Crowley v WorleyParsons Limited

FOSTER J: 1 On 4 October 2013, the plaintiff, Larry Crowley, purchased 423 ordinary shares in the defendant (WorleyParsons) (WOR securities) on the financial market operated by ASX Limited (ASX). He still held all of his WOR securities as at the date of the commencement of this proceeding. 2 WorleyParsons is a global trading corporation which provides a broad range of professional services to the resource and energy sectors and to complex process industries. 3 The plaintiff brings this proceeding as a representative proceeding pursuant to Pt IVA of the Federal Court of Australia Act 1976 (Cth) on behalf of himself and on behalf of all persons who: (a) Acquired an interest in WOR securities during the period from 14 August 2013 to 19 November 2013 (relevant period); (b) Have suffered loss or damage by reason of the conduct of WorleyParsons pleaded in the plaintiff's Amended Statement of Claim filed on 15 February 2016 (ASOC); and (c) Have, as at the date of the commencement of this proceeding, entered into a litigation funding agreement with JustKapital Litigation Pty Limited in relation to this proceeding. 4 These persons will be referred to in these Reasons for Judgment as "the group members" or "the relevant class". 5 Because the relevant class is defined by reference to a requirement that the members thereof must have entered into a litigation funding agreement, the class is a closed class. 6 The plaintiff's case is that, on three occasions on 14 August 2013, WorleyParsons represented to the market that it was on a solid foundation to deliver increased net profit after tax (NPAT) for the financial year ending 30 June 2014 in an amount in excess of $322 million and that, as a result, it expected to earn a NPAT in excess of $322 million in that financial year. The plaintiff alleges that these representations constituted earnings guidance on the part of WorleyParsons and that the substance of that earnings guidance was subsequently repeated on three occasions in October 2013. The plaintiff alleges that, on 20 November 2013, WorleyParsons downgraded the earnings guidance which it had given in August and October 2013 without offering any real explanation as to why, as at 20 November 2013, it considered it necessary to do so. The plaintiff alleges that WorleyParsons had no reasonable basis for giving the earnings guidance which it gave in August and October 2013 and, for this reason, engaged in misleading or deceptive conduct. He also alleges that WorleyParsons was actually aware, at the time when it gave the August and October 2013 earnings guidance, that it had no reasonable basis for giving that guidance and thus breached the continuous disclosure obligations imposed upon it by s 674(2) of the Corporations Act 2001 (Cth) (Corporations Act). 7 The plaintiff relies upon statutory causes of action based upon s 1041H(1) and s 1041H(2)(b) of the Corporations Act, s 12DA(1) of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) and s 18 of Sch 2 to the Competition and Consumer Act 2010 (Cth) (which Schedule is known as the Australian Consumer Law (ACL)) and the State and Territory analogues of s 18 of the ACL. He claims damages or compensation for himself and on behalf of the group members pursuant to the relevant provisions of the Corporations Act, the ASIC Act, the ACL and the State and Territory analogues of the ACL. He also claims interest and costs. 8 By Interlocutory Application filed on 3 March 2016, WorleyParsons sought the following relief: 1. Pursuant to rule 16.21 of the Federal Court Rules 2011 (Cth) (Rules), [an order that] the Amended Statement of Claim filed on 16 February 2016 be struck out. 2. Alternatively, pursuant to rule 16.21 of the Rules, [an order that] the following paragraphs of the Amended Statement of Claim be struck out: a. paragraphs 20 to 24; b. paragraphs 25 to 29; c. paragraph 31; and/or d. paragraph 32. 3. Costs. 4. Such further and other orders as the Court deems fit. 9 By these Reasons for Judgment, I determine the claims for relief made by WorleyParsons in its Interlocutory Application. 10 It is important to note at this point that WorleyParsons has not sought an order that the present proceeding be summarily dismissed. It has confined its present application to an attack on the ASOC pursuant to r 16.21 of the Federal Court Rules 2011 (FCR). 11 In support of its strike out application, WorleyParsons read and relied upon the affidavit of Jason Lawrence Betts sworn and filed on 3 March 2016. That affidavit was the vehicle through which WorleyParsons placed before the Court certain correspondence passing between the lawyers for each of the parties in relation to the ASOC and the alleged defects therein and a number of primary documents, all of which are referred to in the ASOC. 12 Ordinarily, the question of whether a pleading should be struck out pursuant to r 16.21 FCR will be determined by reference to the pleading alone. However, in an appropriate case, evidence may be led. In the present case, Mr Betts' affidavit was read without objection. In those circumstances, I admitted the contents of Mr Betts' affidavit into evidence.

The Plaintiff's Pleaded Case 13 After pleading that he became a shareholder in WorleyParsons on 4 October 2013 and defining the relevant class (par 1 of the ASOC), the plaintiff pleads a number of facts and matters which, he contends, renders WorleyParsons subject to the Corporations Act, the ASIC Act and the ASX Listing Rules (Listing Rules) (par 3). 14 At par 4 of the ASOC, the plaintiff alleges that WorleyParsons was bound by Rule 3.1 of the Listing Rules which, subject to the exception provided by Listing Rule 3.1A, required that, once WorleyParsons is or becomes aware of any information concerning it that a reasonable person would expect to have a material effect on the price or value of WOR securities, WorleyParsons must immediately tell that information to ASX. 15 At par 5 of the ASOC, the plaintiff pleads that WorleyParsons was bound by Rule 19.12 of the Listing Rules which provided, in relation to the definition of "aware" as used in Listing Rule 3.1, that WorleyParsons becomes aware of information if, and as soon as, an officer of WorleyParsons has, or ought reasonably to have, come into possession of the information in the course of the performance of that officer's duties as an officer of WorleyParsons. 16 At pars 6 and 7 of the ASOC, the plaintiff pleads that, throughout the relevant period, WorleyParsons was bound by s 674(2) of the Corporations Act which required that, if WorleyParsons had information that the Listing Rules required WorleyParsons to notify to ASX and that information: (a) was not generally available; and (b) was information that a reasonable person would expect, if it were generally available, to have a material effect on the price or value of WOR securities, then WorleyParsons was obliged to notify ASX of that information in accordance with the Listing Rules. 17 At the heart of the case sought to be made against WorleyParsons by the plaintiff in this proceeding are those allegations which are made at pars 8 to 17 (Section B) of the ASOC and at pars 18 and 19 (Section C) of the ASOC. Paragraphs 8 to 17 are in the following terms: B. AUGUST 2013 EARNINGS GUIDANCE 8. On 14 August 2013, the Respondent lodged with the ASX and publicly released its 2013 Annual Report to Shareholders (2013 Annual Report). 9. In the 2013 Annual Report the Respondent announced net profit after tax (NPAT) of $322 million for the year ended 30 June 2013. PARTICULARS 2013 Annual Report at p.13. 10. In the 2013 Annual Report the Respondent represented that: "While recognizing the uncertainties in world markets, we expect our geographic and sector diversification to provide a solid foundation to deliver increased earnings in FY2014". PARTICULARS 2013 Annual Report at pp.15, 23 and 42. 11. On 14 August 2013 the Respondent, through its CEO Mr Andrew Wood, during a preliminary 2013 earnings presentation represented that: "So the Group outlook, and based upon the preceding discussions our outlook is while recognizing the uncertainties in world markets, we expect our geographic and sector diversification to provide a solid foundation to deliver increased earnings in FY2014". PARTICULARS The statement attributed to the CEO of WOR, Mr Andrew Wood, at p.9 of the edited transcript published by Thomson Reuters Streetevents. 12. In each of the following documents which the Respondent lodged with the ASX and publicly released on 14 August 2013: (a) ASX media release entitled "Geographic and sector diversification contributes to solid performance"; and (b) slideshow presentation entitled "Full Year Results 2013", the Respondent represented that: "While recognizing the uncertainties in world markets, we expect our geographic and sector diversification to provide a solid foundation to deliver increased earnings in FY2014". 