Guglielman v Trescowthick

Australian Securities and Investment Commission Act 1989 (Cth) ss 12AA(3), 12AE, 12BA, 12DA, 12GF, 12GH(4) Corporations Act 2001 (Cth) s 1400 Corporate Law Economic Reform Program Act 1999 (Cth) Corporate Law Reform Act 1994 (Cth) Corporate Law Reform Bill 1993 (Cth) Corporations Law(Cth) ss 79, 670A, 728, 729, 731, 733, 765, 995, 995A, 999, 1005; up to 30 June 1998: ss 295A, 295B, 302, 303, 305; after 1 July 1998: ss 292, 295, 298, 302; up to 13 March 2000: s 232; after 13 March 2000: ss 180, 185, 1317H Fair Trading Act 1987 (SA) ss 54, 56, 84 Federal Court of Australia Act 1976 (Cth) Federal Court Rules (Cth) O 11 r 16 Financial Sector Reform (Consequential Amendments) Act 1998 (Cth) Trade Practices Act 1974 (Cth) ss 6(3), 51N, 51A, 52, 75B, 82, 84(4) Dey v Victorian Railway Commissioners (1949) 78 CLR 62 cited General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 cited Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 applied McKellar v Container Terminal Management Services Ltd (1999) 165 ALR 409; [1999] FCA 1101 applied Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 cited Australian Ocean Line Pty Ltd v West Australian Newspapers (1983) 66 FLR 453 cited Universal Telecasters (Qld) Ltd v Guthrie (1978) 32 FLR 360 cited Gardam v George Wills & Co Ltd (1988) 82 ALR 415 cited Barton v Croner Trading Pty Ltd (1984) 54 ALR 541 cited Korczynski v Wes Loftus (Aust) Pty Ltd (1985) 62 ALR 225 cited Yorke v Lucas (1985) 158 CLR 661 discussed Cassidy v Saatchi & Saatchi Australia Pty Ltd [2004] FCAFC 34 cited King v Milpurrurru (1996) 136 ALR 327 distinguished Mentmore Manufacturing Co Ltd v Merchandise Marketing Co Inc (1978) 89 DLR (3d) 195 referred to Microsoft Corporation v Auschina Polaris Pty Ltd (1996) 71 FCR 231 cited Williams v Natural Life Health Foods Ltd [1998] 2 All ER 577 cited Synman v Cooper (1989) 91 ALR 209 applied Nescor Industries Group Pty Ltd v Miba Pty Ltd (1997) 150 ALR 633 cited Water Board v Moustakas (1988) 180 CLR 491 cited Dare v Pulham (1982) 148 CLR 658 referred to Australian Competition & Consumer Commission v Maritime Union of Australia (2001) 187 ALR 487; [2001] FCA 1549 applied Multigroup Distribution Services Pty Ltd v TNT Australia Pty Ltd (1996) ATPR 41-522 applied Briginshaw v Briginshaw (1938) 60 CLR 336 applied Rejfek v McElroy (1965) 112 CLR 517 applied Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 109 ALR 638 applied Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 applied March v Stramare (E & M H) Pty Ltd (1991) 171 CLR 506 referred to South Australia v Peat Marwick Mitchell & Co (1997) 24 ACSR 231 cited Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241 applied O'Connor v SP Bray Ltd (1937) 56 CLR 464 applied Gardiner v State of Victoria [1999] 2 VR 461 applied Byrne v Australian Airlines Ltd (1995) 185 CLR 410 referred to Philip Morris (Australia) Ltd v Nixon (2000) 170 ALR 487 cited Lowe, Lippman, Figdor & Frank v A.G.C. (Advances) Ltd [1992] VR 671 Mutual Life & Citizens Assurance Co Ltd v Evatt (1968) 122 CLR 556 referred to Hedley Byrne & Co Ltd v Heller Partners [1964] AC 465 referred to ELEANOR GUGLIELMAN v ADAM JOHN TRESCOWTHICK, JOHN MAURICE PATTEN, ROSS GRAHAM OAKLEY, ROBERT DAVID MATTINGLY, ROGER ANDREW CURTIS & MARK CHARLES TRESCOWTHICK S 153 of 2002 MANSFIELD J 25 MARCH 2004 ADELAIDE

THE ISSUES 1 By application of 7 June 2002 the applicant, as a representative party, seeks damages against each of the respondents. The application is made on behalf of the group of persons who were beneficial owners of quoted ED securities in Harris Scarfe Holdings Ltd (Holdings) at 3 April 2001, who (it is claimed) lost the opportunity to dispose of those securities at their 'true market value' prior to those securities becoming valueless, or who acquired those securities at greater than their 'true market value', by reason of the conduct of the respondents. The respondents were at times material to the claim some of the directors of Holdings. 2 The claim is that the respondents variously made representations and provided information to the group members, or to participants in the market for Holdings ED securities, as to the operating results and the financial state of affairs of Holdings over the period 12 March 1996 to 3 April 2001. It is alleged that the conduct complained of (as detailed in the statement of claim) variously contravened s 12DA of the Australian Securities and Investment Commission Act 1989 (Cth) (ASICA), s 999 of the Corporations Law(Cth), s 52 of the Trade Practices Act 1974 (Cth) (TPA), s 56 of the Fair Trading Act 1987 (SA) (FTA) and the duties of the respondents as directors of Holdings imposed at common law and by statute. 3 The sources of the relief, by way of damages, sought in the application are s 12GF of the ASICA for contraventions of s 12DA of the ASICA, s 1005 of the Corporations Law for contraventions of s 999 of the Corporations Law, s 82 of the TPA for contraventions of s 52 of the TPA, s 84 of the FTA for contraventions of s 56 of the FTA, and at common law. 4 Each of the respondents has applied by notice of motion to strike out the statement of claim pursuant to O 11 r 16 of the Federal Court Rules (the Rules). Each relies upon the three grounds specified in O 11 r 16, namely that the statement of claim discloses no reasonable cause of action, that it has a tendency to cause prejudice, embarrassment or delay, and that it is an abuse of the process of the Court. Without attempting to do full justice to the detailed and careful contentions of counsel for the respondents, but simply to endeavour in a general way to reflect their contentions, it is argued that: (1) the causes of action relying on alleged contraventions of s 12DA of the ASICA, s 52 of the TPA, and of duties imposed at common law and by statute are not recognised at law; (2) the causes of action relying on alleged contraventions of s 52 of the TPA, s 56 of the FTA, and s 999 of the Corporations Law do not disclose sustainable causes of action as critical material facts are not alleged; and (3) the causes of action are pleaded in an inconsistent, confusing and embarrassing manner. 5 There is no issue about the principles to be applied in considering the respondents' motions. The Court should proceed with caution before striking out a statement of claim. If, after argument, the Court is firmly of the view that the statement of claim does not plead facts which give rise to the cause of action relied upon, or if the pleaded facts do not support the cause of action relied upon, then the statement of claim should be struck out. See generally Dey v Victorian Railway Commissioners (1949) 78 CLR 62 at 85, 91-92; General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129-130. 6 In Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 at 286, Mason CJ and Gaudron J said: 'The function of pleadings is to state with sufficient clarity the case that must be met. In this way, pleadings serve to ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her and, incidentally, to define the issues for decision.' (Reference omitted.) 7 I have adopted that approach in my consideration of the respective contentions. Weinberg J in McKellar v Container Terminal Management Services Ltd (1999) 165 ALR 409; [1999] FCA 1101 at 417-421; [20]-[32], has considered the provisions of O 11 of the Federal Court Rules and discussed the recent decisions dealing with O 11. I gratefully adopt his Honour's analysis of those cases. I will not repeat it. 8 I think the end result is that the statement of claim must plead the facts necessary for the purpose of making out a complete cause of action. It will not be sufficient simply to plead a conclusion in terms of a statutory provision, or a conclusion drawn from unstated facts. Otherwise, the factual issues for trial will not be identifiable. On the other hand, in considering the adequacy of the pleaded facts, the Court adopts a sensible and robust approach. It will not be concerned with technical or minor criticisms, but whether the pleading does adequately identify for the other party the material facts which, if proved, will establish the cause of action relied upon. Whether the generality of a pleading results in the fundamental function of pleadings not being served is a matter to be addressed in each case. Whether a pleading should be struck out depends upon whether, in the particular circumstances, it is necessary to do so in the interests of justice. If the object of pleadings is sufficiently met, the striking out of the pleading will be unnecessary.

the statement of claim 9 To address the contentions of the parties, it is necessary to set out in a little detail the nature of the allegations in the statement of claim. I will then consider each of the alleged contraventions in turn. As I indicated at the commencement of the submissions, I will consider the statement of claim as if it were amended by the document entitled Appendix A to the written outline of submissions of the applicant filed in January 2003. Senior counsel for the applicant indicated the applicant intended to seek leave to amend the statement of claim in those respects. Senior counsel for the respondents did not accept that the proposed amendments, if made, would respond in any adequate way to the respondents' complaints about the statement of claim; the proposed amendments, if made, would not (it was said) diminish the force of the contentions on behalf of the respondents. Hereafter I will refer to the statement of claim by the letters 'SOC' as if it incorporated those proposed amendments. 10 The SOC is indexed into the following headings: Parties [7]-[21] Events during 1996 [22]-[62] Events during 1997 [63]-[103] Events during 1998 [104]-[156] Events during 1999 [157]-[202] Events during 2000 [203]-[259] Events during 2001 [260]-[273] Holdings Share Price [274]-[279] Breaches [280]-[319] Reliance and Loss [320]-[332] 11 It commences by identifying the phrase 'all material times' as meaning the period from 12 March 1996 to 3 April 2001. As later appears, on 3 April 2001 Holdings securities were suspended from quotation on the securities market and the directors of Holdings appointed voluntary administrators to Holdings under Part 5.3A of the Corporations Law. In April 2001, a bank appointed a receiver and manager over the assets of Holdings following the sale of the business of Holdings by the receiver and manager, namely its retail department store business. The proceeds of sale were applied to discharge or partially discharge the amount secured by the charge granted by Holdings to the bank. It is said that there will be no return to the ordinary shareholders of Holdings.

