Nominex Pty Ltd & Anor v Wieland & Ors [2014] VSCA 199

Court of Appeal (Vic)|2014-09-05|Before: Mr J, Nettle JA, Hansen JA, Beach JA

Texxcon Pty Ltd & Anor v Austexx Corporation Pty Ltd & Ors [2013] VSC 327 (Davies J)

Texxcon Pty Ltd & Anor v Austexx Corporation Pty Ltd & Ors (No 2) [2013] VSC 343 (Davies J)

TRADE PRACTICES - Misleading or deceptive conduct - Representations - Whether representation that funds in capitalised interest facility could be drawn down to fund repayment of the loan made - Alleged oral representations - Construction of funding document - Reliance - Causation - Trade Practices Act 1974 (Cth), - (Vic), s 9.

TRADE PRACTICES - Misleading or deceptive conduct - Accessorial liability - Trade Practices Act 1974 (Cth), s 75B - Fair Trading Act 1999 (Vic), s 159.

CORPORATIONS - Directors' duties - Whether directors breached duties - No breach of duty.

AGENCY - Joint venture - Whether nominee company merely agent for joint venture parties.

DAMAGES - Pleadings - Case not run at trial - Octavo Investments Pty Ltd v Knight [1979] HCA 61; (1979) 144 CLR 360.

APPORTIONMENT - Apportionable claim - Concurrent wrongdoers - Trade Practices Act 1974 (Cth), ss 87CB and 87CC.

For the Appellants, Cross Respondents and Respondents, Mr Wieland and Mr Goldberger

Mr A C Archibald QC with Mr M H O'Bryan QC and Mr M P Costello

For the Appellants, Cross Respondents and Respondents, Mr Porz and Mr Cowan

For the Appellants, Nominexx Pty Ltd and Texxcon Pty Ltd, the Cross Appellant and Respondent, Texxcon Pty Ltd, and the Respondents, Mr Gray, Mr Henderson and Mr Gianfriddo

In October 2008, Nominexx Pty Ltd ('Nominexx') made a loan of $14 million of what were described at trial as 'joint venture funds' to Austexx Corporation Pty Ltd ('Austexx'). That loan was never repaid. In the proceeding below, Nominexx and one of the two joint venture companies, Texxcon Pty Ltd ('Texxcon') claimed damages from David Charles Wieland ('Mr Wieland'), David Goldberger ('Mr Goldberger'), Geoffrey Gordon Porz ('Mr Porz') and Christopher Cowan ('Mr Cowan'). Texxcon and Nominexx alleged that:

(a) Messrs Porz and Cowan had engaged in misleading or deceptive conduct which induced Texxcon to agree to, and Nominexx to make, the loan of joint venture funds;

(b) Messrs Porz, Wieland and Goldberger were accessories to the misleading or deceptive conduct which induced Texxcon to agree to, and Nominexx to enter into, the loan; and

(c) Messrs Porz, Wieland and Goldberger (who were three of the six directors of Nominexx) breached their duties as directors of Nominexx in approving the making of the loan.

2 On 20 June 2013, following an 18 day trial, a judge of the Trial Division:

(a) upheld Texxcon's claims for misleading or deceptive conduct and accessorial liability against Messrs Porz, Cowan, Wieland and Goldberger (essentially finding that representations contended for by Texxcon had been made; the representations were misleading or deceptive; Messrs Wieland and Goldberger were knowingly involved; and that there was relevant reliance);

(b) dismissed Nominexx's claims for breaches of directors' duties on the basis that Nominexx lent the joint venture funds as agent for the joint venturers, Texxcon and Austexx Constructions No 2 Pty Ltd ('Austexx'), the other of the two joint venture companies; and

(c) held that Texxcon was accordingly entitled to an order that Messrs Wieland, Goldberger, Porz and Cowan pay damages quantified in the amount of $7 million (Texxcon's share of the joint venture funds), plus interest.[1]

3 On 2 July 2013, after hearing further argument, the judge:

(a) determined that statutory interest should be awarded at the penalty rate;

(b) held that the claims against Messrs Wieland, Goldberger, Porz and Cowan constituted a single apportionable claim within the meaning of s 87CB of the Trade Practices Act 1974 (Cth) (the 'TPA') in respect of the loss and damage suffered by Texxcon, in relation to which each of Messrs Wieland, Goldberger, Porz and Cowan had equal responsibility, and so should have judgment entered against each of them in an amount equal to 25 per cent of the damages awarded;

(d) determined that, having regard to the mixed success enjoyed by the parties, it was appropriate to reduce the costs otherwise payable by Messrs Wieland, Goldberger, Porz and Cowan by 20 per cent.[2]

(a) entered judgment for Texxcon in the amount of $9,161,484.91 (being damages in the amount of $7,200,021.51 together with interest calculated pursuant to s 60 of the Supreme Court Act 1986 on such damages in the amount of $1,961,463.40) and ordered each of Messrs Wieland, Goldberger, Porz and Cowan to pay 25 per cent of that amount ($2,290,371.23); and

(b) with an exception in relation to the costs of three specified witnesses,[3] ordered Messrs Wieland, Goldberger, Porz and Cowan to pay 80 per cent of Texxcon's and Nominexx's costs[4] of and incidental to the proceeding assessed:

(i) up to and including 28 March 2013, on a party/party basis; and

5 The orders of the judge have spawned three notices of appeal, two notices of cross-appeal and four notices of contention. Each of Texxcon, Nominexx, Mr Wieland, Mr Goldberger, Mr Porz and Mr Cowan is an appellant or a cross-appellant in respect of some aspect of the judge's orders. In addition, there are three applications for leave to appeal against the judge's costs orders.[5] We propose to deal with the various appeals, cross-appeals and applications for leave to appeal in that order.

6 In the appeal filed first in time (the 'Wieland and Goldberger appeal'), Messrs Wieland and Goldberger challenge the judge's findings that they were involved in misleading or deceptive conduct of Messrs Porz and Cowan. Mr Wieland and Mr Goldberger complain that the judge erred in:

(a) basing a finding of knowledge on inferences drawn from circumstantial facts that did not support the inferences or that could only support conflicting inferences of equal degrees of probability;

(b) making an alternative finding of knowledge inferred from wilful blindness without any stated basis for the finding of wilful blindness;

(c) erroneously concluding that the defence filed in an earlier proceeding in December 2010 ('the Ausmez proceeding') on behalf of Mr Wieland and Mr Goldberger supported the finding that Messrs Wieland and Goldberger knew, in October 2008, that the proposed loan was 'at call';

(d) in failing to apply the rule in Browne v Dunn[6] in respect of Mr Wieland in circumstances where Mr Wieland's evidence concerning his knowledge in October 2008 of relevant facts was not challenged in cross-examination; and

(e) impermissibly drawing a Jones v Dunkel[7] inference from Mr Goldberger's failure to give evidence.

7 In response, Texxcon filed a notice of contention asserting grounds which are said to provide additional support for the judge's conclusions as to misleading or deceptive conduct, accessorial liability and reliance.

8 Texxcon also filed a notice of cross-appeal, in which it complains about the judge's finding that the claim against Messrs Wieland, Goldberger, Porz and Cowan was apportionable under s 87CB of the TPA. In that cross-appeal, Texxcon further asserts that the judge was wrong to rule the evidence of an expert, Paul Clark ('Mr Clark') inadmissible.

9 In the appeal filed second in time (the 'Porz and Cowan appeal'), Mr Porz and Mr Cowan contend that the judge:

(a) was wrong to find that the representations found to have been made were made;

(b) erred in finding that the representations found to have been made were misleading or deceptive;

(d) erred in concluding that Texxcon had proved any loss and damage; and

(e) erred in concluding that the rejection of the Calderbank offer was unreasonable.

10 In response, Texxcon filed a notice of contention providing additional grounds which were said to support the judge's conclusions in respect of Messrs Porz and Cowan's misleading or deceptive conduct and further grounds which were said to support the judge's conclusions on reliance, loss and damage and the accessorial liability of Mr Porz.

11 Texxcon also filed a notice of cross-appeal in the Porz and Cowan appeal making the same complaints as are made in the notice of cross-appeal in the Wieland and Goldberger appeal.

