In the matter of Mayne Pharma Group Limited

Medium Neutral Citation: In the matter of Mayne Pharma Group Limited [2025] NSWSC 1204

Hearing dates: 22–26, 30 September 2025, 1, 7–10 October 2025

Date of orders: 15 October 2025

Decision date: 15 October 2025

Jurisdiction: Equity - Corporations List

Before: Black J

Decision: Judgment to be given in favour of the Plaintiff; Cross-Claimant’s Cross-Summons to be dismissed; parties to bring in short minutes of order.

Catchwords: CONTINUOUS DISCLOSURE — where scheme implementation deed required parties to comply with applicable laws including ASX Listing Rules and Corporations Act — where bidder contends scheme company’s delay in disclosing letter from industry regulator in breach of ASX Listing Rules — held that no breach of continuous disclosure obligation established
CONTRACT — material adverse change provision — where bidder claims material adverse change occurred in relation to scheme implementation deed by reason of decline in scheme company’s sales performance and/or following receipt of letter from industry regulator — held that scheme company’s sales performance declined in relevant period —sales decline and other matters did not meet specified quantitative threshold for material adverse change
CONTRACT — representation and warranty — construction — whether representation and warranty clause extended to content of each document disclosed in due diligence materials — held that clause extended only to collation and preparation of totality of documents produced and not the content of each individual document — held that no breach of representation and warranty clause established
CONTRACT — termination — election — where scheme company contends that facts establishing bidder’s purported right to terminate known to the bidder when bidder executed amendment of the scheme implementation deed, then entered into deed poll in respect of scheme and then supported approval of the scheme at first Court hearing and reserved its position as to only one of the matters giving rise to the claimed right to terminate — whether any of these matters constituted election between inconsistent rights — whether “anti-waiver” clause in scheme implementation deed prevented election — held that bidder elected not to terminate the scheme implementation deed by reason of matters then known to it by amendment of scheme implementation deed and again by its conduct at first Court hearing — held that “anti-waiver” clause did not prevent election in the circumstances
CORPORATIONS — scheme of arrangement — where Court made orders convening meeting of members of scheme company to consider scheme proposal — where bidder seeks declaration that scheme implementation deed validly terminated and associated orders for payment of break fee — where scheme company seeks orders that scheme implementation deed not validly terminated
MISLEADING OR DECEPTIVE CONDUCT — where scheme implementation deed required parties to comply with applicable laws including the Australian Consumer Law — where bidder contends scheme company’s disclosure to market of its response to industry regulator letter constituted misleading and deceptive conduct in breach of the Australian Consumer Law — held that scheme company’s response not misleading or deceptive — where bidder contends scheme company engaged in misleading and deceptive conduct in representing that it “expected” its FY25 EBITDA “would be” specified figure — held that alleged representation was not made, given the nature of and context of the relevant forecast — held that misleading and deceptive conduct claims not established

Legislation Cited: - Australian Consumer Law, ss 236, 237, 243
- Australian Securities and Investments Commission Act 2001 (Cth), ss 12DA, 12GF, 12GM
- Competition and Consumer Act 2010 (Cth)
- Corporations Act 2001 (Cth), ss 411, 1041H, 1041I, 1319, 1325
- Evidence Act 1995 (NSW), ss 76, 79, 136, 140
- Uniform Civil Procedure Rules 2005 (NSW), rr 31.19, 31.28, Sch 7
- Supreme Court (Corporations) Rules 1999 (NSW), r 2.13

Cases Cited: - Akorn Inc v Fresenius Kabi AG, 2018 WL 4719347, CA No 2018-0300-JTL (Del Ch 2018)
- Ali v Insurance Australia Ltd [2022] NSWCA 174- Allianz Australia Insurance Limited v Delor Vue Apartments CTS 39788 (2022) 277 CLR 445; [2022] HCA 38
- Androvitsenas v Members First Broker Network [2013] VSCA 212
- Armagas Ltd v Mundogas SA [1985] 1 Ll R 1
- Australia and New Zealand Banking Group Limited v Australian Securities and Investments Commission (2024) 305 FCR 383
- Australian Competition and Consumer Commission v Telstra Corporation Ltd (2004) 208 ALR 459; [2004] FCA 987
- Australian Competition and Consumer Commission v Telstra Corporation Ltd (2007) 244 ALR 470; [2007] FCA 1904
- Australian Competition and Consumer Commission v Woolworths Group Ltd (2020) 281 FCR 108; [2020] FCAFC 162
- Australian Pipeline Ltd v Hastings Funds Management Ltd (2014) 103 ACSR 343; [2014] NSWCA 398
- Australian Securities and Investments Commission v Big Star Energy Limited (No 3) [2020] FCA 1442
- Australian Securities and Investments Commission v GetSwift Ltd [2021] FCA 1384
- Australian Securities and Investments Commission v Southcorp Ltd (No 2) (2003) 130 FCR 406; [2003] FCA 1369
- Australian Securities and Investments Commission v Vocation Limited (In Liquidation) (2019) 136 ACSR 339; [2019] FCA 807
- BM Brazil 1 Fundo De Investimento Em Participacoes Multistrategia & Ors v Sibanye BM Brazil (Pty) Ltd & Anor [2024] EWHC 2566 (Comm)
- Botany Bay City Council v Minister for Planning and Infrastructure [2014] NSWCA 141
- Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34
- Butcher v Lachlan Elder Realty (2004) 218 CLR 592; [2004] HCA 60
- Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25
- Canberra Advance Bank Ltd v Benny (1992) 38 FCR 427; (1992) 115 ALR 207; (1992) 9 ACSR 179
- Charter Reinsurance Co Ltd v Fagan [1997] AC 313
- Crowley v Worley Ltd (2022) 293 FCR 438; [2022] FCA 33
- Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588; [2011] HCA 21
- Daynes v I-MED Central Queensland Pty Ltd [2025] NSWCA 150
- Demagogue Pty Ltd v Ramnesky (1992) 39 FCR 31
- Earglow Pty Ltd v Newcrest Mining Ltd (2015) 230 FCR 469; [2015] FCA 328
- Elders Ltd v E J Knight & Co Pty Ltd [2009] NSWSC 1462
- Elder’s Trustee and Executor Co Ltd v Commonwealth Homes and Investment Co Ltd (1941) 65 CLR 603; [1941] HCA 31
- Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd (2014) 251 CLR 640; (2004) 306 ALR 25; [2014] HCA 7
- ET-China.com International Holdings Ltd v Cheung (2021) 388 ALR 128; [2021] NSWCA 24
- Firmtech Aluminium Pty Ltd v Xie; Zhang v Xu; Xie v Auschn Conveyancing & Associates Pty Ltd [2024] NSWSC 1293 - Forty Two International Pty Ltd v Barnes (2014) 97 ACSR 450; [2014] FCA 85 - Fysh v The Queen [2013] NSWCCA 284 - Grandview Ausbuilder Pty Ltd v Budget Demolitions Pty Ltd (2019) 99 NSWLR 397; [2019] NSWCA 60 - Grant-Taylor v Babcock and Brown Ltd (in liq) (2015) 322 ALR 723; [2015] FCA 149 - Grant-Taylor v Babcock & Brown Ltd (in liq) (2016) 245 FCR 402; [2016] FCAFC 60 - Harvard Nominees Pty Ltd v Tiller (2020) 282 FCR 530; [2020] FCAFC 229 - HDI Global Specialty SE v Wonkana No 3 Pty Ltd (2020) 104 NSWLR 634; [2020] NSWCA 296 - Hexion Speciality Chemicals Inc v Huntsman Corp (2008) 965 A.2d 715 - Ipsos S.A. v Dentsu Aegis Network Ltd (formerly Aegis Group Plc) [2015] EWHC 1726 - Ireland v WG Riverview Pty Ltd (2019) 101 NSWLR 658; [2019] NSWCA 307 - Jubilee Mines NL v Riley (2009) 40 WAR 299; [2009] WASCA 62 - Khoury v Government Insurance Office (NSW) (1984) 165 CLR 622; [1984] HCA 55 - Lang v R (2023) 278 CLR 323; [2023] HCA 29 - Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705; [2001] NSWCA 305 - McFarlane as Trustee for the S McFarlane Superannuation Fund v Insignia Financial Ltd [2023] FCA 1628 - Mansfield v R (2012) 293 ALR 1; [2012] HCA 49 - Minumbra Lancewood Pty Ltd v AM Lancewood Investment Nominees Pty Ltd [2013] NSWSC 1929 - Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; (2015) 325 ALR 188; [2015] HCA 37 - Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449; [1992] HCA 66 - NorthWest Healthcare Australia RE Limited v Australian Unity Funds Management Ltd [2023] NSWSC 86 - Parkin v Boral Limited (Materiality Evidence Ruling) [2025] FCA 70 - Pittmore Pty Ltd v Chan; Chan v Tan (2020) 104 NSWLR 62; [2020] NSWCA 344 - Price (as executor of the estate of Price (dec’d)) v Spoor (as trustee) (2021) 391 ALR 532; [2021] HCA 20 - R v Fysh [2012] NSWSC 1266 - R v Paulson [1921] 1 AC 271 - R&B Investments Pty Ltd (Trustee) v Blue Sky Alternative Investments Limited (in liq) (Separation of Issues) [2025] FCA 1097 - Re Atlas Advisors Australia Pty Ltd (2022) 162 ACSR 509; [2022] NSWSC 705 - Re 1derful Pty Ltd [2024] NSWSC 1414 - Re Colorado Products Pty Ltd (in prov liq) (2014) 101 ACSR 233; [2014] NSWSC 789 - Re Computer Room Solutions Pty Ltd (2021) 154 ACSR 672; [2021] NSWSC 845 - Re Mayne Pharma Group Ltd [2025] NSWSC 513 - Sangha v Baxter [2009] NSWCA 78 - Sargent v ASL Developments Ltd (1974) 131 CLR 634; [1970] HCA 40 - Shellharbour City Council v Minister for Planning [2011] NSWCA 195 - SIF Holdings Pty Ltd v CRC Gosford Pty Ltd (2021) 391 ALR 697; [2021] NSWCA 174 - Tele2 International Card Company SA v Post Office Ltd [2009] EWCA Civ 9 - Thera Agri Capital No 2 Pty Ltd v BCC Trade Credit Pty Ltd t/as The Bond & Credit Co [2022] NSWSC 669 - Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; (2004) 211 ALR 342; [2004] HCA 52 - Varma v Varma [2010] NSWSC 786 - Watson v Foxman (1995) 49 NSWLR 315 - Wiltrading (WA) Pty Ltd v Lumley General Insurance Ltd (2005) 30 WAR 290; [2005] WASCA 106 - Yowie Group Ltd v Keybridge Capital Ltd [2025] NSWCA 142 - Zonia Holdings Pty Ltd v Commonwealth Bank of Australia Ltd [2025] FCAFC 63

Texts Cited: AJ Black & P Hanrahan, Securities and Financial Services Law, 9th ed, 2021, [8.58].

Category: Principal judgment

Parties: Mayne Pharma Group Ltd (Plaintiff / Cross-Defendant)
Cosette Pharmaceuticals, Inc. (First Defendant / Cross-Claimant)
Cosette Australia Bidco Pty Ltd (Second Defendant)

Representation: Counsel:
N Hutley SC / T O’Brien / D Farinha / B Lambourne / S Gerber / J Bailey (Plaintiff / Cross-Defendant)
E Collins SC / M Hodge KC / M Ellicott / B Hancock / S Spiers / E O’Connor Jardine / C Beshara / G Zhu / R Haidary (Defendants / Cross-Claimant)
Solicitors:
Gilbert + Tobin (Plaintiff / Cross-Defendant)
Corrs Chambers Westgarth (Defendants / Cross-Claimant)

File Number(s): 2025/214319

JUDGMENT

1. The Plaintiff, Mayne Pharma Group Limited (“MPG”) is an Australian public company listed on the Australian Securities Exchange (“ASX”). Its business is focused on pharmaceuticals and it has a significant business presence in the United States and Australia. Its headquarters is in North Carolina in the United States of America. The First Defendant, Cosette Pharmaceuticals, Inc. (“Cosette”) and the Second Defendant, Cosette Australia Bidco Pty Ltd (“Cosette Sub”) (together, “Cosette Parties”) are each wholly-owned subsidiaries of Cosette Pharmaceuticals Holdings, Inc (“Cosette Holdings”) which is jointly owned and controlled by Avista Capital Holdings LP (“Avista”) and Hamilton Lane Advisors LLC (“Hamilton Lane”).

2. By a Scheme Implementation Deed (“SID”) dated 20 February 2025, Cosette and MPG agreed the terms and mechanism of a proposed scheme of arrangement which provided for the acquisition of all of MPG’s ordinary shares by Cosette Sub. Under the proposed scheme, MPG shareholders would be paid A$7.40 per share they own and the maximum scheme consideration payable would be A$614,933,421.40. I made orders under ss 411 and 1319 of the Corporations Act 2001 (Cth) (“Act”) relating to that proposed scheme of arrangement and associated orders on 15 May 2025 for the reasons set out in my judgment in Re Mayne Pharma Group Ltd [2025] NSWSC 513.

3. On 17 May 2025, Cosette issued its first notice of a material adverse change under cll 3.5(c) and 3.7(a) of the SID to MPG (“First MAC Notice”) and, on 4 June 2025, Cosette sent a notice of termination of the SID (“First Termination Notice”) to MPG. By Originating Process filed in these proceedings on 4 June 2025, MPG seeks declarations that the First MAC Notice was not validly issued and that Cosette did not validly terminate the SID by its First Termination Notice. The basis of that claim is in turn set out in MPG’s Concise Statement filed on 4 June 2025 (“CS”) and the Cosette Parties filed their Response to that Concise Statement on 13 June 2025 (“RCS”).

4. By its Cross-Summons filed on 13 June 2025, Cosette in turn seeks a declaration that it validly terminated the SID and seeks an order that MPG pay it a break fee pursuant to the SID and further relief, and it relies on its Cross-Claimant’s Amended Concise Statement (“CCS”) filed 23 September 2025 in that regard. MPG relies on a Response to the Cross-Claimant’s Amended Concise Statement (“CCSR”) also filed on 23 September 2025 and Cosette relies on a Further Amended Reply to the CCSR filed late in the hearing on 8 October 2025 (“CCS Reply”). The parties agreed that the larger part of these proceedings concerned Cosette’s Cross-Claim and Cosette first led evidence and made submissions at the hearing. I will generally refer to Cosette when dealing with the Cross-Claim and to the “Cosette Parties” in dealing with MPG’s claim to which both are defendants and with the proceedings generally.

5. The Cosette Parties have declined to extend the End Date (as defined) under the SID, namely 20 November 2025, and a delay in resolving these proceedings would potentially have the consequence that that date would be reached, the scheme would lapse and MPG and its shareholders would be deprived of the commercial benefit of any success in the proceedings. That result would be the antithesis of the just determination of the proceedings. These proceedings have therefore been conducted and determined in circumstances of extreme commercial urgency, and judgment has been given within several days of the conclusion of the hearing. That should allow sufficient time for either or both parties to bring any appeal from my judgment and, preferably, have any appeal determined before the End Date before the scheme expires: [2025] NSWCA 142 at [5]. I have reviewed all evidence and submissions as the hearing progressed and after I reserved judgment but I have necessarily focussed in this judgment on key issues and the matters that it is necessary to decide in order to deliver judgment within the necessary time frame.

Affidavit evidence

7. I now turn to the affidavit evidence and cross-examination. In addressing that evidence, I recognise that this hearing took place not long after the events in issue but I also have regard to the fallibility of human memory which increases with the passage of time, particularly where disputes or litigation intervene: Watson v Foxman (1995) 49 NSWLR 315 at 318–319; Varma v Varma [2010] NSWSC 786 at [424]–[425]. I also have regard to the fact that objective evidence, where available, is likely to be the most reliable basis for determining matters of credit that arise as to the affidavit evidence: Armagas Ltd v Mundogas SA [1985] 1 Ll R 1 at 57; Re Colorado Products Pty Ltd (in prov liq) (2014) 101 ACSR 233; [2014] NSWSC 789 at [10] (“Colorado”). I also bear in mind the observations of Bell P (as the Chief Justice then was, with whom Bathurst CJ agreed) in ET-China.com International Holdings Ltd v Cheung (2021) 388 ALR 128; [2021] NSWCA 24 at [27]–[28]:

“Whilst the quality and accuracy of oral recollection of actual conversations should be treated with care and caution given the fallibility of human memory (of which there has been a growing appreciation within the judiciary in recent decades), oral testimony may still be of value and importance, as was recognised in the nuanced observations of Leggatt J (as his Lordship then was) in Gestmin SGPS SA v Credit Suisse (UK) Ltd [2013] EWHC (Comm) 3560 at [22] (Gestmin):

“the best approach for a judge to adopt in the trial of a commercial case is, in my view, to place little if any reliance at all on witnesses' recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts. This does not mean that oral testimony serves no useful purpose – though its utility is often disproportionate to its length. But its value lies largely, as I see it, in the opportunity which cross-examination affords to subject the documentary record to critical scrutiny and to gauge the personality, motivations and working practices of a witness, rather than in testimony of what the witness recalls of particular conversations and events. Above all, it is important to avoid the fallacy of supposing that, because a witness has confidence in his or her recollection and is honest, evidence based on that recollection provides any reliable guide to the truth.” [emphasis added]

Documents and events have to be understood in their context, and evidence of context will often be furnished by witnesses in their oral evidence. Documents, moreover, will not always present a complete picture of events. Indeed it would be rare that they do. Nor do contemporaneous documents necessarily or invariably convey or record the background or context in which events took place. That background or context will be familiar to the actors at the time of those events but may not always emerge from documents.”

8. I have here drawn on my summary of the applicable principles in, inter alia, Re 1derful Pty Ltd [2024] NSWSC 1414 at [7]ff. I have also borne in mind the cautionary observations of Basten JA (Handley JA agreeing) in Sangha v Baxter [2009] NSWCA 78 at [155], applied by Nixon J in Firmtech Aluminium Pty Ltd v Xie; Zhang v Xu; Xie v Auschn Conveyancing & Associates Pty Ltd [2024] NSWSC 1293 at [42], that:

“Because a witness has not told the truth with respect to a particular matter does not mean that other parts of his or her evidence are untruthful. Where possible, an assessment should be made of the reasons for the untruthfulness in order to see if other aspects of the evidence are likely to be infected by the same concern. Further, evidence may be rejected because it is apparently unreliable, possibly mistaken or deliberately untruthful or capable of being categorised in a variety of ways which are unlikely to be capable of clear delineation in some cases.

Further, findings of credibility are not usually findings with respect to factual issues in the case, but are rather subsidiary findings on the way to determination of issues. Like many aspects of the evidence in a trial, the evidence of a witness who is believed to have lied in a particular respect, will nevertheless be able to bear some weight and should be placed into a balance, with other material evidence, before a conclusion is reached in relation to a critical fact. The rejection of a witness in total, absent corroboration is likely to mean that, even where corroborated, little attention will be paid to the evidence of the witness and less to the possible consequences which might flow from the fact that particular evidence is shown to be truthful: see generally, R v Collins [2007] NSWCA 122 at [44].”

9. I also bear in mind that the allegations of breach of the continuous disclosure requirements made by Cosette against MPG have potential civil penalty consequences, and I should apply the standards set out in Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34 and its equivalent under s 140 of the Evidence Act 1995 (NSW) (“Evidence Act”) in this regard. Where a party advances allegations of impropriety, the Court must take account of the gravity of the matters alleged in deciding whether the inference should be drawn and, although the standard of proof remains proof on the balance of probabilities, the strength of the evidence necessary to establish a given fact to the civil standard may vary according to the nature of what it is sought to be proved: Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449 at 449 –450; [1992] HCA 66. Section 140 of the Evidence Act similarly provides that, in a civil proceeding, the Court must find the case of a party proved if it is so satisfied on the balance of probabilities and that, without limiting the matters that the Court may take into account in deciding whether it is so satisfied, it is to take into account the nature of the cause of action or defence, the nature of the subject matter of the proceeding and the gravity of the matters alleged. I approach the evidence in Cosette’s claim for breach of MPG’s continuous disclosure obligations on that basis.

10. The Cosette Parties read three affidavits dated 22 July 2025, 7 September 2025 and 21 September 2025 of Mr Apurva Saraf, who is the President and Chief Executive Officer of Cosette, a director of Cosette and a director of Cosette Holdings. In his first affidavit, Mr Saraf set out the background to the Cosette Group, his experience, and provided a detailed chronological account of dealings with MPG, and I refer to aspects of his evidence in setting out the chronology of events below. Mr Saraf did not there, or in subsequent affidavits, address the modelling undertaken by Cosette or its advisers in any detail. Ultimately, little turns on that in these proceedings, where Cosette has not established any representational case as to which reliance would become significant.

11. Mr Saraf was cross-examined. He was an intelligent and careful witness who slowly read each document he was shown before he answered any question concerning it. I was left with the strong impression that his affidavit was in significant part a reconstruction of events from documents that he had been shown. In cross-examination, Mr Saraf was reluctant to address and generally would not concede matters which were potentially adverse to Cosette’s claims or his evidence. A striking example of his approach was his prolonged reluctance to acknowledge an obvious and significant error in the treatment in his affidavit of a valuation of MPG that had been prepared by Santander Bank, S. A. (“Santander”), an investment bank retained by Cosette. It is plain that, when preparing his affidavit, he had misunderstood that valuation as made in AUD rather than USD, and that had led him wrongly to claim that Cosette had substantially increased the price that it (or, strictly, Cosette Sub) would pay for MPG shares in the course of the transaction. Mr Saraf was plainly reluctant to acknowledge the impact of that misunderstanding in cross-examination, although that impact must have been immediately apparent to him given his obvious intelligence and expertise (Saraf XX, T146–150, 199–206). When this difficulty emerged, he gave evidence that he did not remember whether Cosette had substantially increased its valuation for MPG in this way, although his affidavit had plainly represented that that had occurred. It seemed to me that Mr Saraf’s as to this matter was, at best, guarded and, possibly, evasive.

“… it is not an expert’s role, in applying his expertise to assumed facts, to engage in a process of fact finding. Second, and practically, there is a real risk of wasted time and costs involved in that approach, where significant time may be spent in an expert reaching findings based on his or her perception of the facts, where that perception of the facts does not coincide with the case that is put by any party, or with the findings that are ultimately reached by the Court, and that is not transparent, because it is not identified in any assumptions which the expert has been asked to make.”

I also there noted the difficulty with the process by which an expert is invited to engage in the assessment of a matter by reference to what he would “expect” to be taken into account and noted that will likely result in “idiosyncratic opinions, based on the expert’s subjective assessment of what a [party] or its officers should do.”

24. My concerns as to these matters reflects the nature of expert evidence, which I should emphasise given the importance of this issue in this case. Section 76 of the Evidence Act provides that evidence of an opinion is not admissible to prove the existence of a fact about the existence of which the opinion is expressed. Section 79 of the Evidence Act states an exception to the opinion rule, as follows:

"If a person has specialised knowledge based on the person's training, study or experience, the opinion rule does not apply to evidence of an opinion of that person that is wholly or substantially based on that knowledge."

25. In well-known observations in Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705; [2001] NSWCA 305 (“Makita”), Heydon JA noted (at [85]) that what will ordinarily be necessary in order to lead admissible evidence includes an explanation that shows that the opinion is substantially based on the witness's expertise as applied to facts assumed or observed to produce the relevant opinion. I bear in mind that, as subsequent case law has recognised, the observations of Heydon JA in that case may be something of a counsel of perfection, and the Court does not apply those observations with a view to finding a way to exclude the expert report, rather than assessing its admissibility in a more pragmatic way. In Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588; [2011] HCA 21 (“Dasreef”), the plurality pointed to the fact that, for expert evidence to be admissible, the witness must have relevant specialised knowledge based on his or her training, study or experience; the opinion must be wholly or substantially based on that knowledge; and the report should be presented in a form which makes it possible to determine whether the opinion is wholly or substantially based on that knowledge. In Lang v R (2023) 278 CLR 323; [2023] HCA 29, the High Court referred to Makita and Dasreef as identifying the applicable principles in respect of the admissibility of the opinion of an expert under the uniform evidence legislation, and Kiefel CJ and Gageler J observed (at [11]) that:

“Those principles require that, in order to satisfy the condition of admissibility that the opinion of an expert be demonstrated to be based on specialised knowledge or experience, the inference drawn by the expert which constitutes the opinion be supported by reasoning on the part of the expert sufficient to demonstrate that the opinion is the product of the application of the specialised knowledge of the expert to facts which the expert has observed or assumed."

26. Here, Mr Meyers has no personal knowledge of what MPG did or did not do. He refers in his report to eleven letters of instruction. The first of those letters dated 28 June 2025 (Ex C6, 240) identified the questions which he was asked to address and provided limited factual background, which he has presumably assumed, and some documents. He was then provided further documents, without identification of any facts that he was asked to assume by reference to them, by letters dated 5 July 2025 (Ex C6, 247), 9 July 2025 (Ex C6, 251), 11 July 2025 (Ex C6, 253), 14 July 2025 (Ex C6, 257), 24 July 2025 (Ex C6, 259) and 25 July 2025 (Ex C6, 261). By letter dated 27 July 2025 (Ex C6, 265), he was provided with further questions and asked to identify his assumptions in the body of his report (Ex C6, 265), which he has generally not done; he was provided with further documents, again without identification of any facts that he was asked to assume by reference to them, by letters dated 29 July 2025 (Ex C6, 268) and 30 July 2025 (Ex C6, 271); and he was provided with two assumptions and the expert witness code of conduct by letter dated 31 July 2025 (Ex C6, 273).

27. As I have pointed out, the instructions given to Mr Meyers did not define the factual assumptions which could properly be made by reference to the documents that were provided to him and he has plainly undertaken an extended exercise in fact finding by reference to those documents, without reference to any other part of the evidence that is now available, including from Mr Gray’s lengthy cross-examination. Parts of his evidence were objected to and rejected on that basis. Where he generally made no attempt to identify what assumptions he has made in his report, it was literally impossible to know what information that he perceived (and I use that term advisedly) MPG had at any relevant time or what he perceived that it did or did not do with that information. Here, as in NorthWest Healthcare, there would be little utility and a real risk of error in drawing conclusions from an expert report where the expert’s perception of the facts did not or may not:

“… coincide with the case that is put by any party, or with the findings that are ultimately reached by the Court, and that is not transparent, because it is not identified in any assumptions which the expert has been asked to make.”

28. On balance, and with real hesitation, I granted leave to the Cosette Parties to rely on Mr Meyers’ reports, where the orders as to expert evidence had not squarely addressed that matter; Mr Meyers had already travelled from the United States for cross-examination and MPG was ready to cross-examine him; and there was a possibility that these matters might be cured by his oral evidence. They were not and his evidence is of little utility for the reasons noted above. I will nonetheless now address his report in greater detail.

29. Mr Meyers addresses (Ex C6, 173ff) the typical roles of a chief financial officer and finance team in the US pharmaceutical industry, (Ex C6, 174ff) the revenue recognition practices in the US pharmaceutical industry and (Ex C6, 167, 178ff) the relationship between revenue and EBITDA in the US pharmaceutical industry, including the significance of “gross to net” calculations in revenue recognition. He then refers (Ex C6, 180ff) to supply chain finance and channel inventory monitoring practices; (Ex C6, 182ff) the implications of channel inventory for expected EBITDA; and (Ex C6, 183ff) identifies several “Key Mayne Products” for the purposes of his report.

30. Mr Meyers then outlines the background to MPG’s performance in the third quarter of the financial year ended 30 June 2025 (“Q3 FY25”) by reference to a review of documents and events which should be treated as matters of assumption. He then expresses the opinion (Ex C6, 168), largely without reference to identified assumptions of facts and partly in reliance on parts of his report that were not admissible and were not admitted, that, as at 17 or 20 February 2025, MPG did not have reasonable grounds for its forecast of underlying EBITDA for the remainder of FY25 reflected in the FY25 6+6 Forecast. He refers, in his review of MPG’s FY25 6+6 Forecast, to customary practice in the United States for companies to have access to and monitor certain kinds of data. He there identifies at least some assumptions that he has made by reference to his eleventh letter of instruction, from which he concludes that MPG at least had access to daily “ex-factory” shipment data. He also refers to other information which he “would expect” MPG to have received, although it is not apparent whether he has assumed that MPG in fact received what he expected it to receive, or has assumed that it did not and is critical of that matter. Mr Meyers also undertakes an analysis relating to the “pace” of MPG’s “ex-factory” shipments (Ex C6, 170), on the premise that that calculation provides meaningful information. These matters underpin Mr Meyers’ opinion that there was no reasonable basis for MPG’s FY25 6+6 Forecast given its projected increases in ex-factory shipments and, consequently, EBITDA for the Key Mayne Products (as defined in his report) in February and March 2025.

31. The difficulties with that analysis are, first, that it is undermined by Mr Gray’s evidence in cross-examination, which I address below and accept, as to the lack of utility in shipment information for such an analysis; and second, it is not possible to know how it takes into account the other information available to MPG to support a forecast where, as I have noted above, Mr Meyers does not identify the assumptions (or findings that he has made) which underpin his view to allow then to be tested. Mr Meyers implicitly assumes that all that was known to MPG and those preparing the FY25 6+6 Forecast is what emerges from the particular documents which were provided to him, which were a fraction of the evidence led in the proceedings, whatever (unidentified) factual inferences he has drawn from them and the information that the FY25 6+6 Forecast discloses on its face. It is impossible to test his conclusions formed on that incomplete basis against the evidence in this case, including the matters addressed in the extended cross examination of Mr Gray, where Mr Meyers does not disclose what assumptions of fact he has made. Where the body of knowledge which Mr Meyers thinks was known to MPG, at the time it prepared the FY 6+6 Forecast, cannot be identified, then his evidence as to whether that unidentified body of information provides a reasonable basis for MPG’s view does not assist.

“I am involved in finalising and approving the forecasts, together with [Mr Gray]. As part of that process [Mr Gray] and I evaluate the output of the mathematical model prepared by the finance team against the input and assumptions that have been provided by the commercial business leaders and incorporated into the forecast to test the v[e]racity of the projections. In addition, I am also considering market factors which may impact on [MPG’s] business including for example any new competitor products introduced into the market, changes in reimbursements policies for product coverage and any changes in our commercial investments which may impact product performance.”

37. I refer to other aspects of Mr O’Brien’s evidence in the chronology set out below. Mr O’Brien was cross-examined at some length as to the extent of his involvement in MPG’s forecasts (O’Brien XX, T295ff); the manner in which MPG’s FY25 6+6 Forecast was prepared (O’Brien XX, T299); the information available to MPG, including Mr O’Brien (O’Brien XX, T312ff); the history and significance of Nextstellis (O’Brien XX, T323ff); the significance of revenue from MPG’s women’s health business to its forecast EBITDA (O’Brien XX, T327); the circumstances of the subsequent decline in sales reflected in MPG’s later forecasts and financial performance (O’Brien XX, T393ff); and other events which I address in the chronology set out below.

38. In closing submissions, the Cosette Parties submit that Mr O’Brien’s evidence should not be accepted in significant aspects and where that evidence was not reflective of contemporaneous documents. I do not accept that there was any significant inconsistency between Mr O’Brien’s evidence and the contemporaneous documents. It seems to me that Mr O’Brien was a cautious and careful witness, who typically wished to review his affidavit and contemporaneous correspondence before responding to questions. I was nonetheless satisfied that he was giving evidence to the best of his recollection and, had it been necessary to resolve matters as to which Mr Saraf and Mr O’Brien had different recollections, I would largely have preferred Mr O’Brien’s evidence to Mr Saraf’s evidence as to those matters.

39. MPG also read the affidavit dated 24 August 2025 of Mr Aaron Gray, who is MPG’s Chief Financial Officer and is based in the United States. Mr Gray addressed his education and experience, including in forecasting, as to which he has significant expertise, and in senior finance roles. Mr Gray has a postgraduate qualification which included quantitative analysis courses. He has worked in financing roles at an industrial company in which he had responsibility for forecasting the relevant business; in a global medical technology business where he also had responsibility for forecasting orders, revenue and profit and managed that company’s large data analytics team; and he then had responsibility for forecasting equipment revenue for all of the diagnostic imaging business for North America at that company. He joined MPG as its Chief Financial Officer in August 2022 and, as the evidence demonstrated, has since introduced more sophisticated forecasting approaches at MPG, particularly from late 2024.

40. Mr Gray addressed aspects of MPG’s business relevant to his role and explained the way in which quarterly forecasts were prepared in MPG’s business. Mr Gray outlined MPG’s women’s health, dermatology and international business and its dealings with speciality pharmacies, large wholesalers and its mail order pharmacy, to which I referred above in addressing Mr O’Brien’s evidence. He also addressed the complexities of the application of US health insurance plans to MPG’s products and “co-pay” assistance programs which MPG offers in the United States. He explained, at length, the manner in which MPG calculates EBITDA, the data sources used in that calculation and the timing of its access to those data sources. He also explained the steps that he has taken, since he joined MPG, to introduce a single forecast as a management tool, combining previously separate financial and supply chain forecasts, and updating that forecast on a quarterly basis. He also explained (Gray 24.8.25 [106]ff) the use of statistical modelling as the first step in preparation of MPG’s forecast, commencing with the 3+9 Forecast that was prepared by MPG early in the period in issue in these proceedings. He also referred (Gray 24.8.25 [109]) to matters that are not readily captured by statistical modelling and to the steps taken by MPG to address those matters, including by review meetings undertaken by his team to obtain information from the business that is then included in forecasting. He outlined the steps taken in that forecasting (Gray 24.8.25 [123]ff) and explained the basis on which he considered those steps gave rise to a robust forecasting process. Mr Gray specifically addressed the preparation of the FY25 6+6 Forecast, which I address below, and also addressed subsequent developments. Mr Gray also addressed (Gray 24.8.25 [205]ff) his dealings with Cosette in respect of the proposed acquisition of MPG, and I will address that evidence in the chronology set out below. By a second affidavit dated 23 September 2025, Mr Gray corrected aspects of his first affidavit, which are not material to the determination of these proceedings.

“The run rate in January more than nearly any other month would not be indicative of the trend because of the holidays that happen early in the month.”

47. Mr Gray accepted in cross-examination (Gray XX, T491) that, on comparing the forecasts for January 2025 for MPG’s US business between 28 January and 13 February 2025, it appeared that forecast result for that month had fallen by more than $6 million, and that would be a significant change between a forecast result and an actual result (T491); that was a good example of Mr Gray’s willingness to make proper concessions against MPG’s apparent interest and supports his credit. I address the significance of that matter to Cosette’s cross-claim below.

48. Mr Gray also fairly accepted in cross-examination (Gray XX, T492) that MPG had, for January 2025, fallen short of its forecast EBITDA result in the FY25 3+9 Forecast, which he noted was the relevant version to be compared with actual results in January 2025. Mr Gray also accepted (Gray XX, T495) that the adjustments made, implicitly between the FY25 3+9 Forecast and the FY25 6+6 Forecast, involve shifting projected unit sales to later months, so that it would be necessary for those months to perform better (in the cross-examiner’s words) in order to achieve the forecast. However, he also pointed out (Gray XX, T495) and, I accept, that that shift was not significant:

“[b]ecause the unit miss for the month of January [2025] was something about two and a half percent of the units forecasted for the second half.”

49. The cross-examiner then rightly anticipated (Gray XX, T496) Mr Gray’s expectation that MPG could have recovered that modest shortfall in actual sales within the next several months and Mr Gray broadly accepted that proposition.

50. Mr Gray was cross-examined as to the forecasting methodology recorded in the FY25 6+6 Forecast (Ex J1, 10A/7809; Gray XX T507ff). Mr Gray accepted (Gray XX, T509–510) that the “miss” disclosed in his CFO report to MPG’s board for January 2025 was about A$800,000 to forecast and he rejected the proposition that the likelihood of a “miss” in subsequent months would be increased by increasing the number of units forecast for subsequent months, on the basis that “the demand meaning prescriptions dispensed, continued” and that:

“The continuation of demand would signal that if anything one would expect an increase, looking forward.”

I accept that that reasoning process was reasonably founded, although, as I will observe below, that result did not come to pass.

51. Mr Gray’s evidence (Gray XX, T511) was, and I also accept, that a “miss” in the run rate for shipped units as at mid-February 2025 did not indicate a significant likelihood that MPG would not be able to achieve the forecast EBITDA for February 2025 because:

“Our shipping patterns don’t follow a run rate. They’re very volatile. Lower shipments earlier in the month in the face of continued demand or prescriptions dispensed, meaning demand, would indicate that there would be a most likely an acceleration of shipments needed to fill the demand.”

52. Mr Gray nonetheless fairly acknowledged (Gray XX, T512) that, as events developed, there was a “significant miss” to forecast EBITDA for February 2025, which became apparent when he received MPG’s February results in March 2025. Mr Gray’s evidence (Gray XX, T519) was that further analysis undertaken by MPG had been able to exclude particular causes for the decline in demand in February 2025, and the only remaining hypothesis that could not be excluded was an impact of steps then being taken by MPG to change its sales team and that this hypothesis was very difficult mathematically to prove or disprove. Mr Gray also rightly then pointed out (Gray XX, T519–520) that it was a fact that there was specific demand softness in the third quarter of FY25, commencing in January 2025, in that the “demand was lower than what we had forecasted and what we expected”; the demand in that period did not reflect what MPG believed to be the trend of the demand and was a change from what had been the case in the first half of the financial year; and that the uncertainty was as to the cause of that matter, where the only remaining explanation related to the change in the sales team. He nonetheless confirmed (Gray XX, T521) that, as at 14 February 2025, he believed that prescription data until early February 2025, which was the data then available, and co-pay data supported the then forecast.

53. Mr Gray was also cross-examined (Gray XX, T556ff) as to a spreadsheet which he had prepared to compare demand and wholesaler inventory (Gray 24.8.25 [92]) that used both prescription data and information as to units dispensed; Mr Gray fairly accepted (Gray XX, T560) that that document did not support the forecast made as a February 2025 for unit sales for Nextstellis, where at least two years data would be needed for a trend line in forecasting. He confirmed in cross-examination (Gray XX, T561) that his review of three years’ data in relation to prescriptions which he undertook on an ongoing and monthly basis had supported the forecast number of units for Nextstellis for February to June 2025 in the FY25 6+6 Forecast. He again pointed out (Gray XX, T562):

“The point is one month doesn’t make a trend and so in mathematical modelling, spikes way up or way down would be treated as an outlier”.

54. His evidence (Gray XX, T561) was also that, as a February 2025, the “slope of the [demand] line supported by the history would show that there was going to be a rebound”. Mr Gray also noted, in cross-examination (Gray XX, T588) the complexities introduced by a change in foreign exchange rate in the second half of FY25, which were not fully explored in his cross-examination or in the proceedings. Mr Gray’s evidence (Gray XX, T597–599) was that he did not realise until after the end of February 2025 that there would be a shortfall in gross sales, although he fairly acknowledged that units shipped as at mid-February 2025 did not support meeting forecast gross sales for that month, while also noting that gross sales might be made up in the second half of February, pointing to the continuance of demand over that period.

55. In closing submissions, the Cosette Parties submit that there are material gaps in Mr Gray’s affidavit as to the process that MPG followed in preparation of the FY25 6+6 Forecast and that:

“Some parts of Mr Gray’s evidence were unsatisfactory as, in cross-examination, he gave evidence that was not contained in his affidavit or which was inconsistent with his earlier attempts to describe the forecasting methodology and the basis on which he approved the [FY25] 6+6 Forecast.”

56. I do not accept this submission. I recognise that Mr Gray’s affidavit, although long and detailed, did not contain the degree of detail that emerged from his cross-examination over a day and a half, but that was likely inevitable given the practical constraints in preparation of affidavit evidence, particularly in a case prepared under an accelerated timetable. It was hardly surprising that, given the length of Mr Gray’s cross-examination, additional matters emerged from that cross-examination which largely elaborated on and were consistent with his affidavit evidence and, in other cases, involved appropriate concessions and qualifications to that evidence. That matter seems to me to support Mr Gray’s credit rather than the reverse.

57. In closing submissions, the Cosette Parties also advance lengthy submissions to the effect that Mr Gray’s evidence as to MPG’s statistical model changed in the course of cross-examination. I do not accept that submission, beyond the unsurprising proposition that, where Mr Gray was cross-examined at length as to that statistical model, his evidence about it grew steadily more detailed, as additional aspects of it were disclosed and exhaustively examined by that cross-examination. I also note that the suggested “changes” in that model, to the extent that they exist, often reflected an ongoing failure in the cross-examination to draw the distinction between the underlying statistical model and its outputs in various forms, although Mr Gray was generally precise in distinguishing the two in his cross-examination.

58. It seems to me that Mr Gray responded to very detailed questions, covering a very large body of information, over a relatively long cross-examination, in a direct and constructive way. He plainly had a strong understanding of MPG’s financial reporting, he was responsive in dealing with questions and frequently made concessions in respect of particular matters which were potentially adverse to MPG’s case and he was otherwise clear and direct in indicating where he disagreed with other matters put to him by the cross-examiner and, when asked, why he did so. I have no hesitation in accepting his evidence across the range of matters as to which he gave evidence, and preferring his evidence to Mr Saraf’s and Mr Casten’s evidence in those areas where there was a conflict between their evidence.

59. MPG also reads MPG reads the affidavit dated 25 August 2025 of Mr Turner, its Vice President of Marketing, also based in the United States, which addressed issues relating to the marketing of Nextstellis, before and after the receipt of the FDA Letter. I will address that affidavit and his cross-examination in dealing with the FDA Letter below. The Cosette Parties advance criticisms of Mr Turner’s evidence in cross-examination in closing submissions. I accept that Mr Turner had little experience to allow him to express views as to whether an “untitled letter” issued by the FDA was a serious matter, at least from a regulatory rather than a marketing perspective. I do not accept that there was any inconsistency between that evidence and his evidence that allegations from a regulatory agency like the FDA were “absolutely taken very seriously”, where that proposition is plainly sensible, irrespective of whether a regulator’s concerns are well-founded in the particular case. I also do not accept there is any basis for criticism of Mr Turner, so far as he referred in cross-examination to the steps which were already being taken by MPG to change its marketing approach. That evidence was properly given where, to give accurate evidence, Mr Turner had properly to distinguish between the steps which he plainly already wished to take to alter MPG’s marketing approach to Nextstellis, and the effect of the FDA Letter which provided him an opportunity to accelerate those steps.

Chronology and background facts

63. There is a degree of common ground as to the background facts which emerge from the pleadings. There are differences between Australian time and US time in respect of communications to which I refer in the chronology below but no issue generally arises here as to the precise timing of any communication. I have adopted the date shown on the relevant document, rather than seeking to convert between Australian and US times in that chronology.

