Matheson Property Group Pty Ltd (Trustee) v Virgin Australia Holdings Limited

Counsel for the first respondent: Mr J Hutton SC

Solicitor for the first respondent: Gilbert + Tobin

Counsel for the second and third respondents: Ms E Bathurst

Solicitor for the second and third respondents: Baker McKenzie

BETWEEN: MATHESON PROPERTY GROUP PTY LTD ACN 107 163 253 AS TRUSTEE FOR THE MPG TRUST Applicant

AND: VIRGIN AUSTRALIA HOLDINGS LIMITED ACN 100 686 226 First Respondent

PAUL SCURRAH (and others named in the schedule) Third Respondent

order made by: LEE J DATE OF ORDER: 7 NOVEMBER 2024

THE COURT ORDERS THAT:

1. The applicant be granted leave to join Velocity Rewards Pty Limited (ACN 116 089 448) as trustee for the Loyalty Trust to the proceeding as the nineteenth respondent.
2. By 8 November 2024, the applicant file the further amended originating application and further amended statement of claim in the form of the drafts provided to the Court.
3. By 14 March 2025, the first, second, third and nineteenth respondents file their defences to the further amended statement of claim.
4. The proceeding be listed for a case management hearing at 9:30am on 21 March 2025 with a view to fixing a hearing date.
5. The costs of the joinder application be costs in the cause. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

A INTRODUCTION AND BACKGROUND 1 This is the fifth judgment I have delivered in relation to this proceeding: see Matheson Property Group Pty Ltd (Trustee) v Virgin Australia Holdings Limited [2022] FCA 1243; (2022) 165 ACSR 550; Matheson Property Group Pty Ltd (Trustee) v Virgin Australia Holdings Limited (No 2) [2023] FCA 899; Matheson Property Group Pty Ltd (Trustee) v Virgin Australia Holdings Limited (No 3) [2023] FCA 1329; Matheson Property Group Pty Ltd (Trustee) v Virgin Australia Holdings Limited (No 4) [2024] FCA 280. It assumes familiarity with, and adopts the definitions used in, my earlier judgments. 2 By way of brief background, this class action was commenced by MPG as the representative applicant in May 2022. The first respondent, VAH, and the second and third respondents (Director Respondents) have eventually given standard discovery pursuant to orders made in July 2023, with VAH serving a revised verified list of documents in July 2024. In the same month, leave was given to MPG to file and serve a further amended statement of claim (FASOC) and further amended originating application (although MPG was not then able to determine the precise nature and extent of the amendments it intended to make). 3 What presently matters is that without undue delay, and following completion of the process of inspecting discovery, MPG seeks, among other things, an order that Velocity Rewards Pty Limited (as trustee for the Loyalty Trust) (VRPL) be joined to the proceeding as the nineteenth respondent. 4 MPG also sought an order to expand the class pursuant to s 33K of the FCA Act. This was opposed but this order was made for reasons disclosed on the transcript and will not be referred to further in these reasons.