13. The representations pleaded at paragraphs [10] to [12] conveyed to their intended audience, which relevantly included investors and potential investors in the Respondent and investment analysts, that the Respondent expected to earn NPAT in excess of $322 million in the financial year ending 30 June 2014 (August 2013 Earnings Guidance). B.1 August 2013 Earnings Guidance Restated 14. On 9 October 2013, the Respondent, through its CEO Mr Wood, represented that: "While recognizing the uncertainties in world markets, we expect our geographic and sector diversification to provide a solid foundation to deliver increased earnings in FY2014". PARTICULARS Mr Wood's speech to the Respondent's Annual General Meeting held on 9 October 2013, a transcript of which was lodged with the ASX and made publicly available on 9 October 2014 [sic]. 15. On 10 October 2013, the Respondent, through its CEO Mr Wood, represented that the Respondent expected "improved earnings FY14 across all sectors". PARTICULARS Mr Wood's speech at the strategy presentation that the Respondent held for the investment community on 10 October 2013. 16. On 15 October 2013, the Respondent, through its CEO Mr Wood, represented that the Respondent expected "improved earnings FY14 across all sectors" (which, together with the restatements at [14] and [15] above, are referred to as the Restatements). PARTICULARS Mr Wood's presentation to the Macquarie Western Australia Forum. 17. The representations pleaded at paragraphs [14] to [16] reiterated and reconveyed to their intended audience, which relevantly included investors and potential investors in the Respondent and investment analysts, the August 2013 Earnings Guidance. 18 As submitted on behalf of the plaintiff, it is the plaintiff's case that, on three separate occasions (as described in pars 10 to 12 of the ASOC), WorleyParsons made essentially the same representation being a representation to the effect that "while recognising the uncertainties in world markets, [WorleyParsons] expects its geographic and sector diversification to provide a solid foundation to deliver increased earnings in FY2014". On the same day (viz 14 August 2013), WorleyParsons lodged with the ASX and publicly released its 2013 Annual Report to Shareholders. In that Report, WorleyParsons announced a NPAT of $322 million for the year ended 30 June 2013. 19 As pleaded in par 13 of the ASOC, it is the plaintiff's case that, when taken together, the various statements to which I have referred which WorleyParsons made on 14 August 2013 conveyed to the market that WorleyParsons expected to earn a NPAT in excess of $322 million in the Financial Year ending 30 June 2014. The plaintiff refers to the message so conveyed in the ASOC as "the August 2013 Earnings Guidance" thereby suggesting that, by making the statements which it made to the market on 14 August 2013, WorleyParsons gave an earnings guidance for the financial year ending 30 June 2014. 20 At pars 14 to 16 of the ASOC, the plaintiff alleges that WorleyParsons repeated or restated the August 2013 Earnings Guidance on three further occasions, namely, on 9 October 2013, on 10 October 2013 and on 15 October 2013. At par 17, the plaintiff alleges that, by making the statements which he did on the three occasions referred to in pars 14 to 16 of the ASOC, the Chief Executive Officer of WorleyParsons, Mr Wood, reiterated and reconveyed to the market the August 2013 Earnings Guidance. 21 At pars 18 and 19 (Section C) of the ASOC, the plaintiff pleads the following matter: C. NOVEMBER 2013 DOWNGRADE 18. On 20 November 2013, the Respondent issued revised earnings guidance, stating that it expects to report underlying NPAT in the range of $260 million to $300 million for the financial year ending 30 June 2014 (November 2013 Downgrade). PARTICULARS The ASX Release entitled "Trading update" that was lodged with the ASX and publicly released on 20 November 2013. 19. Following the November 2013 Downgrade, WOR Securities fell in value by approximately 25.9% from the closing price on 19 November 2013, to $16.00. 22 The effect of the 20 November 2013 ASX Release made by WorleyParsons was to downgrade, so the plaintiff alleges, the August 2013 Earnings Guidance from a NPAT of a figure in excess of $322 million to a figure in the range of $260 million to $300 million. 23 At par 20 of the ASOC, the plaintiff alleges that the giving of the August 2013 Earnings Guidance on 14 August 2013 and the making of the statements made on 9, 10 and 15 October 2013 as to earnings, was conduct by WorleyParsons in relation to financial products (being WOR securities) within the meaning of s 1041H(1) and s 1041H(2) of the Corporations Act; was conduct by WorleyParsons in trade or commerce and in relation to financial services within the meaning of s 12DA(1) of the ASIC Act; and was conduct engaged in by WorleyParsons in trade or commerce within the meaning of s 18 of Sch 2 to the Competition Act and within the meaning of that section as it applies to the State and Territory analogues of s 18 which are specified in par 20. 24 At pars 21 to 23 (Section D) of the ASOC, the plaintiff pleads facts and matters which he contends justify the conclusion that WorleyParsons contravened one or more of s 1041H(1) of the Corporations Act, s 12DA(1) of the ASIC Act and s 18 of the ACL. Paragraphs 21 to 23 of the ASOC are in the following terms: 21. The representations by which the Respondent conveyed the August 2013 Earnings Guidance and each of the Restatements were representations about a future matter within the meaning of one or more of section 769C of the Corporations Act, section 12BB of the ASIC Act and section 4 of the Australian Consumer Law. 22. The Respondent did not have reasonable grounds for giving the August 2013 Earnings Guidance, nor for any of the Restatements. PARTICULARS (a) The ASX Release entitled "Trading update" that was lodged with the ASX and publicly released on 20 November 2013 did not identify any specific matter in the November 2013 Downgrade as being a fact or circumstance that had arisen since the August 2013 Earning [sic] Guidance. It provided no explanation about why the three identified primary reasons for the profit downgrade (being reduced professional services revenue, implementation of a rigorous costs reduction program and the decline of the Australian and Canadian businesses) were unexpected or unforeseen developments that had occurred since the August 2013 Earnings Guidance. (b) The only material reasons for the profit downgrade on 20 November 2013 were those articulated in the ASX Release. (c) The wording of the ASX Release avoided specificity as to cause, effect or the timing of the factors identified. It is was [sic] the Respondent's ordinary practice (reflected in the 2013 Annual Report) to provide information about performance and expected performance on a sector by sector basis but the Respondent adopted a different approach in its ASX Release by referring to geography rather than by sector. (d) It may be inferred that this was done deliberately because there were no reasonable grounds for the August 2013 Earnings Guidance in the first place. If there was an explanation for the downgrade that was consistent with there having been reasonable grounds for the August 2013 Earnings Guidance it is probable that such an explanation would have been provided, and it was not so provided. The overarching reason provided appears to be that WorleyParsons had experienced 'a delay in upturn in our markets'. This explanation is so general that it is impenetrable. (e) The size of the downgrade and the short period between the giving of the August 2013 Earnings Guidance and Restatements, together with the expression of reasons for the downgrade, supports an inference that there were no reasonable grounds for giving or restating the August 2013 Earnings Guidance. (f) The plaintiff relies upon each of: (i) S.4(2) of the Australian Consumer Law as defined by paragraph [20] above; and (ii) S.12BB(2) of the ASIC Act as defined by paragraph [3(e)] above. 23. By giving the August 2013 Earnings Guidance and making each of the Restatements, the Respondent engaged in conduct that was misleading or deceptive or was likely to mislead or deceive. 