12 In the appeal filed third in time (the 'Nominexx and Texxcon appeal'), Nominexx complains about the judge's finding that Nominexx lent the joint venture moneys as a mere nominee for Texxcon and Austexx. Nominexx contends that the judge should have concluded that Nominexx lost $14 million plus interest as a result of the misleading or deceptive conduct which her Honour found to have occurred. Nominexx also contends that the judge was wrong in dismissing its claims for breaches of directors' duties against Messrs Wieland, Goldberger and Porz.

13 Additionally, in the Nominexx and Texxcon appeal, Nominexx and Texxcon make the same complaints as those made by Texxcon in its cross-appeals, namely, that the judge erred in:

(b) concluding that the TPA claims were apportionable pursuant to s 87CB of the TPA (Nominexx and Texxcon contend that the factual findings made by the judge satisfy the test of intentionally or fraudulently causing the economic loss found to have been suffered, so as to engage s 87CC of the TPA, and thus take the case outside the operation of s 87CB).

14 In response, Messrs Porz and Cowan filed a notice of contention asserting additional grounds for dismissal of the claims for breaches of directors' duties made against them by Nominexx. Messrs Porz and Cowan further contend that any claim against them for breaches of directors' duties was an apportionable claim (scil. with the other directors of Nominexx (Simon James Gray ('Mr Gray'), Noel Raymond Henderson ('Mr Henderson') and Joseph John Gianfriddo ('Mr Gianfriddo')), being concurrent wrongdoers within the meaning of s 24AH(1) of the Wrongs Act 1958. Messrs Gray, Henderson and Gianfriddo were the three directors of Nominexx appointed to represent Texxcon's interests in the joint venture. They were also the eighth, ninth and tenth defendants respectively in the proceeding below.

15 Messrs Wieland and Goldberger have also filed a notice of contention containing additional grounds said to support the judge's dismissal of the breach of directors' duties claims.

16 As well as that there are two written applications for leave to appeal against the judge's orders for costs, one filed on behalf of Messrs Wieland and Goldberger, and the other filed on behalf of Messrs Porz and Cowan. In those applications:

(a) Messrs Wieland and Goldberger make complaint about the judge's reliance upon the Calderbank offer and the judge's conclusions about the way in which they conducted the proceeding; and

(b) Messrs Porz and Cowan make complaint about various findings made by the judge, and the judge's reliance upon the Calderbank offer.

17 Both summonses name Texxcon and Nominexx as respondents, as well as Mr Gray, Mr Henderson and Mr Gianfriddo. Although Messrs Gray, Henderson and Gianfriddo were defendants at trial, no orders were made against them and they recovered 80 per cent of their costs on the same terms as Texxcon and Nominexx recovered their costs. The applications for leave to appeal seek to overturn the costs orders made in favour of Texxcon and Nominexx and the costs orders made in favour of Messrs Gray, Henderson and Gianfriddo.

18 Finally, during the hearing before us, senior counsel for Texxcon and Nominexx made an oral application for leave to appeal in relation to the judge's costs orders. The, complaint was that the judge awarded Texxcon and Nominexx only 80 per cent of their costs and excluded the costs of the expert witness Mr Clark, whose evidence was ruled inadmissible.

19 Texxcon and Austexx Constructions were joint venturers in an unincorporated joint venture, called the Austexx Texxcon Joint Venture ('the Joint Venture'), which was established to carry out the design and construction of various commercial developments for the Austexx Group of companies. Nominexx was jointly owned and controlled by the joint venture parties and was appointed by them to undertake the joint venture works on their behalf. Those works included the construction of a retail and tower complex (the 'South Wharf Development') for South Wharf Tower Pty Ltd ('SWT') and South Wharf Retail Pty Ltd ('SWR') (collectively, the 'Developers'). The Developers were Austexx Group companies, owned as to 75 per cent by the Austexx Group and as to 25 per cent by the Plenary Group ('Plenary').

20 Austexx was a parent company of the Austexx Group, which was privately owned. Messrs Wieland, Goldberger and Porz held substantial indirect shareholding interests in the Austexx Group and were also directors of Austexx. Mr Porz was the Austexx Group's chief executive officer and, during the relevant time, Mr Cowan was its chief financial officer.

21 In brief substance, the circumstances leading to the making of the $14 million loan were as follows.

22 The principal funding for the South Wharf development was to be provided by a syndicate of lenders ('Senior Lenders'). On or about 19 December 2007, the Developers entered into a Syndicated Facility Agreement ('SFA') with the Senior Lenders for that purpose. That same day, the Senior Lenders, the Developers, Nominexx, Contexx Pty Ltd ('Contexx')[8] and others entered into a multi-party construction deed.

23 The SFA had a construction facility limit of $551,700,000, which included $124,100,000 to finance the tower component of the South Wharf Development. It was a condition of requesting a drawdown on the tower component of the construction facility that, by a date specified in the SFA, SWT had entered into an Approved Commercial Office Tower Contract ('Tower Pre-sale Condition')[9]. If the Tower Pre-sale Condition was not satisfied, the construction facility limit would automatically reduce and the Senior Lenders would not need to finance the construction of the tower.[10]

24 The Tower Pre-sale Condition was not satisfied. That caused a renegotiation of the SFA with the Senior Lenders resulting in the execution of a Deed of Variation to the SFA on 18 September 2008.

25 The Deed of Variation amended the SFA in a number of ways, including by requiring that additional funding of $72 million was to be contributed to the development, with $12 million to be contributed by Plenary and $60 million to be contributed by the Austexx Group through mezzanine finance.[11]

26 Concurrently with the negotiation of the Deed of Variation, Mr Porz negotiated to obtain mezzanine funding of $60 million from Mirvac Funds Management Ltd, as facility agent for Ausmezz Pty Ltd and Mirvac Capital Investments Pty Ltd (together, 'Mirvac'). The substance and effect of those negotiations were contentious in the proceeding.

27 On 19 September 2008, two companies within the Austexx Group, Direct Factory Outlets Spencer Pty Ltd and Austexx Spencer Pty Ltd (together, the 'Borrower') entered into a facility agreement with Mirvac ('Mirvac Facility'). The Mirvac Facility was to be used for the purpose of contributing equity towards the development and construction of the South Wharf Development.[12] The facility comprised a Tranche A Advance ($13 million at 16.95% pa), a Tranche B Advance ($23 million at 17.50% pa), a Tranche C Advance ($10 million at 18% pa) and a Capitalised Interest Facility ('CIF') ($14 million).

28 Clause 4.3 of the Mirvac Facility required the capitalisation of any interest that became due and owing in respect of the Tranche C Advance. Clause 4.3(c) of the Mirvac Facility provided that 'despite clause 4.3, the Borrower may elect to convert the Capitalised Interest Facility into a principal sum available for drawdown, by prior written notification being provided to the Facility Agent[13].'

29 During September 2008, a total of $46,000,000 was advanced to the Borrower under the Mirvac Facility as follows. On 16 September 2008, the first drawdown under the Mirvac Facility of $22,734,990 was requested. Those funds were advanced. On 23 September 2008, a further drawdown under the Mirvac Facility of $23,265,010 was requested. Those funds were also advanced.

30 On 20 October 2008, the Borrower formally requested a drawdown of $7,241,968 of the CIF as a principal sum. That amount was equal to the amount the Developers intended to contribute in respect of the September progress claim under the South Wharf Building Contract, as part of the Austexx Group's obligation to contribute further funds as a result of non-fulfilment of the Tower Pre-sale Condition. The drawdown was requested to be paid on 28 October 2008, being the date that the September progress claim was due.

31 Messrs Porz and Cowan contended that Mirvac's representatives advised them that there would be a delay on the provision of the CIF. Texxcon and Nominexx contended, however, that Mirvac's representatives advised Messrs Porz and Cowan that the CIF would not be available for drawdown as a capital sum when required (ie 28 October 2008). In any event, this delay or unavailability led Messrs Porz and Cowan to seek a loan of $14 million from funds held by Nominexx in a joint venture bank account held with Westpac (the 'JV Account'). To this end, there were three meetings between the relevant parties in October 2008: the first was between Mr Cowan and Mr Gray on 21 October 2008; the second was between Mr Porz and Mr Gray on 22, 23 or 24 October 2008 (while Mr Gray says Mr Cowan was present as this meeting, Mr Porz and Mr Cowan's recollection is that Mr Cowan was not present); and the third was between Mr Cowan, Mr Gray and Mr Gianfriddo on 27 October 2008.