12 The SOC asserts that Holdings securities (comprising shares and, from 3 July 2000, convertible notes) were quoted on the stock market of the Australian Stock Exchange Ltd (the ASX), and that its securities were ED Securities within the meaning of s 111AD of the Corporations Law. Holdings was a disclosing entity under s 111AC and s 111AL of the Corporations Law and its securities were quoted ED securities under s 111AM of the Corporations Law. Holdings was subject to the continuous disclosure requirements of Ch 3 of the ASX Listing Rules, as well as the periodic disclosure requirements of Ch 4 of the ASX Listing Rules. 13 Thus it sets the scene for the allegations concerning the respondents. The first, second and fifth respondents were directors of Holdings at all material times. The first respondent was the Chairman of the Board of directors. The third, fourth and sixth respondents were directors from 28 July 1997, 31 January 1997, and 27 November 1998 respectively and at all material times thereafter. The SOC also identifies Alan Hodgson (Mr Hodgson) as the company secretary, and from March 1999 the chief financial officer, of Holdings, and Ronald Baker (Mr Baker) as its managing director until March 1999. For the purpose of addressing the present issues, nothing is said to turn upon the individual circumstances of a particular respondent. Despite the different periods for which they were directors, it is convenient simply to deal with them collectively as the respondents. Use of that term should hereafter be taken as a reference to those respondents who were directors of Holdings from time to time during times material to the action. There is a need to address the circumstances of the first respondent separately for limited purposes. 14 The SOC then recites, calendar year by calendar year, the information publicly disseminated by Holdings concerning its financial performance. The dissemination alleged includes the financial reports and statements required by ss 295A, 295B, 302 and 305 of the Corporations Law up to 30 June 1998 and ss 292, 295, 298 and 302 after 1 July 1998. It includes the Chairman's and Managing Director's addresses to the annual general meeting (also provided to the ASX). It includes the half yearly financial reports, including the opinion of the directors as to the status of the financial reports and directors' reports. It includes correspondence to the holders of credit accounts, copied to the ASX. It also includes the issue of a prospectus under Part 6D.2 of the Corporations Law on 19 May 2000 (the 19 May 2000 prospectus) for the issue to existing shareholders of a renounceable rights issue of convertible notes, and for the issue to the public of convertible notes. Chapters 3 and 4 of the ASX Listing Rules are also said to contain relevant reporting requirements. 15 The SOC asserts that each of those communications was made 'for and on behalf of Holdings and the directors', whether issued by or under the name of Mr Hodgson or of the Chairman for the time being or directly by the directors, or by Holdings itself without the actual issuing source being asserted. 16 Details of the representations made by each separate communication are provided. 17 It is then alleged, in respect of each separate communication, that each of the representations so made was false or misleading or deceptive or was likely to mislead or deceive. Particulars of the facts are alleged which (if proved) are claimed to show that each of the alleged representations has that character. 18 Where the representations alleged are that the directors held the opinions expressed in the financial accounts, it is alleged that by implication it was represented that the opinions were held on a reasonable basis, were the product of reasonable care and skill on the part of directors, and were safe to be relied upon. It is claimed that such implied representations were false or misleading or deceptive or were likely to be misleading or deceptive; in those instances, particulars of the facts or matters proposed to be proved to demonstrate the claim are not given. It is said particulars or further particulars will be provided after discovery and inspection, and after the obtaining of experts' reports. 19 In a number of instances, where there is said to be a representation as to the future (e.g. a confidence that a budget will be achieved or a profit level reached), it is pleaded alternatively that the representations were as to future matters within the meaning of s 765 of the Corporations Law, s 51A of the TPA and s 54 of the FTA, and that there were no reasonable grounds for the representations. 20 The SOC alleges also the making of a rights offer in 1998 and the issue of shares by Holdings pursuant to that offer in 1998, the further issues of shares in January 2000 and in June 2000, the purchases of shares by the applicant in Holdings in February and March 2000 and in February and March 2001, the issue of convertible notes pursuant to acceptances following the prospectus of 19 May 2000, and the payments of dividends in January and June 2000. 21 As noted above, the SOC then asserts that trading in Holdings' shares and convertible notes ceased on about 30 March 2001, that voluntary administrators were appointed on 3 April 2001, and that a receiver and manager was appointed in April 2001. 22 The SOC then records the trading price of Holdings shares on the securities market over five separate but continuous periods. It claims that Holdings share trading price during those periods would have been lower but for the misrepresentations made relating to that period. The five periods relate to the dates when there was a change in the combination of the respondents who were directors of Holdings: see [13] above. The five periods are: 12 March 1996 to 30 January 1997 31 January 1997 to 27 July 1997 28 July 1997 to 1 January 1998 1 January 1998 to 26 November 1998 27 November 1998 to 3 April 2001

The fourth period, in respect of some alleged contraventions, is broken into the period between 1 January 1998 and 30 June 1998, and between 1 July 1998 and 26 November 1998 because from 1 July 1998 s 12DA of the ASICA came into force, and other legislative changes were made as discussed in the next section of these reasons for decision. 23 The balance of the SOC alleges, sequentially in respect of each of the five periods, breaches of the Corporations Law, then of the TPA, then of ASICA, then of the FTA, and then of the directors' 'duty of care owed to Group Members' and of the directors 'statutory duty to Group Members'. 24 The breaches of s 999 of the Corporations Law in respect of the five periods are said to have been the making of statements or the dissemination of information which was false in a material particular or was materially misleading and which was likely - · to induce other persons to subscribe for Holdings shares, or · to induce the sale or purchase of Holdings shares by other persons, or · to have the effect of increasing, reducing, maintaining or stabilising the market price of Holdings shares

in circumstances where the relevant respondents ought reasonably to have known that the statements or information was false in a material particular or was materially misleading. Details of the conduct, and the basis of knowledge of each of the relevant respondents in respect of each of the five periods (periods three and four are run together) are asserted. 25 In addition, breach by Holdings itself of s 728 of the Corporations Law is alleged only in respect of the fifth period, that is from 27 November 1998 to 3 April 2001. It is claimed that, by reason of the 19 May 2000 prospectus, Holdings offered securities under a disclosure document in circumstances where there was a misleading and deceptive statement in the disclosure statement. The SOC does not claim damages for any contravention by Holdings of s 728. It is not a party. The allegation appears to set the scene for part of the alleged conduct on the part of the respondents in contravention of s 999. The contravention of s 999 of the Corporations Law by each of the respondents during the fifth period (they are all said to have been directors during that period) includes the conduct of the respondents through or by the issue of the 19 May 2000 prospectus. 26 Section 52 of the TPA is relied upon by reason of, and to the extent to which, the conduct of the respondents involved the use of postal, telegraphic or telephonic services. The relevant respondents (the third and fourth periods are partly run together, but are broken then by the date 1 July 1998 apparently by reason of the legislative changes effected on that date as discussed below) are, in terms of s 52 of the TPA, alleged to have engaged in conduct in trade or commerce which was misleading or deceptive or was likely to mislead or deceive. Details of the conduct are given. The conduct is the same as the conduct which is alleged to amount to conduct in contravention of s 999 of the Corporations Law. 27 The contraventions of s 12DA of the ASICA are alleged as alternatives to the contraventions of s 52 of the TPA in respect of that part of the fourth period from 1 July 1998 and the fifth period. It was not in force before 1 July 1998. It is relied upon by reason of, and to the extent to which, the conduct of the respondents involved the use of postal, telegraphic or telephonic services. As s 12DA mirrors the terms of s 52 of the TPA, except that it applies only in relation to financial services, the allegations mirror those made concerning s 52 of the TPA in respect of those periods. 28 It is apparent that if the alleged conduct in respect of those periods was in relation to financial services, it is intended to invoke s 12DA of the ASICA, and if it was not in relation to financial services, it is intended to invoke s 52 of the TPA. 29 The alleged contraventions of s 56 of the FTA by the relevant respondents effectively also mirror the alleged contraventions of s 52 of the TPA. In that instance, s 56 of the FTA applies on its face to individuals. From 1 July 1998, these contraventions are pleaded as alternatives to the alleged contraventions of s 12DA of the ASICA. Again, the alternatives depend upon whether the alleged conduct, after 1 July 1998, was in relation to financial services. 30 Contraventions of the alleged duty of care owed by the directors of Holdings to 'Group Members' is alleged against each of the respondents from the time each became a director to 3 April 2001. The duty alleged is to exercise reasonable care and skill to ensure the accuracy of statements contained in the yearly and half-yearly financial statements, in the directors' statement and in the directors' report. Proximity between the directors and the group numbers (including the applicant) is said to arise because a primary purpose of those documents was to inform Holdings shareholders as to the state of affairs of Holdings, and because the directors intended or knew that they would be sent to its shareholders. Reliance is also placed upon the statutory obligations imposed upon the directors by s 232 of the Corporations Law up to 13 March 2000, and by s 180 of the Corporations Law after 13 March 2000 to exercise care and diligence in the discharge of their duties. There are further factual allegations said to give rise to the existence of the duty of care allegedly owed to the applicant and group members. They will need to be referred to when dealing with the submissions on the several notices of motion. It is then alleged that, in respect of the financial statements, directors' statements and directors' reports during the periods the respondents were variously directors, they each failed to exercise reasonable care to ensure the accuracy of the representations contained in those documents. The SOC says that particulars of the failure to exercise reasonable care will be provided after discovery and inspection. 31 Finally there is the claim based upon breach of statutory duty. The SOC, in a similar structure (that is, severally in relation to the respondents by reference to the date when each became a director of Holdings), alleges that as directors they owed 'a statutory duty to the applicant and to each of the members of the group' to exercise the degree of care and diligence that a reasonable person in such a position in a corporation would exercise in Holdings' circumstances in the preparation of the yearly and half yearly financial reports by reason of ss 295A and 295B of the Corporations Law up to the financial reports dated 31 January 1998, and thereafter by reason of ss 292 and 295 of the Corporations Law. The same allegation is made in respect of the directors' statements accompanying those financial reports by reason of s 302 of the Corporations Law and after the financial reports dated 31 January 1998 by reason of s 292 and s 295 of the Corporations Law, and in respect of the directors' reports also accompanying those financial statements by reason of s 305 of the Corporations Law until the financial reports dated 31 January 1998, and thereafter by reason of ss 292 and 298 of the Corporations Law. The duty alleged is to ensure: 'that the applicant and the members of the group and the market for Holdings securities received accurate information as to Holdings' financial position and state of affairs'. Again, the respondents are severally alleged to have breached those statutory duties in the preparation of those documents. Again, particulars (it is said) will be provided after discovery and inspection. I note that in respect of the financial statements of 31 January 2000 and the directors' declaration and directors' report concerning those statements, only s 302 of the Corporations Law is referred to. 32 The final section of the SOC deals with reliance and loss and damage. It alleges that the breaches of s 999 of the Corporations Law caused the trading price for Holdings' shares to fail to reflect the true market value of Holdings business or of its prospects. Consequently, those breaches caused the applicant and other members of the group to acquire Holdings shares at more than their true value, to believe (wrongly) that the trading price of Holdings shares reflected their true market value, and so to lose the opportunity to dispose of Holdings shares at their true market value before 3 April 2001. 33 The SOC alleges that, had the trading price of Holdings shares from time to time reflected their true market value, the applicant and other group members would have sought professional advice and would not have acquired, and if holding them would have sold, Holdings shares before 3 April 2001 when they effectively had no value. Damages are claimed pursuant to s 1005 of the Corporations Law as:

'The difference between the price paid for shares in Holdings and the true market value of those shares at the date of acquisition or in the alternative, the loss incurred through not disposing of those shares.' 34 The breaches of s 52 of the TPA, s 56 of the FTA, s 12AD of the ASICA and of the duties at common law and under the Corporations Law are all alleged to have similar consequences. It is alleged the applicant and other members of the group formed the mistaken belief that from about late 1995 Holdings had successfully been following a policy of expansion, that it was trading profitably and increasingly so over each half year, that its net assets continued to increase over each half year, and having held or acquired Holdings shares that they lost the opportunity to decide whether to continue to hold or to dispose of their Holdings shares and to dispose of them before they became valueless. Damages are claimed pursuant to s 82 of the TPA, s 84 of the FTA, s 12GF of the ASICA of the same nature as is claimed under s 1005 of the Corporations Law. Damages are claimed for breach of the common law duty and at common law for the breach of that duty, described as: 'The price paid for shares in Holdings or the loss incurred through not disposing of the shares.'