64. From about mid-July 2024, Cosette undertook (Saraf 22.7.25 [24]ff) initial preparatory work done in relation to a potential acquisition of MPG and identified an indicative price for such an acquisition, by reference to estimated EBITDA figures. Mr Saraf’s evidence (Saraf 22.7.25 [34]) that Santander identified an indicative fair value for MPG shares of A$4.74–$6.04. I think it likely, by reference to the derivation of that figure, that it was a reference to US$4.74–$6.04. Mr Saraf was reluctant to accept that matter in cross-examination, although he conceded the correctness of the calculation that led to that result. When he prepared his affidavit, Mr Saraf misunderstood that those figures were in AUD rather than USD, and that misunderstanding contributed to a significant error in another aspect of his evidence, which I address below.

65. Mr Casten’s evidence (Casten 22.7.25 [22]) is that was that he was first told about a proposed transaction to acquire MPG in or around mid-August 2024 when Mr Saraf told him that Mr Saraf was meeting Mr O’Brien in person to receive an overview of MPG’s business and operations.

66. On 23 August 2024, MPG released its FY24 Annual Report, Mr O’Brien and Mr Gray delivered its FY24 results presentation and MPG released an ASX announcement as to its results on the same day.

67. On 26 August 2024, Santander prepared discussion materials (Ex J1, 6/4651) for Cosette in preparation for Mr Saraf’s first meeting with Mr O’Brien. That document valued MPG at US$2.62 per share, with no premium for control, but also pointed to higher valuations, including an analyst high valuation of US$4.71. It identified an implied enterprise value for MPG between US$390 and US$518 million, on a multiple of FY25 estimated EBITDA between 10.3 and 13.6; an equity value of between US$466 million and US$594 million; a value per share of between US$4.74 and US$6.04; and a “Wall Street Median Price Target” of US$4.57.

68. Mr Saraf first met with Mr O’Brien on 29 August 2024 (Saraf 22.7.25 [35]). Mr Saraf’s evidence is that Mr O'Brien indicated, in substance, that any offer to acquire MPG’s shares would need to be at least A$6 per share and would have to include a significant premium. Mr O’Brien also addressed (O’Brien 24.8.25 [63]ff; see also O’Brien XX, T329ff) the circumstances in which he was introduced to Mr Saraf, by an investment banker at Santander and met with Mr Saraf on 29 August 2024. Mr O’Brien denied Mr Saraf’s evidence that he had indicated a price that would be needed for any offer to acquire MPG, although he agreed that he said “the Board would be resistant to any takeover that does not reflect the value they see in the Company in the future”. It is not necessary to determine the disagreement as to whether price was discussed in order to determine the proceedings.

“I consider that an important part of my role as CFO is to maintain a level of professional scepticism when reviewing financial modelling (including models prepared by target companies such as [MPG], internal Cosette models and models prepared by Cosette’s advisers such as [Santander]. This is important because it ensures that the quality of any models [sic] and, more broadly, the financial assumptions used by Cosette to make commercial decisions, are properly investigated and that any information gaps that exist are identified and (where possible) resolved.”

76. The evidence indicates that Mr Casten did maintain that level of scepticism throughout the transaction, although, as I noted above, he was not prepared to acknowledge the extent of his scepticism in cross-examination. Mr Casten also outlined the extent of his involvement in the due diligence process and the work carried out by Cosette up to the entry into an Exclusivity Deed on 24 November 2024 (Casten 22.7.25 [33]ff).

77. On 5 October 2024, Mr Saraf advised Mr Burgstahler and others (Ex J1, 7/5386) that that Jefferies were targeting the end of the month to “get us everything, including a management pack and a MP”. He noted that MPG had provided responses to several information requests in the last day in the VDR and observed that:

“I think time is of the essence here, as more and more people/advisers get involved, the probability of leaks to interlopers increases. If we can get ahead of everyone else, [MPG] will be left with limited options of either engaging with us or risk us walking vs try to get a process going with other bids 45-60 days out.”

78. Also on 5 October 2024, Mr Casten advised Mr Saraf and others (Ex J1, 7/5389) that:

“I would like to keep up to speed with the bankers work and understand what they are doing VS our internal modelling that we are to receive early next week from the BD team. Is it just further updates and analysis with the recent data, or they performing a new “bottoms up” analysis on [MPG]? …”

79. Mr Saraf responded (Ex J1,7/5388) that Mr Casten should deal directly with Santander and UBS, along with the Cosette business development team and indicated that Mr Saraf had set three targets for the modelling:

● “[MPG] forecast standalone and proforma:

● synergy estimate and assumptions

● point estimate bid supported by DCF, TEV, Comps analysis and Cash Flow forecast”

80. On 11 October 2024 (Ex M3, Tab A) Mr Casten advised Mr Saraf of his dissatisfaction with the position as to Cosette’s forecasting of MPG as follows:

“Just sharing with you to keep you in the loop [Jayson of Cosette] and I had an update call with the bankers earlier today which was, in short, a waste of our time. They are still confusing calendar vs fiscal year view of the modelling and have a hard time articulating the assumptions built into the analysis.

In short, I struggle with our current base case, and need insights from our [business development] team, as the banks could not answer any inquiries from [Mr Jacobs] and I today, and no-one from [business development] was on the call today.

Not sure how our base case can be higher than the “Seller’s Model” in revenues and EBITDA (without synergies) on SL 2 for the one ST 3 years, which in my mind are the most critical, along with the LOE [loss of exclusivity] assumptions. Thinking we need to vet those assumptions with our [business development team] (as I have yet to talk specifics, and confirm their thoughts) … Along with Commercial, and ensure their “buy-in”, Without receiving much data from Jefferies and [MPG Business Development] Team (which was exactly what I mentioned to you and the [Board of directors] last week), nor understanding the assumptions built in the model for some key products and the LOE for products like Nextstellis, Rhofade and Annovera, it is difficult to work though the process. I’d be interested on your thoughts on the attached.”

81. The attachment is an operating model for MPG prepared by UBS and Santander, setting out a base case forecast for, inter alia, synergised EBITDA from FY25 until FY35 and supporting material, including a detailed breakdown of synergies.

82. On 12 October 2024, Mr Casten advised Mr Ilin-Schneider of Cosette’s business development team and others including Mr Saraf (Ex M3, Tab B) that:

“… I have several questions that the bankers were not able to answer and no-one from [Business Development] has been on the call or available for the past couple of days. I am a little nervous about the model even the Cosette Base case, which without synergies, is higher in revenues and EBITDA the first couple years than what is in the Sellers model?”

Mr Casten then identified several specific questions in respect of the model and indicated his concern with sharing the model with Avista or the lender early in the next week and sought input of Cosette’s business development team on the model.

83. Mr Saraf also refers to an email dated 16 October 2024 from UBS (Saraf 22.7.25 [72]ff) which attached a management presentation made by MPG and to the content of that document. Mr O’Brien also addresses (O’Brien 24.8.25 [76]) a presentation made by MPG to Cosette and representatives of its shareholders, Avista and Hamilton Lane, on 18 October 2024, attended by Mr Saraf, Mr Casten, other management personnel from Cosette, Mr Burgstahler of Avista, a representative of UBS and representative of Hayfin Capital Management LLP (“Hayfin”), which was the proposed lender to Cosette in respect of the transaction.

84. On 22 October 2024, Mr Burgstahler advised Mr Saraf and others (Ex J1, 8/5712) that:

“We do not want to wait for [MPG’s] long term projections (they indicated last Friday they would be done in a few weeks). Since we will be running the combined business, I don’t put much value on them. If they are important to [Mr Saraf], then obviously we have to throw the quick bid strategy out the window. I don’t think waiting for those projections will change my view on value but will allow them to market to other buyers.”

85. On 23 October 2024, Mr Saraf responded to Mr Burgstahler (Ex J1, 8/5711) that Cosette did not need to wait for MPG’s long range forecast to put in a non-binding bid and that Cosette would work internally and with PricewaterhouseCoopers (“PwC”) and McKinsey to make its own forecasts and the forecast that MPG provided would then be used to “test our assumptions” prior to signing a definitive agreement.

86. On 23 October 2024, Cosette submitted a non-binding indicative offer to acquire all of the issued share capital of MPG at $7.00 per share and was then given extended access to information from MPG (Saraf 22.7.25 [82]ff; O’Brien 24.8.25 [79]). Mr Saraf also refers (Saraf 22.7.25 [75]ff) to his review in late October 2024 of work undertaken by Santander as to the implied valuation of MPG at different prices and he there claims that the valuation range had increased from Cosette’s previous thinking based on (or, in a subsequent revision of his evidence) informed by updated forecasts from MPG and further conversations with Mr O’Brien. I am satisfied that evidence was incorrect and reflected the error Mr Saraf had previously made in mistaking USD for AUD in the indicative valuation provided by Santander in mid-July 2024. Mr O’Brien’s evidence is that he attended a meeting with Mr Saraf and Cosette Holdings’ board in late 2024, although he does not recall the date of the meeting (O’Brien 24.8.25 [83]).

87. Cosette engaged PwC on about 25 October 2024 to advise Cosette in respect of aspects of the financial analysis of MPG, including synergies.

88. On 31 October 2024, at an MPG directors meeting, Mr Gray outlined the approach to be taken to MPG’s FY25 3+9 Forecast. The FY25 3+9 Forecast (Ex J1, 8/5919) describes the forecasting methodology (Ex J1, 8/5921) and contains an “EBITDA bridge” comparing the FY25 budget and the FY25 3+9 Forecast (Ex J1, 8/5924). That document included a forecast $10 million in cost reductions and a forecast that MPG’s underlying EBITDA for FY25 would be A$71 million but also referred to and quantified a range of risks and opportunities that would increase or decrease that figure (Ex J1, 8/5926).

89. Mr Saraf also refers (Saraf 22.7.25 [82]ff) to the continuance of Cosette’s due diligence from November 2024; the execution of an Exclusivity Deed in late November 2024; and confirmatory due diligence and the FY25 3+9 Forecast also in late November 2024.

90. On 4 November 2024, MPG posted a Q1 FY25 trading update to the VDR, and Mr Bidwell of Santander forwarded it to Mr Saraf, Mr Casten and others (Ex J1, 8/6022). On 4 November 2024, Mr Saraf responded to Mr Bidwell, Mr Casten, Mr Burgstahler and other employees of Avista and Cosette advisers noting that the “underlying EBITDA” was A$7.7 million for Q1 FY25 and A$30.6 million for FY25 although MPG’s budget was approximately A$75 million in FY25. Plainly, this email recognised a potential shortfall of MPG’s earnings to budget. On 5 November 2024, Mr Bidwell responded (Ex J1, 8/6026):

“Yes, that’s correct. The budgeted FY 2025 EBITDA is [approximately $75m AUD] or [approximately] $50m USD. I would note that the FY 2025 budget is heavily back-end weighted with the next three quarters budgeted at $13mn; $12mn and $16mn ([approximately] $40mn US total). Q1 FY 2025 Dermatology was also $5mn lower than budget due to seasonality. We should further diligence and discuss both of these points with management on the forecast call later this week.”

91. Mr Casten then sent an email to Mr Saraf only on 5 November 2025 (Ex J1, 8/6041) which plainly expressed his scepticism as to forecasting generally:

“Of course it is back-half weighted, call me s[c]eptical. Even with that said, we are now $5M USD short on tracking to the $50M EBITDA in F 25 that [Mr Bidwell] noted below.”

92. In his affidavit evidence (Casten 22.7.25 [41]), Mr Casten explained his scepticism as follows:

“My reference to [MPG’s] budget being “back-half weighted” was on the basis that, in my experience, it is not uncommon for target companies to provide forecasts whereby the growth and higher contributions towards underlying EBITDA (and this higher value) are not in the historical actuals from a projected period yet to be achieved. Higher EBITDA figures in the outer period are then used by a target company to support a higher present valuation for the company.”

Both Mr Saraf and Mr Casten were cross-examined as to this matter (Saraf XX, T168; Casten XX, T265-266).

93. On 5 November 2024, Mr Bidwell also sent MPG’s trading update Q1 FY25 to Mr Burgstahler (Ex J1, 8/6029) noting that it included Q1 year-on-year variances and an implied FY2025 forecast “assuming [MPG] meets budget for the next three fiscal quarters.” The reference to “assuming” that matter unsurprisingly recognised that it was not a certainty. On 7 November 2024, MPG provided Cosette with a 5-year forecast. On 12 November 2024, Cosette made a second non-binding indicative offer for MPG, maintaining the price of A$7.00 per share which had been included in the initial non-binding indicative offer (O’Brien 24.8.25 [85]).

94. On 12 November 2024, Mr Bidwell of Santander sent an email (Ex J1, 8/6076) to Mr Ilin-Schneider, Mr Saraf, Mr Casten, Mr Burgstahler and others attaching a document headed “Project Monarch Updated Valuation Materials” prepared by UBS and Santander and dated 11 November 2024 (Ex J1, 8/6078). [Redacted] I will refer to the development of Cosette’s modelling as at the point of its entry into the SID below.

95. It is common ground (CCS [24]–[26]; CCSR [24]) that, on 21 November 2024, MPG published an announcement to the ASX comprising a presentation titled “Mayne Pharma Group Limited – Annual General Meeting” (Ex J1, 8A/6210). That presentation referred to MPG’s transformation between FY22 and FY24 and summarised the then position as follows:

“● Strong net cash position.

● Discontinued and restructuring adjustments reduced to 7.2m (from $33.7m).

● NWC as a % revenue profile has declined markedly.

● Company has generated positive cash flow from operations number 3 of last number 4 quarters (Ex class action settlement).

● Positioned in growing markets with a channel strategy and IP that provides significant protection in revenues.”

96. The next slide referred to FY24 underlying EBITDA in August 2024 as A$22.9 million (Ex J1, 8A/6220). The description of women’s health under the heading “FY 24 operating highlights” recorded:

● Three new US FDA orange-book listed Nextstellis patents expiring 2036.

● Nextstellis achieved break even run rate from December and delivered positive contribution in 2 HFY 24.

● 85% growth in demand cycles for Nextstellis, compared to FY 23.

● 31% growth in demand TRx from licensed portfolio: ANNOVERA, IMVEXXY and BIJUVA”.

97. A further slide was headed “FY 24: strong financial results by delivering on all goals” and again referred to an underlying EBITDA of $22.9 million, increased from negative $95.3 million in FY23. That results presentation also referred to the position for July–October 2024, referring to an underlying EBITDA of $14.7 million and described MPG’s business outlook as follows:

“The Company expects growth in underlying EBITDA and free cash flow in FY25 via revenue growth and costs leverage, with all three segments contributing positive direct contribution. Specifically, [MPG] anticipates:

● Women’s Health growth continuing, Dermatology new product launch contribution, continued growth in MYX channel (disintermediation), international KAPANOL export growth.

● Continued focus on operating expenditures to drive operating leverage and positive underlying free cash flow generation.

● Underlying EBITDA to show a significant improvement on PCP and further growth on the four months to 31 October 2024.”

98. MPG rightly points out (CCSR [24]) that that document also contained a strong disclaimer as to the nature of forward looking statements contained in that document. Mr O’Brien took issue with Mr Saraf’s account of the reason for this update being made in November 2024 (Saraf 22.7.25 [109]; O’Brien 24.8.25 [86]). I would have preferred Mr O’Brien’s account that this release was consistent with MPG’s usual practice had it been necessary to determine this dispute.

99. On 22 November 2024, Cosette decided to increase its offer price to A$7.40 per share (Saraf 22.7.25 [113]).

100. Cosette then retained McKinsey by memorandum dated 23 November 2024 (Ex J1, 8B/6283). McKinsey were instructed to focus diligence on three primary workstreams:

“● Market assessment of prioritised focus areas for [MPG]: overview of market for the key areas where [MPG’s] prioritised portfolio is focused today (ie women’s health and dermatology products that account for a majority of sales).

● Business Unit forecasts: assets forecasts for select products and markets based on factors such as: unmet needs/patient demand, reimbursement, competitive landscape, benchmarks with curves to peak ROI [return on investment].

● Sales for sizing: estimate of sales force to cover [MPG’s] portfolio based on industry benchmarks, portfolio mix, and key core points.”

The engagement letter also contemplated that the project would complete in late December 2024. I will refer below to forecasts made by McKinsey and communicated to Cosette, which were less favourable than Cosette’s forecasts.

101. On 24 November 2024, Cosette entered into an Exclusivity Deed with MPG allowing Cosette exclusivity until 20 December 2024 for a confirmatory due diligence review for a proposed transaction to acquire all the shares in MPG at $7.40 per share (O’Brien 24.8.25 [87]; Saraf 22.7.25 [116]–[117]).

102. It is also common ground (CCS [27]; CCSR [27]) that, on 24 or 25 November 2024, MPG caused the FY25 3+9 Forecast to be uploaded to the VDR. Mr Casten (Casten 22.7.25 [48]) refers to his review of the FY25 3+9 Forecast and MPG’s five year forecast in November 2024.

103. By email dated 28 November 2024 (Ex J1, 8B/6309.60.1), Mr Smolenski, who worked in Cosette’s Business Development team, advised McKinsey that Cosette’s bid had been premised on Cosette’s “Base Case” (described in relevant documents as the “Crown Base Case”) and, after referring to the Seller Case and the Cosette Case, observed that:

“I would focus on the BASE case. Our non-binding bid was premised on the BASE case. The Excel tabs that will probably be most relevant to you are the Product Builds, the US Opex Drivers, and the Synergy Summary (which shows the delta between [MPG’s] assumptions and our assumptions).”

104. Mr Gray also referred (Gray 24.8.25 [220]) to participating in conference calls with Mr Casten and Mr Saraf in December 2024. In one call he spoke about his experience with MPG’s forecasts and said words to the effect that:

“The forecast is based on our historical experience with the products, but it is still a forecast”; “We have experienced significant volatility in the forecast”; “the forecast has improved and is still improving” and “there are some deviations that no model would ever pick up.”

105. Mr Gray’s evidence, which I accept, is that it is his practice to say words to this effect when discussing MPG’s forecasts with a person who is not familiar with them. That practice is plainly sensible and consistent with the commercial probabilities. He also referred (Gray 24.8.25 [220]) to his practice of explaining “the volatility in forecasting by referring to demand fluctuations, doctors’ prescribing habits, deductible resetting, changes to insurance coverage, introduction of competitors and seasonality influences for dermatology products” and that he also referred (Gray 24.8.25 [222]) to returns on Annovera having negatively affected budgeting and forecasting accuracy.

106. Mr Casten accepted in cross-examination (Casten XX, T259–260) that, in discussions in December 2024 concerning MPG’s forecast, Mr Gray made clear that MPG was doing its best with forecasts but they were “just forecasts” and that there were departures in results from its forecasts, and that Mr Gray may also have said that MPG had experienced volatility in the relationship between forecasts and results and that Annovera returns had negatively affected the budgeting and forecasting accuracy, although Mr Casten did not specifically recall those words being said. I accept that Mr Gray made the observations set out in his evidence in these conversations.

107. Mr Gray also referred (Gray 24.8.25 [214]–[215]) to another (and possibly earlier) meeting when Mr Casten asked him:

“What is the real forecast? Give me the real forecast?”

Mr Gray’s evidence is that he responded:

“We have a single forecast, which is created bottom-up”.

Mr Casten does not accept that he asked this question (Casten XX, T55, T256). Mr Gray’s evidence is that he also then explained the manner in which business leaders were involved in creating quarterly forecasts and “own” the forecast for their business units, in explaining the concept of a “bottom-up” forecast.

108. McKinsey provided three successive analyses to Cosette in respect of the proposed transaction on 2 December 2024, 6 December 2024 and 12 December 2024 and Mr Casten reviewed the relevant presentations and the relevant documents (Casten 22.7.25 [50]). On 6 December 2024, McKinsey emailed Mr Saraf, Mr Casten and others materials for a discussion based on MPG’s disintermediation strategy and McKinsey’s preliminary view on its forecasts. McKinsey there provided a general market overview and noted MPG’s “innovative channel/disintermediation strategy” relying on retail pharmacies, independent pharmacies and its own distributing chemist. It provided a detailed overview of developments in the US contraceptive market, noted that Nextstellis was positioned as the “only OCP to contain low-dose, plant-sourced estrogen” using estetrol (E4) and also assessed the position as to Annovera and MPG’s women’s health and dermatology products. McKinsey there set out (Ex J1, 9/6692) forecasts for the relevant products which were, on both downside and upside scenarios, significantly less than Cosette’s forecasts and drew attention to their forecast of “[m]ore moderate commercial uplift vs management” in respect of four product areas. Mr Casten responded (Ex J1, 9/6615) that McKinsey’s comments “goes back to my comments from October [2024] on our modelling VS Sell Side Modelling Assumptions”. Mr Saraf and Mr Casten were both cross-examined as to these forecasts (Saraf XX, T173; Casten XX, T271ff).

109. By email dated 6 December 2024, MPG’s adviser, Jefferies, advised Mr O’Brien and Mr Gray of the views expressed by McKinsey as to the projected forecast for MPG’s key women’s health products, as follows (O’Brien 24.8.25 [89]):

“Shawn, Aaron - Cosette advisers rang to say:

● McKinsey had presented their findings to Cosette on the projected forecasts for [MPG’s] key WH products.

● McKinsey have presented a significant negative deviation to [MPG’s] forecasts for these products, and also materially below Cosette’s own sensitised forecasts.

● The deviation is apparently being driven by ANNOVERA, and NEXTSTELLIS.

● Cosette are concerned by these findings and have encouraged McKinsey to do more work and refine their views further.

● As a result, they are requesting an urgent session between McKinsey and [MPG] to discuss the basis of the product forecasts. …”

That email also referred to a discussion between the advisers as to how that issue would be addressed.

110. Mr O’Brien responded on the same day (O’Brien 24.8.25 [90]) observing that:

“… Assumptions are key to understand.

As I communicated previously to [Cosette] we did not put the business up for sale and create a fictitious SIM with a hockey stick sales and EBITDA curve of hope with Jefferies help. Our long range forecast is based on the impairment forecast assumptions – something we need to have a high level of confidence in delivering as a public company for many reasons.

There are more realistic upsides than downsides to our forecast.”

111. Mr O’Brien’s evidence (O’Brien 24.8.25 [91]) is that his reference to a “fictitious SIM” was to a confidential information memorandum produced by a company to provide to potential acquirers. He also noted that MPG’s forecasts provided to Cosette in the VDR were prepared for MPG’s internal purposes and were not disclosed to the market. That evidence is consistent with common practice, where a company’s internal forecast will ordinarily fall within an exception to continuous disclosure requirements. Mr O’Brien was cross-examined as to this evidence, but it was not undermined by that cross-examination.

112. By email dated 9 December 2024 (Ex J1, 6939; Saraf XX T170–171), Mr Saraf referred to McKinsey’s work and noted his then concern about “the lack of backup from [MPG] on their growth projections other than to cite tail winds and recent pick-up in pace”. A conference call also took place between Cosette and MPG on 10 December 2024, when MPG’s promotional claims about Nextstellis were discussed, and a subsequent internal call took place within Cosette, including Mr Saraf, after that call.

113. On 11 December 2024, Mr Bidwell of Santander sent Mr Burgstaher, Mr Saraf, Mr Casten, Mr Ilind-Schneider and others an email (Ex J1, 9/6967) attaching the “latest valuation materials”, being Santander’s “Project Monarch Updated Valuation Materials” dated 10 December 2024 (Ex J1, 9/6969). That document took a similar format to the earlier Santander valuation materials and again contained a table setting our “key drivers” for changes in its valuation of MPG, now by reference to prior Cosette forecasts and the forecasts for MPG provided by McKinsey, which recorded reductions in the modelled revenues for Nextstellis and Annovera and an increase in modelled revenues for Imvexxy and modest increases in model revenues for Bijuva and Rhofade. The result (Ex J1, 9/6971) indicated a reduction in MPG’s modelled equity value of US$67 million and negative impacts per share of US$0.67 or A$1.00 and a current discounted cash flow mid-point of US$449 million, reflecting a value per share of US$4.96 or A$7.40. This valuation set out forecast assumptions for “sell-side”, Cosette and McKinsey “cases” and a further “updated base case” which indicated a synergised EBITDA for FY25 of US$47 million. The equity value per share on the Cosette base case was between A$7.65 and A$9.40; on McKinsey’s base case between A$6.70 and A$8.25; on McKinsey’s “upside case” between A$7.15 and A$8.60; and on McKinsey’s downside case between A$4.70 and A$5.20 (Ex J1, 8/6977). An annexure included updated revenue forecasts by segment, a key product forecast update and key product volume forecasts. I will address the development of Cosette’s modelling at the point of its entry into the SID below.

114. Also on 18 December 2024, Mr Saraf advised Mr O’Brien (O’Brien 24.8.25 [95]) that the deal was on hold. Mr O’Brien’s evidence is that Mr Saraf said that the financier could not get comfortable with an investigation in the US involving MPG and that, without the financier, Cosette did not have funding to do the deal. The evidence which I note below indicates that this was a partial explanation for Cosette’s then funding difficulties, which also reflected the lender’s then assessment of Cosette’s position.

“I just wanted to follow up on the below as well as if you had a read on where December sales are coming out relative to forecast. Right now, the debt isn’t there to fund the [MPG] transaction – the three primary reasons cited are: (1) LTM EBITDA/net leverage (significant reduction on both sides); (2) Cosette stand alone plan (reliance on [business development/organic trajectory X [business development]; and (3) a [MPG] legal matter.”

Mr Casten responded that he understood the lender’s, Hayfin’s, perspective, which Mr Saraf and he had been discussing for several weeks and noted that updates put “a little more pressure on Cosette” and wondered whether “any overall price renegotiation on the deal value should be able to get us there?” Mr Saraf was cross-examined as to this matter, but was reluctant to accept that, as emerged from this email, Hayfin’s assessment of Cosette’s then forecast earnings contributed to its then position (Saraf XX, T208ff).

116. On 21 December 2024, MPG’s chair and Mr Burgstahler had a discussion (O’Brien 24.8.25 [101]) which covered some of the matters that had been discussed between Mr O’Brien and Mr Saraf on 18 December and indicated Cosette’s continued interest in a transaction, reflecting “strategic synergies for putting the two companies together”.

117. Communications between the parties concerning due diligence recommenced in early January 2025.

118. On 14 January 2025, Mr Gray sent an email (Ex J1, 11A/8667.2) to members of MPG’s board referring to work which had been done as to MPG’s long range forecast models for some weeks in preparation for its mid-year review, impairment testing and capitalised earn-out valuation. That email also attached a document that described the method used to arrive at unit forecasts for women’s health and dermatology; the different models adopted; major assumptions made; and the major risks and opportunities

119. In late January 2025, Mr Casten and PwC reviewed MPG’s December CFO Report (Casten 22.7.25 [51]–[52]).

120. On 27 January 2025, Mr Gray attended (Gray 24.8.25 [146]ff; Gray XX, T439) a management review of MPG’s gross margin and was provided information as to preliminary gross margin forecasts for MPG’s dermatology and women’s health businesses. Mr Gray’s evidence is that Ms Claire Hying, who is MPG’s director, Financial Planning & Analysis and reports to Mr Gray, there observed that actual unit volumes for January 2025 would be available before the FY25 6+6 Forecast was finalised and suggested using the January actuals in the forecast and adjusting the “out-periods” after January 2025 so the full fiscal year forecast would not be affected by that approach. Mr Gray noted (Gray 24.8.25 [148], [151], [158]; Gray XX, T501ff) that MPG’s forecasts were based on continuing “trends” and that, while “one month may be above or below”, nothing suggested that the “slope of the line” had changed and he did not want to suggest to the board that any deviation in January 2025 indicated a difference in the total fiscal year. Mr Gray subsequently consulted with the business leaders of women’s health and dermatology who did not object to that approach.

121. Mr Gray was cross-examined, at length, as to the basis of that approach, and (Gray XX, T472ff) as to the process by which, at 27 January 2025, an extra week was added to the forecast for Nextstellis for June 2025 to reflect an anticipated catch up in sales over that period. Mr Gray was also cross-examined (Gray XX, T475ff) as to the discussion about January unit volumes at the meeting on 27 January and referred to the testing of the forecast against the statistical model with the commercial leadership of the business, which was referred to in MPG as “grounding” the forecast. Importantly, Mr Gray pointed out (Gray XX, T476) that a statistical model seeks a fit across multiple data points over a period and seeks to achieve accuracy over the entire period, rather than for a given data point; I understand that evidence to indicate that that model seeks to achieve an accurate forecast of sales over the relevant six month period, rather than for each month in that period, although it is structured in a manner that projects sales for each month in that period. That evidence supports the approach taken by MPG, and challenged by the Cosette Parties, in maintaining the total forecast for 2H FY25, although sales in one month in the forecast period in January 2025 had fallen short of the forecast. In opening, the Cosette Parties treated that approach as having concealed a decline in MPG’s January 2025 EBITDA from Cosette. That characterisation is inconsistent with the fact that MPG had disclosed that decline in by the “Cash flow by month F25” (Ex M4) placed in the VDR, albeit only shortly before the SID was executed, to which Cosette’s advisers and Avista took access and which MPG could reasonably assume that Cosette would review and understand.

“Based on the estimate, both Derm and W[omen’s] H[ealth] will be short of the current f[ore]c[a]sted units. Derm[atology] is short (9,335) units… This would result in Gross Sales being short of the 6+6 f[ore]c[a]st for January by ($6.3M). W[omen’s] H[ealth] is short (11,360) units… This would result in Gross Sales being short of the 6+6 f[ore]c[a]st for January by ($7.6M) “

124. On 30 January 2025, Mr Hying advised Mr Gray (Ex J1, 10A/7573; Gray XX, T486) that:

“I wanted to provide an update on where we currently stand with the 6+6.

When we reviewed on Tuesday, US EBITDA was $49.8m a reduction of $0.9m vs the 3+9. We are currently rolling up to $48.8m, a reduction of $1.9m vs the 3+9.”

Ms Hying there noted several components of that reduction and recognised that the reduction of $0.6 million in women’s health was due to the fact that “we had missed updating the January Annovera unit forecast count for the high inventory in December and would be discussing whether there was an opportunity to claw back those units across 2H”. She also identified several remaining open items and observed that, consistently with the approach she had proposed on 28 January:

“We’re also continuing to look at January units as they come in, so we’re closely aligned with actuals. This has no P&L impact though as any January adjustments are being moved to later in the half to offset.”

She added, in an observation emphasised by the Cosette Parties, that:

“Given we’re moving in the wrong direction here, are there any other areas within OPEX we need to look at closely? …”

125. Mr Gray was cross-examined as to this email and his evidence is that the reference to the “wrong direction” in that email reflected the fact that employees had an incentive target, set by reference to the FY25 3+9 Forecast, although incentives would be adjusted throughout the year based on expected performance and were ultimately reduced to zero in determining MPG’s FY25 result (T570). The Cosette Parties seek to give this email a sinister, and indeed conspiratorial, reading which seems to me to be unjustified. That sinister reading turns on the premise that it was not legitimate, if a shortfall in deliveries occurred in January 2025, to investigate whether that shortfall would be caught up in total deliveries in February-July 2025 and adjust forecast deliveries for that month if that was thought likely. There was not sufficient evidentiary basis for that premise.

126. Also on 4 February 2025, Ms Hying, Mr Mateer and Mr Goyani exchanged text messages (Ex J1, 10A/7602) concerning the preparation of the FY25 6+6 Forecast and Ms Hying observed that:

“i think we need to update the 6+6 to match what we’re seeing come through actuals for Jan because it’s really far off … Jaydeep [Goyani] – are you able to make that adjustment – to match January 6+6 to trade units and push the difference out so that GM remains unchanged on the half?”

127. On 31 January 2025, Mr Gray attended (Gray 24.8.25 [156]ff; Gray XX, T498ff) a final management review, at which the group US profit and loss forecast spreadsheets for the FY25 6+6 Forecast were confirmed and then instructed Ms Hying to “lock” the US FY25 6+6 Forecast, which she confirmed had been done on 1 February 2025, although the forecast was later re-opened and adjusted in early February to address an issue as to cost of goods sold for a product that does not otherwise appear to be in issue in the proceedings. Mr O’Brien and Ms Hying also exchanged emails concerning MPG’s “half on half” financial performance, compared to actual performance over successive half year periods, in late January 2025 (O’Brien 24.8.25 [120]ff).

128. By 4 February 2025, Cosette had reaffirmed an indicative offer price for MPG of A$7.40 per share, subject to completion of a limited number of confirmatory due diligence items (O’Brien 24.8.25 [124]). On 5 February 2025, Cosette’s lender, Hayfin, provided Cosette with an executed debt commitment letter committing to provide US$300 million for the purposes of funding part of the scheme consideration for Cosette’s acquisition of MPG.

129. On 12 February 2025, Ms Hying provided a link to Mr O’Brien to MPG’s US January 2025 financial results (O’Brien 24.8.25 [129]) under cover of an email which observed that:

“Group underlying EBITDA is A$5.1m this month which is A$0.8m behind forecast for January. Of this unfavourability, A$1.4m is from gross margin misses – mainly driven by the co-pay pipeline methodology within Dermatology. It is expected to correct itself across the half. OPEX is A$0.6m favourable this month, mostly within US Corporate from 401K forfeitures and IT savings.”

130. Mr O’Brien’s evidence (O’Brien 24.8.25 [130]; see also O’Brien XX, T322), which I accept, is that:

“I was not concerned by the January results for a few reasons. First, it was a small miss of A$800,000 where January was already forecast to generate a negative EBITDA. This is consistent with performance in January for [MPG] generally given the time of year and seasonality. As indicated by Ms Hying, I was also confident that we would be able to correct the miss across the rest of the half-year such that this miss would have negligible, if any net effect.”

131. Mr O’Brien also addressed (O’Brien 24.8.25 [131]ff) the preparation of the FY25 6+6 Forecast (Ex J1, 10A/7807).

132. Mr Gray outlined (Gray 24.8.25 [140]ff) the steps that were taken, commencing at the end of October 2024, to prepare the FY25 6+6 Forecast and the circumstances in which an adjustment was made, in preparing that forecast, to reflect a decline in actual sales in January 2025 in that forecast and to increase the estimates for the remaining sales in February-June 2025, so as to preserve the existing total forecast. Mr Gray also explained, at length, the work done by members of his team in preparation for the FY25 6+6 Forecast and his work on that forecast between 12 and 14 February 2025, including writing the executive summary for that forecast. His evidence (Gray 24.8.25 [172]–[174]) was that he first received an email containing the January monthly financial results of MPG on 13 February 2025; he finished preparing the FY25 6+6 Forecast on 14 February 2025; that forecast was included in board papers circulated to the board of MPG on 22 February 2025; and Mr O’Brien and Mr Gray presented that forecast to MPG’s board on 25 February 2025. Mr Gray also referred (Gray 24.8.25 [175]) to the comparison between the FY25 3+9 Forecast and FY25 6+6 Forecast, included in a section headed “EBITDA Bridge FY25 3+9 to 6+6 Forecast in AUD” in that board paper. Mr Gray also addressed (Gray 24.8.25 [177]ff) subsequent developments, including the identification of an error in the treatment of inventory and the co-pay pipeline in respect of a dermatology product, Doryx (“Doryx Co-Pay Adjustment”) and subsequent developments in respect of MPG’s financial results through to July and August 2025.

133. Mr Gray was cross-examined at length as to the proposition that the decline in MPG’s sales in January 2025 undermined the forecast for the remaining five months in H2 FY25 in the FY25 6+6 Forecast. Mr Gray did not accept that proposition where his evidence was that the process that had been adopted for that forecast was robust; the forecast then appeared to be supported by the apparent product demand, so that it appeared that unmet demand from January 2025 would be reflected in increased sales for the balance of the period; the slope of the line used by MPG’s models in forecasting demand had not changed, at least in January 2025; and issues as to the underlying demand, arising from changes made to MPG’s sales teams, only subsequently emerged. I accept Mr Gray’s evidence as to these matters, having regard to the documentary evidence and his cross-examination as a whole.

134. On 13 February 2025, Ms Hying advised Mr O’Brien, Mr Gray and others (Ex J1, 10A/7670) that:

“Group underlying EBITDA is A$5.1m this month which is A$0.8m behind forecast for January [2025]. Of this unfavourability, A[$1.4m] is from gross margin misses – mainly driven by the co-pay pipeline methodology within dermatology. It is expected to correct itself across the half. OPEX is $0.6 favourable this month, mostly within US corporate, from 401K forfeitures and IT savings.”

135. There was considerable emphasis, in the Cosette Parties’ case, on the negative EBITDA for MPG of A$5.1 million for January 2025, but less focus on recognising that that negative figure was a lesser decline of $800,000 against the previous forecast and, second, that information concerning that negative EBITDA was provided to Cosette by the “Cash flow by month F25” (Ex M4) placed in the VDR, albeit shortly before the SID was executed, and accessed by Cosette’s advisers and Avista’s employees.

136. On 14 February 2025, Jefferies advised MPG that:

“On the 6+6 [forecast], I had guided to them [Cosette] that this is a work in progress inside the company and that it would likely need to go to the Board, to be discussed and reviewed, prior to being provided externally, and that it was unlikely that that process would be fully completed prior to the signing of the [MPG] transaction. As a result it might be better to have a call with management on the outlook for the rest of the year rather than rushing a document to them that has not gone through the normal processes.”

137. Later on 14 February 2025, Jefferies advised MPG that:

“[Cosette] would like a call on the 6+6. Given the forecast is not finalised and hasn’t been approved by the Board etc I suggested a call with [Mr O’Brien] and [Mr Gray] to talk about the current trading and outlook through balance of this year. Please let us know any times that work on Monday morning US time for that call.”

138. On 15 February 2025, Mr Gray advised Jefferies (Ex J1, 10A/7721) that the FY25 6+6 Forecast was final and that an attached paper would be distributed to the Board. He observed that “I do not call this board-approved however it is completed bottom-up”.

139. On 17 February 2025, Ms Amberiadis, a Vice President of Avista, emailed Mr Casten and others (Ex C12, Tab 45; Ex J1, 10A/7727.11.2) identifying “a few questions for our team” in advance of a proposed virtual meeting with MPG to discuss MPG’s FY25 6+6 Forecast as follows:

“1. Please provide an overview of segment level revenue and EBITDA performance, including driers of differences to the 3+9.

2. Please provide underlying EBITDA and cash EBITDA results and projections, in a format comparable to what was provided in the cash flow datapack.

3. Will the tax refund that was intended to be received in Q2 still be paid?

4. What are the estimated cash balances at 3/31 and 6/30 in AUD and USD?

5. To the extent that estimated cash balances had moved since the 3+9, please discuss the key drivers (changes in cash EBITDA, new cash items, payments deferred etc).

(a) Please discuss changes in working capital vs the prior forecast, and how this impacts high-level guidance for future years as well.

(b) Please discuss any new items impacting cash flow that were not known at the time the 3+9 was put together.

(c) If applicable, what is the rationale behind the deferral of payments vs the 3+9, and are there any key payments in the 6+6 that could be deferred as well?”

140. By email dated 17 February 2025 (Ex C12, Tab 45; Ex J1, 7727.11.1), in preparation for the virtual meeting, Mr Casten then advised Mr Moran and others at Avista, an employee of Cosette and several representatives of PwC that:

“Without any data it’s difficult to lead the call. I am anticipating that Aaron [Gray] will lead the call and review his initial 6+6 LE. We should be able to pose questions, similar to the prior financial review back in the fall. Accordingly, were you thinking something different. If David [Burgstahler] or Apurva [Saraf] have specific inquiries, they will definitely have an opportunity to pose questions, as well as our BD team responsible for the [MPG] modelling.”

141. Mr Moran responded:

“Understood. Based on our experience so far, I don’t expect Aaron [Gray] to present to us for an hour. May be he gives a high level overview for 5 or 10 minutes but I expect them to get on the call and ask what do you want to know. I see it as broad buckets with a bunch of detailed questions that I would rely on the Cosette and PwC team to fill in (i) has the revenue forecast changed and drivers thereof, (ii) has the EBITDA forecast changed and drivers thereof, (iii) has the cash forecast changed and drivers thereof, (iv) anything we want to know to triangulate our EBITDA adjustments. I don’t think we will get the opportunity to see any FUs so anything we want to know should be asked on this call.”

142. Ms Amberiadis’ and Mr Moran’s focus on MPG’s cash forecast as one of the issues for inquiry is inconsistent with the position taken by Mr Burgstahler in cross-examination (T226) that he did not recall screenshots in relation to the cash position being shown to him, because he was focused on the EBITDA and further that:

“I told you I didn’t focus on the cash, I already said that.”

I accept that it is, perhaps, possible that matters as to the cash forecast of MPG were only of significance to Avista’s employees working on the transaction and not to Mr Burgstahler.

143. By email dated 18 February 2025, (Ex C12, Tab 51; Ex J1, 10A/7836.0.9), Ms Amberiadis advised representatives of PwC that:

“We are looking for the detail behind the QoE adjustments (line by line) that are included in the “Other QoE Adjustments” line of the attached, for the periods beyond September 2024. Understand that the QoE workbook and report only shows this schedule through the September period, but we are looking to understand the LTM 3/31/25 Adjustments so we can apply the correct adjustments to the 6+6. …

We are hoping to get an answer on this tonight, so we can adjust the multiples in our internal communications accordingly (which will be based on the 6+6).”

It is not apparent what subsequently occurred in respect of this analysis.

144. On 17 February 2025, the FY25 6+6 Forecast was discussed at a virtual meeting attended by many representatives of Cosette and Avista and their advisers. A note made by an employee of Jefferies of the discussion concerning the FY25 6+6 Forecast at that virtual meeting recorded that Mr Gray there screen shared that forecast, although Mr Gray’s evidence is that he did not have a recollection of doing so. That note recorded a discussion of slide 8, referable to the OPEX bridge, and slide 12, relating to women’s health, as follows:

“● Net sales are flat, OPEX is slightly down v the 3+9.

● Slightly up on EBITDA contribution and women’s health. …

● Second half margin is lower than first half margin. Is there compression?

● OPEX increase from S&M expense to build materials for Bijuva and Annovera.

● Expected to recover in 26 …

H2 25 forecast: minimal changes in the units from the prior projections to the back half of the year?

● Yes.”

There was also discussion of the position as to the dermatology profit and loss.

145. In opening, Ms Collins draws particular attention to the exchange as to minimal changes in the units sold from the prior projections to the back half of the year. She submits, plausibly, that the “prior projections” referred to were likely the FY25 3+9 Forecast. She then submits that:

“There is no suggestion in the evidence that [MPG] qualified the FY25 6+6 Forecast by disclosing to Cosette that there had been a material miss in January, or that the FY25 6+6 Forecast reflected a deliberate decision to move missing units to later months so as not to meaningfully reduce the forecast EBITDA. The issue is not simply about the future; it is about what had already occurred. The trajectory of the [MPG] business for H2 FY25 had already changed negatively. But [MPG] did not reveal that to Cosette.” [emphasis added]

146. This is a significant aspect of Cosette’s case and it is plainly not correct. MPG had disclosed, by the “Cash flow by month F25” (Ex M4) placed in the VDR and accessed by Cosette’s advisers and Avista’s employees, the fact of that decline in EBITDA in January 2025, although it appears that Mr Saraf and Mr Casten of Cosette and Mr Burgstahler of Avista did not become aware of that information. The proposition that the FY25 6+6 Forecast reflected a decision to move missing units to later months is correct, but there is not sufficient evidentiary basis for a finding that that decision was not then reasonably made. The additional proposition that any adverse change in the “trajectory” of the business, arising from the decline in EBITDA in January, does not recognise either that the decline was not material, by reference to a previously forecast negative EBITDA for January, or the fact that that information was, in any event, disclosed by the “Cash flow by month F25” in the VDR (Ex M4).

