Johnstone v HIH Limited

AND: HIH INSURANCE LIMITED (ACN 008 636 575)

1. I direct the parties to bring in Draft Short Minutes to give effect to these reasons, including appropriate orders as to the costs of the interlocutory applications, and I stand the matter over until 26 March 2004 at 2.15 pm for settlement of the orders. 2. I direct Messrs Dennis and Co, solicitors for the applicant, to file with the Court and serve on the respondents a Draft Letter of Correction to be sent to all addressees of the letter of 22 September 2003 in accordance with these reasons. Such draft shall be filed with the Court and served on the respondents on or before 19 March 2004. I will hear submissions as to the final form of that letter on 26 March 2004 at 2.15 pm. 3. Messrs Dennis and Co shall file on or before 19 March 2004 an affidavit setting out the names and addresses of all persons to whom that letter was sent. 4. The matter is stood over to 26 March 2004 at 2.15 pm. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT 1 These reasons concern applications brought by the third, fourth, fifth, seventh, tenth and eleventh respondents in the main proceeding to discontinue the Application as a representative proceeding, and also to strike out the Statement of Claim on a number of specific pleading grounds. Some respondents seek orders that the whole proceeding be dismissed as disclosing no arguable cause of action on the part of the representative Mr Johnstone or the group. 2 The applicants in these applications are the third to seventh respondents and the tenth to thirteenth respondents in the main proceedings. The third to seventh respondents were directors of the first respondent, HIH ("the Directors"). The tenth respondent is an accounting firm ("Arthur Andersen"), and the eleventh to thirteenth respondents are insurance companies ("the Reinsurers"). The main proceeding has been discontinued as against the fourteenth respondent. Not all of the respondents to the main proceeding have made the applications that are the subject of these reasons. I will refer to those respondents that have made these applications collectively as "the respondents". There is also an application for security for costs brought by the fifth respondent, Mr Stitt, QC. 3 Mr Johnstone commenced the main proceeding by Statement of Claim, claiming to be a representative party under Part IVA of the Federal Court of Australia Act 1976 (Cth) ("the FCA"). The original Statement of Claim was filed on 17 April 2002. This Statement of Claim was subsequently amended, and the ASC was filed on 15 October 2003. 4 The Application of Mr Johnstone commencing the main proceeding claims relief by way of declaration that any or all of the respondents to the main proceeding engaged in misleading or deceptive conduct in breach of ss 52 and 75B of the Trade Practices Act 1974 (Cth)("the TPA"), ss 79 and 995 of the Corporations Act 2001 (Cth) ("Corporations Act 2001") and/or s 42 of the Fair Trading Act 1987 (NSW) ("the FTA"). It also seeks damages against any or all of the respondents to the main proceeding pursuant to ss 82 or 87 of the TPA and damages under s 1005(1) of the Corporations Act 2001, s 68 of the FTA and at common law. The reference to the Corporations Act 2001 is clearly wrong, because the conduct complained of occurred prior to 2001. 5 The Application brought by Mr Johnstone as a representative party states that the "Group Members" to whom the proceeding relates are: "… Shareholders and Noteholders in HIH [the first respondent] who suffered loss and damage as a result of the misleading and deceptive conduct of any or all of the Respondents." (Emphasis added) 6 "Group Members" are defined differently in both cl 19 and the "Loss and Damage" section of the ASC. Some persons are excluded from the definition of "Group Members" but these exclusions are not relevant for present purposes. 7 The claims are described in the Application as being: "… in the nature of a class action by Shareholders and Noteholders in HIH who suffered loss and damage as a result of the misleading and deceptive conduct of any or all of the Respondents which involved, amongst other wrongful acts, financial and accounting manipulation, the issue of misleading and deceptive media releases and misleading and deceptive financial reports as well as the dissemination of misleading and deceptive information over the internet." (Emphasis added) 8 The case is said to also "involve": "… the creation by the Respondents of the illusion that HIH was financially sound, profitable and solvent by financial and accounting manipulation and the dissemination of misleading and deceptive media releases, financial reports and information when in reality HIH was financially unsound, was trading at a loss and was insolvent." 9 The misleading and deceptive conduct alleged is said to have been: "… achieved in the main by the use of 'sham' reinsurance contracts, overstatement of asset values and the understatement of the provisioning for claims." 10 There is then an allegation that as a consequence of the misleading and deceptive conduct of the respondents the "Group Members" suffered loss and damage.

parties 11 The applicant (Mr Johnstone) is a person who purchased 40,000 ordinary shares in HIH on 5 December 2000, has owned those these shares continuously from that time, and still owns these shares. 12 The first respondent, HIH Insurance Limited (in liquidation) ("HIH"), at all material times was a corporation which, it is alleged, had obligations under the TPA, Australian Accounting Standards, and the Rules of the Australian Stock Exchange, regarding disclosure. 13 The second through ninth respondents were directors of HIH during periods ranging from 1988 to the date of provisional liquidation on 15 March 2001. 14 The tenth respondent ("Arthur Andersen") carries on business as accountants and auditors and is said to have provided a "myriad of services" to HIH on a continuous basis from March 1999 to the date of provisional liquidation on 15 March 2001. 15 The eleventh, twelfth and thirteenth respondents ("the Reinsurers") are said to have carried on business as reinsurers in Australia and to have entered into two reinsurance contracts with HIH on 14 October 1999.