THE LEGISLATION 35 The various causes of action involve a tangled legislative weave. The weave is intended to make the provisions of the TPA, the FTA, the ASICA and the Corporations Law operate in a complementary way in different areas of commercial activity, generally to the same effect, but without overlapping. In respect of the material period, i.e. the period commencing on 12 March 1996 and ending on 3 April 2001, it is necessary to address the provisions of those enactments as they applied from time to time. 36 Section 52 of the TPA was in force at all material times. It provided: '(1) A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.' Section 6(3) of the TPA provides that, relevantly, s 52 of the TPA has the effect as if it were confined in its operation to engaging in conduct to the extent to which the conduct involves the use of postal, telegraphic or telephonic services or takes place in a radio or television broadcast, and so that a reference in s 52 to a corporation includes a reference to a person not being a corporation: see s 6(3) of the TPA. 37 Section 51AF of the TPA was introduced by the Financial Sector Reform (Consequential Amendments) Act 1998 (Cth). Schedule 2 Pt 2 cl 27 inserted s 51AF into the TPA. It provides that Pt 5 of the TPA (including s 52) does not apply to the supply, or possible supply, of services that are financial services. Definitions of 'financial product' and 'financial service' were introduced into s 4(1) of the TPA to have the same meanings as in Div 2 of Pt 2 of the ASICA. It took effect from 1 July 1998. 38 Schedule 2 Pt 1 of the Financial Sector Reform (Consequential Amendments) Act 1998 (Cth) also introduced extensive amendments to the ASICA. For present purposes, the amendments also took effect from 1 July 1998. Those amendments included the introduction of s 12DA of the ASICA which, relevantly, provides: 'A corporation must not, in trade or commerce, engage in conduct in relation to financial services that is misleading or deceptive or is likely to mislead or deceive.' Section 12AA(3) of the ASICA Act was introduced at the same time, in substance to the same general effect and intent and in relevantly the same terms as s 6(3) of the TPA. 39 At the same time definitions of 'financial product' and 'financial service' were introduced as part of s 12BA of the ASICA Act. 'Financial product' is defined to include 'a security'. Financial service is defined to mean a service that: '(a) consists of providing a financial product; or (b) is otherwise supplied in relation to a financial product.' It is also appropriate to note the definition of 'services' as including: '… any rights (including rights in relation to, and interests in, real or personal property), benefits, privileges or facilities that are, or are to be, provided, granted or conferred in trade or commerce but does not include: (a) the supply of goods within the meaning of the Trade Practices Act 1974; or (b) the performance of work under a contract of service.' There is no definition of 'security'. 40 It is noteworthy also that s 12AE of the ASICA, also introduced at that time, provided that the new Subdiv D (including s 12DA) was not intended to exclude or limit the concurrent operation of any law of a State or Territory. Thus, s 56 of the FTA continued to operate according to its terms. There were exceptions to s 12AE(1) which do not apply. 41 Accordingly, s 56 of the FTA applied from and prior to 12 March 1996 and continued to apply after the commencement of those amendments. It provided: '(1) A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.' 42 The consequence is that, at material times from 12 March 1996 to 30 June 1998 both s 52 of the TPA and s 56 of the FTA continued to operate concurrently in respect of the alleged offending conduct, so long as s 52 of the TPA had the extended operation to which s 6(3) of that Act referred. From 1 July 1998, in relation to the supply of financial services, s 52 of the TPA no longer applied. It was replaced by s 12DA of the ASICA. Section 12DA of the ASICA also had the extended operation referred to. Concurrently, s 56 of the FTA continued to operate. 43 There were further relevant amendments effected on 13 March 2000 by the Corporate Law Economic Reform Program Act 1999 (Cth). Their effect was to remove from the operation of s 12DA of the ASICA, and from s 56 of the FTA, 'dealings in securities'. Section 995A was introduced into the Corporations Law: Sch 3 Pt 1 cl 61. It provided that the provisions of State Fair Trading Acts do not apply to dealings in securities. Clause 24 inserted into the definitions in s 9 of the Corporations Law a definition of 'State Fair Trading Act' to include the FTA. In addition, Sch 4 Pt 1 cl 1 inserted into s 12DA of the ASICA, subs (1A) in the following terms: 'This section does not apply to dealings in securities.' 44 At material times from 12 March 1996 and continuing, s 999 of the Corporations Law provided: 'A person must not make a statement, or disseminate information, that is false in a material particular or materially misleading and: (aa) is likely to induce other persons to subscribe for securities; or (a) is likely to induce the sale or purchase of securities by other persons; or (b) is likely to have the effect of increasing, reducing, maintaining or stabilising the market price of securities; if, when the person makes the statement or disseminates the information: (c) the person does not care whether the statement or information is true or false; or (d) the person knows or reasonably to have known that the statement or information is false in a material particular or materially misleading.' 45 Section 995 of the Corporations Law prior to and after 12 March 1996 relevantly provided: '(2) A person shall not, in or in connection with: (a) any dealing in securities; or (b) without limiting the generality of paragraph (a): (i) the allotment or issue of securities; (ii) … engage in conduct that is misleading or deceptive or is likely to mislead or deceive.' 46 By the Corporate Law Economic Reform Program Act 1999 (Cth), Sch 3 Pt 1 cl 59, s 995(2A) was inserted to read: 'Conduct that contravenes: (a) section 670A (misleading or deceptive takeover document); or (b) section 728 (misleading or deceptive fund raising document); does not contravene subs (2). For this purpose, conduct contravenes the provision even if the conduct does not constitute an offence, or does not lead to any liability, because of the availability of a defence.' 47 Hence, s 995 of the Corporations Law also imposes liability in respect of misleading or deceptive conduct in the circumstances to which it applied, and continued to do so at all material times. From 13 March 2000, in respect of dealings in securities, neither s 12DA of the ASICA, nor s 56 of the FTA applied to dealings in securities. Sections 995(2) and 999 of the Corporations Law applied to conduct in or in connection with dealings in securities, except that in respect of conduct which fell within s 670A or s 728, s 995(2) did not apply. Section 728 relates to misleading or deceptive statements in 'disclosure documents', such as the 19 May 2000 prospectus. 48 A clear legislative intent is that, whether the conduct be a financial service, or whether it be a dealing in securities, provided conduct attracted the operation of s 52 of the TPA and s 56 of the FTA, it would be actionable, but progressively by refinement of the operation of those sections, such conduct in relation to financial services would be actionable under s 12DA of the ASICA rather than under the TPA, and at a later point, in respect of financial services involving dealings in securities, under s 999 of the Corporations Law only. It is not necessary to refer further to s 995(2) of the Corporations Law as the SOC relies only upon alleged contraventions of s 999.

consideration of contentions 49 Before addressing the various causes of action alleged, it should be noted that the SOC does not allege accessorial liability on the part of any of the respondents. Sections 12GF of the ASICA and s 75B of the TPA respectively specify circumstances in which personal accessorial liability for the contravention of s 12DA of the ASICA and s 52 of the TPA by a corporation may arise. Section 79 of the Corporations Law performs the same function in relation to contraventions of the Corporations Law. The allegations in the SOC against each of the respondents are that they are each liable as principals for the causes of action pleaded.

(1) The FTA and the TPA 50 It is convenient to address the allegations concerning contravention of s 56 of the FTA first. It applied in respect of all the identified periods, except that after 13 March 2000 it did not apply in relation to dealings in securities. 51 To sustain a cause of action under s 56 of the FTA against each of the respondents, in respect of the periods that each was a director of Holdings, it is necessary that the SOC plead material facts which could show: (1) conduct engaged in by each of the respondents personally; (2) in trade or commerce; (3) which was misleading or deceptive or was likely to mislead or deceive; and that (4) the applicant relied on the conduct of respondents; and (5) the applicant thereby suffered loss or damage; and (6) from 13 March 2000, the conduct was not in relation to dealings in securities.

For the cause of action under s 52 of the TPA, it is also necessary to plead facts to establish that the conduct involved the use of postal, telegraphic or telephonic services. I note that there was no contention put on behalf of any of the respondents that the conduct alleged (which they accepted as being conduct of Holdings) was not arguably in trade or commerce, or that it was not alleged to be misleading or deceptive or likely to mislead or deceive. 52 The respondents' contentions concerned the pleading of conduct engaged in by the respondents. It was further contended on behalf of the respondents that the SOC does not plead facts which may demonstrate a causal connection between the impugned conduct and the loss said to have been suffered by the applicant and by each group member. 53 Finally, in relation to the cause of action under s 56 of the TPA, it was contended that the SOC does not plead that the conduct was engaged in in South Australia. Section 55 of the FTA limits the operation of the FTA to transactions that take place wholly or in part in South Australia, or to conduct that occurs and representations that are made wholly or partly in South Australia. 54 It is convenient to deal with the latter point first. I do not think it is fatal to the SOC, insofar as it pleads contraventions of s 56 of the FTA. It has been addressed by pars 306A and 306B of the SOC (paragraphs added by the annexure to the applicant's written submissions). The allegations are that the conduct took place by the passing of resolutions of the directors of Holdings from time to time in Adelaide, by the transmission and publication of the materials referred to from the registered office of Holdings in South Australia, and by the receipt in South Australia by the applicant of the materials referred to. In respect of the receipt of materials by group members outside South Australia, reliance is also placed on the corresponding legislative provisions to s 56 of the FTA in force in the other Australian States and Territories. 55 From 1 July 1998, the obligation to prepare annual and half yearly financial reports under ss 292 and 302 respectively of the Corporations Law, and to prepare directors' reports under s 298 of the Corporations Law, rested on Holdings. Sections 319 and 320 obliged Holdings to lodge those documents with the Australian Securities and Investments Commission (ASIC). The obligations to complete 'Appendix 4B' statements, and to lodge them together with half yearly and annual financial reports with the ASX, and to send the annual report to shareholders and to the ASX, were also obligations resting upon Holdings under ASX Listing Rules, Chapter 4. The obligations of continuous disclosure under Chapter 3 of the ASX Listing Rules were also those of Holdings itself. Hence, the respondents contend, there is no conduct on the part of any of them which has been pleaded. Under the Corporations Law regime prior to 1 July 1998, ss 295A, 295B and ss 302 and 305 obliged Holdings' directors to cause to be prepared its consolidated balance sheet and profit and loss account and its directors' report. For reasons which appear below, I do not consider the difference to be of moment to the motions presently under consideration. 56 The SOC does contain allegations that certain conduct was engaged in by Mr Hodgson 'for and on behalf of' Holdings and its directors. But, it is submitted, no facts are pleaded by which that conclusionary allegation could be made out, especially where Holdings itself was obliged to engage in that conduct. 57 The only particular conduct pleaded which, the respondents acknowledge, may have been expressly ascribed to the respondents as directors of Holdings is the issue of the 19 May 2000 prospectus. Because the prospectus relates to dealings in securities, from 13 March 2000 it is argued that it cannot fall within the aegis of s 56 of the FTA. It is further argued that it must fall only within the scope of operation of s 999 (or more generally Div 2 of Pt 7.11 and Div 1 of Pt 6D.3) of the Corporations Law. For reasons referred to below, the respondents contend s 999 is not properly alleged to have been contravened. 58 To consider those submissions, it is convenient to look to a sample period of the allegations in the SOC. I shall select indicative examples from the 12 month period commencing on 1 August 1999 (the start of Holdings financial year). The period is one during which all the respondents were directors. It includes the issue of the 19 May 2000 prospectus. It follows the amendments to the ASICA and the TPA effective from 1 July 1998. And it runs over the legislative changes made on 13 March 2000: see [43] above. 59 The applicant contends that analysis of the SOC will demonstrate that it is alleged that each of the respondents, for the period he was a director, was directly involved in the preparation of and making of financial statements, directors' statements, directors' declarations and directors' reports, and their dissemination through Mr Hodgson. It is further contended that the fact that from 1 July 1998 Holdings was legally obliged to prepare or have prepared, and to disseminate, such material does not preclude the respondents and each of them, during their respective directorships, from also engaging in that conduct. 60 The applicant presented in argument a volume containing the documents published, at least by Holdings, during that period. There was no opposition to the Court having resort to it. 61 The first relevant event alleged during that financial year is the issue of a press release on 14 September 1999 (the 14 September 1999 press release). It is pleaded (par 181 of the SOC) that it was sent by Mr Hodgson to the ASX 'for and on behalf of Holdings and the directors'. It enclosed Holdings' preliminary final report for the financial year to 31 July 1999 (an 'Appendix 4B' report required under the ASX Listing Rules). 62 The 14 September 1999 press release is on the letterhead of Holdings. It contains statements attributed to the first respondent. The statements are expressed to represent the views of 'the Board'. The preliminary final report includes a section headed 'comments by directors' and it deals with the matters required by the ASX Rules. 63 The second communications alleged during that period are the 31 July 1999 financial statements of Holdings, the 31 July 1999 directors' declaration about the financial statements, and the report called the 31 July 1999 directors' report. They are part of Holdings 1999 Annual Report, including its financial statements, which was issued on about 30 September 1999. It is pleaded that 'the directors caused Holdings to prepare' those documents, as it was required to do so by ss 292, 295 and 298 of the Corporations Law. It is then pleaded that by those documents 'Holdings and the directors' make certain representations. The Holdings 1999 Annual Report is said to have been published by Holdings, and distributed to the Australian Securities and Investments Commission (ASIC), the ASX and to shareholders by Mr Hodgson 'for and on behalf of Holdings and the directors' (pars 192, 193 and 194 of the SOC). The second communication included the Chairman's report to shareholders dated 1 October 1999 of the first respondent. I shall call those documents collectively 'the 1999 Annual Report'. 64 The 1999 Annual Report was issued, on its face, by Holdings. It included the Executive Chairman's Report of 1 October 1999, apparently signed by the first respondent. It identified the respondents as some of the directors. It included the Directors' Report dated 30 September 1999, apparently signed by the first and second respondents. It also included the Directors' Declaration dated 1 October 1999, apparently also signed by the first and second respondents relating to the financial statements and notes. 65 The third communication occurred at Holdings' annual general meeting on 26 November 1999. The 1999 Annual Report was presented. The first respondent orally addressed the shareholders (the 1999 Chairman's address). The 1999 Chairman's address was sent by Hodgson to the ASX 'for and on behalf of Holdings and the directors' shortly afterwards. 66 The fourth communication constituted a media release dated 7 February 2000 concerning the performance of Holdings for the six month period to 31 January 2000 (the 7 February 2000 press release). It was presented as an announcement by 'the Directors' of Holdings, and was sent to the ASX under cover of a short letter from Mr Hodgson 'For and on behalf of the Board' on Holdings letterhead. 67 The fifth communication is the 'Appendix 4B' half yearly financial report of Holdings to 31 January 2000 (the 31 January 2000 financial statements). It includes the required 'comments by directors'. It is alleged the document was 'caused to be prepared' by Holdings and by the directors pursuant to s 302 of the Corporations Law, and that the communication involved 'Holdings and the directors' making representations in terms of certain of its contents. The communication was sent to the ASX on 9 March 2000 by Holdings, signed by Mr Hodgson 'For and on behalf of the Board'. 68 The sixth communication is a media release dated 9 March 2000 (the 9 March 2000 press release). It reported upon Holdings half yearly net profit and other financial results, and included statements attributed to the Executive Chairman, the first respondent. It accompanied the 'Appendix 4B' half yearly report sent to the ASX. 69 The seventh communication is a media release dated 11 May 2000 (the 11 May 2000 press release). It was sent to the ASX by Mr Hodgson 'for and on behalf of Holdings and the directors' as part of disclosure to the securities market. It is alleged to contain representations concerning Holdings gross profit margins. 70 The eighth communication is the 19 May 2000 prospectus. It was signed and authorised by each of the respondents. It included a letter to shareholders and prospective investors from the first respondent 'for and on behalf of the directors' which expressed optimism about the ongoing success of Holdings' business. It also included statements about Holdings' balance sheet picture, and its present net asset backing and its anticipated net asset backing if the offer of convertible notes were taken up. It also contained a statement as to the operating profit of Holdings in the six months to 31 January 2000, compared to the comparable period of the previous year.

