Grant-Taylor v Babcock & Brown Limited

AND: BABCOCK & BROWN LIMITED (IN LIQUIDATION) (ACN 108 614 955)

JUDGES: ALLSOP CJ, GILMOUR AND BEACH JJ DATE OF ORDER: 21 april 2016

1. The appeal be dismissed.
2. The appellants pay the respondents' costs of and incidental to the appeal. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT THE COURT: 1 The appellants have appealed the decision and order of a judge of the Court dismissing their application for damages against Babcock & Brown Ltd (BBL) and its liquidator for alleged breaches of the continuous disclosure obligations of s 674(2) of the Corporations Act 2001 (Cth) (the Act) and listing rule 3.1 of the ASX listing rules (the Listing Rules). 2 The appellants are 77 persons or entities who purchased shares in BBL, a listed financial services firm, between 21 February 2008 and 13 March 2009. They lost the value of their investment when BBL was placed in voluntary administration on 13 March 2009 and then liquidation on 24 August 2009. BBL was the non-trading holding company of the Babcock & Brown group of companies. It owned a majority of the shares in Babcock & Brown International Pty Ltd (BBIPL), the unlisted operating company for the group. 3 The appellants claimed that BBL had breached its continuous disclosure obligations under s 674(2) of the Act and Listing Rule 3.1 during the period 21 February 2008 to 13 March 2009 (the non-disclosure period) in that it had failed to disclose information to the market which was not generally available and which a reasonable person would have expected to have had a material effect on the price of BBL shares. Such allegedly non-disclosed information fell within the following three categories (the primary judge's findings on a fourth category have not been appealed and that category does not need to be further considered): (a) first, final dividends for the years 2005 to 2007 had been paid out of capital, rather than profits, contrary to the then s 254T of the Act and BBL's Constitution, and that its share capital had thereby been reduced contrary to s 256D (the final dividend information); (b) secondly, BBL's financial reports for 2005 to 2007 did not give a true and fair view of its financial position in that the reports failed to disclose that final dividends had been paid out of capital and that share capital had been reduced in each financial year (the final report information); (c) thirdly, BBL was insolvent on 29 November 2008 (the insolvency information). 4 On causation, the appellants did not advance a case or cases based on any specific reliance; rather their causation case was based on what has been described as a market-based or indirect causation theory. They claimed that the failure to disclose the said information caused them to acquire the relevant shares at an overvalue and that they were entitled to recover the difference between what they had paid for the shares and their so-called true value when acquired. 5 BBL admitted that the final dividends for 2005 to 2007 had been paid out of capital, contrary to the then Act and its Constitution. But it said that no obligation of disclosure arose in respect of such information. It said that each breach was a "technical" accounting error which came about when BBIPL declared a dividend in favour of BBL in respect of each relevant year. It said that there had been no reduction in capital on a consolidated group basis and that the value of the listed shares was a function of the value of the consolidated group. In any event, BBL submitted that it could be appreciated from its financial reports that the dividends had been paid out of capital and that such information would have had no impact on share price. 6 Further and relatedly, BBL argued that the group's financial statements for 2005 to 2007 did not fail to give a true and fair view of BBL's financial position. It said that the unauthorised reduction of capital was a "technical" breach and had no material effect on BBL's financial position. 7 Finally, BBL admitted that it had become insolvent on 29 November 2008 but submitted that such information was not then required to be disclosed. It said that whilst its directors were aware of various solvency issues confronting BBL during the credit crisis and as at 29 November 2008, they did not believe that BBL was insolvent at that time. A conclusion of insolvency could only be drawn after the non-disclosure period. Accordingly, no such relevant information was required to be disclosed during the non-disclosure period. 8 The primary judge found that the information in 3(a) to (c) above was not required to be disclosed by BBL pursuant to s 674 and accordingly dismissed the claims. 9 The present appeal raises some important questions as to the construction of the Act and the Listing Rules. We are of the view that the appeal should be dismissed for the reasons below. Those reasons make it unnecessary in this case to deal with the important question of causation in connection with a posited failure by a listed company to disclose market sensitive information. It is also unnecessary to deal with the respondents' notice of contention concerning the evidence of Professor Frino, Listing Rule 19.12 and loss and damage.

background 10 It is important to set out the background and to give context to the alleged non-disclosures. 11 At the outset, it is appropriate to state our ultimate conclusion that the payment of dividends out of capital contrary to the Act and to BBL's Constitution was technical and of no economic significance. This can be seen from the history of BBL and its subsidiary, and operating company for the group, BBIPL, and an understanding of the mistake of timing made in relation to the 2005, 2006 and 2007 dividends. 12 The Babcock & Brown group was formed in 1977 in San Francisco. By 2004, it had expanded into a global investment and advisory firm and was forecasting net total revenue of $424 million. 13 In 2000, a German bank, Bayerische Hypo-und Vereinsbank AG (HVB), acquired a 20% interest in the Babcock and Brown group for US$120 million; the balance of 80% of the group was owned by Babcock and Brown's executives. In 2004, a decision was made to raise $550 million of equity capital by an initial public offering of shares on the ASX. Under the IPO it was proposed that 100% of BBL, the listed holding company, would be floated on the ASX. BBL would own 70% of BBIPL, the operating company, with the other 30% held by HVB and the executive shareholders. It was also proposed that the shares in BBL and BBIPL would be economically equivalent in that the dividends on both would be the same. It was anticipated that the group's operating profits would flow into BBIPL, which would then declare and pay dividends to BBL and to the executive shareholders and HVB. BBL would then declare and pay an identical dividend to the one it had received to its shareholders who held the ASX traded shares. 14 On 6 October 2004, BBL listed on the ASX. The capital raising was a success and $550 million of stock was subscribed for. 15 BBL was dependent upon BBIPL for its dividend income. However, both companies operated on the same financial year (ending 31 December) and could only declare a final dividend in respect of the year just finished and only when the accounts for that year had been prepared and the profits ascertained. Accordingly, the dividends flowing up from BBIPL in one financial year could only be used by BBL to declare a final dividend in the next financial year. For example, BBIPL could only declare a final dividend for the year ending 31 December 2005 sometime early in 2006, which would create a debt due to BBL in 2006 and come into BBL's books in 2006. 16 Between 2004 and 19 June 2007, shares in BBL escalated in value to a peak of $34.63 per share. On 21 February 2008, the shares were trading at $16.76 per share. They were last traded on 7 January 2009 at 33c per share when trading was suspended. 17 The primary judge found that it was the global financial crisis in 2008 that was responsible for the collapse of BBL. On 10 March 2008, BBL revealed that it had retired $250 million of short term loans owed by its listed vehicles. As conditions in the credit markets worsened throughout April to June, BBL's share price continued to fall. An aggressive run of short-selling in June triggered a review under its banking facilities. A drop in projected profits in August prompted a further sell-off. On 19 August 2008, BBL flagged internal management changes but the stock continued to decline in value. On 17 September 2008, Lehman Brothers filed for Ch 11 protection in New York which caused paralysis in global credit markets. In the week of 17 September 2008, BBL shares dropped 57%. By mid-October BBL was seeking to sell-off assets and was in discussions with private equity firms. By late November, the boards of BBL and BBIPL were concerned about solvency. They met on an almost daily basis with lawyers and insolvency practitioners in attempts to restructure the group's equity and debt arrangements so as to avoid the destruction of the business. 18 On 13 March 2009, BBL's directors concluded that it was no longer solvent and resolved to place it in voluntary administration under Part 5.3A of the Act. No deed of company arrangement was agreed upon by BBL's creditors. Accordingly, on 24 August 2009 it was placed in liquidation. 19 It is to be noted, as the primary judge emphasised, that the payment of final dividends out of capital in 2005 to 2007 occurred before BBL found itself vulnerable to the 2008 credit crisis.

(a) Declaration of the final dividends 20 It is appropriate to elaborate further on the dividend question. 21 The final dividend for the year ending 31 December 2005 was declared by BBL in the following circumstances as set out by the primary judge. 22 On 23 February 2006, BBIPL declared a dividend of 14.25 cents per share and delivered a promissory note to BBL in the amount of $32,907,716 payable by no later than 23 March 2006 being BBL's share of the dividend declared by BBIPL. The delivery of the promissory note discharged the debt owed by BBIPL to BBL as a result of the declaration (Industrial Equity Ltd v Blackburn [1977] HCA 59; 137 CLR 567 at 578). It constituted receipt of the dividend at that time. On the same day, the BBL board declared a final dividend for the year ending 31 December 2005 of 14.25 cents per share (amounting to $32,907,716) to be paid on 17 March 2006. The dividend declared by BBL was explicitly a final dividend for the year ended 31 December 2005. A final dividend, unlike an interim dividend, reflects the results of a completed year of trading (Bluebottle UK Ltd v Deputy Commissioner of Taxation [2007] HCA 54; 232 CLR 598 at [19]). 23 However, the final dividend for BBL for the year ending 31 December 2005 could only be paid out of profits made by BBL in that year. BBL's financial statements for that year revealed profits of only $5,577,000 constituted by retained earnings. Accordingly, $27,330,716 of the dividend had to be paid other than out of profits. It was not disputed that this was a breach of article 29.1 of the Constitution and the then s 254T of the Act and involved an unauthorised reduction of capital. 24 The misconception is manifested in the board papers. The board of BBIPL (whose directors were directors of BBL) had before it a memorandum dated 16 February 2006 prepared by management recommending the payment of a dividend. It used slightly different figures to the ones eventually adopted. It said: A recommendation for the payment of a dividend has been put forward to the Directors of BBIPL, a 71.06% owned subsidiary of BBL for the payment of a 13.85 cents unfranked dividend per share (consisting entirely of conduit foreign income - see below). BBL's share of this dividend is $31,983,991.15. The BBIPL dividend is due for payment on or around 5 March 2006. At 31 December 2005, the BBL entity had retained earnings of $5,576,439. The net retained earnings after the receipt of the BBIPL dividend above will be $37,560,430.15. The retained earnings at date of payment will be suffıcient to pay the proposed dividend below. [Emphasis added.] 25 However, in respect of BBL, the question was not whether the profits were sufficient at the time of payment of the dividend, but as at the balance sheet date of 31 December 2005. Once the 2005 year was finished, the profits for that year could not be enhanced by events occurring after the reporting date. Accordingly, the receipt by BBL of the BBIPL dividend in the 2006 financial year (before BBL paid its dividend) did not solve the shortfall in retained earnings in respect of BBL. BBL could only declare a final dividend for the year ending 31 December 2005 out of profit and retained earnings as at that balance date and not as enhanced by events occurring in 2006 as a result of receiving a dividend from BBIPL. It was open for BBL to declare in 2006 an interim dividend in respect of what it received by way of dividend from BBIPL in 2006, but this is not what occurred. 26 Essentially the same events took place in 2006 and 2007. 27 For the year ending 31 December 2006, BBL's retained earnings were $10,665,000. On 8 February 2007, management of BBIPL recommended that the BBIPL board declare a dividend of 21c per share payable on 10 April 2007 and that the BBL board declare an identical dividend payable on 11 April 2007. The BBIPL board declared such a dividend on 20 February 2007, creating a debt in favour of BBL of $56,384,518, and authorised the issue of a promissory note with which to pay it. On 22 February 2007, a subcommittee of the BBL board declared an identical dividend of 21c per share (amounting to $56,384,518) which was paid on 11 April 2007. A significant proportion of that dividend was thus paid out of capital. 28 For the year ending 31 December 2007, BBL's retained earnings were $11,952,000. On 19 February 2008, BBIPL declared a dividend of 33c per share (amounting to $96,995,110.74) and on 21 February 2008 paid that dividend to BBL by the delivery of a promissory note. On 21 February 2008, a subcommittee of the BBL board declared an identical dividend of 33c per share (that is, $96,995,110.74).