32 In response to a statement (or statements) by Mr Gray that he needed a written proposal, a document headed 'South Wharf Tower Funding' ('the funding document') was emailed on 29 October 2008 by Mr Cowan to Mr Gianfriddo and copied to Mr Gray and Mr Porz.

33 Subsequently, Mr Gray and Mr Henderson approved the loan. The loan funds were advanced from Nominexx (from funds in the JV Account) to Austexx in two tranches: $7,211,968 on 31 October 2008 and $6,788,032 on 27 November 2008. The moneys loaned from Nominexx (from funds in the JV Account) to Austexx were on-paid to the Developers so that they could pay amounts owing to Nominexx under the South Wharf Building Contract, which in turn paid amounts owing to Contexx.

34 The loan was never repaid and, by April 2010, the CIF was exhausted.

35 The misleading or deceptive conduct case was based upon representations said to have been made between 20 and 29 October 2008 in order to induce Texxcon to approve a loan of $14 million by Nominexx to Austexx. The representations pleaded in the Third Further Amended Statement of Claim were that:

(a) the loan from Nominexx to Austexx would be for a maximum of fourteen months;

(b) Austexx would pay interest on funds drawn under the loan at a rate of ten per cent per annum, which was also to be paid to Nominexx by December 2009;

(c) Nominexx could call up the loan at any time during the fourteen months to December 2009 and it would be paid by Austexx if such call was made;

(d) funds were available to Austexx by way of the CIF that could be used to repay the loan amount plus interest due under the loan at any time; and

(e) by inference, as a consequence of those representations, that:

(i) Austexx then had the capacity to repay the loan amount plus accrued interest to Nominexx;

(ii) Austexx would have the capacity to repay the loan amount plus accrued interest to Nominexx at the expiry of fourteen months, in December 2009; and

(iii) at any time during the fourteen month period Austexx would have the capacity to repay the loan amount plus accrued interest.

36 Texxcon and Nominexx alleged that the representations were made by Mr Cowan in meetings between 20 and 28 October 2008 and further or alternatively in the funding document which was emailed from Mr Cowan to Mr Gianfriddo, and copied to Mr Gray and Mr Porz, on 29 October 2008 at about 5:20 pm. Texxcon and Nominexx also contended at trial that Mr Porz represented to Mr Gray at one of the meetings between 20 and 28 October 2008 that the loan amount could be repaid 'at call' by Austexx drawing down on the Mirvac facility.

37 Much was made at trial and on these appeals by counsel for Messrs Porz and Goldberger of the fact that, as originally pleaded, such representations as were relied upon by Texxcon and Nominexx were said to arise only from the terms and provisions of the funding document. The claims of Texxcon and Nominexx, as originally pleaded, did not contain any allegations of oral representations.

38 This proceeding was commenced by Texxcon alone. The writ was filed on 29 November 2010. It bore a general endorsement. The general endorsement alleged representations in the terms alleged in paragraphs (a) to (e) above. Those representations were said to have been made on or about 29 October 2008, suggesting that they were made by the sending by Mr Cowan to Mr Gianfriddo (copied to Mr Gray) of the funding document.

39 On 24 December 2010, Texxcon filed a statement of claim. As to misrepresentations made in October 2008, the statement of claim asserted that those misrepresentations were made in the email which forwarded the funding document. No oral representations were alleged. That position was maintained in an amended statement of claim filed in February 2011, a further amended statement of claim filed in May 2011 and a second further amended statement of claim filed in February 2012. In June 2011, Nominexx, was added as a second plaintiff to the proceeding, pursuant to an order made by the judge in May 2011.

40 It was not until October 2012, when Texxcon and Nominexx filed the third further amended statement of claim, that it was alleged for the first time that the pleaded representations were, save for the first of them, made orally by Mr Cowan, as well as being made by the provision of the funding document. It was also in that pleading that it was asserted for the first time that Mr Porz orally represented to Mr Gray that the loan amount could be repaid at call by Austexx drawing down on the Mirvac facility. Counsel for Mr Porz and Mr Cowan stressed the obvious forensic significance of the fact that the first time Texxcon and Nominexx alleged any oral misrepresentation was four years after the events in question and that they so made the allegation without the benefit of any note or other written record of the conversations in which those oral representations were alleged to have been made.

41 While the evidence was not entirely clear, it appears there were three relevant meetings in October 2008. The first occurred on 21 October 2008 between Mr Cowan and Mr Porz (the 'first meeting'). The second occurred on 22, 23 or 24 October 2008 (the 'second meeting'). Messrs Porz and Gray were definitely present at the second meeting. Mr Gray gave evidence that Mr Cowan was not present, but Mr Porz and Mr Cowan gave evidence that Mr Cowan was present. The third meeting occurred on 27 October 2008 (the 'third meeting'). It was a meeting between Messrs Gray, Gianfriddo and Cowan.

42 It was common ground that, at the first meeting:

(a) Mr Cowan explained the funding arrangements for the construction costs of the tower and that Austexx had a $60 million facility with Mirvac.

(b) Mr Cowan told Mr Gray there was $14 million remaining to be drawn down under the Mirvac capitalised interest facility ('CIF'), which was available to be drawn down at any time.

(c) Mr Cowan raised the possibility of Austexx borrowing $14 million from the JV Account on a short term basis as a cheaper form of finance than drawing down the remaining $14 million under the Mirvac facility, which had an interest rate of 18 per cent.

(e) Mr Gray asked for the proposal to be put in in writing, and said he needed to discuss the proposal with Mr Henderson.

(f) Mr Cowan asked to be provided with Nominexx's projected cash flows, so as to understand the likely time when Nominexx would require repayment.

43 Mr Gray gave evidence that at the first meeting Mr Cowan told him that the loan could be repaid 'at call', and that Messrs Goldberger and Wieland were aware of the proposal and its terms. Mr Cowan denied that he said either of those things at that meeting, or at all.

44 Mr Gray gave evidence that, at the second meeting, Mr Porz said he was aware of the first meeting, and that Mr Porz then said:

The loan's at call, Geoff, Mirvac are sitting there.

Mr Gray also claimed that Mr Porz said that Messrs Goldberger and Wieland were aware of the proposal. Mr Gray said that he told Mr Porz that he was still waiting for the proposal to be put in writing so he could discuss it with Mr Henderson.

45 In their evidence, Messrs Porz and Cowan essentially denied Mr Gray's version of the second meeting. In substance, they deposed that the extent of the conversation was that Mr Gray told Mr Porz that he had been having discussions with Mr Cowan about Nominexx making a loan to Austexx; Mr Porz said he was aware of the discussions; Mr Cowan said he needed the projected cash flows; and Mr Gray said he needed something in writing.

46 Mr Cowan gave no evidence about the third meeting because he could not recollect it. It was Mr Cowan's evidence, however, that he never made any of the relevant oral representations alleged against him by Texxcon and Nominexx.

47 Mr Gray gave evidence that, at the third meeting, Mr Cowan said that Austexx was now looking to firm up the proposal. In response to Mr Gray's enquiry about the final terms of the loan, Mr Gray said that Mr Cowan replied 'it's at call' and 'The Mirvac facility is available to draw on'. Mr Gray said he asked Mr Cowan whether Mr Wieland and Mr Goldberger were 'across this loan and this development'. According to Mr Gray, Mr Cowan said 'yes'. Mr Gray then asked Mr Cowan again for the proposal to be put in writing and, according to Mr Gray, Mr Cowan undertook to 'put something in writing'.

48 Mr Gianfriddo recalled Mr Gray asking Mr Cowan at the third meeting to explain the proposal. He recalled Mr Cowan saying that Austexx wanted to use the cash balances in Nominexx temporarily because the use of Nominexx funds at 10 per cent was the cheapest source of funds. Mr Gianfriddo said that Mr Cowan said the Mirvac facility was always there to draw upon (although Mr Gianfriddo agreed in cross-examination he could not recall the exact words used by Mr Cowan). Mr Gianfriddo claimed that he also recalled Mr Gray asking Mr Cowan whether Messrs Wieland, Goldberg and Porz were 'across the detail', to which Mr Cowan replied 'yes'. Mr Gray then said he agreed in principle to the loan but needed a written proposal.