B THE DETERMINANTIVE ISSUE 5 There was no dispute as to the applicable principles. 6 FCR 9.05 provides that a party may apply to the Court for an order that a person be joined as a party to the proceeding if (among other things) the proposed party is a person "who should be joined as a party in order to enable determination of a related dispute and, as a result, avoid a multiplicity of proceedings": FCR 9.05(1)(b)(iii). It is common ground that the party seeking joinder must establish that it has an "arguable case against the parties proposed for joinder, at least to the standard of being able to resist an application for summary judgment if the relevant persons had been sued in separate proceedings": Bupa Australia Pty Ltd v iSelect (No 2) [2012] FCA 1277 (at [23] per Dodds-Streeton J). That standard requires an inquiry into whether the prosecution of the proceeding has no reasonable prospect of success: Spencer v Commonwealth [2010] HCA 28; (2010) 241 CLR 118 (at 139 [52] per Hayne, Crennan, Kiefel and Bell JJ); Revill v John Holland Group Pty Ltd [2020] FCA 1633 (at [21] per Jackson J). 7 Further, the decision as to whether to join a party is a practice and procedure decision and the starting point in exercising the power must be the statutory charge in s 37M(3) of the FCA Act: that is, the power must be exercised or carried out in the way that best promotes the overarching purpose, being the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible. 8 A number of arguments directed to discretionary factors and facilitating the overarching purpose were initially raised by MPG in opposing leave (the Director Respondents have taken a passive role on the application). None of these arguments have decisive force, given that there is no trial date, any hearing is some time away, and I do not consider there has been undue delay in bringing the joinder application (although, I accept, it would somewhat expand and hence complicate the issues to be determined in the proceeding). 9 As senior counsel for both parties accepted, the determinative issue on the joinder application is whether the proposed pleading (which sets out the proposed case to be agitated against VRPL) (proposed claim) is sufficiently arguable to attract a principled grant of leave. Or, to put it another way, whether an arguable case is articulated against VRPL, at least to the standard of being able to resist an application for summary judgment if VRPL had been sued in a separate proceeding.