25 The following observations may be made about the allegations contained in pars 21 to 23 of the ASOC. 26 First, it is perfectly plain that the plaintiff's case that WorleyParsons engaged in misleading or deceptive conduct is based upon the fundamental contention that the various statements which it made in August and October 2013 constituted representations "with respect to a future matter" within the meaning of that expression as it appears in each of s 769C of the Corporations Act, s 12BB of the ASIC Act and s 4 of the ACL. In his pleading, the plaintiff does not characterise those representations as statements of present fact. In particular, the plaintiff does not allege that WorleyParsons did not, in fact, have any belief in the truth of the forecasts which it gave at the time when it gave those forecasts. Rather, it is the plaintiff's case that WorleyParsons did not have reasonable grounds for giving those forecasts. In my view, pars 21 and 22 of the ASOC cannot be read in any other way. 27 Second, in respect of his claims under s 12DA(1) of the ASIC Act, the plaintiff relies upon s 12BB(2) of the ASIC Act. Similarly, in respect of his claims under s 18 of the ACL and the various State and Territory analogues of that section, the plaintiff relies upon s 4(2) of the ACL. 28 Third, in addition to relying upon the statutory provisions to which I have referred at [27] above, the plaintiff also relies upon the facts and matters specified in subpars (a) to (f) of the particulars set out in par 22 of the ASOC as particulars of his allegation that WorleyParsons did not have reasonable grounds for providing the forecasts which it provided in August and October 2013. That is to say, in par 22, the plaintiff recognises and accepts that he bears the onus of proving that WorleyParsons did not have reasonable grounds for making the alleged representations so that, if the effect of s 12BB(2) of the ASIC Act and of s 4(2) of the ACL is exhausted at trial because WorleyParsons goes into evidence in respect of the issue of whether it had reasonable grounds for making the representations alleged against it, the plaintiff accepts that he must discharge that onus at trial by relevant probative evidence. Of course, he must do that, in any event, in respect of the case which he seeks to make based upon s 1041H of the Corporations Act. 29 The particulars of the allegation made in par 22 come to this: Within three months of giving the August 2013 Earnings Guidance and within just over one month of restating the substance of that guidance, WorleyParsons issued the November 2013 profit downgrade which provided no explanation whatsoever as to why the three primary reasons advanced for the profit downgrade were considered "unexpected or unforeseen developments" that had occurred since August 2013 and also since October 2013. The reasons given by WorleyParsons in the November 2013 profit downgrade were impenetrable and did not provide any real detail as to the cause, effect or timing of the factors identified therein. It is the plaintiff's case that it is a reasonably open inference (and one which should ultimately be accepted at trial), based upon the facts and matters contained in the particulars set out in par 22 of the ASOC, that WorleyParsons did not have reasonable grounds for giving the August 2013 Earnings Guidance nor for the repetition of that guidance in October 2013. 30 I note for completeness that the Corporations Act does not contain a provision similar to or substantially the same as s 12BB(2) of the ASIC Act and s 4(2) of the ACL. For this reason, insofar as the causes of action based upon the Corporations Act are concerned, the plaintiff bears the onus of establishing that WorleyParsons did not have reasonable grounds for providing the forecasts which it did, unaided by provisions such as s 12BB(2) of the ASIC Act. 31 In pars 25 to 29 (Section E) of the ASOC, the plaintiff pleads his case based upon WorleyParsons' alleged failure to comply with the continuous disclosure requirements imposed upon it by s 674 of the Corporations Act. 32 Paragraphs 25 to 29 of the ASOC are in the following terms: E. BREACH OF CONTINUOUS DISCLOSURE OBLIGATIONS 25. Immediately after giving the August 2013 Earnings Guidance and, further or alternatively, on each successive day afterwards, the Respondent was aware that it did not have reasonable grounds for giving the August 2013 Earnings Guidance (the Material Information). PARTICULARS (a) The Applicant repeats the particulars to paragraph [22] above. (b) The person or persons within the Respondent who were responsible for formulating or involved in formulating the August 2013 Earnings Guidance and approving the Restatements (which includes at least Mr Wood) had the awareness. The Applicant is not at this stage able to provide better particulars of the particular persons who had the relevant awareness. (c) The Applicant reserves the right to provide further particulars once discovery, and any other document production, have been concluded in these Proceedings. 26. The Material Information was information that: (a) concerned the Respondent; (b) was not generally available during the Relevant Period; (c) a reasonable person would expect, if it was generally available, to have a material effect on the price or value of the WOR Securities; and (d) would be likely to influence persons who commonly invest in securities in deciding whether to acquire or dispose of the WOR Securities. 27. From 13 August 2013 immediately after giving the August 2013 Earnings Guidance and throughout the Relevant Period, the Respondent was required by Listing Rule 3.1 to inform the ASX of the Material Information. 28. The Respondent did not inform the ASX of the Material Information in the Relevant Period. 29. On 14 August 2013, and on each day during the Relevant Period, the Respondent contravened section 674(2) of the Corporations Act. 33 At par 5(b) of the ASOC, the plaintiff pleads and relies upon the specific definition of "aware" as used in Listing Rule 3.1. When the word "aware" is used in par 25 of the ASOC, it is capable of being interpreted as encompassing both actual awareness and constructive awareness. In submissions made at the hearing before me, the plaintiff disavowed any reliance upon any notion of constructive awareness and made perfectly plain that his case is that one or more officers of WorleyParsons was actually aware at the time the various forecasts were given that WorleyParsons did not have reasonable grounds for giving those forecasts. I think that the position should be made perfectly clear in the pleading itself. For this reason, I would be disposed to permit the plaintiff to make an amendment to par 25 in order to remove any possible suggestion that he is relying upon any notion of constructive awareness. 34 The plaintiff's case based upon WorleyParsons' failure to meet its continuous disclosure obligations is a rather curious one. His misleading and deceptive conduct case depends upon the Court accepting that the various representations referred to in the ASOC were made at a time when WorleyParsons had no reasonable grounds for making them. His additional case based upon contravention of s 674(2) of the Corporations Act depends upon his succeeding in his misleading and deceptive conduct case and upon his also making good the proposition that WorleyParsons, through one or more of its officers, was aware, at the time when each of the forecasts was given, that it did not have reasonable grounds for giving that particular forecast. The plaintiff does not appear to be seeking different or greater damages in respect of the alleged contraventions of s 674(2) of the Corporations Act and, as presently advised, it seems to me that it would be rather difficult for him to do so. One wonders, therefore, what real additional benefit is to be gained by the plaintiff by maintaining his case based upon s 674(2) of the Corporations Act. Of course, these incidental observations of mine do not mean that the plaintiff's case based upon s 674(2) of the Corporations Act should be struck out. Rather, these observations merely lead to the inevitable question: What benefit is to be gained, in truth, from relying upon such a case? In the end, in the event that WorleyParsons fails to secure an order striking out the ASOC or the critical paragraphs of the ASOC, it will be a matter for the plaintiff to decide whether he wishes to press this cause of action. 35 In pars 30, 31, 32 and 33 (Section F) of the ASOC, the plaintiff pleads the facts, matters and circumstances relied upon by him to establish the necessary causal link between the statutory contraventions alleged against WorleyParsons earlier in the ASOC and the loss or damage claimed by the plaintiff and the group members at par 33 of the ASOC. Those paragraphs are in the following terms: F. CAUSATION, LOSS AND DAMAGE F.1 Contraventions caused loss to the Applicant and the Group Members 30. During the Relevant Period the Respondent, by reason of any one or more of the contraventions pleaded at paragraphs [24] and [29] above (the Market Contraventions), caused the market price for WOR Securities to be substantially greater than either or both of: (a) their true value; and (b) the market price that would have prevailed but for any one or more of the Market Contraventions. PARTICULARS (i) During the Relevant Period, WOR Securities were traded in a market of investors and potential investors operated by the ASX and regulated by, inter alia, sections 674(2) and 1041H of the Corporations Act and Rules 3.1, 4.3A and 4.3D of the Listing Rules. (ii) The price or value of WOR Securities would reasonably be expected to have been informed or effected by information disclosed in accordance with sections 674(2) of the Corporations Act and Rules 3.1, 4.3A and 4.3D of the Listing Rules, and by the conduct of the Respondent alleged in this statement of claim to be in contravention of section 1041H of the Corporations Act and section 12DA of the ASIC Act and section 18 of the Australian Consumer Law. (iii) The August 2013 Earnings Guidance and each of the Restatements was conduct that a reasonable person would expect to have a material effect on the price or value of WOR Securities. (iv) The Material Information was information that a reasonable person would expect, had it been disclosed, would have had a material effect on the price or value of WOR Securities. (v) The non disclosure of the Material Information, and the giving of the August 2013 Earnings Guidance and each of the Restatements, led to investment analysts giving more favourable ratings to the WOR Securities than would have otherwise been the case. (vi) Had the Respondent disclosed the Material Information as required by law, the market price of the WOR Securities would have reflected their true value. (vii) Falls in the price of WOR Securities on and after 20 November 2013 were caused or materially contributed to by the release of information to the market that had not been previously revealed because of one or more of the Market Contraventions. 