(b) The financial statements 29 In terms of the accounting treatment of the dividends in the financial reports for the years 2005, 2006 and 2007, it is useful to take the 2005 year as an example and to set out what was disclosed given the grounds of appeal, including a ground concerning s 676(3) of the Act as to the deductions, conclusions or inferences that could be drawn from the published accounts. 30 On 30 March 2006, BBL released its financial report for the year ending 31 December 2005. The directors resolved that it gave a true and fair view of the financial position of BBL and the consolidated entity as at 31 December 2005. 31 The financial statements for BBL and the group on a consolidated basis were included in the group's 2005 financial report. In the balance sheet (page three of the financial report), there appeared the following: Consolidated Babcock & Brown Ltd Note 31 December 31 December 31 December 31 December 2005 2004 2005 2004 $'000 $'000 $'000 $'000 Equity Contributed Equity 31 457,608 458,392 547,760 548,716 Reserves 32 47,126 3,209 44,372 5,988 Retained earnings 32 161,106 230 5,577 1,846 Parent entity interest in equity 665,840 461,831 597,709 556,550 Minority interest 448,971 300,071 Total Equity 1,114,811 761,902 597,709 556,550

32 Note 32 to the financial statements also referred to retained earnings: 32. RESERVES AND RETAINED EARNINGS Consolidated Babcock & Brown Limited 2005 2004 2005 2004 $'000 $'000 $'000 $'000 Retained earnings 161,106 230 5,577 1,846 Foreign currency translation reserve 42 1,250 - - Share based payments reserve 44,372 5,988 44,372 5,988 Cash flow hedge reserve (3,259) (7,172) - - Available-for-sale financial assets reserve 5,971 3,143 - - 47,126 3,209 44,372 5,988 Movements: (a) Retained earnings Balance at beginning of the financial period 230 88,134 1,846 - Opening retained earnings attributable to the members of Babcock & Brown Holdings, Inc - (88,134) - - Net profit attributable to members of Babcock & Brown Limited 179,988 230 23,938 1,846 Dividends paid (19,112) - (20,207) - Balance at end of the financial period 161,106 230 5,577 1,846

33 The retained earnings of $1,846,000 in 2004 and the dividend of $20,207,000 in 2005 were explained in other parts of the report. The figure of $23,938,000 by way of attributable profit came from the income statement at page two. 34 Note 6 contained the following information about the dividend situation: 6. DIVIDENDS PAID AND PROPOSED Babcock & Brown Limited 2005 2004 $'000 $'000 Declared and paid during the year - Dividends on ordinary shares: Interim franked dividend for 2005: 8.75 cents fully franked (2004: nil cents) 20,207

Proposed (not recognised as a liability at year end) - Dividends on ordinary shares: Final unfranked dividend for 2005: 14.25 cents unfranked (2004: nil cents) 32,908

35 Like the trial judge, we have set out the accounting treatment for the 2005 year. A similar accounting treatment was used for the 2006 and 2007 years albeit with, of course, different amounts.

(c) General 36 As we have said, in the years in question, the capacity of BBL to declare and pay dividends was dependent on profit generated by the receipt of dividends from BBIPL. To declare and pay equivalent dividends in BBL and BBIPL for the same year based on the operating profits of the operating subsidiary BBIPL, would lead, on a moment's reflection, to a timing difficulty, if the reporting date for each company was the same (as it was: 31 December). BBIPL would declare a dividend from profit from year 1 to BBL as 70% shareholder and to the balance of its shareholders. That sum in dividend to BBL would necessarily be received by BBL in year 2 and could not form part of its profit for year 1. Thus, the two corporations (BBL and BBIPL) could not pay the same final dividend at the same time unless BBL had an existing source of profit (current or retained) in year 1 to make the final dividend lawful. It did not. This inexorable discipline of time was overlooked. Both boards declared final dividends of an equivalent amount at substantially the same time, in respect of the same financial period, without there otherwise being an adequate level of profit in BBL for the relevant year for it to pay the final dividend out of profit. If the point had been realised, the reporting dates of the two companies could have been staggered, or BBL could have paid an interim dividend, not a final dividend. The error was of no significance to the availability within the group of adequate retained profits with which to pay the dividend. Further, there was no suggestion in the case that at the relevant time there was any imprudence or impropriety in declaring the dividends. 37 There was no dispute at trial or on appeal but that the final dividends declared and paid by BBL in 2005, 2006 and 2007 were not "paid out of profits" of BBL and that the then s 254T of the Act which required that to occur (and the relevant article of BBL's Constitution) was breached. The Act was changed in 2010 and the legal requirement to pay a dividend out of profits was removed and replaced with a requirement that the payment of a dividend could not occur unless there was a relevant excess of assets over liabilities, the payment was fair and reasonable to the shareholders and the dividend did not materially prejudice the relevant company's ability to pay its creditors.

legislative framework 38 Before proceeding further, it is necessary to set out relevant provisions of the Act and the Listing Rules. We will elaborate on some of the construction questions raised in this appeal in a later section.

(a) Dividends 39 Section 254T of the Act provided at the relevant time: A dividend may only be paid out of profits of the company. As we have said, in 2010, s 254T was substantially changed in the manner set out earlier. It is not in dispute that under the current law the declaration and payment of the relevant dividends by BBL would have been lawful. 40 We would also note for completeness that nothing contained in s 254T prevented an interim dividend being declared or paid in a particular year out of profits for that year. So, for example, BBL could have in 2006 declared and paid an interim dividend in respect of the dividend received by it from BBIPL in 2006. What s 254T precluded was rather a final dividend being declared or paid for a financial year other than out of profits (and retained earnings) for that year. So, in 2006, BBL could only declare and pay in 2006 a final dividend for the 2005 year out of profits and retained earnings for 2005. 41 Section 256B(1) provided at the relevant time that: A company may reduce its share capital in a way that is not otherwise authorised by law if the reduction: (a) is fair and reasonable to the company's shareholders as a whole; and (b) does not materially prejudice the company's ability to pay its creditors; and (c) is approved by shareholders under section 256C. … 42 Section 256D(1) provided that: The company must not make the reduction unless it complies with subsection 256B(1). But we also note that s 256D(2) provided that any contravention of s 256D(1) did not affect the validity of the reduction or any transaction thereunder. 43 BBL's Constitution provided that the power to declare or determine a dividend and fix the amount, the time for and method of payment was vested in the directors of BBL (article 29.1) and that no dividend was payable except out of the company's profits (article 29.3 until 25 May 2007 and article 29.4 thereafter). Such provisions mirrored the then s 254T. Article 10.3 reflected and incorporated s 256B in relation to reductions of capital.

(b) Financial statements 44 Section 297 of the Act provided: The financial statements and notes for a financial year must give a true and fair view of: (a) the financial position and performance of the company, registered scheme or disclosing entity; and (b) if consolidated financial statements are required - the financial position and performance of the consolidated entity. This section does not affect the obligation under section 296 for a financial report to comply with accounting standards. Note: If the financial statements and notes prepared in compliance with the accounting standards would not give a true and fair view, additional information must be included in the notes to the financial statements under paragraph 295(3)(c). 45 Section 296(1) provided: The financial report for a financial year must comply with the accounting standards. … 46 Accounting Standard AASB 110 provided: 12. If an entity declares dividends to holders of equity instruments (as defined in AASB 132 Financial Instruments: Disclosure and Presentation) after the reporting date, the entity shall not recognise those dividends as a liability at the reporting date. 13. If dividends are declared (i.e. the dividends are appropriately authorised and no longer at the discretion of the entity) after the reporting date but before the financial report is authorised for issue, the dividends are not recognised as a liability at the reporting date because they do not meet the criteria of a present obligation in AASB 137. Such dividends are disclosed in the notes in the financial report in accordance with AASB 101 Presentation of Financial Statements. 47 Clause 15 of AASB 101 relevantly provided: 15. A fair presentation requires an entity: … (c) to provide additional disclosures when compliance with the specific requirements in Australian Accounting Standards is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance.