(a) Does the SOC plead conduct of the respondents? 71 The first, and principal, criticism of the SOC is that it does not, and could not, allege conduct by each of the respondents. In respect of the causes of action based upon s 52 of the TPA, it is also contended by the respondents that the SOC does not, and could not, allege conduct by each of them which involved the use of postal, telegraphic or telephonic services. The respondents further contend that the SOC does not plead facts which (if proved) would establish any connection between the alleged contravening conduct and the loss alleged to have been suffered by the applicant (and by each group applicant). 72 The nature of the allegations upon which the applicant relies to support her claim that the respondents engaged in conduct is set out in the preceding paragraphs of these reasons. 73 It has been held that there can be more than one publisher of misleading information: see e.g. Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 at 89-91. In that case the Full Court (Bowen CJ, Lockhart and Fitzgerald JJ) at 90 said: '… the publication of incorrect information may constitute conduct which is misleading or deceptive or likely to mislead to deceive within the meaning of s 52(1).' [of the TPA] In that case both the publisher of a newspaper and the entity on whose behalf it was published were held to be potentially liable for a contravention of s 52(1) of the TPA. In Australian Ocean Line Pty Ltd v West Australian Newspapers (1983) 66 FLR 453, Toohey J held the publisher of a newspaper could be liable for contravening s 52(1) of the TPA by publishing material which was misleading or deceptive, even though the publisher purported only to represent the views of other persons and not of itself. See also Universal Telecasters (Qld) Ltd v Guthrie (1978) 32 FLR 360 (albeit in relation to s 53(e) of the TPA) where the Court accepted that the advertising agency which created and placed an advertisement for publication, the advertiser on whose behalf the advertisement was placed, and the television station which put the advertisement to air, had each made a false representation in the advertisement. In Gardam v George Wills & Co Ltd (1988) 82 ALR 415 at 427, French J described the question whether a particular person or entity has made a representation to be one of fact in all the circumstances. 74 Most of those cases concern the end publisher of information where its source has been assumed or found to have been also the maker of the representation through the medium of the end publisher. A manufacturer or wholesaler of an article which is labelled in a misleading way does not escape liability under ss 52 or 53 of the TPA by attributing the publication of the labelled article to the retailer which displayed it for sale to the public: see e.g. Barton v Croner Trading Pty Ltd (1984) 54 ALR 541 at 553; Korczynski v Wes Loftus (Aust) Pty Ltd (1985) 62 ALR 225 at 229. 75 In Yorke v Lucas (1985) 158 CLR 661 the High Court was concerned with accessory liability under s 75B of the TPA. In the judgment of Mason ACJ, Wilson Deane and Dawson JJ at 666, after pointing out that a corporation may contravene s 52 of the TPA even though acting honestly, said: 'That does not, however, mean that a corporation which purports to do no more than pass on information supplied by another must nevertheless be engaging in misleading or deceptive conduct if the information turns out to be false. If the circumstances are such as to make it apparent that the corporation is not the source of the information and that it expressly or impliedly disclaims any belief in its truth or falsity, merely passing it on for what it is worth, we very much doubt that the corporation can properly be said to be itself engaging in conduct that is misleading or deceptive.' 76 It is apparent that their Honours had in mind that the originator of a misleading statement may be liable for contravening s 52 of the TPA, although an entity subsequently involved in the chain of publication may not be liable. As their Honours said, whether a person or entity has engaged in conduct that is misleading or deceptive is one to be determined in all the circumstances of the case. An illustration of circumstances where an advertising agent created a misleading advertisement but, on the particular facts, was not found to have engaged in misleading conduct where it had no role in its publication is provided by Cassidy v Saatchi & Saatchi Australia Pty Ltd [2004] FCAFC 34. 77 In this matter, as the sampling from the SOC for Holdings' financial year 1 August 1999 to 31 July 2000 shows the conduct alleged against the respondents generally is that a particular (allegedly misleading) communication was made by Mr Hodgson 'for and on behalf of Holdings and the directors' or by some similar formulation. 78 As noted, a number of the documents comprising those communications were required to be prepared by Holdings under law (e.g. ss 292, 298 and 302 of the Corporations Law) and to be communicated under law (e.g. ss 319 and 320 of the Corporations Law), or to be prepared by Holdings and to be communicated to the ASX and to shareholders (e.g. ASX Listing Rules Chapters 3 and 4). In my view, it does not follow that the communications directly made by or through the medium of Mr Hodgson must have been made by him only for Holdings. It is a question of fact whether he made the communications also on behalf of the respondents or some one or more of them. It is not clear that, merely because Holdings had those obligations, the respondents did not also have Mr Hodgson make those communications on their behalf. At the point of considering whether to strike out the statement of claim, it is not appropriate to finally decide as a fact whether they did so. 79 The SOC contains assertions of facts upon which the applicant will contend the respondents made the representations alleged. It asserts their status as directors of Holdings, and Mr Hodgson's status as its company secretary and from March 1999 its chief financial officer. It asserts each communication was made by Mr Hodgson for and on behalf of the respondents as Holdings' directors. Certain of the communications were required by law to contain a declaration by the directors: see e.g. ss 292(1), 295(1), (4) and (5), 298(2) and 299 in relation to annual financial reports and directors' reports, and ss 302(a), 303(1), (4) and (5), and 306 in relation to half-year financial report and directors' report. 80 The respondents contend that the allegation that the communication was made by Mr Hodgson for and on their behalf is not a pleading of material facts. In my view, the SOC does plead material facts which, if proven, could give rise to a finding that the respondents made the representations alleged. I also consider the pleading is sufficient to meet the objectives for a pleading discussed above. The respondents are on notice as to the case they have to meet. Their status is pleaded. It is apparent that it is alleged that the documents constituting the communications are asserted to have been adopted by them in their role as directors of Holdings. It is apparent that it is alleged that the communications conveying the representations were then published by Mr Hodgson. It is apparent that it is alleged that Mr Hodgson published those documents for or on behalf of the directors. The SOC might expand upon how Mr Hodgson came to do what he did, in effect, as agent of the respondents. But the question is whether it presently sufficiently addresses that issue. 81 The SOC might have pleaded, in respect of each separate communication, a composite set of alternatives (assuming a foundation existed for the allegation) that the directors adopted each communication in its terms (including, where it appears, that the document was for and on behalf of the Board or the directors), that the respondents at a particular meeting decided expressly to request Mr Hodgson then to comply with its terms or that Mr Hodgson had the practice, to the knowledge of the respondents, of publishing such documents following their adoption and that the respondents knew of the practice and expected him to do so. In my view, such a formulation is unnecessary. The respondents know clearly enough what is to be the case against them. It is based upon their activities as directors of Holdings and Mr Hodgson's role as an officer of Holdings including to implement the resolutions of directors and to comply with the statutory and ASX requirements imposed upon Holdings to publish financial accounts and the like. The respondents can prepare for that case. Ultimately, whether they engaged in the conduct alleged is a matter of fact. Also, then, whatever may be found to have been the facts, it will need to be determined whether those facts lead to the conclusion that the respondents engaged in the conduct of publishing the representations. It may well be, as they contend, that the conduct of publishing the representations was not their conduct but that of Holdings (and of Mr Hodgson). That is a matter which should be determined in the light of the facts found on all the evidence. 82 In my view, the SOC does plead material facts upon which it is arguable that the respondents engaged in the conduct of publishing or causing to be published each of the communications referred to. I also consider that the pleading of those material facts is sufficient for the respondents to know the case they have to meet, so that the interests of justice do not require that the SOC be struck out. 83 The circumstances as pleaded are far removed from those addressed by the Full Court in King v Milpurrurru (1996) 136 ALR 327. The non-executive directors in that case were found by the majority (Jenkinson and Beazley JJ) not to have authorised the importation of the articles which infringed the copyright of the artists concerned (see at 331-332 per Jenkinson J and at 351 per Beazley J). Beazley J adopted the 'higher test' (at 346) for the imposition of personal liability upon directors expressed in Mentmore Manufacturing Co Ltd v Merchandise Marketing Co Inc (1978) 89 DLR (3d) 195. Her Honour said at 351 that: 'an essential integer of assumption of responsibility is engaging in conduct which makes the act in question the act or conduct of the director personally.' Lindgren J in Microsoft Corporation v Auschina Polaris Pty Ltd (1996) 71 FCR 231 at 246 adopted as the test for determining whether a director of a corporation is liable for the tortious acts of the company whether the director directed or procured the acts to be done. Reference may also be made to Williams v Natural Life Health Foods Ltd [1998] 2 All ER 577. 84 It is not necessary to address the difference in their Honours' views. For present purposes, the question is whether the SOC presents an arguable case for relief in terms which satisfy the requirements of a proper pleading. I have concluded that it does plead conduct on the part of the respondents, to which then the other elements of the relevant statutory cause of action should be applied. I have also concluded that it identifies with sufficient precision the nature of the conduct in which the respondents are said to have engaged.