overview OF THE ASC 16 The ASC states that HIH carried on business, in Australia and internationally, as a general insurance underwriter, and that it operated insurance underwriting agencies and undertook investment funds management. It states that HIH operated in the areas of general insurance, workers' compensation, public and professional liability insurance, and property and commercial insurance. HIH was placed in provisional liquidation on 15 March 2001 and in final liquidation on 27 August 2001. As at 15 March 2001, the total number of ordinary shares issued by HIH was 477,254,548 and the total value of convertible notes which had been issued by HIH was in the order of $278.4 million. 17 The first group of allegations in the ASC concern statements made by HIH, its directors, Arthur Andersen and the Reinsurers by way of a series of media releases. The ASC alleges that HIH and its directors issued statements and disseminated information in the form of media releases which were available to the public, regarding the solvency of HIH, its financial position, the valuation of its assets, an estimation of its liabilities, and the existence, extent and causes of its profit and losses. As against Arthur Andersen and the Reinsurers, it is said that they remained "silent" and did not at any time contradict, or seek to contradict, the statements and information so disseminated. There is an allegation that the statements made by HIH and its directors which were not contradicted by Arthur Andersen, and in respect of which Arthur Andersen remained silent, were misleading and deceptive or likely to mislead and deceive. There is no allegation made against the Reinsurers that the statements were misleading and deceptive, but upon this being pointed out in argument by Counsel for the Reinsurers, Mr Greenwood SC, Counsel for the applicant, Mr Finch, said this was an oversight. 18 There are then quotes from parts of media releases dated between 3 March 1999 and 13 September 2000, which are said to have been false. Included in these extracts are allegedly misleading statements in relation to the reinsurance arrangements with the Reinsurers. 19 Another allegation of misleading and deceptive conduct is said to arise from a financial report that was signed by the second and eighth respondents on 16 October 2000, and by Arthur Andersen, which was submitted to the Australian Securities Investment Commission ("ASIC") and the Australian Stock Exchange ("ASX"), as well as to members of HIH. It is said that this financial report contained false representations as to the solvency of HIH, its financial position, the valuation of its assets and liabilities and the existence, extent, and causes of its profits and losses, which were false. 20 The substance of the primary allegations against the directors, Arthur Andersen and the Reinsurers is that they remained silent and did not at any time contradict or seek to contradict the statements that were made and the information that was disseminated. It is claimed that this failure to warn and the omissions of material facts created a false impression as to the financial soundness of HIH, which led to falsely high and stabilized market in the ordinary shares and notes of HIH. 21 There is also reference to an "Independent Audit Report" regarding the financial position of HIH and related companies, which was given by Arthur Andersen for the financial year ended 30 June 2000. This report was presented by HIH, its directors and Arthur Andersen to a meeting of shareholders on 15 December 2000. It is said that this report was misleading and deceptive in breach of the Corporations Act 2001 and the FTA. It is alleged that the Reinsurers were silent as to the correctness of this report and that this silence was misleading and deceptive. It is said that the financial reinsurance contracts assisted in overstating the assets in the balance sheet of HIH by $370 million as at 30 June 2000, and that such reinsurance contracts were a "sham". 22 The third ground on which there is said to be misleading and deceptive conduct concerns the website of HIH which was continuously accessible from September 2000 to the date of provisional liquidation on 15 March 2001. It is said that the website www.hih.com contained statements and representations, and disseminated information as to the solvency of HIH and the value of its ordinary shares, its financial position, the valuation of its assets and liabilities and the existence and causes of its profits and losses. The allegations against Arthur Andersen and the Reinsurers is that they did not contradict the statements and information disseminated. 23 The claims against the directors are that they were involved in misleading and deceptive conduct and that they aided and abetted or procured HIH to contravene s 75B of the TPA and s 79 of the Corporations Act 2001 and were knowingly concerned in or party to the misleading and deceptive conduct. 24 As against Arthur Andersen, it is said that it was involved in misleading and deceptive conduct and that it aided, abetted and procured HIH to contravene the legislation, and that it was knowingly concerned in or party to the misleading conduct. The ASC contains a detailed pleading in relation to the negligence of Arthur Andersen, but this was withdrawn by the applicant during the hearing. The applicant stated that it wished to retain the extensive particulars of negligence in the pleading as being particulars in relation to the other claims. However, the way in which this was intended to operate is by no means clear, and the way in which the particulars of negligence are sought to be used is not alleged. 25 In relation to the Reinsurers, it is said that they were involved and that they aided and abetted and were indirectly knowingly concerned in, or party to, the misleading and deceptive conduct. 26 Finally, the way in which the compensation claim is framed under the heading "Loss and Damage - Compensation" is that the loss suffered is: "… the acquisition price of the ordinary shares or notes in HIH minus the current value of the shares or notes (which according to the liquidator is nil) or minus the amount received by the Group Members on the disposition of their respective shares or notes."

RELEVANT pleading PRINCIPLES 27 It is important to consider the ASC with regard to the purpose which pleadings and particulars are designed to serve. These were summarised by the High Court in Dare v Pulham (1982) 148 CLR 658 at 664 in these terms: "Pleadings and particulars have a number of functions: they furnish a statement of the case sufficiently clear to allow the other party a fair opportunity to meet it … they define the issues for decision in the litigation and thereby enable the relevance and admissibility of evidence to be determined at the trial …; and they give a defendant an understanding of a plaintiff's claim in aid of the defendant's right to make a payment into court. Apart from cases where the parties choose to disregard the pleadings and to fight the case on issues chosen at the trial, the relief which may be granted to a party must be founded on the pleadings …" (Citations omitted) 28 To give effect to this purpose, the Federal Court Rules relating to pleadings and particulars spell out the matters required for particular pleading: see O 11 (Pleadings) and O 12 (Particulars). In accordance with these rules, specific matters are required to be raised and particularised in the pleading in respect of certain causes of action. It is well-settled that it is not the task of particulars to fill in gaps in the pleading of material facts. In the present case, the requirements in O 12 rr 2 and 3 to provide particulars in the pleading of any facts relied on to support allegations of fraud, misrepresentation or any condition of mind are particularly important. Where an allegation is made that a respondent knew or ought to have known of a certain state of affairs or matter, then particulars must be given in the pleading as to the facts and circumstances from which it is alleged the respondent ought to have acquired that knowledge either by observation or inference: see Lyons v Kern Konstructions (Townsville) Pty Limited (1983) 47 ALR 114 (an expectation); Fox v H Wood (Harrow) Ltd [1963] 2 QB 601 (knowledge of danger).

respondents' case 29 There are three broad grounds on which the pleading is attacked as inadequate. The first concerns deficiencies in both the Application and the ASC in alleging that the proceeding can be pursued as a representative proceeding. Some but not all the respondents seek an order that the proceeding be discontinued as a group proceeding. 30 The second is that the proceeding is doomed to failure because it is based on a claim that relates to the diminution of value in the shares and notes in the company, for which the proper claimant is only the company, and not the shareholders or noteholders, and that the proceeding should be dismissed, or alternatively, that the Application and Statement of Claim should be recast entirely. 31 The third is that there are manifest inadequacies in the pleading as it presently stands based on the requirements of the Federal Court Rules and basic pleading principles.