(c) Continuous disclosure obligations 48 At the relevant time, s 674(1) and (2) of the Act provided that: (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. 49 BBL was a "listed disclosing entity" within the meaning of s 674(1) (see also s 674(2)(a)). 50 Part 1.2A of the Act deals with what is meant by a "disclosing entity" (s 111AA(a)). Section 111AC(1) provides that if any "securities" of a body are "ED securities" then the company is a disclosing entity. Section 92(3) defines "securities" to include shares in a company. It is to be noted that the s 92(3) definition is expressed to specifically apply to Chapter 6CA. Securities of a company are ED securities if, inter alia, they are ED securities under s 111AE. Section 111AE(1) provides that if the company is included in the official list of a "prescribed financial market" and that market's listing rules apply to the securities, then the securities are "ED securities". The ASX is a "prescribed financial market" (reg 1.0.02A of the Corporations Regulations 2001 (Cth)) and ASX Ltd is a prescribed market operator (the then reg 7.1.01(a)). Section 111AL(1) provides that a disclosing entity is a "listed disclosing entity" if the ED securities are quoted ED securities. In summary, and by this modern drafting technique, a company which is on the official list of the ASX and whose shares are quoted is a "listed disclosing entity". BBL satisfied this requirement as his Honour found. 51 There is a further requirement for s 674(2), namely, that provisions of the Listing Rules require the entity to notify the market operator of relevant information (s 674(1)). An ASX listed company satisfies such a requirement because of the disclosure obligations of Chapter 3 of the Listing Rules, particularly Listing Rule 3.1. 52 The objective and hypothetical (in one sense) requirement of s 674(2)(c)(ii) is identical to the equivalent part of Listing Rule 3.1; but Listing Rule 3.1 requires disclosure of information even if it has come into the public domain (is generally available) in contradistinction to the limitation of not being generally available in s 674(2)(c)(i). 53 ASX Listing Rule 3.1 at all relevant times provided that: Once an entity 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 the entity's securities, the entity must immediately tell ASX that information. 54 The word "aware" was defined in ASX Listing Rule 19.12 at the relevant time in the following terms: an entity becomes aware of information if a director or executive officer (in the case of a trust, a director or executive officer of the responsible entity) has, or ought reasonably to have, come into possession of the information in the course of the performance of their duties as a director or executive officer of that entity. This definition is only relevant to the claim that BBL should have disclosed its insolvency on 29 November 2008. We note that the current form of "aware" is now defined differently, having been amended on 1 May 2013. We also note that the exception contained in Listing Rule 3.1A was also modified by a re-ordering, but the changes are not relevant for present purposes. Finally, a definition of "information" was added to Listing Rule 19.12 on 1 May 2013; no definition of "information" was contained in the Listing Rules at the relevant time involving these proceedings. 55 Section 677 of the Act defines "material effect on price or value" in objective terms as follows: For the purposes of sections 674 and 675, a reasonable person would be taken to expect information to have a material effect on the price or value of ED securities of a disclosing entity if the information would, or would be likely to, influence persons who commonly invest in securities in deciding whether to acquire or dispose of the ED securities. 56 Section 676 provided: (1) This section has effect for the purposes of sections 674 and 675. (2) Information is generally available if: (a) it consists of readily observable matter; or (b) without limiting the generality of paragraph (a), both of the following subparagraphs apply: (i) it has been made known in a manner that would, or would be likely to, bring it to the attention of persons who commonly invest in securities of a kind whose price or value might be affected by the information; and (ii) since it was so made known, a reasonable period for it to be disseminated among such persons has elapsed. (3) Information is also generally available if it consists of deductions, conclusions or inferences made or drawn from either or both of the following: (a) information referred to in paragraph (2)(a); (b) information made known as mentioned in subparagraph (2)(b)(i). 57 Broadly, the above continuous disclosure provisions gave rise to the following issues before the primary judge and before us: first, whether the information identified in [3] above was such as a reasonable person would expect to have a material effect on the price of BBL shares; secondly, whether any of the information was generally available; and, thirdly, whether BBL was or became aware of the information in [3(c)] above, namely, the insolvency of BBL as at late November 2008.

The approach of the primary judge 58 The primary judge approached the issues referred to at [3] above by dealing with the non-disclosure of the unauthorised reductions of capital in Section IV of his reasons at [46] to [107], the truth and fairness of BBL's financial statements in Section V at [108] to [151], the question of BBL's insolvency in Section VI at [152] to [204] and the funding of the 2007 dividend out of an asset revaluation in Section VII at [205] to [210]. The last matter as to the funding of the 2007 dividend was not raised before us. 59 Three experts gave evidence and were cross-examined at trial. Dr Jeffrey Coulton, senior lecturer at the University of New South Wales Australian School of Business, was called by the appellants on the issue of what was required for the financial reports to give a true and fair view of BBL's position. Professor Alex Frino, of Macquarie University and a finance expert, gave evidence for the appellants about the effect of disclosure on the price of BBL shares. Mr Wayne Lonergan, corporate finance and valuations expert and former partner of Coopers & Lybrand, gave evidence for BBL in respect of both matters. 60 Briefly, in summary, the primary judge concluded as follows.

The disclosure of the unauthorised reduction of capital (the final dividend information) 61 As to the contravention of s 254T and the unauthorised reduction of capital, the first thing to be noted is that there was no argument that BBL was not or did not become aware of the information that the final dividends for the 2005, 2006 and 2007 years had been paid contrary to s 254T. 62 The primary judge began by directing himself to s 677. He noted that no submission was put that s 674(2) could be contravened without the enlivenment and satisfaction of s 677. He therefore did not need to consider the issue of whether s 674(2) had additional work to do disconnected from s 677. Like his Honour, we also do not need to consider that question further. 63 The primary judge considered that the approach to s 677 that had been adopted by the Master in Riley v Jubilee Mines NL [2006] WASC 199; 59 ACSR 252 and referred to by the Court of Appeal in that case (Jubilee Mines NL v Riley [2009] WASCA 62; 40 WAR 299), namely, that the investors were those who commonly invested in securities of a class or kind to which the disclosing entity belonged, that is, making significant the character of the company in question (there characterised as a small speculative mining company), was wrong. The primary judge concluded that the phrase refers to persons who ordinarily or usually invest in listed securities. His Honour's interpretation had two features: first, it was directed to a narrower group of securities than defined in s 92(3); and, secondly, the interpretation of "commonly" as "ordinarily or usually" denoted a degree of sophistication to be expected from those who have more than a passing or occasional interest or participation in investing on the stock exchange. This construction was challenged on appeal. 64 Using this posited type of person who may be influenced, the primary judge considered that the final dividend information would not, or would not be likely to, influence such persons in whether to acquire or dispose of BBL shares. This was so because the information was not merely that there was a reduction of capital in the payment of the dividends, but also that it had no economic consequences. It was effectively an internal accounting issue within the group and of no financial significance to those interested in the group's performance as a whole. At [101] of his reasons, the primary judge summarised the nature of any disclosure that could be posited as the following (using 2005 as an example): (i) the declaration of the dividend by BBL contravened s 254T because the retained profits for the 2005 financial year for BBL on a stand-alone basis were less than the proposed dividend; but (ii) the Babcock and Brown group had sufficient retained earnings on a consolidated basis to pay the dividend and the issue only arose because any dividend declared by BBIPL for the 2005 year would only be received as income in the 2006 year; such that (iii) it was purely an accounting issue; and (iv) it had no impact on the value of shares in BBL. 65 Thus his Honour held that s 677 and s 674(2)(c)(ii) were not satisfied. 66 In coming to these conclusions, the primary judge rejected the expert evidence of Professor Frino and preferred that of Mr Wayne Lonergan. 67 Though not necessary to decide because of his views on ss 677 and 674(2)(c)(ii), the primary judge expressed the view that the information was generally available for the purposes of s 674(2)(c)(i) because of satisfaction of s 676. The accounts of BBL disclosed the dividends and the retained earnings. The deduction or conclusion or inference (s 676(3)) from the publication of the accounts that the dividend was an unauthorised reduction of capital was able to be made by those who commonly invest in BBL shares. 68 This conclusion was challenged on appeal.

The disclosure of truth and fairness (the final report information) 69 The primary judge considered that there was a breach of the accounting standard in cl 15(c) of AASB 101. Further, the financial reports for the relevant years did not give a "true" picture of the financial position in failing to contain a note or information that the accounts revealed an unlawful reduction of capital by a dividend paid contrary to s 254T and BBL's Constitution ([145]). This was so despite the fact that the capital reduction was of no consequence in economic terms. 70 This conclusion did not, however, lead the primary judge to any different conclusion under s 674. The primary judge concluded that the full context or full character of the information was such as to lead to the conclusion that it would have had no relevant influence on any decision to acquire or dispose of BBL shares by the relevant class of persons. The full context or character of the information was not just that the accounts did not give a true and fair view of BBL's financial position and involved a breach of a relevant accounting standard, but also that the unauthorised reduction of capital was a breach of a technical kind which had no impact on the value of BBL or the group ([148]). Section 674(2)(c)(ii) was therefore not satisfied. 71 This conclusion was challenged on appeal. 72 Though unnecessary to decide because of his views on s 674(2)(c)(ii), the primary judge expressed the view that he would not have considered that this information was "generally available", given the legal and accounting complexities attending the expression "true and fair".

The question of the insolvency of BBL on 29 November 2008 (the insolvency information) 73 Before his Honour, the parties had agreed as a fact that BBL became insolvent on 29 November 2008. The primary judge concluded, however, that BBL was not "aware" of that fact at that time or during any relevant time for disclosure. 74 The primary judge considered the existence of a state of insolvency as both a question of fact and as an opinion. His analysis proceeded on that basis. 75 The primary judge was of the view that Listing Rule 3.1 and the concept of "information" included opinions (such as of insolvency) that were held by the board of a company or a relevant person. But he concluded that Listing Rule 3.1 was not apt to require directors to form an opinion. The language of coming into possession (Listing Rule 19.12) of information was apt to apply to the coming into possession of the opinions of others (if that were relevant), but not to requiring the board to form an opinion when it in fact did not. 76 Thus the primary judge approached the matter by requiring proof that: (a) the directors or executive officers of BBL were actually aware of BBL's insolvency (or had that opinion); (b) the fact of BBL's insolvency should have become known to the directors or executive officers; or (c) an opinion that BBL was insolvent existed and should have become known to the directors or executive officers. 77 Proof of [76(a)] above was not attempted to be made. As discussed by the primary judge at [175] to [188] of his reasons, towards the end of 2008 the board of BBL were paying close attention to the cash flow, solvency and borrowing positions of BBL and had the view that BBL was solvent. 78 As to [76(b)] above, the primary judge rejected the assertion that the fact of BBL's insolvency should have become known to BBL's directors or executives. 79 The contention of the appellants that the directors ought to have been aware of the fact of BBL's insolvency was summarised by the primary judge at [164] of his reasons. His reasons for rejecting this contention were reflected in the following analysis. 80 The solvency or not of BBL was influenced by two critical features of the financial structure of the group: the $3 billion bank syndicate indebtedness of BBIPL and the $600 million indebtedness of BBL from two series of subordinated notes (BBSN and BBSN2). BBL's obligations to pay interest on the notes accrued semi-annually on each series. Principal repayment was due in November 2015 (for BBSN of $416.2 million) and in September 2016 (for BBSN2 of NZ$225 million). But the apparent interest indebtedness of BBL was qualified. BBL was relieved of its obligation to pay interest on the notes if it did not have the means to do so. Further, BBIPL's guarantee to the noteholders was subordinated to the bank debt; further, whilst BBIPL owed money to the banks, the guarantee of BBIPL was inoperative. Thus, the impact of the existence of and obligations under the bonds on the solvency of BBL in late 2008 was only by reference to a consideration as to how it could repay the principal under each series of notes in 2015 and 2016. 81 The cash flow position of the group was the subject of regular reports to the boards of BBL and BBIPL by accountants from June 2008. On or around 21 November 2008, HVB withheld a €72 million deposit. The directors were concerned about liquidity and solvency. The withholding of the deposit led to the need for short term funding. The BBIPL and BBL boards met to discuss what the primary judge referred to as the "unfolding crisis" (see [177] of the primary judge's reasons). 82 By late November 2008, negotiations were underway with the banking syndicate for short term funding (of a further facility of $150-200 million) and for a renegotiation and restructuring of the whole debt. The former had to be in place by 30 November to meet the December payroll obligations. 83 A short term facility was put in place in time. The primary judge summarised the position of BBIPL at 29 November 2008 as follows at [185]: (a) it was able to meet all its debts as and when they fell due in November except its payroll for December 2008; (b) it was in negotiations with the banking syndicate to borrow (as events transpired, successfully) $150 million to cover its December obligations and the banking syndicate was plainly quite open to this; (c) the breathing space in December was intended to enable the negotiation of a larger restructuring with the syndicate and, again, the syndicate was open to considering that restructuring; and (d) the claims of the noteholders did not arise. 84 At [186] to [189] of his reasons, the primary judge concluded that it was entirely reasonable to conclude, as at 29 November 2008, that BBIPL and BBL were solvent: funding to meet short term obligations was in place and there was a reasonable basis to conclude that a successful restructuring of debt would take place. The latter could be expected, if successful, to provide the financial foundation for BBL ultimately to repay the principal on the two series of subordinated notes in 2015 and 2016. 85 In the primary judge's rejection of the arguments of the appellants (with which we will deal more fully in due course) the primary judge admitted evidence of legal advice BBL received as to solvency. Some of the non-executive directors of BBL also received legal advice on the same subject, but did not waive their privilege ([196]). The primary judge declined to exclude the evidence of such legal advice to BBL under s 136 of the Evidence Act 1995 (Cth). 86 The legal advice given in November 2008 over which privilege was waived was to the effect, or gave a clear basis for the view, that the companies were solvent. 87 Further, and as to [76(c)] above, the primary judge found ([203]) that there was no relevant opinion held by anyone within BBL that BBL was insolvent, the existence of which opinion the board should have been aware.