31. In the decision to acquire an interest in WOR Securities, the Applicant and some Group Members relied directly on one or more of the August 2013 Earnings Guidance and the Restatements. 32. Further or in the alternative, by reason of the matters pleaded in paragraph 31 above [sic], in the decision to acquire an interest in WOR Securities, some Group Members relied indirectly upon on [sic] one or more of the August 2013 Earnings Guidance and the Restatements. F.2 Loss or damage suffered by the Applicant and Group Members 33. The Applicant and Group Members have suffered loss and damage by and resulting from one or more of the Market Contraventions. PARTICULARS The loss suffered by the Applicant is: (a) the difference between the price at which he acquired his interest in WOR Securities during the Relevant Period and the true value of that interest as at the date of purchase; or (b) the difference between the price at which he acquired an interest in WOR Securities during the Relevant Period and the market price that would have prevailed as at the date of purchase had the Market Contraventions not occurred. Further particulars in relation to the Applicant's losses will be provided after the service of opinion evidence in chief. 36 By par 31 of the ASOC, the plaintiff relies upon actual direct reliance by him and some of the group members upon the forecasts given by WorleyParsons in August and October 2013 when deciding whether or not to purchase WOR securities. By par 32, the plaintiff invokes (on behalf of other group members but perhaps not on his own behalf) the concept known as "market based causation theory" being a well-understood concept which is almost always invoked by the plaintiff in every investor class action (as to which, see Caason Investments Pty Ltd v Cao (2015) 236 FCR 322 at 332-334 [59]-[72] per Gilmour and Foster JJ and at 352 [152]-[155] per Edelman J; and see also Re HIH Insurance Ltd (In Liq) (2016) 335 ALR 320 at 334-350 [43]-[78] per Brereton J). 37 At the hearing before me, Senior Counsel for the plaintiff drew my attention and the attention of his opponent to the fact that there is a typographical error in par 32. He said that the reference in the first line of that paragraph to par 31 should have been a reference to par 30. The plaintiff should be given leave to amend par 32 so as to correct this minor referencing error. 38 In par 33, the plaintiff advances alternative bases for the assessment of his loss and the losses of group members.

The Relevant Statutory Provisions 39 Section 1041H(1) of the Corporations Act provides: A person must not, in this jurisdiction, engage in conduct, in relation to a financial product or a financial service, that is misleading or deceptive or is likely to mislead or deceive. Note 1: Failure to comply with this subsection is not an offence. Note 2: Failure to comply with this subsection may lead to civil liability under section 1041I. For limits on, and relief from, liability under that section, see Division 4. 40 In the present case, the plaintiff says that the contravening conduct took place in relation to a financial product, not a financial service. 41 Section 1041H(2) fleshes out the concept of "… engaging in conduct in relation to a financial product …". Section 1041H(3) provides that certain specific conduct, which might otherwise constitute contravening conduct, is not contravening conduct under s 1041H(1). At the moment, s 1041H(3) appears not to be relevant to the present case. 42 "Financial product" is defined in Pt 7.1, Div 3 of the Corporations Act. 43 Failure to comply with the statutory norm of conduct specified in s 1041H(1) is not an offence. However, a person who suffers loss or damage by the conduct of another person that was engaged in in contravention of s 1041H(1) may recover the amount of that loss or damage by action against that other person (s 1041I(1)). That entitlement to statutory compensation is subject to the terms of subsections (1A) to (4) of s 1041I and is also subject to Pt 7.10, Div 4. 44 Section 674(1) and s 674(2) are in the following terms: 674 Continuous disclosure - listed disclosing entity bound by a disclosure requirement in market listing rules Obligation to disclose in accordance with listing rules (1) Subsection (2) applies to a listed disclosing entity if provisions of the listing rules of a listing market in relation to that entity require the entity to notify the market operator of information about specified events or matters as they arise for the purpose of the operator making that information available to participants in the market. (2) If: (a) this subsection applies to a listed disclosing entity; and (b) the entity has information that those provisions require the entity to notify to the market operator; and (c) that information: (i) is not generally available; and (ii) is information that a reasonable person would expect, if it were generally available, to have a material effect on the price or value of ED securities of the entity; the entity must notify the market operator of that information in accordance with those provisions. Note 1: Failure to comply with this subsection is an offence (see subsection 1311(1)). Note 2: This subsection is also a civil penalty provision (see section 1317E). For relief from liability to a civil penalty relating to this subsection, see section 1317S. Note 3: An infringement notice may be issued for an alleged contravention of this subsection, see section 1317DAC. 45 Compensation for loss as a result of a person's failure to comply with s 674(1) and s 674(2) may be recovered pursuant to s 1317HA of the Corporations Act. 46 Section 12DA(1) of the ASIC Act provides: 12DA Misleading or deceptive conduct (1) A person must not, in trade or commerce, engage in conduct in relation to financial services that is misleading or deceptive or is likely to mislead or deceive. 47 For the purposes of s 12DA(1), engaging in conduct in relation to financial services includes dealing in a financial product (s 12BAB(1)(b)). Dealing in a financial product includes issuing a financial product (s 12BAB(7)(b)). 48 As was the case under s 1041H(3) of the Corporations Act, under s 12DA(1A), certain specific conduct, which might otherwise constitute contravening conduct, is deemed not to be contravening conduct under s 12DA(1). 49 Section 12GF(1) of the ASIC Act provides: 12GF Actions for damages (1) A person who suffers loss or damage by conduct of another person that contravenes a provision of Subdivision C (sections 12CA to 12CC) or Subdivision D (sections 12DA to 12DN) may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention. 50 The entitlement to statutory compensation provided for in s 12GF(1) is also subject to various limitations and constraints specified in subss (1A), (1B) and (2) of s 12GF of the ASIC Act. These are not presently relevant. 51 Section 769C of the Corporations Act is in the following terms: 769C Representations about future matters taken to be misleading if made without reasonable grounds (1) For the purposes of this Chapter, or of a proceeding under this Chapter, if: (a) a person makes a representation with respect to any future matter (including the doing of, or refusing to do, any act); and (b) the person does not have reasonable grounds for making the representation; the representation is taken to be misleading. (2) Subsection (1) does not limit the circumstances in which a representation may be misleading. (3) In this section: proceeding under this Chapter has the same meaning as it has in section 769B. 52 Section 18(1) of the ACL provides: 18 Misleading or deceptive conduct (1) A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. 53 It is not necessary to refer expressly to the State and Territory analogues of s 18. 