representative proceeding 32 In its report entitled Group Proceedings in the Federal Court (Report No 46 1988), the Australian Law Reform Commission, at paragraph 69, reached the conclusion that: "An effective grouping procedure is needed as a way of reducing the cost of enforcing legal remedies in cases of multiple wrongdoing. Such a procedure could enable people who suffer loss or damage in common with others as a result of a wrongful act or omission by the same respondent to enforce their legal rights in the courts in a cost effective manner. It could overcome the cost and other barriers which impede people from pursuing a legal remedy. People who may be ignorant of their rights or fearful of embarking on proceedings could be assisted to a remedy if one member of a group, all similarly affected, could commence proceedings on behalf of all members. The grouping of claims could also promote efficiency in the use of resources by enabling common issues to be dealt with together. Appropriate grouping procedures are an essential part of the legal system's response to multiple wrongdoing in an increasingly complex world." 33 Paragraph 7 of the draft Bill which accompanied that report, which was entitled "Commencement of grouped proceedings lawful", provided: "7(1) It is lawful for a person (the principal applicant) who commences a proceeding in the Court against a respondent (the principal proceeding) also to commence, by the same application, other proceedings (group members' proceedings), each within the jurisdiction of the Court and each between another person (a group member) as applicant and the respondent." (Emphasis added) 34 That formulation was not adopted by Parliament. Section 33C, which is the corresponding provision of the FCA, provides: "33C Commencement of Proceeding (1) Subject to this Part, where: (a) 7 or more persons have claims against the same person; and (b) the claims of all those persons are in respect of, or arise out of, the same, similar or related circumstances; and (c) the claims of all those persons give rise to a substantial common issue of law or fact; a proceeding may be commenced by one or more of those persons as representing some or all of them." 35 Each of these requirements is said by the respondents not to have been satisfied. 36 The first matter raised for the respondents is that in the present case, the pleadings do not allege that each of the group members has a claim against the same respondent. The respondents refer to the Full Court decision in Philip Morris (Australia) Ltd v Nixon (2000) 170 ALR 487 ("Philip Morris"), which held that s 33C(1)(a) requires every applicant and represented party to have a claim against all respondents and that this provision is not satisfied if some group members have claims, albeit different, against one respondent or group of respondents while other group members have claims against another respondent or group of respondents. In that case, Sackville J, with whom Spender and Hill JJ agreed on this point, said at [126]: "Thirdly, as the parties accept, s 33C(1)(a) requires every applicant and represented party to have a claim against the one respondent or, if there is more than one, against all respondents. This conclusion follows from the language of s 33C(1)(a) itself and is consistent with the approach taken by the LRC in Grouped Proceedings. It is also consistent with the structure of the legislation." (Emphasis added) 37 On this reasoning, a pleading of a cause of action by each group member against "any" or in the alternative "all" of the respondents does not satisfy the requirements of s 33C(1)(a), because it can give rise to an action against one or some but not all of the respondents. In Philip Morris the Court held that the flaws in the pleadings were such that the Statement of Claim failed to establish the requirements of s 33C(1) of the Act. 38 In a later Full Court decision, Bray v Hoffman-La Roche Limited (2003) 200 ALR 607 ("Bray"), there were some criticism levelled by the members of the Full Court towards the approach taken in Philip Morris on the basis that it is too restrictive and detracts from the purpose of Part IVA: see Bray at 630-631 and 657-659. Such comments were by way of obiter and I consider that I am bound by the reasoning in Philip Morris. 39 Accordingly, the question which arises is whether the Application and pleadings in this case define the group in such a way that each member of the group has a claim against the same respondent. It is of course not necessary that each group member should have a claim which is the same or of the same type. 40 On the pleadings as presently framed, the group, in my view, is not properly defined as required by the FCA. 41 The clearest indication of this deficiency, in the present proceeding, is that the group members are defined as persons who have suffered loss as a result of the misleading and deceptive conduct of any or all of the respondents. This allegation means the claims are made against any one or more of the respondents and alternatively, against all of the respondents. In terms, the definition of the group is sufficiently wide to include persons who may have a claim against one of the respondents but not others among the respondents. This takes the description outside the terms of s 33C(1)(a). 42 Other matters referred to in the Application and the ASC as presently framed, indicate that the members of the group are not properly defined. The first example of this concerns the position of the Reinsurers. One of the claims against the Reinsurers is that by entering into reinsurance contracts with HIH on 14 October 1999, which are alleged to be shams because of the existence of "side letters", they were involved in misleading and deceptive conduct, or were knowingly party to misleading and deceptive conduct. In my view, it is impossible to see how those members of the group who invested in shares or notes of HIH prior to 14 October 1994 could be said to have been misled or deceived by the entry into the reinsurance contracts, or by any silence of the Reinsurers after that date. These shareholders or noteholders form a different group on the case as presently framed. This is a serious deficiency. 43 Counsel for Arthur Andersen tendered a printout of the volumes and prices of shares changing hands between a date prior to the first media release in March 1999 and the provisional liquidation of HIH on 15 March 2001. This list sets out the daily volume of shares traded and the prices at which the shares were sold at the close of each day. This list indicated a very large turnover in the order of millions of dollars in share value per day over the entire period, with significantly fluctuating prices both upwards and downwards. Principally there was a discernible downward trend over the period. The identity of shareholders in the relevant period fluctuated on a daily basis giving rise to real difficulties when defining the class. 44 Having regard to this material, it is apparent that membership of the group as defined in the ASC is widely fluctuating, and far too wide, in the sense that the claims of some shareholders and noteholders against the Reinsurers for entry into the sham transactions is not one which is common to all shareholders and noteholders, so that on the ASC there will be members of the group who do not have a claim against the Reinsurers. 45 A further example of the vagueness of the definition of the group members relates to the position of Arthur Andersen. It is difficult to see how a person who purchased shares in March 1999, after the first media release, and who sold them several months later at a lower price, in say September 1999, can be said to have suffered loss as a result of the reports of Arthur Andersen in respect of the financial year ended 30 June 2000, which was published at a subsequent date. There is a suggestion in the pleadings that Arthur Andersen were engaged as auditors during the entire period, including the dates of the various media releases, and ought to have spoken up to warn of the alleged errors in the statements in the media releases. This allegation is not clearly formulated or spelt out for the reasons which I will give below. Accordingly, on the pleadings, it appears that the claim against Arthur Andersen as presently formulated is not a claim that is common to all the group members. 46 The above matters are central to the proper formulation of a group proceeding. In my view, the requirement of s 33C(1)(a) has not been made out in respect of either the Reinsurers or Arthur Andersen, and indeed the "any or all" nature of the allegations makes it clear that it is intended to reserve the option of there being a claim against one or more of the respondents by the individual members of the group. 47 Section 33C(1)(b) requires further that the claims of all members of the group arise out of similar or related circumstances. As discussed below, the circumstances alleged are said to be similar or related, but they are not sufficiently defined in the pleadings. As a consequence, it is impossible to tell whether or to what extent the ASC claims arise out of similar or related circumstances. In relation to the position of the Reinsurers, there are questions as to whether the reinsurance contracts were a "sham", and the circumstances in which they were entered into. These are distinct from the issue as to whether the directors were knowingly involved in the making of the media releases, and whether the financial and audit reports of Arthur Andersen were misleading and deceptive or complied with the requirements of the Corporations Act 2001. I am not presently persuaded that it has been demonstrated that the claims of all the group members arise out of circumstances which are sufficiently similar or related to the claims against each of the respondents. 