Causation 88 Finally, although questions of causation and quantum did not arise following his Honour's conclusion that the appellants had failed on all liability issues, nevertheless his Honour went on to consider such questions. But we do not need to consider such questions further given our view that the appeal should be dismissed for the reasons set out below. Likewise, we do not need to address the respondents' notice of contention.

Grounds of appeal 89 The notice of appeal contained 23 grounds of appeal, though grounds 7, 13, 14, 15 and 20 were not pressed. No submissions were put on grounds 8, 17 and 18 and we shall treat them as abandoned. 90 The issues on the appeal can be divided into four groups: (a) grounds 1, 2 and 3 are concerned with the identity of those who "commonly invest in securities" for the purposes of s 677; (b) grounds 4, 6, 9 and 19 are concerned with the materiality of the relevant information to be disclosed and whether it should have been disclosed; (c) ground 5 is concerned with whether any information was generally available; (d) grounds 10 to 12, 16 and 21 to 23 are concerned with whether the disclosure as to insolvency should have been made and the definition of "aware" in Listing Rule 19.12.

Several construction questions 91 Before addressing in detail the grounds of appeal, it is appropriate to set out our views on various construction questions taking into account the objectively ascertained statutory purpose(s).

(a) Statutory purposes 92 The statutory purposes for the continuous disclosure regime were foreshadowed in the 1991 Australian Companies and Securities Advisory Committee Report and in a second reading speech to the 1992 Corporate Law Reform Bill (although the 1992 Bill was superseded by the 1993 Bill). The main purpose is to achieve a well-informed market leading to greater investor confidence. The object is to enhance the integrity and efficiency of capital markets by requiring timely disclosure of price or market sensitive information (see James Hardie Industries NV v Australian Securities and Investments Commission [2010] NSWCA 332; 274 ALR 85 at [353] to [355]; Re Chemeq Ltd [2006] FCA 936; 234 ALR 511 at [42] to [46] per French J (as he then was)). Further, one of the justifications for introducing the continuous disclosure regime, as referred to by that Committee, was to "minimize the opportunities for perpetrating insider trading" thereby providing an explicit link between the purposes of the continuous disclosure regime and the insider trading regime. 93 It is also to be noted that ss 674 to 677 are remedial or protective legislation. They should be construed beneficially to the investing public and in a manner which gives the "fullest relief" which the fair meaning of their language allows (James Hardie v ASIC at [356]).

(b) Information 94 Section 674(2) requires it to be established that the company has "information" which the Listing Rules require the company to notify to the market operator. "Information" is not defined for the purposes of s 674. But "information" is defined, for the purposes of the insider trading provisions, to include matters of supposition and matters relating to intentions; see s 1042A and the discussion of its background in Australian Securities and Investments Commission v Citigroup Global Markets Australia Pty Ltd (No 4) [2007] FCA 963; 160 FCR 35 at [526] to [544] per Jacobson J. But there is no similar statutory definition for the purposes of s 674. In that context, "information" may be given a more restrictive interpretation in the specific context of s 674 given the reference to "information about specified events or matters". This is consistent with the philosophy underpinning Australian securities law, particularly in the takeovers context, that disclosure of speculation is not required and is to be avoided: Australian Consolidated Investments Ltd v Rossington Holdings Pty Ltd (No 2) [1992] FCA 188; 35 FCR 226 at 228. But s 674(1) is a generic provision concerned to identify relevant provisions of the Listing Rules as to whether they exist. Further, "specified" is not a direct qualifier of "information". Also, it is to be noted that one element of the exception in Listing Rule 3.1A refers to excluding information which "comprises matters of supposition or is insufficiently definite to warrant disclosure". That might suggest that the Listing Rule 3.1 general context does prima facie use "information" as embracing speculation or insufficiently definite information, but leaves the work to the carve-out to operate to exclude supposition or indefinite information; or, it may simply be a way of emphasising the considerations referred to in Rossington. The current form of Listing Rule 19.12 now defines "information" as including "matters of supposition and other matters that are insufficiently definite …". Given the limited relevance of these matters to the appeal, it is neither necessary nor appropriate to express concluded views on the meaning of the word "information", in particular without a factual context. The elucidation of the reach of the notion of information will, invariably, be assisted by analysis against specific factual circumstances.

(c) Expectation of material effect 95 Listing Rule 3.1 prima facie only requires disclosure if "a reasonable person would expect [it] to have a material effect on the price or value" of the shares. This looked at the question through an ex ante lens. The Listing Rule does not elaborate further on this concept. In contrast, the Act does. Section 674(2)(c)(ii) provides that it be shown (in order for the statutory disclosure obligation to apply) that the information is such that "a reasonable person would expect, if it were generally available, to have a material effect on the price or value …". This mirrors the Listing Rule requirement in terms of a positive element required to be satisfied in order for disclosure to be required. Section 677 elaborates on this concept. Section 677 provides that "a reasonable person would be taken to expect information to have a material effect … if the information would, or would be likely to, influence persons who commonly invest in securities in deciding whether to acquire or dispose of" the shares. The question arises as to the relationship between the Listing Rule and s 677. It seems to us that s 677 does not narrow the ordinary meaning of the concept in the Listing Rule. It is not expressed as "if and only if". Moreover, it does not appear to change the ordinary meaning of the concept. Moreover, reading the Listing Rule 3.1 concept to implicitly embrace the elaboration in s 677 avoids difficulties of discordance between the two. The Listing Rule 3.1 concept should be taken to implicitly embrace the s 677 concept. Such a conclusion is supported by Jubilee Mines NL v Riley [2009] WASCA 62; 40 WAR 299 at [34] and [54] to [62]. Such a conclusion appears also to have been embraced by the publishers of the Listing Rule, who refer to s 677 as part of the explanatory notes to the Listing Rule. 96 What is meant by "material effect" in s 674(2)(c)(ii)? As stated earlier, s 677 illuminates this concept and also identifies the genus of the class of "persons who commonly invest in securities". It refers to the concept of whether "the information would, or would be likely to, influence [such] persons … in deciding whether to acquire or dispose of" the relevant shares. The concept of "materiality" in terms of its capacity to influence a person whether to acquire or dispose of shares must refer to information which is non-trivial at least. It is insufficient that the information "may" or "might" influence a decision: it is "would" or "would be likely" that is required to be shown: TSC Industries Inc v Northway Inc 426 US 438 (1976). Materiality may also then depend upon a balancing of both the indicated probability that the event will occur and the anticipated magnitude of the event on the company's affairs (Basic Inc v Levinson 485 US 224 (1988) at 238 and 239; see also TSC v Northway). Finally, the accounting treatment of "materiality" may not be irrelevant if the information is of a financial nature that ought to be disclosed in the company's accounts. But accounting materiality does have a different, albeit not completely unrelated, focus. It is appropriate to address s 677 in more detail on one aspect relevant to the grounds of appeal.