147. Returning now to the evidence as to the 17 February virtual meeting, Mr O’Brien attended that meeting and gives evidence (O’Brien 24.8.25 [134]) of that meeting. He takes issue with aspects of Mr Casten’s evidence of that meeting, which I address below, but it is not necessary to resolve the differences to determine the proceedings. Mr Gray also addressed the discussion at the 17 February 2025 virtual meeting (Gray 24.8.25 [226]ff), and he accepts (in a good example of his willingness to make concessions that might have been appeared to be against MPG’s interests) that he then said he saw “no reason why we would not achieve the [A$]69.8” figure contained in that forecast (Gray 24.8.25 [228]), but denies that he said that was confident that MPG would meet that forecast, having regard to the volatility in MPG’s business. His evidence of that discussion is consistent with the probabilities and I accept it. I also bear in mind his cross-examination as to that meeting.

148. Mr Gray’s evidence in cross-examination (Gray XX, T573) was also that, as at 15 February 2025, he understood that the board should approve the FY25 6+6 Forecast before it was communicated to Cosette, although MPG’s chair ultimately approved the provision of that forecast to Cosette. Mr Gray was cross-examined (Gray XX, T574ff) as to his lack of recollection, in his affidavit, of sharing his screen represent the FY25 6+6 Forecast at the 17 February meeting and was taken to the notes of that meeting which recorded that forecast being discussed at that meeting. Mr Gray denied that, when he said at that meeting that he saw no reason why MPG would not achieve the $69.8 million forecast, he was aware of reasons that forecast might not be achieved, including the fact that the EBITDA result for January 2015 was negative $5.1 million, although he fairly accepted that, as at that time, that negative EBITDA of $5.1 million was “significantly” less than what had been forecast for the EBITDA for that month in the FY25 3+9 Forecast. I understand his evidence as to that matter to accept that the reduction of $800,000 of actual against forecast in that month is significant in that month, but to maintain the position, which I also accept, that the reduction in that month was not significant for the six months of the FY25 6+6 Forecast, where he then had reasonable grounds to think the shortfall in sales would be recovered. Mr Gray also denied (Gray XX, T582) that, contrary to what was said at that meeting, there was a significant change in units between earlier projections for H2 FY25 and MPG’s current projections and pointed out that:

“January was a two and a half percent miss in total units. On a year-to-date basis, the company was running ahead of the half and so I would not see the change was made to the second half as material.”

149. I also accept Mr Gray’s evidence as to that matter. I recognise that, obviously enough, Mr Gray’s comments at that meeting did not disclose the shortfall in sales in January 2025, putting aside the fact that the decline in January EBITDA was in fact been disclosed to Cosette disclosed by the “Cash flow by month F25” in the VDR (Ex M4), although it appears that only Cosette’s advisers and Avista reviewed that document. However, the proposition that it was false to express that view again depends on the unproved premise that it was not then reasonable for MPG to form the view that demand that had not been met in January would be reflected in a catch up of sales in the balance of 2H FY25.

150. Mr Saraf also addressed (Saraf 22.7.25 [144]ff) the discussion of the FY25 6+6 Forecast at that virtual meeting in his affidavit evidence.

151. Mr Casten (Casten 22.7.25 [46]) also refers to conversations with Mr Gray of MPG including at the virtual meeting, and his evidence is that Mr Gray then repeated his statements about MPG’s financial reporting capabilities. Mr Casten also refers (Casten 22.7.25 [53]ff) to the discussion of MPG’s FY25 6+6 Forecast at that meeting. Mr Casten’s evidence is that, as is common ground, that forecast was (at least partly) presented on screen at that meeting and his recollection is there was a focus on presenting the Executive Summary (page 3), the results for the women’s health and dermatology portfolios (page 4) and the EBITDA “bridge” (page 6). Mr Casten’s evidence is that he asked MPG to explain why the underlying EBITDA for FY25 in the FY25 6+6 Forecast was lower than in the FY25 3+9 Forecast; that Mr Gray stepped through the differences (or bridge) between the two forecasts; and Mr Casten considered Mr Gray’s answers to have been reasonable. Mr Casten also addressed (Casten 22.7.25 [56]) his review of the FY25 6+6 Forecast as uploaded to the VDR on 17 February 2025 and also referred (Casten 22.7.25 [58]) to his having asked a question during the 17 February virtual meeting as to when MPG’s financials for the month of January 2025 would be available.

152. Mr Saraf and Mr Casten were both cross-examined as to this meeting (Saraf XX, T187ff; Casten XX, T276ff). There is a dispute as to whether Mr Saraf or Mr Casten asked for any update as to MPG’s January performance at the virtual meeting on 17 February 2025 at which the FY25 6+6 Forecast was discussed and witnesses were also cross-examined as to that matter. Little turns on this dispute, where the Cossette parties were provided with information as to MPG’s January EBITDA by the “Cash flow by month F25” in the VDR (Ex M4), although Cosette’s advisers and Avista’s employees who reviewed that information did not give evidence and, it appears, did not raise any concern as to that information with Mr Saraf, Mr Casten or Mr Burgstahler.

153. Mr Burgstahler’s evidence in his first affidavit (Burgstahler 21.7.25 [26(e)]) was that he did not recall attending the virtual meeting with representatives of MPG and Cosette to discuss the FY25 6+6 Forecast on 17 February 2025. He reversed that evidence in his second affidavit dated 21 February 2025. He there refers to having been shown an email chain produced by Avista, on subpoena, and his evidence is that he now recalls attending that meeting on a public holiday in the United States. Notwithstanding his previous lack of recollection whether he attended that meeting, he gives evidence in his second affidavit of viewing particular slides of the FY25 6+6 Forecast when it was placed on screen by Mr Gray at the conference and of Mr Gray pointing to the contents of those slides.

“So based on the 6+6, 69.8 x .63 would be $44mm USD EBITDA for the 6/30/25 YE. So we are paying 10X forward actual and 7x PF for $20m of synergies?”

Ms Amberiadis promptly responded confirming that calculation.

155. Mr Burgstahler’s evidence is that his reference to 69.8 was a reference to the underlying EBITDA forecast in the FY25 6+6 Forecast and his reference to “10X forward actual” was a reference to the multiple of total enterprise value assuming an A$7.40 share price to the forecast EBITDA in the FY25 6+6 Forecast. It does not follow from that reference that Mr Burgstahler misunderstood a forecast of future earnings as a fact, and his obvious sophistication had the consequence that it would not have been necessary for him to read the description of forecasting methodology in that document, or the identification of risks and opportunities and the extent to which they could affect actual future results in that document, to recognise the inherent uncertainty in such a forecast. Mr Burgstahler then refers to having received an email from Mr Bidwell of Santander which attached the FY25 6+6 Forecast and to having reviewed that document after he received it.

156. Mr Burgstahler’s change of position as to his recollection of the 17 February 2025 meeting was the subject of vigorous cross-examination. Mr Burgstahler’s evidence on cross-examination was that he did not recall whether he had accessed the VDR, although he may have done so, but it would not be normal for him to do so (T220). He maintained in cross-examination that he now had an actual recollection of attending the virtual meeting on 17 February 2025 (T220) although he had not recalled whether he did so when he provided his first affidavit. His evidence (T221) was that, notwithstanding that he had not previously recalled whether he had attended that meeting, it was a “very” important meeting to him, which he had forgotten because it was “confirmatory and it was positive”. That proposition resulted in the following exchange between Mr Burgstahler and Counsel:

“Q. Now let me just understand that. You say it was a very important meeting which confirmed – it was confirmatory, so you forgot it?

A. Correct.”

Counsel put to Mr Burgstahler that that proposition was “silly”. There is force in that proposition but Mr Burgstahler disagreed with that proposition (T221.

157. Mr Burgstahler’s evidence in cross-examination was that he did not recall whether he had been shown any notes of the meeting in preparing his second affidavit (T223), although he had sworn his second affidavit only two days before he was cross-examined and he then shifted that evidence to deny that he had been shown any document recording what occurred at that virtual meeting (T225). Mr Burgstahler referred in cross-examination to the significance of MPG’s EBITDA position in January 2025 (T226) and then volunteered that, at the 17 February virtual meeting:

“…I focussed on the EBITDA projection, are they on track. They just told the public markets on February 10th the second-half was going to grow. This was the confirmatory meeting on the 6+6 [forecast] telling us that it was going to be up 7 million for the half – over the first-half.”

Mr Burgstahler plainly there overstated the status of a forecast, which he is much too sophisticated to have mistaken for a certainty.

158. Mr Burgstahler’s evidence in cross-examination was also that he did not have regard to information concerning MPG’s group cashflow statement which he accepted was projected on the screen at the 17 February virtual meeting (T228–229) because he was “focused on the EBITDA 6+6 forecast” and he went so far as to assert that he looked at the $68.9 million EBITDA forecast and nothing else at that conference. I am not persuaded by that evidence. Mr Burgstahler’s evidence was also that he also told Mr Ellison, an employee of Avista, that he was “really interested” in MPG’s EBITDA on “many” occasions over the six months before the SID was executed (T229–230); but he did not recall whether Mr Ellison had told him in January 2025 that MPG had suffered a $5.1 million EBITDA loss in January 2025, implicitly after obtaining access to that information by the “Cash flow by month F25” (Ex M4) in the VDR. Again, I do not accept that evidence; it is inconceivable that, given the focus that Mr Burgstahler (and Cosette) put on the question of MPG’s EBITDA for January 2025, he would not remember if he had been told adverse information as to that matter. For completeness, Mr Burgstahler’s evidence was also that he did not recall having been provided with information as to the EBITDA for MPG in January or February 2025 (T231).

159. In closing submissions, Cosette submits that there is nothing surprising in Mr Burgstahler having forgotten the 17 February 2025 meeting, when the email evidencing his attendance at that meeting was only produced by his own company, Avista, after the service of his first affidavit. That submission does not address the inconsistency between the importance that Mr Burgstahler now attributes to that meeting and his lack of recollection of it, or the implausibility of his claimed focus on only one matter at that meeting. I am unable to give any significant weight to Mr Burgstahler’s evidence as to the 17 February 2025 virtual meeting. It sems to me inconceivable that a senior executive of Avista, with substantial financial expertise, would make the effort to attend a meeting on a US public holiday, where MPG disclosed its FY25 6+6 Forecast to which Cosette had been requesting access, and then pay no attention to any aspect of that meeting other than to a single figure in the EBITDA forecast, despite the obvious uncertainties of forecasting and would then forget whether he had done so before later recalling matters of detail in respect of that meeting.

160. After the virtual meeting on 17 February 2025, Ms Amberiadis of Avista sent an email to Mr Moran and Mr Ellison of Avista (Ex J1, 10A/7735.1) referring to that meeting and setting out very detailed notes of that meeting. Those notes apparently include screenshots of the screens shared by Mr Gray in the course of the meeting, including the list of risk and opportunities disclosed in the FY25 6+6 Forecast; the forecast EBITDA figures for women’s health, dermatology, MPG’s international business and other items; a reference to MPG’s forecast EBITDA of $69.8 million for FY25; forecast group operating expenditure; and a comparison between the FY25 3+9 and FY25 6+6 Forecasts for women’s health, dermatology and international, all at a level of detail, after which Ms Amberiadis noted that:

“Second half margin is a lot lower than the first half margin.

● Sales and marketing expense – building material for BIJUVA and ANNOVERA programs.

● Have the co-pay reset where you have lower margins in the second half with deductibles being reset, this is a seasonal phenomenon”.

161. That email also set out MPG’s actual cash flow for January 2025 and a cash flow estimate for the following months. Mr Casten properly accepted in cross-examination that the availability of a cash flow statement for January 2025 indicated that EBITDA may also be available for January 2025; but it is not necessary to speculate as to that matter, where MPG then placed the EBITDA calculation for January 2025 in the VDR as part of the “Cash flow by Month F 25 6+6 v Final” (Ex M4). On 18 February 2025, MPG caused the FY25 6+6 Forecast to be uploaded to the VDR. Cosette contends (CCS [36]–[39]) that that forecast projected underlying EBITDA for FY25 of A$69.8 million. That claim oversimplifies that document, which recorded, inter alia (CCSR [38]) that “overall risks exceed opportunities at present”, quantified risks in a significantly higher figure than opportunities. The FY25 6+6 Forecast also included, in Appendix E, that a breakdown of the FY25 forecast by quarter (Q1 and Q2 being actual results and Q3 and Q4 being forecast results) and forecast, for Q3 FY25, Total Gross Sales of $316.9 million; Total Net Sales of $104.9 million; Total Gross Margin of $67.0 million; and Underlying EBITDA of $8.2 million (CCS [39]; CCSR [39]).

162. Ms Collins submits, in opening, that:

“The FY25 6+6 Forecast said that forecasted underlying EBITDA for FY25 was A$69.8m and contained a comparison to the FY25 3+9 Forecast, which showed that the forecast EBITDA was A$1.4m lower than forecast in the FY25 3+9 Forecast. That comparison included commentary to the effect that there had been some misses in respect of the volumes sold of certain products. The FY25 6+6 Forecast paper also identified “key risks and opportunities”. None of the risks identified were to the effect that there was a risk that the volumes forecast would not be met. The FY25 6+6 Forecast paper did not identify that actual performance in January 2025 had been well behind forecasts for a number of key products and that the forecast was based on forecast for the months of February to June 2025 being increased substantially above the initial modelling so that the total fiscal year would not be materially different from the previous forecast. In context, the FY25 6+6 Forecast paper conveyed that [MPG] expected its underlying EBITDA for FY25 would be A$69.8m. Cosette will establish that this was misleading, including because [MPG] did not have a reasonable basis for that forecast. In short, this is for the following reasons.

First, [MPG] had underperformed its expectations for volumes shipped of key products in January 2025 by substantial amounts. This was reflected in the Women’s Health and Dermatology business units collectively underperforming the FY25 Budget for EBITDA by approximately A$9.5m in January 2025. Instead of reflecting this underperformance in a reduced forecast, [MPG] increased the forecast volumes for those products for the balance of FY25 to more than offset the missing volumes.

Secondly, the evidence will not disclose a reasonable basis for thinking that the performance for the balance of FY25 would be such that the underperformance in January 2025 would be recouped over the balance of FY25 as the forecast suggested.”

163. This is a significant aspect of MPG’s case, and it is also not correct for reasons that I address below. This proposition seeks to isolate one aspect of the information conveyed in the FY25 6+6 Forecast from the document as a whole, including its disclosure of risks and opportunities, and from the discussions which I have found took place between Mr Gray and Mr Casten as to the unsurprising fact that the forecasting process undertaken by MPG involved complexities, uncertainties and an inevitable risk that future reality would not correspond to the result forecast at a point in time.

164. In closing submissions, Cosette also addressed the FY25 6+6 Forecast at length, commencing with the question:

“By the time of the 9+3 Forecast, barely 2 months after the 6+6 Forecast was provided to Cosette and the SID was entered into, [MPG] had revised its FY 25 EBITDA forecast down by over 35%, to approximately A$45 million. A revision of that magnitude, in such a short period, begs the question – how did [MPG] get it so wrong in preparing its 6+6 Forecast?”

165. Plainly, that is a legitimate question. However, I must bear in mind that, here, I must address more specific questions, namely, whether Cosette has established its contractual right to terminate the SID by reason of a decline in MPG’s Maintainable EBITDA that meets the specified quantitative threshold and whether the pleaded FY25 EBITDA Representation was made by the FY25 6+6 Forecast, and, if it was made, whether there were reasonable grounds for it at the time that it was made, rather than whether it was falsified by subsequent events. I also bear in mind, although it is likely not relevant to addressing those questions, that Mr Gray’s evidence has identified the likely, but not certain, answer to that question, developed after excluding alternative hypotheses, which relates to changes made in MPG’s sales team at that time.

166. Cosette also submits that MPG:

“has not led any satisfactory evidence as to the preparation of the 6+6 Forecast. The evidence does not provide the Court with a basis to be satisfied that [MPG] undertook an appropriate and methodical approach to its preparation.”

I do not accept these propositions, having regard to Mr Gray’s evidence and the very detailed testing of that evidence on cross-examination. In any event, that question does not arise in that form, where I find below that the representation and warranty as to Due Diligence Materials (as defined) was directed to those documents collectively and not to the FY25 6+6 Forecast as an individual document. Plainly, here, the FY25 6+6 Forecast was a significant document, but it was one document that was included in the VDR and in the Due Diligence Materials as part of a very detailed disclosure of MPG’s financial position and prospects. That disclosure comprised multiple documents before and after the FY25 6+6 Forecast which addressed MPG’s sales, financial position and prospects. The question whether MPG has a reasonable basis for the pleased FY25 EBITDA Representation arising from the FY25 6+6 Forecast also does not arise, where I find below that that representation was plainly not made. Cosette’s submissions as to the FY25 6+6 Forecast continued with detailed criticisms of Mr Gray’s evidence and of the approach that he adopted in the FY25 6+6 Forecast. I have had regard to all of these criticisms, as put to Mr Gray in cross-examination and in Cosette’s closing submissions, to the extent that it is necessary to do so to resolve the matters in issue.

167. In closing submissions, Cosette also submitted that Mr Gray’s evidence as to how the FY 6+6 Forecast was prepared was unsatisfactory and that having regard to that evidence, the documentary record, Mr Meyers’ evidence, and inferences that may more safely be drawn as a result of MPG’s decision not to call others involved in the preparation of the forecast, there were no reasonable grounds for the EBITDA forecast in the FY25 6+6 Forecast. As I have noted above, Cosette’s cross-claim was pleaded in more specific terms. Even if this general claim were open, I would not accept that submission, given the views I have formed as to the logic of Mr Gray’s evidence, following its comprehensive testing in cross-examination; the forecasting process which is established by that evidence; and the fact that little weight can be given to Mr Meyers’ evidence for the reasons noted above.

168. Returning now to the chronology of events, Cosette accepts in closing submission that on 18 February 2025 (US time) MPG placed a document headed “Cash flow by month F25” (Ex M4) in the VDR and Mr Casten was sent an email notification of the lodgement of that and other documents on the VDR (Ex M6). That may or may not have been before a Cosette board meeting which also occurred on that day and was the occasion that Cosette’s board decided to execute the SID but plainly that lodgement occurred before Cosette’s execution of the SID on 20 February 2025. There is evidence (Ex M3, Tab C) that Cosette’s advisers and employees of Avista reviewed this document, although there is no evidence that any employee of Cosette did so. That document disclosed, admittedly in a line item in a larger financial spreadsheet, MPG’s EBITDA of negative $5.112 million for January 2025.

169. Mr Saraf initially denied in cross-examination that he was told of that matter and then said that he has no recollection of anyone telling him of that matter (Saraf XX, T193-194). He accepted in cross-examination (Saraf XX, T196-197) that he would have expected members of Cosette’s deal team and its advisers to have accessed that document, to have read it carefully and to have brought to his attention anything that was material to Cosette’s and Avista’s consideration of the proposed transaction and that he does not recall anyone having brought that document to his attention (Saraf XX, T197). He also accepted that a failure to identify the matters in that document would be a “miss” in the Cosette’s due diligence; he did not accept that it was a “fundamental failure” but he did accept that it was a “very serious miss” in due diligence, on the basis that the January EBITDA figures were important to Cosette (T198). Mr Casten’s evidence in cross-examination (Casten XX, T263) was that he would also have expected someone on behalf of Cosette to inspect this document, whether someone from Cosette who had requested the information from MPG or someone in Cosette’s business development team or one of Cosette’s consultants (T263).

170. I recognise that no question of any error or fault on the part of Cosette arises in this respect, where relevant provisions in the SID turn upon the disclosure of this matter in due diligence and not upon whether Cosette had regard to the information that was made available to it in the VDR, albeit only shortly before execution of the SID. It is also not apparent that the decline in EBITDA was material, despite Cosette’s present emphasis on it, where it was (as I noted above) a decline of A$800,000 in a previously negative forecast EBITDA for that month. I nonetheless proceed on the basis, consistent with Mr Saraf’s and Mr Casten’s evidence, that it was reasonable to expect that a sophisticated acquirer and its advisers in a large transaction would review the financial information provided to them, including at least month-to-month EBITDA information where, on Cosette’s case, that information was important to Cosette’s decisions.

“When I decided to recommended that Cosette enter into the SID, and when I signed the resolution to that effect and executed the SID on behalf of Cosette, I did so having regard to a range of information. That information included the financial information by Cosette and its advisers, which was based on the information that had been provided by [MPG] throughout the due diligence process. It also included information that had been provided by [MPG]. The information provided by [MPG] that I relied upon included, among other things, the 5-year forecast I had been provided by [MPG], [MPG’s] 3+9 Forecast and the 6+6 Forecast. I regarded those forecasts as important considerations in making my decision, including because the 6+6 Forecast had been largely consistent with the 3+9 Forecast. I also had regard to the public announcement made by [MPG] on February 10, 2025. That announcement was important to me because, as I understood it, [MPG] had obligations to ensure the reliability of public announcements of that kind.”

172. Mr Saraf’s evidence (Saraf 22.7.25 [154]) is also that, at that date, Cosette had not been provided information by MPG concerning actual results for January 2025 or February 2025 and (Saraf 22.7.25 [155]) that:

“Had I known on February 20, 2025 that [MPG’s] sales performance in January and February 2025 was well behind forecast, or that there was no real chance of [MPG] meeting its 6+6 Forecast, I would not have recommended to the Cosette Holdings board that Cosette enter the SID on February 20, 2025 and would not have signed the Cosette board resolution approving entry into the SID. I also would not have signed the SID at that time.”

173. Mr Saraf’s evidence in his second affidavit (Saraf 22.7.25 7.9.25) is similarly that:

“Despite my requests, [MPG] did not provide any actual sales information for January or February 2025 prior to signing the SID on February 20, 2025.”

174. The obvious difficulties for Cosette here is that, accepting that Mr Saraf personally had not seen MPG’s EBITDA for January 2025, Cosette had access to that information in the VDR and its advisers (and Avista) later reviewed it without raising any concern about it or escalating it to Mr Saraf, and the conclusion that there was “no real chance” for MPG to meet the FY25 6+6 Forecast did not, at least at that time, follow from that information or the then available information as to MPG’s sales performance up to mid-February 2025. I return to these matters below.

175. Mr Casten also gave evidence (Casten 22.7.25 [61]) as to matters that he assumed or understood at the time of the Cosette’s entry into the SID on 20 February 2025. It seems to me that Mr Casten there understated the level of scepticism that he applied to these matters, consistent with his approach in understating that matter in cross-examination. Mr Casten’s evidence is (Casten 22.7.25 [103]–[105]) is also that:

“Had I been aware, before entry into the SID, of [MPG’s] revenue and sales performance for January 2025 and the first half of February 2025, or that there was no real prospect of [MPG] achieving its FY25 6+6 EBITDA Forecast, I would have immediately raised a red flag with both Mr Saraf and the Board. This is exactly what I did when I received the February CFO Report, having immediately sent a copy of it to the Board of Cosette for discussion. …

I would have told Mr Saraf and the Board, in this hypothetical scenario, that Cosette should not enter into the SID at the current price of $7.40 per share until such time as Cosette were satisfied that any new financial information or turnaround documents were provided by [MPG] to support the price of $7.40 per share (if that price could still in fact be supported at all). I would also have made a series of information requests to understand what happened, and [MPG’s] likely ongoing performance from Q4 FY25 through to at least FY 2028, to assist Cosette to advise what offer price per share the new, downturned, financial position of [MPG] could still support.”

176. Mr Burgstahler also gave evidence (Burgstahler 21.7.25 [21]) of the board meeting on 18 February 2025 and he refers to material provided by MPG which he had reviewed prior to that meeting, including MPG’s five year forecast, MPG’s ASX announcement dated 21 November 2024, the FY25 3+9 Forecast, MPG’s ASX announcement dated 10 February 2025 and the FY25 6+6 Forecast. He does not there identify the nature of any material provided by Cosette’s management or its advisers, or any internal work undertaken by Avista, to which he had regard in reaching that decision. His evidence (Burgstahler 21.7.25 [27]) is that:

“In deciding whether to support Cosette’s entry into the SID, I took into account all of the information provided by [MPG] as described above, and that information was an important part of my consideration. As set out above, I also received and read a large volume of material from Cosette’s management and Cosette’s independent advisers, including financial modelling. In deciding whether to support the transaction, I took into account the buy-side modelling, as well as the forecasts provided by [MPG].”

177. Mr Burgstahler’s evidence (Burgstahler 21.7.25 [35]) is also that:

“If I had been told before entry into the SID that [MPG] did not have reasonable prospects of meeting the 5-year Forecast, 3+9 Forecast or the 6+6 Forecast and that [MPG] was likely to miss its forecast EBITDA for FY25 by a significant margin, or that [its] sales performance in January and February 2025 were well below its forecasts, I would not have supported Cosette entering into the SID at that time.”

178. Mr Burgstahler also indicates (Burgstahler 21.7.25 [36]) that, in that situation, he would not have signed an “Action by Written Consent” that authorised entry into the SID and would have directed an Avista employee not to give the Avista parties’ consent to the transaction. His evidence is that he would have requested Cosette’s management to make further investigations and offer a recommendation as to whether Cosette should proceed with the transaction. He further states (Burgstahler 21.7.25 [37]) that he would not have supported Cosette’s entry into the SID at the offer price of $7.40 per share. That evidence also depends on its premises.

179. Mr Saraf’s, Mr Casten’s and Mr Burgstahler’s evidence turns on its premises, including the false premise that Cosette and Avista had not been provided with MPG’s EBITDA for January 2025 in the VDR, at least prior to the execution of the SID. I recognise this occurred on the same day as the Cosette board meetings to authorise the entry into the SID, and two days before the SID was executed; but little turns on the timing when none of Cosette’s advisers or Avista’s employees who accessed that information appear to have raised any concern about it. I accept that Mr Saraf, Mr Casten and Mr Burgstahler likely did not personally know of that information, either at the point of authorising or executing the SID or later. Where none of the persons who accessed that information were called by the Cosette Parties, it is not possible to know whether they missed that information or, perhaps more likely, they reviewed it and did not then consider it had the significance that Cosette now seeks to attribute to it, and therefore did not escalate it to Cosette’s management or, in the case of Avista, to Mr Burgstahler.

180. On 20 February 2025, Mr Goyani of MPG emailed Ms Hying and others (Ex J1, 10A/7958) that:

“Per our conversation, I pulled the units shipped for Feb-24, compared the 1H to 2H, and noticed that there wasn’t much difference between the halves”.

The attachment to that email is a spreadsheet that contains daily units shipped figures for most days in February 2025 up to 18 February 2025. In opening, Ms Collins contended that:

“On the performance to 18 February 2025, there was no prospect of [MPG] achieving its forecast for February 2025 that it had provided to Cosette three days earlier.”

181. In its closing submissions, Cosette also submits that:

“As at the date of entry into the SID, Cosette had not been provided with information from [MPG] containing actual results for January 2025 or February 2025, except for the document titled “Cash flow by Month F 25 6+6 v Final” [Ex M4], which was uploaded to the [VDR] 18 February 2025.”

That submission is notable for the qualification which now emerges at the end of the sentence, and the lack of any substantive engagement with the significance of that qualification. I return to that matter below.

182. On 20 February 2025, Avista and Hamilton Lane provided Cosette with an executed equity commitment letter and, by a Joint Action by Written Consent, Cosette Holdings and Cosette resolved to enter into the SID and Avista and Hamilton Lane provided their consent to it doing so. Also on 20 February 2025, Mr Burgstahler advised others within Avista that he was now focused on another transaction and asked, “how much of the 70mm left in F1 did we commit to [MPG] deal?” and how much was left that Avista could commit to a lender that it would contribute to fund that other transaction. After a further exchange with an employee of Avista, Mr Burgstahler in turn advised others within Avista on 20 February 2025 (Ex C1) that:

“So we likely have about $20-35m to use to help fund [other transaction]. What would be the appropriate time to ask lender or UBS (Santander) for another debt commitment increase?”

183. The SID, dated 20 February 2025, (CS [5]–[17], RCS [5]–[17], CCS [41], CCSR [41]; Ex J1, 11/7988) between MPG and Cosette (subsequently amended on 1 April 2025) provided for a subsidiary of Cosette to acquire all of the ordinary shares in MPG for $7.40 per share by a scheme of arrangement, subject to various terms and conditions (CS [7], RCS [7]). The terms of the scheme of arrangement appear at Annexure A of the SID (Ex J1, 11/8082). I will address below the provisions of the SID that are relevant to Cosette’s claim that a Mayne Material Adverse Change (“MMAC”) occurred and its further claims concerning breach of representations and warranties. Clause 20.6 of the SID in turn provided that:

“This deed, the Confidentiality Agreement and any other documents specified by the parties for the purposes of this clause 20.6 contain the entire agreement between the parties with respect to their subject matter. This deed, the Confidentiality Agreement and any other documents specified by the parties for the purposes of this clause 20.6 set out the only conduct relied on by the parties and supersede all earlier conduct and prior agreements and understandings between the parties in connection with their subject matter.”

184. It is common ground (CS [19]–[21], RCS [19]–[21]) that the scheme was conditional upon the satisfaction of various conditions precedent, including the satisfaction or waiver, as at 8.00am on the second Court date, of the conditions precedent in cl 3.1 of the SID and the Court approving the scheme under s 411(6) of the Act. Clause 5.2 of the scheme provides:

“Cosette must, by no later than the date that is one Business Day before the Implementation Date, deposit (or procure the deposit) in cleared funds into the Trust Account an amount equal to the aggregate amount of the Scheme Consideration payable to each Scheme Shareholder (less the Withholding Amount as defined in clause 5.3(b)), such amount to be held by [MPG] on trust for Scheme Shareholder for the purpose of paying the Scheme Consideration to the Scheme Shareholders in accordance with clause 5.3(a), provided that any interest on the amounts deposited (less bank fees and other charges) will be credited to Cosette’s account.”

Clause 5.3 provides for the payment, by MPG, of the Scheme Consideration to Scheme Shareholders on the Implementation Date, subject to Cosette having satisfied its obligations under cl 5.2 of the scheme.

185. On or around 20 February 2025, after the SID was executed, Cosette and MPG established a committee to act as a forum of discussion and planning in respect of the implementation of the scheme and other matters agreed upon under the SID (“Integration Process”).

186. Mr Gray’s evidence (Gray 24.8.25 [233]ff) is that:

“Shortly after the SID was signed on 20 February 2025, I had a conversation with Mr Casten in which he said words to the effect:

“Hey, I have got a question for you about the forecast. I am sure we have the CIM Forecast, but now that we have signed the deal, what is the real forecast?”

I understood the term “CIM” as referring to a “confidential information memo”, being a document used in M&A, and the expression “CIM Forecast” as referring to an inflated forecast provided for M&A purposes. In response, I said words to the effect of:

“We have one forecast. This is the forecast which links to our impairment model, capitalized earn-out, supply chain, sales targets, cash forecast and capital available to deploy.”

187. Mr Gray’s evidence (Gray 24.8.25 [235]) is that he then described the statistical methods used to prepare that forecast and said words to the effect that:

“This forecast is used in our impairment models, to value capitalised earnouts, and is tested twice yearly by our external auditor.”

188. Mr Gray maintained his evidence as to this matter in cross-examination (Gray XX, T608). Mr Casten denied that he had that conversation with Mr Gray in his affidavit evidence (Casten 8.9.25 [17]) and also denied having asked that question in cross-examination (T256). Mr Casten’s having done so would have been wholly consistent with the wider scepticism as to forecasts shown throughout the transaction. Having regard to that matter, and the view which I have formed as to Mr Gray’s credit generally, I accept that that conversation occurred in substantially the form set out in Mr Gray’s affidavit.

189. It is common ground (CCS [43], CCSR [43]) that, on 26 February 2025, MPG published an announcement to the ASX titled “Media release for the half year ended 31 December 2024” (“26 February 2025 ASX Announcement”) and an announcement to the ASX titled “1H FY25 Results Presentation” (“1H Results Presentation”), which disclosed actual underlying EBITDA for the half year ended 31 December 2024 of $31 million, again subject to a disclaimer as to forward looking information contained in that announcement. The 26 February 2025 ASX announcement contained a statement attributed to Mr O’Brien that:

“Our outlook remains positive as we anticipate further improvements in the second half of the year as we continue to build on our market leading position in Women’s Health and Dermatology with a continued focus on improving patient access and growing our revenues, with anticipated growth in underlying EBITDA and sustainable cash flow generation”

That document also stated (CCS [43]–[45]) that MPG:

“expects to grow underlying EBITDA in 2HFY25 via revenue growth. All three segments are expected to deliver a positive direct contribution”.

190. The 1H Results Presentation also contained a statement that MPG “expects to grow underlying EBITDA in 2H FY25 via revenue growth and cost leverage, with all three segments contributing positive direct contribution” (CCS [46]). Cosette contends (CCS [47]) that these statements had the effect that MPG was forecasting underlying EBITDA for the second half of FY25 of more than $31 million; MPG denies that allegation (CCSR [47]), again pointing to the relevant disclaimer as to forward-looking information.

191. Mr Saraf also refers (Saraf 22.7.25 [158]) to MPG’s announcement to ASX on 26 February 2025 concerning its results for the half year ended 31 December 2024.

192. Also after the SID was executed, by email dated 27 February 2025 (Ex J1, 11/8488.1), Mr Casten asked Mr Rajan (who was Cosette’s single point of contact for its advisers in questions and answers in due diligence):

“Vikram,

Can you share with me both the final Jefferies model (STP) for Monarch FY, CY and by month.

Also, please share our final BD model, for however many years that you have on FY, CY and by month.

Let me know if you would prefer to discuss live on what is available in excel vs. PDF from the banks as well. No need to re-create anything, just want the final models now that we are signed.”

193. Mr Rajan responded by email dated 28 February 2025 (Ex J1, 11/8488.1) attaching the final versions of Cosette’s models as at the date of signing the SID (Ex J1, 11/8488.3–8488.4) and observing that:

“Sure, please see attached.

We can discuss live if the below isn’t clear, but here are some answers to your questions:

• Seller’s model was a combination of a 5-year forec[ast] provided by Monarch in the VDR, with an extrapolation driven off of a topline forecast from a PDF that Jefferies created for Monarch that they shared early on.

• The final BD model is the final Santander model, since our BD team stopped our parallel model[l]ing effort when we hired Santander.

o The final cases are driven from McKinsey projections. These projections were derived from their review of 1) Seller’s case, 2) the cases Cosette had developed up to that time, and 3) their independent research.

• FY and CY from Seller (Jefferies) and BD (Santander) are reflected in the final Operating Model from Santander (attached) on sheet “Consolidated P&L”

o To see Seller’s case, input “1” in cell C4

o To see Crown Base case, input “2” in cell C4

o The FY model starts on line 62 and the CY model starts on line 109

• I confirmed with Santander that we do not have a monthly breakdown of any cases.

• If you’re looking for Monarch + Crown, that’s reflected in “Project Monarch_Model” (final Hayfin model) on sheet “Cosette Distribution Model”. There is only one case

194. In closing submissions, Mr Hutley points out, and I accept, that this correspondence and the relevant models (through which I was taken in detail in submissions) indicate several matters, which I pause to note only have relevance in the limited areas where reliance arises in this case. First, by the time that Cosette executed the SID, Cosette’s advisers (rather than MPG) had developed the so-called “Seller’s Model”, with reference to MPG’s 5-year forecast and “a PDF that Jefferies created for [MPG] that they shared early on” and that model was not based on or updated with reference to the FY25 3+9 Forecast or the FY25 6+6 Forecast. As Mr Hutley points out, the so-called “Monarch Sell-Side Case” shows 2025 EBITDA of US$38 million, corresponding to the “Updated Monarch Sell-Side Case” in the “Updated Valuation Materials” prepared by Santander on 11 November 2024, shortly after MPG had provided its 5-year Forecast and before the FY25 3+9 Forecast was provided. It appears that Cosette’s “sell-side” case was not modified after the revisions between the 5-year Forecast and the FY25 3+9 Forecast, or after the FY25 6+6 Forecast was received, likely because Cosette did not consider those forecasts to be particularly relevant to the sophisticated and longer term assessment that it was making of MPG’s value.

195. Second, Cosette’s further “final BD [business development] model” was prepared by Santander and was based on projections derived from McKinsey’s work. As Mr Hutley points out, the revenue figures in that model are drawn from McKinsey’s presentations to Cosette in December 2024, which were not based on MPG’s forecasts, but on information such as US Census Bureau data, expert interviews, IQVIA data, industry benchmarks, McKinsey’s “desktop research” and data in the VDR. Mr Hutley also points out, and the models indicate, that Cosette modelled three alternative “cases” in its final BD model, an Upside Case, Base Case and Downside Case. Before synergies, the forecast FY25 EBITDA in these cases were US$29 million, US$28 million and US$19 million, respectively, substantially less than the US$38 million EBITDA in the “Sell-Side Model” also developed by Cosette as noted above. On a calendar year basis, the “Crown Base Case” predicted US$40.6 million EBITDA for CY2025. Mr Rajan’s email also refers to a “final Hayfin model”, presumably provided to Hayfin as the debt financier for Cosette’s acquisition of MPG, which is attached to Mr Rajan’s email. That model adopted the “Crown Base Case” for MPG’s CY25 EBITDA, which was forecast as US$40.6 million. For completeness, Mr Hutley also points out that a later slide deck sent by Mr Casten to Mr Saraf on 4 May 2025 (Ex J1, 13/10368.1) in preparation for Mr Saraf’s “discussions with David [Burgstahler] on Monday” also describes the “Crown Base Case” as the “Deal Model”.

196. An exchange of emails on 4 and 6 March 2025 (Ex J1, 11/8575–8576) between Mr Moore (Executive Vice President, Speciality Products and Patient Solutions with MPG) and Mr Kalaf (Manager, Gross to Net Accounting with MPG) indicates the basis of the Doryx Co-Pay Adjustment which is addressed in the accounting evidence to which I refer below. On 4 March, Mr Moore advised Mr Kalaf that:

“When I ran the [Doryx] [report for February 2025], the total was showing as negative through to the end of February which doesn’t make any sense. Upon further review I made an error in how I filter out Adelaide Apothecary volume and have been doing it consistently wrong each month. I exclude the data on the shipped side for Adelaide, but I didn’t realize I also needed to exclude it from the card claim side. The resulting total potential IOH [inventory on hand] is 3,480 bottles over the life of the products for the go forward, please just use the same assumption we use for other products which I believe right now is 1.25. …”

197. Mr Moore responded that:

“Updating the calculation for Doryx MPC has resulted in a $1.6m pipeline increase for the month of Feb25. This is because the 1.25 week assumption of 2,533 units is a significant increase from the prior month roll-forward calculation of 907 units used for Jan25.”

198. Mr Moore then advised that:

“Thanks for the update. This is likely high based on our inventory confirmations, but I don’t think we should treat the product differently from any others at this time.”

199. On the face of it, this exchange indicates a one-off error was made by Mr Moore, a matter to which I return in addressing the expert accounting evidence below.

200. On 7 March 2025, Mr McConnell of MPG advised Mr Gray (Ex C12, Tab 16) that:

“Regarding February results, it’s not looking good.

Gross sales are down $18M to forecast, and we had an issue with DORYX NPC Co-pay to the tune of $1.6M. … that is one where we have been using a roll forward of units versus the standard weeks on hand assumption due to the material impact of co-pay on that product and the fact that we could track units from inception, and at the time our on-hand assumption was 2 weeks whereas that product tracks closer to 1 week. Anyway, there was an error in the roll forward we were provided and so we’ve updated to the standard 1.25 weeks same as the other products. Likely the true impact is closer to $1M (based on units sold in February) but still a large adjustment nonetheless. I will forward you the details on this.”

201. Mr Gray was cross-examined as to that email (Gray XX, T596) and he maintained his evidence, which I accept, that he first became aware that February was not going to achieve its forecast when the results for February closed (T595). He pointed to the complexities of converting gross sales to profit and his evidence, which I also accept, was that gross sales alone would not allow a conclusion as to a changed EBITDA result.

202. On 10 March 2025, a meeting took place between MPG and Cosette to discuss integration planning. Mr Saraf attended and gives evidence of this meeting. Mr O’Brien also attended the meeting (O’Brien 24.8.25 [141]ff) and he takes issue with aspects of Mr Saraf’s evidence concerning the meeting. His evidence (O’Brien 24.8.25 [142]–[143]) is that he did not discuss MPG’s February performance results with Mr Saraf at that meeting because he did not then know them; that neither he nor Mr Gray said that January or February were tracking well against budget; and that he told Mr Saraf that “January was soft against plan but prescription levels are tracking”, “the script data for January 2025 is telling me that there is no issue” and:

“there is no concern for these numbers. We had a strong December so it would explain why the January results are softer.”

Mr O’Brien again denied in cross-examination (O’Brien XX, T318) that, on 10 March 2025, he told Mr Saraf that January and February were tracking well against budget. Mr Saraf’s evidence in reply (Saraf 7.9.25 [14]) was that he does not recall (although he does not deny) that Mr O’Brien told him that MPG’s results in January 2025 were “soft against plan” although he also says that he would have reported that matter to others had he been told of it.

203. Mr Gray also outlined the discussions that took place at the meeting on 10 March 2025 (Gray 24.8.25 [247]ff) and his evidence is that he did not recall discussions on the FY25 6+6 Forecast during general or group discussions at that meeting and did not recall discussions about the February results for MPG, which he did not receive until 12 March 2025. Mr Casten also attended the meetings and also addressed them in his evidence (Casten 22.7.25 [65]ff). He referred to statements made by Mr Gray and Ms Hying at that meeting in respect of MPG’s budgeted EBITDA and the past EBITDA contained in the FY25 6+6 Forecast to the effect that MPG was “on track” to deliver the budgeted and forecast EBITDA (Casten 22.7.25 [67]). It is otherwise not necessary to resolve any differences in the accounts of that meeting to determine these proceedings,

204. A document headed “Key Updates” prepared on or about 12 March 2025 by MPG (Ex J1, 11A/8634) recorded that:

“The Group fell significantly short of forecast in February on volume and [gross to net] GTN accrual method. Examining market share for the top products – we did not lose share rather mis-forecast at the market. We expect to make up some ground however there is likely to be a negative impact to the year as compared to the 6+6. …”

205. A slide headed Group P&L in AUD (Ex J1, 11A/8635) referred to actual underlying EBITDA for February 2025 of negative A$6.542 million by contrast with forecast underlying EBITDA for February of A$4.745 million and underlying EBITDA for February year to date of A$20.336 million compared with forecast year to date at that point of A$32.468 million, showing a negative variation against the forecast of A$12.132m. The commentary noted that:

“Compared to forecast the group fell short of margin expectations in February driven by misses in all three functional areas with the most material being Dermatology, resulting in ($11.3m unfavourability to forecast EBITDA.

