact on its financial results, was a material contract in contemplation and was a significant acquisition and capital expenditure to which ABC was giving "serious consideration". 130Paragraph 55 asserts that the 3rd defendant (and ABC, Groves and Black) did not disclose the proposed Leapfrog Acquisition at any time prior to 13 August 2007.

RMC restructuring charges and wage increases 131The pleadings in paragraphs 56-60 and 61-65 adopt a similar pattern and relate respectively to a restructuring and unwinding of ABC's Regional Management Companies ("RMC's") and reductions in its EBIDTA resulting from increases in its expenses for wages and on-costs. 132Again, it is alleged (in [58] and [63]) that these were matters in relation to which knowledge in the 3rd defendant can be inferred from her qualifications and position and the significance of the restructuring and wage increases. Again, it is alleged that these were matters that may affect ABC's future performance etc. Again, it is alleged that the matters particularised were not disclosed by the 3rd defendant.

The allegations of falsity and the pleading against the 3rd defendant 133From paragraph 67 to 72 the FASOC asserts, in respect of each of the six representations pleaded at paragraph 33, that the representation is false. This part of the FASOC is under the sub-heading "Contraventions of the Corporations Act and ASIC Act by ABC learning, Groves, Bowman and Black in relation to the ABC notes issue". The effect of this part of the pleading is to put together the preceding two parts of the pleading. That is to say, the representations enumerated as 1 to 6 in paragraph 33 are "falsified" by reference to the various acquisitions, contracts and accounting treatment of the contracts set out in the FASOC from paragraph 35-65. It is in the following terms: "CONTRAVENTIONS OF THE CORPORATIONS ACT AND ASIC ACT BY ABC LEARNING, GROVES, BANNAN AND BLACK IN RELATION TO THE ABC NOTES ISSUE 66. The conduct of each of ABC Learning, Groves, Bannan and Black pleaded in paragraphs [35] to [65] above was conduct:- (a) in relation to a financial product or a financial service within the meaning of sub-sections 1041H(1) and (2)(b) of the Corporations Act; and/or (b) in trade or commerce, in relation to financial services within the meaning of s.12DA of the ASIC Act. 67. The First Representation pleaded in paragraph [33(a)] above was false. Particulars Contrary to the first representation, as at 24 May 2007, and at all material times thereafter up to and including 9 July 2007, each of ABC Learning, Groves, Bannan and Black should have disclosed to CommSec and/or the Commonwealth Bank:- (a) the proposed acquisition of the Leapfrog Nurseries Group and its proposed terms; (b) the existence and terms of the Developer Contracts, that fees from developers were being recorded by ABC Learning as revenue in its financial statements and included in ABC Learning's EBITDA calculations, together with the quantum of those fees and impact on ABC Learning's EBITDA calculations; (c) the existence of the New Developers Model and its terms or proposed terms; and (d) the proposed unwinding of the RMC structure and its likely impact on ABC Learning's financial position. 68. The Second Representation pleaded in paragraph [33(b)] above was false. Particulars Contrary to the Second Representation, as at 24 May 2007, and at all material times thereafter up to and including 9 July 2007, each of ABC Learning, Groves, Bannan and Black should have disclosed to CommSec and/or the Commonwealth Bank:- (a) the proposed acquisition of the Leapfrog Nurseries Group and its proposed terms; and (b) the existence of the New Developers Model and its terms or proposed terms. 69. The Third Representation pleaded in paragraph [33(c)] above was false. Particulars Contrary to the Third Representation, as at 24 May 2007, and at all material times thereafter up to and including 9 July 2007, each of ABC Learning, Groves, Bannan and Black should have disclosed to CommSec and/or the Commonwealth Bank:- (a) the proposed acquisition of the Leapfrog Nurseries Group and its proposed terms; (b) the existence of the New Developers Model and its terms or proposed terms; and (c) the proposed unwinding of the RMC structure and its likely impact on ABC Learning's financial position. 70. The Fourth Representation pleaded in paragraph [33(d)] above was false. Particulars Contrary to the Fourth Representation, as at 24 May 2007, and at all material times thereafter up to and including 9 July 2007, each of ABC Learning, Groves, Bannan and Black should have disclosed to CommSec and/or the Commonwealth Bank:- (a) the proposed acquisition of the Leapfrog Nurseries Group and its proposed terms; (b) the existence and terms of the Developer Contracts, that fees from developers were being recorded by ABC Learning as revenue in its financial statements and included in ABC Learning's EBITDA calculations, together with the quantum of those fees and impact on EBITDA calculations; (c) the existence of the New Developers Model and its terms or proposed terms; and (d) the proposed unwinding of the RMC structure and its likely impact on ABC Learning's financial position. 71. The Fifth Representation pleaded in paragraph [33(e)] above was false. Particulars Contrary to the Fifth Representation, as at 24 May 2007, and at all material times thereafter up to and including 9 July 2007, each of ABC Learning, Groves, Bannan and Black should have disclosed to CommSec and/or the Commonwealth Bank, that ABC Learning was likely to experience an increase in wages and on-costs for the calendar year 2007 which might potentially affect the ability of ABC Learning to meet ABC Learning management's EBITDA forecasts over the term of the ABC Notes. 72. The Sixth Representation pleaded in paragraph [33(f)] above was false. Particulars Contrary to the Sixth Representation, wages and on-costs increased by greater than 2% in the period ending 31 December 2008." 134I should interpolate at this point that one of the complaints made by the 3rd defendant concerns the use of the word false. It was submitted on the hearing of the application (T 13-14): "My point at the moment is just to focus on the structure and how this is said to amount ultimately to a false representation because what's alleged here is that each and every of these representations was false. If one's going to plead an allegation of falsity that's capable of meaning a number of things including fraud, including negligently false or including all sorts of things but one of the reasons why the High Court has required precision in this area. If your Honour looks at each of the pleadings from paragraph 66 and following, this is how all the contraventions are pleaded, under the heading "contraventions". So after the introductory paragraph, 66, 67 the first representation was false, the second representation was false, the third, fourth, they're all pleaded in the same way; each of them were false. And then even in the latest suggested amended, or the latest amendment that's sought to be made in 72A was about implied representations, the first opinion representation .... The allegation of breach is that the opinion representation was false your Honour sees that in 72B, and in 72D. Your Honour will see that it's then continued in relation to third opinion representation and the fourth opinion representation and each of them is said to be false. ... So it is the precision in which first of all the representation is articulated, and flowing from that how one articulates what is said to be misleading and deceptive about it. And here when one gets a rolled up allegation of representation followed by a rolled allegation of falsity, and the particulars of falsity first of all ought not be particulars of falsity but leaving aside that question about whether they should be material facts or not the particularity of the falsity doesn't make sense. Its what's said to be false about the representations in each case, and I'll just deal with it by example by the first one, in para 67, it's alleged that the first representation pleaded was false, now it's trite that one has to plead the material facts that make the allegation false so that one can identify the material facts said to amount to the misleading or deceptive conduct but instead of doing so all we get is particulars saying that various things should have been disclosed. Now first of all even if particulars were good enough that is not a particular of why the representation was false. And your Honour the same formula is used throughout each of these pleadings of falsity. First, it's alleged that the representation was false and why was it false, because things should have been disclosed, and that is not a proper pleading of why a representation is false. It doesn't tell us which of the High Court Forrest alternatives is envisaged in the allegation, and it provides no material facts at all as to why that allegation is false." 135The plaintiffs submitted that the use of the word false was not "loaded". It simply means that the representation was not true. I can see nothing in the use of the word false in this part of the pleading that is confusing or ambiguous or liable to cause embarrassment to a defendant attempting to respond to it. 136Further, I can also see no fatal problem with the way in which the plaintiff has particularised the allegation of falsity. It is true that the allegation, oft repeated, that the 3rd defendant failed to disclose various matters appears in the document under the heading "particulars" in circumstances where the particulars attach to the allegation of falsity. It is obviously not, technically, a particular of falsity to assert that the maker of the statement ought to have disclosed something. However, there is nothing contradictory or confusing about this. The plaintiffs' case is straightforward: they allege that the representations were false. The use of the term "particulars" may be inappropriate or unfortunate but the allegation of non-disclosure is simply designed to give some colour to what the plaintiff says that the 3rd defendant (and others) should have done or, perhaps, what they did not do. 137Moving back to the way in which the plaintiffs plead their case in the FASOC, the document was amended following the receipt of submissions by the various defendants. This included, relevantly, the 3rd defendant. 138The 3rd defendant, in written submissions dated 3 September 2014, argued that the various representations pleaded against her were pleaded (incorrectly) as representations of fact. It was submitted that the representations were really opinions about the future impact, materiality and significance of various matters of which issues which the 3rd defendant was aware (see, for example, the submissions at paragraphs 21, 33, 38, 43, 47 and 53). 139Perhaps in deference to that submission, but in any event, the third version of the FASOC included a series of alternatives to the six representations earlier pleaded as representations of fact. In each case the representation is the same but the words "further, or in the alternative, in so far as the 1st representation was an opinion ..." 140The 3rd defendant took me to the case of Forrest v Australian Securities and Investments Commission [2012] HCA 39; 247 CLR 486. The 3rd defendant placed particular reliance on the observations of the High Court from pages 501-502 and noted that the material problem with the case presented by ASIC was said by the High Court to be "no pleaders quibble". The High Court said at [25]-[26]; "This is no pleader's quibble. It is a point that reflects fundamental requirements for the fair trial of allegations of contravention of law. It is for the party making those allegations (in this case ASIC) to identify the case which it seeks to make and to do that clearly and distinctly. The statement of claim in these matters did not do that. Contrary to ASIC's submissions in this court, a case of fraud cannot properly be seen as a 'fallback' claim to be made against the possibility that the party accused of engaging in misleading or deceptive conduct by publishing notices in relation to a financial product may seek to characterise them as statements of opinion, not fact. It is fundamental, and long established, that if a case of fraud is to be mounted, it should be pleaded specifically and with particularity. A pleading of fraud will necessarily focus attention upon what it was that the person making the statement intended to convey by its making. And the pleading must make plain that it is alleged that the person who made the statement knew it to be false or was careless as to its truth or falsity. If an alternative case of misleading or deceptive conduct is to be advanced, it is necessary to identify that claim as separate from the allegation of fraud. And for the purposes of the misleading or deceptive claim the pleader must identify what it is alleged that the impugned statements conveyed to their intended audience. Of course there may be circumstances in which it is appropriate to plead alternative cases of misleading or deceptive conduct or alternative cases of fraud and misleading or deceptive conduct. But it is greatly to be doubted that it will ever be appropriate to pile, one on top of the other, as many alternative allegations as were made in this case. Doing so risks contravention of what, in Gould and Birbeck and Bacon v Mount Oxide Mines Ltd (in liq), Isaacs and Rich JJ said was 'the fundamental principle that no man ought to be put to loss without having a proper opportunity of meeting the case against him' which requires that 'pleadings should state with sufficient clearness the case of the party whose averments they are'." 141The High Court made clear in Forrest v ASIC that a party could not properly rely upon fraudulent misrepresentation as some kind of alternative or fall-back position. That is plainly not the case here. In fact, senior counsel for the plaintiff eschewed any reliance on an allegation that the 3rd defendant was engaged in fraudulent conduct. 142Further, the pleading of the statements in the alternative as statements of fact or statements of opinion seems to me, in the absence of being taken to any direct authority on the subject, to be unobjectionable. This accords with the High Court's comment in Forrest v ASIC at [38] (per French CJ, Gummow, Hayne and Kiefel JJ) that it is not necessary to assume that "what is said must be put in a box marked 'fact' or into a box marked 'opinion'". 143Senior counsel for the 3rd defendant submitted (T 8-9): "Just pausing there, your Honour will observe when we get to the pleading one of problems with it is that the representation conveyed by the words is not pleaded. What is conveyed is the words? The missing step is that what's conveyed by the words which amounts to the representation critical to a proper pleading of a misleading and deceptive conduct claim is the emergence of the representation from the words. Ordinarily it's not precisely the same, sometimes is could be, but ordinarily it's not precisely the same. Why that's necessary to identify that with precision is because imprecision in that area takes one down different paths when one is considering whether or not that which is conveyed is misleading or deceptive. In particular, the classic is the difference between a matter of fact and a matter of opinion. When we get to it, your Honour will see that the actual words used in the passages that the plaintiff wishes to rely on contained mixed up notions of fact and opinion, and what we don't have is the representation properly pleaded." 144One of the complaints made by the 3rd defendant appeared to be that the plaintiffs had failed to identify with sufficient particularity the facts upon which their case was mounted. It was submitted that the plaintiffs are required to distinguish between representations that are facts and representations that are opinions. The failure to do so results in confusion over precisely what the representation is that the plaintiffs alleging. The plaintiffs responded by saying in effect that their reliance on the alternative opinion representations as they are styled in the document was to protect them from a submission at the final hearing that the representations initially alleged (which were couched as representations of fact) were in fact no more than opinions. 145I am unable to conclude that there is any real flaw or significant defect in a pleading that asserts alternatives in the way that the current version of the FASOC does. That is particularly so given the approach taken by the 3rd defendant in its submissions in support of the application for summary dismissal or strikeout of the entirety of the plaintiffs' amended statement of claim. 146The 3rd defendant went on to rely upon the observations at paragraph 36 in Forest v ASIC concerning the need for the pleading to "identify the intended audience for the impugned statements and the message or messages conveyed to the audience." The 3rd defendant submitted, based on the decision in Forrest v ASIC, that it was necessary for the plaintiffs to articulate with greater precision what the representations were and that this must be something beyond the mere words of the representation itself. 147The plaintiffs contend that where the words of the representation are plain on their face, there is no reason in law (or proper pleading practice) to articulate further the meaning that was meant to be conveyed to the audience. 148I accept the plaintiffs' submission. Where the words of a representation (whether it be couched as a fact or an opinion) are clear and apparent on their face, such that the message to be conveyed to the audience is clear and unambiguous, it is unnecessary and may be unhelpful for the pleading to attempt to improve upon the words relied upon and evidenced in a relevantly clear document. 149I do not accept this part of the 3rd defendant's complaint.