(d) Meaning of "persons who commonly invest in securities" 97 What does the expression "persons who commonly invest in securities" in s 677 mean? 98 First, this expression is not defined. Moreover, it does not use the language of small or large, sophisticated or unsophisticated, or retail or wholesale investor. 99 Secondly, the expression "in securities" is broader than "ED securities". The section uses the expressions "price or value of ED securities of a disclosing entity" and concludes with "the ED securities". The definite article in the latter phrase is a reference back to the first part of the phrase "ED securities of a disclosing entity". Further, the express reference to ED securities is to a subset of securities, which is perfectly understandable given the context of s 677 in Chapter 6CA. Accordingly, the text of s 677 uses a broader concept for "securities" in the phrase "commonly invest in securities". In our view, as a matter of text and context, there is no reason to give "securities" in that phrase any narrower meaning than its definition in s 92(3), which is expressed to specifically apply to Chapter 6CA. One appreciates from s 92(3) that "securities" can embrace listed and unlisted shares, debentures, options, interests in managed investment schemes and the like. But what is apparent is that it is not confined to listed securities, securities of the same type or class of the ED securities or of the same sector as the entity that has issued the ED securities. 100 Thirdly, the phrase "commonly invest in securities" in s 677 may be contrasted with the phrase "commonly invest in securities of a kind whose price or value might be affected by the information" in s 676. The limiting words "of a kind …" in s 676 do not appear in s 677. Textually then, the contrasting language between s 676 and s 677 demonstrates that the phrase in s 677 is broader than persons who commonly invest in securities of a kind whose price or value might be affected by the information. 101 Fourthly, we have considered the legislative background to these provisions and relevant extrinsic material, but such does not assist in explaining why different language was used. The legislative history of these provisions has been conveniently set out in Australian Securities and Investments Commission v Southcorp Ltd (No 2) [2003] FCA 1369; 130 FCR 406 at [7] to [16] per Lindgren J and Australian Securities and Investments Commission v Fortescue Metals Group Ltd (No 5) [2009] FCA 1586; 264 ALR 201 at [218] to [226] per Gilmour J. The September 1991 Report of the Companies and Securities Advisory Committee recommended that a statutory based enhanced disclosure system be implemented by inclusion into the then Corporations Law (page 9). It favoured the then general test of materiality as found in s 1022(1) of the Corporations Law (the general disclosure then required under a prospectus, viz. "… all such information as investors … would reasonably require … for the purpose of making an informed assessment …"), with the addition of the Listing Rule test(s) (pages 10 and 21), but did not elaborate. No "generally available" carve out was discussed, although other exemptions were noted (pages 21 and 22). 102 The Commonwealth government determined to generally act on the Committee's recommendation and introduced the Corporate Law Reform Bill (No 2) 1992 to give effect thereto. After public comment, the 1992 Bill was withdrawn and the Corporate Law Reform Bill 1993 was introduced. The explanatory memorandum to the 1993 Bill at [225] to [251] makes it plain that some of the proposed provisions (ss 1001C and 1001D) were to be based on the then recent insider trading provisions. The "generally available" provision (s 1001C and now s 676) was based upon the then s 1002B (an interpretative provision of the insider trading provisions). The "materiality" interpretative provision (s 1001D and now s 677) was based upon the then s 1002C (an interpretative provision of the insider trading provisions). Sections 1001C and 1001D were added to the Corporations Law (together with ss 1001A and 1001B) by the Corporate Law Reform Act 1994 (Cth) s 4, sch 1, item 92. For relevant purposes, the text of ss 1001C and 1001D is in a similar form as the current ss 676 and 677 respectively, with only irrelevant differences. The present ss 674 to 677 were placed into the Act by the Financial Services Reform Act 2001 (Cth) s 3, sch 2, item 24, with effect from 11 March 2002. The explanatory memorandum to the Financial Services Reform Bill 2001 (see at [18.1] to [18.16]) does not indicate that any change in operation to the previous ss 1001C and 1001D was intended. Chapter 6CA (as it now operates) however generally widened the scope of the continuous disclosure provisions, as compared with the prior provisions, by removing the elements required of intentional, reckless or negligent non-disclosure. 103 Finally, it is apparent from the explanatory memorandum to the 1993 Bill ([251]) that in s 1001D (s 677) there was to be a distinction between "securities" as used in the phrase "commonly invest in securities" and, to use the language of [251], the "securities in question" in the last part of the section. That supports the distinction that we have made earlier concerning the current s 677. It is also supported by s 1001D when first enacted, which used the language of "the first-mentioned securities" at the end thereof, thereby distinguishing such securities from the securities more generally referred to in the phrase "commonly invest in securities". That is also consistent with the textual distinction that we have made earlier concerning s 677. 104 In summary, the extrinsic material and history to the continuous disclosure provisions demonstrate the following: (a) First, each of ss 676 and 677 was based upon the superseded ss 1001C and 1001D respectively of the Corporations Law, which were in turn based upon the prior insider trading provisions; those prior insider trading provisions are now to be found in ss 1042A, 1042C and 1042D of the Act. (b) Secondly, in s 677, a distinction was intended to be made between the particular ED securities and the generality of the reference to "securities" in the phrase "commonly invest in securities". (c) Thirdly, by contrast with s 676, the phrase "commonly invest in securities" in s 677 is broader than the cognate phrase in s 676. 105 But none of this specifically answers the question of what is meant by "commonly invest in securities" in s 677 and the rationale for the qualifier "of a kind whose price or value might be affected by the information" in s 676, with the absence of that qualifier in s 677. It is appropriate to descend further into history. 106 We have also had recourse to the extrinsic material to the insider trading provisions, upon which the continuous disclosure provisions were based, to see whether they would assist. The "Fair Shares for All" Report (October 1989) of the Standing Committee on Legal and Constitutional Affairs of the House of Representatives, the recommendations of which formed the genesis of the new and more specific insider trading provisions of the Corporations Legislation Amendment Bill 1991 to replace the existing legislative provisions, does not greatly assist. In terms of the concept "generally available" information, reference was made to the "reasonable investor" without further discrimination (see [4.5.1] to [4.5.9]). In terms of the question of "materiality", reference was made ([4.4.17]) to the concept that: inside information is information which is not generally available, but, if it were, a reasonable person could expect it to have a material effect on the price or value of the securities … [in question]. 107 The explanatory memorandum to the 1991 Bill elaborated on these concepts. It is apparent from the explanatory memorandum that the proposed s 1002B ("generally available") was intended to be a "reflection" of the Committee's recommendation, although the language that now appears was enacted rather than a broad "reasonable person" test in terms (see [328]). As to the proposed s 1002C (materiality), the explanatory memorandum refers to it (see [330]) without elaboration. In summary, the extrinsic material throws little light on the different forms of expression in ss 676 and 677 with which we are concerned. But it may be said that this material does not expressly indicate that any difference was intended. 108 When regard is had to the text of each provision in context and in the light of the evident statutory purposes for each provision, the following may be stated. 109 First, undoubtedly, the expression "commonly invest" in s 676 and s 677 is to be similarly construed. We will return to what that means shortly. 110 Secondly, it is apparent that in s 677, the expression "commonly invest in securities" is broader than the expression "commonly invest in securities of a kind …". So, for s 677 the class is not confined to listed securities. Moreover, it is not confined to the type of security or company involved, whether as to size or sector. Contrastingly, s 676 is narrower and looks at the type of securities in question. 111 Not only does the text support the difference, but one can appreciate the rationale. When one is talking about materiality (s 677), there is every reason to have a broader class. The potential class of investors is necessarily broader ("persons who commonly invest in securities") even if they have not invested in securities of that kind before. But s 676 has a different function. It is looking at whether information is "generally available". In that context one is looking at a more relevant but narrower class of persons who commonly invest in the kind of securities under consideration. Has that information been made known to them? If so, it is relevantly generally available. Both the text, context and evident purpose suggests a narrower class for s 676. 112 More generally, a purposive approach might suggest giving a broader reading to s 677, given its protective purpose, and a narrower reading to s 676 which in a sense is part of an "exclusion" (using that term informally). 113 Thirdly, what is meant by "commonly invest"? What work does the adverb perform? It does not appear to us to be an appropriate way to distinguish between the sophisticated and the unsophisticated investor. Further, it also does not use the division of large or small investor. Moreover, there would be problems with such a division. Would large or small be looked at in absolute terms or relative terms? And if in relative terms, relative to what? 114 A possible operation for the adverb might be to look at frequency of investment. So, the phrase is looking at persons who frequently invest, rather than those who are one off investors. But such a construction is also problematic. There is no good reason to limit s 677 in such a fashion. 115 We are of the view that the expression "persons who commonly invest in securities" is a class description. First, the plural "persons" is used in contradistinction to the singular "a reasonable person" in s 677. Secondly, to treat this as a class description avoids distinctions dealing with large or small, frequent or infrequent, sophisticated or unsophisticated individual investors. Such idiosyncratic distinctions are made irrelevant if one is looking at a class of investors. There is no reason to confine "likely to influence persons …" to the sophisticated. The unsophisticated also need protection. Likewise the small investor and likewise the infrequent investor. But not the irrational investor. Thirdly, in the context of s 676, the question is whether the information has been made known to the relevant class, albeit that the class may be narrower than for s 677. We accept that the phrase does not use the express language of "class", but in using the plural "persons", the legislature appears to be generalising to a group description. 116 The word "commonly" in s 677 has been employed to underline that the objective question of materiality posed by ss 674 and 675 by reference to the hypothetical reasonable person in turn has regard to what information would or would be likely to influence a hypothetical class of persons namely "persons who commonly invest in securities".

(e) Is the information "generally available" (s 674(2)(c)(i))? 117 Disclosure of information is not required if the information is "generally available" (see s 674(2)(c)(i)). The expression "generally available" is elaborated on in s 676 of the Act. The two primary limbs of s 676(2) are to be read disjunctively. Section 676(3) is a third but secondary means by which information may become generally available. The elements of ss 676(2) and (3) are objective.

"Readily observable matter" - the first primary possibility (s 676(2)(a)) 118 The first limb of the test in s 676(2)(a) stands as an independent basis upon which information may be found to be "generally available". It does not involve a consideration of whether the market has had a reasonable time to absorb the information. 119 The term "readily observable matter" is not defined in the Act. Extrinsic material relating to the enactment of the analogous provisions proscribing insider trading explained the expression "readily observable matter" as "facts directly observable in the public arena" (explanatory memorandum to the Corporations Legislation Amendment Bill 1991 (Cth) [328]: see R v Firns [2001] NSWCCA 191; 51 NSWLR 548 at [56]). Whether information is "readily observable matter" is a question of fact to be determined objectively and hypothetically. It does not matter how many people actually observe the relevant information; information may be readily observable even if no one has observed it (ASIC v Citigroup (supra) at [546] and [551] per Jacobson J and Woodcroft-Brown v Timbercorp Securities Ltd [2011] VSC 427; 253 FLR 240 at [167] per Judd J (affirmed on appeal but with no additional discussion on relevant aspects ([2013] VSCA 284; 96 ACSR 307))). The test of whether material is readily observable is not whether the particular matter was actually observed but whether it could have been observed readily, meaning easily or without difficulty. 120 Further, s 676(2)(a) does not define the class of persons by whom the matter is to be "readily observable" (cf s 676(2)(b)(i)). 121 Generally, material notified to the ASX becomes generally available on the basis that it is readily observable matter. Further, material stated in a financial report released by a company is readily observable matter: James Hardie Industries NV v Australian Securities and Investments Commission [2010] NSWCA 332; 274 ALR 85 at [541] to [545]. In that case, ASIC accepted, and the Court also appeared to accept, that the information contained in the 4th quarter financial report released by the defendant was readily observable, but the omission from the report of one important aspect of the information requiring disclosure meant that the defendant breached its obligation. ASIC also accepted that when the omitted information was included in the annual report released subsequently, that was sufficient disclosure: [433] and [545].

The information has been "made known", with a "reasonable period" for its dissemination - the second primary possibility (s 676(2)(b)) 122 Extrinsic material relating to the comparable provisions proscribing insider trading explained this element of the second limb of the test as requiring that the information: "be made known in a manner that would, or would be likely to, bring it to the attention of persons who commonly invest in securities of bodies corporate of a kind whose price or value might be affected by the information. This provision is intended to define the term "generally available" in terms appropriate to closely held and unlisted companies as well as listed companies with dispersed shareholdings. It would not be sufficient for information to be released to a small sector of the investors who commonly invest in the securities. The information must be made known to a cross section of the investors who commonly invest in the securities; …" (explanatory memorandum to the Corporations Legislation Amendment Bill 1991 (Cth) [328]) 123 The term "persons who commonly invest" is not defined in the Act. We will elaborate on this aspect shortly.