48 In relation to s 33C(1)(c), it is submitted for the respondents that the claims of all group members do not give rise to substantial common issues of law or fact. In this respect, the Application states that the common questions of law or fact are: · Were the representations referred to in the Statement of Claim made? · Were the said representations misleading and deceptive or likely to mislead or deceive? · Did each or any of the respondents aid, abet, counsel, cause or procure the first respondent to contravene the TPA and/or the Corporations Act 2001, or were they knowingly concerned in or party to the misleading and deceptive conduct? 49 On the present state of the pleadings, it is simply not possible to determine whether there are sufficient common questions of law or fact. For example, the representations and misleading conduct alleged to have been engaged in by Arthur Andersen and the Reinsurers are quite different to each other, and to those alleged to have been made by the directors. Moreover, different group members may have been affected by different representations and by different conduct at different times. For example, a person who bought shares shortly after the first media release and sold them one month later at a loss, would not have been affected by any representations that were made after they sold the shares. 50 Section 33H of the FCA concerns the requirements for an application commencing a representative proceeding. It provides: 33H Originating process (1) An application commencing a representative proceeding, or a document filed in support of such an application must, in addition to any other matters required to be included: (a) describe or otherwise identify the group members to whom the proceeding relates; and (b) specify the nature of the claims made on behalf of the group members and the relief claimed; and (c) specify the questions of law or fact common to the claims of the group members. (2) In describing or otherwise identifying group members for the purposes of subsection (1), it is not necessary to name, or specify the number of, the group members." (Emphasis added) 51 In the present case, the description of group members is framed in the Application and in the ASC by reference to persons who are shareholders and noteholders [at any time] in HIH who suffered loss and damage as a result of the misleading and deceptive conduct of any or all of the respondents presumably over the period from early March 1999. 52 The purpose of the requirement that the application must identify group members is so that group members may be notified in order for them to have an opportunity to decide whether they wish to remain in the proceeding, or to opt out. For this reason, it is necessary to know with some precision who the group members are. This matter was considered in Petrusevski v Bull Dogs Rugby League Club Limited [2003] FCA 61 by Sackville J. At [23], his Honour said: "Clearly enough, not every description or identification of the represented group will satisfy the requirements of s 33H(1)(a) of the Federal Court Act. A useful, although not necessarily exhaustive test, iswhether the description is such as to enable a person, with the assistance of a legal adviser if necessary, to ascertain whether he or she is a group member. If the description incorporates a reference to conduct alleged in the pleadings, a person or his or her adviser ought to be able, by reading the description and the relevant portion of the pleadings, to determine whether he or she is a member of the represented group. If a person cannot reasonably be expected to do this, the definition is unlikely to satisfy the requirements of s 33H(1)(a)." (Emphasis added) 53 His Honour proceeded to discuss the position where the group is identified by consequences in the form of a reference to those persons who have suffered financial loss as the result of the conduct of a respondent. Such a description was determined to be sufficient in King v GIO Australia Holdings Ltd [2000] FCA 1543 ("King v GIO"), where the group members were described as shareholders of GIO who did not accept certain takeover offers. 54 In King v GIO, the Full Court, in the course of determining that the description of the group was adequate, said at [11]: "… the group is defined by reference to matters that are capable of being ascertained objectively namely, GIO share ownership, non-acceptance of the AMP offer by reason of certain conduct and loss suffered as a consequence. If it should transpire that there was no such conduct, or that the conduct did not cause any loss, the group members' claim will fail, now and for the future." 55 As Sackville J pointed out in Petrusevski at [25]: "While it is open to define the represented group by reference to conduct alleged in a pleading, a difficulty may arise if the pleading is so vague or uncertain that some potential group members cannot reasonably be expected to ascertain by reference to the pleading whether they are in fact members of the group." (Emphasis added) 56 The present case falls within the latter description. The pleading here is so vague and uncertain that a potential group member, having invested in shares or notes of HIH, could not be expected, even with the assistance of an astute legal adviser, to be able to ascertain by reference to the pleading whether he or she is a member of the group. The group in this case is so broadly described that any person who bought shares or invested in convertible notes at any time after the date of the first media release in March 1999 would automatically be a member of the group, regardless of whether or not they subsequently sold those shares or notes. On the facts, as presently pleaded, it is difficult, if not impossible, for an investor in shares or convertible notes to know whether or not they were a member of the group, and, in particular, whether they have to make an election to opt out of the group. The inability by reference to the application or the pleading to make such a decision is contrary to the intention of the provisions of Part IVA of the FCA. In order to make a decision, an investor needs to be informed precisely of the allegations made in relation to the representations, and the way in which their position is said to have been affected by those representations. If the pleadings are unclear or uncertain it may be impossible for an investor to be able to tell whether they have a claim or not. The framing of the claim is central to the potential group members' ability to make a proper determination as to whether they are members of the group. I accept the submission that on the present state of the pleading it is not possible to determine with the requisite precision whether a person is or is not a member of the group. 57 Mr Deakin SC submits on behalf of the Directors that noteholders are a different group from shareholders, and should not be part of this proceeding as presently framed, because their rights as creditors are different from the rights of shareholders and ordinary creditors. Accordingly, it is said the applicant, as a shareholder, is not an appropriate party to represent the group of noteholders. This is said to follow from the requirement that the group members must have a claim against all respondents. 58 Mr Deakin refers to the fact that, under the Trust Deed for the Unsecured Subordinate Convertible Notes ("the Trust Deed"), the rights of noteholders against the company on the winding up of the company are postponed to the claims of ordinary creditors. He also refers to the terms of conversion of the convertible notes. 59 Mr Deakin submits that a consequence of recovery by the noteholders in this proceeding would be that the terms of the Trust Deed would, in substance, be abrogated ,because the noteholders would obtain either the same priority or greater priority than ordinary creditors. He submits that the noteholders would thereby avoid the consequences of their subordination to ordinary creditors under the Trust Deed. 60 As the ASC is presently framed, I am not persuaded that it is impossible to raise a case to the effect that the noteholders may be shown to have invested and suffered loss as a consequence of the conduct of the respondents complained of in this proceeding. The unsatisfactory nature of the pleadings make it difficult to determine this question on a final basis at this point in time. 61 However, it does seem to me that there may be some common ground between shareholders and noteholders in HIH, and a common cause of action which is able to be pleaded, and therefore I do not propose to rule that the noteholders are incapable of belonging to the same group as the shareholders. This is not to say that after the Application and pleading have been recast the same or a similar submission would fail. At that point in time, hopefully, it should be possible to determine what is being alleged with greater clarity. This is a matter which the applicant must bear in mind when reframing the terms of the application and the ASC in respect of the formulation of the description of the class members. 62 My conclusion on the submissions made as to the prerequisites of bringing a representative action, is that the group, as presently described, does not satisfy the requirements of s 33C or s 33H of the FCA. I am not, however, persuaded that I should make an order pursuant to s 33N(1) of the FCA, that the proceedings should no longer continue as a representative proceeding, given the unsatisfactory nature of the pleading. It may well be that a proper group can be delineated with precision by appropriate redrafting of the pleading. I propose to give leave to the applicant to amend the Application and the Statement of Claim in an attempt, if possible to meet the objections raised.