49 As was earlier noted, at approximately 5:20 pm on 29 October 2008, Mr Cowan emailed the funding document to Mr Gianfriddo, copied to Mr Gray and Mr Porz. It read as follows:

The Senior Debt funding entered into in Dec 2007 for the Tower was provided conditional on achieving a pre sale of the Tower prior to commencement. No pre sale was achieved & alternate funding options for the Tower cost were sought. The conditions the Syndicate put to SWR were unacceptable so the sponsors elected to contribute $72m from other sources to fund the cost of the tower.

The sponsors Plenary & Austexx have pledged to contribute the $72m as follows

Plenary will provide $12m from its own sources.
Mirvac have provided a $60m mezz facility to DFO Spencer Pty Ltd. cross secured $24m against South Wharf & $36m against Austexx assets.
- The facility includes an Interest Capitalization facility of $14m which at Austexx election may be drawn down as a capital contribution.
- $46m was drawn down in September 08 (used to repay the August Construction claim & September Claim).

$6.71m by Austexx.
$2.0m from Plenary &
Balance by the Senior lending syndicate

Nominexx will loan Austexx $14m for a maximum of 14 months to Dec 09. The loan can be repaid from Austexx Profit share in part or in full as agreed with
First installment [sic] 31 oct 2008 $7m
2nd installment [sic] 28 Nov 2008 $7m
Nominexx may call up the loan at any time during the 14 months (Austexx to draw down the undrawn on Mirvac $14m at that time)
Austexx interest rate to Nominexx 10% PA (5% to Texxcon, 5% to Austexx Con) on drawn funds calculated daily accruing monthly in arrears.
Nominexx will Advance the $14m (via Austexx Constructions No 2.) to Austexx Melbourne Retail PL (South Wharf JV entity) in the same manner that the Mirvac funds have been advances (scil, advanced) to South Wharf as a Partner Capital Contribution

Nominexx currently have $30m on deposit which is the result of many factors.

Profit on Canberra not distributed
Retentions
Margin & savings on South Wharf
Timing difference on claimed v drawn. (this issue is sensitive as WT may look silly if Nominexx were seen to be over claiming)
Nominexx are also owed
- $3m DD contingency on Canberra - timing to be confirmed by Austexx
- $2.4m Short paid in Sept claim - timing to be confirmed by Austexx
- $2.4m (overhead & GST overpayment) - deduct from future distribution to Austexx
The variations will affect this cash flow & variations will need to be declared to lenders (not on end of job for reputational reasons). Best timing for this is early 2009 when tenant pre leasing ramps up. Lenders and Austexx will fund the variations at during constructions with a proportion (yet to be determined) to be funded on takeout to a Term loan facility.
Nominexx partners wish to consider a distribution of margin as the job is significantly progressed. Austexx would use the margin to offset overheads to minimize further cash flow required from Austexx. Current certified Margins is $5268k Texxcon & $1756k Austexx Con.
Savings will be retained by Nominexx until confirmation & quantum of funding of variations is confirmed. An interim distribution of savings will be considered when the Nominexx cash flow to complete inclusive of variations cost less funded variations is confirmed.
Note The Senior lenders retain the right to lend further Senior debt to complete the project as required.

Total Debt on the Tower is $60m. $36m will be refinanced against DFO Spencer & DFO Moorabbin on completion of South Wharf. $24m debt remains

$24m debt inclusive of $14m Nominexx contribution to be financed on completion by the Syndicate. Add 2.5m in Capitalised interest the total Tower Debt will be $26.5m. The Tower was valued in Sept 08 at $100m (on a conservative Mortgage valuation basis).

Takeout facility to be put in place 3 months prior to banks completion date of Nov 09.

repay Senior Debt
repay $10m Mirvac debt & release 2nd mortgage over SW assets
repay $14m Nominexx Advance
Repay Partner Capital Contributions.

Loan agreement to be drawn up by Austexx or alternatively both parties sign this document as a terms sheet. Contexx to confirm.

Summary of commercial terms prepared by C Cowan 29 Oct 2008.

50 As the judge said, however, the funding document never came to be signed and a loan agreement was never drawn up by Austexx. Over the course of the following months, Mr Gianfriddo prepared various iterations of proposed loan terms but it was never finally formalised.

The representation actually pursued in this proceeding

51 Notwithstanding the pleaded terms of the representations alleged in the various iterations of the statement of claim, central to the misleading or deceptive conduct case pursued by Texxcon and Nominexx was a single representation that the Mirvac $14 million CIF was, and would always be, available to be drawn upon immediately if Nominexx required repayment of the loan.

52 Additionally, at various points in the trial, albeit with fluctuating enthusiasm, Nominexx and Texxcon appeared to run an alternative case based on an alleged representation that there was a reasonable basis for Austexx to believe that it had the capacity to repay the $14 million loan plus interest at the end of the term of the loan or within a reasonable period of the loan being called up, which reasonable period might be as little as 24 hours (or perhaps up to seven, or seven to 10, days).

53 During this appeal, there was considerable debate as to whether the alternative case was actually pursued at trial or whether (if pursued at any time in the trial) it was finally abandoned in the reply submissions of the final addresses of Texxcon and Nominexx. In the end, however, it is unnecessary to resolve that issue because, senior counsel for Texxcon and Nominexx expressly abandoned any reliance on the alternative case on the second day of the hearing. The alleged representation ultimately relied upon in this appeal was, in terms, that it was represented by Mr Gray and/or Mr Porz that the whole of the Mirvac $14 million CIF was, and would always be, available to be drawn on immediately should Nominexx require repayment of the loan at any time during the term of the loan.

54 In essence, the judge accepted the evidence called on behalf of Texxcon and Nominexx that, during the October 2008 meetings, Mr Cowan said that the Mirvac facility was 'at call', and that the Mirvac facility was available to draw upon immediately if needed. The judge also accepted that it was represented to Mr Gray that the loan moneys could be repaid 'at call' out of the Mirvac facility. Her Honour found, too, that, at the third meeting, Mr Cowan said that the Mirvac facility was always there to be drawn upon. The judge thus concluded:

Based upon the evidence considered as a whole, I find that it was represented to Texxcon by Mr Cowan and Mr Porz that the loan was at call; that Austexx had $14 million available in the CIF for draw down at any time; that the whole $14 million in the CIF could be used to repay the Nominexx loan being called up, at that time; and that the loan would be repaid upon demand.[14]

Was it represented that the $14 million CIF was, and would always be, available?

55 With all due deference to the advantages enjoyed by the judge in seeing and hearing the witnesses, we think her Honour erred in basing her findings on acceptance of Mr Gray's and Mr Gianfriddo's evidence of the representations alleged to have been made orally during the October 2008 meetings.

56 As has been seen, the first time there was any allegation of oral representations was in the third further amended statement of claim some four years after the relevant events. In our view, it is of profound forensic significance that such allegations were not made in the writ as originally issued, or in the later delivered statement of claim, or in the amended statement of claim, or in the further amended statement of claim, or in the second further statement of claim, or otherwise at all until almost four years after they were alleged to have been made. It is equally significant that neither Mr Gray nor Mr Gianfriddo had any note or other written record of the representations and that it was not suggested there had ever had been any written record of the representations.

57 In our judgment, it is remarkable to the point of incredible that, without the aid of a note or other written record, either man could recall the alleged representations with the precision which they claimed so long after the meetings. And, with all respect to the judge, it is even more remarkable that, despite counsel for the defendants making extensive submissions as to the improbability of Mr Gray and Mr Gianfriddo having that degree of recollection, the judge did not refer to those submissions in her reasons, still less reveal any process of reasoning by which she managed to reconcile the inherent improbability of the accuracy of their recollections with her Honour's conclusion that they could be relied upon as establishing the cause of action alleged.

58 In the circumstances, and also because of the documentary and other evidence to which we shall shortly refer, we consider that this is a case in which, although a credibility finding has been made which represents an apparent obstacle to appellate review, the finding is so '"glaringly improbable" or "contrary to compelling inferences of the case"', that it justifies and authorises appellate interference in the conclusion reached.[15]

59 It will be remembered that Mr Gray said he required a document before any loan would be agreed to and that the document which was provided to him was the funding document. In our view, therefore, the contents of the funding document are likely to provide a much more certain guide to what was said and understood during the October 2008 meetings than the supposed content of lately recalled aspects of conversations years ago. The fact that Mr Gray required the document before acting also casts doubt on the idea that any oral representation was causatively relevant to his decision to agree to the loan.