(b) Does the SOC plead facts to enliven s 52 of the TPA? 85 The respondents contend there is a further fundamental flaw in the SOC because it fails to plead material facts which enliven the claimed liability under s 52 of the TPA (and s 12DA of the ASICA). Even if the SOC pleads that the respondents engaged in conduct as alleged, because their asserted liability is as principal contraveners, and is not accessorial, s 52 of the TPA can only apply in the limited circumstances to which s 6(3) of the TPA refers. The SOC recognises that it is necessary, for that purpose, to plead facts which enliven the extended operation of s 52 by s 6(3) of the TPA (and s 12DA of the ASICA by s 12AA(3) of the ASICA). 86 The SOC, in respect of each communication, pleads that the publication involved the use of postal, telegraphic or telephonic services so as to attract the operation of those provisions. Each of the publications is alleged to have been communicated by Mr Hodgson either by post or by facsimile. The respondents are not themselves alleged to have physically posted or sent by facsimile the communications. Synman v Cooper (1989) 91 ALR 209 at 217 supports the view that s 6(3) of the TPA should be given a broad construction. 87 I do not consider that feature of the SOC means the claims under the TPA (or under the ASICA) are clearly unsustainable. Section 6(3) of the TPA (and s 12AA(3) of the ASICA) provide that s 52 of the TPA (and s 12DA of the ASICA) apply as if they were expressly confined to engaging in conduct to the extent to which the conduct 'involves the use of' postal, telegraphic or telephonic services. If the conduct involves the use of such services, s 52 of the TPA (and s 12DA of the ASICA) apply to the respondents as individuals. 88 The SOC alleges the respondents engaged in the conduct of making the representations. That conduct is asserted to include Mr Hodgson for the respondents using postal and telegraphic services. By reason of s 84(4) of the TPA (and s 12GH(4) of the ASICA), it is arguable that his use of those services was use of those services by the respondents. Those provisions provide that conduct engaged in by one person as agent for another person is conduct of that other person. In addition, in my view, it is arguable that the pleading that the respondents had Mr Hodgson publish the representations, and that he did so by use of postal and telegraphic services, is sufficient to attract the extended operation of s 52 of the TPA (and s 12DA of the ASICA) because then their conduct involved the use of those services. Once the step is taken (as I have done) of accepting that the conduct alleged against the respondents arguably may amount to conduct of the respondents which involved the publication of the representations, the allegations in the SOC are sufficient to maintain an arguable case that the conduct involved the use of postal or telegraphic services.

(2) The alternative claims 89 The claims under s 52 of the TPA and s 12DA of the ASICA are expressed as alternatives. Section 12DA will apply if, in respect of the period from 1 July 1998, the conduct alleged was 'in relation to financial services'. The respondents contend that there is no foundation alleged in the SOC for a finding that the conduct alleged could arguably fall within the description of being 'in relation to financial services'. 90 In one sense, the point is opportunistic. I do not mean that observation to be taken in a way critical of the respondents. But the point is simply that, if the alternative claims under s 12DA of the ASICA are struck out, the respondents would technically still be entitled to assert ultimately that, from 1 July 1998 the conduct alleged was in relation to financial services, so the claims under s 52 of the TPA should be dismissed. Moreover, there is nothing to suggest the applicant's evidentiary case would be any different with the existing SOC containing the alternative pleas. The nature of the conduct alleged is the same: the publication of the documents alleged to contain misrepresentations. The respondents know the case they must meet. 91 Nevertheless, if it is plain that the conduct alleged after 1 July 1998 could not be in relation to financial services, then the alternative claim under s 12DA of the ASICA may be struck out. To consider the contention, it is necessary separately to deal with the communications concerning the annual and half-yearly results of Holdings, and with the issue of the 19 May 2000 prospectus. 92 From 13 March 2000, s 12DA of the ASICA ceased to apply to 'dealings in securities'. At the same time s 56 of the FTA ceased to apply to 'dealings in securities'. Section 995(2) and s 999 of the Corporations Law provided for a liability for engaging in conduct that constitutes dealings in securities and which is misleading and deceptive. From that date, the SOC alleges contraventions of s 999 of the Corporations Law as alternatives to the contraventions of s 52 of the FTA and s 12DA of the ASICA. At the same time as s 995(2) of the Corporations Law provided 'coverage' of misleading conduct in respect of dealings in securities, s 995(2A) provided that it did not apply insofar as the conduct contravened s 670A (misleading or deceptive takeover documents) or insofar as the conduct contravened s 728 (misleading or deceptive fundraising document) of the Corporations Law. 93 The comments which I have made in [90] apply also to how the SOC deals with the legislative changes effective from 13 March 2000. That includes the issue as to whether s 56 of the FTA may still apply, in the face of s 995A. The nature of the alleged conduct is the same. The issue prompted by the challenge to the alternatives expressed is not whether it is conduct engaged in by the respondents, but under which of the potentially applicable provisions the conduct may fall from time to time. There is no relevant additional element to any of the alternative causes of action, other than the definitional siphoning of the conduct into one or other of the legislative provisions. Whichever of the alternatives applies, if any of them is found to apply, there is not said to be any significant difference in the elements of the causes of action or in the nature of the available remedies. Both the Application (to comply with O 4 r 3 of the Federal Court Rules) and the SOC identify the provisions of the enactments which are said to give rise to the right to relief. But the nature of the applicant's claim and the material facts on which it is based (see O 4 r 6(2) of the Rules) in the SOC remain constant, whichever provisions of the enactments are said to give rise to the right to the relief claimed. 94 There seems to be a lack of real benefit in the conduct of the proceedings by the exercise of challenging the applicability of particular legislative provisions, where the fallback or alternative involves the same conduct in substance and provides for the same type of remedy. In Nescor Industries Group Pty Ltd v Miba Pty Ltd (1997) 150 ALR 633, Davies J at 639-640 said: 'However, pleadings are not always well-drafted and expressed with clarity and, however expressed, they cannot require a judge to decide a case otherwise than in accordance with the law. If the pleadings proceed on a misapprehension of the law, the judge should, as the trial judge did in this case, make it clear to the parties what is the correct approach and should proceed accordingly. When that happens, as it did in the present case, then the case must proceed otherwise than in accordance with a strict reading of the words of the pleading.'' His Honour followed the observations of Mason CJ, Wilson, Brennan and Dawson JJ in Water Board v Moustakas (1988) 180 CLR 491 at 497 to the following effect: 'In deciding whether or not a point was raised at trial no narrow or technical view should be taken. Ordinarily the pleadings will be of assistance for it is one of their functions to define the issues so that each party knows the case which he is to meet. In cases where the breach of a duty of care is alleged, the particulars should mark out the area of dispute. The particulars may not be decisive if the evidence has been allowed to travel beyond them, although where this happens and fresh issues are raised, the particulars should be amended to reflect the actual conduct of the proceedings. Nevertheless, failure to amend will not necessarily preclude a verdict upon the facts as they have emerged: see Dare v Pulham (1982) 148 CLR 658.' 95 In a matter such as the present, the points to be raised at trial are clear enough from the SOC. Certain conduct is alleged to have been undertaken by the respondents. It is alleged to have been misleading or deceptive. It is alleged to have been relied upon to the detriment of the applicant (and other group members). Whether, if those facts are made out, contravention of s 56 of the FTA or s 52 of the TPA or s 12DA of the ASICA or s 999 of the Corporations Law is then made out will not depend upon any different factual issues. It will depend upon the characterisation of the conduct in relation to the terms of those provisions, including whether the conduct fell within s 6(3) of the TPA or s 12AA(3) of the ASICA. Those are additional, and essentially legal issues. They do not give rise to different issues on the 'primary' factual matters going to establish a cause of action and a right to relief under each of those statutory provisions. 96 Accordingly, the issues so raised by the respondents are sterile. If the Court finds that the applicant has established that conduct of the respondents was misleading and deceptive and caused her loss, it is not confined to awarding relief under the statutory sources identified (or remaining) in the Application or in the SOC. Relief under s 56 of the FTA or under s 999 of the Corporations Law may be granted, whether or not those potential statutory sources of liability remain specified in the SOC. And if the Court finds, in addition, that the respondent's conduct as claimed involved the use of postal or telegraphic services, relief under s 52 of the TPA or under s 12DA of the ASICA may be granted whether or not those potential statutory sources of liability remain specified in the SOC. The source of the contravention, and so the source of the power to grant relief, will depend upon the characterisation of the conduct as falling within one or other of those potential statutory sources of liability. But the primary findings to establish a contravention will be the same. The evidence going to the characterisation of the conduct will in essence be the nature of the representations pleaded, possibly also having regard to the context in which they were made. The identification of the statutory source for alleged liabilities, and for the grant of relief, would really involve the legal question to be resolved by applying the relevant statutory definition to the nature and context of the representation. It is difficult at present to see that the selection of the appropriate provision as the vehicle for relief would cause injustice to the respondents. 97 In those circumstances, in my discretion I would decline to strike out the expressed alternative statutory sources of potential liability or potential relief in the SOC. 98 In addition, I do not consider that the pleadings make the position so clear that any one of the alternative pleas should be struck out as unarguable. In my view, the allegations in the SOC as to the nature and contents of the documents constituting the representations allegedly made after 1 July 1998 may fall within the definition of 'financial service' in s 12BA of the ASICA. The respondents accept that, but for the 13 March 2000 changes to the legislation, the conduct in relation to the 19 May 2000 prospectus may fall within the definition of 'financial service'. They contend the remainder of the documents constituting the representations cannot do so. Hence they contend, the alternative claim under s 12DA of the ASICA should be struck out. The claim in respect of the 19 May 2000 prospectus is said to clearly rise from a document which is dealing in securities so that it also cannot give rise to a claim under the FTA. 99 Section 12BA of the ASICA defines a 'financial service' to include a service 'otherwise supplied in relation to a financial product'. A financial product is also defined in s 12BA to include a security. Section 5(2) of the ASICA provides that expressions used in the ASICA have the same meaning as in the Corporations Law unless they are otherwise defined. By ss 9 and 92 of the Corporations Law, a 'security' includes shares in a body such as Holdings. In s 12BA of the ASICA 'service' is defined to include any rights, benefits, privileges or facilities that are provided, granted or conferred in trade or commerce, and the supply of a service is defined to including the provision, grant or conferral of a service. 100 The applicant's contention is that from 1 July 1998 the preparation and distribution of the documents said to contain the representations arguably amounts to services supplied in relation to a financial product (Holdings shares), because they are rights, benefits, privileges or facilities provided in trade or commerce supplied in relation to Holdings shares. They are said to have been supplied in relation to Holdings shares because they relate to Holdings' financial position and performance. In Australian Competition & Consumer Commission v Maritime Union of Australia (2001) 187 ALR 487; [2001] FCA 1549, Hill J at 501-502, [68]-[69] referred to authorities in which the expression 'in relation to' has been considered. His Honour pointed out they are wide words which, without reference to context, do no more than signify the need for there to be at least some relationship or connection between the two subject matters. The extent of the relationship will depend upon the context in which the words are used. 101 It is not necessary at present to refer in detail to the context in which those words appear in the definition of 'financial service'. I have considered the context. I do not consider the applicant's contentions to be unarguable, so I do not consider that the references to s 12DA of the ASICA in relation to the alleged conduct from 1 July 1998, that is the making of the communications referred to (putting aside the communication by the 19 May 2000 prospectus), should be struck out. 102 The applicant's contention in relation to the 19 May 2000 prospectus is a little more subtle. She accepts that the 19 May 2000 prospectus is a document which contains an offer to shareholders and members of the public to subscribe for convertible notes in Holdings. It is therefore accepted that it is a 'dealing in securities' as defined in the Corporations Law. It is, to that extent, a communication which falls squarely within the scope of operation of s 995A of the Corporations Law. The corollary is that, to that extent, it cannot fall within the scope of operation of s 52 of the TPA (see s 51AF of the TPA) or s 12DA of the ASICA (see s 12DA(1A) of the ASICA) or s 56 of the TPA. Section 999 of the Corporations Law appears to be part of the provision of a comprehensive and self-contained regime for controlling or regulating dealings in securities, and itself to be part of a comprehensive and self-contained liability regime for misstatements in and omissions from 'disclosure documents'. As noted above, the 19 May 2000 prospectus falls within the description of a disclosure document. 103 The applicant makes two responses to that position. The first is to acknowledge it. Thus, to the extent group members relied upon the 19 May 2000 prospectus to influence their financial judgment by taking up convertible notes in Holdings, their claim is properly confined to one made under s 999 of the Corporations Law. Section 995(2) is not available to them in such circumstances: s 995(2A), and s 728 appears to confine relief for its contravention to that based on conduct of the offeror. 104 The applicant secondly contends that the 19 May 2000 prospectus also had the character of a document containing statements by the respondents as directors of Holdings with respect to the financial affairs of Holdings. As the applicant did not subscribe for convertible notes in Holdings on the strength of the document, she is not a person who can claim under s 728 of the Corporations Law to the extent that she relied upon its content for her investment decisions. It is contended that Div 1 of Part 6D.3 of the Corporations Law does not operate to exclude such a claim, based upon s 56 of the FTA and s 52 of the TPA or s 12DA of the ASICA. Such a claim is available, so the argument runs, because the second or additional characterisation of the 19 May 2000 prospectus is that, in that character, it is not a 'dealing in security' because it does not involve action to 'deal' in relation to securities. The word 'deal' is defined in s 9 of the Corporations Law, and the definition is imported into the ASICA: see s 5(2) of the ASICA. 105 There is considerable attraction in the respondent's contention that any liability for misstatement in the 19 May 2000 prospectus is intended to be limited to that provided for in Div 1 of Part 6D.3 or in s 999 of the Corporations Law. The applicant's contention that, where the prospectus is not a cause of subscription for securities, the prospectus may have a different character from that as dealing in securities is somewhat strained. One can, however, conceive of circumstances where, upon receipt of a prospectus, an existing shareholder in Holdings may decide not to subscribe for shares but also decide to maintain an existing shareholding. It is not clear to me that the legislature intended in such circumstances that any consequential loss should not be recoverable even though it does not fall within the ambit of s 995(2) or s 728 or s 999 of the Corporations Law. In addition, as I have indicated above, in essence the factual and legal issues raised by a claim under s 999 are the same as those raised by claims under s 56 of the FTA, s 52 of the TPA and s 12DA of the ASICA. There seems to be no real point in forcing the SOC to apply one only of a series of possible statutory labels to the cause of action in those circumstances, especially where the Court may ultimately (if it determines the factual and legal issues in the applicant's favour) determine which is the appropriate label to apply. 106 I accordingly decline to strike out those parts of the SOC which deal with the 19 May 2000 prospectus in terms which invoke relief for statutory causes of action outside that provided under s 999 of the Corporations Law.