diminution in share value 63 Mr Deakin, counsel for the third, fourth and fifth respondents, submits that the ASC should be struck out as against those respondents, having regard to the Court of Appeal in Prudential Assurance Co Limited v Newman Industries Limited (No 2) [1982] Ch 204 at 223-3 ("Prudential"); and the House of Lords in Johnson v Gore Wood & Co [2002] 2 AC 1 ("Johnson"). This submission is supported by other directors who are respondents to the main proceeding. The relevant principle is said to be that a shareholder cannot recover a sum equal to the diminution in market value of his shares because such a "loss" is merely a reflection of a loss suffered by the company, and is not a personal loss to the shareholder. It is therefore the company which must bring the proceedings and the investors will indirectly benefit from the increase in value of their shares. However, if the shareholder or noteholder can demonstrate that he or she suffered a loss separate and distinct from that of the company, he or she may be able to recover in circumstances where, for example, the shareholder has given a guarantee, or where the shareholder has additional rights which are more than mere incidents to the ownership of the shares: see Harris v Milfull [2002] FCAFC 442 ("Harris v Milfull") at [38]. It is submitted that there is no relevant distinction so far as holders of convertible notes are concerned. It is said that the above principle is so fundamental and clearly applicable that the claim made by the applicant should be dismissed. In substance that is to submit that the claim is so manifestly untenable that it cannot possibly be sustained. 64 The above authorities were considered by the Full Court in Harris v Milfull, which refers to the "unsettled state of law in this area and the need to examine closely the factual bases of the claims …": see Harris v Milfull at [35]. This exercise can only be undertaken where the material facts and allegations are properly pleaded. In Harris v Milfull, the Full Court held that it was not clear that the company's claim arose from the same facts as the applicant's claim or even that the company necessarily had such a claim. 65 In the present case, the ASC alleges that the group members' loss is the acquisition price of the ordinary shares or notes in HIH, minus the current value of the shares or notes, which is either nil or the purchase price minus the amount received by group members on the disposition of their respective shares or notes. On my reading, this provision is a description of the way in which the group members loss is quantified. The actual claim of the applicant is for breach of the provisions of the Corporations Act 2001, the TPA, and/or the FCA, in respect of a separate duty said to be owed to the investor. 66 In relation to the claim for misleading and deceptive conduct, whether by silence or otherwise, it is apparent that the claim is made by the applicant on the basis there has been misleading and deceptive conduct by the directors, Arthur Andersen, and the Reinsurers. This right is conferred by the TPA and, in my view, is arguably a separate and distinct entitlement from any entitlement which the company itself may have to bring proceedings against the respondents to the main proceeding. I consider that it is therefore at least arguable that the principles set out in the authorities relied on, which require the proceeding to be brought by the company, do not operate as a complete answer to the applicant's claim in the present case. Furthermore, I am not satisfied that the state of the law in this area can be said to be sufficiently settled to provide a proper basis for a dismissal on this ground. 67 In this case the pleading is so deficient that any dismissal application on these grounds should not be determined until such a time that the pleadings are in a settled and proper form. 68 Moreover, I have some doubt whether the principles in Prudential apply in circumstances where the company itself, along with its directors, is said to have engaged in the misleading and deceptive conduct complained of in relation to the media releases and the website. 69 Prudential appears to be distinguishable from the present case because the allegation in Prudential was that two directors had concealed information from the company, with the consequence that the company suffered loss by purchasing certain assets at a substantial overvalue. The action was brought against the directors by a shareholder. It was in this context that the Court of Appeal considered that the action should be brought by the company and not by the shareholder, and stated that it is only in circumstances where the board is controlled by fraudulent directors that the shareholder could bring a derivative action. 70 In Johnson, a shareholder in a company sued solicitors for professional negligence in circumstances where the company had already sued the solicitors and reached a compromise, thereby recovering a substantial part of the sum claimed. The House of Lords held that the shareholder was entitled to recover in respect of any loss that he had suffered which was not merely a reflection of the losses suffered by the company. His claims, in respect of the diminution in the value of his pension rights against the company, were properly struck out as being a reflection of the loss suffered by the company. 71 In Harris v Milfull, a shareholder of a company in liquidation sued the receivers of the company in the Federal Court in negligence and on grounds of breach of the TPA. The liquidators brought proceedings in the Supreme Court against the receivers, claiming that they had breached statutory and fiduciary duties to management. The receivers sought to strike out the Federal Court proceeding on the basis that the damages claimed by the shareholder for breach of the TPA and in negligence were a reflection of the damages incurred by the company and not by the shareholder personally. The trial judge had refused the application on the ground that the loss sustained by the shareholder was separate from any loss sustained by the company. The Full Court dismissed the application for leave to appeal, holding that there must be clear deficiencies in a claim for a court to shut out an applicant at a preliminary stage. The claim was not by the company against a director, but against a third party, the receivers, for negligence in failing to perform duties owed to the company. 72 In the present case, the shareholders and noteholders claim that as a consequence of alleged misrepresentations, they suffered a loss which is to be measured by reference to the diminution in value of their shares or notes once the market was no longer falsely inflated. Such a claim does not necessarily reflect damage suffered by the company. There is no necessary damage to the company in having it shares and notes on the market at an inflated price. Assuming that it can be shown that the alleged misrepresentations led to the shares and notes being sold at an inflated price, and that group members suffered loss by investing in HIH at an inflated value, it does not necessarily follow that the loss sought to be recovered by the shareholder and noteholder reflects a reduction in value that the company suffered as a consequence of the collapse many months later as opposed to being a loss suffered by the individuals who became investors at such allegedly inflated prices. The loss suffered by the shareholder and noteholder may be a separate and distinct loss arising from a separate and distinct cause of action and entitlement given by the TPA. 73 Having regard to the unsettled nature of the law in this area and to the obscure state of the pleadings, which make it extremely difficult to determine what is being alleged, I do not consider that the proceeding should be dismissed as against any of the respondents on this basis.