60 Relevantly, the funding document records the existence of the $14 million CIF 'which at Austexx [sic] election may be drawn down as a capital contribution'. It further records that Nominexx may call up the loan at any time during the loan period and that 'Austexx to draw down the undrawn on Mirvac $14 million at that time'.[16] Equally importantly, under the heading 'Nominexx loan to Austexx', it states that the loan can be repaid from Austexx's profit share 'in part or in full as agreed'. That implies that, unless called up early, the loan would continue for the agreed term of 14 months. The document also refers to a sum of $2.5 million of interest which had already been capitalised; and, read in context and with knowledge of the interest rate of 18 per cent applicable to the $14 million CIF and the interest rate of 10 per cent chargeable on the loan (of which both parties were aware), that implies a recognition of Austexx's intention to capitalise interest under and thus reduce the $14 million CIF over the life of the loan.

61 We note that counsel for Mr Porz and Mr Cowan did not cross-examine Mr Gray or Mr Gianfriddo on the latter aspect of the document and, accordingly, we accord it only limited significance. Even so, the funding document does not appear to contain or imply the representation that Texxcon and Nominexx ultimately contended for before this court that the whole of the Mirvac $14 million CIF was and would be available to be drawn down on immediately should Nominexx require repayment of the loan during the term of the loan. Taken as a whole and taken at its highest, the funding document appears to do no more than record that repayment of the loan might occur from at least two sources: profit share and so much as might remain undrawn under the $14 million CIF at the time of call.

62 A further telling factor against the proposition that the alleged oral representation or any relevant representation was made was the failure by Messrs Gray, Gianfriddo and Henderson, and Texxcon and Nominexx to make any complaint in September 2009. Austexx's failure to maintain the $14 million CIF was well known to Mr Gray by no later than 21 September 2009. He sent a document disclosing those facts to Messrs Henderson and Gianfriddo at or about that time. If the alleged representation had been made, Austexx's failure to maintain the $14 million CIF would surely have been regarded as a very serious breach of the agreement or arrangement reached in October 2008. The absence of complaint speaks volumes against that possibility.

63 Still more telling against the proposition that any relevant representation was made are Mr Gray's notes of his meeting with Mr Cowan on 21 September 2009. There is no mention in them of any misleading or deceptive conduct or any breach of representation made by Mr Cowan or Mr Porz, whether in October 2008 or at all. Further, although in cross-examination, Mr Gray said that, at this time (September 2009) he called Mr Cowan a liar, we consider that glaringly improbable in view of the contemporaneous documents and the lack of written complaint.

64 For these reasons, we think the judge was wrong to find that a relevant representation was made in October 2008.

65 In our view, the issue of reliance (causation) should also have been determined against Texxcon and Nominexx. Assuming for the sake of argument that the relevant representation were made, it is improbable that it was relied on: first, because Mr Gray insisted on receiving the funding document before proceeding; and, secondly, because of the absence of complaint when he learned in September 2009 that the representation was untrue or had been contravened.

66 As was earlier noted, the judge held that Messrs Porz, Wieland and Goldberger were involved in the alleged misleading or deceptive conduct and thus they were liable as accessories under s 75B of the TPA. It will be apparent from what we have already said that we disagree.

67 Starting with Mr Porz, the judge found that he aided and abetted or was directly or indirectly knowingly involved in or party to 'the misrepresentations' because:

Mr Porz was the Chief Executive Officer of Austexx. Mr Cowan reported to him and in preparing and submitting the Funding Document to Texxcon, was acting with the knowledge and approval of Mr Porz. Furthermore, Mr Porz was provided with a copy of the Funding Document at the same time as Mr Cowan provided that document to Mr Gray and Mr Gianfriddo. Mr Porz knew what was put to Texxcon and must have known that the contents of that document were misleading and deceptive because he knew that the request for conversion of the CIF to loan principal had not been complied with and knew that without the advance of funds under the CIF as loan principal, that Austexx then had no ability to repay the Nominexx loan at call.[17]

68 Although the judge's interpretation of the funding document was to some extent informed by her Honour's finding that Messrs Porz and Cowan had previously made oral misrepresentations concerning the loan, it appears that her Honour's reasoning as to Mr Porz's accessorial liability was predominantly based on her interpretation of the Funding Document as such. Either way, however, we reject her Honour's reasoning on the point. As we have explained, we do not consider that Nominexx or Texxcon established on the balance of probabilities that Mr Porz or Mr Cowan made a relevant representation during the October 2008 meetings and, in our view, the funding document did not convey the misleading or deceptive implications which the judge discerned within it.

69 Turning next to Mr Wieland, the judge found that he was involved in 'the misrepresentations' within the meaning of s 75B, for the following reasons:

I have already accepted as reliable, and as a fact, that Mr Porz told Messrs Gray and Gianfriddo at the meeting on 27 October 2008 that Mr Wieland and Mr Goldberger were across the proposal and its terms. Whilst Mr Porz denied that he was asked that question at that meeting, he did not deny discussing the proposal with Mr Wieland - his evidence was simply that he could not recall what was discussed.

Furthermore, Mr Wieland's evidence that he did not know about the 'at call' nature of the loan is not to be accepted in light of his defence in the Ausmezz proceedings.

In all the circumstances, I am prepared to find, and do find, that Mr Porz discussed the proposal with Mr Wieland at or around the time that it was put to Texxcon and that Mr Wieland knew that the proposal was for an at call loan from Nominexx and knew that it was represented that the Mirvac facility was available to repay the loan at any time, if called up. I also find that Mr Wieland knew that the representations were misleading and deceptive. That conclusion is compelled by the matters about which he knew and is not gainsaid by his understanding that the delay in drawing down the Mirvac facility was a timing issue, for the same reasons that the conduct of Mr Porz and Mr Cowan was found to be misleading and deceptive, notwithstanding their view that the delay in drawing down the Mirvac facility was a timing issue. Accordingly, I find Mr Wieland accessorially [sic] liable for the contraventions of s 52 of the TPA and s 9 of the FTA.[18]

70 As with Mr Porz, our conclusion that Nominexx and Texxcon failed to establish that Mr Porz or Mr Cowan made a relevant representation on or about 22, 23 or 24 October 2008, and our interpretation of the funding document, lead us to conclude that it was not established that Mr Wieland was involved in any misleading or deceptive conduct of the kind alleged.

71 Additionally, even if Mr Porz or Mr Cowan had made a relevant representation, and if Mr Porz had expressed the opinion to Messrs Gray and Gianfriddo that Mr Wieland was 'across the proposal and its terms', we would not regard Mr Porz's statement of that opinion as sufficient basis to find that Mr Wieland had actual knowledge[19] of the precise terms of the proposed loan or actual knowledge that Mr Cowan or Mr Porz had orally represented that Austexx had $14 million available in the CIF for drawdown at any time and that the whole of it could be used to repay the loan if called up. Apart from the questionable admissibility of any opinion as to another man's understanding,[20] the demotic terms in which the subject opinion was alleged to have been stated might well have meant no more than that Mr Wieland understood it was proposed that Austexx should borrow $14 million from the Joint Venture for a period of 14 months. To ascribe a more precise or extensive meaning to it than that would have necessitated a basis in circumstantial evidence which in this case was conspicuously absent.