Inferring knowledge (awareness) on the part of the 3rd defendant 150At various points in its written submissions the 3rd defendant asserted that it was "self-evidently" wrong to assert, as the plaintiffs assert, that Ms Bannan's senior position in the company, her qualifications and her role gives rise to an inference of knowledge on her part. 151For example, it was said at paragraph 24 of submissions dated 3 September 2014: "As noted above the pleading of knowledge is based on an inference purportedly drawn from Ms Bannan's position as Company Secretary and General Counsel. It is self-evident that this position is no basis from which to infer that Ms Bannan had actual knowledge of the EBITDA, the impact of the proposed leapfrog nursery group acquisition, even assuming that she knew about the proposed acquisition and its likely cost.." 152Similarly, it is said in paragraph 50(a) that the allegation that wages and costs of ABC were likely to be monitored by Ms Bannan in her position as Company Secretary and General Counsel "only has to be stated to be rejected". 153The plaintiffs placed some reliance on Shafron v ASIC [2012] HCA 18; 247 CLR 465. The 3rd defendant replied by saying that Shafron v ASIC was a case decided on its facts and that the plaintiffs could draw little comfort from the outcome in that case. As to this, see paragraph 13 (French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ). There is no doubt that Shafron v ASIC depended on the evidence at the trial. Nevertheless, the joint judgment noted at [20]: "In this case, Mr Shafron's responsibilities were found by both the primary judge and the Court of Appeal to have included the tendering of relevant advice (including legal advice) about disclosure requirements. As the Court of Appeal rightly said: 'A company secretary with legal background would be expected to raise issues such as potential misleading statements (in relation to the draft ASX announcement) and disclosure obligations (in relation to the DOCI) with the board. Ordinarily it might not be the same with respect to a matter such as the JHIL cash flow modelling, which required particular expertise. But Mr Shafron had a quite close involvement with the cash flow modelling, and raising the limitations of the cash flow model [based on the material Mr Shafron had obtained from Trowbridge] is by no means a legal matter for the attention of general counsel; the involvement, and raising the limitations, in our view fell within Mr Shafron's responsibilities as company secretary.' (Emphasis added [by the High Court]) That is, Mr Shafron's 'responsibilities within the corporation' extended to the several subjects identified. Once it was found that his responsibilities extended to those subjects, the question became whether Mr Shafron undertook those responsibilities with the requisite degree of care and diligence." 154It may be that the 3rd defendant is correct and that the plaintiffs' position in relation to the proper inferences to be drawn from the 3rd defendant's qualifications, position and presumed knowledge of the company's affairs as company secretary and general counsel is not a strong one. I make no finding on that subject. However, it is not an untenable position for the plaintiff to hold. It is not a hopeless case. It may be that further evidence is acquired to support the inference of knowledge. It is not for the plaintiffs, at this stage of proceedings, to set out every piece of evidence upon which it may seek to rely at the final hearing of the matter to determine whether or not the 3rd defendant's position, experience, qualifications and role within the company properly give rise to an inference of knowledge and/or awareness of relevant matters. 155For example, until a defence is filed in the case, the plaintiffs do not know whether the 3rd defendant acknowledges that she knew, for example, of the acquisition of the Leapfrog business in the United Kingdom and its cost in the multiple tens of millions of pounds. Nor is it known whether or not she will admit or deny awareness of other aspects of ABC's affairs which form the basis of the falsification of the representations asserted against her. If she admits knowledge, the plaintiffs will not have to prove them. If she denies that she was aware of those matters, the plaintiffs will need to satisfy the trial judge that she had such awareness. It is simply too early to tell.

Conclusion in relation to the third defendant 156On a fair reading of the FASOC as it affects the 3rd defendant, I am unable to conclude that there is no reasonable or arguable cause of action against her. Nor can I come to the conclusion based on the material before me that the case against her is untenable, hopeless or destined to fail. What is asserted is that she made a number of representations that were false. Whether or not the plaintiffs can sustain those allegations at the final hearing will be a matter to be determined by the trial Judge. I am not persuaded that the case is one where the plaintiffs should be denied the opportunity of pursuing the ordinary interlocutory processes, receiving the benefit of the defendant's defence and conducting their case at a full and final hearing in the usual way. 157The introductory remarks to the management questionnaire make it plain to a person charged with the responsibility of completing it that the answers would form part of the plaintiffs' decision making process as to whether to invest a considerable sum of money in ABC's notes issue. It is an important document and answers provided in it were important to decisions to be made by not only the plaintiffs but potentially other investors. 158For the foregoing reasons I have reached the view that the plaintiffs' action against the 3rd defendant ought not be summarily dismissed. The case against her cannot properly be described as untenable or hopeless or destined to fail or any of the other formulations of words which have been used in the decided cases. The plaintiffs should not be denied the opportunity to present their case at a final hearing. 159Nor am I of the view that the pleading against the 3rd defendant is so deficient that it should be struck out pursuant to part 14.28 of the UCPR. In my opinion, a reasonable course of action is disclosed and nothing in the pleading has a tendency to cause prejudice, embarrassment or delay in the proceedings. 160I return to the method by which the falsity of the representations is pleaded but now in the context of the 3rd defendant's application that the pleading be struck out. The relevant pleadings are at paragraph 67 (the first representation), paragraph 68 (the second representation), paragraph 69 (the third representation), paragraph 71 (the fifth representation) and paragraph 72 (the sixth representation) of the FASOC. 161The complaint is that the facts stated in the pleading constitute no more than a bare assertion that the allegation is false. The particulars then provided do no more than set out various things the plaintiffs assert that the 3rd defendant (and others) "should have disclosed". A particular example is paragraph 67 (also set out above) which is in the following terms and relates to the 1st representation: "67. The First Representation pleaded in paragraph [33(a)] above was false. Particulars Contrary to the first representation, as at 24 May 2007, and at all material times thereafter up to and including 9 July 2007, each of ABC Learning, Groves, Bannan and Black should have disclosed to CommSec and/or the Commonwealth Bank:- (a) the proposed acquisition of the Leapfrog Nurseries Group and its proposed terms; (b) the existence and terms of the Developer Contracts, that fees from developers were being recorded by ABC Learning as revenue in its financial statements and included in ABC Learning's EBITDA calculations, together with the quantum of those fees and impact on ABC Learning's EBITDA calculations; (c) the existence of the New Developers Model and its terms or proposed terms; and (d) the proposed unwinding of the RMC structure and its likely impact on ABC Learning's financial position." 162The same form of pleading is adopted in respect of the second, third and fifth representation (see above). 163The plaintiffs submit that there is nothing wrong with this form of pleading. It submits that the essential fact that needs to be - and is - alleged in the statement of claim is the falsity of the representation in question. Thus, in respect of paragraph 67, the allegation is clear. It is that the representation "that [the 3rd defendant] was not aware of any issues that may materially affect ABC's future performance" was not true or, as it is put, false. The particulars, which assert that the relevant defendants should have disclosed the 4 nominated matters, provides some elaboration on the bare and simple allegation that the representation in question was false. 164Neither party has taken me to any authority directly on point. That is, neither party has pointed me to an authority establishing that any more needs to be said other than that the representation in question is false. 165While it may be thought that the method of pleading is inelegant and perhaps even clumsy, the meaning of the pleading is clear and puts the defendant on notice of the case that the plaintiffs intend to mount. That is, putting aside matters of reliance and damages, the plaintiffs will assert that: The 3rd defendant made the representation (that the 3rd defendant was not aware of any issue that may materially affect ABC's future performance). That representation was not true. The reason it was not true was that there were four material matters of which the 3rd defendant was aware that establish that the representation was not true. Those matters are the proposed acquisition of the Leapfrogs nursery group, the existence and terms of the development contracts and the method by which those matters were recorded in the accounts, the existence of the new development model, the proposed unwinding of the RMC structure and, in each case, the impact that those matters may have on the future performance of ABC. The 3rd defendant did not disclose these matters. 166I can see no confusion in what it is that the plaintiffs assert against the 3rd defendant. I can see no reason why the 3rd defendant would not be able to understand the nature of the case against her. In answering the statement of claim it is open to her to assert for example (if it be her case) that: She was not aware of any issue that may materially affect ABC's future performance. The representation was not false. She was not aware of the proposed acquisition of the Leapfrog nurseries group. She was not aware of the proposed terms of that acquisition. She was not aware of the existence and terms of the developer contracts or their treatment in the financial reports; She was not aware of the existence of the new developers model. She was not aware of the proposed unwinding of the RMC structure. She was not aware of the wage increases. That those matters were not material in the relevant sense. That she was not aware of the impact of those matters on the future performance or financial position of ABC. 167The same process of reasoning applies to the manner in which the falsity of representations 2, 3 and 4 are pleaded. 168I am fortified in that view by the approach to pleadings taken in cases such as ASIC v Adler & 4 Ors [2002] NSWSC 171; 168 FLR 253. In that case Santow J applied the observations of Von Dousa J in Beach Petroleum v Johnson [1991] FCA 839; 105 ALR 456: "A strict distinction between material facts and particulars has tended to become more obscured as the years have gone by. The tendency now is towards narrative pleadings as there is a growing concern that pleadings according to traditional rules do not adequately make known to the court and to the parties the nature of the opposing cases in complex matters. ... Technical objections raised to pleadings on the ground of alleged want of form will be received with less enthusiasm today than in times past. Nevertheless the pleadings, including particulars stated therein, must be adequate to disclose the case which the opposing party must meet at trial, and to disclose a reasonable cause of action." 169The plaintiffs also relied on the following observations of Mansfield J in Guglielman v Trescowthick [2004] FCA 326 at [6]-[8]: "In Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 at 286, Mason CJ and Gaudron J said: 'The function of pleadings is to state with sufficient clarity the case that must be met. In this way, pleadings serve to ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her and, incidentally, to define the issues for decision.' (Reference omitted.) I have adopted that approach in my consideration of the respective contentions. Weinberg J in McKellar v Container Terminal Management Services Ltd (1999) 165 ALR 409; [1999] FCA 1101 at 417-421; [20]- [32], has considered the provisions of O 11 of the Federal Court Rules and discussed the recent decisions dealing with O 11. I gratefully adopt his Honour's analysis of those cases. I will not repeat it. I think the end result is that the statement of claim must plead the facts necessary for the purpose of making out a complete cause of action. It will not be sufficient simply to plead a conclusion in terms of a statutory provision, or a conclusion drawn from unstated facts. Otherwise, the factual issues for trial will not be identifiable. On the other hand, in considering the adequacy of the pleaded facts, the Court adopts a sensible and robust approach. It will not be concerned with technical or minor criticisms, but whether the pleading does adequately identify for the other party the material facts which, if proved, will establish the cause of action relied upon. Whether the generality of a pleading results in the fundamental function of pleadings not being served is a matter to be addressed in each case. Whether a pleading should be struck out depends upon whether, in the particular circumstances, it is necessary to do so in the interests of justice. If the object of pleadings is sufficiently met, the striking out of the pleading will be unnecessary."

Failure to plead an awareness of the materiality 170The 3rd defendant also complains about the way in which the plaintiffs plead its cause of action in relation to what might be called "materiality". 171An example of a relevant part of the FASOC is paragraph 40-41. The 3rd defendant contends that, while paragraph 40 asserts that the existence of the developer contract and the accounting treatment of those contracts was an issue that may have materially affected ABC's future performance and its results for the relevant financial years, it is not pleaded that the 3rd defendant was aware of that fact. The FASOC does not make clear whether the plaintiffs assert that the 3rd defendant was aware that the information was material or had the capacity materially to affect ABC's future performance and results. The plaintiffs submitted that it was not incumbent upon them to do so. However, senior counsel indicated that if required to do so, it would consider whether it could properly assert knowledge of materiality on the part of the 3rd defendant. 172I initially misunderstood the 3rd defendant's submission to be that knowledge on the part of the defendant as to the materiality was an essential part of the proofs required for the plaintiffs to sustain the various causes of action asserted in the FASOC. Senior counsel for the plaintiffs disabused me of that misapprehension, assuring me that it was not necessary for the plaintiffs to establish such knowledge in order to sustain any of the causes of action it seeks to pursue. He provided me with the authority of Yorke v Lucas [1985] HCA 65; 158 CLR 661 at 661 and 675. 173I did not understand counsel for the 3rd defendant in their submissions in reply to contend otherwise. However, counsel for the 3rd defendant maintained that it was necessary in the circumstances of the present case to clarify precisely what state of knowledge is alleged and the basis upon which the plaintiff asserted that the 3rd defendant had that state of knowledge. This arises from the nature of the introductory remarks to the management questionnaire. I have set this out above but the critical passage from the 3rd defendant's point of view are the words "to your knowledge and belief". The submission also appears to be related to the 3rd defendant's complaint about the confusion arising from the lack of rigour with which the plaintiffs plead the representations; that is, are they opinions or representations of fact and what precise representation is the plaintiff asserting? 174I accept this part of the 3rd defendant's submission. In the circumstances of the case and because of the nature of the pleading and the factual material upon which it is based, the plaintiffs' pleading should clearly state the state of knowledge that it asserts in relation to the 3rd defendant. 175Accordingly, leave to file the FASOC will be conditional upon the plaintiffs pleading the fact or facts upon which they rely on in relation to the 3rd defendant's state of knowledge in respect to materiality. 176I accept, at least in this respect, that this is not what was described in Forrest v ASIC as a "mere pleading quibble". The plaintiffs should make clear whether they assert that the 3rd defendant knew or was aware that the relevant information was material, whether it asserts "recklessness" as to that issue or whether it will run its case on some other basis.

Agreed deficiencies in the pleading in relation to the 3rd defendant 177In the course of oral submissions, senior counsel for the plaintiffs conceded that the fourth representation articulated in paragraph 33(d) could not properly be made against the 3rd defendant because it derived from an answer in the management questionnaire that was specifically directed to another officer of the company (T 21). Accordingly the plaintiffs agree that prior to filing the FASOC it would need to delete references to Ms Bannan in so far as the FASOC relates to the 4th representation. Accordingly the FASOC will need to be amended in at least the following respects:

• Paragraph 33(d) will have to make clear that the 4th representation is not pressed as a representation made by the 3rd defendant.
• Paragraph 70 will have to be amended to delete the reference in the particulars to the 3rd defendant.
• Sections of paragraphs 72(G) and 72(H) will need to be amended to remove reference to the 3rd defendant and the assertion that she made the representation therein alleged. 178I will rely on the parties to agree upon the relevant parts of the FASOC which require amendment and the form that those amendments will take.