C.1 Why the Proposed Claim is Arguable 10 MPG alleges that VRPL was knowingly involved in several contraventions by VAH of statutory norms under the Corporations Act and ASIC Act, namely: (1) ss 728(1)(a) and 1041E(1) of the Corporations Act - specifically, that VRPL was involved in VAH's making of the "Cash Balance Representation" and the "Velocity Acquisition Rationale Representation" in the notes prospectus released by VAH to promote the issue of the notes, both of which are alleged by MPG to have been misleading or deceptive; (2) s 728(1)(b) of the Corporations Act - specifically, that VRPL was involved in VAH's omission in the notes prospectus of the existence and terms of a secured loan facility entered by VRPL from 27 August 2024 (FASOC (at [8])) (Velocity Loan), VAH's practice of treating the drawn and undrawn balance of the Velocity Loan as unrestricted cash and the rationale for VAH's acquisition of Affinity's stake in Velocity, being due to the potential loss of the Velocity Loan were Velocity to be sold by way of IPO; (3) s 1041H(1) of the Corporations Act and s 12DA of the ASIC Act - specifically, that VRPL was involved in the making of the "Cash Balance Representation" and the "Velocity Acquisition Rationale Representation" and the omission of the matters referred to at (2) above in the Offering Circular for the US Notes; and (4) s 674(2) of the Corporations Act - specifically, that VRPL was involved in VAH's failure to disclosure to the ASX the true rationale for its acquisition of Velocity being due to the potential loss of the Velocity Loan were Velocity to be sold by way of IPO (described as the "Velocity Acquisition Rationale Information"). 11 VRPL's alleged involvement in VAH's alleged contraventions can be distilled down to two matters of substance. The first is with respect to VAH's available cash balance, including (specifically) VAH's treatment of the drawn and undrawn loan balance of the Velocity Loan as "unrestricted" cash. MPG alleges that such treatment was erroneous and had the purported effect of inflating its cash balance (FASOC (at [46C])). The second relates to the "true but undisclosed reason" for VAH's acquisition of Affinity's stake in Velocity, being because the alternative option for the disposal of Affinity's stake was by way of an IPO, which would lead to VAH's loss of the Velocity Loan and, consequently, its loss of $450 million of purportedly unrestricted cash, which cash was said to be critical to VAH's liquidity position. 12 MPG developed its submissions as to arguability as follows. 13 First, VRPL's participation in VAH's alleged contraventions is said to flow from the fact that: (1) it made the Velocity Loan available to VAH; (2) VRPL regularly extended its maturity date and the size of its facility; and (3) importantly, VRPL permitted VAH to treat the drawn and undrawn loan balance as part of its unrestricted cash (T22.25-23.6; FASOC (at [89L(c)])). MPG submits that the documents disclosed in discovery reveal that "Compliance and Reporting Notes" which VAA was required to submit to VRPL to disclose its restricted and unrestricted cash balance routinely reported an unrestricted cash balance which included the entirety of the Velocity Loan facility (see FASOC (at [103G])), notwithstanding that its obligation to report its unrestricted cash balance each month required it to exclude any cash held by VRPL (cl 4(b) of the Velocity Loan Agreement). It is said those documents similarly disclose the absence of any inquiry by VRPL into VAH's use of the loan funds, despite the fact that the terms of the Velocity Loan Agreement, Loyalty Trust, Investment Mandate and Investment Policy prescribed how such loans could be used. Accordingly, MPG contends that it is "readily arguable" VRPL managed the Velocity Loan in a manner which facilitated VAH's representations as to its financial position and the availability of unrestricted cash, and otherwise supplied VAH with access to funds which motivated VAH's acquisition of VRPL from Affinity. 14 Secondly, it is said that VRPL had the requisite knowledge for each of the contraventions that flow from the "Cash Balance Representation" and the "Velocity Acquisition Rationale Representation". MPG submits that the evidence establishes VRPL was aware of: (1) the terms of the Loyalty Trust Deed, the Investment Policy, and the Velocity Loan Agreement, and accordingly, must have been aware of the discretion vested in VRPL to refuse further drawdowns and the pre-conditions (see FASOC (at [8C])) which applied before VAH was entitled to request a further drawdown; (2) VAH's cash balance from month to month (Compliance & Reporting Notices were submitted to VRPL each month pursuant to the Velocity Loan Agreement disclosing VAH's purportedly unrestricted cash balance); (3) VAH's purportedly unrestricted cash balance as reported, including the drawn and undrawn value of the Velocity Loan facility (given that its company secretary, Ms Sharyn Page, was also company secretary of VAH and attended board meetings where the treatment of the Velocity Loan as unrestricted cash was routinely discussed); (4) the contents of the notes prospectus (given that Ms Page attended meetings of the Due Diligence Committee established by VAH as part of the preparing the notes prospectus (DDC), executed a Verification Sign-Off Certificate and VAH Management Questionnaire with respect to the contents of the prospectus); and (5) in the light of the above, that the "unrestricted cash position" was disclosed in the notes prospectus as being substantially higher than the figures reported to it in the Compliance & Reporting Notices and at a quantum which included the total value of the Velocity Loan (notwithstanding that access to the loan was subject to a range of pre-conditions which did not give VAH free and unrestricted access to, and use of, those funds). 15 Thirdly, and relatedly, MPG contends that these matters are not displaced by evidence given by Ms Platford, the solicitor for VAH, that: first, the corporate structure of VAH and Velocity Group indicates that "VRPL's only role was to act as the corporate trustee of the Loyalty Trust" (Platford (at [64])); and secondly, VRPL was not "involved" in the due diligence process for the preparation of the notes prospectus because, notwithstanding that Ms Page was in attendance at meetings of the DDC, signed a verification certificate as to the content of the notes prospectus, and assisted in responding to the "VAH Management Questionnaire", she only did so in her capacity as company secretary of VAH, not VRPL. MPG submits that these matters do not assist VAH's contentions as to arguability because: (1) Ms Platford's evidence goes no higher than hearsay or opinion evidence and is incapable of establishing any factual proposition to a level that would render the proposed claims against VRPL untenable; (2) even if VRPL's role was limited to its function as corporate trustee, this proposition elides the conduct in which VRPL was required to engage (and did allegedly engage) in carrying out that role, on which the accessorial claims against it depend (for example, it is said that VRPL's role as lender under the Velocity Loan entailed, inter alia, consulting with the Investment Committee with respect to such decisions as extending the maturity date or facility limit of the loan, assessing whether repayment of the loan was required to protect Velocity members' interests in determining whether to call upon repayment of the drawn loan balance, and otherwise exercising its fiduciary duties as trustee to ensure the protection of trust assets); and (3) although Ms Page may have been performing certain functions associated with the due diligence process on behalf of VAH, this does not displace a finding that she possessed certain knowledge of matters or that such knowledge may be attributed to VRPL. It is said that VAH's submission that Ms Page's conduct and knowledge must be disregarded by virtue of the separate corporate personality of VAH and VRPL is contrived when such separation does not appear to reflect the realities of VRPL's operation: cf ACCC v Productivity Partners Pty Ltd (t/as Captain Cook College) (No 3) [2021] FCA 737; (2021) 154 ACSR 472 (at 585-586 [581]-[585] per Stewart J).