72 The judge found that Mr Goldberger was involved 'in the misrepresentations ' within the meaning of s 75B, for the following reasons:

I make the same findings as against Mr Goldberger. Whilst Mr Goldberger did not give evidence himself, it may be inferred that he had the same knowledge as Mr Wieland because Mr Wieland's evidence was that he spoke to Mr Goldberger every day and specifically that he had reported to him that Austexx intended to borrow the $14 million from the JV. In the absence of any evidence from Mr Goldberger that he did not have the same knowledge as Mr Wieland, it is open to make, and I make, a Jones v Dunkel[21] inference that his evidence would not have assisted his case. Mr Goldberger's knowledge necessarily involved Mr Wieland's knowledge and as I have found that Mr Wieland had knowledge of the essential elements of the representations and the falsity of those representations, I so conclude against Mr Goldberger.[22]

73 Once again our conclusion that the plaintiffs failed to establish any relevant misrepresentation means that, in our view, there can be no question of accessorial liability. Additionally, however, even if a relevant representation had been established, we would not have regarded the judge's reasoning as an adequate basis for holding that Mr Goldberger was involved within the meaning of s 75B. Mr Wieland's evidence of reporting to Mr Goldberger that Austexx intended to borrow $14 million from the Joint Venture said nothing about any of the alleged oral misrepresentations; the proposed terms of the loan; the existence of the CIF; or whether it would be kept available to repay the Nominexx loan when and if demanded. The Jones v Dunkel[23] inference which the judge was disposed to draw was incapable of filling those gaps. Jones v Dunkel[24] might have enabled her Honour more confidently to draw an inference which was otherwise open on the available evidence. But it was error to suppose that it enabled her Honour to draw an inference which the available direct and circumstantial evidence could not sustain.[25]

74 In the result, we consider that the claims of accessorial liability failed and should have been dismissed.

75 In the first reasons, the judge held that Nominexx's claim for breach of directors' duties failed because Nominexx acted as agent for the Joint Venture and, further or alternatively, was obliged to, and did, act at the direction of the Joint Venture board in lending the $14 million to Austexx.

76 The appeal from that section of her Honour's judgment was put on the basis that, although Nominexx was agent for the Joint Venture and the $14 million was beneficially owned by the Joint Venturers, Nominexx's obligation to act in accordance with the Joint Venture board's directions was qualified. Counsel for Nominexx argued that, before Nominexx advanced any of the $14 million to Austexx, the board of Nominexx was bound to consider whether the payment would compromise Nominexx's ability to satisfy obligations incurred by Nominexx in the course of the Joint Venture business; and, if so, to resolve that the payment should not be made. The gist of the argument was that, perforce of s 36(2) of the Trustee Act 1958 [26] and also as a matter of general law,[27] Nominexx had a right of indemnity out of the Joint Venture assets (and thus the JV account) in respect of liabilities incurred by Nominexx in the conduct of Joint Venture business and a lien over the JV account as security for its right of indemnity. Thus, it was said, for the directors of Nominexx to permit Nominexx to pay moneys out of the account (otherwise than in discharge of Joint Venture liabilities) without first considering whether the payment would leave sufficient funds in the account to discharge Joint Venture liabilities, was a clear infraction of the directors' duties of due care and diligence under s 180 of the Corporations Act 2001 (Cth).

77 The problem with that argument, however, is that it was not advanced below and it was not considered below. The case pleaded against the directors in the third further amended statement of claim was simply that they breached their duties as directors of Nominexx in that, although they knew or ought to have known that Austexx was unlikely to have the capacity to repay the loan within the foreseeable future, they failed to prevent the loan being made. Thus, it was contended that Nominexx suffered a loss of $14 million plus interest that would have accrued 'on that sum'. There was no mention[28] of any obligation to ensure that sufficient funds were retained to meet third party obligations. Nor was there any reference to a right of indemnity out of the JV Account. The claim for damages for breach of directorial duties was for the full $14 million plus interest and costs and not for the amount of any third party liabilities which Nominexx was rendered unable to pay by reason of the loss of its ability to indemnify itself out of the $14 million.

78 Nor did the directors' defences deal with the subject of indemnity. In response to the Nominexx's pleaded allegations, the directors denied that Nominexx had suffered any loss and damage and, in augmentation of their denial, they alleged that the $14 million from which the loan was made was beneficially owned by the Joint Venturers and paid out to Austexx in accordance with the Joint Venturers' directions. Nominexx's reply in turn merely joined issue with that allegation.

79 Equally, at trial, none of the witnesses was asked to give any evidence relevant to the issue and senior counsel for Nominexx did not say anything about it in the course of his final address. To the contrary, apart from referring to what the directors were said to have known or ought to have known at the time of making the loan, Nominexx senior counsel's only submission concerning the alleged breach of directorial duties was that:

both directors, Wieland and Goldberger, have plainly breached their duties as directors of Nominexx by permitting it to lend $14 million of its money to Austexx in circumstances where neither of them could have had a belief that it could be repaid.[29]

There was no suggestion that Nominexx put its claim for breach of directors' duties as one for loss of a chance for Nominexx to recoup itself out of Joint Venture assets.

80 The defendants' submissions in final address were similarly confined. Senior counsel for the directors' argument on the extent of liability for breach of directorial duties was limited to this:

In our submission, it's beyond doubt that Nominexx was the nominee or agent of the members of the joint venture, Austexx Constructions No. 2 and Texxcon, and its clear from all the documents that I have taken your Honour to. What flows from that conclusion is that, as Nominexx was never the beneficial owner of the funds that were the subject of the loan, it's not Nominexx that has suffered any loss by reason of the failure to repay the loan. The persons who have suffered the loss are the two joint venturers, Austexx Constructions No. 2 and Texxcon. So, if and to the extent the court finds that loss has been suffered by a contravention of s. 52, that loss is confined to Texxcon and its joint venture partner.

On the first question, your Honour, what's the [quantum] of damage suffered by Nominexx, I repeat the submissions made in respect of the s.52 claim, that Nominexx was the nominee or agent of the joint venture and the funds that were loaned were, in fact, loaned by Austexx Constructions and by Texxcon.

The only basis on which it could be said that Nominexx has suffered damage is in its capacity as nominee. It has suffered loss in that capacity, its loss is confined to the extent it's been established that a joint venture has suffered loss and seeks to claim for that loss. As your Honour has heard and knows, it's only Texxcon that seeks to claim for its loss and Austexx Constructions does not.

81 By rights, that should have been the last word on the subject. There was nothing in the directors' final submissions which went beyond the ambit of the pleadings or raised any point with which senior counsel for Nominexx had not had a chance to deal in his submissions in chief. The only points for decision were whether the $14 million had been beneficially owned by the Joint Venturers and whether Nominexx had acted on the instructions of the Joint Venturers.

82 Junior counsel for Nominexx replied and, towards to the end of his reply, he said:

Your Honour can perhaps make this note, that at tab 506 is the deed of priority which shows that Contexx as we sit here today is owed $20 million odd by Nominexx, because it had to pay out money by itself. The joint venture didn't have a right of indemnity out of the account, it's Nominexx that had a right of indemnity out of the account.

In that folder I handed up to you last week on Friday there's the reference to the High Court decision in Octavo, and I won't take you to it, but it's behind tab 8, but the short point there is that the court said at page 370, Stephen, Mason, Aickin and Wilson JJ said this, 'It's common ground that a trustee who in discharge of his trust ... (reads) ... possesses a charge or right of lien over those assets.' That's what the directors have to turn their minds to in this case, and there's other like authorities.

... It's untenable to submit in those circumstances that literally no directors' duties were engaged for the directors of Nominexx. We say very much the case that directors' duties were engaged ...

83 The significance of what junior counsel said on the subject, however, appears to have escaped the attention of all concerned. Notwithstanding that it went well beyond the ambit of the pleadings and that none of the witnesses had been asked anything about it in the course of their evidence, there was no application to amend the pleadings or to recall any of the witnesses. Counsel for the other parties raised no objection to it - although, in view of the way they responded on appeal, we accept that they would have objected vehemently if they had understood its significance. Similarly, the judge said nothing about it at the time or in her reasons and she decided the case solely on the basis that senior counsel for Nominexx put in chief.

84 It follows that Nominexx's attempt to put the argument now as the basis of its appeal is, in effect, an attempt to put its case on an unpleaded, new and different basis for the first time on appeal.