pleading objections 74 In addition to the above objections to the Application and ASC, the respondents have raised a number of objections to the ASC which are common to each of them. 75 In relation to the "silence" claim made against Arthur Andersen and the Reinsurers, the ASC does not spell out whether there is a claim that Arthur Andersen is liable as a person making the misrepresentations, or whether the liability is solely as an accessory or person knowingly involved. This is an important matter which must be made clear. 76 The ASC does not formulate the terms of the representations said to have arisen by silence as a consequence of the media releases, the reports or the website. The precise terms of the representations said to arise form the silence should be formulated so that the pleadings spell out the representations that were allegedly conveyed by the silence. Nor does the ASC plead the material facts from which it is said that Arthur Andersen was aware, or ought to have become aware of the existence or falsity of any specific statements in each of the media releases. No times, dates, circumstances or persons involved on the part of Arthur Andersen are identified. Nor are any material facts alleged which give rise to any requirement to make what is said to be the true position known to any particular person, or to draw the matter to the attention of any one in particular: see Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 39-41. The circumstances pleaded must be such as to justify a conclusion that to remain silent would amount to misleading or deceptive conduct. It is necessary, therefore, to describe those circumstances with precision, in order to ground the non-disclosure or the misrepresentation by silence allegation. The material facts alleged should provide a basis for an expectation by the investor that the existence of relevant facts ought to be disclosed. The classes of persons or bodies, who should have been told, and may now contest the manner and timing of such disclosure, cannot be seen in the ASC. 77 The causal nexus between the conduct alleged and the loss claimed is not formulated with any precision in the pleading. Nor is the way in which the representations were relied on. For example, it is not made clear how a member of the group, such as the applicant, who bought shares in December 2000 can have suffered loss as a consequence of media releases made either prior to that date, or after he had purchased his shares. The same observation applies in relation to the convertible noteholders. 78 In relation to the Independent Audit Report concerning the year ended 30 June 2000, the applicant has not spelt out the details of the precise representations relied on, their falsity, nor any causal connection with the loss suffered by shareholders and noteholders. 79 As to the publications on the website, these are basically reproductions of the material referred to earlier and similar deficiencies, in my view, exist. 80 Several other observations should be made. The numbering of the paragraphs in the ASC is erroneous in many instances and highly confusing. The way in which the applicant seeks to invoke the seven pages of particulars in relation to the now abandoned negligence claim is not spelt out, except for a general assertion that they will be relied on. This needs formulation and linking. 81 Furthermore, there are numerous unconnected, highly generalised assertions throughout the ASC, which are not linked to any particular claim. For example, it is not clear how the material contained in sub-paragraphs 16.1 -16.7, which is set out in the context of describing the parties, is sought to be used in relation to the formulation of the claims against Arthur Andersen. There are references to "the myriad of services provided by Arthur Andersen", the "presence of Arthur Andersen personnel" in HIH offices and a "longstanding relationship", but little in the way of specifics. In addition, there are quotations from a Supreme Court judgment, the purpose of which is unclear, and the inclusion of which is inappropriate as a matter of pleading in the present circumstances. It seems to be more in the nature of a submission or the citation of an authority on which reliance will be sought to be placed in final address. 82 In relation to the allegations of breach of statutory duty under the Corporations Act 2001 the pleading is deficient. First, that Act is clearly irrelevant in relation to obligations in 1999 and 2000 but this may be remedied. 83 The allegations of accessorial liability and knowing involvement under the TPA and the Corporations Act 2001 are not properly pleaded for reasons already given. 84 Moreover, the ASC does not spell out the way in which the respondents may be said to have had the requisite involvement or knowledge: see Yorke v Lucas (1985) 158 CLR 661 at 667-671. By way of illustration, it is not alleged in the ASC at sub-paragraph 41.3.3 that Arthur Andersen knew or ought to have known the true factual position, how it can be said that HIH was insolvent, or how any of the other allegations therein can be made. This is an important deficiency. 85 In addition, the ASC does not state how Arthur Andersen ought to have become aware of all or any of the seventeen matters set out in cl 40.3.1 to 40.3.17.