C.2 Why the Proposed Claim is Unarguable 16 VAH contends that the proposed claim is unarguable for the following reasons. 17 First, in relation to MPG's first submission above (at [13]), the fact that VRPL entered into various agreements in relation to Velocity Loan and approving drawdowns of the loan are not (and cannot be) acts of involvement or procurement of any conduct in relation to alleged misrepresentations, false or misleading statements or breaches of continuous disclosure laws. This is because an act of involvement must bear a practical connexion to the actual contraventions of the statutory norm (that is, the alleged misstatement of the effect of those transactions in VAH's accounts and prospectus): see ASIC v ActiveSuper Pty Ltd (in liq) [2015] FCA 342; (2015) 235 FCR 181 (at 258 [407]-[410] per White J); Trade Practices Commission v Australian Meat Holdings Pty Ltd (1988) 83 ALR 299 (at 357 per Wilcox J). A person is not involved in alleged contraventions involving misstatements or failures to disclosure merely because the person has a connexion with the subject matter of the alleged misstatements of failures to disclose (T40.10-17). In this regard, VAH submits that: (1) the plea does not support an arguable act of involvement as there are no particulars to support MPG's contention that VRPL "facilitat[ed] or otherwise permit[ed] VAH to treat the drawn and undrawn balance of the Velocity Loan as unrestricted cash" (see above (at [13])) - the particulars merely disclose that VAA reported its unrestricted cash to VRPL; (2) the alleged absence of any inquiry by VRPL into VAH's use of loan funds cannot constitute an act of involvement because VRPL had no power or authority to control the representations that VAH made about how the Velocity Loan was treated in the prospectus (cf Re HIH Insurance Ltd (in liq) [2016] NSWSC 482; (2016) 335 ALR 320); (3) there is no basis upon which it is arguable that Ms Page acted in the due diligence process for the prospectus in her capacity as company secretary of VRPL so as to constitute a practical connexion to the alleged contraventions of VAH because: (a) the contemporaneous documents do not support such a claim and are consistent with Ms Page acting as company secretary for VAH; and (b) Ms Page was the company secretary for 50 entities and was an observer to the DDC for the prospectus which VAH proposed to issue in her capacity as an officer of VAH. 18 Secondly, it is said that Ms Page's knowledge obtained during the due diligence process cannot be imputed to VRPL. As I remarked during the course of argument to senior counsel for VAH, Mr Hutton SC, the submissions of VAH in this regard boil down to two points: (1) there is insufficient material demonstrating that Ms Page possessed the knowledge sufficient to satisfy any rule of attribution in the Yorke v Lucas (1985) 158 CLR 661 sense because, among other things, Ms Page: (a) was not a member of the DDC (Platford (at [69])); (b) did not provide a Management Certificate in relation to the notes prospectus (Platford (at [72])); and (c) was not on any of the emails questioning the classification of the Velocity Loan as unrestricted cash (T27.36-47); and (2) Ms Page's knowledge or actions cannot be imputed to VRPL because she had no obligation to report to VRPL which, it is said, creates an insuperable barrier to the foundation of any rule of attribution (notably in relation to the notes issue, the purpose of which was to raise funds to enable VAH, not VRPL, to acquire a stake in the Velocity Group (T29.11-18)) (T29.30-46). Ms Page was, in any event, precluded from disclosing any information obtained by her in relation to the due diligence process by reason of her obligations of confidence to VAH, which, it is said, holds particular significance because an officer of Affinity sat on VRPL's Investment Committee (Affinity being the commercial counterparty to the acquisition transaction). 19 Thirdly, and relatedly, Mr Hutton referred to Productivity Partners Pty Ltd v Australian Competition and Consumer Commission [2024] HCA 27; (2024) 98 ALJR 1021 (at 1041-1042 [81]-[83] per Gageler CJ and Jagot J; 1073 [269] per Edelman J; 1092-1093 [360] per Beech-Jones J) in support of the proposition that in order for an accessory to be liable in this context, it must generally be aware of the falsity of the representation, as opposed to it being merely aware of facts which would have falsified the representation if they had been the subject of advertence (T38.17-39.40) (albeit operating under a different guise with respect to an omissions case, which necessitates knowledge of the fact of the omission and that the omission had certain consequences, that is, presenting a picture which was apt to mislead (T48.22-25)). Mr Hutton contended that the various facts and circumstances said to give rise to an arguable case cannot meet the requisite standard of knowledge of falsity because: (1) the mere existence of the loan arrangement cannot expose VRPL to accessorial liability because it would follow that a person who misled a third party as to their banking arrangements would expose their bank to accessorial liability (T40.10-17); (2) the definition of "VAH cash" in the relevant loan facility being "Consolidated unrestricted cash of VAH (but excluding any cash held by the Velocity Group or the Lender) determined using the same methodology as used to report unrestricted cash to shareholders" is not a basis to infer that VRPL knew that the concept of unrestricted cash was false or misleading (T41.37-16); and (3) if, as VAH suggests, VRPL was not relevantly involved in the due diligence process or the notes issue (see above (at [20])), VRPL could not have been aware what was being disclosed to investors and shareholders, and that in order to find that VRPL knew that such matters were not disclosed, the Court would have to find that Ms Page possessed knowledge of the omission despite her limited role in relation to the preparation of the prospectus, cash position and matters of corporate governance generally (T41.18-26).