On YTD basis, underlying EBITA is behind budget by $13.3m and ($12.1m) behind forecast.

February gross margin is short of forecast by ($12.0m), driven by lighter than expected sales in Dermatology and Women’s health, a one-time adjustment to DORYX co-pay and co-pay pipeline methodology which should normalise across the half.

● The February OPEX favourability of $0.7m is mostly within US Corporate, from timing related savings in legal matters, which is a function of timing.”

206. The document in turn addressed the profit and loss by business unit and, in respect of women’s health, observed that (Ex J1, 11A/8636):

“Women’s health underperforms the revenue forecast for February on unfavourable units across all 4 brands.

● The gross sales miss is driven primarily by softness in underlying demand for Annovera, Nextstellis, and Imvexxy relative to the forecast. A portion of the miss is also attributable to wholesaler inventories declining month-on-month. Wholesaler inventory for Annovera is at the lowest level all year. …

● Overall GTN was unfavourable 1% in February driven by higher co-pay than forecasted. This largely due to the co-pay pipeline methodology which should correct itself across the remainder of the half. YTD GTN is on target to forecast.”

207. I interpolate that, in cross-examination (T516–517), Mr Gray confirmed, and I accept, that MPG did not then consider that it had lost market share, rather than incorrectly forecasting the total market; but it now believes that it had lost market share at that time, by reason of the change to its sales team which has subsequently been recognised as the likely source of adverse sales result at that time.

208. In his CEO Update to MPG’s March 2025 board meeting (Ex J1, 11A/8670), Mr O’Brien observed in a summary of February performance that:

“● EBITDA significantly behind plan (11.3M) driven by a ($28M) miss on gross sales, reflecting entire lower Pharma market performance (market share performance maintained) and reduction of inventory across both WH and Derm.

● YTD EBITDA $20.3m, ($12.1M) to forecast and ($13.3M) to budget.

● RX and Co-pay card utilisation performance trac-king to plan, and March sales off to a strong start.

● Looking back at 2H FY 24 Jan and Feb performance, was weak compared to Mar thru June, 2H FY25 is performing similarly on a percentage basis, so we are expecting strong Mar – Jun performance as the lead indicators are strong.

● Cash ahead of plan, with February FCF neutral, and YTT Cash at [omitted], which is $16.5M ahead of forecast.

● Op[erating] ex[penditure] slightly favourable for Feb (Legal was the driver, timing) and on plan YTD at [omitted].

● Both W[omen’s] H[ealth] and Dermatology significantly behind plan, Annovera behind, however card claims growing rapidly across all WH.

● [Adelaide] TGA and FDA inspections, received a 483 but no critical findings, able to resolve within budget.”

209. It is common ground that, from 11 March 2025 to 13 March 2025, the TGA conducted a surveillance inspection of MPG’s manufacturing site in South Australia and the TGA then issued the TGA Letter (CCS [98]–[100], CCSR [98]–[100]). As I noted above, Cosette abandoned reliance on that matter in its cross-claim in the course of the hearing and I only briefly refer to that matter below.

210. On or about 19 March 2025, MPG established a VDR titled “Project Crocodile (Integration Planning)” (“Integration VDR”) and thereafter MPG and its advisers caused documents to be uploaded to the Integration VDR. It is common ground that, on 25 or 26 March 2025 (CCS [48]–[49], CCSR [48]–[49]), MPG caused to be uploaded to the Integration VDR a document titled “CFO Report Feb FY25” (“February CFO Report”) which recorded:

“(a) on a slide titled “Key updates” (on page 1) that “The group fell significantly short of forecast in February on volume and GTN accrual method” and “there is likely to be a negative impact to the year as compared to the 6+6”;

(b) on a slide titled “Group P&L in AUD” (on page 2), that Total Gross Sales for February 2025 were $86,045,000; Total Net Sales for February 2025 were $25,397,000; Underlying EBITDA for February 2025 was -$6,542,000 and that:

“[c]ompared to forecast the group fell short of margin expectations in February driven by misses in all three functional areas with the most material being Dermatology, resulting in ($11.3m) unfavourability to forecasted EBITDA”;

“[o]n a YTD basis, underlying EBITDA is behind budget by ($13.3m) and ($12.1m) behind forecast”;

“February gross margin is short of forecast by ($12.0m), driven by lighter than expected sales in Dermatology and Women’s Health”;”

(c) on a slide titled “P&L by Business Unit – Women’s Health” (on page 3) that:

“W[omen’s] H[ealth] underperforms the revenue forecast for February on unfavourable units across all 4 brands”;

“The gross sales miss is driven primarily by softness in underlying demand for Annovera, Nextstellis and Imvexxy relative to the forecast”;

(d) on a slide titled “P&L by Business Unit – Dermatology” (on page 4) that “Dermatology fell significantly short of the gross sales forecast in February”; but also that ““Demand, card claim, and market share data remain strong, suggesting no issue with the underlying business”’ and that

“The gross margin unfavorability in February is a function of the higher co-pay expense mentioned previously, with the biggest impact on Doryx and Rhofade, which make up 79% of the miss. GM remains unfavorable YTD vs. budget, mainly from these same two products”.

211. Mr Gray was cross-examined (Gray XX, T514–515) as to that report. Mr Saraf also refers to that report, which he understood to indicate that MPG had fallen significantly short of forecast in February 2025; that there was “likely to be a negative impact” compared to the FY25 6+6 Forecast; and that there was a reduction in total gross sales, total net sales and underlying EBITDA for February 2025, with the performance of women’s health driven primarily by softness in demand for several products.

212. Mr Saraf also refers (Saraf 22.7.25 [166]) to a discussion of that matter with Mr O’Brien, on the first day of a two day visit to MPG’s Adelaide facility on 26 and 27 March 2025, and to his then advising Mr O’Brien, on the next day, that:

“This is a fucking problem. You know, we need to step outside and talk about it.”

Mr Saraf also says (Saraf 22.7.25 [167]) that he told Mr O’Brien that he was “trying to avoid a MAC over here”, plainly a reference to the concept of an MMAC in the SID. Mr Saraf then refers to subsequent correspondence concerning that matter.

213. Mr O’Brien also gives evidence of Mr Saraf’s visit to MPG’s Adelaide facility on 26 and 27 March 2025; he refers to Mr Saraf’s anger on that occasion; and indicates that Mr Saraf raised, in aggressive terms, the position as to MPG’s February results (O’Brien 24.8.25 [148]). He denies Mr Saraf’s evidence as to aspects of that conversation. Mr O’Brien accepts (O’Brien 24.8.25 [150]) that Mr Saraf referred to the possibility of a “MAC” in that conversation and that Mr O’Brien responded “that’s not how a MAC works”. In his second affidavit, Mr Saraf takes issue with Mr O’Brien’s evidence as to aspects of that visit (Saraf 7.9.25 [16]). Little turns on the differences between the witnesses as to that matter; if it were necessary to decide them and given the view that I have formed as to the credit of the witnesses, I would prefer Mr O’Brien’s to Mr Saraf’s evidence of the conversations.

214. Mr Casten also refers to his review of MPG’s February 2025 CFO Report (Casten 22.7.25 [74]ff) and explains that he considered that document to record significant declines in the financial performance of MPG, especially when compared with MPG’s FY25 3+9 Forecast and its FY25 6+6 Forecast. His evidence (Casten 22.7.25 [78]) is that:

“My interpretation of the February 2025 results, as contained in the February CFO Report, was that in the months of January and February 2025 [MPG] had suffered a significant collapse in underlying EBITDA of $12.132 million. This was a significant decline against a previously delivered 6-month year-to-date underlying EBITDA of $31.990 million as at December 31 2024. [MPG’s] year-to-date underlying EBITDA following February 2025 was $20.336 million. At no time in my professional career have I encountered such a significant and adverse change in financial reporting from a company so soon after entry into a transaction that I was working on.”

215. Mr Casten rightly recognised that several matters disclosed by the February CFO Report were adverse, by comparison with MPG’s earlier forecasts, as he observed in his email sent to Mr Burgstahler, Mr Saraf and other persons within Avista on 26 March 2025, which stated that the February financial results for MPG were:

“A significant departure from our expectations and what was communicated to us during the in-person meetings on March 10th in Bridgewater, NJ.”

216. It is also important to recognise that Cosette, at least through Mr Saraf and Mr Casten, had formed these views by late March 2025, prior to the entry into the SID Amendment Deed on 1 April 2025. By entry into that Amendment Deed, Cosette agreed that the SID (as amended) was and continued to be in full force and effect.

217. On 27 March 2025, Mr Casten and Mr Gray met to discuss MPG’s February 2025 results (Casten 22.7.25 [82]) and, on 28 March 2025, Mr Casten emailed (Ex J1, 11A/8761) Mr Burgstahler, others within Avista, and Mr Saraf summarising that conversation as follows:

“● [Mr Gray] has not received any comments on pre-read sent to the [Board of Directors] last week, [Board of Directors] meeting is tomorrow.

● In short, Feb was a forecast miss on volumes in Derm[atology] and lingering GTN issues, FY will be slightly down ([approx.] $5m) to [FY25] 6+6F [f]orecast at about $65m AUD (6+6 was $70M AUD).

● W[omen’s] H[ealth] – slightly lower volume across 4 key brands, lower wholesaler inventories (not forecasted) drove miss in February, especially Annovera.

● W[omen’s] H[ealth] – anticipate volumes to return in March and fiscal Q4 25 MWH, and should deliver on LE, not anticipating significant change to WHLE from 6+6 to 9+3 for full F’25.

● Derm[atology] – market down driving lower volumes, currently looking into reasoning [sic], as well as lower pharmacy inventory levels is primary driver, but demand and market share is relatively strong.

● Derm[atology] – GTN error on DORYX product and overall methodology, along with Co-Pay expense hit in February driving negative segment results.

I have requested, and he has agreed to provide Feb month and YTD EBITDA bridge and summary of Feb impact on rest of year (and full fiscal year) results. Additionally, I have requested information (as he did have hand on our call) and added these request to the PMO tracker today, as follows:

● March EBITDA (LE) as well as updates for making up volume misses in Feb on WH and Derm.

● How March is tracking on net sales for WH and Derm (to date) with associated volumes.

● Monthly EBITDA catchup comparison projections (March – June from LE vs March – June for revised (9+3) getting you guys to the $65M AUD full year fiscal 2025.

● With YTD EBITDA at $23M, articulate/bridge to full fiscal year EBITDA of $65M AUD.”

There is no suggestion that, at this point, Cosette did not understand the position which was then apparent as to MPG’s January and February 2025 sales and EBITDA.

218. On 1 April 2025, MPG and Cosette entered the Amendment Deed, altering the details of the corporate structure of the acquiring entities under the SID, making consequential amendments, and confirming that the SID (as amended) “is and continues to be in full force and effect”.

219. On 4 April 2025, MPG brought its application for orders in relation to the convening and conduct of the scheme meetings.

220. It is common ground that, on 16 April 2025, MPG caused to be uploaded to the Integration VDR a document titled “CFO Report Mar FY25”, recording MPG’s sales performance for March 2025 (“March CFO Report”) (CCS [70]–[71], CCSR [70]–[71]).

221. It is common ground (CCS [50]–[51], CCSR [50]–[51]) that, on 17 April 2025, Mr O’Brien sent an email to Mr Saraf which attached a spreadsheet titled “Confidential Mayne Pharma 9+3 forecast April 17 2025” (based on 9 months of actual results and 3 months of forecast results for FY25) which projected that MPG’s “AIFRS EBITDA (Operating) before F[oreign] [e]x[change] Effect” would be $44.999 million, although MPG again relies on disclaimers in respect of these documents. That email recognised that:

“Based on our 9+3 Forecast, we [MPG] have a disclosure obligation, since our H2 EBITDA will be lower than our H1 reported underlying EBITDA. …”

222. On 17 April 2025, Mr Saraf emailed that document to Mr Casten who responded that:

“Their forecast for FY25 EBITDA is $45M AUD a $20M AUD difference from what [Mr Gray] told me last month.”

223. It is also common ground (CCS [52]), CCSR [52]) that, on 18 April 2025, MPG caused that document to be uploaded to the Integration VDR and MPG again relies on the relevant disclaimers.

224. On 22 April 2025, MPG caused the FY25 9+3 Forecast (Ex J1, 13/9698) to be uploaded to the Integration VDR (CCS [53]–[54]). Cosette contends that this document projected that MPG’s underlying EBITDA for FY25 would be $45 million (“FY25 9+3 EBITDA Forecast”); however, that document also pointed to risks and opportunities, leaving open a wider range of underlying EBITDA for FY25. Cosette also contends (CCS [55]) and MPG denies (CCSR [55]) that the FY25 9+3 EBITDA Forecast is $24,800,000 (or approximately 26%) less than the FY25 6+6 Forecast.

225. Mr Saraf refers (Saraf 22.7.25 [173], [175]) to the CFO Report for March 2025 and to his receipt of the email attaching the 9+3 Forecast spreadsheet on 17 April 2025 and his evidence (Saraf 22.7.25 [177]) is that he then recognised a reduction of A$24.8 million as between the FY25 9+3 EBITDA Forecast and the FY25 6+6 Forecast. He also refers to an email dated 18 April 2025 from Mr Casten recognising the same matter. In his first affidavit (Casten 22.7.25 [88]–[89]), Mr Casten also refers to a reduction of $24.8 million in the FY25 9+3 Forecast from the FY25 6+6 Forecast of $69.8 million. I recognise, of course, that a comparison of forecast earnings at different times does not establish a decline in a company’s actual financial performance, since a forecast ordinarily reflects expectations as to that performance, which may or may not ultimately correspond to those expectations. Mr Casten also refers to further correspondence with Mr Gray concerning the change in the forecast (Casten 22.7.25 [92]–[94]) and to MPG’s uploading the FY25 9+3 EBITDA Forecast to the Integration VDR on 21 April 2025.

226. Mr Burgstahler also refers to his receipt of a copy of the 9+3 Forecast around mid-April 2025 and to his sending an email dated 21 April 2025 to Mr Saraf expressing his view that:

“It looks like a mess. Volume declines in almost everything. … Business has just lost all momentum since December and they told us in January/February that it was temporary when it was clearly not.”

227. It is also common ground (CCS [57], CCSR [57]) that, on 22 April 2025, MPG published an ASX announcement titled “Mayne Pharma Provides Business Update, Details of New Licensing Agreement & Updated Scheme Timetable” which anticipated “underlying EBITDA in the range of $47 million to $51 million” for FY25 (CCS [57]). Cosette pleads the content of that announcement in some detail (CCS [58]–[60]). Mr Saraf also refers to that announcement and indicates (Saraf 22.7.25 [179]) that represented a reduction in underlying EBITDA between A$18.8 million and A$22.8 million as against the FY25 6+6 Forecast.

228. Cosette contends (CCS [61]) and CCSR denies (CCSR [61]) that, on or about 28 April 2025, MPG’s board of directors approved the FY25 9+3 Forecast. Cosette pleads aspects of that forecast (CCS [62]–[68]) and MPG takes issue with aspects of that description (CCSR [62]–[68]). Cosette also pleads and MPG denies (CCS [69], CCSR [69]) that:

“The primary reason for [MPG] revising the FY25 6+6 EBITDA Forecast downwards:

(a) by $24,800,000 in the FY25 9+3 EBITDA Forecast; and

(b) by between $18,800,000 and $22,800,000 in the Revised FY25 EBITDA Forecast,

was [MPG’s] actual sales performance in Q3 FY25.”

229. On 28 April 2025, the OPDP issued the FDA Letter (Ex J1, 13/9969) to MPG and, on 29 April 2025, Ms Nataline of MPG circulated a copy of the FDA Letter to Mr O’Brien and others at MPG. Mr O’Brien addresses (O’Brien 24.8.25 [154]ff) the circumstances in which the FDA Letter was received, on the day of a meeting of the MPG board, and he refers to a presentation that was then made to the MPG board as to that letter and to the discussion by MPG’s board about that matter. Mr O’Brien’s evidence is that he considered that that matter would not have a material financial effect on MPG’s business or Nextstellis (O’Brien 24.8.25 [163], [168]); he outlines the basis on which he held that view, by reference to several apparently relevant factors; and his evidence, which I accept, is that MPG’s board collectively formed the view that the FDA Letter would not have a material effect on MPG’s business or Nextstellis. Mr O’Brien was also cross-examined as to his knowledge of continuous disclosure requirements applicable to MPG (O’Brien XX, T345ff); the circumstances in which he became aware of MPG’s receipt of the FDA Letter (O’Brien XX, T350ff); discussions at MPG’s board as to which a consensus was formed that that letter was not material to MPG’s business; and the basis on which that view was formed (O’Brien XX, T366ff). I return to that matter below.

230. On 30 April 2025, MPG circulated a document containing material affected or potentially affected by the FDA Letter, titled “Nextstellis Promotional Material”. Also on 30 April 2025, Mr O’Brien disclosed the receipt of the FDA Letter to Mr Saraf (O’Brien 24.8.25 [169]). On 5 May 2025, MPG provided Cosette a copy of that letter.

231. Mr Dury’s immediate impression, after the receipt of the FDA Letter, was that it had a significant adverse impact upon MPG’s marketing strategy for Nextstellis. By an email dated 6 May 2025 to others within Cosette (Ex J1, 14/10442), under a heading referring to the FDA Letter and MPG’s “speaker program deck”, he observed that:

“** WORK IN PROGRESS **

At a 1st glance, it’s not good. A lot needs to go.

Since we also need to address everything from the 2022 letters, we are facing serious strategic and execution challenges. My guess is that every single Nextstellis piece is impacted by this. That alone would cause serious disruption, and that is before even thinking about the loss of our unique selling point.”

232. Mr Smolenski, of Cosette, responded on the next day:

“Thanks for the analysis. Everything in the trash bin. Start over.

What will marketing hook being going forward? Won’t be easy. Let’s discuss tomorrow.”

233. By a further email dated 8 May 2025, Mr Dury emailed Ms Beltrani and others of Cosette with a draft list of information that should be sought from MPG as to the FDA Letter (Ex J1, 14/10479). I do not doubt that Mr Dury and other employees of Cosette then regarded the FDA Letter as a significant adverse development for the marketing of Nextstellis, although it appears they did not then know of or take sufficient account of the steps that had already been taken by MPG to reposition its marketing of Nextstellis, which would subsequently assist its response to the FDA Letter.

234. On 9 May 2025, after all of these matters had arisen, the Cosette Parties entered a Deed Poll in favour of each scheme shareholder. It is common ground (CS [22]–[24], RCS [22]–[24]) that that Deed Poll provides, in cl 3.1, that the obligations of Cosette and Cosette Sub under the Deed Poll are subject to the scheme becoming effective and, by cl 4.1, Cosette and Cosette Sub each covenanted in favour of each scheme shareholder that it will observe and perform all obligations contemplated of Cosette, or Cosette Sub (as applicable) under the scheme. Also on 9 May 2025, MPG’s US attorneys gave a notice to Cosette of the issue of the FDA Letter under cl 7.1(d)(vii) of the SID.

235. On 12 May 2025 (US time), the FDA published the FDA Letter on its website. On 13 May 2025 (US time), an internet publication titled Fierce Pharma published an article (Ex J1, 14/10561) titled “Mayne hit by ‘misleading’ drug safety claims from FDA ahead of $430M buyout” (“Fierce Pharma Article”) (emphasis added) which referred to MPG’s receipt of the “untitled” FDA Letter. On 14 May 2025, two days after the publication of the FDA Letter, the day after the publication of the Fierce Pharma article, and on the same day as an Australian broker recommended its clients short sell MPG shares and the Australian media reported a US proposal for tariffs on Australian-made pharmaceutical products, MPG’s share price started to decline. ASX then issued a price query to MPG (Ex J1, 14/10575) and, on 14 May 2025 (Ex J1, 14/10578.1), MPG, by its solicitors, offered Cosette’s solicitors the opportunity to comment on the form of announcement that MPG then proposed to make to ASX. MPG then made two ASX announcements (Ex J1, 14/10652, 10656). I return to these matters in dealing with Cosette’s continuous disclosure claim and its attack on the accuracy of one of those ASX announcements below.

236. In his affidavit evidence, Mr O’Brien addresses (O’Brien 24.8.25 [172]ff) the publication of the Fierce Pharma article and his communications with MPG’s chair and company secretary concerning that article, his communications with Mr Saraf in respect of that article, the subsequent price decline in MPG’s shares on the ASX, subsequent ASX announcements made by MPG and (O’Brien 24.8.25 [196]ff) the development and content of the MPG’s response of the 16 May 2024 to the FDA Letter (“FDA Letter Response”). Mr O’Brien was also cross-examined as to the decline in MPG’s share price after the Fierce Pharma article (O’Brien XX, T369ff), the preparation and content of MPG’s ASX announcement made on 14 May 2025 (O’Brien XX, T378ff) and the steps which were subsequently taken by MPG in response to the FDA Letter (T389ff).

“Various matters emerged which undermined the information that [MPG] ha previously provided, the diligence we had previously conducted and the appropriate valuation of [MPG].”

241. First, Mr Saraf contends that MPG had “drastically reduced” its underlying EBITDA forecast for FY25 compared to the FY25 3+9 Forecast and the FY25 6+6 Forecast; second, he refers to disclosure of the TGA letter, on which Cosette no longer relies in these proceedings; third, he refers to the FDA Letter; and, fourth, to a claim by a third party in litigation, on which Cosette also no longer relies. His evidence is that (Saraf 22.7.25 [185]):

“Given the combination of those events which all arose in within approximately two months of signing the SID, on May 17, 2025, the Cosette board met and after careful and long deliberations, resolved to issue a notice to [MPG] under the SID that a material adverse change had occurred.”

Obviously enough, the basis of that decision is now somewhat undermined by the fact that the Cosette Parties no longer seek to rely on two of these matters.

242. Also on 17 May 2025, Cosette issued the First MAC Notice under cll 3.5(c) and 3.7(a) of the SID (Ex J1, 14/11023) which contended that an MMAC had occurred, or was reasonably expected to occur, in the 12-month period from 1 July 2024 to 30 June 2025 (FY25) by reason of revisions made to internal forecasts within MPG concerning the financial year ending 30 June 2025 (First MAC Notice at [9]–[20]); the TGA inspection and the TGA Letter (First MAC Notice at [21]–[26]), on which Cosette no longer relies; the third party claim noted above, on which Cosette also no longer relies; and the FDA Letter and MPG’s proposed response to that letter (First MAC Notice at [32]–[44]). Cosette also there contended (CS [31]) that an MMAC was reasonably expected to occur in the 12-month period from 28 April 2025 (being the date of the FDA Letter) by reason of, inter alia, the FDA Letter, although it has now also abandoned that claim.

243. About 24 May 2025, MPG’s Nextstellis website went live with revisions omitting claims which formed the subject of complaints from the FDA Letter.

244. At a board meeting of MPG on 26 May 2025 (Ex J1, 15/11297), MPG provided an update to MPG’s board as to the FDA Letter, noting that MPG had reviewed and identified all affected promotional materials that were currently in dissemination between 28 April and 14 May. On 14 May, MPG had paused the ordering and shipping of all affected printed promotional materials and removed digital material from sales representatives iPads and cancelled email communications and paid searches. On 16 May, MPG had sent the FDA Letter Response “providing context for the claims made in the speaker deck and identifying actions taken to address OPDP’s concerns”, including the discontinuation of all affected material discontinued as of 14 May, other than the Nextstellis website. That update also referred to a call between MPG and the OPDP on 22 May, where OPDP requested that the website revision be accelerated and advised that “there were no other concerns” so that, once the OPDP received confirmation that all affected materials were discontinued and the website revised, it would initiate its close-out process. That update also recorded that, on 23 May, the Nextstellis website for health care professionals (“HCPs”) was taken down, internet traffic was redirected to a revised patient website with limited content; the revised patient website was formally submitted to the OPDP and, over the next two weeks, sales representative refresher training would take place on the Nextstellis prescribing information and a revised core visual aid (“CVA”) was under expedited review. Importantly, that update noted additional marketing costs to date as US$12,000 and quantified additional total spend including additional marketing and training costs as approximately US$60,000.

245. It is common ground (CCS [72]–[73], CCSR [72]–[73]) that, on 27 May 2025, MPG caused to be uploaded to the Integration VDR a document titled “FINAL CFO report Apr FY25_26 May2025”, recording MPG’s sales performance for April 2025 which recorded actual underlying EBITDA of the Mayne Group for the 10 months ended April 2025 of $33.524 million, comprising $31.99 million for the 6 months to December 2024 and $1.534 million for the 4 months to 30 April 2025.

“[MPG] also advises that it has now received a close-out letter from the FDA in relation to the [FDA Letter] (previously disclosed to ASX on 14 May 2025). The close-out letter confirms that based on the FDA’s evaluation, [MPG] has addressed the issues identified in the [FDA Letter]. …

[MPG] remains committed to the successful completion of the Scheme in the interests of all shareholders.”

248. Later on 4 June 2025, Cosette delivered the First Termination Notice to MPG, relying on the MAC Notice (Ex J1, 15/11519). MPG denies that Cosette has validly terminated the SID on that basis.

249. On 4 June 2025, Cosette issued a second notice of intention to terminate the SID under cll 3.5(c) and 3.7(a) of the SID and MPG commenced these proceedings. On 13 June 2025, without prejudice to the termination that it claimed to have effected by the First Termination Notice or the second notice of intention to terminate, Cosette delivered a further notice to MPG (“Second Termination Notice”) by which, if the SID had not already been terminated, it terminated the SID for MPG’s alleged breach of the Due Diligence Material Representation, as defined in the CCS (RCS [34(a)(iv)]).

250. On 5 August 2025, Cosette issued a further notice of intention to terminate the SID under cll 7.1(b) and 15.1(a)(i) of the SID (“CY25 Notice”). On 13 August 2025, Cosette delivered a notice to terminate the SID under cll 3.7(b) and 15.1(a)(ii), without prejudice to the termination effected by the First and Second Notices of Termination (“Third Notice of Termination”).

251. On 20 August 2025, Cosette delivered a notice to terminate the SID under cll 3.7(b) and 15.1(a)(ii) in respect of the CY25 Notice, without prejudice to the termination effected by the First, Second and Third Notices of Termination (“Fourth Notice of Termination”).

252. On 29 August 2025 (Ex J1, 18/13486.44), MPG released its FY25 results presentation, which disclosed underlying EBITDA of A$47 million, being more than double its FY24 EBITDA of A$22.9 million but less, of course, than the EBITDA forecast in the FY25 6+6 Forecast. The FY25 operating highlights recorded, in respect of women’s health:

“30% growth in demand cycles for Nextstellis, compared to pcp, driven by new patient starts and repeat RX growth.

● 17% demand TRx from licensed portfolio: ANNOVERA, IMVEXXY and BIJUVA, compared to PCP.

● ANNOVERA TRx volume up 6% versus the PCP. Label change increases product shelf life by one third.

● Those operating highlights also summarised the position in respect of dermatology and MPG’s international business. A table headed “FY25 highlights” recorded MPG’s then assessment of the reasons for the lower demand in the first quarter of calendar year 2025, namely:

“Q3 FY25 demand softness attributable to a transitional period as we upgraded talent in our sales team. This was done strategically to better position the division for sustained growth moving forward.”

253. That page also recorded:

“Women’s Health Revenue increase 23% to US$115.5M versus PCP, driven by growth in NEXTELLIS (plus 41%), BIJUVA (plus 31%) and IMVEXXY (plus 43%) and ANNOVERA (minus 4%), under the heading “future growth drivers for Women’s health”, recorded that “there was a complete refresh of marketing materials based on latest market research read-outs, for rollout in FY 26.”

254. Mr Gray was in turn cross-examined as to that results presentation (Gray XX, T517ff).

Cosette’s claim that an MMAC resulted from MPG’s Q3 FY25 Sales Performance

255. Cosette here relies (CCS [74]–[75]) on the condition precedent in cl 3.1(g) of the SID that no MMAC had occurred between the date of the SID and the second Court date, and contends that an MMAC in respect of FY25 resulted from MPG’s Q3 FY25 Sales Performance. MPG responds that that condition precedent was subject to cl 3.2(d), which I note below; that the definition of MMAC excludes the specified events, matters and circumstances; and that (CCSR [75(c)]):

“properly construed, the definition of [MMAC] requires a comparison with the consolidated Maintainable EBITDA over a 12-month period of the Mayne Group with and without the events, occurrences, changes, circumstances or matters relied on to engage the definition, not a comparison with any particular forecast (including the FY25 6+6 EBITDA Forecast).”

256. MPG also contends (CCSR [76]) that, on the proper construction of the definition of MMAC, the applicable 12-month period may not commence before the last, or alternatively, the earliest, of the events, occurrences, changes, circumstances and/or matters relied on to engage the definition; and otherwise denies that claim.

257. I should now address the applicable provisions in the SID. Clause 3.1 of the SID provides that the scheme will not become effective unless certain conditions precedent are satisfied or waived. Relevantly, the condition precedent in cl 3.1(g) of the SID requires that:

“No [MMAC] occurs between the date of this deed and 8.00am on the Second Court Date (subject to clause 3.2(d))”.

258. The term “Mayne Material Adverse Change” is defined in the SID as follows:

“Any event, occurrence, change, circumstance or matter, whether occurring before, on or after the date of this deed, which has, has had or is (either individually or when aggregated together with any such other events, occurrences, changes, matters or circumstances) reasonably expected to have, the effect of diminishing the consolidated Maintainable EBITDA over a 12-month period of the Mayne Group, taken as a whole, by at least A$10.76 million, other than any event, matter or circumstance:

(a) arising solely or predominantly out of the announcement or pendency of the Scheme (including any loss of or adverse change in the relationship of [MPG] or any of its subsidiaries with their respective employees, customers, partners, creditors or suppliers as at the date of this deed, including the loss of any contract);

(b) required or expressly permitted by this deed;

(c) Fairly Disclosed in the Due Diligence Material (or which ought reasonably to have been expected to arise from a matter, event or circumstance which has been Fairly Disclosed);

(d) Fairly Disclosed in:

(i) announcements to the ASX within two years prior to the date of this deed;

(ii) a document that would have been returned by a search, in respect of each member of the Mayne Group, of:

(A) the public records maintained by ASIC (had the relevant searches been conducted on 17 February 2025);

(B) the PPS Register (had the relevant searches been conducted on 17 February 2025);

(C) the public records maintained by the High Court of Australia on 27 and 28 November 2024, Federal Court of Australia on 11 February 2025, the Supreme Court of New South Wales on 18 December 2024, the Supreme Court of South Australia on 11 February 2025 and the Supreme Court of Victoria on 2 December 2024; or

(D) IP Australia on 17 February 2025; or

(iii) a document that would have been returned by any of the searches set out in the Disclosure Letter;

(e) arising from any change in any law, regulation or rule of a Government Agency or accounting standards;

(f) arising from general economic or political conditions or changes in those conditions (including financial market fluctuations, changes in interest rates, commodity prices or foreign currency exchange rates) on or after the date of this deed; or

(g) arising from an act of terrorism, war (whether or not declared), natural disaster, epidemic, pandemic or adverse weather conditions or the like, provided if reasonably practicable [MPG] will consult with Cosette in good faith prior to undertaking any action in response to an act of terrorism, war (whether or not declared), natural disaster, epidemic, pandemic or adverse weather conditions or the like that would result in the [MMNAC],

but in the case of paragraphs (e) to (g) above, excluding any event, matter or occurrence which has a disproportionate effect on the Mayne Group relative to other participants in the industry in which the Mayne Group operates.”

259. The term “Maintainable EBITDA” is defined in the SID as follows:

“EBITDA as defined in this agreement, including United States dollar denominated items, calculated by applying an exchange rate of 0.6558 United States dollars to 1 Australian dollar and adjusted to exclude the financial impact of the following:

(a) (restructuring costs) costs or expenses that relate to employee redundancies and are consistent with those treated as non-underlying in [MPG]’s FY24 results presentation;

(b) (deferred liabilities and earn-outs) reassessment of earn-out and deferred consideration, royalty and milestone payment liabilities that have been Fairly Disclosed in the Due Diligence Materials;

(c) (derivative adjustments) fair value adjustments relating to the Convertible Notes;

(d) (hedge and swap arrangements) any unrealised or realised gains or losses on any hedge or swap arrangements that have been Fairly Disclosed in the Due Diligence Materials;

(e) (legal costs) settlement amounts relating to legal proceedings provided that [MPG] has complied with clauses 7.1 and 7.2 in reaching the settlement amount, and operating legal costs and expenditure relating to discontinued businesses or operations that have been Fairly Disclosed. For the avoidance of doubt, any incremental ongoing operating costs (which it is agreed does not include settlement amounts and legal costs) to be incurred by [MPG] resulting from changes to the business implemented by [MPG] arising out of settlement of such legal proceedings will not be excluded from the calculation of Maintainable EBITDA;

(f) (Transaction costs) costs or expenses incurred by a member of the Mayne Group in relation to the Scheme to the extent that they have been Fairly Disclosed in the Due Diligence Materials;

(g) (revenue or profit from Non-operating Activities) revenue or profit on sales of assets, insurance recoveries, out of period release of a provision or accrual recorded at the end of the previous financial period (each a Nonoperating Activity), to the extent such Nonoperating Activity is permitted under clause 7.1 of this deed; and

(h) (costs or losses from non-operating activities) costs or losses arising from any sale of assets either (A) prior to the date of this deed that have been Fairly Disclosed in the Due Diligence Materials or (B) to the extent such sale is permitted under clause 7.1 of this deed, excluding any impact on EBITDA resulting from any act or omission by Cosette that constitutes a breach of this document.”

260. The term “EBITDA” is defined in the SID as:

“In respect of a financial period, the underlying earnings before interest, taxes, depreciation and amortisation for the consolidated Mayne Group using the same methodology as in the Mayne Group’s full year financial report for the financial year ending 30 June 2024.”

261. Clause 3.2(d) of the SID relevantly provides:

“In respect of the Condition Precedent in clause 3.1(g) (No [MMAC]), if a [MMAC] occurs between the date of this deed and 5.00pm on the Business Day prior to the Second Court Date, the Condition Precedent in clause 3.1(g) (No [MMAC]) will not be taken to have been breached or not satisfied, provided that:

(i) a party has given written notice to the other party of the [MMAC] in accordance with clause 3.5(c); and

(ii) [MPG] has remedied the breach within seven Business Days (or any shorter period ending at 5.00pm on the Business Day prior to the Second Court Date) after the date on which such notice is given.”

262. Clause 3.5 of the SID relevantly provides:

“Each party must: … (c) promptly notify the other party in writing of a failure to satisfy a Condition Precedent or of any fact or circumstance that results in that Condition Precedent becoming incapable of being satisfied or that may result in that Condition Precedent not being satisfied in accordance with its terms.”

263. Clause 3.7 of the SID relevantly provides:

“(a) If:

(i) there is a breach or non-satisfaction of a Condition Precedent which is not waived in accordance with this deed by the time or date specified in this deed for the satisfaction of the Condition Precedent;

(ii) there is an act, failure to act or occurrence which will be reasonably likely to prevent a Condition Precedent being satisfied by the time or date specified in this deed for the satisfaction of the Condition Precedent (and the breach or non-satisfaction which would otherwise occur has not already been waived in accordance with this deed); or

(iii) the Scheme has not become Effective by the End Date,

then either party may serve a written notice on the other party, and the parties must promptly consult in good faith with a view to determining whether:

(iv) the Scheme or the Transaction may proceed by way of alternative strategy, means or methods;

(v) to extend the relevant time or date for satisfaction of the Condition Precedent;

(vi) to change the First Court Date or to adjourn the application for orders pursuant to section 411(1) of the Corporations Act convening the Scheme Meeting to another date agreed by the parties;

(vii) to change the Second Court Date or to adjourn the application for orders pursuant to section 411(4)(b) of the Corporations Act approving the Scheme to another date agreed by the parties;

(viii) to seek orders from the Court to postpone the Scheme Meeting, or recommend to the Chairperson of the Scheme Meeting that there be an adjournment of the Scheme Meeting, to another date agreed by the parties; or

(ix) to extend the End Date.

(b) If [MPG] and Cosette are unable to reach agreement under clauses 3.7(a)(iv), 3.7(a)(v), 3.7(a)(vi), 3.7(a)(vii) or 3.7(a)(ix) within ten Business Days after the delivery of the notice under that clause or any shorter period ending at 5:00pm on the day before the Second Court Date, either party may terminate this deed by notice in writing to the other party, provided that:

(i) the Condition Precedent to which the notice relates is for the benefit of that party (whether or not the Condition Precedent is also for the benefit of the other party); and

(ii) there has been no failure by that party to comply with its obligations under this deed, where that failure directly and materially contributed to the Condition Precedent to which the notice relates becoming incapable of satisfaction, or being breached or not satisfied before the End Date,

in which case clause 15.2 will have effect.”

264. Ms Collins submits, in opening, that the Court “should not limit” the phrase “event, occurrence, change, circumstance or matter” or read in words of limitation or construe the words used in a way narrower than is warranted by their natural and ordinary meaning. That proposition is, perhaps, self-evident when expressed in general terms, but the Court must nonetheless construe those terms, to which I return below. Ms Collins also submits that:

“The failure to meet a forecast is evidence from which the existence of an event, occurrence, change, circumstance or matter constituting a MMAC may be inferred. In Akorn [Inc v Fresenius Kabi AG, 2018 WL 4719347, CA No 2018-0300-JTL (Del Ch 2018)] [“Akorn”], the [Delaware] Court of Chancery observed that “a failure to meet a financial projection is not itself an adverse change, but rather evidence of such a change”. In doing so, the Vice Chancellor identified a failure to meet a projection as an “indicator risk” that “signal[s] that an MAE may have occurred”. Similarly, in Minumbra [Lancewood Pty Ltd v AM Lancewood Investment Nominees Pty Ltd [2013] NSWSC 1929 at [211]–[221] (“Minumbra”)], which concerned a [material adverse change] clause in a financing agreement, Robb J rejected an argument that “a failure to meet budget is only a failure to reach an expectation, hope or business intention” and “[o]f itself … does not constitute a change in the business or financial condition of the Borrower”. His Honour reasoned that “[t]he issue of whether the failure of a business to meet budget expectations is a relevant change for the purposes of [the MAC clause] is a matter of degree, and depends upon the magnitude of the shortfall and the underlying reasons for its occurrence”. It was likewise accepted in Ipsos SA v Dentsu Aegis Network Ltd (formerly Aegis Group Plc) [2015] EWHC 1726 (Comm) that “[t]he fact that the financial performance of [the target company] … was significantly worse than forecast” (as particularised by “details of the drop in sales, revenue and operating profits” that resulted in a “disastrous” decline in the target company’s “actual performance”) formed the basis of an arguable case that a [material adverse change] had occurred.”

265. It seems to me that a change in forecast is not itself an “event, occurrence, change, circumstance or matter”, but the reflection of a range of other events, occurrences, changes, circumstances or matters which give rise to the range of earnings that are the subject of that forecast. I prefer the approach taken in Akorn, that a failure to meet a financial projection is not itself an adverse change, but rather evidence of such a change. Mr Hutley points out, and I accept, that the clause in issue in Minumbra was very different from the clause in issue here and, in any event, Robb J’s observation that it is necessary to have regard to the underlying reasons for the occurrence of a budget shortfall requires analysis of the actual events that may be reflected in a change to a forecast.

266. Mr Hutley also points out that the observations of Blair J in Ipsos S*.A.* v Dentsu Aegis Network Ltd (formerly Aegis Group Plc) [2015] EWHC 1726 (Comm) (“Ipsos”) do not support any contention that a difference between forecasts can, in itself, give rise to a material adverse change. That decision was concerned with a strike-out application, in a case where the relevant clause referred to “an act or omission, or the occurrence of a fact, matter, event or circumstance” giving rise to a “material adverse effect” on, inter alia, the business of a group of companies involved in an acquisition. The acquirer claimed that, first, revisions to forecasts and, second, actual performance fell within that clause. Blair J held (at [54]ff) that the claim based on revisions to the forecasts was “unarguable” on the basis that:

“First, I do not consider that the revision of forecasts falls naturally within the words “act or omission or the occurrence of a fact, matter, event or circumstance”. …

Second, I consider that [the acquirer’s] case as to the second constituent of the definition, namely, that the act etc has a material adverse effect on the business etc is tenuous. It is obviously true to say that things may follow from the revision of the forecast, but this has to do with what underlies the revision, rather than the fact of the revision itself …

Third, I accept [the seller’s] submission that this construction is not in accordance with commercial sense. … [The acquirer] agreed that [the seller] did not give any warranty as to the accuracy of forecasts provided to it on or prior to the signing date. [The acquirer] contends that this is irrelevant to the present issue. However, … [the acquirer’s] construction results in substance to a warranty in respect of the forecasts given after the Signing Date. In substance, if not in form, [the acquirer] seeks to treat the forecasts as warranted, and the downwards revision as giving rise to a right to terminate, or as is sought in this case, a damages claim …

Finally, … [the acquirer’s] construction including forecasts within the definition would be productive of uncertainty, which is highly undesirable in the M&E market. In agreement with [the seller], therefore, I consider that the case as put is not arguable.”

267. In any event, and in accord with the approach taken in Ipsos, it seems to me that a change in MPG’s forecast does not, in itself, have any diminishing effect on MPG’s EBITDA for the purposes of the definition of MMAC and the operative clauses in the SID, but only indicates an estimate, at a point of time, of the impact of other matters that may affect MPG’s actual Maintainable EBITDA. I also recognise that little turns on this matter here, where Cosette’s pleaded cross-claim identifies the specific factual matters which are alleged to have affected MPG’s actual (rather than merely its forecast) Maintainable EBITDA.

268. Ms Collins also submits, and I accept, that the phrase “reasonably expected” in the definition of an MMAC can extend to an event, occurrence, change, circumstance or matter that has occurred although the effect on MPG’s business has not yet been felt. She also submits, and I also accept, that the test of reasonable expectation is “an objective one” that calls for an “evaluative judgment” by the Court and does “not depend on what either party subjectively thought at the time”, although a contemporaneous assessment made by a party of whether an occurrence was reasonably expected to have the relevant effect, if made carefully and in good faith, “might carry considerable weight”: BM Brazil 1 Fundo De Investimento Em Participacoes Multistrategia & Ors v Sibanye BM Brazil (Pty) Ltd & Anor [2024] EWHC 2566 (Comm) at [225], [242]–[243] (“Sibanye”).