Leave to file the FASOC against the 3rd defendant 179It follows from the foregoing analysis that I propose to grant leave to the plaintiffs to file and rely on the further amended statement of claim. 180Such leave will be conditional upon the version of the FASOC provided on 16 October 2014 being further refined to reflect concessions made in the course of argument and in accordance with these reasons.

THE FIFTH TO EIGHTH DEFENDANTS 181The issues raised by to the 5th to 8th defendants have some common elements with those raised by the 3rd defendant. I will attempt not to repeat my reasoning where those issues are common. 182Mr Dick SC and Mr Barnett appeared for each of the 5th to 8th defendants and neither they, nor counsel for the plaintiffs, suggested that there was any matter that would distinguish my treatment of any of them. For example, no submission was made that the 5th defendant was in any different position on the basis that she was the one who actually signed the relevant directors' declaration.

The substance of the case against the 5th to 8th defendants 183The case that the plaintiffs plead against the 5th to 8th defendants is based on different representations and upon different documents to those alleged against the 3rd defendant. However, some of the factual matters that the plaintiffs rely upon to establish the falsity of the representations are the same as those relied upon in respect of the 3rd defendant. 184In essence, the plaintiffs rely upon the fact that each of the 5th to 8th defendants made a declaration in relation to the end of year financial statements for 30 June 2006 and the mid-year financial statements for the period ending 31 December 2006. 185As has been seen from the chronology and analysis of the case against the 3rd defendant, those financial statements were subsequently adjusted. The adjustment occurred after the plaintiffs had advanced the $600 million to ABC to underwrite (and sub-underwrite) the notes issue. The adjustments to the accounts were announced to the ASX after the notes issue. 186The director's declaration in each instance is contained in the plaintiffs' bundle (at 524 and 595 respectively). In each case it is in the following terms: "Directors' Declaration In the Directors' opinion: (a) the financial statements and notes set out on pages 40 to 97 are in accordance with the Corporations Act 2001, including: (i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and (ii) giving a true and fair view of the Company's and Group's financial position at 30 June 2006 and of its performance, as represented by the results of their operations, changes in equity arid their cash flows, for the financial year ended on that date; and (b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; (c) the audited remuneration disclosures set out on pages 27 to 34 of the Directors' Report comply with Accounting Standards AASB 124 'Related Party Disclosures' and the Corporations Regulations 2001. The Directors have been given the declarations by the chief executive officer and chief financial officer required by section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of the Directors. On behalf of the Directors, Sally Atkinson AO, Chairman Edmund S Groves, Director"