(3) The claim under s 999 of the Corporations Law 107 The alleged contraventions of s 999 of the Corporations Law follow the wording of s 999(aa), (a) and (b) so that the relevant respondent is said to have made the false or misleading statement at a time when the relevant respondent 'ought reasonably to have known' that the statement was false in a material particular or was materially misleading. 108 The conduct relied upon, namely the particular alleged representation and its misleading features is specified by reference to the earlier paragraphs of the SOC. The basis upon which the relevant respondents are said to have reasonable grounds for knowing the representation was misleading are provided. That basis is alleged to be the status of the respondents, their participation in meetings of directors of Holdings, in respect of the period up to 30 June 1998, their obligations under ss 295A, 295B and 298 of the Corporations Law and after 1 July 1998 their duty under ss 295, 296 and 297 to cause Holdings' accounts to be made out to give a true and fair picture and to declare that the accounts did so, the fact that Holdings' management and financial position 'was or should have been' considered at directors' meetings of Holdings, the membership of the first and second respondents in the Board Audit Committee of Holdings, and the individual (specified) expertise of certain of the respondents. It is also stated that 'further particulars will be provided after discovery and inspection'. 109 The respondents contend that SOC contains four fatal defects. 110 The first can be shortly dealt with. It is that the SOC does not plead any material fact which, if proved, would establish that the respondents made any of the communications in the documents referred to in the SOC. For reasons already given, I do not consider the SOC is so flawed. It does, in my judgment, make allegations of material facts which, if proved, could arguably lead to findings that the respondents engaged in the conduct alleged against them. It is correct that the SOC allows for the communications to have been made primarily by Holdings (and directly by Mr Hodgson). But, I consider it arguable that the SOC pleads, and may plead, also that the communications were also made by the respondents. And I have reached the view that the SOC is not unfair to the respondents in that respect by leaving them uncertain as to the case they are to meet. As senior counsel for the second to fifth respondents submitted, it is necessary to consider whether in truth the conduct alleged is that of Holdings, its directors or both. Those factual issues will have to be addressed at the hearing. For present purposes, however, it is sufficient if the SOC alleges facts which are capable, if proved, of making out liability against the respondents in terms which enable them to understand the case they have to meet. 111 The second contention also concerns the breadth and generality of the pleading. Section 999 provides: 'False or misleading statements in relation to securities A person must not make a statement, or disseminate information, that is false in a material particular or materially misleading and: (aa) is likely to induce other persons to subscribe for securities; or (a) is likely to induce the sale or purchase of securities by other persons; or (b) is likely to have the effect of increasing, reducing, maintaining or stabilising the market price of securities; if, when the person makes the statement or disseminates the information: (c) the person does not care whether the statement or information is true or false; or (d) the person knows or ought reasonably to have known that the statement or information is false in a material particular or materially misleading.' As noted, the SOC pleads each of the alternatives in terms of subs 999(aa), (a) and (b) as alternatives, and the state of knowledge of the respondents in terms of subs 999(d). 112 The respondents contend that the breadth of the pleading makes it embarrassing and meaningless. It is submitted that the SOC should, but does not, indicate which of subs 999(aa), (a) and (b) is said to apply to each of the communications or if subs 999(a) is applicable and whether each communication induced the sale or the purchase of Holdings securities. 113 The second to fifth respondents also contend that the SOC does not make it clear whether the conduct pleaded is said to amount to making a statement or to disseminating information. However, in my view, that is in the present matter a distinction without a real difference. The SOC makes it clear enough that it is alleged that the respondents engaged in the conduct of making the communications alleged, and that the communications included the statements specified severally in respect of each communication. I doubt that the final relief, if the factual allegations are found to have been proved, will turn on such subtleties. 114 However, it is important that each of the respondents knows the case pleaded against each of them. Their individual circumstances may well be different. The 'rolled up' nature of the SOC is said not to enable them to do so. 115 To address that contention, it is desirable to note that the SOC pleads: (1) the respondents variously engaged in conduct which was misleading. I have concluded that it does so sufficiently (no contention was put that the allegedly misleading character of the communications did not fall within the scope of s 999) and I note that it deals separately with the respondents in relation to their individual periods of directorships (see [22] above); (2) the conduct had one or each of the qualities referred to in subs 999(aa), (a) or (b), albeit in very general terms simply adopting the statutory expressions; and (3) the respondents had or ought reasonably to have had the state of knowledge referred to in subs 999(d), and in doing so the SOC addresses the individual periods of directorships (see [22] above] separately and also to some extent the individual circumstances of each respondent are addressed. 116 In my view, it is not necessary for the SOC to elect between the alternatives in subs 999(aa), (a) and (b). It identifies which of the respondents is alleged to have made the communications alleged, the nature of each communication, and the matters by reason of which each communication is said to have been misleading. It pleads that the trading price of Holdings securities from time to time was higher than it would otherwise have been if the impugned conduct had not been engaged in. They are the material facts. If they are proven, or depending upon the findings upon the whole of the evidence, the Court may conclude that particular conduct falls within one or more of subs 999(aa), (a) or (b). They are not mutually exclusive. 117 I do not accept the contention that, as pleaded, the SOC in relation to s 999 of the Corporations Law is embarrassing to any of the respondents. In my view, the SOC has sufficiently committed itself to the case the applicant wishes to pursue against each of them, and does not in the manner submitted contain inconsistent or imprecise allegations which might expose the several respondents to unfairness: cp Multigroup Distribution Services Pty Ltd v TNT Australia Pty Ltd (1996) ATPR 41-522. The allegations are in part collective (that is, they apply to all the respondents who were directors during a particular period) or specific to the circumstances of a particular respondent. By the combination of those allegations, I think each respondent is apprised of the case he has to answer. 118 The third contention complains about the inadequacy of the allegations against the respondents to attract subs 999(d) of the Corporations Law. There are two steps to be taken if the SOC is to be sustained. The first is to determine whether the pleaded facts fairly put each respondent on notice as to the case each has to meet. For the reasons already given, in my view the SOC fulfils that purpose. The second is to determine whether, if those pleaded facts are proven, it is arguable that the applicant may be entitled to the relief sought. The pleaded facts, if proven, are capable of resulting in a finding that each of the respondents knew or ought reasonably to have known that the communications were misleading. Whether such findings will be made will depend upon the whole of the evidence. The gravity of the allegations highlights that proof of the facts in issue will not be easy: Briginshaw v Briginshaw (1938) 60 CLR 336 at 361-362; Rejfek v McElroy (1965) 112 CLR 517 at 521. But that is a matter for the trial. Equally, for the same reason if (as the applicant foreshadowed through senior counsel) the applicant wishes to extend the material facts to be relied upon to support a finding in terms of subs 999(d) against the respondents or any of them, the applicant will have to make an appropriate application to do so. For the purpose of the present application, in my view the SOC is adequate to fulfil its purpose and to put forward material facts upon which the finding sought in terms of subs 999(d) might arguably be made against each respondent. The respondents may additionally be entitled to further and better particulars of the allegations in the SOC addressing the topic to which subs 999(d) refers, but that does not mean the SOC itself dealing with that topic should be struck out. 119 The fourth contention concerns causation or reliance and loss. The first respondent contends that the allegations could enliven subs 999(b) only, so the references to subs 999(aa) and (a) should be struck out. The respondents also complain of the lack of any allegations of material facts which might enliven any of subs 999(aa), (a) or (b). 120 To the extent that the respondent's contentions are concerned with the generality of the pleadings on causation and relevance, for the reasons given below at [123] - [129], I adhere to the view that the SOC should not be struck out. The remaining submissions concern the pleadings and the particular wording of s 999. 121 Section 1005 of the Corporations Law entitles a person who has suffered loss or damage by conduct of another person in contravention of s 999 to recover such loss or damage by action. The SOC (pars 320-322) alleges that the conduct allegedly in contravention of s 999 caused the trading price for Holdings securities from time to time to fail to reflect the true market value of its business or of its prospects. It alleges that the applicant (and group members) acquired Holdings shares at prices higher than otherwise they would have done, and to make decisions with respect to their Holdings shares (to refrain from selling them) upon inaccurate information. It further alleges that, had the trading price for Holdings securities from time to time been reflective of their true market value, the applicant (and other group members) would have taken advice about their shareholdings in Holding, would not have acquired Holdings shares, and would have disposed of Holdings shares before April 2001. 122 As with the other claims of reliance or causation and damages, the generality of those allegations is unsatisfactory. Not even the applicant has descended into particularity. However, as I have ruled, that lack of particularity is not fatal. I do not think that the pleading is expressed so narrowly that it can be taken to refer only to subs 999(b). In my view, it is also capable also of referring to the circumstances to which subs 999(aa) and (a) relate. In addition, it is the contravention of s 999 which relevantly gives rise to the right to recover loss under s 1005. If the applicant suffers loss or damage by conduct which contravenes s 999, then the loss or damage may be recoverable. Also, par 320 of the SOC is to the effect that the contravention caused the market price of Holdings securities to fail to reflect the true market value and prospects of Holdings business. The contravention may operate to cause the applicant (and other group members) loss through the communication having any one of the qualities in subs 999(aa), (a) or (b). For instance, the applicant has alleged in pars 208 and 267 she acquired Holdings securities by reliance on certain of its financial statements as well as its prevailing share price.