269. Ms Collins also submits that:

“Inherent in the concept of reasonable expectation is that the expected effect on Maintainable EBITDA need not be certain or even probable. Thus, it is possible at a given point in time for an event to be “reasonably expected to have” the effect of diminishing [MPG’s] Maintainable EBITDA by A$10.76m within the nominated 12-month period, even if there is some doubt as to whether the event will have that effect (and even if it later transpires that the event has not had that effect). In determining whether an effect is reasonably expected at the point of termination, while “a mere risk of an MAE cannot be enough”, it is sufficient for the party invoking the clause to make “some showing that there is a basis in law and in fact for the serious adverse consequences prophesied by the party claiming the MAE””. [citations omitted]

270. I am inclined to think this submission understates what is required for a reasonable expectation of the requisite effect, particularly where a specified monetary threshold must be met to establish an MMAC. To that extent, I would prefer the view expressed in Sibanye that “the assessment is whether a reasonable person would have considered it more likely than not that the matter would turn out to be material”, rather than the lower threshold that has arguably been adopted in some US case law. However, it is sufficient for present purposes to recognise that, as is common ground between the parties, a mere risk of an MMAC is not enough. I also accept that, as Butcher J recognised in Sibanye and Ms Collins emphasises, subsequent events are not necessarily irrelevant and when making that assessment whether an MMAC has occurred, since such events “may shed some light on what was, as at the relevant date, reasonably to be expected”, although “this exercise must be treated with some caution so that regard to what actually occurred does not overwhelm and subvert what is intended to be an assessment of what would have been said looking forward”.

271. Turning now to the matters on which Cosette relies for this claim, they contend and MPG largely denies (CCS [77]–[79], CCSR [77]–[79]) that:

77 By May 2025, one or more events, occurrences, changes, circumstances or matters occurred being:

(a) weak underlying demand for [MPG]’s Women’s Health and Dermatology products in Q3 FY25, including as a result of [MPG]’s customers shifting to generics;

(b) co-pay increases in Q3 FY25 for [MPG]’s Dermatology products; and

(c) poor actual sales and earnings in Q3 FY25 (as identified in paragraph 65 above) [which pleads the content of the 9+3 Forecast],

leading to:

(d) a shortfall in actual EBITDA for the 9 months to March 2025 against the forecast EBITDA for the same period in the FY25 6+6 EBITDA Forecast of $12.13 million; and

(e) a reduction to forecast FY25 EBITDA against the FY25 6+6 EBITDA Forecast of at least $24.8 million,

(together, the Q3 FY25 Sales Performance Matters).

78 The Q3 FY25 Sales Performance Matters constitute events, occurrences, changes, circumstances or matters within the meaning of the [MMAC] definition in clause 1.1 of the SID.

79 By reason of the matters pleaded and particularised at paragraphs 76 to 78 above, the Q3 FY25 Sales Performance Matters comprise events, occurrences, changes, circumstances or matters that:

(a) have the effect of diminishing the consolidated Maintainable EBITDA over FY25 of the Mayne Group, taken as a whole, by at least A$10.76 million; or

(b) alternatively, are reasonably expected to have the effect of diminishing the consolidated Maintainable EBITDA over FY25 of the Mayne Group, taken as a whole, by at least A$10.76 million.

272. Cosette in turn deploys (CCS Reply [5]) the limitation to the exception in the SID for general economic conditions that have a disproportionate impact on MPG.

273. On one reading of this claim, as Mr Hutley points out in opening for MPG, the allegation in CCS [77] is, in effect, that MPG’s actual results reflecting demand were “weak”, the suggested co-pay increased and actual sales were “poor” by comparison with the levels forecast for the FY25 6+6 Forecast. Mr Hutley submits, in opening, that such a claim:

“is bad in law and on the facts. Variances between actual and forecast levels of demand, co-pay, sales and earnings cannot constitute an “event, occurrence, change, circumstance or matter”. Cosette does not allege the requisite effect over “a 12-month period” as required by the definition. Variances of the kind relied on ought reasonably to have been expected to arise from the very nature of the FY25 6+6 as a forecast, which was “Fairly Disclosed”, so they cannot be relied on to engage the definition. The co-pay “increases” arose from general economic conditions or changes, so they cannot be relied on for a further reason. And Cosette will not establish that the “Q3 FY25 Sales Performance Matters” were reasonably expected to have the effect of diminishing consolidated Maintainable EBITDA by at least A$10.76 million.”

274. There is, in my view, a fundamental conceptual difficulty with a claim by reference to changes in MPG’s forecasts, namely that the material adverse change in EBITDA contemplated by the SID is a change in MPG’s actual position, between two points in time in a 12 month period, not a change between a forecast and an actual position. As Mr Hutley points out, an attempt to establish an MMAC by comparing forecast results with actual results would defeat the disclaimer in respect of the forecast, in a manner that is not available on the proper construction of the SID or in such provisions generally: Hex**ion Speciality Chemicals Inc v Huntsman Corp (2008) 965 A.2d 715 at 741.

275. On another, and tenable, reading of the claim, its gravamen is an allegation of adverse factual developments in MPG’s business in respect of the relevant product demand, co-pay increases and poor actual sales, reflected in actual earnings in the relevant period which are alleged to have the claimed financial consequences. Ms Collins appears to put Cosette’s claim in this way in opening submissions.

276. There is a further dispute between the parties as to whether (as MPG contends) it is an essential element of Cosette’s claim in CCS [77] that, not only did the Q3 FY25 Sales Performance Matters (as defined in CCS [77]) occur, but they had the specified consequences pleaded in CCS [77(d)] and [77(e)], by reference to the forecast EBITDA contained in the FY25 6+6 EBITDA forecast. In closing submissions, Cosette responds to that submission and contends, with substantial force, that:

“The definition of Q3 FY25 Sales Performance Matters then goes on to state that the decline in actual performance pleaded at subparas (a) to (c) was one “leading to” the consequences specified in subparas (d) and (e): namely, shortfalls against the FY25 6+6 EBITDA Forecast. The use of the introductory words “leading to” before subparas (d) and (e) confirms that those subparagraphs do not define what the events at subparas (a) to (c) are. Rather, subparas (d) and (e) are identifying the consequences of the matters pleaded at sub-paras (a) to (c): the failure to meet the FY26 6+6 EBITDA Forecast. Those consequences are relevant to an assessment of whether a Mayne Material Adverse Change occurred because the Cosette Parties rely on the FY25 6+6 EBITDA Forecast as the source of the counterfactual EBITDA in FY25 absent the matters pleaded in subparas (a) to (c). Put another way, subparas (d) and (e) are pleading what Mayne’s EBITDA in FY25 was reasonably expected to be without the “events, occurrences, changes, circumstances or matters” specified in subparas (a) to (c).

In summary:

(a) The MMAC events on which the Cosette Parties rely are the Q3 business collapse consisting of weak underlying demand, co-pay increases, and deteriorating financial performance as compared to the historical trend of the business (including Q2 FY25 actuals and the prior corresponding period).

(b) The FY25 6+6 EBITDA Forecast supplies the counterfactual EBITDA for measuring the effect of the Q3 business collapse across the full FY25 period. That forecast EBITDA is a measure of what Mayne’s EBITDA was reasonably expected to be had the Q3 business collapse not occurred.”

277. It is not necessary to determine this pleading dispute where I find below that, in any case, Cosette has not established that the Q3 FY25 Sales Performance Matters, alone or together with matters arising from the FDA Letter, meet the quantitative threshold for an MMAC contained in the SID.

278. Turning now to more substantive matters, Ms Collins points to the fact that MPG’s FY25 9+3 Forecast, in its EBITDA bridge which identifies variances between the FY25 6+6 EBITDA Forecast and the FY25 9+3 Forecast, identified, in women’s health products, an A$11.5 million reduction from the FY25 6+6 EBITDA Forecast “driven by a unit reduction across all brands, but mainly Annovera”, with $4.1 million of that drop occurring in Q3 FY25; and an A$3.8 million reduction from the FY25 6+6 EBITDA Forecast associated with Nextstellis, “driven by a unit reduction”, more than half of which had already occurred in Q3 FY25. Consistent with the case law to which I referred above, and Cosette’s pleaded claims of weak underlying demand and poor actual sales and earnings in Q3 FY25, I here have regard to the actual decline in sales rather than the change between forecasts of sales made at different times. Ms Collins also points, in MPG’s dermatology products, to several declines in forecast earnings, including those associated with unit declines, but it is there more difficult to identify the actual decline in sales.

279. Ms Collins submits, and I broadly accept, that:

“The unit declines referred to in the FY25 9+3 Forecast answer the description of “weak underlying demand for [MPG]’s Women’s Health and Dermatology products in Q3 FY25” and “poor actual sales and earnings in Q3 FY25” …”

Ms Collins also submits that the FY25 6+6 Forecast already substantially incorporated the drop in units for January 2025, so the bridge from the FY25 6+6 Forecast to the FY25 9+3 Forecast is principally concerned with the further collapse of sales in February and March 2025 and the flow-on consequences of that collapse. I note, however, that it is not open to Cosette to rely on the decline in sales in January 2025, leading to a decline in EBITDA in January 2025, where I have pointed above to the disclosure of that EBITDA decline in the VDR.

280. Ms Collins also rightly points to observations in MPG’s February 2025 board paper which recognised the fact of lower unit sales in all four major brands in MPG’s women’s health business in Q3 FY25 and also projected reduced sales in Q4 FY25, and also noted declines in unit sales in major dermatology products, including Rhofade and Doryx. She also points to observations in the February 2025 CEO report, to which I referred above, that:

“(a) in relation to “Group P&L in AUD”:

February gross margin is short of forecast by ($12.0m), driven by lighter than expected sales in Dermatology and Women’s Health, a one-time adjustment to Doryx co-pay, and co-pay pipeline methodology which should normalize across the half.

(b) in relation to “P&L by Business Unit – Women’s Health”:

The gross sales miss is driven primarily by softness in underlying demand for Annovera, Nextstellis and Imvexxy relative to the forecast. A portion of the miss is also attributable to wholesaler inventories declining month-on-month. Wholesaler inventory for Annovera is at the lowest level all year.

(c) in relation to “P&L by Business Unit – Dermatology”:

Dermatology fell significantly short of the gross sales forecast in February. Sales for all products except Accutane, Rhofade, and Tretinoin Micro were the lowest we’ve seen this fiscal year as pharmacy inventory levels remain extremely low. Demand, card claim, and market share data remain strong, suggesting no issue with the underlying business. …

The gross margin unfavorability in February is a function of the higher co-pay expense mentioned previously, with the biggest impact on Doryx and Rhofade, which make up 79% of the miss. GM remains unfavorable YTD vs. budget, mainly from these same two products.”

281. Ms Collins also points to MPG’s March 2025 CFO Report, to which I also referred above, which was made available to Cosette on 16 April 2025, and observed that:

“(a) under “Group Summary – EBITDA variance vs FC”, “Unit Volume” reductions of A$1.1m associated “mostly” with NEXTSTELLIS® and ANNOVERA® and A$1.7m associated with “unit misses across entire [Dermatology] portfolio, except Fabior”;

(b) under “Group P&L in AUD”:

On a YTD basis, underlying EBITDA is behind budget by ($11.1m) and ($11.6m) behind forecast.

March gross margin is short of forecast by ($2.4m), driven by lighter than expected sales in Dermatology and Women’s Health, partially offset by co-pay favorability due to a pipeline methodology change.

(c) under “P&L by Business Unit – Women’s Health”:

WH underperforms the revenue forecast for March on unfavorable units across Nextstellis and Annovera. Imvexxy and Bijuva sales performed in-line with March forecast. Although there was softness relative to the forecast, overall sales did rebound vs. February, up 10k MoM.

The gross sales miss is driven primarily by softness in underlying demand for Annovera and Nextstellis relative to the forecast …

(d) under “P&L by Business Unit – Dermatology”:

Dermatology fell significantly short of the gross sales forecast in March. Sales did rebound vs. February, up 11,000 units MoM. There appears to be a shift in the oral antibiotic market (Doryx) from branded to generic products, generating light sales for this brand in March—which is usually the strongest month of the year.”

282. Ms Collins also relies on a comparison of MPG’s quarterly forecasts through FY25 to submit that what occurred in Q3 was a collapse in sales that was a significant departure from the trend of the business. Consistent with the case law to which I have referred, I accept that the change in forecast earnings is evidence of the fact of a decline in product sales in the underlying business, although the comparison of forecasts does not allow the quantification of that decline.

283. There is, in any event, no real dispute as to the fact of that significant decline in that period, which was frankly and properly accepted by Mr Gray in his cross-examination. In closing submissions, Cosette rightly points to the concessions made by Mr Gray in cross-examination as to a decline in demand for MPG’s products in Q3 FY25, by contrast with the previous trend in demand, to which I have referred above. I also noted the explanation that has now been identified by MPG for that adverse development. Cosette also points to Mr Gray’s evidence as to other changes in MPG’s dermatology sales channel, including the launch of competitive products which altered the persons who were buying MPG’s products and reduced MPG’s overall selling price for those products, adversely affecting gross sales and EBITDA and the loss of coverage for Rhofade which had the same effect. I accept Cosette’s submission that these matters, confirmed by Mr Gray’s evidence, rise beyond a variance between forecast and actual results to establish an actual decline in demand for MPG’s health and dermatology products in Q3 FY25, which supports Cosette’s first contention of “weak” underlying demand for those products in that period, although not as a result of a shift to generic products in respect of women’s health (as distinct from dermatology) products.

284. I accept that an occurrence, change, circumstance or matter had arisen by March 2025 in respect of weak underlying demand for MPG’s women’s health and dermatology products in Q3 FY25. It is apparent from MPG’s FY25 annual report and Mr Gray’s evidence that the cause of that development in that period cannot be established with certainty, but it most likely relates to the changes in MPG’s sales team to which I have referred above. I accept that at least a circumstance as to poor actual sales and earnings in Q3 FY25 has been established, for the same reasons that weak underlying demand was established.

285. MPG relies in response (CCSR [79]), so far as the alleged Q3 FY25 Sales Performance Matters are concerned, on disclosure in Due Diligence Material and further, or alternatively, on the claim that the matters arose from general economic or political conditions or changes in those conditions (including market fluctuations, changes in interest rates, commodity prices or foreign currency exchange rates) on or after the date of the SID, within the meaning of subparagraph (f) of the definition of an MMAC. I accept that the decline in EBITDA in January 2025, arising from these matters, was fairly disclosed in Due Diligence Material and is not available to establish an MMAC. I do not accept that these matters arose from general economic or political conditions or changes in those conditions, where they appear to have been the consequence of the changes to MPG’s sales team to which Mr Gray referred.

“There is no reason to doubt [MPG’s] own contemporaneous assessment, as reflected in the FY 25 9+3 Forecast, of the extent to which events in the course of FY 25 operated to reduce [MPG’s] EBITDA for both Q3 and the fiscal year as a whole.”

298. I do not accept that approach. At the risk of repetition, first, that approach depends on taking a single point in the forecast as establishing the likely actual result on the balance of probabilities. There is no reason to treat the several forecasts in that manner, given their nature. Second, the assessment of the decline that occurred, or was reasonably expected to occur, in Maintainable EBITDA as a result of the Q3 FY25 Sales Performance Matters requires that the impacts of those matters be isolated from other economic developments, particularly given the exceptions to Cosette’s right to terminate for an MMAC and Cosette’s comparison of forecasts does not provide any basis to do so.

299. Cosette then contended, in a manner that was unsupported by Ms Friend’s accounting evidence and was rejected by Ms Wright’s accounting evidence, for the adjustments that should be made to operational expenditure so as to reach the result that the amount of the decline in Maintainable EBITDA would exceed the quantitative threshold in the SID. I reject that approach, where that is a matter that could only properly be determined by an adequate analysis in expert evidence directed to assumed facts that were then established by evidence. Cosette in turn addresses the Doryx Co-Pay Adjustment, addressed in the expert evidence to which I have referred above, at some length, but I also consider that matter is properly addressed by reference to its factual basis and the expert evidence, which I have addressed above.

300. Cosette then contends and MPG denies (CCS [80], CCSR [80]) that, by reason of these matters, an MMAC occurred by 17 May 2025, the date of the first MAC Notice. That matter has not been established for the reasons noted above. I will address MPG’s election defence below.

Cosette’s claim that an MMAC resulted from other events

301. Cosette initially relied on two further matters, the FDA Letter relating to Nextstellis and matters raised by the TGA in an inspection of MPG’s Adelaide facility in March 2025 to establish an MMAC. As I noted above, they abandoned reliance on the TGA Letter in the course of the hearing and I need only address their claim relating to the FDA Letter here.

302. Cosette pleads (CCS [81]–[95]) matters relating to Nextstellis and refers to the reference to that product in the independent expert’s report in respect of the scheme, the receipt of the FDA Letter, the publication of that letter on the FDA’s website, a subsequent internet publication and a fall in MPG’s share price, MPG’s ASX announcements in respect of that matter and the FDA Letter Response (Ex J1, 14/10945). Cosette then pleads, and MPG denies, (CCS [86], CCSR [86]) that:

“The FDA Letter is an event, occurrence, change, circumstance or matter within the meaning of the [MMAC] definition in clause 1.1 of the SID.”

303. Cosette Parties plead, and MPG partly admits and partly denies (CCS [96A]–[96B], CCSR [96A]–[96B]) the content and effect of promotional material that MPG was using to market Nextstellis in the United States and the parties are in dispute as the effect of modifying those materials. Cosette then pleads and MPG denies (CCS [97], CCSR [97], CCS Reply [6]):

“In each of FY25, CY25, and the 12-month period from 28 April 2025, the FDA Letter and [MPG]’s changes to its NEXTSTELLIS® promotional materials and strategy as outlined in the [FDA Letter Response] have had, or are reasonably expected to have, the following effects:

(a) material costs and expenditures associated with updating the promotional materials for NEXTSTELLIS® and otherwise remediating the matters identified in the FDA Letter, including conducting additional speaker training;

(b) decline in unit sales and forecasted growth of NEXTSTELLIS®, including due to the speaker program pause, the discontinuation of the core marketing materials for NEXTSTELLIS®, and the revisions to the NEXTSTELLIS® promotional strategy that [MPG] proposes to offer in response to the FDA Letter, and the retraction of the statements and cessation of the omissions made in the Pre-FDA Letter Marketing Material …;

(c) the calling into doubt of the fundamental marketing message of the benefit of Estetrol E4 (NEXTSTELLIS API);

(d) decline in the trust and confidence of consumers in [MPG’s] practices and products, including NEXTSTELLIS®; and

(e) loss of [MPG’s] competitive advantage in relation to NEXTSTELLIS®.”

304. I should first address a preliminary issue as to the FDA Letter, which arises in this claim and in Cosette’s continuous disclosure claim based on the FDA Letter. In closing submissions, Mr Hutley submits that, to put it neutrally, Cosette does not seek to establish that the views expressed in the FDA Letter were correct, and MPG conversely does not seek to establish that, as it had previously contended, those views were incorrect at least in significant part. Neither party called their respective expert witnesses who were to address any dispute as to that issue. I recognise that Cosette sought to qualify that apparent position in closing submissions, although it was not apparent what they would put in its place where they had only pleaded the fact and content of the FDA Letter and had not pleaded or led evidence that was capable of establishing the facts and opinions expressed by the FDA in that letter or the correctness of the FDA’s view.

305. I have no doubt that the position is as Mr Hutley summarised it. That matter was plainly exposed in the course of the hearing, where I had squarely raised, and Counsel had plainly understood, from the point of opening submissions, the real difference between a contention that a regulatory communication (which may or may not may not be correct) was sent and received and a contention as to the underlying facts and matters asserted by that communication. This simply recognises the straightforward propositions that communications often do not prove the trust of their contents and (as Ms Collins fairly recognised in opening) there is no presumption of infallibility in favour of regulatory bodies.

306. In an aide memoire provided in the course of its closing submissions, Cosette drew attention to the many references to this matter in the course of the hearing but one (T42–43) is likely sufficient to identify the basis on which the case was opened and conducted by Cosette, to which MPG ultimately acceded, although it had originally placed the correctness of the FDA’s views in issue:

[Black J] “So this is a letter, a regulator expresses some views. It might have been right, it might have been wrong, and we treat those views right or wrong as a fact that exists. …

[Collins] We say that one reads the [FDA L]etter on its face, as I have just taken your Honour through, and it is a serious matter because it is an expression of a view by a regulator which has other statutory teeth, if I can use that expression …

So we see a degree of tension between the way in which this issue is developed in [MPG’s] case, but ultimately I think we agree with your Honour that the letter is what it is. It is a serious flex of muscle by a regulator, whether or not the regulator is right or wrong, particularly having regard to what [MPG] did when they got the letter is, to some extent, neither here nor there.” [emphasis added]

307. As I noted above, the parties then decided not to lead their expert evidence as to, inter alia, whether the FDA’s views were correct. I proceeded on the basis that this approach was common ground in dealing with objections to evidence (T963–964), as follows:

[Black J] “Objection is taken to an extract of US law, which appears to be possibly an extract from the Federal Food, Drug And Cosmetic Act. I would potentially have admitted that document, had there been an allegation that there was in fact a violation of that Act, and the content of that Act was relevant to indicating the content of that violation. However, no such allegation is made here.

First, [paragraph] 87 of the Cosette [P]arties' cross-claim is, in terms, an allegation of what the FDA said, not the correctness of what the FDA said, and both parties have proceeded on the basis that neither seeks to prove the truth on the one hand, or any error, on the other, in FDA's letter. In those circumstances, there is no issue about the fact that the FDA said what it said, which is common ground, and there is also no issue as to the existence or otherwise of a contravention of the relevant US legislation, because it is not asserted that the FDA's view as to that matter is correct. For that reason I will reject the pages which amount to an extract of the US legislation.” [emphasis added]

308. I therefore proceed, in this aspect of the case (and also in Cosette’s continuous disclosure claim relying on the FDA Letter, which I address below) on the basis that it is common ground that the FDA Letter had been received by MPG from the FDA, which is plainly an important regulator for its business; the FDA had expressed views in it which may or may not have been correct; MPG has responded to the FDA Letter by the FDA Letter Response; and MPG has now made changes to its marketing approach for Nextstellis as addressed in Mr Turner’s affidavit and cross-examination and the documentary evidence. Notwithstanding the position put by Ms Collins in closing submissions, neither party made any real attempt to prove the correctness or otherwise of the views expressed in the FDA Letter and that matter cannot be either assumed or determined in this judgment.

309. Cosette Parties led expert evidence and MPG led both lay and expert evidence relating to the marketing of Nextstellis which is relevant to the impact of the FDA Letter and to this claim. The Cosette Parties relied on a lengthy expert report dated 3 August 2025 of Mr John Hosier (Ex C4). Mr Hosier is a marketing consultant in the pharmaceutical industry in the United States. It was apparent from his cross-examination that he has significant experience in pharmaceutical marketing generally but limited experience in respect of the marketing of oral contraceptives. Mr Hutley made detailed criticisms of Mr Hosier’s evidence in closing submissions, and I address the difficulties with Mr Hosier’s evidence below. Mr Hutley submitted, and I accept, that Mr Hosier’s methodology depended upon the assumption that an oral contraceptive product would or should be marketed by way of a single “differentiating” feature that is unique and clinically meaningful and that Nextstellis would in fact be marketed by the “differentiating feature” that he attributed to it, namely that its estrogen ingredient was plant-based. As I note below, that premise was, at best, not established.

310. Mr Hosier was asked to evaluate the commercial impact of the FDA Letter on the gross sales of Nextstellis for FY25, CY25, a 12 month period from the date of the letter to 27 April 2026, and for a further 12 month period from the date of publication of the FDA Letter to 11 May 2026. It is not necessary to address whether it is open to Cosette to rely on any of those multiple periods, where Mr Hosier’s evidence did not establish a material impact of the FDA Letter in any of those periods for the reasons noted below. Mr Hosier adopted several complex methodologies to do so, none of which had any significant regard to the fact of MPG’s current or intended marketing strategy for Nextstellis, as distinct from as marketing approach which Mr Hosier attributes to MPG but which it is not in fact adopting, for good reason. Mr Hosier’s report indicated that he had complied with the Expert Witness Code of Conduct in Sch 7 of the UCPR and made the inquiries which he believed were necessary and appropriate. It seems to me that those inquiries should at least have included making a genuine attempt to test Mr Hosier’s hypothesis as to how MPG would market Nextstellis after the FDA Letter against how it did market Nextstellis after the FDA Letter. That makes Mr Hosier’s lack of engagement with the actual marketing approach adopted by MPG since the FDA Letter all the more unfortunate.

“In my view, the remaining Nextstellis marketing claims … leave the product at risk of being perceived by [HCPs], patients and industry observers as largely the same as other oral contraceptives, rather than, as was the case previously, a differentiated therapeutic option.”

That conclusion could not rise higher than its basis which, as I noted above, turned on a marketing approach attributed by Mr Hosier to MPG rather than the marketing approach that it is in fact adopting.

315. Mr Hosier then notes that “undifferentiated” pharmaceutical products particularly those which are more expensive than other products, are unlikely to perform as well as “differentiated” pharmaceutical products and that, as a result, Nextstellis is likely to lose prescriptions or sales, or both, due to the revised marketing claims. His conclusion that a marketing strategy that emphasised that estetrol (E4) was “unique and plant based” would leave Nextstellis as an undifferentiated product again depended on the new marketing strategy which Mr Hosier attributed to MPG, as distinct from the new marketing strategy which MPG has adopted, and I have addressed the difficulty in that approach above.

316. On the basis that MPG intends to market Nextstellis as “unique and plant-based”, Mr Hosier determined, by reference to MPG’s earlier market research, that a portion of HCPs will likely stop prescribing Nextstellis. He concludes that MPG will then lose 35% of sales from HCPs that thought Nextstellis differentiated for a reason other than its ingredient estetrol, plus 21% of sales for HCPs that thought Nextstellis was differentiated because of estetrol, but who do not believe that it is important that estetrol is plant-based. These conclusions are again derivative of the assumptions which underly them, and critically the choice of marketing claims which Mr Hosier attributes to MPG, rather than marketing claims which MPG is making. At this point, one might also have expected an expert to question his or her underlying assumptions, since it seems obvious enough that, if a marketing strategy would have that consequence, then a company would likely adopt a different and more effective one, as MPG in fact appears to have done. Mr Hosier did not, however, then pause to re-evaluate his assumptions on that basis.

317. Mr Hosier’s lengthy cross-examination demonstrated that there were also likely significant errors in the detail of his approach, including that he misread the results of marketing studies as to the extent to which HCPs value estetrol (E4) as an ingredient in Nextstellis; and, as a result, even if his methodology was otherwise correct, adopted excessive percentages reductions to the likely prescriptions and failed to exclude overlap between the two asserted categories of lost prescriptions. However, at the risk of repetition, the more fundamental difficulty with that approach was that it depended on his view that Nextstellis would become undifferentiated, on the basis of the marketing approach that he attributed to it, rather than the marketing approach that it has adopted.

318. Having reached that unsustainable conclusion, Mr Hosier in turn concluded that:

“It is reasonable to expect that the decline in NEXTSTELLIS prescriptions results in lost gross sales between $23.4 million and $37.6 million (USD) for the full year following the [FDA Letter] and between $25.2 million and $40.5 million (USD) for the full year following the [FDA Letter] becoming public (May 12, 2025, through May 11, 2026).

In my opinion, while for the April 28, 2025 through April 27, 2026 period, the range of reasonably expected outcomes extends from $23.4 million to $37.6 million (or $25.2 million to $45.5 million for the later 12 month period), all available evidence, including market analogues (my second approach) and actual data through June 2025, supports the conclusion lost gross sales would most likely align with the upper end of this range, in each time period.”

That conclusion depends on its underlying assumptions, and I do not accept it for the reasons noted above.

319. In an alternative analysis, Mr Hosier then considered how “similar oral contraceptive products” have performed over the same period of time since launch. However, his cross-examination demonstrated, beyond doubt, that his choice of two “similar” products was at best unjustified and at worst perverse, because one of those “similar products” had an uncommon dosage structure and was promoted to a relatively specialist market and the other was a product that was largely not distinguishable from many other contraceptive products. Mr Hosier saw a decline in prescriptions for those products over the relevant time period and, on that basis, forecast a decrease in gross sales of Nextstellis for $37.5 million one year after the FDA Letter and $40.7 million one year after the FDA Letter became public. Those conclusions also cannot rise higher than their underlying assumptions and, in particular, Mr Hosier’s choice of the comparator products, which I do not accept.

320. By a second expert report dated 8 September 2025 (Ex C5), Mr Hosier responded to Mr Turner’s affidavit evidence and an expert report of Ms Selman on which MPG relied, which I address below. Mr Hosier expressed the view that Mr Turner’s affidavit and Ms Selman’s report did not change any of his opinions and that, despite the features of Nextstellis to which Ms Selman and Mr Turner pointed, Nextstellis was “largely undifferentiated” following the FDA Letter and that, other than the use of estetrol, none of its features is distinct to Nextstellis. Mr Hosier there accepts that estetrol is distinct to Nextstellis; but contends that, where MPG will not market it in a manner that implies that that results in superior safety or efficacy, estetrol would not offer a “differentiating” advantage to Nextstellis. That proposition depends on Mr Hosier’s perception as to what would be a “differentiating advantage” to Nextstellis and the distinction between what is a “difference” and what is a “differentiating advantage” became elusive in his cross-examination.

321. Mr Hosier there responds to the “differentiating features” of Nextstellis identified by Ms Selman and Mr Turner and suggests that each of the separate differentiating features may be found in another product or products in the market for oral contraceptives. While that proposition may be true, a combination of features does appear to distinguish Nextstellis from other products, for the reasons pointed out by Ms Selman and Mr Turner, and it is not apparent that Mr Hosier has a proper basis on which to dismiss the significance of that combination of features to HCPs or consumers, or to exclude MPG’s ability to capitalise on any attraction of that combination, in the face of the evidence that it is in fact continuing to do so. Mr Hosier, in reply, also repeats aspects of his evidence in chief, but that repetition does not address the difficulties with that evidence which I have noted above.

322. Mr Hosier was cross-examined at length, although the deficiencies in his approach emerged early in that cross-examination and were only reinforced as it continued. He was, in my view, an unimpressive witness, who typically did not engage with questions in a responsive way and, to the extent that he did so, defended his position without any real analytical engagement with the matters that falsify it which were put to him in cross-examination. Mr Hosier’s evidence in cross-examination reinforces my conclusion that his views are of no assistance to the Court.

“The receipt of [the FDA Letter] was a material development in the conduct of [MPG]’s business, in the context where NEXTSTELLIS®:

(a) is [MPG]’s most important product and is a major contributor to [MPG]’s earnings;

(b) was described as being one of [MPG]’s “key products” by [MPG]’s independent expert engaged to express an opinion on whether the SID was in the best interests of [MPG] Shareholders;

(c) was referred to in [MPG]’s 2024 Annual Report as “one of our key growth drivers”. In that report, [MPG] identified that the revenue increase for its “Women’s Health” segment in FY24 was driven by (inter alia) “improved sales performance of NEXTSTELLIS®, as a result of refreshed sales leadership and marketing strategies” and “volume growth of all key Women’s Health products” (of which NEXTSTELLIS® was one);

(d) was projected by [MPG] in the FY25 9+3 Forecast to generate US$35,773,033 (over A$56m) of gross margin in FY25; and

(e) was projected by [MPG] as of 5 June 2025, in a document purporting to be [MPG]’s FY26 budget, to generate US$44,881,119 (over A$69m) of gross margin.”

333. I have no doubt that Nextstellis is a significant product for MPG, and MPG does not suggest the contrary. However, where neither party seeks to establish whether the FDA was right or wrong in the views that it expressed, the materiality of the letter turns on the fact that it was a communication from a regulator that expressed certain views which may or may not have been correct and, more fundamentally, on its impact upon continuing sales of Nextstellis and upon MPG’s business, earnings and profitability.

334. Ms Collins in turn submits in opening, plausibly, that MPG’s earnings generated from sales of Nextstellis are influenced by its ability to market the product in a way that differentiates the drug and promotes its efficacy and safety profile. She points to statements included in previous advertising for Nextstellis, including in speaker programs and CVAs, which were addressed in Mr Turner’s evidence to which I referred above and to the manner in which those statements differentiated Nextstellis and, at least potentially, contributed to sales of Nextstellis. She points to the views expressed by the FDA Letter, the truth of which neither party seeks to establish, and relies on MPG’s immediate response to the FDA Letter and share price movements to establish its materiality. I do not accept the former establishes materiality in a relevant sense, where MPG’s immediate response plainly reflected the need for immediate action in response to the FDA’s concerns, and concerns raised by a regulatory in a highly regulated industry are properly treated as significant in any event. I do not accept the latter establishes materiality in a relevant sense, for the reasons that I address in dealing with Cosette’s allegation of a breach of MPG’s continuous disclosure obligations below. Ms Collins also refers to the FDA Letter Response and the steps which MPG has taken in response to that letter, as they emerge from Mr Turner’s evidence and documents tendered by the parties.

335. Cosette pleads that direct marketing-related costs and loss of gross sales consequent upon MPG’s changes to its Nextstellis promotional materials and strategy have or are reasonably expected to have the effect of diminishing consolidated Maintainable EBITDA by at least $10.76 million, either by itself or in combination with other pleaded matters. It relies on Mr Hosier’s evidence, which I have addressed above, for that proposition, although it somewhat withdrew from that reliance in closing submissions . As I have noted above, it seems to me that Mr Hosier’s evidence is based on a fundamental false premise. He assesses the outcome of MPG discontinuing aspects of its former marketing of Nextstellis, which were likely significant to that marketing, but disregards the marketing approach which MPG will now take for Nextstellis which, as Mr Turner’s evidence had made clear, MPG was already moving towards prior to the FDA Letter. Mr Hosier’s evidence assumes a position which does not and will not exist, by assuming that an earlier marketing strategy is abandoned and nothing is put in its place, and begs the question whether, as Mr Turner plainly believes, the new marketing strategy that he had been promoting before the FDA Letter will improve MPG’s sales results for and earnings from Nextstellis. In short, Mr Hosier’s report is of no assistance in determining the questions that I need to decide, and I would comfortably prefer Mr Turner’s evidence of the benefits of MPG’s new marketing strategy for Nextstellis to Mr Hosier’s assessment, which fails to address that critical question.

“[112] In the alternative to the matters pleaded in paragraph 80 above, and by reason of the matters pleaded in paragraph 77 and paragraphs 81 to 102 above, the FDA Letter, [MPG]’s changes to its NEXTSTELLIS® promotional materials and strategy as outlined in the [MPG] FDA Letter Response, and the TGA Letter collectively, or when aggregated with the Q3 FY25 Sales Performance Matters, have or are reasonably expected to have the effect of:

(a) diminishing the consolidated Maintainable EBITDA of the Mayne Group over FY25, taken as a whole; or

(b) alternatively, diminishing the consolidated Maintainable EBITDA of the Mayne Group over CY25, taken as a whole,

by at least A$10.76 million.

[Paragraph 113 was abandoned: T1072]

[114] By reason of the matters pleaded in paragraph … paragraph 112 … a [MMAC] occurred by 17 May 2025.”

339. These allegations are not established where the claim on which they rely is not established.

340. In closing submissions, although Cosette did not press its earlier contention that the FDA Letter had or was reasonably expected to have the effect of diminishing the consolidated Maintainable EBITDA of MPG over the 12 month period from 28 April 2025, it pressed a claim that the FDA Letter, in combination with the Q3 FY25 Sales Performance matters had or was reasonably expected to have the effect of diminishing MPG’s consolidated Maintainable EBITDA over the 12 month period for FY25 or CY25, and made detailed submissions as to the calculation of the financial loss said to have arisen from the FDA Letter. Cosette now submits that the Court should find that the FDA Letter was reasonably expected to have the effect of diminishing the consolidated maintainable EBITDA by amounts of $A471,708 for FY25 and $A2.83 million for CY25. It is not necessary to address the complex calculations undertaken in those submissions to support that conclusion, which depend in part on Mr Hosier’s evidence which I have not accepted. I have found above, as a matter of fact, that it has not been established that the changes made by MPG to its marketing strategy, in response to the FDA Letter, were adverse rather than positive, and the evidence does not establish that those changes have had, or are reasonably expected to have a material adverse impact on MPG’s sales of Nextstellis. The calculations made by Cosette in submissions, however elaborate and ingenious, cannot raise above their lack of factual basis.

341. I have dealt with the position in respect of the Q3 FY25 Sales Performance matters above, and Cosette has not established any material additional reduction in its Maintainable EBITDA over either period resulting from the FDA Letter or the FDA Letter Response.

342. MPG relies (CCSR [97(c)]), by way of defence, on disclosure of this matter in due diligence materials. MPG had frankly and properly drawn the receipt of the FDA Letter to Cosette’s attention in the due diligence process. It is not necessary to address this defence given the conclusions that I have reached on other grounds.

Cosette’s claim for breach of Mayne Representation and Warranty

343. Third, Cosette relies on an alleged breach of a representation and warranty given by MPG under the SID. The warranty claim is that the “Mayne Representation and Warranty” about “Due Diligence Material” in Sch 2 cl 15 was not true and correct and that breach was “material in the context of the Transaction as a whole”, giving Cosette a right to terminate under cl 15.1(a)(i) of the SID.

344. Cosette relevantly pleads (CCS [115]–[116]) the Mayne Representation and Warranty under cll 9.2 and 9.3 of the SID and that the FY25 6+6 Forecast formed part of the “Due Diligence Materials” within the meaning of the SID. MPG responds (CCSR [115], disputed CCS Reply [8]) that:

“(a) … the representation and warranty referred to in subparagraph (c) was subject to:

(i) the disclaimer as to forecasts, predictions or projections, budgets, business plans and other forward looking statements in paragraph 15(c) of Schedule 2 to the SID referred to in paragraph 41(b)(i) above; and

(ii) Cosette’s acknowledgment that it was solely for Cosette to consider and determine the materiality and relevance of the information Fairly Disclosed in the Due Diligence Materials for the purposes of evaluating the Mayne Group and proceeding with the Transaction in paragraph 15(c) of Schedule 2 to the SID;

(iii) Cosette’s acknowledgment and agreement by clause 9.2(b) that the Mayne Representations and Warranties were made or given by [MPG] subject to any facts, matters, circumstances, events and acts that (amongst other things) (A) had been Fairly Disclosed in the Due Diligence Material; or (B) were within the knowledge, belief or awareness of any member of the Cosette Deal Team;

(b) says that the conduct relied on by the parties was also subject to:

(i) the exclusion of representations and entire agreements clause in the SID referred to in paragraph 41(b)(ii) and (iii) above, and

(ii) the Confidentiality Agreement, including the provisions referred to in [CCSR 18(a)].”

345. I now turn to the applicable provision of the SID. By cl 9.2 of the SID, MPG made the representations and warranties contained in Sch 2 of the SID. Clause 15 of Sch 2 relevantly provides:

(Due Diligence Material) The Due Diligence Material has been collated and prepared in good faith and with reasonable care and:

(a) as far as [MPG] is aware, the Due Diligence Material are accurate in all material respects and the information contained in the Due Diligence Material is not false or misleading in any material respect (including by omission); and

(b) [MPG] has not knowingly withheld or omitted information from disclosure to Cosette (including in response to Cosette’s due diligence requests) that is not subject to legal professional privilege which could reasonably be expected to be material to Cosette’s evaluation of the Mayne Group and the merits of the Transaction …

346. The phrase “Due Diligence Material” is defined to mean the “Data Room Materials”, the “Disclosure Letter” and any other information made available by MPG to Cosette prior to execution of the SID which is agreed in writing. Clause 15(c) of Schedule 2 to the SID in turn provides that, in respect of the Due Diligence Materials provided to Cosette:

“[MPG] does not make any representation or warranty as to the accuracy or adequacy of a forecast, prediction or projection, budget, business plan or other forward looking statement in respect of the future financial position, performance or prospects of the Mayne Group (Mayne Group Forecast) or that any Mayne Group Forecast will be achieved”.

347. Cosette contends that this clause does not qualify the representation and warranty that the Due Diligence Material has been collated and prepared in good faith and with reasonable care and does not qualify the representation and warranty that MPG has not withheld any information within the specified character. The Cosette Parties also contend that this clause operates in respect of the future financial position of MPG and does not qualify a representation as to historical or current information.

348. Clause 15(d) of the SID relevantly provides:

… for the purposes of subparagraph (b) above, while [MPG] represents and warrants the contents of that subparagraph, Cosette acknowledges that it is solely for Cosette to consider and determine the materiality and relevance of the information Fairly Disclosed in the Due Diligence Materials for the purposes of evaluating the Mayne Group and proceeding with the Transaction.

349. Cosette contends that this clause only operates in respect of the representations and warranties in cl 15(b) and the effect of the clause is that the representation and warranty in cl 15(b) is not to be construed as imposing on MPG any obligation to educate Cosette as to the materiality and relevance of information it has disclosed. Cosette submits that it does not diminish the scope of MPG’s representation that it has not knowingly withheld or omitted information of the kind covered by cl 15(b).

350. Returning to the body of the SID, Cosette also relies on cl 9.6(a) of the SID which requires MPG to notify Cosette if it becomes aware of any fact, matter or circumstance that has resulted in, or might reasonably be expected to result in, a breach of a Mayne Representation and Warranty. Clause 9.7 of the SID in turn provides:

“Each party acknowledges that no party (nor any person acting on its behalf) has made any representation or other inducement to it to enter into this deed, except for representations or inducements expressly set out in this deed and (to the maximum extent permitted by law) all other representations, warranties and conditions implied by statute or otherwise in relation to any matter relating to this deed, the circumstances surrounding the parties’ entry into it and the transactions contemplated by it are expressly excluded.”

351. Clause 15.1(a)(i) of the SID relevantly provides that Cosette may terminate the SID if a Mayne Representation and Warranty is not true and correct where that breach of representation and warranty is material in the context of the Transaction as a whole; or is reasonably expected to result in an MMAC. Clause 15.2 of the SID relevantly provided that on termination by a party under cl 3.7(b), the SID will be of no force or effect except for several exceptions.

352. I approach the question of construction of these clauses with regard to the High Court’s observations as to the objective approach to construction in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; (2004) 211 ALR 342; [2004] HCA 52 at [40]; Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd (2014) 251 CLR 640; (2004) 306 ALR 25; [2014] HCA 7 at [35] and Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; (2015) 325 ALR 188; [2015] HCA 37 at [46]–[52], [59] and I proceed on the basis that construction should commence with the language used by the parties, although the Court may also have regard to objective surrounding circumstances. In Price (as executor of the estate of Price (dec’d)) v Spoor (as trustee) (2021) 391 ALR 532; [2021] HCA 20 at [27] , the High Court again observed that an objective approach is applied in determining the rights and liabilities of a party to a commercial contract, by reference to its text, context and purpose, and “[t]he meaning to be given to its terms is determined by reference to what a reasonable business person would have understood those terms to mean”. I accept that it is necessary to construe the language of these clauses in the SID according to their natural and ordinary meaning, having regard to the circumstances which the document addresses, and the objects which it is intended to secure; and the inquiry will start, and usually finish, by asking what is the ordinary meaning of the words used: Charter Reinsurance Co Ltd v Fagan [1997] AC 313 at 384; Australian Pipeline Ltd v Hastings Funds Management Ltd (2014) 103 ACSR 343 at 348; [2014] NSWCA 398; HDI Global Specialty SE v Wonkana No 3 Pty Ltd (2020) 104 NSWLR 634; [2020] NSWCA 296 at [22]; SIF Holdings Pty Ltd v CRC Gosford Pty Ltd (2021) 391 ALR 697; [2021] NSWCA 174 at [73]; Ali v Insurance Australia Ltd [2022] NSWCA 174 at [29] .