D CONSIDERATION 20 There is significant substance in the points made by Mr Hutton, and the application is finely balanced, but upon reflection, I consider that MPG's contention that it has pleaded an arguable (albeit, at present, a barely arguable) case alleging VRPL's participation in VAH's alleged contraventions should be accepted. 21 As set out in the FASOC and discussed above, there is at least a coherent basis to assert that VRPL was aware of the relevant terms of the Loyalty Trust Deed; the Investment Policy; the Velocity Loan Agreement; VAH's cash balances; VAH's "unrestricted" cash balances; the value of the Velocity Loan facility; the contents of the notes prospectus; and the fact the "unrestricted cash position" as disclosed in the notes prospectus was substantially higher than the figures reported to it in the Compliance & Reporting Notices because of the inclusion of the total value of the Velocity Loan (notwithstanding the existence of known pre-conditions to the use of those funds). 22 Further, although: (1) Ms Page was a company secretary of many companies; (2) there is reason to suspect she had a limited role; and (3) there was a substantive demarcation in the management and operations as between VAH (and the broader Virgin Group) and VRPL; these matters do not necessarily represent an insurmountable barrier to an ultimate finding, depending upon how the evidence unfolds, that Ms Page possessed the knowledge summarised above and that this knowledge, depending upon an examination at trial of all the circumstances, may be attributed to VRPL. 23 The issue that has caused me pause (and was not really grappled with specifically by MPG) is Mr Hutton's argument based upon Productivity Partners (at 1041-1042 [81]-[83] per Gageler CJ and Jagot J; 1073 [269] per Edelman J; 1092-1093 [360] per Beech-Jones J). As is well-known, there has been considerable uncertainty as to the requirements for accessorial liability (particularly in the context of allegations of misleading or deceptive conduct contrary to s 18 of the Australian Consumer Law). 24 This is not the forum for an excursus on the law of accessorial liability in general, or Productivity Partners in particular. 25 It suffices for present purposes to observe that six judgments were delivered in Productivity Partners, and although each judge held that the knowledge requirement for accessorial liability had been established, the reasoning for reaching this conclusion is not identical in all respects. That said, the case has provided clarity for the following propositions: (1) it is unnecessary for the accessory to know the primary contravener's conduct is capable of characterisation as contrary to the relevant statutory norm (hence the accessory does not need to be cognately aware they are contravening the law); (2) knowledge of all the essential facts that were established to show that the primary contravention was committed is required (recognising that the difference between the essential facts and the legal characterisation of those facts can be a fine one depending upon the circumstances, including the nature of the relevant statutory norm); and (3) for a case of misleading or deceptive conduct based on a false representation, the accessory must actually know the representation was false and mere knowledge of facts from which a person might have deduced or inferred falsity is insufficient. 26 There is no "smoking gun" in the possession of MPG which demonstrates knowledge of falsity in Ms Page or any other natural person or persons of representations (a fortiori omissions) that can be attributed to VRPL. However, there are pleaded and particularised circumstances that MPG alleges inferences can be drawn as to such knowledge. Although it is possible to say that as presently articulated the case is not a compelling one, it is not my place to speculate as to what the evidence may reveal. Moreover, I do not consider, with my present state of knowledge, that I can be satisfied that the articulated case against VRPL has no reasonable prospect of success. 27 Given both parties accepted that my conclusion in this respect would be determinative on the application, the joinder should be allowed. 28 The resistance to the application was reasonable and, as I have already noted, the outcome was finely balanced. Subject to further order, the costs of the joinder application should follow the ultimate outcome of MPG's claim against VRPL.