85 In our view, that should not be allowed. The authorities are clear that a party is bound by the conduct of his case at trial and that, except in the most exceptional circumstances:

it would be contrary to all principle to allow a party, after a case had been decided against him, to raise a new argument which, whether deliberately or by inadvertence, he failed to put during the hearing when he had an opportunity to do so.[30]

86 Further, as Tadgell J said in Geelong Building Society v Encel,[31] the importance of holding parties to the way in which they put their case at first instance is even more pronounced in cases, like this, which have been dealt with below in the managed environment of the Commercial Court:

... the concept that proceedings in a court of first instance - especially the commercial list - should not be reduced to 'little more than a preliminary skirmish' assumes a particular piquancy. It is inimical to the interests of justice that a plaintiff's case, left half-made in the commercial list, should be completed on appeal. In particular, it is not sensible to suppose that an application for a pleading amendment that would in all probability have been attended with difficulty at first instance should be any more easily made on appeal. No reason at all having been given for a failure to make the application below, I should be unwilling to allow it now simply, as it were, for the asking. Apart from that, to allow the amendment sought would in my opinion be manifestly unfair to the respondent: cf Banbury v Bank of Montreal.[32] If it be right to say that some aspects of the relevant rule 'may have their genesis in estoppel by election in the conduct of litigation' and, if so, 'the relevant consideration is not that the other party is put in a worse position but that he or she may have been so placed',[33] I think it plain that the respondent would be placed in a markedly worse position than if the reply had been properly framed in the first place. If the application were now allowed and the new point were to succeed so that the appellant obtained judgment, the respondent would be liable by way of interest for over $1 million in excess of that for which he would have been liable had he failed first at first instance. It is reasonable to suppose that, had the respondent been faced with the point that is now sought to be made against him, he could well have taken a different attitude to the appellant's claim from that which he did. Thus, to allow the amendment now sought would be to put the respondent at risk of incurring a very large extra liability without having an appropriate opportunity to consider avoiding it by way of compromise or other means. That is a disadvantage for which an order for costs of the appeal in the respondent's favour could not compensate him. [34]

87 Here, there are no exceptional circumstances. Nothing was offered as to why the point was not pleaded and led below or as to why the directors would not be unfairly prejudiced if Nominexx were now permitted to amend its pleadings and put its case on such a new and different basis for the first time on appeal. In our view, that is sufficient reason to dismiss this aspect of the appeal.

88 In case it be thought, however, that Nominexx is thereby to be deprived of an otherwise just entitlement, we add that as presently advised we also think the proposed claim for breach of directors' duties was problematic. Admittedly, there were not reasonable grounds to suppose that the loan could be repaid within 24 hours. But, as we have sought to explain, we are not persuaded that it was ever represented that the loan could be repaid within 24 hours. Upon its proper construction, the funding document on which Mr Gray said he and Mr Henderson acted provided that the loan was for a term of 14 months with the right in Nominexx to call up the loan at any time during that term. Thereupon, the loan would have become due but, as a matter of law, payable within a reasonable time thereafter.[35] Consequently, it seems to us that, even if the directors of Nominexx were under a duty to consider whether the loan was in the best interests of Nominexx, they would not likely be found to have breached that duty unless it were shown that they did not have reasonable grounds to suppose that, if the loan were called up, it could be repaid within a reasonable time following call.

89 The judge reached no conclusions on that issue. Due to her Honour's perception that it was represented that the loan would be repayable 'at call'; and, seemingly, because her Honour thought that a loan payable 'at call' is, as a matter of law, necessarily payable instanter, her Honour resolved that:

It is unnecessary to make findings on whether there was a reasonable basis to believe that Austexx had the capacity to repay the loan plus interest at the end of the term of the loan or within [a] reasonable period of the loan being called up. Mr Tilley fixed a reasonable period of time as being not less than thirty days. But the pertinent issue is not concerned with whether, as at 29 October 2008, there was a reasonable basis for Austexx to believe that it had the capacity to repay the Nominexx loan at the expiration of the fourteen month period, or over a period of time or even within a reasonable period, say, one month, of the Nominexx loan being called up. The question is whether, as at 29 October 2008, there was a reasonable basis to believe that Austexx then had the capacity, and would continue to have the capacity, to repay the Nominexx loan plus accrued interest at call: that is, as an immediate payment obligation.[36]

...

The onus was on Mr Cowan and Mr Porz to adduce evidence that they had reasonable grounds for making the representations[37] and they did not discharge that onus. The matters referred to above, and the absence of reasonable grounds as at the end of October 2008 for the belief that the loan could, or would, be capable of repayment at call, compel the conclusion that the representations were misleading and deceptive.[38]

90 In passing, however, the judge did refer to a body of evidence which, in our view, tends to imply that there may have been reasonable grounds to conclude that, if the loan were called up, it could be repaid within a reasonable period of time following call. Her Honour described that evidence, as follows:

Additionally, as Mr Porz agreed, the Austexx Group was then at the limit of its ability to provide security for any further borrowings. There may have been some capability to refinance, but any refinancing would have involved the revaluation of various assets which Mr Porz did not want to undertake in the then prevailing economic circumstances, and as at the end of October 2008, the then strategy was to avoid restructuring any of the existing facilities.

Mr Tilley, who gave expert evidence for Mr Porz and Mr Cowan, candidly gave the following evidence in cross-examination:

Now, if I can ask the question again. If you were in the position of Austexx and you knew that you had given all material security that you had, would you agree it would be harder to borrow more, first, and especially if you were unwilling to have your properties re-valued?---Let me answer the second question first, if I may. If you're unwilling to have your properties re-valued and you had borrowed to 100 per cent of the amount that you were allowed to borrow against on all the existing properties, then the answer is, absolutely yes, but both those propositions are not realistic in terms of the situation that was in place at the time.

Was it part of your instructions that Aertex's position as at October 2008 was that they had given all the material security that they had to give and that they had nothing left to give?---Not that I recall.

If that had been part of your instruction, do you agree that it would have been much more difficult for anyone at Austexx standing as at 29 October 2008 to be optimistic about the prospect of borrowing $14 million plus interest in order to repay the Nominexx loan?---Please, if I may see if I have the question correct. If you're asking me if I had been instructed that no more security interests could be given away, could you not borrow anymore? Then the answer is, no, with the same security interests - - -

Is that no, you could not borrow anymore?---No. Yes, you could borrow more, with the same security interests; with new valuations you could borrow more. If the instruction was, you can't get any revaluations done and you can't extend any security interests, which would be nonsensical for any director to agree to, then the answer is, yes, it's difficult to imagine how you could borrow more.

Furthermore, the evidence indicated that even if funds were to be borrowed to repay the loan if it was called up, that process would have taken several weeks, if not months. Similarly, any sale of assets would likely have taken several weeks. Mr Tilley opined that the sale of an equity interest in a project like the South Wharf Development could possibly have happened quite quickly, in a matter of five to ten days but I do not find this evidence alone a secure foundation to conclude that there was a reasonable basis for believing that Austexx could, or would be able, to repay a $14 million loan at call. It assumes that there was an investor who would be prepared to invest immediately and on the state of the evidence, this was a purely theoretical consideration and conjecture.[39]

91 It is also necessary to bear in mind that, because s 51A of the TPA does not apply to breach of directorial duties, the onus would have been on Nominexx to prove on the balance of probabilities that the directors did not have reasonable grounds to conclude that the loan could be repaid within a reasonable period following demand. Going on the basis of Mr Tilley's evidence, that would have been difficult.

92 It is true that Nominexx and Texxccon called an expert witness, Mr Sutton, to give opinion evidence which in some respects ran counter to Mr Tilley's views. In Mr Sutton's opinion, the chances of refinancing might not have been as good as Mr Tilley considered them to be.[40] But, even if Mr Sutton's evidence were to be preferred - and, as matters stand, we see no reason to be any more enthusiastic about Mr Sutton's opinion than the judge seems to have been[41] - it strikes us that a divergence of ex post facto expert opinions concerning matters of that kind is hardly a compelling basis to be satisfied on the balance of probabilities that, at the time the loan was made, the directors of Nominexx did not have reasonable grounds to conclude that the loan could and would be repaid within the time required.

93 It needs to be kept in mind, too, that, although the judge was critical of Messrs Porz and Wieland and so not disposed to accept their evidence on some of the matters relevant to the issue at hand, her Honour's conclusions on that score were, according to her reasons, significantly shaped by her misconception that 'at call' meant payable immediately on demand or at least within 24 hours. Thus, her Honour concluded, Messrs Porz and Wieland were not to be believed when they denied that they understood that the $14 million loan to Nominexx was at call in that sense.[42] The same problem infects so much of her Honour's assessment of Messrs Porz and Wieland's credibility as appears based on the averment in their defences in the Ausmezz proceeding that the Austexx loan was 'at call'.[43] In our view, it is not at all obvious that the judge would have come to the same conclusions about credit and credibility if she had understood that the Nominexx loan would not fall due for payment before the expiration of the term, unless earlier demanded, and that, even if called up early, it would be payable within a reasonable time following call.