353. As I noted above, Cosette seeks to read the representation and warranty as to the collation and preparation of the “Due Diligence Material” as extending to the preparation of, and by extension the content of, each document contained in the VDR. Mr Hutley responds that this representation and warranty is limited only to the collation and preparation of that material for the purposes of due diligence, at a point after it is brought into existence, likely for other purposes, and does not extend to the content of each document made available for due diligence. Mr Hutley also submits that the relevant warranty is directed to the “Due Diligence Material” as a whole, being the body of material produced in due diligence, and not to single documents included in that material. I recognise that the definition of “Due Diligence Material” and the definition of “Data Room Materials” are themselves directed to the totality of the documents falling within those definitions, read as a whole, and not to each individual document falling within those definitions. That reading of the provision operates consistently with the fact that other warranties deal with the accuracy of particular items including, relevantly, the disclaimer of any warranty as to the accuracy, adequacy or achievability of a Mayne Group forecast.

“[117] As at and from 17 February 2025, including on 20 February 2025, [MPG] had access to and knew, or ought to have known on the basis of reasonable inquiries of direct reports of the Mayne Specified Executives, the following:

(a) prescription data for the month of January 2025 and daily prescription data for February 2025;

(b) co-pay card data for the month of January 2025 and daily co-pay card data for February 2025;

(c) data in relation to the number of units that it had shipped for the month of January 2025 and daily data in relation to the number of units shipped for February 2025; and

(d) data in relation to its daily gross sales for February 2025.

[118] As at and from 17 February 2025, including on 20 February 2025, [MPG] knew, or alternatively ought to have known on the basis of reasonable inquiries of direct reports of the Mayne Specified Executives:

(a) [MPG]’s full January 2025 results, being an actual underlying EBITDA for the month of negative $5,112,000 against a forecast of negative $4,267,000;

(b) the reasons for the variation against EBITDA forecast for January 2025;

(c) the actual gross sales performance of [MPG] for February 2025 up to the date of the SID, including:

(i) daily sales volumes across all products;

(ii) overall volume declines across [MPG]’s Women’s Health portfolio in February 2025 against forecast;

(iii) weakness in underlying demand for its products, ANNOVERA®, NEXTSTELLIS® and IMVEXXY®, relative to forecast;

(iv) poor gross sales performance in [MPG]’s Dermatology portfolio in February 2025;

(d) the reasons for the shortfall in gross sales in January and February 2025, including (without limitation) market trends such as market shifts from branded to generic products in Dermatology and increased generic competition;

(e) the implications of the actual January 2025 results and gross sales performance in February 2025 for the likely EBITDA result for FY25;

(f) that the FY25 6+6 EBITDA Forecast was likely not achievable given the actual sales performance in January and February 2025; and

Particulars

A. Information available to [MPG] as at both 17 February and 20 February 2025 showed that [MPG] had high levels of channel inventory for six products constituting the main source of [MPG]’s revenue, being NEXTSTELLIS®, ANNOVERA®, IMVEXXY®, BIJUVA®, RHOFADE® and DORYX® (Key F Products). A high level of channel inventory is a leading indicator of likely depressed net sales (and EBITDA) in the near future, as high channel inventory leads to decreased short-term demand from wholesalers or pharmacies and signals an increased likelihood of future product returns: Expert Report of Pete A Meyers dated 1 August 2025 (Meyers Report) at [18].

B. As of 17 February 2025, five of the six Key Mayne Products were more than 15% behind the pace needed to meet the FY25 6+6 Forecast for February, and [MPG] would have needed to ship NEXTSTELLIS® units at a rate 37% faster than its actual month-to-date daily shipment rate for the remainder of the month: Meyers Report at [18], [73]-[74], Ex 4A.

C. As of 20 February 2025, all six of the Key Mayne Products had fallen behind the pace needed to meet the FY25 6+6 Forecast for February 2025, with five of the six more than 20% behind pace: Meyers Report at [18], [75].

(g) that the likely shortfall to the FY25 6+6 EBITDA Forecast would be material.

356. The first pleaded matter (CCS [118]) is MPG’s actual underlying EBITDA for the month of negative $5.112 million against a forecast of negative $4.267 million. As I have noted above, Mr Gray received those results on 13 February 2025 and, as Cosette pleads, they showed a reduction of $845,000 from its budgeted EBITDA for January 2025 from (A$4.267 million) to (A$5.112 million). MPG plainly knew that matter from that date, as I have noted above, and that information was also made available to Cosette and its advisers and Avista by the “Cash flow by month F25” placed in the VDR (Ex M4) on 18 February 2025.

357. The second pleaded matter (CCS [118(b)]) is that MPG then knew or ought to have known the reasons for the variation against EBITDA forecast in January 2025, although Cosette does not there allege the content of those reasons. MPG’s January CFO report (Ex J1, 11A/8110, noted above) referred, in addressing the variance in the January 2025 EBITDA, to a shortfall in the January 2025 gross margin of A$1.5 million “driven entirely by Dermatology – specifically the co-pay pipeline calculation”, which “should normalize across the half.” It is apparent that MPG then knew the basis for the Doryx Co-Pay Adjustment which I have addressed above in dealing with the expert accounting evidence. It is not apparent that MPG then knew or should or could have known the cause of any EBITDA decline arising in its women’s health products arising from changes in its sales team, as evidenced in Mr Gray’s cross-examination to which I have referred above.

358. The third pleaded matter (CCS [118(c)]) is that MPG then knew or ought to have known MPG’s February sales performance, including four elements of that performance. It is not apparent that all these matters have been established, still less that MPG knew or ought to have known that information at that time, where some sales information was available daily but other information was not. Mr Gray did not know “daily sales volumes across all products” up to 17 February 2025. His evidence (T422, 510), which I accept, was that he generally looked at the number of units shipped in the second, third and fourth week of the month and he “had access to up-to-date units shipped to 14 February” and “would have looked at it”. There is no basis in expert or other evidence for a finding that he should have reviewed such evidence more frequently than he did. I have addressed the second element of this matter, whether there were “overall volume declines across [MPG’s] Women’s Health portfolio in February 2025 against forecast” above. The third element of this matter is “weakness in underlying demand”. That was not known, and there is no basis to find that it should have been known, as at 17 February 2025, when Mr Gray only had access to consolidated demand data up to the end of January 2025, or as at 20 February 2025. The information then available did not indicate a change in the level of demand, as distinct from a decline in units shipped, and I have addressed Mr Gray’s and Mr Meyers’ evidence as to that matter above. The fourth element of this matter is that “gross sales performance in M[PG’s] Dermatology portfolio” was “poor”, and I have addressed the issue of the decline in sales performance above.

“Nor does Cosette attempt to justify why the analysis ought to have been undertaken as at 17 and 20 February 2025. Those dates have no special significance in terms of [MPG’s] quarterly forecasting process. They were after Mr Gray had finished drafting his forecast paper but before the paper was circulated to the board. Cosette only attaches significance to these dates by reference to a meeting about the FY25 6+6 and the execution of the SID. But any warranty to the effect that the FY25 6+6 was prepared “with reasonable care” could not require Mr Gray to perform some “pace” analysis that he—and others in the industry—do not use.”

363. The claim as to the third particularised matter to CCS [118(f)] has the same difficulties.

364. I accept that MPG, at the relevant time, knew its actual underlying EBITDA for January 2025, but that matter was fairly disclosed in the Due Diligence Materials by the “Cash flow by month F25” (Ex M4) placed in the VDR and does not support an allegation for breach of the Mayne Representation and Warranty. I also accept, having regard to Mr Gray’s evidence in cross-examination, that MPG did not then know and could not reasonably have known the reasons for the variation against EBITDA forecast for January 2025, now thought to be the changes to its sales team. I accept that it was the fact, and MPG knew that competition from generic products was affecting its dermatology business, although not to a level that would, at least in itself, materially impact its likely EBITDA result for FY25. The evidence does not establish that MPG knew or should have known the unidentified implications of the actual January 2025 results and gross sales performance in February 2025 for the likely EBITDA result for FY25, or that those implications were adverse since, on the information then known, demand that was not met by deliveries in January or February 2025 might well have resulted in increased sales in the balance of Q2 of FY25.

365. Cosette contends (CCS [118(g)]), in consequence, MPG know or ought to have known that “the likely shortfall to the FY25 6+6 EBITDA Forecast would be material.” I do not accept this proposition is established, because its basis in previous paragraphs is largely not established. This claim also involves the implicit allegation that the then shortfall in MPG’s EBITDA was not recoverable and that the shortfall to forecast was material in a relevant sense and it has also not been established that MPG know or ought to have known those matters at that time. For completeness, Mr Gray’s evidence, which I accept, was that he first became aware of the “significant miss” to the February 2025 EBITDA forecast when he received the February 2025 results in March 2025.

366. Cosette then pleads (CCS [119], denied CCSR [119]) that:

“Had the Due Diligence Materials been collated and prepared with reasonable care, the matters pleaded in paragraph 118 above would have been considered in the preparation of the FY25 6+6 Forecast and the FY25 6+6 EBITDA Forecast would have been revised downwards accordingly.”

367. The evidence also does not establish this matter, even if (contrary to the conclusion that I have reached) the relevant representation and warranty applied to a specific document within the Due Diligence Materials, namely the FY25 6+6 Forecast, rather than the body of the Due Diligence Material as a whole. Mr Gray’s evidence establishes that a structured and reasonable process was adopted by MPG to prepare the FY25 6+6 Forecast and the FY25 6+6 EBITDA Forecast and his lengthy cross-examination reinforced rather than impugned that process. An adjustment was made, and challenged at length in Mr Gray’s cross-examination, to reflect the decline in actual EBITDA in January 2025 in that forecast while maintaining the forecast number, on the basis that unmet demand in January 2025 would be reflected in increased sales in the subsequent period. It has not been established that that approach was not then a reasonable one.

368. Cosette’s criticism of the FY25 6+6 Forecast also relies on Mr Meyers’ “pace” analysis. The difficulties with that analysis are, first, the wider difficulties with Mr Meyers’ evidence that I have addressed above. Second, in the course of cross-examination, Mr Meyers significantly changed his description of that analysis, to suggest that it is not a straightforward calculation of daily average shipment rate but has regard to a wide range of other materials including the level of inventory, in a manner that would render it both highly subjective and inconsistent with limited analysis that he performed in his report. Third, and importantly, it was not put to Mr Gray that, if a pace analysis was performed that took account of those wider factors, it would have been inconsistent with the approach that Mr Gray had adopted. Fourth, as Mr Meyers’ cross-examination demonstrated, the application of a “pace” analysis (at least in the simpler version applied in Mr Meyers’ report, as distinct from the more complex version articulated in his cross-examination) would have shown, at particular times, that MPG was “behind the pace” by reference to its budget, but there is no suggestion that it could not or did not then reach its budget or forecast, where that result simply reflected fluctuations of shipping rates at those times.

369. Cosette also did not establish a critical premise of this claim, which I raised with Counsel in the course of Mr Gray’s cross-examination, namely that the exercise of reasonable care in the preparation of the FY25 6+6 Forecast at a point in time, or forecasts generally, would require that the forecast be updated by reference to subsequent information. The fact that MPG here chose to adjust its FY25 6+6 Forecast (which was, by definition, directed to forecast information in 2H FY25) for known EBITDA in January 2025 did not establish that it was obliged, in exercising reasonable care, to do so or to continue to do so by reference to even later information. That is plainly not self-evident, where it is in the nature of a forecast prepared at a point in time that subsequent actual events will likely depart from it. Absent an external obligation to undertake continuous forecasting, it is not apparent why a forecast prepared at a point in time should necessarily be updated because actual results depart from it.

[120] By reason of the matters pleaded in paragraph 118 and 119 above, as at and from 17 February 2025, including on 20 February 2025, the Due Diligence Materials:

(a) were not collated and prepared with reasonable care;

(b) were misleading in a material respect (including by omission); and

(c) omitted information which could reasonably be expected to be material to Cosette’s evaluation of the Mayne Group and the merits of the Transaction.

[121] By reason of the matters pleaded in paragraphs 117 to 120 above, the Due Diligence Material Representation was not true and correct at the date of the SID.”

371. This claim is also not established. First, I have not accepted the construction of the SID on which it depends. Second, it is not apparent that there is any lack of reasonable care in preparation of a forecast, particularly one that discloses risks and opportunities, by reason of the fact that the forecast might not be achieved or might be surpassed. Any contrary view would have the result that management could not provide its best estimate to a company’s directors or a sophisticated potential acquirer, recognising both the possibility of over-performance and under-performance, but would instead be required to provide a less useful and less informative estimate which was biased to conservatism. Third, even if the relevant representation and warranty applied to specific documents within the Due Diligence Materials, namely the FY25 6+6 Forecast and the FY25 6+6 EBITDA Forecast, the evidence to which I have referred above does not establish that they were not prepared with reasonable care.

372. The evidence also does not establish that the FY25 6+6 Forecast and the FY25 6+6 EBITDA Forecast were misleading in a material respect (including by omission), where they represented no more than that they were a forecast for the relevant six month period and that they had a reasonable basis. There is no basis to find the contrary, particularly where the decline in MPG’s January 2025 EBITDA had itself been fairly disclosed in the Due Diligence Materials. I also do not find that the relevant forecasts omitted information which could reasonably be expected to be material to Cosette’s evaluation of the MPG and the merits of the transaction, where there is no basis to think that forecasts of that kind should been adjusted in the manner that Cosette contends and the decline in the January 2025 EBITDA had itself been fairly disclosed in the Due Diligence Materials.

373. The allegation in CCS [121] fails for the same reasons. MPG also responds (CCSR [121]) that the fact that the underlying EBITDA forecast for FY25 in the FY25 6+6 Forecast was not prepared by reference to the “pace” of shipments in February 2025 up to 17 or 20 February 2025 was fairly disclosed in the Due Diligence Material; and/or within the knowledge, belief or awareness of Cosette’s deal team. It is not necessary to determine this matter given the conclusions that I have reached on other grounds.

374. Cosette then pleads (CCS [122]–[124], denied CCSR [122]–[124]) that it is entitled to terminate the SID by reason of the alleged breach of the Due Diligence Material Representation, as follows (omitting particulars):

“[MPG’s] breach of the Due Diligence Material Representation was material in the context of the Transaction as a whole, within the meaning of clause 15.1(a)(i)(A)(2) of the SID.

By reason of the matters pleaded at paragraphs 115(d) to 115(g) and paragraphs 121 and 122, Cosette:

(a) has a right to terminate the SID for [MPG’s] breach of the Due Diligence Material Representation by giving written notice to [MPG] setting out the relevant circumstances and stating an intention to terminate the SID, provided the relevant circumstances continue to exist for five Business Days from the time the notice of intention to terminate is given (or any shorter period ending at 5.00 pm on the Business Day before the Second Court Date);

(b) is entitled to be indemnified by [MPG] and to be paid by [MPG] on demand the amount of any losses, liabilities, damages, costs, charges or expenses suffered or incurred by Cosette as a result of, or in connection with, [MPG’s] breach of the Due Diligence Material Representation, up to the amount of the Mayne Break Fee; and

(c) is entitled to the Mayne Break Fee, being a liquidated sum of A$6,718,788.50, if Cosette validly terminates the SID for [MPG’s] breach of the Due Diligence Material Representation.

Cosette has suffered or incurred losses, liabilities, damages, costs, charges or expenses as a result of, or in connection with, Mayne’s breach of the Due Diligence Material Representation.”

375. Mr Hutley responds that Cosette has neither pleaded nor established the matters necessary to show that any contravention of the warranty as to Due Diligence Material arising from the FY25 6+6 Forecast was “material on the context of the transaction as a whole”, by way of any established impact on Cosette’s decision-making, to give rise to a right of termination within cl 15.1(1)(A)(2) of the SID. He submits that:

“to sustain its claim, Cosette would need to establish that the failure to prepare the FY25 6+6 [Forecast] with reasonable care given the channel inventory and “pace” of sales was material in the context of its acquisition of the Scheme Shares through implementation of the Scheme in accordance with the terms of the SID. That requires an assertion that the alleged failure was material to its decision whether to acquire the Scheme Shares in accordance with the terms of the SID. Cosette was required to identify—directly and unambiguously—the material facts relied on to establish any such causal link between the alleged failure and the decision. It has not done so. Nor would the Court be satisfied of any such link on the evidence.”

376. I accept that submission, for the reasons that Mr Hutley there puts, in respect of channel inventory and the “pace” of sales and also in respect of the other factual bases of this claim that I have addressed above. In closing submissions, Mr Hutley also addresses the question of reliance and loss, in respect of the question whether any breach of the contractual due diligence material warranty was material for the purposes of cl 15.1(i)(A)(2) of the SID. I need not address that question further, where neither misleading or deceptive conduct nor the breach of that warranty has been established. This claim is not established for the reasons set out above, even apart from the question of election that I address below.

Cosette’s claim for breach of obligation to comply with applicable laws – continuous disclosure

377. Fourth, Cosette pleads a breach of MPG’s continuous disclosure obligations and misleading and deceptive conduct to assert a breach of a warranty as to compliance with applicable laws. In their outline of the nature of dispute in the CCS, they contend (CCS [15A]) that:

“by reason of [MPG’s] failures to disclose material information concerning NEXTSTELLIS® to the market, [MPG] has failed to comply in all material respects with all applicable material authorisations, laws and regulations (including the ASX Listing Rules), and is therefore in material breach of clause 7.1(b) of the SID. On 5 August 2025, Cosette gave [MPG] notice of its intention to terminate the SID for this breach. Cosette intends to issue a notice of termination for this breach on 11 August 2025.”

378. It is common ground (CCS [124A]–[124B], CCSR [124A]–[124B]) that cl 7.1(b) of the SID required MPG, broadly, to comply in all material respects with applicable laws, including Australian Consumer Law in Sch 2 of the Competition and Consumer Act 2010 (Cth) (“ACL”) s 18, Australian Securities and Investments Commission Act 2001 (Cth) (“ASIC Act”) s 12DA, ss 674A and 1041H of the Act and rule 3.1 of the ASX Listing Rules. Cosette had a right to terminate the SID (which it has purportedly exercised) if, for the purposes of cl 15.1(a)(i)(A)(1), there was a material breach of cl 7.1(b). In opening submissions, Ms Collins draws attention to case law as to the scope of a material breach, including Elders Ltd v E J Knight & Co Pty Ltd [2009] NSWSC 1462, where White J observed (at [48]) that, in respect of a “material breach” of a lease:

“Counsel correctly submitted that the focus is on the materiality of the breach rather than the materiality of the obligation (Celtech International Ltd v Dalkia Utility Services plc [2004] EWHC 193 (Ch) at [26]). Counsel submitted that for the breach to be material, it must have had a serious effect on the benefit which the Lessor would otherwise have had from the transaction, that is, it must be of serious or substantial import (Celtech International Ltd v Dalkia Utility Services at [26]; Mobileciti Pty Ltd v Vodafone Pty Ltd [2009] NSWSC 899 at [58]). I agree with this submission. The context in which the expression “material breach” is used in clause 6(d) is that such a breach, if not rectified, would result in an obligation to pay an additional $1.8 million of rent plus interest. In that context I think it is clear that a reference to a material breach is only to a breach which substantially adversely affects the interests of the Lessor.”

379. Ms Collins also referred to Androvitsenas v Members First Broker Network [2013] VSCA 212 at [89] (“Androvitsenas”), where the Court held that the word “material” had the meaning of “important” and connoted “significance” and (at [92]) that a breach by the representative which could put in jeopardy the licensee’s credit licence, or expose it to criminal liability for breach of legislation, had “the potential of being of serious or substantial import to the intended benefits to the licensee of the deed.”

380. Mr Hutley in turn submits, by reference to the case law including Androvitsenas, Thera Agri Capital No 2 Pty Ltd v BCC Trade Credit Pty Ltd t/as The Bond & Credit Co [2022] NSWSC 669 at [186] and Daynes v I-MED Central Queensland Pty Ltd [2025] NSWCA 150 at [132]–[133] that:

“A “material” breach has repeatedly been held, in the context of various contracts (and in the case of termination clauses in particular), to mean “having a serious effect on the benefit which the innocent party would otherwise derive from performance of the contract in accordance with its terms””.

381. Cosette in turn pleads and MPG partly admits (CCS [124C]–[124CC], CCSR [124C]–[124CC]) the application of continuous disclosure obligations to MPG and also plead MPG’s Market Disclosure and Communications Policy (Ex J1, 1A/609). Cosette then pleads (CCS [124D]) MPG’s receipt of the FDA Letter; that letter and its contents were information that a reasonable person would expect to have a material effect on the price or value of the scheme securities, a matter that is essential to the alleged breach of MPG’s continuous disclosure obligation; and that MPG did not disclose the FDA Letter until after it was published on the FDA’s website on 12 May 2025 and reported in an internet publication. This matter seeks to establish a breach of r 3.1 of the ASX LR in this regard. Initially, MPG put the correctness of the matters raised by the FDA in issue and pleaded (CCSR [124D]) that “some of the contents of the FDA Letter was [sic] incorrect” and that “to that extent, [MPG] denies that all of the contents of the FDA Letter was “information” within the meaning of [s] 674A(2) of the [Act] and ASX Listing Rule 3.1”. MPG did not press that matter, and Cosette did not contend to the contrary, in the circumstances that I noted above.

382. Both parties provided comprehensive summaries of the applicable principles in respect of continuous disclosure, which I adopt with gratitude, and I have also drawn on Ms Collins’ very helpful review of recent appellate cases in oral submissions. I understand there to be little, if any, dispute as to these principles, although there is a vigorous dispute as to their application to the relevant facts. The purposes underlying the continuous disclosure regime established by r 3.1 of the ASX Listing Rules (“ASX LR”) and ss 674–674A of the Act are well-established and Ms Collins rightly refers to the recognition in Australian Securities and Investments Commission v Southcorp Ltd (No 2) (2003) 130 FCR 406 at [2]; [2003] FCA 1369 that they include enhancing the integrity and efficiency of Australian capital markets by ensuring that the market is fully informed of information that is properly disclosable under them. Ms Collins also points out, in opening, that rule 3.1 of the ASX LR requires that a listed entity must immediately notify ASX of any information concerning the entity of which it is or becomes aware if a reasonable person would expect the information to have a material effect on the price or value of the entity’s securities, subject to exceptions that are not relevant here. The term “aware” is defined in ASX LR 19.12 as follows:

“[A]n entity becomes aware of information if, and as soon as, an officer of the entity … has, or ought reasonably to have, come into possession of the information in the course of the performance of their duties as an officer of that entity.”

383. Ms Collins rightly recognises that the definition of “aware” is capable of extending the obligation in ASX LR 3.1 to information, and inferences from known facts, which a director or executive officer has, or ought reasonably to have, come into possession in the course of performing his or her duties: Crowley v Worley Ltd (2022) 293 FCR 438 at [171], [173], [178]; [2022] FCA 33; Zonia Holdings Pty Ltd v Commonwealth Bank of Australia Ltd [2025] FCAFC 63 at [266]–[269] (“Zonia”).

384. Ms Collins also rightly refers to s 674A of the Act, introduced by the Treasury Laws Amendment (2021 Measures No 1) Act 2021 (Cth), which relevantly provides that, if the section applies to a listed disclosing entity; that entity has information that those provisions require the entity to notify to the market operator; the information is not generally available; and the entity knows, or is reckless or negligent with respect to whether, the information would, if it were generally available, have a material effect on the price or value of ED securities (as defined) of the entity, then the entity must notify the market operator of that information in accordance with those provisions. Sections 676(2) and (3) of the Act relevantly describe when information is taken to be generally available for the purposes of s 674A, although there is no contest as to that matter here.

385. I proceed on the basis that the test for the materiality of information in ASX LR 3.1 is whether a reasonable person would expect the information to have a material effect on the price or value of the entity’s securities. That rule is to be interpreted in the context that s 677 of the Act provides, namely, that information is deemed to be material if the information would, or would be likely to, influence persons who commonly invest in securities in deciding whether to acquire or dispose of the securities: Jubilee Mines NL v Riley (2009) 40 WAR 299 at [62]; [2009] WASCA 62 (“Jubilee Mines”); Grant-Taylor v Babcock & Brown Ltd (in liq) (2016) 245 FCR 402; [2016] FCAFC 60 at [95] (“Grant-Taylor FC”). In determining the question of materiality, the pleaded information must be looked at “in context, rather than in isolation, against the backdrop of: (a) the circumstances affecting the entity at the time; (b) any external information that is publicly available at the time; and (c) any previous information the entity has provided to the market”: Australia and New Zealand Banking Group Limited v Australian Securities and Investments Commission (2024) 305 FCR 383; [2024] FCAFC 128 at [46]–[47], [56], [60] (“ANZ v ASIC”); Zonia at [445].

386. I recognise that the test for materiality is objective, hypothetical and forward-looking and is to be determined ex ante: at [95], [116]. However, evidence of the market’s actual reaction to the subsequent disclosure of information can be used as a “cross-check” of the ex ante materiality of the information, but only as a means “for confirming the correctness of a conclusion already reached”: (2015) 322 ALR 723; [2015] FCA 149 at [64]; [2025] FCA 1097 at [47]. The class of hypothetical investors to which such a determination is directed includes both the sophisticated and the unsophisticated, but does not include the irrational or “speculators and day traders who seek to profit on the back of rumour or momentum”: at [115]; (2019) 136 ACSR 339; [2019] FCA 807 at [552]–[553]; [2023] FCA 1628 at [147](13); at [95], [216].

“…The contention the materiality test requires the information to have an established economic value effect is a gloss. Relatedly, there no necessity to prove that a change in the price of securities occurred to establish liability.

… s 674(2) relevantly conditions the obligation for a listed disclosing entity bound by a disclosure requirement in market listing rules to disclose if it is aware of the relevant information and it: (a) is not generally available; and (b) is information that a reasonable person would expect, if it were generally available, to have a material effect on the price or value of ED securities of the entity.

Section 677 then provides that the expression “to have a material effect on the price or value” of the entity’s securities, be given an expansive meaning. Specifically, s 677 states that a reasonable person would be taken to expect information to have a material effect on the price or value of the securities if:

the information would, or would be likely to, influence persons who commonly invest in securities in deciding whether to acquire or dispose of the [entity’s securities].

Both the purpose and the effect of this provision is evident: the “deeming” provision applies to satisfy the requirements of Listing Rule 3.1: Grant-Taylor (FC) (at 419–420 [95]); Jubilee Mines (at 309 [34], 315–317 [54]–[62]). Provided other requirements of disclosure are present, it is relevantly sufficient (and necessary) if the information would be likely to influence the investment decisions of potential investors. There is no other relevant requirement, but the notion of “influence” reflects the fact that the obligation is conditioned upon materiality, as the relevant information must be of a particular character, that is, it would, or be likely to, influence persons who commonly invest in securities to decide to acquire or dispose of an entity’s securities (and not merely be an immaterial factor in making such a decision). …

In the end, as noted above, the resolution of the question of materiality is a matter of judgment, informed by commercial commonsense and it demands appreciation of any relevant broader context, investor experience and intuitive realism: GetSwift (at [1101], [1165], [1240] and [1259]). To erect some test based on fundamental value is as erroneous as adopting a rigid numerical formula based upon a percentage of price movement in the share price upon any corrective disclosure. …”

390. I bear these observations in mind. I also recognise that the continuous disclosure provisions include a materiality standard and the effective operation of those provisions would be undermined, rather than promoted, by interpreting them so as to require the disclosure of immaterial as well as material information, with the likely result that investors were submerged with a flood of announcements, dealing with the significant and the insignificant, without any real basis to distinguish the two.

391. Ms Collins also drew attention to his Honour’s recognition at [89]–[91] of the purpose of the provisions, as there put by ASIC in submissions, and its implications as follows:

“As ASIC correctly submits, the primary purpose of continuous disclosure is to ensure the existence of an informed market for financial products. Disclosing entities are required to disclose materially price sensitive information on a continuous basis to all categories of investors. The continuous disclosure regime does not give companies a right to withhold information because the company’s officers form the opinion that disclosure might cause a misalignment between price and what those officers perceive, at any one time, to be the value of the company’s securities.

Any notion that s 677 only has an operation whereby the relevant information could only have a relevant impact upon fundamental value is not only acontextual (giving insufficient attention to the alternative concept of “price”) but, when one has regards to purpose, makes little practical sense when one considers the way the market operates in the real world and the forensic realities in sometimes proving changes in the fundamental value of a share.

… the fundamental value of a security is the expected risk-adjusted present value of all free cash flows. But, as was noted during oral argument, one cannot ignore the evidence that a market can misprice securities and there are well-known empirical limitations that demonstrate some limitation in the efficient market hypothesis (at least in its strong or semi-strong form). Indeed, it is trite that a perceived discrepancy between market price and estimated intrinsic or fundamental value of a share is the measure of opportunity for those engaged in making investment decisions based upon fundamental analysis.”

392. Ms Collins also referred to the concept of “persons who commonly invest in securities”, as noted in ASIC v ANZ at [95] as follows:

“There is a danger in putting a gloss on the phrase “persons who commonly invest in securities” in s 677. Although the use of the word “invest” rather than “purchase” or “acquire” suggests that the hypothetical reasonable person excludes “irrational” purchasers, this reflects that persons who commonly invest in securities are likely to act rationally, and is consistent with the notion that inconsequential information, irrelevant to a company’s financial position, is unlikely to change investors’ collective valuation and is not information that a reasonable person would expect to have a material effect.”

393. Ms Collins also drew attention to the observations of Button J in ASIC v ANZ at [215]–[216], where her Honour recognised that observations in Vocation at [553] did not “confine the target of the continuous disclosure regime to information that is material because it concerns ‘company fundamentals’ going to earnings, or the anticipated return on risk” and observed by reference to Grant-Taylor at [115] that “s 677 is not confined to sophisticated investors, but extends to small and infrequent — but not irrational — investors.”

394. I also bear in mind the observations of the Full Court of the Federal Court, in Zonia at [333], that a party that wishes to contend that pleaded information was incomplete and/or misleading or not in a form that was appropriate for disclosure was required to plead those contentions, including pleading the additional information without which the pleaded information was said to be incomplete and/or misleading. That proposition does not assist here in any assessment of materiality of the relevant information, where that is plainly a matter asserted by Cosette, and it needs to establish the factual basis of that allegation. I also note that, as Ms Collins pointed out, the Full Court there observed that the question whether pleaded information was incomplete or misleading or not in a form appropriate for disclosure should be dealt with as part of an analysis of materiality. I adopt that approach here, where the primary issue here is the materiality of information in any event. The Court there observed at [366]:

“Having regard to the elements of the provisions, where a respondent contends that the pleaded information is incomplete and therefore misleading, we consider that the impact of the contextual information on the information said to require disclosure will usually be considered as part of the analysis of materiality, and not as a threshold issue. One problem with considering such a contention as a threshold point is that, if it is concluded that the pleaded information is incomplete and therefore misleading, the applicant’s case fails at this point, without even considering the materiality of the pleaded information (together with the asserted additional information, if considered relevant). This may produce the result that the applicant’s case fails even though, if the pleaded information were considered together with the asserted additional information, it would be considered material and required to be disclosed. This would be contrary to the text of the provisions insofar as they mandate disclosure where the elements identified above are satisfied in respect of an item of information. It would not further, and indeed would frustrate, the purposes of the continuous disclosure regime. The approach we favour — namely considering the asserted additional information at the materiality stage of analysis — is consistent with the approach taken in Jubilee Mines.”

395. I recognise that, as Mr Hutley pointed out the Court distinguished the position at [368] where:

“… a respondent contends that the pleaded information is factually incorrect or that the pleaded information is so vague and imprecise that it is not required to be disclosed. In such cases, the respondent may in substance be contending that, regardless of any additional information, the pleaded information is not required to be notified to the market operator under the Listing Rules: see s 674(1) and (2). Such a contention may be appropriately considered at the outset, because:

(a) information that is not correct does not “arise” or constitute “information” for the purposes of s 674(1); and

(b) information that “comprises matters of supposition or is insufficiently definite to warrant disclosure” may not be information to which rule 3.1 (and, therefore, s 674(1)) applies (see rule 3.1A.1).

In such cases, there is a clear textual foundation for considering a contention that the information is incorrect or insufficiently precise otherwise than as part of the analysis of materiality.”

396. Happily, I may pass by these subtle distinctions without further comment, since this issue does not squarely arise here. As I noted above, the parties conducted the case on the basis that neither seeks to prove that the views expressed by the FDA in the FDA Letter were well founded or not well founded.

397. The Court also there observed at [371] that:

“It may be accepted that, as the Bank submitted orally, the continuous disclosure regime does not contemplate the disclosure of information that is misleading or materially incomplete. However, the approach that we prefer would not produce this result. First, on this approach, pleaded information that is misleading because it is factually incorrect need not be disclosed at all. Secondly, where a respondent contends that the pleaded information is incomplete and therefore misleading, the asserted additional information would be considered as part of the analysis of materiality. If considered relevant (for example, because it is necessary to ensure that the pleaded information is not misleading), the additional information would be taken into account, together with the pleaded information, when assessing materiality. If the additional information is relevant in this way, it may follow that the additional information is itself material and must be disclosed, assuming it otherwise satisfies the elements of rule 3.1 and s 674. Further, the entity may (had it disclosed the pleaded information) also have been obliged to disclose the additional information to avoid breaching the statutory prohibitions on misleading or deceptive conduct. In this way, s 674 and rule 3.1 can operate according to their terms without any disharmony with the prohibition on misleading or deceptive conduct.”

398. I also recognise that the Court observed (at [498]) that:

“information can be material even if it does not, of itself, reveal events or circumstances that will affect the financial performance of a company. Sections 674 and 677 refer to the “price or value” of securities, which may be affected by matters that do not find reflection in the financial performance of the company. See also the discussion in ANZ v ASIC at [215]–[216] per Button J (Markovic agreeing at [2(3)]).”

399. I should also note that, for the reasons I have set out above in dealing with Cosette’s claim relying on the FDA Letter in support of an MMAC, I proceed in this aspect of the case on the basis that it is common ground that the FDA Letter had been received by MPG from the FDA, which is plainly an important regulator for MPG’s business, and had expressed views which may or may not have been correct; MPG responded to the FDA Letter by the FDA Letter Response; and MPG has now made changes to its marketing approach for Nextstellis as addressed in Mr Turner’s affidavit and cross-examination and the documentary evidence. As I noted above, and despite the Cosette Parties’ position put in closing submissions and noted above, neither party made any real attempt to prove the correctness or otherwise of the views expressed in the FDA Letter and that matter cannot be assumed or determined in this judgment. This matter is potentially of some significance in Cosette’s continuous disclosure case relying on the FDA Letter. I recognise that information need not necessarily be true in order to be information, or material information, for the purposes of the insider trading prohibition, which adopts broadly similar concepts language to the continuous disclosure requirements: Mansfield v R (2012) 293 ALR 1; [2012] HCA 49. However, the Full Court recognised in Zonia, to which I have referred above, that the truth or falsity of information is potentially relevant to whether it is information within the scope of the continuous disclosure requirement, and it is plainly relevant to whether information is material in the relevant sense and disclosable under ASX LR 3.1 and s 674A of the Act.

400. I now turn to the chronology of events in this regard. As I noted above, on 12 May 2025 (US time), the FDA published the FDA Letter on its website. It appears that MPG’s share price did not decline in response to the pleaded FDA Letter Information on the next trading day, 13 May 2025. I return to the complexities arising from that matter below.

401. On 13 May 2025 (US time), an internet publication titled Fierce Pharma published a media article entitled “Mayne hit by ‘misleading’ drug safety claims from FDA ahead of $430M buyout” (“Fierce Pharma Article”) (emphasis added). The title of that article impliedly linked the FDA Letter and the prospects of Cosette’s proposed acquisition of MPG. The article went on to state:

“[MPG] is in trouble with the FDA. The agency has accused the Australian pharma of giving a misleading impression of the risks of its oral birth control pill in a presentation, triggering an untitled letter (PDF). FDA officials sent the letter after reviewing a slide deck (PDF) about [MPG]’s contraceptive medication Nextstellis.

The FDA claimed the presentation minimized the risks associated with Nextstellis and misrepresented how the drug compares to rival estrogen-containing combined hormonal contraceptives. Those failings are particularly concerning, according to the agency, because Nextstellis is linked to potentially life-threatening risks.”

402. On 14 May 2025, a broker’s report (Ex J1, 20/13492.274.13) circulated to many advisers in the brokers’ firm and institutional clients (Ex J1, 20/13492.274.32) recommended that those clients short sell MPG shares, for reasons that appear to include the threat of US tariffs on Australian pharmaceutical products and risks as to the completion of Cosette’s acquisition of MPG. Those matters are not raised in Cosette’s continuous disclosure claim against MPG. That report advised, cryptically in parts, that:

“Could we still be covering [MPG] … in July ???

D3P highlighting more risk to the takeover deal. If Tariff news, the ‘Most-Favoured–Nation pricing’ and the Q3 result weren’t enough to rock the boat, overnight the FDA has hit [MPG] with ‘misleading’ safety claims ahead of their [US]$430m buyout. The agency accused [MPG] of giving a misleading impression of the risks of its oral birth control in a presentation, after [MPG] claimed estetrol, one of the active ingredients in Nextstellis, is unique and intrinsically different from other estrogens – which is yet to be demonstrated. From here [MPG] has until the 16th May to respond. As a reminder Cosette agreed to b[u]y [MPG] for [US]$430m in Feb and despite all the noise, at the moment appears to be on track for completion – having completed one closing condition last week.

[MPG] is trading at an 8% discount to the $7.40 bid price (last $6.79) … implementation date is late May to early June. Stock was $4.50 at the end of Jan (minus 33.7% from last) – I’m not one to normally short takeover stock, but the risk reward looks compelling. If there were to be another bidder, Shane’s view is it would have come by now.” [emphasis in original]

403. Also on 14 May 2025, the Australian media reported a US proposal for tariffs on Australian-made pharmaceutical products. MPG’s share price then started to decline and fell from $6.79 to $5.97 on that day.

404. On 14 May 2025, ASX issued a price query to MPG (Ex J1, 14/10575) advising that MPG’s shares had been “placed in a pause pending release of the response to the market”. Subsequently, also on 14 May, MPG released two ASX announcements titled “Response to [ASX] Price Query” (Ex J1, 14/10652) and “Mayne Pharma Responds to Speculation on FDA Untitled Letter” (“Second May 2025 ASX Announcement”) (Ex J1, 14/10656).

405. MPG’s second announcement stated that:

“[MPG] today provides an update in relation to market speculation following the recent publication of an ‘untitled letter’ from the US Food and Drug Administration’s (FDA) Office of Prescription Drug Promotion (OPDP) received 15by [MPG] on 28 April 2025 (US time) and made public on 12 May 2025 (US time) related to certain promotional claims used in a speaker presentation for NEXTSTELLIS (Drospirenone and Estetrol tablets), a combined oral contraceptive (FDA Untitled Letter).

[MPG] takes the views of the FDA seriously and will respond to the letter within the prescribed timeframe. Out of an abundance of caution, and as an initial and immediate action [MPG] voluntarily withdrew the speaker presentation reference in the FDA Untitled Letter.

The FDA Untitled Letter does not impact [MPG’s] ability to continue to sell and distribute NEXTSTELLIS in the United States. [MPG] does not regard the receipt of the FDA Untitled Letter as materially price sensitive.

[MPG’s] intention is for the proposed Scheme of Arrangement with Cosette to continue to proceed in accordance with the timetable previously announced on 22 April 2025.”

By the time the Second May 2025 ASX Announcement was released, MPG’s share price had fallen to $5.73.

406. As I noted above, after the close of trading on 14 May 2025, a research analyst at Canaccord Genuity published a “Flash Update” on MPG (Ex J1, 14/10669.1) which referred to MPG’s receipt of the FDA Letter. That report demonstrated an understanding of the FDA’s regulatory practices in observing that:

“This is an Untitled Letter from the FDA, not Warning Letter. The company does not have to take any drastic measures like halting marketing of the drug … “[MPG] only had to pull one speaker deck from circulation. In our view, the FDA appears more concerned with semantics around the descriptors that are used to describe the Next[s]tellis safety and efficacy claims, and how those might be interpreted”.

That report also expressed the view that MPG would likely make “minor adjustments” to resume normal marketing activities, which likely understates the effect of changes which were ultimately made by MPG, and went on to observe that:

“We have reviewed available quarterly sales data for some other therapies which have received Untitled Letters (note the majority do get resolved), and have found that most of these branded products saw increasing QoQ sales before and after the letters were delivered. The only recent product exception (Neulasta 2021), which saw a sales decline, was a result of biosimilar-driven decreased pricing and lower unit sales.”

407. Importantly, like Fierce Pharma, that analyst also recognised a possible link between the FDA Letter and the transaction between MPG and Cosette, which plainly had the potential adversely to impact MPG’s share price, in observing that:

“If we were to put ourselves in Cosette’s shoes, we still see the strategic benefit of the joint entity. However, it would be remiss to not consider the worst case scenario … that Cosette would shy away from a transaction amidst (1) an earnings downgrade (not enough to trigger a MAC); (2) Medicare Part D changes already somewhat known at the time of the acquisition … but with unforeseen impacts to listed private health insurers, who have now responded and may require pre-authorization for branded drugs; and (3) and the new MFN policy (likely more bark than bite, given how the MBI index has responded).

Is this the straw that breaks the camel’s back ahead of tomorrow’s 9.15am first Court hearing? There’s a very small possibility, in our view, but this isn’t a likely outcome. However, to frame the risk: prior to the acquisition, our price started was $6.25 with the dermatology segment contributing $3.00, International contributing $2.09, net cash contributing $0.44 and women’s health contributing $0.73. Even without the women’s health contribution, the resulting valuation sits at $5.52, just below current trading levels … and women’s health, while facing some structural headwinds on generic alternative availability and likely price tension, is not a zero, given it is already responsible for a positive earnings contribution at the status quo.”