54 Section 236 of the ACL provides: Division 3 - Damages 236 Actions for damages (1) If: (a) a person (the claimant) suffers loss or damage because of the conduct of another person; and (b) the conduct contravened a provision of Chapter 2 or 3; the claimant may recover the amount of the loss or damage by action against that other person, or against any person involved in the contravention. (2) An action under subsection (1) may be commenced at any time within 6 years after the day on which the cause of action that relates to the conduct accrued. 55 Section 12BB of the ASIC Act is in the following terms: 12BB Misleading representations with respect to future matters (1) If: (a) a person makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act); and (b) the person does not have reasonable grounds for making the representation; the representation is taken, for the purposes of Subdivision D (sections 12DA to 12DN), to be misleading. (2) For the purposes of applying subsection (1) in relation to a proceeding concerning a representation made with respect to a future matter by: (a) a party to the proceeding; or (b) any other person; the party or other person is taken not to have had reasonable grounds for making the representation, unless evidence is adduced to the contrary. (3) To avoid doubt, subsection (2) does not: (a) have the effect that, merely because such evidence to the contrary is adduced, the person who made the representation is taken to have had reasonable grounds for making the representation; or (b) have the effect of placing on any person an onus of proving that the person who made the representation had reasonable grounds for making the representation. (4) Subsection (1) does not by implication limit the meaning of a reference in this Division to: (a) a misleading representation; or (b) a representation that is misleading in a material particular; or (c) conduct that is misleading or is likely or liable to mislead; and, in particular, does not imply that a representation that a person makes with respect to any future matter is not misleading merely because the person has reasonable grounds for making the representation. 56 Section 4 of the ACL provides: 4 Misleading representations with respect to future matters (1) If: (a) a person makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act); and (b) the person does not have reasonable grounds for making the representation; the representation is taken, for the purposes of this Schedule, to be misleading. (2) For the purposes of applying subsection (1) in relation to a proceeding concerning a representation made with respect to a future matter by: (a) a party to the proceeding; or (b) any other person; the party or other person is taken not to have had reasonable grounds for making the representation, unless evidence is adduced to the contrary. (3) To avoid doubt, subsection (2) does not: (a) have the effect that, merely because such evidence to the contrary is adduced, the person who made the representation is taken to have had reasonable grounds for making the representation; or (b) have the effect of placing on any person an onus of proving that the person who made the representation had reasonable grounds for making the representation. (4) Subsection (1) does not limit by implication the meaning of a reference in this Schedule to: (a) a misleading representation; or (b) a representation that is misleading in a material particular; or (c) conduct that is misleading or is likely or liable to mislead; and, in particular, does not imply that a representation that a person makes with respect to any future matter is not misleading merely because the person has reasonable grounds for making the representation.

Rule 16.21 FCR 57 Although in its Interlocutory Application, WorleyParsons did not specify which particular grounds set out in r 16.21(1) FCR upon which it relied in support of its strike out application, in submissions before me it made clear that it relied upon subpars (d), (e) and (f) of r 16.21(1). Further, insofar as subpar (d) is concerned, WorleyParsons confined itself to the proposition that the pleading is likely to cause embarrassment. 58 Rule 16.21(1) relevantly provides: 16.21 Application to strike out pleadings (1) A party may apply to the Court for an order that all or part of a pleading be struck out on the ground that the pleading: … (d) is likely to cause … embarrassment …; or (e) fails to disclose a reasonable cause of action or defence or other case appropriate to the nature of the pleading; or (f) is otherwise an abuse of the process of the Court. 59 In r 16.21(1)(d), a pleading is embarrassing if it is unintelligible, ambiguous, vague, evasive or too general with the consequence that the opposite party is "embarrassed" because that party does not know what is alleged against him or her (Fair Work Ombudsman v Eastern Colour Pty Ltd (2011) 209 IR 263). A pleading which is internally inconsistent is also embarrassing (Spiteri v Nine Network Australia Pty Ltd [2008] FCA 905). 60 A pleading is also embarrassing within the subrule if it simply asserts a conclusion to be drawn from facts which are not stated. 61 For the purposes of r 16.21(1)(e), the power to strike out a pleading because it discloses no reasonable cause of action will be exercised only in a plain and obvious case. Leave to replead will be refused if no reasonable amendment can cure the alleged defect and if there is no reasonable question to be tried (Polar Aviation Pty Ltd v Civil Aviation Safety Authority (2012) 203 FCR 325 at 337 [43] per Perram, Dodds-Streeton and Griffiths JJ). 62 Abuse of process is a very broad concept. For example, proceedings brought for an improper purpose or which are hopeless constitute an abuse of process. 63 In the present case, it is difficult to discern any particular matter in the ASOC which WorleyParsons contended "otherwise" constitutes an abuse of the process of the Court within the meaning of that expression in r 16.21(1)(f). WorleyParsons' approach seemed to be to identify alleged defects in the ASOC and to then assert that it should be struck out on one or more of the grounds specified in rr 16.21(1)(d), (e) and (f) FCR without being too particular about which specific ground justified the striking out of the allegedly defective material. 64 Of course, whether the Court should strike out a pleading involves the exercise of discretionary judgment.

The Requirements of Pleading in relation to a Statement of Claim 65 At pars 4 and 5 of its Written Outline of Submissions dated and filed on 4 March 2016, WorleyParsons made the following submissions: 4. The usual rules of pleading are equally applicable in representative proceedings. It is well established that the function of the statement of claim is to set out with sufficient clarity the case which a respondent must meet. It is also clear that in so doing, the statement of claim must plead all material facts necessary to constitute a complete cause of action. As Croft J observed in Clarke & Ors v Great Southern Finance Pty Ltd (in liq) & Ors: "It should also be stressed, particularly in the present context, that it is necessary to allege what must be a cause of action, not merely what might be one." 5. Critically, a pleading must contain all material facts on which the party relies and proper particulars of those material facts and accordingly, it is insufficient to state conclusions drawn from unstated facts. Such a requirement is necessary to ensure that the Court and respondent can understand the case to be met and assess whether or not the applicant's claim exists and is one known to the law. Similarly, the object of particulars is to limit the generality of the pleading and prevent the respondent being taken by surprise at the trial. Particulars serve to limit the issues of fact to be investigated. Accordingly, an applicant must plead the cause of action to be made at trial with sufficient particularity to serve the purposes identified above. (Footnotes and authorities therein omitted) 66 At the level of generality at which those Submissions were made, they are correct and I accept them. However, the resolution of the competing arguments made in relation to WorleyParsons' present strike out application requires the Court to apply those principles to the circumstances of the present case, appreciating all the while that, when considering whether or not to strike out a Statement of Claim upon one or more of the grounds specified in r 16.21(d), (e) and (f) FCR, the Court would usually take the pleading at face value and would not usually engage in some kind of preliminary assessment of the evidence that might be led in support of the allegations made in the pleading and of the evidence that might be led against those allegations. Such an assessment of the evidence should ordinarily await the trial.

The Alleged Defects in the ASOC 67 In this section of these Reasons, I propose to identify and explain each of the defects in the ASOC which WorleyParsons contended are present in that pleading, to evaluate the arguments advanced in support and against those contentions and to record my decision in relation to each of those contentions.