reinsurers 86 In relation to the case framed against the Reinsurers, who are the eleventh to thirteenth respondents now that the fourteenth respondent is no longer a party to the main proceeding, the above observations are applicable. 87 There is an allegation by the applicant of "sham" arrangements in relation to the reinsurance contracts. It is not clear from the pleadings whether it is alleged that the reinsurance contracts were never intended to have any binding legal effect, or alternatively, whether they are said to have a binding legal effect but that they were in some way fraudulent. The pleading is inadequate as to the material facts which could warrant a conclusion that the contracts were shams or whether they are fraudulent. These matters must be pleaded with precision. Again, the circumstances in which it is said that knowledge is to be attributed to the Reinsurers is not spelt out. 88 The Reinsurers submitted that the TPA has no application to them because they were not incorporated in Australia and did not carry on business here at material times. Reference is made to the provisions of subsections 5(1), (3) and (4) of the TPA and is said that the applicant has not sought Ministerial consent as required. 89 I do not think that this is a matter to be resolved at this stage. After the pleading has been formulated with more precision it may be appropriate to revisit this question further. I note the issue has been raised but leave it for determination at a later time.

directors 90 Counsel for the third to fifth respondents submits that the entire proceeding should be dismissed as against the directors on the basis that the proper applicant is the company and not the shareholders. For reasons given earlier, I do not consider that this is the appropriate course to adopt and I reject this submission at this stage. 91 In relation to the directors, substantially the same deficiencies apply to the case sought to be made against them, as those which are set out above in relation to the other respondents, both in relation to the representative nature of the proceeding and the deficient formulation of the pleadings. 92 The third, fourth, fifth and seventh respondents emphasise that there is no proper pleading as to reliance, and that no sufficient material facts are alleged on which to suggest that all members of the group or any members relied on any misrepresentations or as to how such reliance was manifested. They submit that this is relevant to whether the misrepresentations caused the losses claimed. I agree with this submission. 93 In response, Counsel for the applicant says that reliance need not be shown, because in general terms, the applicant's case is that the misrepresentations and other conduct led to an artificially inflated or stabilised market which the shareholders and noteholders had invested in to their detriment. The difficulty with this generalised response is that the pleading does not allege facts to indicate the way in which, or the reasons why, the market was inflated or stabilised or distorted by the conduct alleged, nor as to how this fact led to particular groups of investors suffering the loss they seek to claim. The pleading does not set out how the market would have been affected if the statements, that have allegedly been omitted had in fact been made. There is no assertion as to the persons to whom the omitted statements were required to be made, or when and how the directors ought to have been aware of any falsity in the representations that were made, or the sort of statements that were required to be made in contradiction or correction of the representations. The pleading is left at a level of vagueness and generality which makes it unreasonable to expect any respondent to formulate an answer to the claims as presently formulated.

Security for costs 94 The fifth respondent, Mr Stitt QC, has sought an order for security for costs and furnished some evidence in support of the claim indicating that the anticipated expenditure for the foreseeable interlocutory applications, on the part of Mr Stitt, would be an amount in the order of $110,000. This figure was expressed to be indicative only and it was submitted should be subject to final determination once a decision has been made in principle as to whether security for costs should be ordered. 95 The application is resisted. However, no evidence has been forthcoming from Mr Johnstone to substantiate any suggestion that he is in a position to pay the costs sought. Nevertheless, it is pointed out, on his behalf, that he is suing as an individual and it is submitted that an order for costs against an individual applicant, as opposed to a body corporate, should only be made in rare circumstances. I accept this as a general proposition. In addition, it is submitted for the applicant, that it has not been clearly shown that Mr Stitt is not covered for legal costs. This submission is based on a letter to Mr Stitt from the insurer. However, this letter is by no means conclusive. He sets out the general policy of the insurer and refers to a pending decision. 96 Counsel for Mr Stitt points out that although the applicant may not have resources of his own, there is a real possibility that the shareholders and noteholders will include some persons or bodies of financial substance, with a clear interest to have the proceedings determined, such that one or more of the persons for whose benefit the action is brought may be in a position to fund the costs. Accordingly, it is said that a case has not been made out to the effect that Mr Stitt would suffer significant financial hardship if an order were made as to costs, nor has it been substantiated that there is a real possibility the proceedings might be frustrated if such an order were made. The relevant principles are summarised in the observations by Finkelstein J in Bray at [252]. 97 At this stage of the proceeding I do not think it appropriate to make such an order. One of the important elements to be considered in such an application, as Finkelstein J observed, is the strength or otherwise of the applicant's case. At this very early stage with the pleadings in their present state of disarray, it is not possible to speculate with any utility as to the applicant's prospects of success or failure, especially since the pleadings have not proceeded beyond an unsatisfactory application and ASC. 98 While I observe that the claim for security for costs appears to have some merit on the material presently before me, I think that it is premature at this point to make any determination in relation to it until the matter has progressed further and issues have been determined.