408. Turning now to the parties’ submissions, Ms Collins submits, in opening, that:

“The FDA Letter Information was information concerning [MPG] that “a reasonable person would expect to have a material effect on the price or value of the entity’s securities” for the purposes of ASX Listing Rule 3.1. This arises by reason of the following matters:

(a) the importance of NEXTSTELLIS® as a major contributor to [MPG]’s earnings and [MPG]’s promotion of NEXTSTELLIS® to the market as one of [MPG’]s “key growth drivers” (see, for example, [MPG’s] 2024 Annual Report);

(b) the relevance of NEXTSTELLIS® to investors in the Scheme Shares, as evident through, for example:

(i) published results and announcements released to the market concerning NEXTSTELLIS®, such as, for example, the statement by [MPG] in the 2024 Annual Report that: “One of our key strategic priorities is driving NEXTSTELLIS® to become a leading brand in the US and Australian contraceptive markets” ;

(ii) the market analysis and commentary concerning NEXTSTELLIS® and the performance of NEXTSTELLIS®;

(c) the extensive and grave nature of the concerns and violations outlined in the FDA Letter … including having regard to the issues of patient safety raised by the letter;

(d) [MPG’s] own identification in the 2024 Annual Report of “material business risks” relevant to NEXTSTELLIS®, including, in particular, “lack of market acceptance of NEXTSTELLIS®” and “non-compliance with legal or regulatory requirements”; and

(e) the notice given on 9 May 2025 by [MPG’]’s US attorneys, Arnold & Porter, to Cosette of the issue of the FDA Letter under clause 7.1(d)(vii) of the SID (which required [MPG] to keep Cosette reasonably informed of any material developments concerning the conduct of its business).”

409. Mr Hutley responds, in opening, that:

“First, the nature of the concerns and alleged violations outlined in the FDA Letter does not of itself establish that the FDA Letter would have a material effect on the price or value of the Scheme Shares. The materiality of the FDA Letter depends on the consequences which might flow from it.

Secondly, the importance of Nextstellis® to Mayne’s business and thus to its investors does not take matters any further because it says nothing about the effect of the FDA Letter on Mayne’s business.

Thirdly, Mayne’s description of the FDA Letter as a “risk” in its internal documents is irrelevant to the substantive question whether the FDA Letter in fact presented a risk to Mayne’s business such that it was price sensitive.

Fourthly, Mayne’s decision to notify Cosette of the FDA Letter pursuant to cl 7.1(d)(vii) of the SID is irrelevant. Clause 7.1(d)(vii) requires Mayne to use reasonable endeavours to “keep Cosette reasonably informed of any material developments concerning the conduct of its business (including in relation to the preparation and approval of any budget or business plan relating to Mayne’s business or operations)”. It appears within a provision of the SID, clause 7, which governs the conduct of Mayne’s business from the date of the SID up to and including the implementation of the Scheme.”

410. Mr Hutley also contends in closing, first, that the open question whether the FDA’s views were correct has the consequence that the content of the FDA Letter is not “information” within the meaning of ASX LR 3.1. I do not accept that submission, although I recognise that that open question is relevant to whether there is an evidentiary basis for a finding of the content of the FDA Letter was material for the purposes of ASX LR 3.1 or s 674A of the Act. I understand this approach to be consistent with that taken by the Full Court of the Federal Court in Zonia at [368], [371], which treated the nature of the information that is contended to be continuously disclosable as linked with the question of its materiality. I recognise that the decision in Zonia (at [371]ff) also recognises that information that is simply incorrect is not “information” for the purpose of the continuous disclosure requirements and need not be disclosed, since there would be no utility in disclosing that information pointing to its falsity at the same time. It does not seem to me that that principle is applicable here, where the contents of the FDA Letter were not shown to be incorrect, although they were also not shown to be correct, and they are simply left as views expressed by a regulator that may be right or wrong. Mr Hutley also submits that Cosette does not plead a case that the receipt of the FDA Letter, irrespective of the truth of its contents, is continuously disclosable. I prefer not to decide that question as a matter of strict pleading, where the more fundamental question is whether there is any evidentiary basis to find the FDA Letter, irrespective of the truth or otherwise of its contents, was material in the relevant sense.

411. The matters put by Ms Collins partly overlap with the matters put by Cosette in support of the submission that the receipt of the FDA Letter was a material development in the conduct of MPG’s business, which I have addressed above. Cosette also places substantial weight on the fact that MPG’s executives treated the receipt of the FDA Letter as a serious matter and, for example, promptly drew the receipt of that letter to the attention of MPG’s board which then discussed its implications. It seems to me that that matter does not advance Cosette’s claims in respect of continuous disclosure as to the FDA Letter. Plainly, MPG’s executives treated the receipt of the FDA Letter as a serious matter, because it was received from a regulator and MPG operated in a highly regulated industry, although they also identified questions as to whether the views expressed by the FDA were correct. The position was further complicated by the fact that, as Mr Turner’s evidence demonstrates, the changes that might be necessary to respond to the FDA’s views, whether correct or incorrect, substantially overlapped with changes to the marketing of Nextstellis, which Mr Turner had been advocating and which MPG was already proposing to make. The fact that MPG’s management, sensibly, treated the receipt of the FDA Letter seriously does not assist in determining its materiality for the purposes of continuous disclosure, which requires the more complex assessment which I undertake below. MPG’s notice of the FDA Letter to Cosette was plainly also prudently and properly given but that also does not establish materiality of that letter in any relevant sense.

“Warning Letters, not Untitled Letters, should be issued for promotional activities if the nature of the activity is such that the center would support further regulatory or administrative action”.

413. These matters were recognised by Canaccord Genuity in its report dated 14 May 2025 (Ex J1, 14/10669.1) which, as I noted above, recorded that the FDA Letter was “an Untitled Letter from the FDA, not a Warning Letter” and left its price target of $7.40/share unchanged. Contrary to Ms Collins’ submissions, there is no reason to assume that investors in MPG would not know the broad outline of these matters, where they have invested in a company which largely operates a US pharmaceuticals business or that, before deciding whether to acquire or dispose of their MPG shares in response to the FDA’s “untitled” letter to MPG, they would not at least inform themselves of what such a latter was by a basic internet inquiry (for example, obviously enough, “what is an FDA untitled letter”?). Second, as Mr Hutley points out, Cosette does not plead or seek to establish any adverse regulatory consequence for MPG arising from the issue of the FDA Letter, although it relies on the steps taken by MPG in response to that letter.

414. In summary, considering the materiality of the FDA Letter Information on an ex ante basis, it seems to me that, first, that information cannot be taken to be material in the relevant sense, as conveying the fact of regulatory breaches by MPG, where Cosette does not plead or seek to establish that fact and the views expressed by the FDA were not self-evidently correct. Second, that information was not material in the relevant sense because MPG could reasonably expect that (1) the issue could readily be resolved with the FDA, at least by addressing its views without taking issue as to their correctness, which was the approach that it ultimately took; (2) that resolution would involve only modest immediate costs of replacing CVAs and marketing material and largely repurposing existing speaking presentations, as ultimately occurred; and (3) that resolution would not significantly, adversely affect the marketing of Nextstellis in the next two years or into middle term, both because the steps that would be taken aligned with MPG’s already planned shift of its marketing strategy for Nextstellis and because that was the general experience of pharmaceutical companies that received untitled letters of a similar kind. That reasoning is consistent with the view then formed by Mr O’Brien and the consensus then formed by MPG’s board. Importantly, its essential elements were also reflected in Canaccord Genuity’s contemporaneous comments as to the issue, the substance of which was not undermined by its underestimate of the quantity of marketing materials involved. The absence of reason to think that there would be wider adverse impacts on MPG’s marketing strategy for Nextstellis is also supported by Ms Selman’s expert evidence which I have addressed above.

415. I recognise that Cosette also emphasises the significance of Nextstellis for MPG and I accept that Nextstellis was plainly a significant product for MPG. I also recognise that, as Cosette points out, broker reports regarded Nextstellis as significant for an investment in MPG (for example, Ex C12, 3981.1). However, for the reasons noted above, the evidence does not establish that the receipt of the FDA Letter will have a real, still less a material, adverse impact on the promotion of Nextstellis or its sales or on MPG’s business or earnings and I could not conclude that a reasonable person would expect to have a material effect on the price or value of the entity’s securities on that basis. For completeness, I did not understand Ms Collins to submit and no Australian case has (so far as I am aware) held that communication from a regulatory to a listed company, whether well-founded or not and whether likely to result in adverse action or not, was within the scope of the disclosure obligation under ASX LR 3.1.

“the drop in [MPG’s] share price that occurred once the market became aware of [MPG]’s receipt of the FDA Letter is a powerful indicator of materiality, by way of a cross-check. When the existence of the FDA Letter was disclosed to the market, the price of [MPG’s] securities fell significantly.”

417. Mr Hutley responds:

“Quite apart from the fact that a subsequent price reaction is not a “powerful indicator of materiality”, but is at best a potential cross-check that “could , depending upon the circumstances, rationally affect, at least indirectly, the assessment of materiality” [R&B Investments Pty Ltd (Trustee) v Blue Sky Alternative Investments Limited (in liq) (Separation of Issues)] [2025] FCA 1097 at [47]], Cosette did not plead the asserted drop in Mayne’s share price in support of its allegation that the FDA Letter and its contents were materially price sensitive, [MPG] has not prepared to meet that case, and Cosette should not now be permitted to rely on it (or on any other matter that was not pleaded). In any event, Cosette has not served any evidence, such as expert evidence, capable of establishing that the asserted price drop did in fact occur “once” (implicitly, because) the market became aware of Mayne’s receipt of the FDA Letter” — as distinct from the market becoming aware of, or being affected by, other news or noise.”

418. Mr Hutley also points to the relevance of expert evidence concerning the cause of a price drop in continuous disclosure claims, often in the form of quantitative linear regression techniques involving event studies, to identify whether the alleged disclosure or non-disclosure caused any price drop rather than other matters: Earglow Pty Ltd v Newcrest Mining Ltd (2015) 230 FCR 469; [2015] FCA 328 at [84]; Zonia at [591]–[593]. He also notes that.

“Rather than advancing such evidence Cosette merely asserts that the price drop was a result of the disclosure of the “FDA Letter” to the market.”

419. In closing submissions, Mr Hutley submits, and I accept, that it is not possible to reason from the price change in MPG’s shares to the materiality of the FDA Letter, where no attempt has been made by Cosette to seek to exclude the effect of the other “confounding” information contained in the Fierce Pharma article, including its headline that linked the FDA Letter to then prospects of Cosette’s acquisition of MPG; its assertion that MPG was “in trouble” with the FDA, which likely overstated the status of the letter; its treatment of the concerns raised by the FDA as established facts, where their truth has not been established; and its conclusion that again placed the FDA Letter in the context of the impending transaction with Cosette. The decline in MPG’s share price after that article appeared does not establish, on an ex post basis, the materiality of the FDA Letter Information, given the other matters which Fierce Pharma had mixed with that information. The position is further complicated by the other matters noted below and the possible impact of general market movements, which would ordinarily need to be addressed by expert evidence.

420. Mr Hutley also points to further confounding information published on 14 May 2025 that emerges from the evidence. I recognise that MPG did not plead these matters, but the evidence of them was admitted without objection and their relevance here is not to establish any aspect of MPG’s case but instead to indicate matters that prevent any ex post inference, based on common sense rather than evidence, that the FDA Letter Information rather than (at least in part) those other matters brought about the decline in MPG’s share price on 14 May 2025. First, on 14 May 2025, a stockbroking firm sent an email to a large number of institutional clients that raised the speculation that the FDA Letter would have an adverse impact on Cosette’s acquisition of MPG and suggested that its clients “short” MPG’s stock, implicitly so as to profit from a future fall in that share price. Plainly, any clients who took up that advice would then sell MPG shares, leading to a likely fall in its share price. Second, there was media reporting on the morning of 14 May 2025 as to the threat of US tariffs on Australian-manufactured pharmaceutical protects, which was plainly capable of placing downward price pressure on MPG and other Australian pharmaceutical manufacturers that sold to the US. There is no evidence as to the impact of these matters on MPG’s share price, but that is the source of the difficulty in Cosette’s case at this point rather than a solution to it.

421. It seems to me that an ex post analysis here does not confirm any ex ante view that the FDA Letter was material in the relevant sense, although it also would not falsify such a view, where the position is complex and the parties did not lead the expert evidence that would be necessary to address its complexities. First, the proposition for which Cosette contends, that the FDA Letter and its contents was itself material faces the significant difficulty that, if the pleaded information as to the FDA Letter was material in the relevant sense, then MPG’s share price should have declined promptly in response to the FDA’s publication of the FDA Letter on the internet. It did not do so, where the FDA placed that letter on its website on 12 May 2025 (US time) and a day’s trading then occurred (on 13 May 2025, Australian time) without any apparent share price response until the Fierce Pharma article appeared and the other information which I noted above emerged and MPG’s share price fell on ASX on 14 May 2025. While it might be tempting to speculate that investors may not have accessed the FDA website and only reacted to the Fierce Pharma article, with or without other events, that speculation would be inconsistent with a market for MPG shares that was efficient even on the semi-strong basis, which would promptly reflect publicly available information. [2] That speculation would also highlight the question as to whether the other information (and possible short selling) which emerged on 14 May 2025, Australian time, rather than the FDA Letter Information or indeed the Fierce Pharma letter prompted the then fall in MPG’s share price.

“[MPG] can only assume that the recent trading is due to market speculation about the perceived implications of the FDA Untitled Letter being received by company such as [MPG]. [MPG’s] view is that in and of itself, the FDA Untitled Letter is not materially price sensitive [and MPG] confirms that it has a near finalised response to the FDA Untitled Letter which it proposes to provide to the FDA within the prescribed timetable.”

423. For these reasons, MPG has not established that the information as to the FDA Letter was disclosable under ASX LR 3.1, at least in the period prior to its disclosure by MPG to ASX.

424. Alternatively, Cosette alleges (CCS [124E]) that, on 28 April 2025 or shortly thereafter, at the time of receipt of the FDA Letter, to around 12 May 2025, the FDA Letter Information (as defined) was not generally available and MPG was negligent with respect to whether the FDA Letter Information would, if it were generally available, have a material effect on the price or value of scheme shares. This matter is relied on to support an alleged contravention of s 674A of the Act. It does not establish such a contravention, because that contravention cannot be established unless the relevant information is disclosable under ASX LR 3.1.

425. In opening, Ms Collins submits that:

“[Cosette] allege[s] that, in the circumstances of this case, the “negligence” standard is satisfied. … In [Cosette’s] submission, consistently with common law principles, an entity may be “negligent” for the purposes of s 674A(2) if there is a failure to observe the standard of care that a reasonable person would exercise in the circumstances.”

426. In closing submissions, Mr Hutley responds to the question whether negligence is established for the purposes of s 674A(2) of the Act, at some length, but it is not necessary to address that question further, given the conclusions which I have reached on other grounds. This claim is also not established because its premise of the materiality of the relevant matters is not established.

427. Cosette alleges in consequence (CCS [124F]) that:

“During the period 28 April 2025 to at least around 12 to 14 May 2025, [MPG] contravened ASX Listing Rule 3.1, and further and in the alternative section 674A(2) of the Corporations Act, by failing to inform the ASX of the FDA Letter Information.”

This allegation is also not established for the reasons noted above.

428. Cosette then advances (CCS [124F]–[124J]) a similarly structured allegation as to steps taken by MPG in response to the FDA Letter. The pleading is complex. Paragraph 124G pleads (omitting particulars) that:

“In the period from 14 May 2025, [MPG]”

(a) has withdrawn from circulation at least 9 other items of NEXTSTELLIS® promotional materials which contained the Pre-FDA Letter Marketing Material:

(b) has distributed new promotional material for NEXTSTELLIS® some or all of which does not contain the claims and omissions in the Pre-FDA Letter Marketing Material pleaded at paragraph 96A above;

(c) has experienced a substantial decline in sales of NEXTSTELLIS® for at least the month of June 2025; and

(d) is reasonably likely to experience a significant decline in sales of NEXTSTELLIS® over the period from 28 April 2025 up to and including at least 28 April 2026.

429. Cosette then contends (CCS [124H]) (again omitting very complex particulars) that:

“From a date no later than 23 May 2025 (in respect of the matters in paragraphs 124G(a) and (b) above), or, alternatively, by no later than 28 July 2025 (in respect of the matters in paragraphs 124G(a) to (d)):

(a) M[PG] was aware of the information referred to in paragraph 124G above (Mayne FDA Letter Response Information);

(b) each of the items of information referred to in paragraph 124G above was (individually or in combination) information that a reasonable person would expect to have a material effect on the price or value of Scheme Shares;

(c) in the premises of (a) and (b) above, ASX Listing Rule 3.1 required immediate disclosure to the ASX from a date no later than 23 May or in the case of sub-para (d) by no later than 28 July 2025, of the information referred to in paragraph 124G above; and

(d) Mayne did not disclose the information referred to in paragraph 124G above to the market.”

430. Cosette also contends that the identified matters were also materially price sensitive information and (CCS [124J]) that:

“During the period from 14 May 2025, alternatively no later than 28 July 2025, [MPG] contravened ASX Listing Rule 3.1, and further and in the alternative, section 674A(2) of the Corporations Act by failing to inform the ASX of the information referred to in paragraph 124G above, either individually or in any combination.”

431. In closing submissions, Mr Hutley rightly submits that there is a real lack of clarity in the Cosette Parties’ claim in respect of the FDA Letter Response Information, where it refers to the four alleged items of information and then contends that those four items individually or in any of the sixteen possible combinations were material. The difficulty which arises from that matter, not as a result of strict pleading principles but as a matter of procedural fairness, was exacerbated by the fact that, when I invited Ms Collins, in closing submissions, to seek to identify which of these matters was pressed as a combination, she did not provide any clear answer to that question, so as to allow MPG to know what it had to address in closing submissions, or allow the Court to know what it had to decide. It is not necessary to address Mr Hutley’s detailed submission in closing as to this matter further. This claim is not established because its premise, being the materiality of the relevant matters, is not established for the reasons I have noted above in dealing with Cosette’s claim that the FDA Letter and its consequences for MPG gave rise to a breach of the SID; in dealing with the alleged continuous disclosure contravention in respect of the FDA Letter; and in dealing with Mr Hosier’s evidence.

Cosette’s claim for breach of obligation to comply with applicable laws – misleading and deceptive conduct as to the Second May 2025 ASX Announcement

432. Cosette then brings a misleading or deceptive conduct claim (CCS [124K]-[124U]) in respect of the Second May 2025 ASX Announcement (as defined). They relevantly plead (CCS [124O], denied CCSR [124O]) that:

“By releasing the Second May 2025 ASX Announcement [MPG] represented that:

(a) the concerns raised in the FDA Letter related to one speaker program presentation for NEXTSTELLIS® (Speaker Program Representation); and

(b) the matters set out in the FDA Letter did not impact [MPG]’s ability to continue to sell and distribute NEXTSTELLIS® in the US (Impact of the FDA Letter Representation).

433. Cosette also plead (CCS [124R]–[124T], denied CCSR [124R]–[124T], in seeking to falsify these representations, that:

“The Speaker Program Representation was misleading or deceptive in that the concerns raised in the FDA Letter were not limited to claims made in one speaker program presentation, but in fact related to claims contained in numerous promotional materials used by [MPG].

On and from 14 May 2025, or alternatively 16 May 2025, [MPG] did not have reasonable grounds for making the Impact of FDA Letter Representation.

Further or alternatively, the Impact of FDA Letter Representation was misleading or deceptive.”

434. The applicable principles in respect of a claim for misleading or deceptive conduct are well-established. Section 18 of the ACL provides that:

“A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.”

Section 4 of the ACL applies to misleading representations concerning future matters. Section 1041H of the Act similarly prohibits a person from engaging in conduct, in the jurisdiction, in relation to a financial product or financial service that is misleading or deceptive or is likely to mislead or deceive. In determining a claim for misleading or deceptive conduct, the Court will address a question of fact as to whether the alleged or deceptive representations were made and, if they were, were misleading or deceptive or likely to mislead or deceive. This is an objective question that is to be determined by considering the conduct of the person who made the representation as a whole viewed in the context of all relevant surrounding facts and circumstances: Butcher v Lachlan Elder Realty (2004) 218 CLR 592 at [109]; [2004] HCA 60; Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at [102]; [2009] HCA 25; Australian Competition and Consumer Commission v Telstra Corporation Ltd (2004) 208 ALR 459 at [49]; [2004] FCA 987.

435. The approach to be adopted in assessing whether conduct is misleading or deceptive was summarised by Gordon J in Australian Competition and Consumer Commission v Telstra Corporation Ltd (2007) 244 ALR 470; [2007] FCA 1904 at [14]–[15], in a passage which Griffiths J followed in Forty Two International Pty Ltd v Barnes (2014) 97 ACSR 450; [2014] FCA 85 at [446] and which I followed in Colorado at [86] as follows:

“The relevant legal principles have been well traversed by Australian courts. A two-step analysis is required. First, it is necessary to ask whether each or any of the pleaded representations is conveyed by the particular events complained of … Second, it is necessary to ask whether the representations conveyed are false, misleading or deceptive or likely to mislead or deceive. This is a ‘quintessential question of fact’… [citations omitted]

Conduct is misleading or deceptive or likely to mislead or deceive if it is capable of inducing error: Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640; [2013] HCA 54 . It is not necessary for [the plaintiff] to establish that [the defendant] intended to mislead or deceive and the relevant question is whether, viewed objectively, the relevant conduct was misleading or deceptive or likely to mislead or deceive: Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 197 per Gibbs CJ, 216 per Brennan J; [1982] HCA 44; Australian Competition and Consumer Commission v Jewellery Group Pty Ltd (2012) 293 ALR 335; [2012] FCA 848 at [66]. Conduct is likely to mislead or deceive if there is a real and not remote chance or possibility that a person is likely to be misled or deceived, and this is so even though the possibility of that occurring is less than 50 per cent: Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; [2004] HCA 60 at [112] per McHugh J; Colorado Products above at [87]; Redmond Family Holdings v GC Access Pty Ltd [2016] NSWSC 796 at [49] ff.”

436. In Re Atlas Advisors Australia Pty Ltd (2022) 162 ACSR 509; [2022] NSWSC 705 at [211], I accepted Counsel’s summary of the matters relevant to whether misleading or deceptive conduct is established as follows:

“The case law on misleading conduct is legion. However, the principles governing the matters in issue in the present case are likely to be uncontroversial. Relevantly:—

Whether conduct is misleading or deceptive is a question of fact to be determined objectively, by reference to all of the relevant circumstances …

It is uncontroversial that misleading conduct can be established where a misrepresentation was but one of a number of factors which induced a loss-making decision… It is sufficient if the misrepresentation in question is a though not the cause of loss, and that it materially contributed to the claimant’s loss: …

Contravention of the provisions does not require proof of intention on the part of the representor …

The Court is required to determine what the conduct gives the complainant to understand or what is to be taken from such conduct …

A representation may be misleading, although apparently true, if it masks an underlying falsity …” [citations omitted]

437. I also recognise that, to the extent that a representation alleged to have been made by MPG was a representation as to future matters, whether it had reasonable grounds for making them must be assessed at the date of the representation. In a claim under s 18 of the ACL, s 4 provides that MPG bears an evidentiary burden to demonstrate some reasonable ground for making a representation and, if some evidence is led, Cosette then bears the onus of proving that MPG did not have reasonable grounds for making the representation.

438. I also bear in mind the observation of Bell ACJ (as the Chief Justice then was) in Ireland v WG Riverview Pty Ltd (2019) 101 NSWLR 658; [2019] NSWCA 307 at [33]–[34] (“WG Riverview”) that:

“… there will be cases where a statement made by a person honestly believing it to be true will give rise to liability, notwithstanding that person’s honest belief in its truth because, to the target audience, that statement has presented as one of fact, and not of opinion or belief: Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 197; [1982] HCA 44. In this sense, liability for misleading or deceptive conduct is sometimes described as strict (in that it does not require any fault or intent on the part of the representor to be established: see, for example, Heydon at [160.250])

Where, however, it is established that a statement or representation is or must have been understood by its target audience as one of opinion or belief, even though presenting at one level as one of fact, liability will not be strict; rather, it will generally depend upon an assessment as to whether or not the belief or the opinion was honestly held and “perhaps” … whether or not the maker had a reasonable basis for the belief or opinion. Other than in cases of statements as to future matters (where the statutory presumption is engaged: see, for example, Competition and Consumer Act 2010 (Cth), Sch 2 – Australian Consumer Law, s 4), it will be for a plaintiff to establish the lack of reasonable basis for belief if misleading or deceptive conduct is to be established.”

439. As Mr Hutley points out, Macfarlan JA (with whom Barrett AJA agreed) also there observed at [64]–[67] that:

“The High Court’s decisions in Butcher and in Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25 are authority for the following three propositions that are of particular relevance to the present appeal.

First, when determining whether conduct was misleading or deceptive, it is necessary to consider that conduct from the perspective of a reasonable person in the position of the person complaining of it. In Butcher, the purchasers of an expensive residential property complained that a sales brochure provided to them by a suburban real estate agent was misleading and deceptive because it reproduced an inaccurate survey diagram prepared by a surveyor. The majority in that case considered that the conduct of the real estate agent was to be assessed “in relation to the particular purchasers, bearing in mind what matters of fact each knew about the other as a result of the nature of their dealings and the conversations between them, or which each may be taken to have known”: at [37]. The majority accordingly took into account the character and circumstances of the purchasers, including that they were “intelligent, shrewd and self-reliant”: at [41] cf at [188] (Kirby J).

Secondly, the conduct of the person alleged to have engaged in misleading or deceptive conduct must be viewed as a whole. In this respect, the plurality in Campbell cited with approval the following observations of McHugh J in Butcher at [109], adding the emphasis which appears in the quotation below (at [102]):

“[109] The question whether conduct is misleading or deceptive or is likely to mislead or deceive is a question of fact. In determining whether a contravention of s 52 has occurred, the task of the court is to examine the relevant course of conduct as a whole. It is determined by reference to the alleged conduct in the light of the relevant surrounding facts and circumstances. It is an objective question that the court must determine for itself. It invites error to look at isolated parts of the corporation’s conduct. The effect of any relevant statements or actions or any silence or inaction occurring in the context of a single course of conduct must be deduced from the whole course of conduct. Thus, where the alleged contravention of s 52 relates primarily to a document, the effect of the document must be examined in the context of the evidence as a whole. The court is not confined to examining the document in isolation. It must have regard to all the conduct of the corporation in relation to the document including the preparation and distribution of the document and any statement, action, silence or inaction in connection with the document.” (Footnotes omitted)

Thirdly, the majority in Butcher emphasised that the provision of a disclaimer by a defendant is part of the conduct that is required to be considered. Their Honours referred to the Court of Appeal having declined in that case to accord disclaimers “decisive significance” but their Honours said that “they do have some significance”: at [50]. Their Honours continued:

“[50] … If the ‘conduct’ of the agent is what a reasonable person in the position of the purchasers, taking into account what they knew, would make of the agent’s behaviour, reasonable purchasers would have read the whole document, given its importance, its brevity, and their use of it as the source of instructions to professional advisers.””

440. Ms Collins submits that:

“The Impact of the FDA Letter Representation was a representation as to a future matter within the meaning of s. 4 of the ACL, s 12BB of the ASIC Act and s. 769C of the [Act]. The effect of these deeming provisions is that the representation is taken to be misleading and [MPG] bears the onus of establishing that it had reasonable grounds for making the representation.

In that connection, the onus imposed by the deeming provision requires [MPG] to show: (1) some facts or circumstances; (2) existing at the time of the representation; (3) on which [MPG] in fact relied; (4) which are objectively reasonable; and (5) which support the representation made. ... In circumstances where the contemporaneous documents establish that [MPG] was required to withdraw almost all of its promotional material for NEXTSTELLIS® in response to the FDA Letter, [MPG] did not have reasonable grounds to represent that the FDA Letter did not impact its ability to continue to sell and distribute NEXTSTELLIS® in the United States.”

441. In response, Mr Hutley submits that:

“… the statement was true. The FDA Letter did not affect [MPG]’s ability to sell and distribute Nextstellis® in the United States.

Further, even if [MPG]’s statement is interpreted in the way Cosette (implicitly) interprets it – as, in effect, a representation that the FDA Letter would not meaningfully affect the marketing of Nextstellis® – [MPG] had a reasonable basis to make that representation…”.

442. The first paragraph of MPG’s ASX announcement, which I set out above, seems to me to be no more than an accurate description of the FDA Letter, which in fact related to promotional claims used in a speaker presentation for Nextstellis. It does not seem to me that that description of the FDA Letter can fairly be read as a representation that similar claims had not been made in other documents; and, even if I am wrong in that view, the making of those representations in one document or several documents was not material, where MPG was already advanced in a process of amending its market materials, to change their focus and, on balance, those amendments seem more likely to be positive rather than negative for MPG’s marketing activities and the sale of Nextstellis. Second, that announcement appears to me to accurately reflect MPG’s approach to the FDA Letter, which was to address the concerns in a serious way, irrespective of whether it considered the FDA’s views were well-founded in whole or in part, and irrespective of whether they were in fact well-founded in whole or in part. That is hardly an unreasonable approach for a company in a highly regulated industry to take. Third, the evidence to which I have referred supports the statement that the FDA Letter does not impact MPG’s ability to continue to sell and distribute Nextstellis in the United States. That proposition was plainly true in the narrower sense that the FDA Letter did not raise any legal obstacle to the continued sale of Nextstellis in the United States. The evidence does not support a finding that it was either misleading or deceptive or likely to mislead or deceive if read in a wider sense, where changes to MPG’s marketing strategy were already under way and the immediate steps taken following the FDA Letter and those changes have not been shown to be adverse to ongoing sales of Nextstellis in any significant respect.

443. Cosette’s consequential claim (CCS [124V]) that, by reason of these matters, MPG was in material breach of cl 7.1(b) of the SID is also not established, because the claim that the FDA Letter Representation is misleading or deceptive is not established and Cosette has also not established the materiality of these matters.

Cosette’s further claim for misleading and deceptive conduct as to the FY25 EBITDA Representation

444. Cosette pleads (CCS [133]–[134], denied CCSR [133]–[134]) that, on 17 February 2025, MPG represented to Cosette that it expected that MPG’s underlying EBITDA for FY25 would be $69.8 million (“FY25 EBITDA Representation”) and, on 20 February 2025, being the date on which Cosette and MPG entered into the SID, MPG continued to make the FY25 EBITDA Representation. This is, of course, a reference to the FY25 6+6 Forecast.

445. Ms Collins submits, in opening, that:

“the Court will be satisfied that, by disclosing the FY5 6+6 Forecast, but not disclosing that [MPG]’s sales of key products in January 2025 were materially below expectations, or that the FY25 6+6 Forecast was prepared on the basis that those same missed sales would be recouped in the balance of FY25, the Due Diligence Materials were not prepared with reasonable care.”

446. First, I remind myself, as I from time to time attempted (generally without success) to remind Ms Collins and Mr Hodge, that Cosette does not bring a misleading and deceptive conduct claim as to the FY25 6+6 Forecast generally, which would have required that it engage with that document as a whole. It also does not bring a claim that the FY25 6+6 Forecast was misleading in the context of the whole of information disclosed by MPG, which would have required it to come to grips with the extensive information disclosed by MPG in the VDR. It brings a more specific claim, that the FY25 EBITDA Representation was made, namely that MPG represented to Cosette that it expected that MPG’s underlying EBITDA for FY25 would be $69.8 million. That understanding of Cosette’s claim is consistent with the evidence led by the key witnesses called by Cosette, particularly Mr Saraf and Mr Burgstahler, who led evidence to support that narrower claim and not a more widely framed claim. Second, Ms Collins’ submission here failed to recognise that MPG had in fact disclosed the decline in its “Cash flow by month F25” (Ex M4) placed in the VDR and Cosette’s advisers and Avista’s employees had repeatedly accessed that document.

447. Ms Collins also submits that:

“The representation as to expected FY25 EBITDA contained in the FY25 6+6 Forecast, and provided to Cosette on 17 February 2025, was a representation as to future matters. It will, therefore, be found to be misleading or deceptive unless [MPG] had reasonable grounds for that forecast. [MPG] bears the evidential onus of establishing reasonable grounds. The Court will not be satisfied that it has discharged that onus.

The methods by which the FY25 6+6 Forecast was prepared, in particular the approach to adjusting the forecasts to take account of the missed January 2025 sales, together with the information available to [MPG] about the sales of its key products in January and February 2025, will satisfy the Court that [MPG] did not have reasonable grounds for conveying to Cosette on 17 February 2025 that it expected FY25 EBITDA to be A$69.8m (that is, the FY25 6+6 EBITDA Forecast).

This is a fortiori when one has regard to the fact that the FY25 6+6 EBITDA Forecast representation was not accompanied by any qualification or other commentary that addressed the underperformance in January 2025, or the sales performance in February 2025 to date. A person in the position of Cosette, when presented with a forecast for FY25 EBITDA shortly before entering into the SID, would reasonably expect qualification or commentary of that kind to be provided if the circumstances were as they were. This is particularly so because the FY25 6+6 Forecast was presented during a conference call between senior management of both [MPG] and Cosette on 17 February 2025; this was not a document that simply happened to be uploaded to the data room in the lead up to execution.

… the Court will be satisfied that [MPG] engaged in misleading or deceptive conduct in providing the FY25 6+6 Forecast to Cosette without qualification or other commentary as to the underperformance in January and February 2025, and the likelihood of MPG meeting that forecast.”

448. Mr Hutley responds, in opening, that this claim:

“adds nothing to the warranty claim. If the warranty claim fails on the facts, then so must the MDC claim. If the warranty claim fails based on the terms of the SID, then Cosette would need to rely on some extra-contractual representation arising from the mere act of uploading the FY25 6+6 to the VDR, contrary to what is said in the 6+6 and an express acknowledgement given by every person who accessed the VDR. No such representation is plausible.”

449. Mr Hutley also submits that, applying the approach described in WG Riverview at [33]–[34] (to which I referred above):

“First, “when determining whether conduct was misleading or deceptive, it is necessary to consider that conduct from the perspective of a reasonable person in the position of the person complaining of it”, in light of the sophistication of the parties and dealings between them. Here, the alleged representation is to be assessed from the perspective of a reasonable person in the position of a pharmaceutical group backed by two private equity funds with US$ billions under management considering the entry into a public takeover by scheme of arrangement worth some $615 million after months of due diligence and contract negotiations. The idea that such a person would interpret the uploading of a forecast paper to a VDR as involving the alleged representation arising irrespective of the SID rather strains credulity.

Secondly, “the conduct of the person alleged to have engaged in misleading or deceptive conduct must be viewed as a whole”. In this case, that requires reading past the cover page of the FY25 6+6, including the section headed “Key Risks & Opportunities in AUD”. Having read that section, no reasonable person could nevertheless conclude that [MPG] was representing that it expected it “would” achieve its forecast as alleged.

Thirdly, “the provision of a disclaimer by a defendant is part of the conduct that is required to be considered”. Here, at the very point of accessing the VDR for the first time, the reasonable person would have acknowledged propositions including the following about forecasts and other forward-looking statements:

(i) [that the statements] involve known and unknown risks, uncertainties, assumptions and other important factors that could cause the actual results, performance or achievements of [MPG] or its affiliates, to be materially different from future results, performance or achievements expressed or implied by such” forecasts;

(ii) [that the statements] may involve significant elements of subjective judgement and are based on numerous assumptions regarding present and future business strategies and the environment in which [MPG] or its affiliates will operate in the future;

(iii) [that the person] would independently, and without reliance upon the Statements or upon [MPG] or its affiliates or any of its shareholders, Related Bodies Corporate, affiliates or respective shareholders, directors, officers, partners, employees, consultants, contractors, representatives, agents or advisers of each of the foregoing (each, a Released Person), make their own investigation and analysis of [MPG] or its affiliates and its business, based on such information as deemed necessary;

(iv) [that the statements] had not been the subject of any due diligence or verification and were subject to change without notice and certain risks, uncertainties and assumptions are in many instances beyond the control of [MPG] or its affiliates and, similarly, no representation was given that the assumptions upon which the [statements] may be based, were reasonable;

(v) [that the person] acknowledged that no audit or review had been undertaken by an independent third party of the assumptions, data, results, calculations and forecasts contained in or referred to in the [statements];

(vi) [that the person] acknowledged that no Released Person had any duty to update, revise or reaffirm the [statements]; and

(vii) no representation, warranty, assurance or guarantee (express or implied) is given in relation to the occurrence or likelihood of any events expressed or implied in any [statements] in the Confidential Information; …

Having given those acknowledgments before accessing the FY25 6+6, the reasonable person in Cosette’s position would have then acknowledged by cl 9.7 of the SID:

… that no party (nor any person acting on its behalf) has made any representation or other inducement to it to enter into this deed, except for representations or inducements expressly set out in this deed and (to the maximum extent permitted by law) all other representations, warranties and conditions implied by statute or otherwise in relation to any matter relating to this deed, the circumstances surrounding the parties’ entry into it and the transactions contemplated by it are expressly excluded.”

450. Mr Hutley then asks, rhetorically:

“How, in the face of what was said in the [FY25] 6+6 [Forecast] and all of those acknowledgments, could a reasonable person in Cosette’s position think that uploading the paper to the VDR involved a representation that MPG expected it “would” hit the EBITDA forecast independently of the terms of the SID?

451. In closing submissions, Mr Hutley unsurprisingly also submits that:

“For the reasons set out in opening, the upload FY25 6+6 Forecast to the VDR did not convey a representation that [MPG] “expected” the underlying EBITDA for FY 25 “would” be $69.8 million … the lay evidence has only tended to confirm that [Cosette’s] position as at 17 February 2025 was that of a sophisticated commercial actor who would not be so naive as to think [MPG] was making such a representation.”

452. I accept that submission, which seems to me to be plainly correct. I have addressed the principles applicable to determining a claim for misleading or deceptive conduct above, and I am comfortably satisfied that the pleaded FY25 EBITDA Representation was not made by MPG. First, any representation was no more than that, subject to the detail of the FY25 6+6 Forecast, MPG had then forecast its EBITDA for FY25 as $69.8 million. There is no basis to read that as a representation that MPG “expected” that forecast to eventuate, where it was apparent that forecast differed from the FY25 3+9 Forecast, made on the basis of three months’ actual results; I have found that MPG, through Mr Gray, had made the complexities and uncertainties inherent in its forecasting process clear to Cosette, at least through Mr Casten, on several occasions; and it must have been plain to Cosette that the 6+6 Forecast would be (and was) superseded by the 9+3 Forecast, when actual results were available for a longer period. Even apart from the information provided by Mr Gray to Mr Casten as to the uncertainties in MPG’s forecasting process, the proposition that an entity of the sophistication of Cosette, or persons of the sophistication of Cosette’s executives and Mr Burgstahler, or any reasonable business person, or indeed any reasonable person, would have read a forecast of a complex business that disclosed risks and opportunities as indicating an expectation of a single figure result need only be stated to be rejected. Where the alleged representation was not made, the balance of this claim must fail.

453. Cosette then pleads (CSS [136], denied CCSR [136]) that this was a representation as to a future matter and (CCS [137]ff, denied CCSR [137]ff) that MPG did not have reasonable grounds for the representation and engaged in misleading and deceptive conduct in contravention of s 1041H of the Act, s 12DA of the ASIC Act and/or s 18 of the ACL, and I noted Ms Collins’ submission to that effect above*.* The parties made detailed submissions as to the complexities in the case law in distinguishing statements of present expectation and representations as to the future. I also have regard to the discussion of whether a representation is a representation as to a future matter in Australian Competition and Consumer Commission v Woolworths Group Ltd (2020) 281 FCR 108; [2020] FCAFC 162 at [132], to which Counsel drew my attention. It is not necessary to address these matters further. Where the pleaded FY25 EBITDA Representation was not made, it is unnecessary and it would be highly artificial to determine whether MPG had reasonable grounds for it. The fact that neither MPG nor Cosette could rationally have “expected” (as pleaded by Cosette) that MPG’s underlying EBITDA for FY25 “would” be $69.8 million is plain enough, given the complexities and uncertainties in its forecasting process. However, that supports a finding that MPG did not make a representation to that effect, not a finding that it had any lack of reasonable basis for such a representation.

“[MPG]’s misleading or deceptive conduct induced Cosette to enter into the SID at a price per Scheme Share that was substantially greater than the true value of the Scheme Shares and in circumstances where, had [MPG] not engaged in the misleading or deceptive conduct, Cosette would not have entered into the SID at all or would not have entered into the SID on the terms that it did.”

455. Cosette also pleads (CCS [141]–[142], denied CCSR [141]–[142]) that it has suffered loss and damage by reason of these matters. In closing submissions, Mr Hutley addresses the question of reliance and loss, in respect of MPG’s misleading and deceptive claim conduct. I need not address that question further, where neither misleading or deceptive conduct nor the breach of that warranty has been established. These claims cannot succeed where the pleaded representation was not made.

456. MPG responds, in its identification of issues (CCSR [15]), that:

“Cosette also seeks a declaration that [MPG] engaged in misleading or deceptive conduct and orders avoiding the SID or damages on that basis. The claim is put on the basis that [MPG] represented that it expected its underlying EBITDA “would be” $69,800,000 by the 6+6 forecast, notwithstanding the references to key risks there, as well as the terms of the confidentiality agreement, the terms of access to the virtual data room, and the terms of the SID. [MPG] is said not to have had reasonable grounds for making and/or failing to correct, modify, qualify or contract the alleged representation based on its alleged knowledge of matters concerning Q3 of FY25. And the alleged representation two days before the SID is said to have “induced Cosette to enter into the SID”. [MPG] disputes each integer of this claim to impugn the SID and maintains that the scheme should be implemented in accordance with the terms of that deed.”

457. I have referred to the principles applicable to a misleading and deceptive conduct claim above. This claim depends on isolating a single point forecast in the FY2025 from both its context in that document and from the surrounding discussions as to the nature of MPG’s forecast which I have addressed above and the factual context of those forecasts. This claim fails on the straightforward basis that the alleged representation does not exist in that isolated form and was not made in the terms for which Cosette contends.

MPG’s election defence

458. In further answer to the Cosette Parties’ claim that they have properly terminates the SID, MPG pleads a defence which was headed “waiver” but Counsel accept that it raises issues as to election. It will be convenient first to deal with the applicable principles before turning to the several points at which an election is alleged to have occurred.

459. In Sargent v ASL Developments Ltd (1974) 131 CLR 634 at 642; [1970] HCA 40 (“Sargent”), Stephen J (with whom McTiernan J agreed) observed that, for the doctrine of election to operate, “there must be both an element of knowledge on the part of the elector and words or conduct sufficient to amount to the making of an election as between the two inconsistent rights which he possesses”. His Honour pointed to a variance in the authorities as to the nature of the knowledge which the elector must possess, and then observed that:

“An elector must at least know of the facts which give rise to those legal rights, as between which an election must be made.”