The case pleaded against the 5th to 8th defendants 187One of the complaints made by the 5th to 8th defendants is that the ASOC (and the first version of the FASOC) pleaded the representations as one of fact whereas the directors' declaration is self-evidently an opinion. In the current (3rd) version of the FASOC, the plaintiffs have pleaded an alternative case in which the representation is pleaded as an opinion. To understand my conclusions it is necessary to set out the relevant part of the FASOC (in its present form) in full: "FINANCIAL YEAR ENDING 20 JUNE 2006 ANNOUNCEMENTS The FY06 Financial Report 75. On 29 September 2006 ABC Learning made and lodged with the ASX its FY06 Financial Report. 76. On 29 September 2006 and at all material times until about 31 July 2008 ABC Learning represented that the consolidated financial statements for the year ended 30 June 2006 in the FY06 Financial Report were prepared in compliance with: (a) Australian Accounting Standards; and (b) ABC Learning's obligations under the Corporations Act, (FY06 Financial Report Representation). Particulars The FY06 Financial Report Representation was partly express and partly implied; insofar as it was express it was made in writing on page 36 in the FY06 Financial Report, insofar as it was implied it was implied by reason of the obligation imposed on ABC Learning by section 296 of the Corporations Act. 77. On 29 September 2006 and at all material times until about 31 July 2008, Atkinson, Groves, Le Neve Groves, Kemp, Bessemer, Ryan and Anthony represented that: (a) the financial statements and notes set out on pages 37 to 120 of the FY06 Financial Report were in accordance with the Corporations Act 2001,including: - (i) Complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and (ii) Giving a true and fair view of the consolidated entity's financial position as at 30 June 2006 and of its performance, as represented by the results of its operations, changes in equity, and its cash flows, for the financial year ended on that date; - (the FY06 Directors' Accounts Representation) Particulars The FY06 Directors' Accounts Representation was made in writing on page 369 of the FY06 Financial Report. (b) insofar as the FY Directors' Accounts Representation was an opinion (i) the opinion was held on a reasonable basis and was the product of the application of reasonable care and skill by the relevant director; (ii) the opinion was a matter to which the relevant director had turned his or her mind, having informed himself or herself as to the financial affairs of the company to the extent necessary to form an opinion as to the truth and fairness of the accounts; (iii) the opinion was formed after the relevant director had read and understood the financial statements and considered whether the financial statements were consistent with his or her own knowledge of ABC Learning's financial position, and (iv) the opinion was formed after the relevant director had taken a diligent and intelligent interest in the information available to him or her or which he or she might with fairness have demanded from the executives or other employees and agents of ABC Learning(collectively, the Implied FY06 Directors' Accounts Representations). Particulars The Implied FY06 Directors' Accounts Representations were implied by reason of (i) the making of the FY06 Directors' Accounts Representation and the terms of that representation, (ii) the terms of the FY06 Financial Report, and (iii) the obligations imposed on company directors in relation to the preparation of financial reports under chapter 2M of the Corporations Act and as interpreted by the courts 78. On 29 September 2006 and at all material times until about 31 July 2008, ABC Learning represented that as at 30 June 2006 (a) its net operating profit after tax was $81,110,000 (September Profit Representation) (b) its earnings per share were 27.7 cents per share (basic and undiluted) (September Earnings Per Share Representation); its net assets were $1,837,732,000 (September Net Assets Representation) (c) that revenue attributable to the rendering of services for the ABC Group was $592,176,000 (September Revenue Representation),(collectively, the September Representations). Particulars (i) The September Profit Representation was in writing and made in the FY06 Financial Report on page 37. (ii) The September Earnings Per Share Representation was in writing and made in the FY06 Financial Report on page 37 (iii)The September Net Assets Representation was in writing and made in the FY06 Financial Report on page 38 (iv) The September Revenue Representation was in writing and made in the FY06 Financial Report on page 37 The Annual Report 79. On 27 October 2006 ABC Learning lodged with the ASX its Annual Report for the year ended 30 June 2006, which was signed by Sallyanne Atkinson and Edmund Groves on 27 October 2006. 80. On 27 October 2006 and at all material times until about 31 July 2008 ABC Learning represented that the consolidated financial statements for the year ended 30 June 2006 in the Annual Report were prepared in compliance with (a) Australian Accounting Standards, and (b) ABC Learning's obligations under the Corporations Act, (Annual Report Representation) Particulars The Annual Report Representation was partly express and partly implied, insofar as it was express it was made in writing on page 38 of the Annual Report, insofar as it was implied it was implied by reason of the obligation imposed on ABC Learning by section 296 of the Corporations Act. 81. On 27 October 2006 and at all material times until about 31 July 2008 ABC Learning, Atkinson, Groves, Le Neve Groves, Kemp, Bessemer, Ryan and Anthony represented that: (a) as at 30 June 2006: (i) the ABC Group's net operating profit after tax was $81,110,000 (October Profit Representation); (ii) the ABC Group's earnings per share were 27.7 cents per share (basic and undiluted) (October Earnings Per Share Representation); (iii) the ABC Group's net assets were $1,837,732,000 (October Net Assets Representation); (iv) that revenue attributable to the rendering of services for the ABC Group was $592,176,000 (October Revenue Representation), (collectively, the October Representations). Particulars (i) The October Profit Representation was in writing and made in the Annual Report on page 40. (ii) The October Earnings Per Share Representation was in writing and made in the Annual Report on page 40. (iii) The October Net Assets Representation was in writing and made in the Annual Report on page 41. (iv)The October Revenue Representation was in writing and made in the Annual Report on page 40. (b) insofar as the October Representations were opinions expressed by Atkinson, Groves, Le Neve Groves, Kemp, Bessemer, Ryan or Anthony: (i) each opinion was held on a reasonable basis and was the product of the application of reasonable care and skill by the relevant director; (ii) each opinion was a matter to which the relevant director had turned his or her mind, having informed himself or herself as to the financial affairs of the company to the extent necessary to form an opinion as to the truth and fairness of the accounts; (iii) each opinion was formed after the relevant director had read and understood the financial statements and considered whether the financial statements were consistent with his or her own knowledge of ABC Learning's financial position; and (iv) each opinion was formed after the relevant director had taken a diligent and intelligent interest in the information available to him or her or which he or she might with fairness have demanded from the executives or other employees and agents of ABC Learning (collectively, the Implied October Representations). Particulars The Implied October Representations were implied by reason of: (i) the making of the October Representations; (ii) the terms of the Annual Report (particularly the declaration on page 39 of the Annual Report); and (iii) the obligations imposed on company directors in relation to the preparation of annual reports and financial reports under chapter 2M of the Corporations Act and as interpreted by the courts. MISLEADING OR DECEPTIVE CONDUCT - FY06 ANNOUNCEMENTS 82. The making of each of the: (a) FY06 Financial Report Representation; (b) September Representations; (c) Annual Report Representations; and (d) October Representations constituted conduct by ABC Learning: (e) in relation to a financial product or a financial service within the meaning of s.1041H(1) of the Corporations Act; Particulars The conduct was "in relation to a financial product or a financial service" because it consisted of communications made to the ASX for announcement to the market concerning the financial performance of a listed public company, in circumstances where it was reasonably likely that the announcements would be relied upon by persons dealing or seeking to deal with the company's shares or other financial products issued by or in relation to the company (such as, without limitation, the subordinated reset convertible notes that are the subject of this claim). (f) in trade or commerce, in relation to financial services, within the meaning of s.12DA(1) of the ASIC Act; or Particulars The conduct was "in relation to financial services" because it consisted of communications made to the ASX for announcement to the market concerning the financial performance of a listed public company, in circumstances where it was reasonably likely that the announcements would be relied upon by persons dealing or seeking to deal with the company's shares or other financial products issued by or in relation to the company (such as, without limitation, the subordinated reset convertible notes that are the subject of this claim). (g) in trade or commerce within the meaning of s.52 of the Trade Practices Act 1974 (Cth) ("TPA"). 83. The making of each of the: (a) FY06 Directors' Accounts Representations; and (b) Implied FY06 Directors' Accounts Representations; (c) October Representations; and (d) Implied October Representations by Atkinson, Groves, Le Neve Groves, Kemp, Bessemer, Ryan and Anthony constituted conduct: (e) by a person in relation to a financial product or a financial service within the meaning of s.1041H(1) of the Corporations Act; Particulars The plaintiffs repeat the particulars to subparagraph 82(e) above. (f) by a person in trade or commerce, in relation to financial services, within the meaning of s.12DA(1) of the ASIC Act. Particulars The plaintiffs repeat the particulars to subparagraph 82(f) above. (g) by a person in trade or commerce within the meaning of s 52 of TPA as extended by ss.6(2) and 6(3) of the TPA; Particulars The conduct included conduct: (a) involving the use of telegraphic or telephonic services; and (b) in the course of or in relation to trade and commerce among the States or between a State and a Territory; by reason that the FY06 Directors' Accounts Representations and the October Representations were made in an Annual Report that was communicated to the ASX (as alleged in paragraph 79 above) and published electronically by the ASX on its website (and thereby and available throughout Australia), and concerned the financial performance of a company (ABC Learning) that carried on business throughout Australia, in circumstances where Atkinson, Groves, Le Neve Groves, Kemp, Bessemer, Ryan and Anthony were aware or ought to have been aware that the representations would be so communicated and published. Further particulars will be provided after disclosure, including in relation to the method by which the Annual Report containing the FY06 Directors' Accounts Representations and the October Representations was (i) communicated to the ASX; and (ii) otherwise disseminated by ABC. (h) by a person in trade or commerce within the meaning of s.4238 of the Fair Trading Act (NSWQld) 19879 ("FTA"). Particulars The FTA applied by reason of the terms of ss 5A(1) and 5A(2) of the FTA (as it stood at all material times after 20 October 2006) and because the making of the FY06 Directors' Accounts Representation and the October Representations was: (i) conduct that affected persons in NSW, by reason that the representations were made in the Annual Report of a public company listed on the ASX and were likely to be relied on by persons in NSW; (ii) conduct in connection with services supplied in NSW, by reason that they were made in the Annual Report of a company that at all material times conducted business in NSW; and (iii) conduct that has resulted in loss or damage in NSW, being the loss or damage pleaded in paragraphs 121 and 122 below, which occurred in NSW by reason that the plaintiffs operate and have assets in NSW. 84. By reason of the accounting treatment of the developers fee referred to in paragraphs [37] to [38] and 123 Careers referred to in paragraphs [46B] to [48]: (a) the consolidated financial statements for the year ended 30 June 2006 in the FY06 Financial Report and the Annual Report contained overstatements, including in respect of: (i) net profit after tax; (ii) earnings per share; (iii) EBITDA; (iv) revenue; (v) net assets. Particulars Particulars to be provided after disclosure. (b) The September Representations were false in that they contained overstatements, including in respect of: (i) net profit after tax; (ii) earnings per share; (iii)net assets; (iv)revenue; (c)The October Representations were false in that they contained overstatements, including in respect of: (i) net profit after tax; (ii) earnings per share; (iii) net assets; (iv) revenue; 85. The consolidated financial statements for the year ended 30 June 2006 in the FY06 Financial Report were not prepared in compliance with. (a) Australian Accounting Standards; and (b) ABC Learning's obligations under the Corporations Act. Particulars The consolidated financial statements were not prepared in accordance with AASB 1004 and section 296 of the Corporations Act in that, contrary to AASB 1004 the financial statements did not disclose the matters referred to paragraphs in paragraphs [37] (Developer Contracts) and [46B] (123 Careers). 86. The consolidated financial statements for the year ended 30 June 2006 in the FY06 Financial Report were not in accordance with the Corporations Act 2001, in that they did not: (a) comply with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and (b) give a true and fair view of the consolidated entity's financial position as at 30 June 2006 and of its performance, as represented by the results of its operations, changes in equity, and its cash flows, for the year ended on that date. Particulars The consolidated financial statements were not prepared in accordance with AASB 118 and section 296 of the Corporations Act in that, contrary to AASB 118 the financial statements did not disclose the matters referred to in paragraphs [37] (Developer Contracts) and [46] (123 Careers), and, for the reasons set out in paragraph [84] did not give a true and fair view of the consolidated entity's financial position as at 30 June 2006 and of its performance for the year ended 30 June 2006. 87. The consolidated financial statements for the year ended 30 June 2006 in the Annual Report were not prepared in compliance with: (a) Australian Accounting Standards; and (b) ABC Learning's obligations under the Corporations Act. Particulars The plaintiffs repeat the particulars to paragraph [86]. 87A. By no later than 26 September 2006 and at all material times thereafter, Atkinson, Groves, Le Neve Groves, Kemp, Bessemer, Ryan or Anthony ought have been aware, after properly informing himself or herself and making proper enquiries, and applying his or her own knowledge of the ABC Group's business and financial position: (a) of the existence of the Developer Contracts and the material terms of those contracts; (b) that fees received by ABC Learning from developers pursuant to the Developer Contracts were recorded by ABC Learning as revenue in ABC Learning's FY06 financial statements and were included in ABC Learning's EBITDA calculations; and Particulars In respect of subparagraphs (a) and (b) above: (i) Before giving an opinion that the FY06 consolidated financial statements were complaint and true and fair, each of Atkinson, Groves, Le Neve Groves, Kemp, Bessemer, Ryan and Anthony was required to take a diligent interest in and have the ability to understand the FY06 consolidated financial statements, to inquire about any potential deficiency in the financial statements, inform himself or herself of conventional accounting practice and the relevant accounting standards, and apply his or her own knowledge of the ABC Group's business and financial position. (ii) Each of Atkinson, Groves, Le Neve Groves, Kemp, Bessemer, Ryan and Anthony had accounting or business and management qualifications and/or substantial experience acting as a director of major companies, as set out in the FY06 Financial Report at pp 6-9 and the Annual Report at pp 14-15, and in the case of Bessemer and Ryan, were Certified Practising Accountants with significant experience. (iii) During the year ended 30 June 2006, each of Atkinson, Bessemer and Ryan were members of ABC Learning's Audit Committee, which was responsible for reviewing the integrity of ABC Learning's financial reporting and overseeing the independence of ABC Learning's external auditors, Pitcher Partners (Annual Report, p 20). (iv) Anthony was a member of ABC Learning's Audit Committee at all material times from August 2006 (Annual Report, p 20). (v) During the year ended 30 June 2006, each of Le Neve Groves, Bessemer and Kemp was a member of the Risk Management Committee, the duties and responsibilities of which included assessing the internal processes for determining and managing key risk areas, particularly non-compliance with law, regulations, standards and best practice guidelines, and meeting periodically with internal and external auditors (Annual Report, pp 21-22). (vi) Atkinson, Ryan and Anthony were independent Non-Executive Directors who were held out in ABC Learning's Annual Report as being in a position to ensure that ABC Learning complied with all of its statutory and other legal obligations, and Bessemer was held out in ABC Learning's Annual Report as being a founding director whose experience and knowledge of ABC Learning made his contribution to the Board such that it was appropriate for him to remain on the Board (Annual Report, p 18). (vii) The developers' fees recorded as revenue in the FY06 consolidated financial statements made up a substantial proportion of the profit from continuing operations recorded in those financial statements, being $57.4 million in the context of reported profit from continuing operations of $81.1 million. (c) that the fees received by ABC Learning from developers pursuant to the Developer Contracts should not have been recorded by ABC Learning as revenue in ABC Learning's FY06 consolidated financial statements or have been included in ABC Learning's EBITDA calculations. Particulars (i) The plaintiffs repeat the particulars to subparagraphs (a) and (b) above and repeat paragraphs 37 to 38 above. (ii) Had each of Atkinson, Groves, Le Neve Groves, Kemp, Bessemer, Ryan and Anthony taken a diligent interest in the FY06 consolidated financial statements, properly informed himself or herself, made proper enquiries and applied his or her own knowledge of the ABC Group's business and financial position, he or she would have been aware that the developers' fees should not have been recorded as revenue or included in EBITDA but should instead have been accounted for as an adjustment to the consideration payable and in fact paid by ABC Learning to acquire new centres, which adjustment reflected that those centres were newly developed centres, that had not reached target revenue and wage rates, rather than established centres. 87B. By no later than 26 September 2006 and at all material times thereafter, Atkinson, Groves, Le Neve Groves, Kemp, Bessemer, Ryan or Anthony ought have been aware, after properly informing himself or herself, making proper enquiries and applying his or her own knowledge of the ABC Group's business and financial position: (a) of the existence of the 123 Careers Agreement and the material terms of that agreement; (b) that the income received by ABC Learning under the 123 Careers Agreement was recorded as revenue in ABC Learning's FY06 consolidated financial statements and included in ABC Learning's EBITDA calculation on the basis pleaded in paragraph 46B above; and Particulars In respect of subparagraphs (a) and (b) above: (i) The plaintiffs repeat particulars (i) to (vi) to subparagraphs 87A(a) and (b) above. (ii) The plaintiffs repeat particular (vii) to subparagraphs 87A(a) and (b) above, but by reference to the 123 Careers Agreement income instead of the developers' fees, and note that the income received under the 123 Careers Agreement that was recorded as revenue in the FY06 consolidated financial statements was $30 million in the context of reported profit from continuing operations of $81.1 million. (c) that the income received by ABC Learning under the 123 Careers Agreement should not have been recorded as revenue in ABC Learning's financial statements on the basis pleaded in paragraph 46B above, but should instead have been recorded as income over the 10 year term of the 123 Careers Agreement. Particulars (i) The plaintiffs repeat the particulars to subparagraphs (a) and (b) above and repeat paragraphs 46B to 48 above. (ii) Had each of Atkinson, Groves, Le Neve Groves, Kemp, Bessemer, Ryan and Anthony taken a diligent interest in the FY06 consolidated financial statements, properly informed himself or herself, made proper enquiries and applied his or her own knowledge of the ABC Group's business and financial position, he or she would have been aware that the income received by ABC Learning under the 123 Careers Agreement should not have been recorded as revenue or included in EBITDA but should instead have been recorded as income over the 10 year term of the 123 Careers Agreement. 