"Deductions, conclusions or inferences" from the primary sources - the third (but secondary) possibility (s 676(3)) 124 The third (but secondary) means by which information may become "generally available" is if the information consists of "deductions, conclusions or inferences" based upon information that is either readily observable or publicly disseminated. A party seeking to prove the lack of general availability of information must negative the existence of relevant deductions, conclusions or inferences (R v Rivkin [2004] NSWCCA 7; 184 FLR 365 at [178]). Extrinsic material relating to the provisions proscribing insider trading noted that it was not intended that the provisions would regard, as "inside" information, such things as deductions and conclusions which investors, brokers or other market participants may make based upon independent research of generally available information (explanatory memorandum to the Corporations Legislation Amendment Bill 1991 (Cth) [327]: see Woodcroft-Brown v Timbercorp Securities Ltd at [176]; R v Firns (supra) at [56]).

(a) "Persons who commonly invest in securities" (grounds 1 to 3) 125 The first ground of appeal alleges that the primary judge erred in construing the phrase "persons who commonly invest in securities" in s 677 of the Act to mean "persons who ordinarily or usually invest in listed securities" and excluding "self-funded retirees who, from time to time, (perhaps between games of bingo) play the stockmarket". 126 The second ground of appeal asserts that the primary judge erred by interpreting the phrase "persons who commonly invest in securities" so as not to encompass common or ordinary people who invest in listed securities such as self-funded retirees, widows, "mums and dads" as well as those persons "who have a degree of sophistication and who have more than a passing or occasional interest in the activities of securities exchanges". 127 The third ground of appeal states that as a consequence of the erroneous predetermination of the nature of persons who commonly invest in securities, the primary judge erred in finding that those persons who commonly invested in BBL shares "would be likely to have become acquainted with the information by reason of its formal provision to the market". The information would not have been generally available (see also the fifth ground of appeal discussed below) because it had not been made known in a manner that would or would be likely to bring it to the attention of a correctly determined class of persons who commonly invest in securities. 128 The term "persons who commonly invest" is not defined in the Act. We agree that no express distinction in the Act is made between the sophisticated and the unsophisticated, the large and the small, or the retail and the wholesale investor. We also accept that the context of s 677 must be examined to determine the construction of the section. As we have discussed earlier, the continuous disclosure regime is designed to ensure that the market is fully informed to maintain and increase the confidence of investors. It is remedial legislation designed to enhance the public interest and to protect individual investors and should be construed beneficially. 129 The appellants have contended that his Honour erroneously interpreted the phrase as meaning those who commonly invest in listed securities in general rather than those who commonly invest in the shares of a listed company like BBL. His Honour's interpretation, so it was contended, is contrary to the decision of the Master in Riley v Jubilee Mines NL [2006] WASC 199; 59 ACSR 252 at 268 [63], referred to by Martin CJ without disapproval at Jubilee (2009) 40 WAR 299 at 328 [121] and [122]. Building upon this foundation, it was said that his Honour failed to have regard to the evidence of actual shareholder investment in BBL which demonstrated that the vast majority of investors in BBL had relatively small shareholdings. 130 In our opinion, the approach taken by the Master in Jubilee at [281] and [287] was, with respect, incorrect; we note that the Full Court in Jubilee did not need to decide the point (see at [122]). The phrase "commonly invest in securities" in s 677 is not limited to shares in the type of company in question. Both the text and context of s 677, including the contrast with the language in s 676, point against that construction. We treat the phrase as being rather a type of class description (see our earlier discussion). On this aspect, we agree generally with the primary judge at [68] in his rejection of the Jubilee approach. 131 But we depart from the primary judge's approach in two other respects. First, his Honour confined the phrase in s 677 to listed securities (see at [70]). But in our view, the text does not provide that limitation and nor does the context require it. Secondly, his Honour confined the phrase to those who "ordinarily or usually" invest in listed securities (see at [70]). But in our view, if the phrase is looking at the matter from a class perspective (as we think it does), it would embrace both the frequent investor and the infrequent investor such as a self-funded retiree (cf his Honour's observations at [72]). Moreover, the class would embrace both the sophisticated investor and the unsophisticated investor including those who may have an occasional interest in investing (cf his Honour's observations at [70]). 132 But accepting that our interpretation of the relevant phrase in s 677 differs from the approach taken by his Honour, this difference does not avail the appellants. The relevant non-disclosed information in the three categories that we have set out at the outset of these reasons did not require disclosure under s 674 for the other reasons advanced by his Honour that have not been shown to be in error including the following. His Honour found ([95]) that the non-disclosure of the final dividend information had no economic significance to the shareholders of BBL. He also stated ([96]) that it had no financial significance to those interested in the group's performance as a whole. Generally, he concluded that the final dividend information was economically irrelevant to the value of the traded BBL shares ([100], [212] and [215]). No ground of appeal has expressly challenged such findings. His Honour also concluded that the non-disclosure of the final report information was economically irrelevant (see at [212] and [216]). No ground of appeal has expressly challenged such findings. As to the insolvency information, there was no such information requiring disclosure. 133 Accordingly, even if his Honour had construed s 677 in the manner that we have suggested, no disclosure was required by s 674 of any of the relevant classes of information asserted by the appellants not to have been disclosed.

(b) Whether the information was material or an "internal accounting issue" (grounds 4 and 6) 134 Ground four asserted that the primary judge erred in concluding that the breaches of ss 254T and 256D and BBL's Constitution were merely "internal accounting issues within the group" and would not have influenced or been likely to influence persons who commonly invest in securities. Relatedly, ground six asserted that the primary judge failed to grapple with the appellants' argument that BBL's breaches of the Act and its Constitution for three years and its false declarations in each year that its financial statements gave a true and fair view of its financial position, was information indicating a lack of integrity, a propensity to commit illegal corporate acts, and corporate maladministration and mismanagement of BBL. It was said that such information was likely to influence persons who commonly invest in securities. 135 In elaboration, the appellants contended that the payment of dividends was not merely an internal accounting issue but a contravention of the law and a breach of BBL's Constitution. It was said that his Honour's conclusion ignored the fact that BBL was a separate legal entity from the group and from BBIPL. It was said that once the final dividend was declared, the debt was payable by BBL not the group. The appellants submitted that it was the parent company as a stand-alone entity which must have the profits available for appropriation for the distribution at the time of declaration. 136 Further, the appellants contended that the problem of paying the final dividend otherwise than out of profits could not have been cured by the payment of an interim dividend as his Honour found. Even if an interim dividend had been paid, BBL would have had to have made an announcement to the ASX as to why it was only able to pay two interim dividends and no final dividend, particularly because in previous years it had paid a final dividend. 137 Further, the appellants referred to the fact that his Honour found that the relevant information did not consist "simply of the mere fact that for each year part of each final dividend had been paid out of capital". As his Honour held, "the whole situation had to be disclosed" which included that the payment of the final dividends from capital was an internal accounting issue. Leveraging off this statement by his Honour, the appellants contended that the "whole situation" that had to be disclosed included the systematic breaches by BBL of the Act and its Constitution, the ultra vires payments, the misleading nature of the published financial reports and the asserted potential for shareholders to be liable to pay back the unlawful dividends on the grounds of knowing receipt of trust property and unjust enrichment. The appellants then asserted that it was difficult to see why investors would have been indifferent to systematic and serious breaches of the law. 138 Relatedly, the appellants also contended that his Honour failed to identify the following potential consequences for investors from the disclosure of the final dividend information and final report information which indicated that more than a mere accounting error was involved: (a) the potential for shareholders to have to repay the unlawful dividends to BBL; and (b) the potential for investors who received franked dividends to have their notice of tax assessment revised in subsequent years. 139 The appellants asserted that the potential claw back arose because the dividends paid to shareholders were unlawful. 140 In elaboration, the appellants referred to the fact that the dividends paid in the 2006 and 2007 financial years were 50% franked. Each shareholder in those financial years received a tax credit on the franked portion of the dividend. However, a distribution that is taken not to be a frankable dividend for the purposes of the Income Tax Assessment 1997 (Cth) is unfrankable. An unfrankable dividend includes a dividend received from the company's share capital account. In 2006 and 2007, a significant component of the final dividends was paid from BBL's contributed equity or share capital account. That component, so the appellants said, was unfrankable and the tax credits impermissibly received by the shareholders in those years were potentially recoverable if the ATO was to issue a revised notice of tax assessment. 141 Further, the appellants also said that his Honour's finding on the issue of the identification of the relevant information was influenced by his erroneous conclusion in the context of s 677 as to the correct identity of those who commonly invest in securities. His Honour was of the view that the genus of investor who commonly invested in securities would be primarily motivated in making investment decisions by information which had an economic significance for the company. However, his Honour's finding as to the identification of the relevant information, and thus the likely influence test, might have been different had he correctly concluded that the class who commonly invest in securities was the common investor. The common investor may have many different reasons for acquiring or disposing of securities, not all of which have a purely economic rationale. Information that BBL repeatedly broke the law and breached its constitution was likely to influence the common investor interested in the reputation of the company and its directors in deciding whether to acquire or dispose of BBL securities. 142 More generally, the appellants argued that the test posed by s 677 was satisfied by information concerning the reputation of the company if that information was likely to influence persons who commonly invest in securities. The appellants contended that his Honour was required to ask whether the "occurrence of breaches of the Act had the potential to damage the reputation of BBL in the financial market" and/or whether the publication of financial statements that were not true and fair was likely to lead to a loss of confidence in BBL and thus whether the reasonable investor would expect this information to be price sensitive. The appellants asserted that by directing his attention to the conclusion that the information was economically insignificant because there was sufficient cash in the group to pay the dividends and that the contraventions were accounting issues of no significance, his Honour never addressed those reputational issues. 143 Finally, the appellants submitted that their argument was supported by Professor Frino's evidence that BBL was required to hold a general meeting to authorise the reduction in share capital at which time the information would have been disclosed to shareholders and the market, and that he would expect financial statements which were not true and fair to receive a qualified audit opinion. His view was that a qualified audit report would affect the confidence of investors and lead to a drop in the share price of BBL, and that the final report information would therefore have had a material effect on the price or value of BBL shares. It was said that Professor Frino's evidence on this aspect was unchallenged by BBL and ignored by his Honour. Further, the appellants said that Professor Frino's opinion was that had the final report information been disclosed to the market, the stock price of BBL would have fallen by at least an additional 5%. 144 There are a number of answers to the appellants' contentions. 145 First, the appellants sought to establish at trial that the final dividend information and final report information were material because of their economic significance. His Honour correctly summarised the key propositions in Professor Frino's evidence, which went to that proposition concerning economic significance, as follows: (a) a reduction in capital may encumber a company's ability to maintain productive capacity and generate future cashflows; and (b) there was a statistical correlation between reduced retained earnings and subsequent corporate failure. But his Honour rightly found that there were numerous problems with those opinions. They were formed without regard to the fact that BBIPL had declared an equivalent dividend to BBL at the same time that BBL declared its final dividend and were based on a false factual assumption that BBL did not have access to BBIPL's assets (reasons at [82] to [94]). His Honour's findings on Professor Frino's erroneous opinion evidence have not been the subject of express attack in any ground of appeal. 146 Secondly, as the respondents correctly contend, the appellants have belatedly reformulated their claims in an attempt to do without Professor Frino's evidence on economic significance. The claims are now put on the basis that some persons who commonly purchase securities would be influenced in their trading decisions by the mere fact of there being contraventions, even if those persons were simultaneously informed that the contraventions were the result of an internal accounting error, had no economic consequences and could have been resolved without any change in the amount of the dividends. But the appellants did not adduce expert evidence of materiality on the reformulated case dealing solely with the reputational question. 147 Professor Frino's evidence was the only evidence relied upon to prove price inflation and thereby to infer or establish materiality. But the two ways in which Professor Frino attempted to estimate price inflation were rejected by the primary judge (at [213] to [218]). Neither of them attempted to establish that BBL's share price was inflated because some investors would have been influenced by illegality simpliciter, without any economic consequences. Further, there are no grounds of appeal which expressly challenge his Honour's rejection of Professor Frino's evidence in this respect. 148 Thirdly, the appellants' assertion that the same result could not have been achieved by the payment of interim dividends was contrary to the evidence and unsupported. Further, the submission that it was "not permissible for BBL to seek to go behind the figures for its distributable profits disclosed by the accounts" was misconceived. BBL's case did not involve such a step. 149 Fourthly, as his Honour rightly found, persons who commonly invested in securities would not have been influenced, or likely to be influenced, by an announcement of the contraventions coupled with the ameliorative matters that his Honour identified (see at [101]); we will address ground 19 in the next section of our reasons. Even if some investors were motivated in a general sense by non-financial considerations, none but the most irrational or idiosyncratic (who would in any event fall outside the class identified in s 677) would react in the manner asserted by the appellants. 150 Fifthly, the appellants' assertion that shareholders may be liable to pay back the unlawful dividends that they had received from BBL was not run below or in any event substantiated before us. The same may be said concerning the appellants' franking credits argument. 151 Before turning to ground five dealing with s 676, it is convenient to address ground nine and relatedly ground 19.