460. His Honour noted that “full knowledge of the material facts” was required, although he also referred to Elder’s Trustee and Executor Co Ltd v Commonwealth Homes and Investment Co Ltd (1941) 65 CLR 603 at 617; [1941] HCA 31 as authority that knowledge of circumstances such as will provide information from which the decisive fact giving rise to the legal right is “a clear if not a necessary inference” would be sufficient. After a comprehensive review of the authorities, his Honour noted that an elector is deemed to know the terms of his or her own contract and the rights it confers, or at least cannot take advantage of his or her own ignorance, and summarised the knowledge requirement (at 645) as follows:

“All that need be established in order for the doctrine of election to apply is knowledge … of the facts giving rise to inconsistent legal rights”.

461. Mason J in turn observed (at 658) that:

“If a party to a contract, aware of a breach going to the root of the contract, or of other circumstances entitling him to terminate the contract, though unaware of the existence of the right to terminate the contract, exercises rights under the contract, he must be held to have made a binding election to affirm. Such conduct is justifiable only on the footing that an election has been made to affirm the contract; the conduct is adverse to the other party and may therefore be considered unequivocal in its effect. The justification for imputing to the affirming party a binding election in these circumstances, though he be unaware of his alternative right, is that, having a knowledge of the facts sufficient to alert him to the possibility of the existence of his alternative right, he has acted adversely to the other party and that, by so doing, he has induced the other party to believe that performance of the contract is insisted upon. It is with these considerations in mind that the law attributes to the party the making of a choice, though he be ignorant of his alternative right. For reasons stated earlier the affirming party cannot be permitted to change his position once he has elected.”

462. Mr Hutley refers to the observation in Khoury v Government Insurance Office (NSW) (1984) 165 CLR 622 at 633; [1984] HCA 55 that:

“A person confronted by two truly alternative rights or sets of rights, such as the right to avoid or terminate a contract and the right to affirm it and insist on performance, may lose one of them by acting “in a manner which is consistent only with his having chosen to rely on [the other] of them".

463. In Wiltrading (WA) Pty Ltd v Lumley General Insurance Ltd (2005) 30 WAR 290; [2005] WASCA 106 at [35]–[39], Steytler P also referred to the elements of election, as requiring a choice between two inconsistent legal rights, and requiring “knowledge on the part of the elector and words or conduct sufficient to amount to the making of the election”, with that knowledge being “full knowledge of the material facts”, on the basis that a party to a contract is taken to know of the rights that it confers and that unequivocal conduct is required to establish an election that is not consciously made. I also summarised the applicable principles in Re Computer Room Solutions Pty Ltd (2021) 154 ACSR 672; [2021] NSWSC 845 at [61]ff, on which I have partly drawn for this summary.

464. In Allianz Australia Insurance Limited v Delor Vue Apartments CTS 39788 (2022) 277 CLR 445 at [51]; [2022] HCA 38, Kiefel CJ, Edelman, Steward and Gleeson JJ in turn observed that:

“This doctrine of election by affirmation of a contract has been recognised by decisions, including in this Court, for almost a century. The dominant rationale is that the "the mere fact of intimating [a] choice" in relation to these alternative rights makes it ‘inevitable, or necessary in the interests of justice, that the choice, when once made, should be irrevocable’. In other words, the choice between maintaining one right or set of rights and extinguishing an alternative, immediately inconsistent right or set of rights is one that must be irrevocable ‘because [the sets of rights] are inconsistent [so that] neither one may be enjoyed without the extinction of the other and that extinction confers upon the elector the benefit of enjoying the other’. The very nature of the states of legal existence and non-existence of a contract is that both states cannot subsist, like Schrödinger's cat, at the same time.”

465. Mr Hutley also recognises, in opening, that:

“Where the time has not yet arrived when the party is confronted with the need to choose between two inconsistent rights (e.g. to terminate or insist on performance) it may keep its options open but only if it refrains from engaging in conduct that unequivocally indicates that it has made a choice between them: Immer (No 145) Pty Ltd v Uniting Church in Australia Property Trust (NSW) [(1993) 182 CLR 26]; Summer Hill Business Estate Pty Ltd v Equititrust Ltd [[2011] NSWCA 149 at [26]].511 Thus a party “is not bound to elect at once. He may keep the question open, so long as he does not affirm the contract” [Sargent at 656.] A party is not necessary forced to elect by the effluxion of time. They may sit and consider their position, provided they do not engage in unequivocal conduct.

However, where, as here, the right to terminate is an express right under the contract, it must be exercised within a reasonable time. As Carter explains, “a contract that confers an express right to terminate is presumed to include a requirement of exercise within a reasonable time” [Carter’s Breach of Contract (2024, 3rd ed), [11-22]] and that such time is “the shortest time reasonably necessary to enable the [promisee] to hear of the default and issue instructions”, such that, “[d]elay for a longer period will usually be unreasonable” and the right to terminate will be lost.” [Carter’s Breach of Contract (2024, 3rd ed), [11-23]].

466. Mr Hutley also refers, as an example of the nature of conduct which may give rise to an election, to Grandview Ausbuilder Pty Ltd v Budget Demolitions Pty Ltd (2019) 99 NSWLR 397 at [66]–[69]; [2019] NSWCA 60 and submits, by reference to authority, that:

“Another example of unequivocal conduct is the entry into a contract varying the contract which one party has the right to terminate. 520 On one view, a variation terminates the existing contract and replaces it with a new one. On another, the original agreement is affirmed with variations. Either way, the act of variation is unequivocal that the agreement as varied is on foot and is not terminated.”

467. Turning now to the pleaded case, MPG pleads (CCSR [144A]–[144B]) that:

[144A] Cosette had knowledge of each of the following matters concerning its alleged rights to terminate relating to [MPG’s] FY25 6+6 Forecast:

(a) at all material times, that Cosette believed it was industry standard for daily data to be available [CCS [117]];

(b) by on or around 17 February 2025, MPG’s financial results for January 2025 [CCS [118]];

(c) by on or around [26] March 2025 [sic], MPG’s financial results of February 2025 ([CCS [118]];

(d) by on or around 26 March 2025, the “February CFO Report” ([CCS [48]-[49]];

(e) by on or around 16 April 2025, the March CFO Report [CCS [70]];

(f) by on or around 18 April 2025, the FY25 9+3 Forecast Spreadsheet [CCS [50-[52]];

(g) by on or around 22 April 2025, the FY25 9+3 Forecast ([CCS [[53]-[55]]; and

(h) by on or around 21 April 2025, the 22 April 2025 Announcement [CCS [56]-[60]].

[144B] Cosette had knowledge of the each of the following matters in relation to its alleged rights to terminate relating to the FDA Letter:

(a) by 10 December 2024, the promotional materials [MPG] was using to market NEXTSTELLIS for sale in the United States [CCS [96A]-[96C];

(b) by 4 December 2024, Cosette considered that there were potentially unsubstantiated marketing claims being made for NEXTSTELLIS which posed significant regulatory risks;

(c) by 5 December 2024, the advisory comments [MPG] had received on 26 January 2022 and 27 April 2022 from the FDA concerning its marketing material of NEXTSTELLIS;

(d) by 30 April 2025 or alternatively no later than 6 May 2025, the FDA Letter (CCS [85]-[91], [97]];

(e) by 6 May 2025, Cosette was provided with a copy of the FDA Letter;

(f) by 30 April 2025 and following, that [MPG] had not disclosed the FDA Letter of the FDA Letter Information to the ASX [CCS [124D]-[124F]]); and

(g) on 14 May 2025, the Second May 2025 ASX Announcement ([CCS [92], [124K]-[124U].

468. It is not necessary to address a further pleading of the Cosette Parties’ knowledge in respect of the TGA Letter here since, as I noted above, the Cosette Parties abandoned reliance on that matter in the course of the hearing. Cosette, in substance, admits its knowledge of all of the matters pleaded in CCSR [144A] (CCS Reply [8AA]), but adds that it otherwise denies the paragraph; and admits its knowledge of some but not all of the matters pleaded in CCSR [144B] (CCS Reply [8AB]).

469. MPG in turn pleads (CCSR [144D]–[144E], admitted CCS Reply [8A]–[8B]) that, on 1 April 2025, MPG and Cosette entered into the Amendment Deed, by which they agreed to make various amendments to the SID and agreed that the SID as amended by the Amendment Deed “is and continues to be in full force and effect”. MPG then pleads (CCSR [144F], denied CCS Reply [9]) that:

“By entering into the Amendment Deed, Cosette affirmed the SID, thereby losing the right to elect to terminate on the grounds it now advances to terminate the SID:

(a) as a result of the alleged Q3 FY25 Sales Performance being a material adverse change (as pleaded in sections F and G.4 of the [CCS]); and

(b) as a result of the allegation that [MPG] breached its Due Diligence Material Representation concerning the FY25 6+6 Forecast (as pleaded in section H of the [CCS]).

470. The Cosette Parties rely (CCS Reply [9]) on the terms of the SID to displace the waiver defence, pleading that:

“(i) clause 3.4(b) of the SID provides that the Condition Precedent in clause 3.1(g) of the SID is for the sole benefit of Cosette and any breach or non-satisfaction of that Condition Precedent may only be waived by Cosette giving its written consent;

(ii) clause 20.11 of the SID provides, among other things, that:

(A) any failure to exercise or a delay in exercising any right, power or remedy under the SID does not operate as a waiver; and

(B) a waiver is not valid or binding on the party granting that waiver unless made in writing;

(iii) Cosette has not:

(A) given its written consent to the breach or non-satisfaction of the Condition Precedent in clause 3.1(g) of the SID;

(B) delayed in exercising any right, power or remedy under the SID; or

(C) made any waiver of any right, power or remedy under or in connection with the SID in writing; and

(iv) if (which is denied) Cosette had delayed in exercising any right, power or remedy under the SID, clause 20.11 of the SID has the effect that any such delay does not operate as a waiver of Cosette’s rights under the SID, including its rights to terminate the SID; and

471. Mr Hutley in turn submits that:

“prior to amending the SID on 1 April 2025, Cosette’s Chief Executive Officer, Mr Saraf, had been provided the February 2025 results which were below the [FY25] 6+6 Forecast and informed the Chief Executive Officer of Mayne, Mr O’Brien, that this “might be a MAC”.”

472. In closing submissions, Mr Hutley advances detailed submissions as to the question of election or affirmation of the SID by Cosette. There is now little dispute as to the matters known to Cosette, at the relevant time, by reason of the latest amendment to the Reply which I have noted above. However, Mr Hutley also emphasises the extent of Cosette’s knowledge of the relevant matters, as recorded in significant detail in its First MAC Notice delivered on 17 May 2025, two days after the first Court hearing at which it supported the application for approval of the scheme and shortly after Mr Ilin-Schneider had verified the “Cosette Information” in the scheme booklet by his affidavit dated 12 May 2025 which was led in evidence at the first Court hearing in respect of the scheme. Mr Hutley also emphasises Mr Saraf’s evidence that the matters subsequently relied on to terminate the SID had arisen “within approximately two months of signing the SID” (Saraf 22.7.25 [185]) and submits that the Court would infer that, by no later than 14 May 2025, before the first Court hearing, Cosette knew all of the matters on which it now relies to contend that it has rightfully terminated the SID. Mr Hutley also addressed, at some length, suggested inconsistencies between the Cosette Parties’ conduct in respect of the Deed Poll and the first Court hearing and the exercise of a right to terminate the SID. I return to that question below.

473. It seems to me plain enough, given the chronology that I have set out above, that by 1 April 2025, that Cosette had knowledge of the material facts necessary to give rise to an election, in respect of matters as to the Q3 FY25 Sales Performance and the alleged Due Diligence Material Representation concerning the FY25 6+6 Forecast at the time of entry into the amended SID.

474. Mr Hutley then submits that:

“On 1 April 2025 [Cosette] entered into the scheme implementation deed amendment deed. In that deed Cosette agreed that the SID (as amended) “is and continues to be in full force and effect”.547 That included Cosette’s agreement to “assist Mayne to propose and implement the Scheme” (cl 2.2). Cosette’s entry into the amendment deed was wholly inconsistent with any intention to terminate.

Cosette need only have sufficient knowledge of the facts giving rise to a right to terminate the SID at the time of its unequivocal conduct. Relevantly, prior to 1 April 2025, when Cosette executed the amendment deed, it knew at least the following concerning its purported rights of termination in relation to the 6+6 Forecast, being the alleged MAC and the alleged breach of warranty. By 26 March 2025, when the February CFO Report was uploaded to the VDR, Cosette knew the February results fell A$11,287,000 short of the forecast results for that month in the 6+6 Forecast. The February CFO Report stated that “the group fell significantly short of forecast in February on volume and GTN accrual method” and “there is likely to be a negative impact to the year as compared to the 6+6”. It stated that gross sales fell short of forecast. These shortfalls, and the failure to foresee them, lie at the heart of Cosette’s case that a MAC occurred when Mayne did not reach its expectation set out in the 6+6 Forecast. At the same time, Cosette knew of the January 2025 results, and the industry standard it alleges concerning having access to the daily data which it says could have been used to predict the shortfall when the Forecast was finalised on 17 February 2025. Thus, it knew the components of its claimed rights to terminate the SID concerning the 6+6 Forecast. Indeed, as was stated above, in late March 2025, Mr Saraf told Mr O’Brien that the miss of forecast “could be a MAC”.

With knowledge of these circumstances and its potential right to terminate, Cosette agreed to amend the SID on 1 April 2025, agreeing that the SID (as amended) remained in full force and effect. In doing so, Cosette lost any rights it had to terminate the SID based upon the 6+6 Forecast.”

475. In response, Ms Collins submits that:

“… a party to a contract is not taken to have affirmed the contract only because it recognised the existence of the contract, exercised rights under the contract, or otherwise acted on the basis that the contract remains on foot. There is no overriding principle that an act done under the contract will always communicate the decision to affirm; that would be contrary to the true nature of election; it may simply be the taking of action consistent with the contract while the position is explored.”

476. I accept that submission, as a matter of principle and authority, but it plainly does not exclude the prospect that a waiver or election can take place by a choice to take one rather than another course, although a party would prefer to leave its options open, since the contrary view would denude principles of election of operative effect.

477. Ms Collins then submits that:

“The Deed of Amend[ment] altered details of the corporate structure of the acquiring entities under the SID, together with consequential amendments. This was not done in the exercise of a right by Cosette. There was no inconsistency between entry into the Deed of Amendment and the reservation by Cosette of a right to terminate the SID.”

478. I do not accept the latter part of this submission. The entry into a new agreement which confirmed the continuing effect of the SID, as amended, into the future, while an alleged right of termination was pending, was of its nature a choice between two inconsistent alternatives, whether to terminate the SID for the alleged subsisting breach of it or to commit to its continuation in an amended form. The course then taken by Cosette had real significance, where it had the result that MPG’s shareholders were not then alerted to any undisclosed right to terminate the SID and were deprived (without any fault on MPG’s part) of the opportunity to make decisions in respect of their shares in MPG and the scheme with knowledge of that matter.

Cosette seeks to avoid an election by reliance on cl 3.4(b) of the SID. That clause does not seem to me to assist the Cosette Parties here, because it is directed to “waiver” and not to an election between inconsistent rights. In Canberra Advance Bank Ltd v Benny (1992) 38 FCR 427; (1992) 115 ALR 207 at 200; (1992) 9 ACSR 179, the Full Court of the Federal Court in turn observed that:

“There are occasions when, notwithstanding the presence of a provision to the effect that a waiver must be in writing, the courts have found that waiver has occurred despite the absence of writing. R v Paulson [1921] 1 AC 271 is one such example. The headnote adequately summarises the relevant passage from the judgment of their Lordships appearing at 282-3. It is in these terms:

The principle of law that a lessor who accepts rent knowing that there has been a breach of a covenant in the lease thereby irrevocably elects to treat the lease as subsisting, and is precluded from claiming a forfeiture, is applicable although the lease provides that no waiver by the lessor shall take effect unless it is in writing.

[The trial judge] also referred to [Sargent] v and Legione v Hateley (1983) 152 CLR 406 ; 46 ALR 1. In the first of those cases, the vendors of land lost their right to rescind, notwithstanding the purchaser's breach, because of their activities in taking money from the purchaser and joining with the purchaser in converting the land from the “Old System” to Torrens Title. Thus, as in Paulson's case, there was a specific act by a party with knowledge of a breach which act was inconsistent with that party's subsequent attempt to rely on that breach. It is, of course, true that a term in a contract which states that any waiver must be in writing can be the subject of evidence which would justify a finding that the conduct of a party was such that the requirement for writing had been waived by that party.”

479. In Tele2 International Card Company SA v Post Office Ltd [2009] EWCA Civ 9 (“Tele2”), Aiken LJ (with whom Richards and Ward LJJ agreed) considered the application of an “anti-waiver” clause in a case of election and observed (at [55]–[56]) that the clause did not have the effect of overcoming election as a doctrine of law and likely could not do so, as follows:

“Therefore, it seems to me, clause 16 of the Agreement is of no particular help to POL, except perhaps in terms of emphasising the requirement that an election to abandon a right will only be shown if there was a clear and unequivocal communication of an election to abandon the right to terminate and to continue the Agreement. As a matter of fact, either POL elected to abandon its right to terminate the Agreement for Tele2's breach of clause 3.10.2 or it did not. If POL did elect to abandon its right to terminate for breach, then the whole contract, including clause 16, would continue in existence. (Of course, the continuation of the Agreement would not stop POL from claiming damages against Tele2 for breach of clause 3.10.2, but that is not in issue here).

In short, clause 16 cannot prevent the fact of an election to abandon the right to terminate from existing: either it does or it does not. This conclusion is reinforced, I think, by the terms of clause 16 itself. Although it stipulates that “in no event shall any delay, neglect or forbearance” on the part of any party in enforcing a provision of the Agreement “…be or be deemed to be a waiver” of the provision or “….shall in any way prejudice any right of that party under this Agreement”, it does not deal at all with the issue of election of whether or not to exercise a contractual right. The general law demands that a party which has a contractual right to terminate a contract must elect whether or not to do so. This clause does not attempt to say that the doctrine of election shall not apply – even assuming that any contractual provision could exclude the operation of the doctrine.”

480. It also seems to me that, consistent with the approach taken in R v Paulson [1921] 1 AC 271 and Sargent, Cosette’s entry into the Amending Deed was a specific act by a party with knowledge of many of the matters on which it now relies as a breach of the SID, which act was inconsistent with its subsequent attempt to rely on that breach. The inconsistency between terminating the SID for breach and continuing it in amended form and reaffirming its effect is so stark that Cosette waived the requirement for writing at the same time that it waived the asserted breaches of the SID arising from the facts then know to it. Second, consistent with the approach taken in Tele2, cl 3.4(b) of the SID does not, and likely could not, exclude an election arising from Cosette’s choice to take one course, namely to amend and confirm the SID, rather than another inconsistent course, to terminate it.

481. The Cosette Parties also rely on cl 20.11 of the SID, which also does not assist them, for the reason explained by the Court of Appeal in dealing with a corresponding clause in Pittmore Pty Ltd v Chan; Chan v Tan (2020) 104 NSWLR 62; [2020] NSWCA 344 at [130] as follows:

“[Counsel] maintained that cl 13 had no operation in relation to election or affirmation. He also adopted a construction to the effect that the clause applied to inaction by way of failure, delay or omission, but not to positive acts amounting to affirmation. That, with respect, is a natural way to read the clause. It is expressed to preclude inactivity by a party from amounting to a waiver of rights arising under the contract. It is not expressed to apply to positive acts of the party which are sufficient to affirm the contract. It is not necessary to express a concluded opinion on the operation of cl 13 ,,, but I favour the view that cl 13 would not prevent [the party’s] positive acts constituting an election or affirmation.”

482. I am reinforced in taking this view in the context of a scheme of arrangement, where an acquirer’s choices has significant public impacts, not only upon a target company and its shareholders, but also upon its employees and the communities in which it conducts business. Cosette’s choice, with admitted knowledge of relevant matters, to amend the SID and affirm its continued operation was necessarily inconsistent with a choice to terminate and amounted, at least, to an election not to terminate the SID by reason of the matters then known to it.

483. Turning now to the second aspect of MPG’s election defence, MPG then pleads (CCSR [144G]–[144J], substantially admitted CCS Reply [9]), in respect of the entry into the Deed Poll that:

“On 9 May 2025, [the Cosette Parties] made a Deed Poll in favour of each Scheme Shareholder as defined in the SID (Deed Poll).

By the Deed Poll, Cosette covenanted in favour of the Scheme Shareholders that it would perform all obligations contemplated of it under the Scheme, including providing the Scheme Consideration in accordance with the terms of the Scheme.

On or about 9 May 2025, Cosette provided the executed Deed Poll to [MPG].”

484. MPG then pleads (CCSR [144K], denied CCS Reply [9]), in respect of the entry into the Deed Poll that:

“By making the Deed Poll and providing it to [MPG], Cosette affirmed the SID, thereby losing the right to elect to terminate on the grounds it now advances to terminate the SID:

(a) as a result of the alleged Q3 FY25 Sales Performance being a material adverse change (as pleaded in sections F and G.4 of the [CCS]);

(b) as a result of the allegation that [MPG] breached its Due Diligence Material Representation concerning the FY25 6+6 Forecast (as pleaded in section H of the [CCS]);

(c) as a result of the FDA Letter being a material adverse change (as pleaded in sections G.1 and G.4 of the [CCS]);

(d) as a result of the alleged failure to disclose the FDA Letter being a breach of the ASX listing rules or Corporations Act (as pleaded in section H1 of the [CCS]) …”

485. It also seems to me plain enough, from the chronology set out above, that the Cosette Parties had knowledge of the material facts necessary to give rise to an election, in respect of these matters at the time of entry into the Deed Poll.

486. Mr Hutley here submits that:

“The [D]eed [P]oll was expressly provided pursuant to Cosette’s obligations under the SID (recital C). Clause 4.1 provided that Cosette covenanted in favour of each Scheme Shareholder that it will observe and perform all obligations contemplated of Cosette under the Scheme, including the relevant obligations relating to the provisions of the Scheme Consideration in accordance with the terms of the Scheme. By clause 5 of the Deed Poll, Cosette represented that it has power, and had appropriate corporate authorisation, to enter into and perform the obligations under the Deed Poll. The Deed Poll was included in Mr Ilin-Schneider’s affidavit dated 12 May 2025, which was served on Mayne and read at the First Court Hearing on 15 May 2025.

The execution of the Deed Poll and its provision to Mayne Pharma was wholly inconsistent with any intention to terminate.”

487. Ms Collins responds that:

“Cosette made a Deed Poll in favour of Scheme Members on 9 May 2025. Again, this was not done in the exercise of a right by Cosette. Rather, this was the performance by Cosette of its obligations under cl 4.2 of the SID. This was conduct consistent with the reservation by Cosette of a right to terminate the SID. Cosette was not required to act contrary to its obligations under the SID in order to preserve an ability to exercise a right to terminate.

488. Ms Collins also submits that:

“The terms of the Deed Poll are consistent with the reservation of a right to terminate. The obligations under the Deed Poll were subject to the Scheme becoming Effective. If the SID was terminated before the Effective Date, the obligations of Cosette under the Deed Poll were to automatically terminate.”

489. I have reservations as to these submissions. The Deed Poll could only take effect if the SID was not terminated before the Effective Date; and, at the point of entry into the Deed Poll, Cosette did not reserve, or disclose to third parties who would rely on their execution of that document (including MPG’s shareholders, the Australian Securities & Investments Commission (“ASIC”) and the Court) any substantial undisclosed risk of termination of the SID that would defeat the operation of the Deed Poll. The position here is very different from one where any risk of termination would only arise in the future from events between the first and second Court hearings for the scheme. However, it is ultimately not necessary to decide whether the Cosette Parties’ entry into the Deed Poll also amounted to an election to continue the arrangements contemplated by the SID (as by then amended) rather than terminate them, where I find below that a further election plainly arose from Costete’s conduct at the first Court hearing for the scheme.

490. Finally, MPG pleads (CCSR [145]–[155]) and the Cosette Parties admit (CCS Reply [9]) the steps taken by the parties in respect of the scheme booklet and the first Court hearing in respect of the scheme. MPG then pleads (CCSR 156, denied CCS Reply [9]) that:

“In the circumstances pleaded above at 144D to 155, Cosette affirmed the SID, thereby losing the right to elect to terminate on the grounds it now advances to terminate the SID:

(a) as a result of the alleged Q3 FY25 Sales Performance constituting a material adverse change (as pleaded in sections F and G.4 of the [CCS]);

(b) as a result of the allegation that [MPG] breached its Due Diligence Material Representation concerning the FY25 6+6 Forecast (as pleaded in section H of the [CCS]);

(c) as a result of the FDA Letter being a material adverse change (as pleaded in sections G.1 and G.4 of the [CCS]);

(d) as a result of the alleged failure to disclose the FDA Letter being a breach of the ASX listing rules or Corporations Act (as pleaded in section H1 of the [CCS]) …”

491. As I noted above, Dr Ilin-Schneider (who is the Senior Vice President, Corporate Development and General Counsel of Cosette) affirmed an affidavit dated 12 May 2025 (Ex J1, 14/10494.2) in the application to convene the scheme meeting brought in this Court, which was then read at the first Court hearing on 15 May 2025. Cosette’s Counsel and solicitors, who represented Cosette at that hearing, did not then disavow that affidavit or seek to qualify its contents. Dr Ilin-Schneider there recorded that:

“I am authorised to make this affidavit on behalf of Cosette and Cosette [Sub] in support of the application by [MPG] for orders under section 411 of the [Act] in relation to a scheme of arrangement (Scheme) proposed to be made between [MPG] and those [MPG] shareholders who are “scheme shareholders” (as defined in the [SID]). …”

492. This observation is important, because the authority conferred on Dr Ilin-Schneider to make that affidavit on behalf of the Cosette Parties in that application extends, in my view, to making any consequential election that arises from permitting reliance on that affidavit at the first Court hearing. Ms Collins was at pains to emphasise, in closing submissions, that Cosette’s board did not make a decision to terminate the SID until shortly after the first Court hearing; but that is not to the point, where the Cosette Parties had conferred authority on Mr Ilin-Schneider, if the steps taken within that authority amounted to an election not to terminate the SID.

493. Mr Ilin-Schneider went on to outline the process by which MPG and Cosette entered into the SID on 20 February 2025 and to describe the Cosette Group and its ownership by Avista and Hamilton Lane and outlined the position in respect of Cosette Sub. He referred to the entry by the Cosette Parties into the Deed Poll dated 9 May 2025, with no suggestion that the Cosette Parties’ obligations under the Deed Poll would not, in practice, be performed if, immediately after the first Court hearing, the SID was terminated. Mr Ilin-Schneider then outlined how the scheme consideration would be funded by the Cosette Parties, through an existing cash advance available to the Cosette Group, being approximately US$52.5 million as at 9 May 2025, equity financing and debt financing. He observed without further qualification that:

“The Maximum Scheme Consideration and other additional funding will be provided by the Cosette Group to Cosette [Sub] by way of a mix of capital contributions, inter-company loans and equity subscriptions, which have been documented via inter-company arrangements between the relevant entities.”

494. Dr Ilin-Schneider there referred to section 8.2 of the scheme booklet which provided a summary of the sources of funding, including equity funding by a legally binding equity commitment letter with Avista and Hamilton Lane; debt financing under a credit agreement with Santander and Hayfin. He observed that “the provision of the Debt Financing is subject to certain customary conditions precedent, as set out in section 8.2 of the scheme booklet” and noted that that section was verified in accordance with the verification process to which he deposed. Notably, he did not disclose any further risk to debt funding which would arise from termination of the SID immediately after the first Court hearing.

495. Dr Ilin-Schneider then outlined the process for the verification of the “Cosette Information” in the scheme booklet, which had importantly stated (Ex J1, 14/10740) that:

“As at the date of the scheme booklet, Cosette and [Cosette] Parent are not aware of any reason why the conditions to the Debt Financing would not be satisfied to enable the facilities to be drawn for the purpose of funding the Scheme Consideration.”

496. The Cosette Information contained in the scheme booklet also referred to the ASX announcement made by MPG in respect of the FDA Letter but not to other material information which would plainly have included the risk of termination of the SID on other grounds as follows:

“No other material information

The Cosette Group refers to the announcements made by [MPG] to ASX on 14 May 2025 as referred to in section 7.10. The matters described in these announcements remain under consideration by the Cosette Group as at the date of the scheme booklet, including in relation to the impact of these matters on [MPG] and its business and operations.

Other than as disclosed in this section 8 (information on Cosette and Cosette Group), there is no information as to the Cosette Group or its intentions regarding [MPG], that is material to the making of a decision by a [MPG] Shareholder on whether or not to vote in favour of the Scheme that is within the knowledge of any director of Cosette or Cosette Sub as at the date of this Scheme Booklet that has not been previously disclosed to [MPG] Shareholders.”

497. Dr Ilin-Schneider there observed that he was personally involved in that verification process and that:

“On 12 May 2025, the Board Statements were approved by the Cosette Board. The Board resolved that the Board Statements are accurate and, if applicable, held by the directors and that there is a reasonable basis for the Board Statements.”

The term “Board Statements” is defined in his affidavit as statements of intention, opinion, future matters or Cosette’s belief which were assigned for verification to management or directors on the Cosette Board.

498. Dr Ilin-Schneider then stated, in paragraph 32 of his affidavit, that by reason of the matters set out above in respect of the verification process:

“I am able to state that, to the best of my knowledge, information and belief, the Cosette Information, in the context in which it appears in the scheme booklet, is accurate and complete, not misleading or deceptive or likely to mislead or deceive in any material respect, and does not omit any material information.”

499. I have not neglected the fact that further adverse developments had occurred after 12 May 2025, the date that Dr Ilin-Schneider’s affidavit was affirmed, at least including the fall in MPG’s share price on 14 May 2025, and I have referred above to the evidence that Cosette knew of or was made aware of these developments as they occurred. However, it is not to the point that Dr Ilin-Schneider’s affidavit was affirmed before these developments when he and the Cosette Parties permitted it to be read in Court on 15 May 2025, without update or qualification, and necessarily as expressing Cosette’s then position as at the date of that hearing.

500. In my view, the Cosette Parties’ actions (by themselves and by Dr Ilin-Schneider) in permitting that affidavit to be read without update or qualification at that hearing excluded the possibility of termination of the SID by reference to the several matters known to the Cosette Parties at that date and not disclosed in that affidavit, other than the FDA Letter which was disclosed at the first Court hearing. That result arises because Cosette’s reserving such a right of termination would render the Cosette Information contained in the scheme booklet incomplete, misleading and deceptive and likely to mislead and deceive in critical respects, contrary to the confirmation which was then given to the Court by the Cosette Parties and Dr Ilin-Schneider as their authorised officer by permitting his affidavit to be read. The Court was then entitled to take the Cosette Parties at their word when they indicated, by what Dr Ilin-Schnider said and did not say, that such a right of termination did not then exist.

501. It is also broadly common ground (CS [26]–[27], RCS [26]–[27]) that, during that hearing, counsel for the Cosette Parties advised the Court that Cosette supported MPG’s application for orders convening the scheme meeting; drew attention (Ex J1, 14/10940.8–10940.9) to the fact that Cosette was considering the FDA Letter and its impact; and did not otherwise indicate that Cosette was considering any of the other matters later outlined in the First MAC Notice and subsequent notices.

502. I also recorded what the Court was told about the Cosette Parties’ position, as at 15 May 2025 when the first Court hearing took place, in my judgment in Re Mayne Pharma Group Ltd [2025] NSWSC 513 as follows:

“The proposed scheme provides for the acquisition of all of MPG’s ordinary shares by [Cosette Sub], which is ultimately owned by Cosette Pharmaceuticals Holdings, Inc. (“Cosette Holdings”). Cosette Holdings is in turn jointly owned and controlled by [Avista] and [Hamilton Lane]. Under the proposed scheme, MPG shareholders will be paid AU$7.40 per share they own and the maximum scheme consideration payable by Cosette Sub will be AU$614,933,421.40. …

By an affidavit dated 12 May 2025, of Dr Serge Ilin-Schneider, who is the Senior Vice President, Corporate Development and General Counsel of Cosette Pharmaceuticals, Inc. (“Cosette”), addresses, inter alia, the Deed Poll made by Cosette and Cosette Sub, funding arrangements for the scheme consideration and verification of the Cosette Information (as defined) in the scheme booklet. … [Counsel for MPG] addresses the questions of performance risk and funding. He recognises that Cosette Sub is a special purpose entity created for the purpose of acquiring the ordinary shares in MPG, and points to evidence led by MPG, in Dr Ilin-Schneider’s affidavit, concerning Cosette Sub’s ability to fund the cash components of the scheme consideration, and also notes that the information as to that matter in section 8.2 of the scheme booklet which has been verified. That evidence addresses the issue noted in paragraph 28(b) of Practice Note SC Eq 4, which recognises that:

“Where a special purpose vehicle with minimal assets is to acquire securities of substantial value under a scheme, a risk of a scheme not completing is likely to be material to securityholders, irrespective of the fact that their securities are not transferred to that special purpose vehicle until the consideration is paid. Disclosure of such a risk is also important to maintaining a fully informed market. Evidence should be led at the first Court hearing of the availability of the funding or other financial support on which the special purpose vehicle will rely to complete the scheme.”

[Counsel for MPG] points out that it is anticipated that the maximum cash consideration payable by Cosette Sub will be AU$614,933,421.40, being approximately US$394 million (based on an AUD to USD exchange rate of $0.64), which will be funded by the Cosette Group from existing cash reserves, amounting to approximately US$52.5 million; from equity financing, relying on legally binding equity commitment letters with funds managed by Avista and Hamilton Lane under which they have irrevocably committed to providing to Cosette (or Cosette Sub as applicable) US$75 million in total at or before one business day prior to when the scheme consideration is payable; and from debt, where relevant debt commitments are subject to customary conditions precedent including no material adverse change, the scheme becoming effective and the completion of the equity financing. I am satisfied that the evidence led by MPG as to Cosette Sub’s funding arrangements sufficiently addresses the concerns which would otherwise arise where Cosette Sub is a special purpose company that could not pay the scheme consideration from its own resources. [I interpolate, Counsel who then appeared for the Cosette Parties and the solicitors who then appeared and still appear for Cosette did not intervene to qualify any aspect of this submission, a matter which is only consistent with an election that avoided the need to do so.]

[Counsel for MPG] also notes that cl 5 of the scheme adopts the conventional mechanism of making the transfer of MPG shares to Cosette Sub conditional on the payment of the total consideration into a trust account with an Australian bank, and that Cosette Sub and Cosette have given a Deed Poll in favour of MPG shareholders. I accept that these are well-established means of properly managing performance risk in these circumstances: ELMO at [27]-[28]. [I again interpolate, Counsel who then appeared for the Cosette Parties and the solicitors who then appeared and still appear for Cosette did not intervene to qualify any aspect of this submission, including to disclose that the Deed Poll would not protect MPG shareholders against a termination of the scheme arising from existing matters. That matter is again only consistent with an election that avoided the need to do so.] …

[Counsel for MPG] also addresses the issue arising from correspondence that MPG received from the FDA on 28 April 2025, to which I referred above. The explanatory booklet for the scheme has been amended, in a relatively minimalist way, to address that issue, primarily by cross reference to MPG’s response to the ASX price query and to MPG’s ASX announcement in response to the "speculation" as to the FDA's letter. I recognise that, on one view, that information is now in the public domain, and will likely have been absorbed by, at least, sophisticated shareholders who are trading in MPG shares and is likely incorporated in the price at which MPG shares are traded. However, the limited details of this matter provided in the scheme booklet has the consequence that the reader of the explanatory booklet, who is not already aware of these matters by having accessed the information released to ASX, and does not now make any further inquiry to access that information on ASX, will not know what is the content of the FDA letter, the ASX price query or MPG’s response to it. I also recognise that the explanatory booklet notes that the Cosette Group is considering these matters, including in relation to their impact on MPG and its business and operations. That disclosure will also be less meaningful to a reader of the explanatory booklet who does not already know these matters, who will not know what the Cosette Group is considering.

I have borne these matters in mind, and I am conscious that it is MPG’s, not the Court's, role to draft the explanatory booklet. Plainly, an alternative drafting approach would have been available, which would have described at least the objective subject matter of the FDA letter and the steps which MPG was taking in response to that letter, which are already addressed in MPG’s announcement to ASX. However, it is apparent from MPG’s response to the ASX price query that it takes the position that this matter is not material to the price of its shares, and the evidence in this application does not allow an assessment of the correctness or otherwise of that position, and the independent expert has confirmed this matter does not affect his opinion as to the scheme. On balance, I am not persuaded that I should decline to convene the scheme meeting by reason of the limited disclosure of this matter, on the premise that MPG’s contention that it is not material is correct. No doubt, as events develop, it may become clearer whether any supplementary disclosure is required in respect of this matter.”

503. Mr Hutley submits in opening that:

“by the time of the First Court Hearing on 15 May 2025, Cosette knew all of the circumstances it alleges gave it the rights to terminate. It knew all the detail of the “Q3 Performance Matters”. … It knew of the FDA Untitled Letter, and Mayne’s proposed response. It had been provided with a draft of the 14 May 2025 announcement for comment, which it now alleges was misleading. It also knew that … [MPG] had not announced the receipt of the letter prior to it being posted on the FDA’s website.”

504. It again seems to me plain that the Cosette Parties had full knowledge of the material facts necessary to give rise to an election, in respect of these matters at the time of the first Court hearing.

505. Ms Collins here responds that:

“Cosette provided input to the Scheme Booklet. Again, this was not the exercise of a right, but rather the performance of an obligation. Similarly, Cosette’s appearance at the First Court Hearing was not the exercise of a right under the SID. There was no inconsistency between Cosette providing assistance in the preparation of the Scheme Booklet, and appearing at the First Court Hearing, and the reservation of a right to terminate.”

506. I also do not accept this submission. First, contrary to this submission, the Cosette Parties were not party to the scheme proceedings and had no “right” to appear at the first Court hearing. They instead chose to seek, and obtained, leave to appear under r 2.13 of the Supreme Court (Corporations) Rules 1999 (NSW), which they may well not have obtained had they or their legal representatives then disclosed any reservation of a right to terminate the SID, at least by reason of any matter other than the FDA Letter, which had only just been received. That matter was not disclosed to the Court. Second, there would be a real inconsistency between appearing at the first Court hearing, apparently to support a scheme, and reserving an undisclosed right to terminate the SID. The Cosette Parties and their legal representatives taking the former position, without any further disclosure other than as to the FDA Letter, implied to the Court and to MPG’s shareholders that they were not taking the latter position. That inconsistency can only be resolved by treating that conduct as an election to affirm the SID

507. I am satisfied that the Cosette Parties’ position taken at the first Court hearing (other than in respect of the FDA Letter, where they reserved their position) amounted to an election to continue the arrangements contemplated by the SID (as by then amended) rather than terminate them. The Cosette Parties again cannot avoid a waiver (or election) by reliance on cll 3.4(b) or 20.11 of the SID for the reasons noted above, and I am again reinforced in that view by the public impacts of the Cosette Parties’ choice to support the scheme at the first Court hearing rather than terminate the SID at that point.

508. MPG also pleads, and makes submissions as to, a further defence relying on the proposition that the Cosette Parties cannot take advantage of their own wrong, in respect of matters that have arisen in the period since the scheme would likely have been implemented, immediately following the second Court date that was originally scheduled for 20 June 2025, but for the Cosette Parties purported termination of the SID. It is not necessary to address this defence given the conclusions that I have reached above and having regard to the urgency of the matter.

Orders

509. First, Cosette claims (Cross-Summons [1], CCS [143(a)]) a declaration that it has validly terminated the SID pursuant to one or both of cll 15.1(a)(i) and 15.1(a)(ii) of the SID. This declaration cannot be made, first, because I have found that, although Cosette has established that aspects of MPG’s Q3 FY25 Sales Performance constituted an adverse change, the impact of that change of MPG’s Maintainable EBITDA fell short of the impact required to give rise to an MMAC. That declaration also cannot be made, second, because I have found that the Cosette Parties are bound by an election not to terminate the SID, made by their entry into the amended SID and the Deed Poll and their conduct at the first Court hearing.

510. Second, Cosette claims (Cross-Summons [2], CSS [143(b)]) an order that MPG pay the “Mayne Break Fee” (as defined in cl 1.1 of the SID) by reason of Cosette’s termination of the SID for MPG’s alleged breach of the Mayne Representation and Warranty contained in cl 15 of Sch 2 to the SID (Due Diligence Material Representation), pursuant to cl 13.2(c) of the SID. Third and alternatively, Cosette claims (Cross-Summons [3], CSS [143(c)]) a declaration that MPG must indemnify it against, and must pay it on demand the amount of, any losses, liabilities, damages, costs, charges or expenses suffered or incurred by Cosette as a result of, or in connection with, MPG’s alleged breach of the Due Diligence Material Representation, up to the amount of the Mayne Break Fee, pursuant to cl 9.2(c) of the SID. These orders should not be made where they are consequential on the claim that Cosette has validly terminated the SID. Fourth, and further or alternatively, Cosette claims (Cross-Summons [4], CSS [143(d)]) a declaration that MPG engaged in misleading or deceptive conduct in contravention of s 18 of the ACL, s 1041H(1) of the Act and/or s 12DA(1) of the ASIC Act). A declaration could not be made in that form, where it makes no attempt to identify the conduct to which it refers, and should not be made on the merits since Cosette’s misleading and deceptive conduct claim has not been established

511. In the further alternative, Cosette claims (Cross-Summons [5], CSS [143(e)]) an order under ss 237 and 243 of the ACL, s 1325(1), (2) and (5)(a) of the Act and/or section 12GM(1) and (7)(a) of the ASIC Act declaring the SID to be void ab initio or from the date of the order or from such other date as the Court deems fit and claims (Cross-Summons [6], CSS [143(f)]) an order for damages under s 236 of the ACL, s 1041I of the Act and/or s 12GF of the ASIC Act. In closing submissions, Mr Hutley submits that it is a statutory pre-condition to the grant of relief under ss 236 and 237 of the ACL that the party seeking relief has suffered loss or damage or, in the case of ACL s 237, is likely to suffer loss or damage because of contravening conduct. I will assume, without deciding, by reference to the case law to which Cosette refers, that such loss can include the entry into a contract, resulting from misleading or deceptive conduct, without establishing economic disadvantage from that contract: (1992) 39 FCR 31 at [32]–[33], [44]; (2020) 282 FCR 530; [2020] FCAFC 229 at [77]. The proposition does not assist the Cosette Parties here, where the relevant breach has not been established. These orders should not be made since Cosette has not established their basis on the merits.

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Endnotes

Mr Hosier’s concept of a “differentiated” product is one which is different from other products, where the difference is of benefit or significance to HCPs or consumers. That concept was inconsistently applied, particularly in his cross-examination, when it became necessary to distinguish between a mere difference and a “distinguishing” factor, and at times seemed to depend on Mr Hosier’s view of what HCPs or consumers should think (as distinct from what they do think) is significant to them.

The voluminous academic commentary and relevant case law is noted in AJ Black & P Hanrahan, Securities and Financial Services Law, 9th ed, 2021, [8.58].

Amendments

17 October 2025

Para 146 first line - change "MPG's" to "Cosette's".