87C. The Implied FY06 Directors' Accounts Representations and the Implied October Representations were false. Particulars The plaintiffs repeat the particulars to paragraphs 87A and 87B above. The opinion that the consolidated financial statements were compliant and true and fair was not an opinion that a person in the position of Atkinson, Groves, Le Neve Groves, Kemp, Bessemer, Ryan or Anthony could have held on a reasonable basis after properly informing himself or herself, making proper enquiries and applying his or her own knowledge of the ABC Group's business and financial position, having regard to (i) the nature of defects in the consolidated financial statements for the year ended 30 June 2006 set out in the FY06 Financial Report and the Annual Report, as pleaded in paragraphs 84 to 87B above and their effect on reported profit; (ii) the terms of the declaration given by Atkinson, Groves, Le Neve Groves, Kemp, Bessemer, Ryan and Anthony on page 36 of the FY06 Financial Report and page 39 of the Annual Report; and (iii) the qualifications of each of each of Atkinson, Groves, Le Neve Groves, Kemp, Bessemer, Ryan and Anthony, the senior positions which each occupied, and the roles which each played within ABC Learning, as set out in the FY06 Financial Report and the Annual Report. Further particulars will be provided following disclosure. 88. By reason of the matters pleaded in paragraphs [82] to [87A] the: (a) FY06 Financial Report Representation; (b) FY06 Directors' Accounts Representation; (c) Implied FY06 Directors' Accounts Representations; (d) September Representations; (e) Annual Report Representation; (f) October Representations; and (g) Implied October Representations, at the time they were each made was misleading or deceptive or was likely to mislead or deceive in contravention of: (h) s.1041H(1) of the Corporations Act; (i) s.12DA(1) of the ASIC Act; (j) s.52 of the TPA; (k) s.4238 of the FTA. HALF YEAR ENDING 31 DECEMBER 2006 ANNOUNCEMENTS Interim Financial Report 89. On 19 February 2007 ABC Learning made and lodged with the ASX its Interim Financial Report for the half year ended 31 December 2006. 90. On 19 February 2007 ABC Learning represented that the consolidated financial statements for the half year ended 31 December 2006 in the Interim Financial Report were prepared in compliance with: (a) Australian Accounting Standards; and (b) ABC Learning's obligations under the Corporations Act, (Interim Report Representation). Particulars The Interim Report Representation was partly express and partly implied; insofar as it was express it was made in writing on page 14 in the Interim Financial Report; insofar as it was implied it was implied by reason of the obligation imposed on ABC Learning by section 296 of the Corporations Act. 91. On 19 February 2007, Atkinson, Groves, Le Neve Groves, Kemp, Bessemer, Ryan and Anthony represented that: (a) the financial statements and notes set out on pages 9 to 23 of the Interim Financial Report were in accordance with the Corporations Act 2001, including:- (i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and (ii) giving a true and fair view of the consolidated entity's financial position as at 31 December 2006 and of its performance, as represented by the results of its operations, changes in equity, and its cash flows, for the half-year ended on that date. (the 1H07 Directors' Accounts Representation) Particulars The 1H07 Directors' Accounts Representation was made in writing on page 8 of the Interim Financial Report. (b)insofar as the 1H07 Directors' Accounts Representation was an opinion: (i)the opinion was held on a reasonable basis and was the product of the application of reasonable care and skill by the relevant director; (ii) the opinion was a matter to which the relevant director had turned his or her mind, having informed himself or herself as to the financial affairs of the company to the extent necessary to form an opinion as to the truth and fairness of the accounts; (iii) the opinion was formed after the relevant director had read and understood the financial statements and considered whether the financial statements were consistent with his or her own knowledge of ABC Learning's financial position; and (iv) the opinion was formed after the relevant director had taken a diligent and intelligent interest in the information available to him or her or which he or she might with fairness have demanded from the executives or other employees and agents of ABC Learning, (collectively, the Implied 1H07 Directors' Accounts Representations). Particulars The Implied 1H07 Directors' Accounts Representations were implied by reason of: (i) the making of the 1H07 Directors' Accounts Representation and the terms of that representation; (ii) the terms of the Interim Financial Report; and (iii) the obligations imposed on company directors in relation to the preparation of financial reports under chapter 2M of the Corporations Act and as interpreted by the courts. 92. On 19 February 2007, ABC Learning represented that as at 31 December 2006: (a)the ABC Group's net operating profit after tax was $61.6million ("February Profit Representation"); (b) the ABC Group's earnings per share were 15.6 cents per share (basic and undiluted) ("February Earnings Per Share Representation"); (c) the ABC Group's net assets were $1,869,854 ("February Net Assets Representation"); (d) that revenue attributable to continuing operations of the ABC Group was $466,236,000 ("February Revenue Representation"), (collectively, the "February Representations"). Particulars (i)The February Profit Representation was in writing and made in the Interim Financial Report on page 2. (ii) The February Earnings Per Share Representation was in writing and made in the Interim Financial Report on page 2. (iii) The February Net Assets Representation was in writing and made in the Interim Financial Report on page 10. (iv) The February Revenue Representation was in writing and made in the Interim Financial Report on page 9. 93. The making of each of the: (a) Interim Report Representation; (b) February Representations, constituted conduct by ABC Learning: (c) in relation to a financial product or a financial service within the meaning of s.1041H(1) of the Corporations Act; (d) in trade or commerce, in relation to financial services, within the meaning of s.12DA(1) of the ASIC Act; or (e) in trade or commerce within the meaning of s.52 of the Trade Practices Act 1974 (Cth) ("TPA"). 94. The making of the 1H07 Directors' Accounts Representations and Implied 1H07 Directors' Accounts Representations constituted conduct by Atkinson, Groves, Le Neve Groves, Kemp, Bessemer, Ryan and Anthony constituted conduct: (a) by a person in trade or commerce within the meaning of s.4238 of the FTA.; (b) by a person in relation to a financial product or a financial service within the meaning of s.1041H(1) of the Corporations Act; (c) by a person in trade or commerce, in relation to financial services, within the meaning of s.12DA(1) of the ASIC Act; (d) by a person in trade or commerce within the meaning of s.52 of TPA as extended by s.6(2) of the TPA. Particulars The plaintiffs repeat the particulars to subparagraphs 83(c)-(f) above. 95. By reason of the accounting treatment of the developers' fees referred to in paragraph [37] to [38], and/or 123 Careers income referred to in paragraphs [46B] to [48]: (a) the consolidated financial statements for the half year ended 31 December 2006 in the Interim Financial Report contained overstatements, including in respect of: (i) net profit after tax; (ii) earnings per share; (iii) EBITDA; (iv) revenue ; (v) net assets. Particulars Particulars to be provided after disclosure. (b)The February Representations were false in that contained overstatements, including in respect of: (i) net profit after tax; (ii) earnings per share; (iii) net assets; (iv) revenue. Particulars Particulars to be provided after disclosure. 96. The consolidated financial statements for the half year ended 31 December 2006 in the Interim Financial Report were not prepared in compliance with: (a) Australian Accounting Standards; and (b) ABC Learning's obligations under the Corporations Act. Particulars The consolidated financial statements were not prepared in accordance with AASB134 and section 296 of the Corporations Act in that, contrary to AASB134 the financial statements did not disclose the matters referred to in paragraphs [37] (Developer Contracts) and [46B] (123 Careers) and, for the reasons set out in paragraph [95] did not give a true and fair view of the consolidated entity's financial position as at 31 December 2006 and of its performance for the half year ended 31 December 2006. 97. The consolidated financial statements for the half year ended 31 December 2006 in the Interim Financial Report were not in accordance with the Corporations Act 2001, in that they did not: (a) comply with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and (b) give a true and fair view of the consolidated entity's financial position as at 31 December 2006 and of its performance, as represented by the results of its operations, changes in equity, and its cash flows, for the half-year ended on that date. Particulars The consolidated financial statements were not prepared in accordance with AASB 134 or AASB 118 and section 296 of the Corporations Act in that, contrary to AASB 134 and/or AASB 118 the financial statements did not disclose the matters referred to in paragraphs [37] (Developer Contracts) and [46B] (123 Careers) and, for the reasons set out in paragraph [95], did not give a true and fair view of the consolidated entity's financial position as at 31 December 2006 and of its performance for the half year ended 31 December 2006. 97A. By no later than 19 February 2007 and at all material times thereafter, Atkinson, Groves, Le Neve Groves, Kemp, Bessemer, Ryan or Anthony ought have been aware, after properly informing himself or herself, making proper enquiries and applying his or her own knowledge of the ABC Group's business and financial position: (a) of the existence of the Developer Contracts and the material terms of those contracts; (b) that fees received by ABC Learning from developers pursuant to the Developer Contracts were recorded by ABC Learning as revenue in ABC Learning's Interim Financial Report and were included in ABC Learning's EBITDA calculations; and Particulars In respect of subparagraphs (a) and (b) above: (i) Before giving an opinion that the Interim Financial Report statements were complaint and true and fair, each of Atkinson, Groves, Le Neve Groves, Kemp, Bessemer, Ryan and Anthony was required to take a diligent interest in and have the ability to understand the financial statements in the Interim Financial Report statements, to inquire about any potential deficiency in the financial statements, inform himself or herself of conventional accounting practice and the relevant accounting standards, and apply his or her own knowledge of the ABC Group's business and financial position. (ii) The plaintiffs repeat (ii)-(vi) of the particulars to paragraph 87A above. (iii) The developers' fees recorded as revenue in the FY06 consolidated financial statements made up a substantial proportion of the profit from continuing operations recorded in those financial statements, being $43 million in the context of reported after tax profit of $61.6 million. (c) that the fees received by ABC Learning from developers pursuant to the Developer Contracts should not have been recorded by ABC Learning as revenue in the financial statements in ABC Learning's Interim Financial Report or have been included in ABC Learning's EBITDA calculations. Particulars (i) The plaintiffs repeat the particulars to subparagraphs (a) and (b) above and repeat paragraphs 37 to 38 above. (ii) Had each Atkinson, Groves, Le Neve Groves, Kemp, Bessemer, Ryan and Anthony taken a diligent interest in the financial statements in the Interim Financial Report, made proper enquiries, properly informed himself or herself and applied his or her own knowledge of the ABC Group's business and financial position, he or she would have been aware that the developers' fees should not have been recorded as revenue or included in EBITDA but should instead have been accounted for as an adjustment to the consideration payable and in fact paid by ABC Learning to acquire new centres, which adjustment reflected that those centres were newly developed centres, that had not reached target revenue and wage rates, rather than established centres. 97B. By no later than 19 February 2007 and at all material times thereafter, Atkinson, Groves, Le Neve Groves, Kemp, Bessemer, Ryan or Anthony ought have been aware, after making proper enquiries, properly informing himself or herself, and applying his or her own knowledge of the ABC Group's business and financial position: (a) of the existence of the 123 Careers Agreement and the material terms of that agreement; (b) that the income received by ABC Learning under the 123 Careers Agreement was recorded as revenue in the financial statements in ABC Learning's Interim Financial Report and included in ABC Learning's EBITDA calculation on the basis pleaded in paragraph 46B above; and Particulars In respect of subparagraphs (a) and (b) above: (i) The plaintiffs repeat particulars (i) to (ii) to subparagraphs 97A(a) and (b) above. (ii) The plaintiffs repeat particular (iii) to subparagraphs 97A(a) and (b) above, but by reference to the 123 Careers Agreement income instead of the developers' fees, and note that the income received under the 123 Careers Agreement that was recorded as revenue in the FY07 consolidated financial statements was $14 million. (c) that the income received by ABC Learning under the 123 Careers Agreement should not have been recorded as revenue in ABC Learning's financial statements on the basis pleaded in paragraph 46B above, but should instead have been recorded as income over the 10 year term of the 123 Careers Agreement. Particulars (i) The plaintiffs repeat particulars to subparagraphs (a) and (b) above and repeat paragraphs 46B to 48 above. (ii) Had each of Atkinson, Groves, Le Neve Groves, Kemp, Bessemer, Ryan and Anthony taken a diligent interest in the financial statements in the Interim Financial Report, properly informed himself or herself, made proper enquiries and applied his or her own knowledge of the ABC Group's business and financial position, he or she would have been aware that the income received by ABC Learning under the 123 Careers Agreement should not have been recorded as revenue or included in EBITDA but should instead have been recorded as income over the 10 year term of the 123 Careers Agreement. 97C.The Implied 1H07 Directors' Accounts Representations were false. Particulars The opinion that the consolidated financial statements were compliant and true and fair was not an opinion that a person in the position of Atkinson, Groves, Le Neve Groves, Kemp, Bessemer, Ryan or Anthony could have held on a reasonable basis after making proper enquiries and applying his or her own knowledge of the ABC Group's business and financial position, having regard to (i) the defects in the consolidated financial statements for the half year ended 31 December 2006 in the Interim Financial Report; (ii) the terms of the declaration given by Atkinson, Groves, Le Neve Groves, Kemp, Bessemer, Ryan and Anthony on page 8 of the Interim Financial Report; and (iii) the qualifications of each of each of Atkinson, Groves, Le Neve Groves, Kemp, Bessemer, Ryan and Anthony, the senior positions which each occupied, and the roles which each played within ABC Learning. Further particulars will be provided following disclosure. 98. By reason of the matters pleaded in paragraphs [95] to [97A] the: (a) Interim Report Representation; (b) 1H07 Directors' Accounts Representation; (c) the Implied 1H07 Directors' Accounts Representations and; (d) the February Representations, at the time they were each made was misleading or deceptive or was likely to mislead or deceive in contravention of: (e) s.1041H(1) of the Corporations Act; (f) s.12DA(1) of the ASIC Act; (g) s.52 of the TPA; (h) s.4238 of the FTA. F. OTHER IMPLIED REPRESENTATIONS IN FINANCIAL STATEMENTS 99. Further or alternatively, during the Relevant Period ABC Learning represented that its financial statements for the year ended 30 June 2006 in the FY06 Financial Report were prepared in compliance with: (a) Australian Accounting Standards; and (b) ABC Learning's obligations under the Corporations Act, (Implied FY06 Financial Report Representation). Particulars The Implied FY06 Financial Report Representation was implied by reason of: (i) the publication by ABC Learning of the financial reports in the financial reports prepared under Chapter 2M of the Corporations Act; and (ii) the obligation imposed on ABC Learning by section 296 of the Corporations Act. 100. Further or alternatively, during the Relevant Period ABC Learning, Groves and/or Atkinson represented that its financial statements for the year ended 30 June 2006 in the Annual Report were prepared in compliance with: (a) Australian Accounting Standards; and (b) ABC Learning's obligations under the Corporations Act, (Implied Annual Report Representation). Particulars The Implied Annual Report Representation was implied by reason of: (i) the publication by ABC Learning of the financial reports in the financial reports prepared under Chapter 2M of the Corporations Act; and (ii) the obligation imposed on ABC Learning by section 296 of the Corporations Act. 101. Further or alternatively, ABC Learning represented that it had told or given the ASX all the information it was required to tell or give under the ASX Listing Rules (Implied Listing Rule Representation). Particulars The representation was implied by reasons of the matters pleaded in paragraph [99] above. 102. The making of: (a) Implied FY06 Financial Report Representation; (b) Implied Listing Rule Representation, constituted conduct by ABC Learning: (c) in relation to financial products, within the meaning of subsections 1041H(1) and (2)(b) of the Corporations Act; and/or (d) in trade or commerce, in relation to financial services within the meaning of section 12DA(1) of the ASIC Act; and/or (e) in trade or commerce within the meaning of section 52 of the TPA. 103. The making of the Implied Annual Representation constituted conduct by ABC Learning, Groves and/or Atkinson: (a) in relation to financial products, within the meaning of subsections 1041H(1) and (2)(b) of the Corporations Act; and/or (b) in trade or commerce, in relation to financial services within the meaning of section 12DA(1) of the ASIC Act; and/or (c) in trade or commerce within the meaning of section 52 of the TPA; and/or (d) in trade or commerce within the meaning of section 4238 of the FTA. 104.The: (a) Implied FY06 Financial Report Representation; (b) Implied Annual Report Representation; were each false. Particulars The consolidated financial statements were not prepared in accordance with AASB 118 and section 296 of the Corporations Act in that, contrary to AASB 118 the financial statements did not disclose the matters referred to paragraphs [36] and [46A] above. 105.The Implied Listing Rule Representation was false. Particulars ABC Learning had not complied with the Listing Rules as it had not disclosed the matters referred to paragraphs [35] to [65] above. 106.By reason of the matters pleaded in paragraphs [99] to [105] the: (a) Implied FY06 Financial Report Representation; (b) Implied Annual Report Representation; (c) Implied Listing Rule Representation, at the time they were each made was misleading or deceptive or was likely to mislead or deceive in contravention of: (d) section 1041H of the Corporations Act; (e) section 12DA(1) of the ASIC Act; (f) section 52 of the TPA; (g) section 4238 of the FTA."