(c) Whether the financial statements gave a true and fair view of BBL's financial position (ground 9 and relatedly ground 19) 152 Ground nine asserts that the primary judge erred in not deciding that a statement by the directors and/or auditors of BBL that the financial statements were not true and fair would have had a material effect on the price or value of the shares in the terms contemplated by s 677. 153 His Honour found that BBL's financial statements for 2005 to 2007 did not give a true and fair view of its financial position in breach of s 297. Nevertheless, his Honour found that such information did not need to be disclosed ([147] to [151]), principally because it had no financial consequence for the value of BBL shares. 154 The appellants submitted that in each of the financial reports the directors declared that the reports did give a true and fair view of BBL's financial position but this was not true. It was said that the relevant information consisted not only of the information that the reports did not give a true and fair view, but that the directors' declaration that the reports did so was false. It was said that it was one thing for the directors to fail to disclose that the accounts were not true and fair; it was quite another for the directors to declare positively but falsely that they were true and fair. The appellants asserted that this raised reputational issues. The appellants said that the common investor would not have been disinterested in the corporate governance of BBL, the contraventions and the failure of the financial statements to give a true and fair view of BBL's financial position and performance. 155 We agree with his Honour that it was misleading for the appellants to so portray those matters divorced from their context. 156 First, the primary judge correctly characterised the contraventions as the result of an "accounting error". There was no evidence that the contraventions were deliberate or reckless. 157 Secondly, the retained earnings and net assets of the group at year end in 2005, 2006 and 2007 substantially exceeded the amount of the final dividend declared in respect of each such year. 158 Thirdly, investors could reasonably have been expected to have been interested in the performance of the group and not of BBL as a standalone entity (see reasons at [93]). 159 Fourthly, as the respondents contended and his Honour found, when each dividend was declared, BBL had enforceable rights against BBIPL to funds sufficient to pay the dividend, by reason of BBIPL having earlier declared a corresponding dividend. Further, the final dividends were not paid until after BBL was put in funds by BBIPL by payment of the corresponding dividend. 160 Fifthly, the same economic result without changing the amount of the dividends could have been readily achieved without contravention of the Act or BBL's Constitution by BBL paying an interim dividend instead of declaring a final dividend. 161 Generally, and as his Honour rightly found, if presented together with the "totality of relevant information", the final report information would not have influenced investors in their investment decisions. Relatedly, we would also reject ground 19 complaining of error in his Honour's example of a note; we also note that this ground was not the subject of any separate submissions. His Honour dealt with this aspect in two sections of his reasons (see at [101] and again at [147] to [149]). We detect no error in his Honour's approach. 162 Finally on this aspect, we would mention one other matter. 163 Professor Frino conceded that he did not have the requisite expertise to opine on whether the accounts reflected a true and fair view (see [30] of his first report). But Professor Frino reported on research showing price falls for other companies where a true and fair view of their position had not originally been made, but then disclosures to correct that position had been made with consequent price falls. Professor Frino opined on the basis of this research that had the final report information, i.e. that the accounts did not reflect a true and fair view, been disclosed, the share price of BBL would have fallen by 5% (see his second and third reports). This evidence was used by the appellants in an attempt to show materiality. But that research had the deficiencies explained by Mr Lonergan. Not only was the research of limited compass and value, but the corrective disclosures related either to substantial asset qualifications (relating to the carrying value of assets in the balance sheet) or going concern qualifications. Neither had any relevance to the present context where the alleged non-disclosures had no economic consequence. 164 Further, and generally, there was no evidence adduced from Professor Frino concerning the materiality of non-disclosed information concerning so-called reputational risk or accounting deficiencies that had no economic consequence (as the primary judge found).

(d) Whether the final dividend information was generally available (ground 5) 165 Ground five asserts that the primary judge erred in concluding that the contraventions of ss 254T and 256D and the breach of BBL's Constitution was information that was "generally available" pursuant to s 676. The appellants assert that such information was never expressly or impliedly disclosed in any of BBL's financial statements and was not generally available. The appellants submit that his Honour's errors on this issue in part relate to his failure to identify the correct information. It is said that it was never expressly disclosed in any document that BBL had contravened the Act or its Constitution concerning the final dividends. 166 We agree with his Honour's analysis on this aspect. Each of the financial reports disclosed the amount of the dividend and the amount of retained earnings. His Honour found that the information was not "readily observable matter" but was "generally available" information within the meaning of s 676(2)(b)(i) together with s 676(3). 167 The appellants have asserted that his Honour's finding was wrong. It was not stated explicitly within the report that dividends were not being paid out of the profits of BBL. It was said that only a reader of the report who was sufficiently financially astute might have been able to deduce this latter fact. It was said that part of the information was only at its highest contained in the financial statements and nowhere else and was only contained in the notes. 168 We note on this aspect that Mr Lonergan gave evidence that only disclosure in the notes, rather than the balance sheet, was required. Further, he expressed the view that there had been adequate disclosure in the notes of the source of the dividends (consolidated group net profit after tax) and how they would be calculated and paid. Further, the notes were part of the accounts; the accounts stated that the "accompanying notes form part of the financial report and should be read in conjunction" with the balance sheet, income statement etc. 169 The appellants contended that the way the figures were set out had to be considered in light of the financial statements as a whole. Each statement set out the dividend policy but never disclosed that dividends were not to be paid out of the retained earnings of BBL but from revenue from BBIPL and that the effect of this was to reduce share capital. It was never disclosed that by adopting the dividend policy in each annual report, BBL was contravening the Act and its Constitution. 170 In our view, the appellants' contentions that the primary judge's finding wrongly assumed a high level of financial astuteness on the part of the common investor, ignored the express operation of s 676(3). 171 In any event, we do not need to elaborate further as his Honour's consideration and application of s 676 was in any event obiter dicta given his Honour's findings on lack of materiality in any event.