(4) Causation and loss 123 Paragraphs 324 to 329 contain such allegations of material facts as there are in the SOC relating to the elements of causation and loss in respect of the causes of action based upon s 56 of the FTA, s 52 of the TPA and s 12DA of the ASICA. The allegations are brief. It is asserted that 'the applicant and members of the group' relied upon the representations to form certain views about the financial status of Holdings and decided to acquire Holdings shares and lost the opportunity to decide whether to retain rather than dispose of Holdings shares upon proper information. It is then asserted that 'the applicant and each of the other members of the group' suffered loss and damage as a result, namely: 'The difference between the price paid for shares in Holdings and the true market value of those shares at the date of acquisition or in the alternative the loss incurred through not disposing of those shares.' 124 The respondents complain that the SOC does not state which of the representations 'each' applicant became aware of, or the effect of that particular representation upon 'each' applicant, or the shareholding of each applicant at the time of that representation being considered, or any financial consequences of the decision made at the time. They further complain that the 'rolled up' nature of the plea of causation and loss fails to meet the pleading requirements because it does not tell the respondents what effect each of the allegedly misleading communications had upon the trading price for Holdings shares from time to time, or how a correct communication would have been translated into a different trading price and then into different conduct on the part of the applicant and other group members. 125 The SOC, in my view, sufficiently specifies the material facts upon which the applicant relies to establish causation and loss. In respect of the claim based upon a contravention of s 999 of the Corporations Law, the breaches are alleged to have caused the trading price in Holdings securities from time to time to fail to reflect the true market value of its business and its future prospects. 126 In the case of contraventions of the FTA, the TPA and the ASICA, the applicant specifically pleads reliance upon the representations pleaded. She says she formed beliefs about Holdings trading profitability and its net assets, and decided to acquire Holdings securities and then lost the opportunity in an informed way to decide to dispose of them. The allegations do treat the communications containing the alleged misrepresentations compendiously, but the SOC indicates that it is the applicant's case that she relied upon each of the alleged misrepresentations firstly to acquire Holdings securities and then to retain them. That involves her compendious understanding of the communications from time to time. Whether that factual claim is made out is of course a matter later to be decided. But in my view the SOC tells the respondents the case they must meet. If the applicant succeeds only partly in her claims, either because she shows (for example) only one misleading communication, or she shows (for example) only one of the respondents caused Mr Hodgson to make the communication, then there will be difficult causation and damages issues to be addressed. There may also be issues as to how the costs of the proceedings are to be awarded. But such considerations do not mean that the SOC as presently expressed does not disclose the applicant's case adequately, or in terms which (if proven) may arguably establish her claimed cause or causes of action. 127 The loss alleged by the applicant and by other group members, whether by acquiring or deciding to retain Holdings securities, is one which must occur at various times over the whole of the relevant period, dependent upon the individual group member's circumstances. In the case of the applicant, she pleads the loss occurred when she acquired Holdings securities. She claims she acquired those securities at a price higher than it would have been had the communications preceding the dates of those acquisitions not been misleading. She further claims that she held on to those securities, and lost the opportunity to dispose of them or to consider disposing of them, because the trading price was higher than it would have been had the communications from time to time not been misleading. She has not specified the 'true market value' of Holdings securities from time to time. In the case of the applicant those deficiencies can be remedied by appropriate particulars. The absence of that degree of particularity at present from the SOC does not, in my view, indicate the necessary material facts are not pleaded. 128 Each of the enactments provides relief for contraventions (s 82 of the TPA, s 12GF of the ASICA, and s 1005 of the Corporations Law). Each provides relief for loss or damage suffered 'by conduct' in contravention of the relevant statutory provision by the communications which are alleged to give rise to these contraventions. It is only necessary for there to be a relevant nexus between the contravening conduct and the loss alleged: see Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 109 ALR 638. That, it is argued, is because the expression 'by conduct' requires only the application of a practical or commonsense concept of causation: Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 525; March v Stramare (E & M H) Pty Ltd (1991) 171 CLR 506. 129 In respect of the other group members, the failure of the SOC to deal with the individual circumstances of each of them is not a reason to strike it out. The group members are required to be identified in the application: s 33H, Federal Court of Australia Act 1976 (Cth). The extent of common questions of law and fact as between the applicant and other group members is clear. It appears to be quite extensive. However, the extent to which their individual circumstances involve reliance upon the misrepresentations pleaded, and the extent of the individual losses or damage and whether that loss or damage was caused by contravening conduct does not involve common questions of fact or law. At this point, therefore, I do not consider that the individual group members' circumstances on those matters need be fully pleaded in the SOC. I note that there is to be heard on motion of the second to fifth respondents that the proceeding, to the extent that it is a representative proceeding, should be dismissed. I am not to be taken as having expressed any views as to how that motion should be decided. It is yet to be argued.

(5) The claim for breach of common law duty of care 130 The SOC alleges each of the respondents as non-executive directors owed a duty to the applicant and to other group members to exercise reasonable care 'to ensure the accuracy' of Holdings annual and half-yearly financial accounts over the period each was a director. 131 The necessary proximity for the purposes of the existence of the duty is said to arise from the fact that the financial accounts were prepared for and to be sent to Holdings shareholders, and that s 180 of the Corporations Law (s 232(4) prior to 13 March 2000) requires the directors of a corporation to exercise care and diligence in the discharge of their duties 'including the preparation of the' financial accounts. The respondents as directors are also alleged to have known that they were the only source of accurate information to Holdings shareholders, that its shareholders would regard the financial accounts as having been prepared with the exercise of reasonable care by the directors, and that its shareholders would use the financial reports to decide whether to hold or to dispose of their Holdings securities. Hence, the SOC claims that it was reasonably foreseeable that the applicant and other group members would rely upon statements made by the respondents in the financial accounts of Holdings to decide whether to hold or dispose of their Holdings securities, or to decide to seek professional advice on that matter. It also claims that it was reasonably foreseeable that the applicant and the other group members would suffer loss and damage by relying upon statements made by the respondents in breach of their duty of care. 132 One allegation only might be seen as extending the duty of care beyond Holdings members. It is also pleaded that the respondents were aware that they were the only source of accurate information about the state of affairs of Holdings to 'the securities market'. However, senior counsel for the applicant acknowledged that it was intended to claim, and to plead, that the duty of care alleged was owed only to Holdings' shareholders or security holders.

133 In essence, the conduct giving rise to the existence of the duty of care alleged and its breach (apart from the allegations to establish want of proper care) are the same as those for the other causes of action: the communications allegedly made by the respondents, and the matters by reason of which the communications are said to be inaccurate. There are no material facts alleged upon which it might be found that the inaccuracy of any of those communications is a consequence of a want of care on the part of any of the respondents. There is only the general assertion to that effect. 134 The causation and damages allegations assert that the applicant and group members, relied upon the representations. They are in substance the same as those made in respect of the claims which are statutorily sourced. The only significant difference, no doubt reflecting that the alleged duty could not as a matter of law be sustained in relation to persons who were not holders of Holdings securities (see: South Australia v Peat Marwick Mitchell & Co (1997) 24 ACSR 231 (Peat Marwick) is that it is not claimed that the applicant or any group member relied upon the alleged misrepresentation to decide to acquire Holdings securities. Nevertheless, presumably through oversight, it is claimed that the loss and damage suffered included the price paid for Holdings securities as well as the loss incurred through not disposing of them. 135 It is clear that the SOC could not provide any basis for a duty of care at common law, on the facts pleaded, to be owed other than to members of Holdings. Senior counsel for the applicant acknowledged that. Accordingly, I propose to strike out from par 308.5 the words 'and the securities market', and from the particulars in par 331.1 the words 'The price paid for shares in Holdings or the and substitute the word 'The'. 136 The SOC appears to assert a claim in negligence for failing to ensure the accuracy of the specified information in Holdings annual and half-yearly financial accounts, and in the directors' statements and reports. Counsel for the second to fifth respondents, not inappropriately in my view, characterised the claim as being for negligent misstatement by the respondents as directors of Holdings, whose statements were relied upon by the applicant and other group members to their detriment.

137 The SOC allegations appear to have been drawn to reflect the requisite elements of that cause of action as discussed by Brennan CJ in Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241 (Esanda) at 252. As senior counsel for the second to fifth respondents pointed out, there may be a difference of emphasis between the views of Brennan CJ at 252 and of McHugh J at 275 in that case. The necessary proximity to give rise to the existence of a duty of care is, however, arguably established by the pleaded facts if they are made out. In my view, the circumstances pleaded (and, to the extent it is relevant, the statutory context in which the pleaded circumstances occurred) provide an arguable basis for finding that the respondents knew or ought reasonably to have known that the making of the communications was to inform the shareholders of Holdings about the state of its affairs, so that they may act upon the information provided for a serious purpose. It might be observed that the reporting obligations imposed under the Corporations Law are to better inform the shareholders. Their reliance upon the information provided for the purpose of voting at the annual general meeting would be an illustration of reliance on such material precisely for the purpose it was provided. In my view, it remains arguable that their reliance for the purpose of determining whether to hold or divest themselves of their shareholding is not outside the ambit of knowledge or reasonable anticipation of the use to which the communications might be put. Whether, as a matter of law, that contention is correct remains to be determined at the hearing. 138 The legal position is by no means clear. In Esanda, the claim by a financier failed to sustain a claim for negligent misstatement against the auditors of a corporation when the financier had relied upon audited accounts to provide financial accommodation to the audited corporation and had suffered loss. Brennan CJ said at 252: 'But, in every case, it is necessary for the plaintiff to allege and prove that the defendant knew or ought reasonably to have known that the information or advice would be communicated to the plaintiff, either individually or as a member of an identified class, that the information or advice would be so communicated for a purpose that would be very likely to lead the plaintiff to enter into a transaction of the kind that the plaintiff does enter into and that it would be very likely that the plaintiff would enter into such a transaction in reliance on the information or advice and thereby risk the incurring of economic loss if the statement should be untrue or the advice should be unsound.'