Letter to shareholders 99 Counsel for the Reinsurers, Mr Greenwood SC, has drawn my attention to a letter written by the applicant's solicitors, Dennis and Co, dated 22 September 2003, which reads as follows: "Dear Shareholder, RE: Brian Alexander Johnstone vs HIH Insurance Limited (In Liquidation)("HIH") and Ors. We have instituted a CLASS ACTION on behalf of Shareholders and Noteholders against the DIRECTORS and OFFICERS of HIH, its AUDITORS and HANNOVER RE for their losses arising out of the liquidation of HIH and the suspension of its shares on the Australian Stock Exchange. As you are no doubt aware the findings of the HIH Royal Commission have been made public. These findings support the Statement of Claim issued by us on behalf of Shareholders of HIH which is currently before the Federal Court of Australia. The said Statement of Claim covered almost all the issues relevant to Shareholders of HIH dealt with by the Royal Commission. As a result of the Royal Commission's findings confirming our own investigations we are now even more confident that we will succeed against those persons who we have sued on behalf of Shareholders of HIH viz the Chairman and certain Directors of HIH, Arthur Anderson [sic] and Hannover Re (A Reinsurer). We understand that Arthur Andersen, the Auditors of HIH is covered by Insurance. Hannover Re is, of course, a substantial world renowned Reinsurer which is capable of satisfying any verdict against it. As you are also probably aware from the media coverage our action on behalf of Shareholders of HIH has been postponed until 24th October 2003 for a preliminary hearing in the form of strike out applications. Certain of the other preliminary issues are already out of the way amounting to a substantial commencement of this Class Action which we trust will be finalised within a reasonable period of time. We have commenced settlement negotiations with Anderson [sic] Worldwide for compensation as well as with the Liquidator of HIH with a view to providing claims against HIH itself which if we succeed in achieving the latter will result in a dividend to creditors arising out of recoveries made by the Liquidator of HIH. The Liquidator of HIH is suing APRA for billions of dollars which he hopefully will recover. Press cuttings from the Daily Telegraph dated 18th April 2003 and The Australian Financial Review dated 22nd April 2003 relating to our Class Action accompany this letter for your information. You are, in your capacity as a smaller HIH Shareholder with fewer than 11,000 shares, still able to join by completing the accompanying HIH CLASS ACTION FORM, and forwarding it together with payment by means of a cheque, money order or credit card of a nominal amount of $350 plus GST of 10%, (total $385), made payable to Dennis & Company. Our fee to join this Class Action includes all work necessary to quantify and prosecute your claim and is your only expense. We would welcome the opportunity to represent you, along with other shareholders in our class action. Yours faithfully DENNIS AND COMPANY [Signature] Bruce Dennis" 100 Mr Greenwood SC has drawn my attention to the terms of this letter and made an application that the solicitor for the applicant file an affidavit, setting out the persons to whom the letter was sent. He also seeks an order that the solicitors should provide a draft form of correction letter to the Court so that such a letter, when settled, can be sent to each of the addressees. 101 The basis for this application was that in Counsel's submission, the letter is misleading. In support of this contention, Mr Greenwood raised two matters in respect of the terms of the letter. First, the letter states that "addressees are still able to join", when the position is that members are not required to join in the proceedings but can at their choice opt out of the proceedings. Second, Counsel submits that it is misleading to suggest that in order to join there is any need to make a payment for the entitlement to do so. The specific reference in the letter is for the shareholder to be "able to join by … forwarding it [the form] together with a payment of … $350 plus GST of 10% (total $385) made payable to Dennis and Co." It is also stated that this is "our fee to join …". 102 In my view, the letter is misleading in the respects alleged. A misleading communication of this nature can undermine the integrity of Part IVA proceedings, by inducing a misunderstanding on the part of recipients as to the nature and operation of the representative proceeding, and the rights and liabilities of the recipients in respect of the proceeding. Such a letter may well dissuade a shareholder from being included in the action, and lead to an opting out, if he or she thought that it was necessary to pay money in order to be involved in the proceeding. 103 Section 33Z of the FCA confers a wide discretion on the Court to determine a matter in a representative action, and empowers the Court to control representative proceedings, and to make any order which it thinks just. Section 33X(5) of the FCA enables the Court, at any stage of the proceedings, to order that a notice of any matter be given to a group member or to group members. As Wilcox J pointed out in McMullin v ICI Australia Operations Pty Ltd (1998) 84 FCR 1 (McMullin") at 4: "In enacting Pt IVA of the Federal Court of Australia Act, Parliament was introducing into Australian law an entirely novel procedure. It was impossible to foresee all the issues that might arise in the operation of the Part. In order to avoid the necessity for frequent resort to Parliament for amendments to the legislation, it was obviously desirable to empower the court to make the orders necessary to resolve unforeseen difficulties; the only limitation being that the court must think the order appropriate or necessary to ensure 'that justice is done in the proceeding.' I think an order fixing a date by which claimants must identify themselves is capable of falling within s 33ZF(1). The criterion 'justice is done', involves consideration of the position of all parties. An order preventing unfairness to a particular party may be necessary to ensure justice is done in the proceeding." 104 This power is not limited to the actual determination of the matter in question but extends to encompass all procedures necessary to bring the matter to a fair hearing on a just basis. This includes basic considerations regarding the manner in which members of a class are notified about their entitlements to opt out, and the way in which the proceedings are to be conducted. If a misleading representation is made to group members, this could well serve to confuse and disrupt the progress of the proceeding. It is essential that communications with class members or potential class members do not give rise to misunderstandings regarding their entitlements to opt out, or as to their responsibility for costs and expenses or their obligations to contribute to the proceedings in order to benefit from those proceedings. In McMullin, Wilcox J required the posting of a notice to potential class members in a form annexed to the Minutes of Order and directed that such notice be published in two country newspapers. The principles expressed by Wilcox J were applied by Moore J in King v AG Australia Holdings Ltd (formerly GIO Holdings Ltd) [2002] FCA 1560; see also Williams v FAI Home Security Pty Ltd (No 3) [2000] FCA 1438. 105 The Court has an important and continuing role in managing representative proceedings in the public interest to rectify any potentially misleading communications to class members or potential class members, in order to ensure that there is no misunderstanding engendered by such communications, particularly when they emanate from legal advisers, as to rights and obligations and procedures to be followed by recipients of such communications. 106 I therefore accept the submission that it is appropriate to require the solicitors for the applicant, Dennis and Co, to file an affidavit identifying each of the addressees of this or any letter in identical or substantially similar terms and to require that firm to file within fourteen days a draft letter of correction, which after settlement of its terms is to be sent to each of the recipients. I also direct that a copy of such letter be served on all applicants in this proceeding, who may make submissions as to the appropriate terms to be included in the letter if they so wish. 107 I do not accede to the applications that the proceeding be dismissed or that it be discontinued as a class action or that security for costs of the fifth respondent be required at this stage and I reserve the right of the respondents to raise these matters at a later stage.

conclusion 108 For the reasons given above, it is apparent that there are significant deficiencies in the Application and the ASC and that they must be amended and substantially recast. I do not consider it appropriate at this point to strike out the proceedings, as I do not think the requisite threshold of satisfaction has been established. I propose to grant leave to the applicant to amend and refurnish the terms of the Application and the Statement of Claim. To enable the parties to formulate appropriate orders, I give the following directions:

• I direct the parties to bring in Draft Short Minutes to give effect to these reasons, including appropriate orders as to the costs of the interlocutory applications, and I stand the matter over until 26 March 2004 at 2.15 pm for settlement of the orders.
• I direct Messrs Dennis and Co, solicitors for the applicant, to file with the Court and serve on the respondents a Draft Letter of Correction to be sent to all addressees of the letter of 22 September 2003 in accordance with these reasons. Such draft shall be filed with the Court and served on the respondents on or before 19 March 2004. I will hear submissions as to the final form of that letter on 26 March 2004 at 2.15 pm.
• Messrs Dennis and Co shall file on or before 19 March 2004 an affidavit setting out the names and addresses of all persons to whom that letter was sent.
• The matter is stood over to 26 March 2004 at 2.15 pm. I certify that the preceding one hundred and eight (108) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tamberlin.

Counsel for the Applicant: P J Finch

Solicitors for the Applicant: Dennis and Co

Counsel for the Third to Fifth Respondents: P Deakin QC R S Curruthers

Solicitors for the Third to Fifth Respondents: Piper Alderman

Solicitors for the Sixth Respondent: Gilbert + Tobin

Counsel for the Seventh Respondent: J R Sackler QC A T Dawson

Solicitors for the Seventh Respondent: Arnold Bloch

Counsel for the Tenth Respondent: N C Hutley SC R Lancaster

Solicitors for the Tenth Respondent: Baker & McKenzie

Counsel for the Eleventh to Thirteenth Respondents: P H Greenwood SC D Hogan-Doran

Solicitors for the Eleventh to Thirteenth Respondents: Minter Ellison

Date of Hearing: 23, 24 October 2003 16 December 2003

Date of Judgment: 5 March 2004