Representations of fact or opinion? 188Each of the representations asserted in that discursive and alternative-ridden exposition of the case that the plaintiffs seek to bring against the 5th to 8th defendants is based upon the directors' declaration for the accounts, returns and reports made for the year ending 30 June 2006 and the half year ending 31 December 2006. In so far as there remains a dispute between the parties as to whether it can properly be said that the declaration contained a statement of fact, as opposed to a statement of opinion, I agree with the submissions made by the 5th through 8th defendants that there is no arguable case in relation to the former proposition. The directors' declarations are, on their face, statements of opinion. Any case brought against the 5th to 8th defendant based on a pleading to the effect that they constituted representations of fact is destined to fail. 189Accordingly, if I am to grant leave to file the FASOC I will do so only on the condition that those allegations against the 5th to 8th defendants in which the pleading asserts that the directors in question made misrepresentations of fact are deleted from the document. 190That would leave a case for the 5th to 8th defendants to answer that the declarations made in the June 2006 and December 2006 accounts represented statements of opinion that, at the risk of oversimplification, (i) carried with them certain implications or inferences as to the basis upon which they were held and (ii) were not held on reasonable grounds or upon a reasonable basis.

Can the plaintiffs succeed on the basis of the directors' declarations? 191However, the 5th to 8th defendants assert that the plaintiffs cannot succeed in bringing such an action against them. Accordingly, either the proceedings should be dismissed or the ASOC should be struck out and I should refuse to allow the filing of the FASOC. 192The 5th to 8th defendant rely on the fact that all they were required to do was to take the advice of the accountants, auditors or CFO and cannot therefore be held responsible for the mistakes (if any) in the accounting treatment of the relevant items pleaded against them. 193I should interpolate that the particular items pleaded against them are the developer contracts and the 123 Careers disclosure, each of which I have described in dealing with the 3rd defendant's application (at [112]-[117] and [121]-[126]). The plaintiffs seek to establish that the accounts were misleading because of the treatment as "income" of receipts which either should have been spread over the ten year term of the agreement or were subject to substantial payments going back to the contracting party. 194The 5th to 8th defendants go on to submit that there is no arguable case that would make a director liable for signing a declaration such as this. They point out that such a declaration is required pursuant to the provisions of ss 292-295 of the Corporations Act. It is submitted that all that they were doing was complying with their statutory obligation and fulfilling their statutory function. The 5th to 8th defendants argue that they did nothing to facilitate the publication of the accounts or the dissemination of the representations contained within them. 195In the course of argument I asked senior counsel for the 5th to 8th defendants whether he could point to any case where there had been an attempt to sue directors on the basis of such declarations and where it had been held that such a cause of action, based on such a declaration, was not available. Senior counsel was unable to take me to any such case. 196Equally, senior counsel for the plaintiff did not point me to any case where a director had been held liable on the sole basis of a declaration on financial reports such as the ones relied upon here. 197The 5th to 8th defendants submit that the absence of any authority is indicative of the fact that seeking to make the directors liable for such a declaration is untenable. 198I am unable to draw a conclusion from the absence of decided authority, or the inability of counsel to point me to such an authority, as determinative one way or another. The plaintiffs rely on the decision of Middleton J in ASIC v Healy [2011] FCA 717; 196 FCR 291. I was also taken to ASIC v Narain [2008] FCAFC 120; 169 FCR 211. Neither of those cases are precisely on point, and both parties seek to take comfort from various aspects of those decisions. 199In ASIC v Healy, Middleton J made the following observations: "206. Further, it may well be that directors should have a degree of accounting literacy that requires a knowledge of accounting practice and accounting standards. That is not for decision in this proceeding. All that is being alleged is that where the accounts on their face refer, as here, to classification of debt and post balance date events, the director adopting and approving the accounts should have a knowledge of and apply the basic elements of the one or two standards relevant to this proceeding. ...... 240. In relation to this submission I make the following observations: (a) ASIC does not allege that the non-executive directors need to personally scrutinise each line of the financial statements as suggested. What is pleaded and contended for by ASIC is that having a sufficient knowledge of conventional accounting practice to enable a director to carry out his or her responsibility, each director had to read and understand the financial statements, and then giving consideration to those financial statements with each director's accumulated knowledge, draw the error or apparent error to the attention of executive management or the other directors. It is then said, that in failing to draw the attention of the error or apparent error to the executive management or the other directors, the directors, and each of them failed to take all reasonable steps to secure compliance by Centro. (b) I accept that directors may rely on others to assist them in fulfilling a requirement even where it is one directly imposed upon them by the Act. To a degree, the directors can rely upon the processes they have put in place. However, this is not exclusively the situation in the case of financial accounts, as I have endeavoured to explain. Of course, the drafting of a financial statement will be the domain of management. Nevertheless, the whole purpose of the directors' involvement in the adoption and approval of the accounts is to have the directors involved in the process at a level and responsibility commensurate with their role. In other words a reasonable step would be to delegate various tasks to others, but this does not discharge the entire obligation upon the directors. A further step is required, so it can be said that all reasonable steps have been taken by the directors. To complete the process, this step, as I have said repeatedly in answer to the contentions of the directors, involves the directors and each of them taking upon themselves the responsibility of reading and understanding the financial statements in the way I have described. .............. 245. ASIC submitted that the required financial literacy of a public company director extends to a general awareness of the financial reporting obligations of the Act, bearing in mind that directors have a statutory obligation under s 344 to take all reasonable steps to comply or secure compliance with them. This would include the knowledge that directors must approve the accounts and directors' reports, that accounts must show a true and fair view and comply with accounting standards, and that the law requires the directors' report to refer to particular things such as events after the balance date. 246. ASIC did not seek to establish that any of the defendants did not possess the necessary degree of financial literacy. In fact the intelligence, experience and knowledge of each director was relied upon to show that the omissions could only have occurred through lack of focus in approving or adopting the financial statements. Nevertheless, ASIC submitted that if the absence of the necessary financial literacy was an explanation for failure of any or all of the directors to notice the deficiencies in the accounts and reports, the failure to acquire such knowledge was itself a breach of the duty of care and diligence. 247. ASIC's case was that there was an irreducible requirement upon the directors of involvement in the management of the company which includes maintaining familiarity with the company's financial affairs. In the case of Centro, that required familiarity extended to being aware of the extent of the borrowings and the maturity profile of those borrowings, and aware of the guarantees which had been given in August 2007. It was ASIC's case that every one of the directors in fact knew of these matters by virtue of various information and reports they were given. However, ASIC contended that if ignorance of these matters was an explanation for failure of any or all of the directors to notice the deficiencies in the accounts and reports, that ignorance itself bespoke a breach of the duty of care and diligence. 248. The second stage in defining the required degree of care and diligence is in the process of review of the accounts by the directors. ASIC submitted that it was the duty of every director to read the financial statements carefully and consider whether what they disclose is consistent with the directors' own knowledge of the company's affairs. ASIC's case against each director was not that he did not look at the accounts. ASIC in its opening contended that each director did not do so with "the necessary degree of care, and application of the mind, to the task"." ............. 315. On the basis of this documentation, without more, I find that there were short-term liabilities as alleged by ASIC which each of the directors were aware of or should have been aware of. This information concerning debt was put before the Board and was readily available to each director over a period of time. 316. I will detail the evidence of the directors later. By way of summary, the evidence of the directors as to short-term debt was as follows. The evidence of Mr Healey was that he did know that CNP had substantial short-term debt in the order of $2.5 billion. Mr Kavourakis was aware that CNP and CER had facilities that had to be refinanced within 12 months of 30 June 2007, not necessarily repaid. Mr Hall's evidence was that, while he kept himself informed by means of the various papers provided by management and from the annual accounts, he did not think he was otherwise aware in July 2007 of the level of debt of CNP which was maturing within 12 months. Nevertheless, Mr Hall had been given all the information referred to above, in the same way as the other directors. Mr Cooper was aware around the time of reviewing the Appendix 4E financial report that CNP had debts maturing within the year of about $2.5 billion and read the Banking Facilities Review for CNP which provided a figure of $2 billion was due within six months. Mr Goldie was aware there was substantial debt but could not recall the specific figures in September 2007. Mr Goldie was broadly aware in June 2007 of CNP's debt position. Mr Scott was also aware of the short-term debt position. 317. I conclude that each director knew or should have known that CNP and CER had substantial short-term liabilities which were required to be repaid or refinanced during the year ending on 30 June 2008 as alleged by ASIC." 200The plaintiffs are correct to assert that ASIC v Healy provides some support for the liability of directors in respect of representations contained in or implicit in financial reports in relation to which they have signed a relevant declaration. However, the 5th to 8th defendants are correct when they say that the evidence available to Justice Middleton and the pleadings that one might infer were made in that case were of a very different nature to that which pertains here. 201The 5th to 8th defendants also rely upon the decision in ASIC v Narain to mount the argument that, like ASIC v Healy, the kind of activity alleged and established was of a very different kind to that which pertains here. For example at paragraph 13 of the judgment of Finklestein J: "As to the second issue raised by this appeal (whether Mr Narain engaged in the relevant conduct) again I must disagree with the judge. I will explain why in a moment. First of all I should say something about the shape of the action. In its statement of claim, the ASIC set out the following case against Mr Narain. He was involved in preparing the release and approved its contents. He directed the company secretary to send the release to the ASX and it was sent in accordance with that instruction. He breached s 1041H by "making" the representations in the release. When read as a whole, it is clear that the ASIC meant that Mr Narain made the representations by preparing the release and directing that it be sent to the ASX." 202The 5th to 8th defendants also rely on findings made against Mr Narain in that case that he was responsible for the publication of the relevant representation. At [19] the following finding was made: "To find that a person has contravened s 1041H(1) it is necessary to show that he "engaged" in the proscribed conduct. Subsection (2) gives examples of the kind of conduct that would bring a person within subs (1). Each example requires (as does the word "conduct" itself) some act on the part of the person. In this case the relevant act might be "publishing a notice in relation to [shares]": compare s 1041H(2)(b)(ii). Or the relevant act could be giving the release to the ASX for publication on the exchange. As the judge pointed out, Mr Narain did not publish the release. Speaking strictly, the release was published by the ASX. Nor did Mr Narain send the notice to the ASX. But the publication of the release by the ASX was the natural consequence of giving the release to the ASX and its publication should, in the first instance, be attributed at least to the person who sent it to the ASX. As the judge pointed out, that person is CTF or the company secretary, or both of them. The real culprit, however, is not the individual who sent the release to the ASX; in many cases that person might just be an office worker. It is the person in authority who, with knowledge of its contents, gave the instruction that the release be sent to the ASX for publication. In my opinion the action of the company secretary must be treated as the action of Mr Narain. It is his action either because the company secretary was his agent, or, as I would prefer, because, in the circumstances of a case such as this, the secretary's actions should, as a matter of law, be attributed to Mr Narain. I note in passing that in reaching this conclusion I have acted on the basis that there is nothing in s 1041H which, as a matter of construction, requires the conclusion that every act that goes to make up a contravention must be that of the defendant personally. That must be so if for no other reason than that a company, which can only act through individuals, may breach the section." 203Again from [81] to [91] the conduct relied upon against Mr Narain was set out: "81. Here, the relevant conduct was not merely the text of the announcement, as was urged upon us by Mr Myers. The conduct consisted of an announcement made to the ASX about a 'landmark' test result for the company's products. It was an announcement that consisted of disclosure to the market that the test results indicated that the company believed it could offer a global solution to a disease which affects 40 million people. 82. To say that one must parse and analyse the announcement to determine whether it expressly refers to the company's shares or the value of them, is, with respect to the primary judge, contrary to the meaning of the section and to commercial reality. 83. As senior counsel for the ASIC, Mr Bathurst QC, pointed out, upon the construction adopted by the primary judge, a company could announce to the ASX with impunity that it had struck gold but it could not say, 'Buy our shares because we have struck gold'. 84. This is not to apply an ex post facto rationalisation by looking at what actually occurs in the marketplace. It is simply to reject, as a matter of statutory construction and commercial common sense, the narrow view of s 1041H(1) for which Mr Myers contended. 85. We reject the submission of Mr Myers that s 1041H(1) is narrower than its predecessor in s 995 of the Corporations Law. The earlier legislation contained narrow definitions of 'securities' and 'futures contract' which have since been broadened to cover a new range of products. The definitions were extended by the Financial Services Reform Act to cover the new types of products within the definition of "financial product": see s 763A of the Act. This is reflected, at least in part, in the matters referred to in s 1041H(2). 86. Moreover, s 995 of the Corporations Law was not as narrow as was suggested in Mr Narain's written submissions because subs (2)(b)(iv) of that provision included conduct in almost the same terms as that which is now stated in s 1041H(2)(x). 87. In our opinion, the requisite connection between the conduct and the financial product was established so as to give rise to a possible contravention of s 1041H(1). 247 ALR 659 at 673. Whether Mr Narain engaged in the conduct as a principal 88. Mr Myers submitted that the claim against Mr Narain as argued by Mr Bathurst on the appeal fell outside the case as pleaded or run before the primary judge. 89. In particular, Mr Myers focused upon para 35 of the statement of claim in which the ASIC alleges that, by making the representations contained in the letter of 27 September 2005 (that is the announcement), Mr Narain engaged in misleading conduct in contravention of s 1041H of the Act. He submitted that the effect of this was that the ASIC alleged the representation was made by sending the letter, which was, as the primary judge found, an act of Mr Hanlon, not Mr Narain. 90. However, in our view this submission takes too narrow an approach to the pleading. The question of fact which arose on para 35 of the statement of claim considered in light of the document as a whole, including para 22, was whether Mr Narain's conduct amounted to representations made by him personally. 91. Mr Narain's conduct included the drafting and approval of the content of the announcement and his direction to Mr Hanlon to send it to the ASX. The findings which the primary judge made about this, as set out in the passage at [55] above, fell squarely within the pleaded case." 204I accept that there are qualitative differences between these cases and the case that the plaintiffs seek to bring against the 5th to 8th defendants. But it does not follow that, because some decided cases brought against non-executive directors involved conduct of a greater magnitude than that involved in the subject case, the subject case is an untenable one. 205When the 5th to 8th defendants were mounting their submissions in relation to the absence of any allegation (let alone any evidence to support such an allegation) that the individual directors had played any part in the publication of the material, I posed the somewhat naïve question (T 26/9/14 p 26): "When a director signs one of these declarations at page 524 of the bundle and page 395 of the bundle, what do they think is going to happen to those financial reports?" 206Senior counsel responded by acknowledging that this was an interesting enough question, but posed the rhetorical question as to whether this meant that the directors had engaged in conduct of the kind pleaded? Reference was then made to the cases of Gugielman v Trescowthick, ASIC v Narain and ASIC v Healey. 207In my judgment, it is at least arguable that a director signing a declaration of the kind relied upon by the plaintiffs here must know, and certainly ought to know, that such a document is likely to be provided to organisations such as the ASX and form part of the publicly available financial and other reports relating to the company. It is obvious that such documents will be relied upon by people in the marketplace in making investment decisions in relation to whether to invest money in the subject company. 208The plaintiffs' case is that the financial accounts for the end of year 2006 and mid-year 2007 contained significant errors such as to lead to an inference or conclusion that they contained misrepresentations. The plaintiffs point to the announcement made in April and July 2008 to indicate that the representations were false. The 5th to 8th defendants say that the plaintiffs can do no more than point to the fact that the accounting and auditing advice received by ABC, and at relevant times relied upon by the directors, changed. Thus, it is said that the treatment of the developer contracts and 123 Carers agreement changed between the time of the signing of the impugned declarations and the time of the announcements that the treatment was to be changed retrospectively and adjustments made to the accounts. According to the arguments of the 5th to 8th defendant, it is not a matter that can found a civil suit against the directors who were entirely reliant upon the advice and opinions of the accountants, auditors and CFO. 209The 5th to 8th defendants point to material in the plaintiffs' bundle demonstrating that auditors had subsequently (i.e. after the declarations were signed but before the announcements to the ASX) indicated that there was no issue surrounding the relevant financial statements. That confirms, in the 5th to 8th defendants' submission, that there was nothing glaringly obvious and erroneous in the accounts. They say that they were entitled to rely upon the advice of the accountants and CFO and cannot be held liable in relation to the kinds of causes of action brought by the plaintiffs.