139 See also per Dawson J at 256-257. His Honour at 258 remarked upon the fact that (unlike the SOC) the statement of claim in that case placed no reliance upon the statutory role of the auditors. Toohey and Gaudron JJ at 260 observed that (unlike the SOC), there was no claim that the auditors knew that the audited accounts would be communicated to any financier. Their Honours added at 260-261: 'Had [that matter] been pleaded, Esanda might have brought itself within the duty of care recognised by Barwick CJ in Mutual Life & Citizens Assurance Co Ltd v Evatt (1968) 122 CLR 556 at 572-573 or that recognised by The House of Lords in Hedley Byrne & Co Ltd v Heller Partners [1964] AC 465 at 497.' 140 It is plain that mere foreseeability of others relying upon published financial information is insufficient to give rise to the proximity necessary for a duty of care to arise. McHugh J at 290 and Gummow J at 310 make that plain. But the circumstances necessary to give rise to the existence of a sufficiently proximate relationship that a duty of care arises is not so clearly determined that I am satisfied that the SOC does not give the applicant an arguable case. 141 Apart from the matters pleaded (as set out in [130] above), the applicant has invoked the obligations imposed upon the directors of a corporation under ss 295A, 295B, 301, 302, 303 and 305 of the Corporations Law up to 30 June 1998. She has invoked the obligations imposed upon Holdings under ss 292, 295, 298 and 302 of the Corporations Law from 1 July 1998, including the requirements for directors' declarations and the terms of such declarations and for a resolution of directors to support the directors' report. 142 I have not overlooked the contention that the communications were not, and are not alleged to have been, made by the respondents. Whether the communication of Holdings' annual and half-yearly financial accounts and directors' statements and reports were in fact made by the respondents (as well as by Holdings) is a matter to be determined at the hearing. For the reasons I have already given, I consider the SOC alleged as material facts that those documents were communicated in the way asserted by the respondents through Mr Hodgson. Cf Lowe, Lippman, Figdor & Frank v A.G.C. (Advances) Ltd [1992] 2 VR 671.

(6) The claim based on breach of statutory duty 143 The SOC alleges that the directors owed a statutory duty to the applicant and group members to exercise the degree of care and diligence that a reasonable person in such a position would exercise in the circumstances in the preparation of the annual and half-yearly financial accounts of Holdings, including the directors' reports. The duty of care is said to be directed to ensuring 'the applicant and the members of the group and the market for Holdings securities' received accurate information about its financial position and state of affairs. As noted earlier, the relevant provisions of the Corporations Law were ss 295A, 295B, 302 and 305 up to 30 June 1998, and ss 292, 295, 298 and 302 thereafter. In respect of each set of financial accounts, the relevant directors are said to have breached their statutory duty 'in the preparation' of the relevant financial accounts and the directors' report. No particulars are given. It is said that they will be provided after discovery and inspection. The causation and loss pleadings in respect of the cause of action based on breach of statutory duty mirror those in respect of the other causes of action pleaded. 144 The respondents contend that the SOC is confusing and embarrassing because it does not identify the statutory source of the alleged duty. In respect of the period after 1 July 1998, the obligations under s 292, 295, 298 and 302 are upon Holdings. In respect of the period before 30 June 1998, the obligations under ss 295A, 295B, 302 and 305 are upon the directors but they are not in the terms alleged. More fundamentally, the respondents contend that none of those provisions of the Corporations Law is of such a character that its contravention is intended to provide a civil remedy to a person who suffers loss as a result. 145 Senior counsel for the applicant identified the source of the statutory duty relied upon as s 232(4) of the Corporations Law up to 13 March 2000 and s 180(1) of the Corporations Law thereafter. Section 232(4) provided: 'In the exercise of his or her powers and the discharge of his or her duties, an officer of a corporation must exercise the degree of care and diligence that a reasonable person in a like position in a corporation would exercise in the corporation's circumstances.' 146 Section 180(1) relevantly obliges directors of a corporation to exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they were a director of the corporation in the corporation's circumstances, and the reasonable person had the same office and responsibilities as the director. 147 In either event, the provisions impose a standard of performance in the fulfilment of the powers and duties of directors, but they do not themselves create powers or duties on the part of the directors of corporations. The source of those powers or duties must be discerned elsewhere in legislation, or at common law. 148 Part 9.4B of the Corporations Law deals with the civil consequences of contravening civil penalty provisions. Both the former s 232(4), and s 180(1), are civil penalty provisions. Although the statutory regime under Part 9.4B altered from 13 March 2000, it provided at material times for declarations to be made of contraventions of a civil penalty provision. The consequence of such a declaration is vulnerability to a pecuniary penalty order (previously a civil penalty order) and a compensation order. The persons who may apply for a declaration of contravention, a pecuniary penalty order, or a compensation order are the ASIC and the corporation concerned. A person such as the applicant is not empowered to do so. However, s 1317H (in force to 13 March 2000) and then s 185 provided that the entitlement of ASIC or the corporation to recover compensation did not disentitle others from pursuing such actions as they may have been entitled to pursue. 149 The question therefore is whether the applicant has an arguable case that she has a claim for damages against any of the respondents for breach of statutory duty. Whether a provision of an enactment provides a civil remedy to a person who suffers loss as a consequence of its contravention is a matter of construction based upon legislative intention: O'Connor v SP Bray Ltd (1937) 56 CLR 464 at 477-478. In Gardiner v Victoria [1999] 2 VR 461 at 469-470 Phillips JA identified four factors which may be relevant to that issue. The first is whether the provision was passed primarily for the general good or for the benefit of a particular class of persons: see e.g. Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 424-425. I do not think that consideration leads to a firm conclusion one way or the other. It is correct that the object of such provisions as ss 295A, 295B, 298, 302 and 305, and subsequently ss 292, 295, 298 and 302, are (as senior counsel for the first respondent put it) 'to serve the community as a whole' by ensuring good corporate governance. They also serve to inform the members of matters relevant to decisions to be made as members, at least in their collective status at general meetings of the corporation. The reporting requirements were refined and expanded by the Corporate Law Reform Act 1994 (Cth). The amendments then introduced were, at least in part, to enhance disclosure obligations so informed decisions could be made about the allocation of investment funds: Corporate Law Reform Bill 1993 (Cth), Explanatory Memorandum, pars 1-9. Regard should also be had to whether the enactment itself provides remedies for contravention of particular provisions, and a structure for the enforcement of statutory obligations. It does so, but (as noted) not exclusively. Finally, it is necessary to consider whether the enactment elaborates upon an established pre-existing common law duty. Neither s 232(4) nor s 180 imposes a standard of care or a norm of conduct which differs from that imposed by the common law. 150 The particular statutory duties to which the prescribed standard of care is said by the applicant to apply, namely the reporting obligations, involve specific statutory responsibilities which do not necessarily correspond with any requirements of the common law. But, as I have found the common law claim as expressed to be an arguable case, in substance I do not see how the statutory provisions relied upon may enhance the prospects of the applicant succeeding in the claim. In addition, the statutory reporting obligations after 1 July 1998 are imposed upon Holdings and not the directors. Section 232(4) and later s 180 may impose a norm of conduct about how those obligations are to be fulfilled, but the obligations themselves are not, after 1 July 1998, imposed upon the respondents. See e.g. the observations of Olsson J in Peat Marwick at 261. In s 1005 of the Corporations Law, specific provision is made for civil liability to arise in the case of contraventions of a provision of Part 7.11 of the Corporations Law (including ss 995 and 999). The issue as to which provisions of the Corporations Law should give rise to vulnerability to civil proceedings upon their contravention has been addressed to that extent. 151 I have therefore come to the view that there is no real prospect of the applicant succeeding in her claim based upon breach of statutory duty in respect of the period from 1 July 1998. 152 The reporting obligations up to 30 June 1998 did rest upon the directors of a corporation. Assuming those obligations were fulfilled, s 232(4) would impose a standard of conduct in the manner of their fulfilment. It is not said to be a standard different from the common law standard of care, although the common law duty of care and the standard of care which it imposes arises (or arguably arises) by reason of the fact of the reporting by the respondents (as alleged) rather than the existence of the reporting obligation itself. 153 I do not consider the common law claim based upon breach of statutory duty up to 30 June 1998 is so clearly untenable that it should be struck out. I accept further that it is arguable that the cause of action survives as a claim at common law, notwithstanding s 1400 of the Corporations Act 2001 (Cth). 154 In submissions, senior counsel for the applicant acknowledged that the duty relied upon did not extend beyond the shareholders from time to time by Holdings. 155 In the result, I propose to strike out from the SOC the following: (1) par 315.4 (2) the date '3 April 2001' first appearing in par 315 and to substitute the date '30 June 1998'; (3) pars 315.10, 315.11, 315.12, 315.13 and 315.14; (4) the words 'and the market for Holdings securities' in par 315 (5) par 319 (6) the number '319' in par 330 and to substitute the number '318'.

(7) Section 728 of the Corporations Law 156 Paragraph 289 of the SOC refers to those earlier paragraphs which allege the 19 May 2000 prospectus issued by Holdings contained misleading and deceptive statements. It alleges Holdings thereby contravened s 728 of the Corporations Law. Paragraphs 291 and 291.13 allege that the respondents also published the 19 May 2000 prospectus and are liable for the contravention of s 999 of the Corporations Law as a result. The SOC also alleges, alternatively, that the conduct contravened s 52 of the TDA and s 12DA of the ASICA. I have allowed those pleadings to stand. 157 The applicant does not claim to have subscribed for securities in Holdings in reliance upon the 19 May 2000 prospectus. However, as her senior counsel points out, other group members did so. At present, I think it is arguable that their claims are sufficiently similar to the applicant's claims as to warrant the inclusion in the SOC of the allegations generally concerning the 19 May 2000 prospectus. The issues may involve substantially similar questions of fact and law. Indeed, it is likely that the evidence relevant to whether a group member relied upon the 19 May 2000 prospectus, and to showing the 19 May 2000 prospectus was misleading (if it was), would overlap substantially with evidence about other communications. The 19 May 2000 prospectus should not be viewed as existing in an information vacuum. 158 For the reasons given at [96] above, if at the end of the hearing, certain group members may be entitled to relief in respect of the 19 May 2000 prospectus, the absence of reference to s 729 or to ss 731 or 733 of the Corporations Law in the SOC will not be fatal to their entitlement, provided the respondents have had a fair opportunity to know the case they must meet, and to meet it.

conclusion 159 I will give the parties the opportunity to consider these reasons for decision before making the orders proposed. I direct the applicant in the first place to prepare minutes of order to reflect these reasons for consideration by the other parties before submitting them to the Court. 160 It is apparent, in an application such as the present, the Court is not called upon to finally resolve any complex questions of law or fact. Its role is a more confined one. I am not to be taken as having formed any views as to the prospects of the applicant establishing any of the facts which have been pleaded in the SOC. In particular, the SOC alleges that the respondents variously were negligent and in breach of their statutory duty in causing the publication of the various pleaded communications. There is a very considerable step between attributing to a non-executive director responsibility for the contents of a communication (if that were to be proven) and attributing to that director a lack of reasonable care in expressing the contents of the communication. Non-executive directors are not agents of the corporation. Generally speaking, there is an obvious need for a non-executive director to be informed by the senior employees of a corporation about its affairs, and to be in a position to make decisions on the basis of such information. Section 180(1)(a) and (b) of the Corporations Law appear to recognise that circumstance. However, as I have elsewhere noted, such matters are to be decided upon the whole of the evidence.

161 The next step in the proceeding, apart from the filing of defences, would appear to be addressing the motion of the second to fifth respondents to dismiss the application to the extent that it is a representative proceeding. As to that, see the discussion by Sackville J in Philip Morris (Australia) Ltd v Nixon (2000) 170 ALR 487 at 514-517; [123]-[137]. I certify that the preceding one hundred and sixty-one (161) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield.

Associate: Dated: 24 March 2004 Counsel for the Applicant: WJN Wells QC with A Dal Cin

Solicitor for the Applicant: Duncan Basheer Hannon

Counsel for the First Respondent: SW Kaye QC with M Gordon

Solicitor for the First Respondent: Clayton Utz

Counsel for the Second to Fifth Respondents: PJ Jopling QC with J Delany

Solicitor for the Second to Fifth Respondents: Minter Ellison

Counsel for the Sixth Respondent: DG Robertson

Solicitor for the Sixth Respondent: Corrs Chambers Westgarth

Date of Hearing: 20 and 21 March 2003

Date of Judgment: 25 March 2004