Absence of Reasonable Grounds for the Earnings Guidance 68 In its Written Outline of Submissions, WorleyParsons submitted that there is a real question as to whether the representations pleaded by the plaintiff in the present case constitute representations with respect to future matters or are more correctly characterised as statements of fact. As already noted, the plaintiff says that his pleaded case is that all of those representations were made with respect to future matters. The plaintiff took issue with WorleyParsons' submissions in this respect, arguing that the proper characterisation of the representations in question is a matter for trial. In oral submissions before me, Senior Counsel for WorleyParsons accepted that the proper characterisation of the statements in question is ultimately a matter for the trial. 69 It was then submitted on behalf of WorleyParsons that, in order to make good his core contention that WorleyParsons engaged in misleading or deceptive conduct by giving the forecasts as to earnings which it gave in the latter part of 2013, the plaintiff must plead and establish, as a necessary element of his cause of action, that WorleyParsons lacked reasonable grounds for making the representations. 70 Senior Counsel for WorleyParsons went on to submit that a plea of "lack of reasonable grounds" requires that the facts and circumstances actually known to the relevant person did not, when taken as a whole, reasonably support the opinion or forward looking statement. 71 At [24]-[30] above, I have set out and explained pars 21 to 23 of the ASOC. As I said in those paragraphs of these Reasons, it seems to me that the plaintiff accepts that he bears the onus of proving that WorleyParsons did not have reasonable grounds for making the alleged representations. He may be aided in this endeavour in respect of his causes of action under the ASIC Act and under the ACL by s 12BB(2) of the ASIC Act and s 4 of the ACL respectively. But, whatever role those sections might play in due course at the trial, the ultimate onus remains with the plaintiff. As I said in SPAR Licensing Pty Ltd v MIS Qld Pty Ltd (2014) 314 ALR 35 (SPAR) at 55-57 [71]-[77], the question of where the ultimate onus lies was finally put to rest by two Full Court decisions, North East Equity Pty Ltd v Proud Nominees Pty Ltd (2010) 269 ALR 262 (North East No 1) and North East Equity Pty Ltd v Proud Nominees Pty Ltd (2012) 285 ALR 217 (North East No 2). In SPAR, at 55-57 [71]-[77], I said: For some time, there was a conflict of authority in this court as to the effect of s 51A(2). One line of authority (exemplified by the judgment of Emmett J in Australian Competition and Consumer Commission v Universal Sports Challenge Ltd [2002] FCA 1276) stood for the proposition that all that s 51A(2) did was to cast an evidential burden on the respondent to adduce "evidence to the contrary", that is to say, to adduce some evidence tending to establish that it had reasonable grounds for making the alleged statement at the time when it was made, rather than require the respondent to prove on the balance of probabilities that it had such reasonable grounds. The other line of authority (exemplified by the judgment of Stone J in Lewarne v Momentum Productions Pty Ltd [2007] FCA 1136) was to the effect that the deeming consequences of the engagement of s 51A(2) can only be defeated by a respondent who proves on the balance of probabilities that it had reasonable grounds for making the statement at the time when it was made. This view imposed the ultimate onus of proof in respect of the issue of reasonable grounds upon the respondent (representor). The above difference of opinion was resolved by the Full Court in North East Equity Pty Ltd v Proud Nominees Pty Ltd (2010) 269 ALR 262; [2010] FCAFC 60 at [29]-[35] where the court said: [29] Section 51A(2) imposes an evidential burden on a respondent. It does not impose on a respondent the legal or persuasive burden of proving that reasonable grounds existed for making the representation alleged: see Australian Competition and Consumer Commission v Universal Sports Challenge [2002] FCA 1276 at [46] (Universal Sports). In Fubilian Catering Services Ltd v Compass Group (Aust) Pty Ltd [2007] FCA 1205 at [545] (Fubilian), French J said: "[545] Section 51A ' … does not of itself create a cause of action, nor define a norm of conduct' … It does not create a cause of action independent of that created by s 52 when read with s 82 … It certainly casts the 'evidential burden' on the respondent in the sense of an obligation to adduce evidence on the issue of whether there were reasonable grounds for making the representation. It does not impose on the representor the legal or persuasive burden to prove that it had reasonable grounds for making the representations alleged … [T]he section does not refer to the onus of proof when it applies. It merely requires the alleged representor to 'adduce evidence to the contrary'. There may be a question whether the representor can discharge the evidential burden by pointing to evidence which forms part of the applicant's case. In my opinion a respondent may rely upon evidence called by an applicant which answers the description 'evidence to the contrary'." [30] Later at [548], French J said: "[548] … The causal connection between the respondent's conduct [in a case based on statements of future fact] and the loss or damage claimed is not the breaking of the promise or the failure of the prediction. The causal connection which must be shown to exist is a causal connection between the loss or damage claimed and the making of the promise or prediction without reasonable grounds." [31] The observations of French J recorded at [29] and [30] were applied by the primary judge in the interlocutory ruling referred to at [25]: North East Equity Pty Ltd v Proud Nominees Pty Ltd [2007] FCA 1587 at [19]-[21]. [32] An appeal to the Full Court in Fubilian was dismissed: Fubilian Catering Services Ltd v Compass Group (Aust) Pty Ltd [2008] FCAFC 53, but there was no discussion of the matters canvassed at [29]-[30]. [33] What is said in Universal Sports and Fubilian about the evidential burden as opposed to onus of proof is important in the present case. If s 51A(1) stood alone, an applicant would have to establish the absence of reasonable grounds for making the representation. Without that, the cause of action under s 52 would be incomplete. The deeming effect of subs (2) arises only when the representor fails to adduce evidence to the contrary; that is to say, some evidence that it had reasonable grounds for making the representation. Once the representor discharges that evidential burden, the matter is thereafter dealt with under subs (1), the obligation being on the applicant to establish that the representor did not have reasonable grounds for making the representation. [34] The respondents illustrated the operation of the two components of s 51A by reference to one of the matters in its list of reasonable grounds, namely Proud Machinery's letter of 30 September 2002 containing the pack out rate per hour representation. After making the representation the writer went on to explain its basis - "I have used the following as a basis of our calculation". Then are set out pre pack line, carton filler and hand line calculations which, says the writer, explain how "we are able to achieve the desired pack out of 18.75 tonnes per hour". The respondents submitted that while the court may not accept that the letter in fact establishes the existence of reasonable grounds, it nevertheless qualifies as "evidence to the contrary" so as to discharge the evidential burden in s 51A(2). Thus the issue reverts to subs (1) which, say the respondents, "depends entirely upon the applicant satisfying the court that the representation … is in fact misleading or deceptive as s 52 requires". [35] We accept the thrust of this submission, though we think it more accurate to say that once evidence to the contrary is adduced, an applicant must, in order to establish a s 52 contravention, satisfy the court under s 51A(1) that the representor does not have reasonable grounds for making the representation. A differently constituted Full Court expressed the same views in North East Equity Pty Ltd v Proud Nominees Pty Ltd (2012) 285 ALR 217; [2012] FCAFC 1 at [28]-[34]. Thus, the ultimate onus of proof in respect of the issue of reasonable grounds rests with the applicant (the representee), that is to say, in a case where reliance is placed upon s 51A, once "evidence to the contrary" is adduced by the respondent (representor), it always was and remains part of the applicant's case to prove that the maker of the statement did not have reasonable grounds for making the statement at the time when it was made. Here, the MIS cross-claimants should have pleaded that Mr Gale did not have reasonable grounds for making the representations pleaded in para 14 of the cross-claim at the time when he made those representations and should also have pleaded that they relied on s 51A if, indeed, they intended to do so. It is highly undesirable that a case of misleading and deceptive conduct based upon representations as to future matters should have proceeded as the present case did with no reference in the pleadings or submissions to s 51A or to the issue of reasonable grounds. In this court, there is authority for the proposition that a party who wishes to rely upon s 51A ought specifically plead that it intends to rely upon that provision or ought at least to notify the counter-party that it intends to rely upon that provision: see O'Neill v Medical Benefits Fund of Australia Ltd (2002) 122 FCR 455; [2002] FCAFC 188 at [15]-[21]. Only in that way can the counter-party be placed on fair notice that it is required to adduce "evidence to the contrary" (see s 51A(2)) if it is to avoid the deeming effect of s 51A(2). In my view, a party who wishes to rely upon s 51A (or its equivalent in the Australian Consumer Law) should specifically plead its intention to do so in the first pleading where it is appropriate to do so. Although not bearing any ultimate onus of proof on the issue of reasonable grounds, the counter-party ought then be required to plead that it had reasonable grounds for making the relevant statement and to specify with particularity the nature of those grounds and, by way of particulars, the substance of the evidence it intends to adduce to establish those grounds. 