(e) Whether BBL was required to disclose that it was insolvent (grounds 10 to 12, 16 and 21 to 23) 172 Ground 10 states that the primary judge erred in concluding that BBL was not aware that it was insolvent or likely to become so on or about 29 November 2008 (applying the definition of "aware" in Listing Rule 19.12). It is said that as BBL admitted that it was insolvent or likely to become so on or about 29 November 2008, his Honour should have concluded that the directors or officers of BBL ought reasonably to have come into possession of such information. It is said that the question of the directors' actual opinion did not arise given the definition of "aware" in Listing Rule 19.12. Relatedly, ground eleven states that the primary judge erred by wrongly interpreting the definition of "aware" in Listing Rule 19.12. It is said that the definition of "aware" included the words "ought reasonably to have come into possession of the information". The appellants asserted that if BBL was objectively insolvent at the time, it followed as a "matter of interpretation and logic" that the directors ought to have come into possession of that information. The appellants asserted that it was unnecessary for any evidence to be presented in that regard. Relatedly, ground 12 stated that the primary judge erred in failing to find that the purpose of the deeming provision in Listing Rule 19.12 was to prevent directors or officers of BBL using the excuse that they were not aware of matters, such as the fact that BBL was insolvent. 173 Ground 16 asserts that in determining whether BBL was aware of its insolvency the primary judge erred in failing to exclude or limit the use of the evidence of advice on insolvency pursuant to ss 135 and 136 of the Evidence Act 1995 (Cth). It was said that the primary judge was not provided with the evidence, which was withheld on the grounds of privilege, of contemporaneous advice on the same issue of insolvency provided to the individual directors of BBIPL. It was said that the partial or truncated evidence was misleading and confusing and was unfairly prejudicial to the appellants. 174 Ground 21 states that the primary judge erred in not considering the evidence that was contained in the supplementary report pursuant to s 438D of the Act by Deloitte to ASIC in connection with the possible misconduct and breaches of directors' and officers' duties. The report also dealt with the possible culpability of a director in contravening s 254T and the capital reduction provisions of the Act. 175 Ground 22 states that the primary judge erred in concluding that Listing Rule 3.1 was not engaged where the directors of a company should have realised, but did not realise, the implications of information of which they were aware. 176 Ground 23 asserts that the primary judge erred in concluding that the directors did not know that BBL was insolvent on 29 November 2008 and that there was no opinion to that effect within it of which its directors ought reasonably to have come into possession and of which they should have thereby become aware. 177 In support of these grounds of appeal, the appellants contended the following. 178 The appellants contended that the fact that BBL was insolvent was information that needed to be disclosed to the ASX. The issue was whether BBL "had" that information for the purposes of s 674(2)(b). According to his Honour, so the appellants contended, the appellants had to prove either that: (a) the fact of BBL's insolvency was actually known to the directors; or (b) an opinion that BBL was insolvent existed and should have become known to the directors or management. 179 As to (a), the appellants submitted that his Honour considered some material which had been before the directors and concluded that it did not indicate that BBL was insolvent on 29 November 2008. His Honour then said that the directors "were not required to disclose what did not appear to be the case". The appellants asserted that that reasoning might have been open to his Honour if the fact of insolvency was in issue but it was not; it was an admitted fact that BBL was insolvent on that date. It was said that the question was whether a director of BBL ought reasonably to have known that fact because he was a director. It was said that any reasonable director of a company ought reasonably to have been aware of the admitted fact that the company was insolvent. It was information that BBL "ought to have had". Now there are several difficulties with the appellants' assertions. First, (a) does not reflect his Honour's approach as set out in [76(b)] above. His Honour addressed whether the fact of insolvency should have been known. Second, the admission of the objective fact was made on the basis of later acquired information and the benefit of hindsight. It is a non-sequitur to use the later admission to establish the prior actual or constructive knowledge. 180 As to (b), the appellants submitted that his Honour's reasoning impermissibly concentrated on the subjective knowledge on the part of the directors of BBL. The appellants said that the test was an objective one. We disagree with this characterisation of his Honour's reasoning. His Honour clearly had regard to the objective dimension in addition to the opinion the directors actually held at the time. 181 The appellants submitted that the relevant test was not whether BBL had knowledge of the relevant information but whether it had, or ought reasonably to have, come into possession of the information. But even accepting this to be so, no error has been shown in his Honour's analysis. 182 The appellants also submitted that his Honour did not grapple with the admissions by the liquidator Mr Lombe contained in the s 439A report to creditors and the s 533(2) report that BBL became and remained insolvent from no later than 29 November 2008 and that the BBL board should have taken action at that time. We consider this submission to be misconceived for reasons that we will explain in a moment. 183 In our view, no error was made by the primary judge as identified in any of these grounds of appeal. 184 First, the primary judge undertook a detailed analysis of the facts relating to insolvency (at [165] to [189]). In summary, he found that the only solvency issue facing BBL as at 29 November 2008 was whether its obligation to repay noteholders in 2015 and 2016 made it insolvent on that date. Further, he found that various restructuring proposals were under consideration and that the directors could reasonably have concluded that BBL's fortunes might turn around over such a long period, enabling repayment of the noteholders when the notes matured almost a decade later. His Honour noted that such findings were consistent with contemporaneous legal advice that the directors had received. No challenge has been made out on his Honour's factual findings as to the opinion then held by the directors and the reasonableness of the opinion so held. 185 Secondly, the appellants' submission that satisfaction of s 674(2)(b) and Listing Rule 19.12 necessarily followed from the fact of insolvency itself, was inconsistent with the terms of Listing Rule 19.12, which referred to an entity being in possession of information if a director "has, or ought reasonably to have, come into possession of the information". These provisions make a distinction between the objective fact of insolvency and the directors' awareness (actual or constructive) of insolvency. They are different issues. The latter did not necessarily follow from the former. 186 Thirdly, the administrators' report to creditors of 12 August 2009 expresses the administrators' opinion that BBL was insolvent from 29 November 2008. But several observations should be made. First, this was their opinion as distinct from establishing the objective fact of such insolvency from that time. Secondly, it was made with the benefit of hindsight. Thirdly, some of their statements were to the effect of "we did not see any evidence that …", which hardly provides positive and probative foundations for their views. Fourth, the administrators' opinions were wrongly premised on the foundation that at the time there had been implementation of the "firewall strategy". The administrators' opinion was reiterated in their supplementary report to ASIC on 12 October 2010, but little additional foundation was added. 187 Fourthly and relatedly, the appellants have appealed from the primary judge's exercise of discretion not to exclude or limit the use of evidence of contemporaneous legal advice provided to the board of BBIPL by Freehills and senior counsel on the basis, so the appellants said, that such evidence was only "half the story". But as the respondents contended, legal advice provided to the non-executive directors of BBIPL by Jones Day was not in evidence because the non-executive directors maintained privilege over it. As the respondents also contended, there was no evidence as to the content of this advice. It is trite to observe that the exercise of a discretion to exclude or limit the use of evidence is reviewable only on House v The King (1936) 55 CLR 499 grounds. But no such error was identified by the appellants. Further, as the respondents pointed out, in any event the contemporaneous legal advice that was admitted supported a conclusion that his Honour had already reached independently of it. This ground of appeal lacks any substance and even if made out could not have affected the result.

Notice of contention 188 In the light of our conclusions set out above, we do not need to address the respondents' notice of contention.

conclusion 189 Although the appellants have established that his Honour construed the phrase "commonly invest in securities" in s 677 in a manner that differs from the preferable construction, that difference does not avail the appellants for the reasons that we have previously discussed. The other grounds of appeal have not been made out. The appeal must be dismissed. We also see no reason why costs should not follow the event. I certify that the preceding one hundred and eighty nine (189) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Chief Justice Allsop, Justice Gilmour and Justice Beach.

SCHEDULE OF PARTIES NSD 289 of 2015 Appellants Fourth Appellant: ANDREW CASEY THAM Fifth Appellant: BRUNO NERI Sixth Appellant: CHARMAINE MARY NERI Seventh Appellant: CAROLYN JOY KELMAR Eighth Appellant: CHARLES JAMES LEOTTA Ninth Appellant: DANIEL FRANJIC Tenth Appellant: DANIEL RAMLU Eleventh Appellant: SAROJINI RAMLU Twelfth Appellant: ENORE QUERIN Thirteenth Appellant: MARIA QUERIN Fourteenth Appellant: ERIC YACOEL Fifteenth Appellant: JOANNE YACOEL Sixteenth Appellant: ERNEST MICHAEL REAVELL Seventeenth Appellant EWEN MCPHERSON Eighteenth Appellant: GERRY PETER O'HEHIR Nineteenth Appellant: GRAEME CUCEUL Twentieth Appellant: JOHN CHRISTOPHER PARISOTTO Twenty-First Appellant: JUDITH MAE NGUYEN Twenty-Second Appellant: KEVIN EDWARD CROSLAND Twenty-Third Appellant: LYNDSEY JOAN CROSLAND Twenty-Fourth Appellant: LAGBAIL PTY LTD (ACN 010 395 632) Twenty-Fifth Appellant: LESLIE GEORGE MILLER Twenty-Sixth Appellant: MARIA GIULIA FATIGUSO Twenty-Seventh Appellant: NANCY LAMBROPOULOS Twenty-Eighth Appellant: PAUL ROBERT HACK Twenty-Ninth Appellant: RONALD MCDERMOTT Thirtieth Appellant: STEPHEN DEW Thirty-First Appellant: RIKA DEW Thirty-Second Appellant: STEVE CONTOGIANNIS Thirty-Third Appellant: TERENCE MCDONALD Thirty-Fourth Appellant: FLEUR FANSELOW Thirty-Fifth Appellant: TERRY JOHN BORLAND Thirty-Sixth Appellant: WAYNE JAMES FOOTE Thirty-Seventh Appellant: PAULINE FOOTE Thirty-Eighth Appellant: G HARVEY NOMINEES PTY LTD (ACN 001 021 236) Thirty-Ninth Appellant: GRAEME LESLIE LAIDLER Fortieth Appellant: JUNE ISOBEL LAIDLER Forty-First Appellant: GRAHAM KENNETH GIRDLER Forty-Second Appellant: ROBYN ANN GIRDLER Forty-Third Appellant: LAURENT LUCIEN BORDES Forty-Fourth Appellant: CECILE MADELEINE BORDES Forty-Fifth Appellant: MUSTAFA FIKRET Forty-Sixth Appellant: GUNSEL FIKRET Forty-Seventh Appellant: NEVILLE ALLAN LAKE Forty-Eighth Appellant: JANET MARY LAKE Forty-Ninth Appellant: NEWKS INVESTMENTS PTY LTD (ACN 001 426 348) Fiftieth Appellant: PETER ROBERT MACMORRAN Fifty-First Appellant: IRENE VALENTINE MACMORRAN Fifty-Second Appellant: S HARVEY NOMINEES PTY LTD (ACN 123 497 334) Fifty-Third Appellant: YOOGALU PTY LTD (ACN 002 269 132) Fifty-Fourth Appellant: BRENDAN CHRISTOPHER TAYLOR Fifty-Fifth Appellant: MARIANA TAYLOR Fifty-Sixth Appellant: RICHARD TERANCE GOLDBURG Fifty-Seventh Appellant: CHRISTINE ROSE SHEARING Fifty-Eighth Appellant: WILLIAM MATTHEW DUNSTAN Fifty-Ninth Appellant: ROSEMARY JANE DUNSTAN Sixtieth Appellant: BENJAMIN KARL RUDZYN Sixty-First Appellant: CHRISTOPHER JOHN GARVAN Sixty-Second Appellant: JAMES BARTHOLOMEW WIRTH Sixty-Third Appellant: JAMES DOUGLAS HAIG MUIR Sixty-Fourth Appellant: JOSEPH RUDZYN Sixty-Fifth Appellant: SUSAN RUDZYN Sixty-Sixth Appellant: PETER BRUCE RIES Sixty-Seventh Appellant: PETER RIES SUPERANNUATION PTY LTD (ACN 123 435 101) Sixty-Eighth Appellant: REMY SAGE Sixty-Ninth Appellant: SAMUEL RUDZYN Seventieth Appellant: ROBYN RUDZYN Seventy-First Appellant: WILLIAM ROBERT ECCLESTON Seventy-Second Appellant: GEORGE DOUGLAS Seventy-Third Appellant: MICHAEL GRAHAM SHIELDS Seventy-Fourth Appellant: AMANDA JOY SHIELDS Seventy-Fifth Appellant: MICHAEL MATTHEW MOORE Seventy-Sixth Appellant: ANTHONY JOHN THOMAS MOORE Seventy-Seventh Appellant: WEIDONG CHEN