Implied representations arising from statements of opinion 210The 5th to 8th defendants say that the suggestion that the opinion contained in the directors' declaration carried with it implied representations set out (for example) at FASOC [77(b)] and [81(b)] is not tenable. Those implied representations included (to paraphrase) that; (1)the opinions were the product of reasonable care and skill; (2)the director had turned his or her mind to the financial affairs of the company and had informed themselves as to those matters; (3)the director had read and understood the financial statements and considered that they were consistent with what they knew of the company's affairs; and (4)the opinion was formed after the director took a diligent interest in the information available. 211There were submissions going both ways as to the correct approach to the representations that are implicit in, or to be inferred from, the provision of an opinion. Both parties sought to place reliance on the case of MGICA (1992) Ltd (formerly MGICA Ltd) v Kenny & Good Pty Ltd [1996] FCA 766; 140 ALR 313. The plaintiffs sought to assert that the case supported the proposition that, implicit in the provision on an opinion, are a number of representations such as those pleaded in the FASOC. The 5th to 8th defendants submitted that those implied representations only arose in the case of experts. It was submitted that the only implicit representation in the provision of an opinion is that the provider held the opinion. 212In my judgment, the answer will turn on the facts of any individual case. That is, the extent to which the statement of an opinion carries with it implied representations beyond the entirely prosaic proposition that the person who states the opinion in fact holds that opinion will turn on a number of matters of fact peculiar to the particular case. These include, but are not limited to, the qualifications of the maker, the circumstances in which the opinion is provided, the importance of the information and the extent to which it may be relied on by those hearing it. 213In MGICA (1992) Ltd (formerly MGICA Ltd) v Kenny & Good Pty Ltd, Lindgren J said (at 356): "Commonly, perhaps mostly, an expression of opinion conveys no more than that the opinion is held: Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82 ; 55 ALR 25 (FC) (Global Sportsman) at FCR 88. But, depending on the circumstances, it may convey more than that: Global Sportsman at FCR 88; James v Australia & New Zealand Banking Group Ltd (1986) 64 ALR 347 (Fed C of A, Toohey J) at 372; Bateman v Slatyer (1987) 71 ALR 553 (Fed C of A, Burchett J) at 559; RAIA Insurance Brokers Ltd v FAI General Insurance Co Ltd (1993) 41 FCR 164 at 172-5 ; 112 ALR 511 (FC); Harbour Agency Pty Ltd v Agency for the Performing Arts Pty Ltd (1989) ATPR 40-969 (Fed C of A, Hill J) (Harbour Agency) at 50,593. Important considerations in this regard are whether the person expressing the opinion knows, or should know, that another person will or may act in reliance on the opinion and whether the person expressing the opinion professes to have expertise in forming and giving opinions of the kind in question: Bateman v Slatyer, supra, at 559; Elders Trustee & Executor Co Ltd v EG Reeves Pty Ltd (1987) 78 ALR 193 (Fed C of A, Gummow J) at 242; Brown v Australian Harvestore Products Pty Ltd (1989) ATPR (Digest) 46-051 at 53,180 (Fed C of A, von Doussa J); Harbour Agency at 50,593. Both of these factual matters characterise the present case: Mr Kenny knew that MGICA would or might well rely upon his opinion as to the fair market value of the property, and he professed to have expertise in forming and expressing opinions on such a matter." 214His Honour concluded (at 356-357) that the valuation in that case did carry with it representations that (a) the opinions were based on reasonable grounds, (b) they were the product of the exercise of due care and skill and (c) they were safe to be relied upon taking into account various relevant contingencies. 215I am not persuaded of either argument that has been put to me based around the judgment of Lindgren J in MGICA (1992) Ltd (formerly MGICA Ltd) v Kenny & Good Pty Ltd. I am not satisfied that the judgment is authority that statements of opinion generally carry the kind of implied representations for which the plaintiffs contend. Nor am I satisfied that such implied representations will only arise in the case of experts. As I have said, it depends upon the factual circumstances of the case. This approach seems to accord with the statement of French CJ in Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; 238 CLR 304 at [32]: "A statement of opinion may be a statement with respect to a future matter. It may take the form of a prediction. A forward estimate relating to the financial results of a business is a class of prediction. In strict logic there may be some category overlap between opinions and statements of fact. Opinions may carry with them one or more implied representations according to the circumstances of the case. There will ordinarily be an implied representation that the person offering the opinion actually holds it. Other implied representations may be that the opinion is based upon reasonable grounds, which may include the representation that it was formed on the basis of reasonable enquiries. In the case of a person professing expertise or particular skill or experience the opinion may carry the implied representation that it is based upon his or her expertise, skill or experience." 216The 5th to 8th defendants also took me in a little detail to the accounts to demonstrate that there is nothing on their face which would alert a director to the fact (if it be the fact) that the developer contracts and 123 Careers agreements had been treated in any way other than in accordance with appropriate accounting standards. Again, it is submitted that in the circumstances they were entitled to rely on the advice of the accountants and the assurances of the CFO. Thus, it is submitted that the directors cannot be held liable and the proceedings against them are destined to fail (or, at least, that there is no reasonable prospects of the case against them succeeding). 217In relation to this submission, and the competing arguments about case of MGICA (1992) Ltd (formerly MGICA Ltd) v Kenny & Good Pty Ltd, it is necessary to note that at least part of the evidence before me shows the following qualifications in the 5th to 8th defendants: Mrs Sallyanne Atkinson AO - Chairman [the 5th defendant] Sallyanne Atkinson is a former Lord Mayor of Brisbane, Australian Senior Trade Commissioner to Paris and Chairman of Queensland Tourism. She is a director of several public companies and associations, including APN News & Media Limited and The Australian Ballet. She is Chairman of the Federal Ministerial Taskforce on Dementia and of the Crawford Fund (Qld). Sallyanne is also a Special Representative for Queensland, South East Asia in the Queensland State Government. Among Sallyanne's many achievements, she has received several awards including Officer of the Order of Australia and was recently awarded an Honorary Doctorate by the Australian Catholic University. She is a fellow of the Australian Institute of Planning. Sallyanne holds a Bachelor of Arts degree from the University of Queensland. Mr William Bessemer - Non-Executive Director [the 6th defendant] Bill Bessemer is currently chairman of Austock Group Limited and Australia Pacific Exchange Limited and is a director of public company Timbercorp Limited. He has extensive experience and practical corporate skills covering debt and equity raisings, financial structuring, mergers, acquisitions and business recoveries. Bill holds a Bachelor of Economics degree from the University of Queensland, a Master of Business Administration degree from the University of Melbourne and is a Certified Practicing Accountant. Mr David Ryan AO - Non-Executive Director [the 7th defendant] David Ryan is the Chairman of Tooth & Co and other Residual Assco Group Limited group companies. He is also a non-executive director of Tansurban Group and Lend Lease Corporation Limited, as well as a member of the Advisory Board of Virgin Management Asia-Pacific Pty Ltd and a member of the Advisory Board of Caliburn Partnership. David has extensive business experience through his current and former roles which include holding senior executive management positions in public companies and being a member of a number of public company boards. David is well credentialed to provide support to the ABC board as a Non-Executive Director. The Hon. Lawrence James Anthony - Non-Executive Director [the 8th defendant] Larry Anthony is currently a board member of Learning Care Group, Inc, Macquarie Media group, Indue Ltd and the National Chairman for the Duke of Edinburgh's Awards Australia. Larry has a vast experience in government sectors and finance including roles with Merrill Lynch and Potter Warburg. He is a former Federal Minister for Children and Youth Affairs, Community Services and the Parliamentary Secretary for trade. He is also involved with various charities across Australia. Larry holds a Bachelor of Commerce degree from the University of New South Wales, a diploma from the Australian Institute of Company Directors, a diploma of Applied Finance and Investment and is a Member of the Banking and Securities Institute of Australia and Australian Institute of Company Directors. 218Those profiles are part of ABC's Annual Report for 2006 (PB 499-500). One of the relevant directors' declarations is to be found in the same Annual Report (PB 529). It shows that the plaintiffs are in a position to establish to varying degrees the experience, expertise and qualifications of the 5th to 8th defendants. 219In light of this evidence, I am unable to conclude that the plaintiffs should be denied the opportunity to pursue their case based around the implied representations that it will assert arose from the directors' declaration(s).

Was the conduct "in trade or commerce" or "in relation to a financial product or service"? 220The 5th to 8th defendants submit that the conduct alleged against them is not conduct "in trade or commerce" within the meaning s 12DA ASIC Act, s 52 TPA or s 42 FTA. They make the same submission in relation to whether the conduct was "in relation to a financial product or service" in s 1041H of the Corporations Act and s 12DA of the ASIC Act. 221Reliance is placed on the "narrow" construction given to the expression "in trade or commerce" by the High Court in Concrete Constructions (NSW) v Nelson [1990] HCA 17; 169 CLR 594 at 602-604 (Mason CJ, Deane, Dawson and Gaudron JJ). Reliance is also placed on what the 5th to 8th defendants say is the absence of connection between the conduct alleged against them and the financial product or service provided by ABC. Reliance is placed on ASIC v Narain at [8]. 222The plaintiffs submit that the representations pleaded "were clearly made in trade or commerce" because they "formed part of the statutory accounts published to the world at large". The plaintiffs rely on the "extremely wide" meaning of the expression "in relation to" in ss 1041H and 12 DA of the respective statutes. 223As to the narrow construction of "trade and commerce" adopted in Concrete Constructions v Nelson, I accept the plaintiffs' submission that the particular circumstances of that case (a construction worker attempting to call into aid the TPA due to problems in establishing a personal injury case under state law) place it in a very different category. That approach accords with what was said by French, Sackville and Conti JJ in Village Building Co v Canberra International Airport [2004] FCAFC 240; 139 FCR 330: "46. In applying the principles laid down by the High Court it is helpful to bear in mind the context in which Concrete Constructions was decided. As Wilcox J observed in Barto v GPR Management Services Pty Ltd (1991) 33 FCR 389 at 393: 'It is easy to understand the policy reasons underlying Concrete Constructions. A contrary result would have led to s 52 being used as a vehicle for the recovery of personal injury damages in a large number of industrial and motor accident cases; even cases where the respondent was not negligent, but only if it happened to be a 'corporation' as defined in s 4 of the Trade Practices Act. And this development would have occurred at the very time that some States were legislating to exclude personal injury damages claims in industrial and/or motor accident cases.' 47. The context assists in understanding the import of remarks in the joint judgment, which sometimes appear to be treated as though they are contained in a statute rather than a judgment construing a statute. For example, their Honours observed (at 604) that s 52 was: ' ... not intended to impose, by a side-wind, an overlay of Commonwealth law upon every field of legislative control into which a corporation might stray for the purposes of, or in connection with, carrying on its trading or commercial activities.' Clearly enough, this observation was directed at the construction worker's attempt to use s 52 of the TP Act to circumvent restrictions imposed by State law on the recovery of damages in personal injury cases. It should not be regarded as an independent principle of construction intended to narrow the scope of s 52 beyond what follows from the construction adopted by the joint judgment. 48. The joint judgment in Concrete Constructions acknowledged that the 'dividing line' between conduct that is or is not in trade or commerce, according to the narrower construction of s 52 of the TP Act, may be difficult to draw. However, once the narrower construction of s 52 was adopted, the facts of Concrete Constructions clearly fell outside s 52. Other fact situations will be much closer to the line." 224The question of whether the case against the non-executive directors involves conduct in relation to a financial product or service" again focussed attention on the factual distinctions between the conduct established in the case of ASIC v Narain and the conduct alleged in the present case. I have already set out at [201]-[203] various relevant parts of the judgment in that case. In the present context the following passage is instructive: "66. Mr Myers QC, who appeared for Mr Narain, emphasised that the words 'in relation to a financial product' are an adjectival phrase which qualify the conduct that is proscribed by s 1041H. He submitted that the phrase narrows or qualifies the breadth of the proscribed conduct and it directs attention to the characteristics of the conduct itself, not its consequences. 67. So much may be accepted. However, to narrow the scope of the conduct to that which appears 'on its face', as the learned primary judge did, is in our view contrary to the meaning of s 1041H(i) considered as a whole. Indeed, it would be contrary to the well-known principles of statutory construction stated in Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at [69]-[71]. 68. There is a wealth of authority for the proposition that the expression 'in relation to' is extremely wide and that its meaning will be determined by the context. The leading authorities were collected and stated by Beaumont and Lehane JJ in Joye v Beach Petroleum NL (1996) 67 FCR 275 at 285; see also Australian Competition and Consumer Commission v Maritime Union of Australia (2001) 114 FCR 472 at [68] per Hill J. 69. As those cases point out, the words "in relation to" signify the need for there to be some relationship or correlation between the two subject matters that are specified. 70. But as Hill J observed in ACCC v Maritime Union of Australia 114 FCR 472 at [68] there will always be a question of degree involved where the issue is the relationship between those matters. 71. What must be borne in mind is that, as Beaumont and Lehane JJ said in Joye 67 FCR 275, the context will determine whether the relationship must be direct or substantial or whether an indirect or less than substantial connection will be sufficient: Joye 67 FCR at 285 (citing a number of decisions of the High Court)." 225While I appreciate the force of the 5th to 8th defendants' submissions on these issues, my conclusion is that the plaintiffs' position is not "so obviously untenable that it cannot succeed": Dey v Victorian Railway Commissioner. These questions of degree and which side of relevant dividing lines particular conduct falls are matters better addressed by a trial judge in the light of all of the evidence.

Part 3M Corporations Act and the scope of directors' liability 226The 5th to 8th defendant contend that Part 2M (and specifically s 344) of the Corporations Act defines the scope of the non-executive directors' "responsibility and potential liability" for the financial reports. Reliance is again placed on Concrete Constructions v Nelson to suggest, at least implicitly, that the operation of Part 3M excludes liability for false and misleading arising under other parts of the act and in other federal statutes. (See written submissions 25 July 2014 paragraph 17, T 26/9/14 pp 16-19.) 227I am unable to accept this submission, particularly on an application for strike out or summary judgment. For present purposes, I accept that the plaintiffs' contention on this point is (at least) an arguable one. The plaintiffs submit that where the Corporations Act "excludes liability for misleading or deceptive conduct because the relevant sphere of activity is governed by other rules, it does so expressly". They point to s 945A as an example. They also refer to Gugielman v Trescowthick where a director was held to be liable for the declaration in financial reports "notwithstanding that such reports are also regulated by Part 2M.3"

Particulars to be supplied following disclosure 228Another complaint is that, in many instances, the FASOC says that further particulars will be supplied following disclosure. It is submitted that the plaintiffs should be required to avail themselves of the process of preliminary discovery (see Part 5 UCPR). 229An example concerns the developer contracts. The "particulars" to paragraphs 38 and 39 (asserting that the accounting treatment of the developer contracts resulted in overstatements as to profits, earnings per share, EBITDA, revenue and net assets) are in the following terms: "The financial statements for the year ended 30 June 2006 in the Preliminary Final Report and Annual Report included Developer Contracts fees of approximately $57.4 million as revenue. Further particulars will be provided following disclosure." 230Senior counsel for the plaintiffs acknowledged that he has not seen the developer contracts (T 85) but submits that there is no requirement that a plaintiff must obtain copies of such documents by way of preliminary discovery. He says the case pleaded in regard to the developer contracts is relatively simple (T 90-91): "Because if one looks at the essence of the allegation that we plead in relation to developer contracts we say is pretty obvious. They buy some childcare centres, there's a certain price that's paid but in effect by a side wind at the same time there are some payments that come back the other way which reduce, we say, the purchase price but were recorded as revenue. And the vice or the real problem that occurred was that they record what are called the back payments as revenue I will use the word window dressing perhaps a bit pejoratively but they window dressed the accounts by recording the revenue whereas we say the appropriate accounting treatment, and it's pretty obvious, was not to record it as revenue but rather to record it as being a reduction in the purchase price that is paid. They were underdeveloped centres that were purchased. They pay a high figure but then say if it doesn't achieve a certain occupancy rate we'll give you some money back. And we would say that the only correct accounting treatment is not to regard it as revenue and record it to, as it were, increase the bottom line but to rather regard it in actuality for what it was, namely a reduction in the purchase price 231Senior counsel acknowledged that he could not, as he stood making submission, explain how the figures of $57.4 million (in the particulars to [38] FASOC) or $43 million (in the particulars to [39]) were calculated. However, he said such particulars could be supplied if required or requested (T 90). 232I do not accept that the plaintiffs are required to undertake preliminary discovery in order to provide these kinds of particulars. However, given the specificity of the pleading in relation to those figures and the significance of those figures to the defendants, it will be a condition of the filing of the FASOC that those figures be explained in the pleading.