72 I adhere to those views. 73 WorleyParsons (correctly) recognised that the critical paragraph in respect of the question of whether or not WorleyParsons had reasonable grounds for giving the earnings guidance which it gave is par 22 of the ASOC. It submitted that the plaintiff's pleading as to the absence of reasonable grounds on the part of WorleyParsons is wholly inadequate. It submitted that the plaintiff was required by r 16.43 FCR to provide adequate particulars of the facts upon which he relies in support of the allegation that WorleyParsons had no reasonable expectation in relation to its FY14 earnings. WorleyParsons then contended that the particulars set out in par 22 of the ASOC rose no higher than speculation or conjecture. 74 At [29] above, I have set out the plaintiff's contentions that, at the times the earnings guidance was given, WorleyParsons did not have reasonable grounds for giving that guidance. The question at the moment is whether the case sought to be made by the plaintiff has been sufficiently articulated in par 22 of the ASOC (read with the earlier relevant paragraphs of the ASOC) and whether there is a sufficient basis in the material available to the plaintiff for the allegations which he makes in par 22. While it is correct to say (as WorleyParsons does) that the plaintiff bases his case in respect of absence of reasonable grounds upon a process of inference, it is not a correct approach to WorleyParsons' strike out application to trawl through some of the evidence that is likely to be led at the trial in order to demonstrate that the inference which the plaintiff seeks the Court to draw would not ultimately be drawn by the Court. It must be remembered that the task which the plaintiff has necessarily undertaken involves an exploration of the state of mind of the relevant human actors within WorleyParsons who caused the earnings guidance to be given. It is notoriously difficult for a litigant in the position of the plaintiff to prove the state of mind of his or her opponent. As I said in SPAR, once a plaintiff invokes in his Statement of Claim as part of his litigious armoury, the evidentiary advantages provided by sections like s 12BB(2) of the ASIC Act, the defendant is obliged to specify in its Defence whether it contends that it had reasonable grounds for making the relevant representations and, if so, to set out with particularity the substance of those grounds so that the litigation goes forward to trial with a clear framework as to the scope of the contest concerning whether or not the representor had reasonable grounds and the evidence that will likely be led in respect of that contest. The true position is that, once the plaintiff has made a justifiable and supportable allegation in his or her pleading to the effect that the relevant representor did not have reasonable grounds for making the representations as to future matters which are in question in the proceeding, it is incumbent upon the representor to take up the question in the manner that I have described if it intends to assert that it did have reasonable grounds for making those representations. Were it otherwise, a plaintiff would almost always fail at the outset because he or she would not be able to plead at the outset all matters upon which he or she would ultimately rely at the trial in support of his or her allegation that the representations were made without reasonable grounds. This is the approach reflected in the observations made by Merkel J in Johnson Tiles Pty Ltd v Esso Australia Ltd (1999) ATPR 41-679 at [26] and by Mason P in City of Botany Bay Council v Jazabas Pty Ltd (2001) ATPR 46-210 at [83]-[86]. In the latter case, his Honour cited with approval the judgment of Heerey J in Sykes v Reserve Bank of Australia (1998) 88 FCR 511 at 513. That passage in the judgment of Heerey J must now be regarded as no longer representing the law in light of the Full Court decisions in North East No 1 and North East No 2. 75 WorleyParsons then made a number of very detailed submissions by reference to documents exhibited to Mr Betts' affidavit in order to demonstrate that the Court would never draw the inference which the plaintiff seeks to have the Court draw based upon the existing particulars in par 22 of the ASOC. These submissions may carry considerable weight at the trial but, of course, whether they do or not will depend upon all of the evidence admitted at the trial. At the present time, however, at the pleading stage, they are beside the point. The real question in the present context is whether there is sufficient material in par 22 to justify allowing the pleading to stand. I am of the view that there is sufficient material in that paragraph to allow the pleading to stand. The August earnings guidance was given a little over three months before the November earnings downgrade. It was repeated in mid-October, only a month before the earnings downgrade. The close proximity in time between the giving of the earnings guidance and the November earnings downgrade, in and of itself, is sufficient to require an explanation from WorleyParsons as to the basis upon which the August 2013 and October 2013 earnings guidance was given and the reasons for the change in WorleyParsons' opinion as to future earnings between those dates and the date when the November earnings downgrade was given. In argument before me, Senior Counsel for WorleyParsons endeavoured to demonstrate that a satisfactory explanation of these matters was provided by WorleyParsons in its release to the ASX on 20 November 2013. Once again, however, this argument developed into a detailed consideration of matters which can only ultimately be determined at the trial. 76 For reasons which I have explained, I am not persuaded that par 22 does not contain sufficient facts, matters and circumstances to support the allegation that, when it gave the earnings guidance in August 2013 and again in October 2013, WorleyParsons did not have reasonable grounds for giving that guidance. 77 It was ultimately submitted on behalf of WorleyParsons that the case sought to be made by the pleading and particulars in par 22 of the ASOC is inconsistent with the reasoning of the Full Court in Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 (Global Sportsman) at 88 where the Court said: The non-fulfilment of a promise when the time for performance arrives does not of itself establish that the promisor did not intend to perform it when it was made or that the promisor's intention lacked any, or any adequate, foundation. Similarly, that a prediction proves inaccurate does not of itself establish that the maker of the prediction did not believe that it would eventuate or that the belief lacked any, or any adequate, foundation. Likewise, the incorrectness of an opinion (assuming that can be established) does not of itself establish that the opinion was not held by the person who expressed it or that it lacked any, or any adequate, foundation. The applicants argued that, nevertheless, the statement of an incorrect opinion is misleading or deceptive or likely to mislead or deceive merely because it misinforms or is likely to misinform. An expression of opinion which is identifiable as such conveys no more than that the opinion expressed is held and perhaps that there is basis for the opinion. At least if those conditions are met, an expression of opinion, however erroneous, misrepresents nothing. I do not agree with this submission. The plaintiff's case is not inconsistent with the reasoning in Global Sportsman. 78 The propositions explained by the Full Court in Global Sportsman were based upon the earlier decision of the Court in Bill Acceptance Corporation Ltd v GWA Ltd (1983) 50 ALR 242. 79 It is these two cases in particular which together constitute the basal authority for the proposition that, ordinarily, if a representor makes a statement which is a statement of opinion or which is a statement in respect of a future matter, that person thereby represents that he or she holds the relevant opinion or has an honest belief about the future matter (as the case may be) and also that there is a reasonable basis for the opinion and for the belief about the future matter. These ideas are now embodied in a number of statutory provisions (eg s 12BB(1) of the ASIC Act).