E CONCLUSION AND ORDERS 29 Accordingly, I make the following orders: 1. The applicant be granted leave to join Velocity Rewards Pty Limited (ACN 116 089 448) as trustee for the Loyalty Trust to the proceeding as the nineteenth respondent. 2. By 8 November 2024, the applicant file the further amended originating application and further amended statement of claim in the form of the drafts provided to the Court. 3. By 14 March 2025, the first, second, third and nineteenth respondents file their defences to the further amended statement of claim. 4. The proceeding be listed for a case management hearing at 9:30am on 21 March 2025 with a view to fixing a hearing date. 5. The costs of the joinder application be costs in the cause. I certify that the preceding twenty-nine (29) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Lee.

SCHEDULE OF PARTIES NSD 346 of 2022 Respondents Fourth Respondent LIBERTY MUTUAL INSURANCE COMPANY ARBN 086 083 605 Fifth Respondent HDI GLOBAL SPECIALTY SE Sixth Respondent BEAZLEY LLOYD'S SYNDICATE 2623/623 Seventh Respondent ENDURANCE WORLDWIDE INSURANCE LIMITED Eighth Respondent ACT LLOYD'S SYNDICATE 9554 Ninth Respondent HISCOX LLOYDS SYNDICATE 0033 Eleventh Respondent CV STARR LLOYD'S SYNDICATE 1919 Twelfth Respondent HCC INTERNATIONAL INSURANCE COMPANY PLC Thirteenth Respondent ASPEN LLOYD'S SYNDICATE 4711 Fourteenth Respondent ASSICURAZIONI GENERALI S.P.A. UK BRANCH Fifteenth Respondent AVIVA INSURANCE LIMITED Sixteenth Respondent BERKSHIRE HATHAWAY SPECIALTY INSURANCE COMPANY ARBN 600 643 034 Seventeenth Respondent TRAVELERS LLOYD'S SYNDICATE 5000 Eighteenth Respondent RSG UNDERWRITING MANAGEMENT EUROPE LIMITED T/AS STARTPOINT EXECUTIVE RISKS