Failure to plead the relevant accounting standard 233Another complaint of the 5th to 8th defendants is the failure of the plaintiffs to plead specifically the accounting standard that is said was not complied with in relation to the treatment of both the 123 Careers agreement and the developer contracts. 234Senior counsel for the plaintiffs again indicated that particulars of the relevant accounting standards could be provided if directed to do so. 235As Mr Dick SC acknowledged in the course of his oral submissions, it seems that the relevant standards are referred to in the particulars to paragraph 85 and 86 which form part of the pleading that asserts that the FY06 announcements were misleading and deceptive. The particulars refer specifically to the 123 Careers agreement and developer contracts and to Accounting Standards (AASB 118). 236Mr Dick then argued that the FASOC does not make clear the part of the standard that applied, the reason it applied and the way in which the standard was breached. There were a number of other complaints (T 69-70). While that is not a basis upon which to strike out the pleading altogether, I agree that the plaintiffs should further particularise the parts of the accounting standard upon which they rely, the basis upon which it is asserted to be applicable and the manner in which it was breached. Any grant of leave to file the FASOC will be conditional upon them doing so.

Conclusion as to the 5th to 8th defendants 237For the foregoing reasons, I have concluded that the application by the 5th to 8th defendants for summary dismissal and striking out of the ASOC (or the FASOC) must fail. The question of whether the remaining "opinion representations" were made or implied and whether they are false are matters properly to be decided by a trial judge. The question of whether the non-executive directors were entitled to rely on the advice they received from the CFO, accountants and auditors will turn on the evidence in the case. The significance of subsequent auditors' reports is also, properly, a matter for consideration at the final hearing. While there is considerable force in the submissions advanced on behalf of the 5th to 8th defendants, and while the case will proceed on the basis that any representation made by them was a representation of opinion (not fact), the case pleaded by the plaintiffs is not so untenable that it is destined to fail. 238I propose that leave be granted to the plaintiffs to file the FASOC on the condition that further amendments are made in accordance with these reasons.

WICKSTEAD V BROWNE 239A matter which is not determinative in my decision-making, but which fortifies me in my conclusion that the cases against the 3rd and 5th to 8th defendants ought not to be subject to summary dismissal is the fact that this is a case involving multiple defendants. In Wickstead v Browne (1992) 30 NSWLR 1, Handley JA and Cripps JA made the following observations at 11-12: "The principles upon which a court should act in determining anapplication under Supreme Court Rules Pt 13, r 5 are well-established. A convenient summary is to be found in the well-known decision in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125. Barwick CJ said (at 128-129): 'The plaintiff rightly points out that the jurisdiction summarily to terminate an action is to be sparingly employed and it is not to be used except in a clear case where the court is satisfied that it has the requisite material and the necessary assistance from the parties to reach a definite and certain conclusion ... the plaintiff ought not to be denied access to the customary tribunal which deals with actions of the kind he brings, unless his lack of a cause of action - if that be the ground on which the court is invited, ... to exercise its powers of summary dismissal- is clearly demonstrated.' The respondent submitted that the appellants had failed to adduce any evidence or any admissible evidence on a number of issues and that the appeals should therefore be dismissed. Again it seems to us that those submissions misconceived the nature of the court's jurisdiction to dismiss summarily a plaintiff's action. By launching such an application a defendant undertakes the burden of establishing that there is no triable issue. On such an application the defendant bears the onus of proof and where the facts are peculiarly within the defendant's knowledge the plaintiff's action should not be dismissed because of gaps in the case if the necessary evidence might be obtained as a result of discovery or interrogatories. However for another reason, which was first raised by the Court, the respondent as one of a number of defendants cannot be entitled to summary dismissal before trial because of evidentiary deficiencies in the plaintiff's case. If at the close of the plaintiff's case at the trial there was no evidence against this respondent he would not be entitled at that stage to judgment if any of the other defendants intended to go into evidence: see Menzies v Australian Iron & Steel Ltd (1952) 52 SR (NSW) 62; 69 WN (NSW) 68. The effect of this rule is now embodied in Supreme Court Rules Pt 34, r 7(6) and r 8(5). The reason for the rules is clear and was explained in the decision referred to. At the close of the plaintiff's case there may be evidence against some defendants but not against others. The court will not entertain a motion for judgment by only some of the defendants because any gaps in the plaintiff's case against those defendants may be filled when the other defendants go into evidence. In particular one or more of the defendants going into evidence may seek to exculpate themselves by inculpating defendants against whom the plaintiff had no admissible evidence at the close of his case. If the respondent would not be entitled to succeed on a no evidence point at the trial until all the evidence has been called, including that from other defendants, it is clear that there can be no such entitlement on an application by one of several defendants for summary dismissal." 240In Ford v Nagle and Ors [2004] NSWCA 33 the Court of Appeal confirmed the applicability Wickstead v Browne and upheld a trial Judge's reliance on that authority. 241The Supreme Court Rules to which their Honour's referred in Wickstead v Brown have been repealed. However there are similar rules in the UCPR: "29.9 Dismissal of proceedings on defendant's application (cf SCR Part 34, rule 7; DCR Part 26, rule 7; LCR Part 21, rule 5(2)-(7)) 29.9 (1) A defendant in proceedings in which the plaintiff is the beginning party may apply to the court for an order: (a) for the dismissal of the proceedings, or (b) for the dismissal of the proceedings to the extent to which they concern any cause of action relevant to the plaintiff's claim for relief against that defendant, on the ground that, on the evidence given, a judgment for the plaintiff could not be supported. (2) Such an application may be made at any time after the conclusion of the evidence for the plaintiff in his or her case in chief. (3) The plaintiff may argue, or decline to argue, the question raised by the application. (4) The court may not make an order under this rule unless the plaintiff argues the question raised by the application and the defendant satisfies the court that, on the evidence given, a judgment for the plaintiff could not be supported. (5) If the plaintiff declines to argue the question raised by the application, or if the defendant fails to satisfy the court that, on the evidence given, a judgment for the plaintiff could not be supported, the defendant: (a) may adduce evidence or further evidence, or (b) may make an application under rule 29.10. (6) If fewer than all defendants apply to the court under subrule (1), the court must not deal with any such application before the conclusion of the evidence given for all parties. 29.10 Judgment for want of evidence (cf SCR Part 34, rule 8; DCR Part 26, rule 8; LCR Part 21, rule 6)29.10 (1) An opposite party may apply to the court to give judgment for the opposite party, either generally or on any claim for relief in the proceedings, on the ground that, on the evidence given, a judgment for the beginning party could not be supported. (2) Such an application may be made at any time after the conclusion of the evidence for the beginning party in his or her case in chief. (3) The court may not give judgment under this rule unless the opposite party satisfies the court that, on the evidence given, a judgment for the beginning party could not be supported. (4) If the opposite party fails to satisfy the court that, on the evidence given, a judgment for the beginning party could not be supported, the opposite party may not adduce evidence or further evidence in the proceedings generally or on the claim for relief concerned, as the case may be, except by leave of the court. (5) If not all opposite parties apply to the court under subrule (1), the court must not deal with any such application before the conclusion of the evidence given for all parties." 242Because of the nature of the claim and the multiplicity of the defendants, it may be that the plaintiffs' understanding of the precise roles, knowledge and responsibility for the various representations will gain clarity in the course of the defendants filing their pleadings, cross claims and serving their evidence (if any). There may also be some enlightenment in regard to those matters at the final hearing, particularly if the kind of circumstances envisaged by the joint judgment in Wickstead v Browne arise. 243I accept, as the 3rd defendant submitted, that Wickstead v Browne does not stand for the proposition that summary judgment can never be granted in the case of multiple defendants. The 3rd defendant relies on the terms of rule 13.4 allowing for summary dismissal of "the proceedings generally or in relation to any claim for relief in the proceedings and rule 14.28 UCPR providing a power to "order that the whole or any part of a pleading be struck out". I need not determine whether that is purpose of those parts of the rules but I accept that there will be cases where it is appropriate to exercise the power of summary dismissal where there are multiple defendants. 244However, this is a case where the principles discussed in Wickstead v Browne have particular application. This is because of the number of defendants, the relationships between those defendants, the fact that a particular defendant's role in the affairs of the company are likely to be better known by the other defendants than they are by the plaintiffs and the possibility that some defendants will call evidence that is relevant to the plaintiffs case against other defendants.

THE LIMITATION ISSUE 245The 3rd and 5th to 8th defendants submit that the ASOC and the FASOC are brought outside of the 6 year limitation period: see ss 1041(I)(2) and 1325(4) Corporations Act, ss 12GF(2) and 12GM (5) ASIC Act, s 87 (1A) TPA and s 68 FTA. The defendants assert that the plaintiffs' case is a "no transaction case" - which is to say, as I understand it, that the plaintiffs assert that had they known of the true position of ABC, they would not have entered into the underwriting agreements. Accordingly, the defendants assert that the cause of action accrued on the date of acquisition, i.e. 13 June 2007 (see [25] of FASOC). The defendants go on to assert that, even if the damages are calculated as on the basis of their inability to recoup monies, that loss accrued on 25 August 2008 when trading in ABC securities was suspended. 246On the defendants' argument this means that the limitation period expired on 13 June 2013 or, at the latest, 25 August 2014. The original statement of claim was commenced on 28 May 2013. Accordingly, on any view, the original statement of claim was brought within the limitation period. However, the defendants point to ss 64 and 65 of the Civil Procedure Act. These, according to the defendants, deny the court discretion to grant leave to amend to introduce a new cause of action after the expiration of the limitation period. The discretion under this 65(2)(c) is enlivened only if the new cause of action "in the courts opinion, arises from the same (or substantially the same) facts as those giving rise to an existing cause of action and claim for relief set out in the originating process". It is the defendants' submission that the ASOC and the FASOC, each of which was brought after the expiration of the limitation period, attempt to bring an entirely different action against the defendants. Thus, the power to amend in s 65(2)(c) is not engaged. 247It is accepted, at least by the 5th to 8th defendants, that it is generally considered undesirable for limitation issues to be resolved in the course of interlocutory proceedings. They should generally be left for determination by the trial judge "except in the clearest of cases": Wardley Australia Ltd V Western Australia [1992] HCA 55; 175 CLR 514 at 533. However, the defendants submit that this is a clear case where the relevant limitation periods have expired. It is also a case where the cause of action now pleaded does not arise from the same or substantially the same facts as those giving rise to the existing cause of action and claim for relief. 248The plaintiffs contend that there is no limitation problem at all because they say that the loss and damage was suffered in 2010 when liquidators were appointed to ABC. The plaintiffs rely on the judgment of Gaudron J in Hawkins v Clayton (1988) 164 CLR 539 at 601. In terms of the operation of Wardley v Western Australia, the plaintiffs took me to the decision of Clasul Pty Ltd v Commonwealth of Australia [2014] FCA 1133 at [21]-[27] (Gleeson J). 249In submissions dated 25 September 2014, the 5th to 8th defendants submitted that a solution to the question of the limitation period "may be to order that any amendments take effect from the date of the Court's order rather than relating back to the commencement of the proceedings." That way, issues about limitation periods and when cause of action accrued can be resolved at trial. 250The plaintiffs say that to approach the matter in that way is essentially to decide the issue against them. They contend that I should not resolve the limitation period issue (unless I have come to the view that the plaintiffs' submission as to when the cause of action accrued is clearly correct). The plaintiffs submit that the "orthodox" approach is to make any grant of leave to amend conditional upon the question of the date of amendment being reserved to the trial challenge. Reliance is placed on a trilogy of decisions in the litigation of Ingot Capital v Macquarie Equity (see [2003] NSWSC 1012; [2004] NSWSC 1219 at [71]; (No 3) [2005] NSWSC 255 at [33]. 251I should say that I have glossed over a controversy surrounding the interaction of the provisions of the Judiciary Act 1903 (Cth), the relevant Commonwealth statutes and the UCPR (NSW) which was subject to debate in the course of the written submissions. In that regard I was taken by the 5th to 8th defendants to cases such as University of Wollongong v Metwally [1984] HCA 74; 158 CLR 447 at 463, Northern Territory v GPAO [1999] HCA 8; 196 CLR 553 at [81], Austral Pacific Group Limited (in liquidation) v Airservices Australia [2000] HCA 39; 203 CLR 136 at [17]. The contentions of the plaintiffs are, as they acknowledge, contrary to the decision of Beech-Jones J in Karl Suleman Enterprizes Pty Ltd (in liq) v Pham [2013] NSWSC 110 at [37] - [40]. 252The plaintiff said that I ought not adopt a different approach to Beech-Jones J unless I concluded that his Honour's decision was clearly wrong. 253It is not necessary to come to any conclusion as to these matters other than to say that I am of the view that this is not a clear case where the limitation period had expired. There are arguments going both ways. Accordingly I propose to adopt the same approach as McDougall J in Ingot Capital and this will be reflected in the orders that I make.

ORDERS AND COSTS 254While the plaintiffs have largely been successful in these interlocutory applications, the fact is that by the time it files a FASOC in conformity with this judgment, it will have made no less than five attempts at producing its initiating process. It has made substantial and repeated amendments to the proposed FASOC in response to submissions made by the defendants. In the absence of some of those amendments (for example, the re-casting of the allegations against the 5th to 8th defendants as opinions) the pleading may well have been struck out. Further, the limitation question remains to be determined. 255In those circumstances, it is not just to order that the defendants pay the costs of the proceedings. I propose to make no orders as to the costs of the interlocutory proceedings. The question of costs of these motions will be reserved to the trial judge. 256I make the following orders: (1)The application of the 3rd defendant for summary dismissal of the proceedings is refused. (2)The application of the 3rd defendant for the amended statement of claim to be struck out is refused. (3)The application of the 5th, 6th, 7th and 8th defendants for summary dismissal of the proceedings is refused. (4)The application of the 5th, 6th, 7th and 8th defendants for the amended statement of claim to be struck out is refused. (5)The plaintiffs have leave to file a further amended statement of claim in the form provided on 16 October 2014 conditional upon it being amended in accordance with the terms of this judgment. (6)The further amended statement of claim shall be filed on or before 12 December 2014. (7)The date that the amendments are to take effect and the question of whether they are brought outside the relevant limitation periods are matters reserved for the decision of the trial Judge. (8)The matter will be listed before the Registrar on 18 December 2014 for directions. (9)Costs of all motions are reserved to the trial judge.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 15 December 2014