The Non Disclosure Case 80 WorleyParsons also challenged the adequacy of the plaintiff's articulation of his non disclosure case based upon a contravention of s 674(2) of the Corporations Act. 81 A number of submissions were made in writing on behalf of WorleyParsons to the effect that the plaintiff had pleaded both actual and constructive knowledge of the relevant undisclosed material. It was then submitted on behalf of WorleyParsons that the awareness required by s 674(2) is actual awareness, not constructive awareness. 82 The plaintiff accepted this last proposition and informed both WorleyParsons and the Court that he never intended to plead or rely upon constructive awareness and that par 25 of the ASOC does not include a plea of constructive awareness. As I mentioned at [33] above, I think there is some potential for ambiguity in respect of this aspect of par 25 and it should be clarified by an appropriate amendment. 83 WorleyParsons also submitted that the plaintiff's non disclosure case was dependent upon his establishing his misleading or deceptive conduct case. This submission is correct. It was also submitted on behalf of WorleyParsons that, because par 22 of the ASOC should be struck out and because the non disclosure case, as pleaded, was dependent upon the contents of par 22, par 25 should also be struck out. Given that I am not prepared to strike out par 22, this particular argument must be rejected. 84 WorleyParsons then argued that the particulars provided in par 25 are wholly inadequate as particulars of the allegations that WorleyParsons was aware that it lacked reasonable grounds for providing the earnings guidance which it provided. In support of that proposition, WorleyParsons cited a passage from the judgment of Reeves J in Australian Securities and Investments Commission v Storm Financial Ltd (Receivers and Managers Appointed) (In Liq) (No 6) [2012] FCA 996 at [14] where his Honour said: MBL's knowledge of Storm's alleged promotion of an unregistered managed investment scheme in contravention of the Corporations Act 2001 (Cth) is one of the central elements of ASIC's case against MBL. As a corporation, that knowledge could only be held by its human agents, namely its officers. It was therefore incumbent upon ASIC to particularise precisely which of MBL's officers are alleged to have had the requisite knowledge, what that knowledge was, how it was obtained and when that knowledge was held. Apart from anything else, ASIC was required to do this in order to comply with Rule 16.43 of the Federal Court Rules 2011, which provides: (a) A party who pleads a condition of mind must state in the pleading particulars of the facts on which the party relies. (b) If a party pleads that another party ought to have known something, the party must give particulars of the facts and circumstances from which the other party ought to have acquired the knowledge. (c) In this rule: condition of mind, for a party, means: (a) knowledge; and (b) any disorder or disability of the party's mind; and (c) any fraudulent intention of the party. 85 Rule 16.43(1) FCR provides that a party who pleads a condition of mind must state in the pleading particulars of the facts upon which that party relies. So much may be accepted. The real issue here is whether the plaintiff has satisfied the requirements of that rule. 86 Here, the plaintiff has specified what the knowledge was and who had that knowledge (subject to supplementation). The particulars are not very detailed as to how the knowledge was obtained or when the knowledge was obtained although it seems that the plaintiff will be relying upon a process of inference as he proposes to do, at least to some extent, in relation to the misleading or deceptive conduct case which he has brought. 87 Senior Counsel for WorleyParsons also argued that, in truth, the plaintiff's non disclosure case is tantamount to an allegation of fraud or dishonest conduct and thus requires very specific particularisation. She urged that submission upon the Court because, so she argued, if Mr Wood and possibly other executives of WorleyParsons were aware in August 2013 and again in October 2013 that WorleyParsons had no reasonable basis for providing the earnings guidance which was provided at each of those times then, as night follows day, Mr Wood and whoever else was involved were knowingly engaging in misleading and deceptive conduct. 88 Senior Counsel for the plaintiff disavowed any case of fraud or dishonesty. In particular, he did not embrace the proposition that Mr Wood (and possibly other executives within WorleyParsons) did not honestly and actually believe that there was good reason for providing the earnings guidance which was provided in August 2013 and again in October 2013. It was submitted on behalf of the plaintiff that a person may make a representation as to a future matter knowing that he or she has no reasonable grounds for making that representation but believing nonetheless that there was some basis for making that representation (just not a reasonable one). Senior Counsel put to me that the representor may make a statement about a future matter upon a very flimsy foundation which the representor might well appreciate did not constitute a reasonable basis for making that representation but that person may nonetheless honestly believe that there is some basis for making that representation. 89 As I said at [34] above, the case seems to add nothing or very little to the misleading or deceptive conduct case. 90 It was submitted on behalf of the plaintiff that pars 25 to 29 of the ASOC squarely put WorleyParsons on notice of the case which it has to meet and that this is one of those cases where, given the nature of the subject matter of the relevant allegations, very little is required to justify the pleading and thus to withstand a strike out application. In particular, the plaintiff relied upon the observations of French J (as his Honour then was) in Police & Nurses Credit Society Ltd v Burgess Rawson (WA) Pty Ltd [2006] FCA 1395. 91 I am persuaded, but only just persuaded, that there is sufficient material in the relevant paragraphs to support the plaintiff's non disclosure case. As submitted on behalf of the plaintiff, the plaintiff is obliged to provide as fulsome a set of particulars as he is currently able and will be obliged to supplement those particulars from time to time as best as he is able.

Causation 92 As I have already noted at [37] above, there is a typographical error in par 32 of the ASOC. This should be remedied by an amendment. For present purposes, I propose to treat the reference in par 32 to par 31 as a reference to par 30. 93 It was submitted on behalf of WorleyParsons that the concept of "indirect reliance" mentioned in par 32 of the ASOC is ambiguous and incapable of meaning. It was suggested that that expression might be a reference to market based causation theory or it might be a reference to information being passed on through an intermediary to the plaintiff or to various group members. An example of such an intermediary would be a stockbroker. It was also submitted that the plaintiff was obliged in his pleading to articulate with precision whether his argument at trial in respect of causation will be based upon the theoretical proposition that market based causation theory imputes reliance or whether it is truly a causation analysis which is not dependent upon establishing reliance. 94 I think that the submissions which I have summarised at [93] above are entirely unreal. As I observed at [36] above, it is perfectly clear that the plaintiff's case is that he and some group members relied on the August 2013 earnings guidance (whether or not they relied upon the restatement of that guidance in October 2013) and that, although other group members did not directly actually rely upon that guidance, those group members, the plaintiff and other group members are entitled to rely upon market based causation theory to establish the relevant loss. As submitted on behalf of the plaintiff, the pleading identifies what action or inaction would have occurred had the true position been known consistent with the authorities considered by Ferguson J in Bolitho v Banksia Securities Ltd [2014] VSC 8 at [23]-[35] and the observations of the plurality in Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at 351-352 [143]. WorleyParsons' submission to the effect that the plaintiff must specify in his pleading the jurisprudential foundation for his market based causation theory is unsound and I reject it. 95 Therefore, WorleyParsons' challenge to the plaintiff's pleading in respect of causation and loss and damage also fails.

Some General Observations 96 In the ASOC itself and from time to time during argument, the plaintiff asserted a right to supplement existing particulars in the ASOC in the future when more is known about the relevant events as a result of the evidence gathering process. As a general proposition, this claimed entitlement is supportable and was not resisted by Senior Counsel for WorleyParsons. In cases where the opposing litigant's state of mind is central to at least some of the causes of action relied upon, it is legitimate for a litigant in the position of the plaintiff in the present case to exercise his or her entitlement as often as he or she may consider necessary subject always to the supervision and control of the Court.

Conclusions 97 For all of the above reasons, I do not think that WorleyParsons has made out its case that the ASOC should be entirely struck out nor do I consider that the specific paragraphs referred to in par 2 of its Interlocutory Application should be struck out. Although I have suggested that the plaintiff should amend his Statement of Claim in some very minor respects, I have found that the ASOC should not be struck out in whole or in part. WorleyParsons has failed to secure any part of the relief which it claimed in its Interlocutory Application. I see no reason why costs should not follow the event. 98 Accordingly, I propose to dismiss that Interlocutory Application with costs. 99 I also propose to grant leave to the plaintiff to amend the current iteration of his Statement of Claim in order to clarify one or two matters so that his Statement of Claim is in a form with which the plaintiff is entirely content as at the present time. 100 I also propose to order WorleyParsons to file its Defence with a view to having the pleadings in this matter settled as soon as possible. The matter will then be listed for case management before me. At that further case management hearing, I wish to be informed as to the current status of the competing class action in the Supreme Court of Victoria (Walsh v WorleyParsons Ltd) as there will inevitably be a need on the next occasion that the matter is before the Court for the parties and the Court to consider how best to deal with the existence of that other proceeding. 101 There will be orders accordingly. I certify that the preceding one hundred and one (101) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Foster.