94 Further, the issue of whether the directors breached their duties by failing to consider if the loan to Austexx were in the best interests of Nominexx would in all probability have turned on a good deal more than just the presence or absence of reasonable grounds to suppose that the loan could be repaid within a reasonable period following call. Other relevant considerations might have included how likely it was that the loan would be called up before the expiration of the term; what would have been the projected financial consequences for Nominexx if the loan were not made; and which of those two possibilities would have been a more acceptable outcome for Nominexx, all things considered.

95 Moreover, if Messrs Porz and Wieland were shown to have breached their duties as directors - by allowing Nominexx to make the loan to Austexx when there were not reasonable grounds to conclude that the loan could be repaid within a reasonable period following demand - it would also have been necessary to consider whether, because Nominexx made the loan to Austexx at the direction of all Joint Venturers, Nominexx was entitled to be indemnified by each of the Joint Venturers for the loss of Joint Venture assets thereby sustained; and, if so, whether it could be said that Nominexx had in fact suffered any loss and damage. Prima facie at least, the rule in Hardoon v Belilios[44] would appear to apply.

96 Finally on this aspect of the matter, if Messrs Porz and Wieland were shown to have breached their duties as directors in the circumstances postulated, it would then have been necessary to consider whether the other directors of Nominexx were in breach of their duties for authorising the loan in those circumstances; and, if so, whether liability for breach of duty should be apportioned between all directors of Nominexx pursuant to Part IVAA of the Wrongs Act 1958. Although counsel for Nominexx submitted that, as a matter of principle, it could not be right that directors ex hypothesi guilty of misleading or deceiving other directors would be entitled to claim the benefits of apportionment in those circumstances, the recent decision of the majority of the High Court in Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd[45] tends to imply the contrary.

97 As it is, because of the appellants' failure to plead the case which they now seek to make for the first time on appeal and, therefore, because none of the relevant issues was gone into at trial, it is far from certain how any of those questions would have been resolved.

98 In her second reasons, the judge held that the claim for damages for breach of s 52 of the TPA was apportionable pursuant to s 87CB of the Act and thus that judgment should be entered against each of the four defendants for 25 per cent of the loss alleged to have been suffered by Nominexx.[46] Her Honour rejected the Nominexx and Texxcon's contention that the defendants intended to cause the loss within the meaning of s 87CC(1)(a) or fraudulently caused the loss within the meaning of s 87CC(1)(b) and, accordingly, held that s 87CB did not apply. Her Honour's reasons were as follows:

Mr Burnside QC for the plaintiffs referred to, and relied on, s 87CC of the TPA, which had been pleaded by way of reply to the fourth and fifth defendants' reliance on Part VIA of the TPA. Section 87CC operates to prevent apportionment of the liability of a concurrent wrongdoer in proceedings involving an apportionable claim if the concurrent wrongdoer intended to cause, or fraudulently caused, the economic loss that is the subject of the claim. However, whilst pleaded, no reliance was placed by the plaintiffs on s 87CC in closing submissions, nor was the case for the plaintiffs put on the basis of fraud or deceit and no findings were made by the Court to the effect that the defendants intentionally or fraudulently caused the economic loss. In the circumstances, s 87CC of the TPA does not apply.[47]

99 Counsel for Nominexx and Texxcon submitted in support of their appeal against that aspect of the judge's second judgment that, inasmuch as the judge found Messrs Porz and Cowan made representations of fact which they knew to be incorrect - namely, that the whole of the $14 million CIF would be available to repay the loan if called up - it should be taken that the judge had held that Messrs Porz and Cowan had 'fraudulently caused the economic loss' within the s 87CC(1)(b).

100 We reject the submission. For the reasons earlier given, we do not consider it was established that Messrs Porz or Cowan represented that the whole of the $14 million CIF would be kept available to repay the loan, or that any of the defendants otherwise engaged in actionable misleading or deceptive conduct. It follows that we do not consider there to be a liability to be apportioned under s 87CB or, therefore, any room for the application of s 87CC. We also think that, even if it had been established Messrs Porz and Cowan made a misleading and deceptive representation of the kind alleged, and it resulted in Nominexx suffering the loss and damage alleged, the judge would still have been correct to reject the contention that s 87CC was applicable.

101 Nominexx and Texxcon did not contend at trial that the defendants had acted fraudulently. It was not put to any of the defendants in cross-examination that they acted with intent to cause the loss suffered by Nominexx or that they otherwise acted dishonestly. The judge was not taken in the course of Nominexx and Texxcon counsel's final addresses (either in chief or reply) or, consequently, in the final addresses of the defendants' counsel, to any evidence said to establish intent or dishonesty (or which implied the contrary). In effect the judge proceeded on the basis that, although s 87CC was pleaded, the plaintiffs ran their case at trial in a manner which conveyed tacit acceptance of the defendants averment that s 87CC did not apply. In those circumstances, it would have been unfair for the judge after the conclusion of the case to go back and determine the issue of apportionment on a new and different basis.

102 We add as well that, although it may be that 'fraudulently' in s 87CC(1)(b) requires no more than that a defendant has acted dishonestly 'judged by the standards of ordinary, decent people, without [necessarily] appreciating that the act in question was dishonest by those standards',[48] we consider that, in this context, proof that a defendant 'fraudulently caused the economic loss or damage' in question would require proof at least that the defendant knew that the alleged representation was misleading or deceptive;[49] or, if it were a representation of future fact, knew that there were not reasonable grounds on which to base the representation.[50] As a result, however, of the way in which the case was conducted at trial, the judge did not make any of the findings which would be required before we could be satisfied that the defendants acted with intent to cause economic loss or fraudulently in the sense of acting with knowing dishonesty; and, as counsel for the appellants properly conceded, we are not in a position to make findings of that kind without seeing and hearing the defendants cross-examined.[51]

103 Although the judge found in the first judgment that the plaintiffs succeeded in their claim that the defendants had engaged in misleading and deceptive conduct which caused Nominexx to lend $14 million to Austexx, in the second judgment her Honour held that Nominexx did not thereby suffer any loss or damage, because the $14 million had been beneficially owned by the Joint Venturers and Nominexx had lent it to Austexx as agent for the Joint Venturers. The judge accepted that, as a 50 per cent Joint Venturer, Texxcon had suffered loss and damage, but her Honour held accordingly that Texconn's loss was limited to half of the $14 million which was claimed.

104 The appeal against those aspects of her Honour's second judgment was put on the basis once again of the argument earlier referred to, which the appellants sought to put for the first time on appeal, that, as nominee for the Joint Venturers, Nominexx was entitled to recoup itself out of the $14 million in the Joint Venture account for obligations incurred by Nominexx in the course of the Joint Venture's business and had a charge or lien over the moneys as security for its right of indemnity. Thus, it was contended that, if Nominexx had not lent the $14 million to Austexx, that sum would have remained available to Nominexx to satisfy liabilities which it incurred on behalf of the Joint Venture (including, an alleged liability of $20 million to Contexx), with the result that Nominexx did suffer loss and damage of not less than $20 million.

105 As was earlier stated, we are not prepared to countenance that argument for the first time on appeal. It follows that, even if we had accepted that the defendants engaged in misleading or deceptive conduct of the kind alleged, the appeal against the judge's assessment of damages would have failed. As it is, because we are not persuaded that the defendants engaged in any misleading or deceptive conduct of the kind alleged, the claim for damages must be dismissed altogether.

106 The trial was conducted on the basis that the evidence of expert witnesses would be heard together after all lay witnesses had given their evidence. Mr Clark was one of the proposed expert witnesses; he was to give evidence for Texxcon. He had provided a report dated 30 March 2012.

107 Mr Clark was to opine as to whether there was a reasonable basis for the directors of Austexx, as at 29 October 2008, to have considered that Austexx had, and would continue to have, capacity to repay the $14 million Nominexx loan when it was due for repayment, apart from relying on the Mirvac facility.

108 On 20 May 2013, the thirteenth day of the trial, counsel for Messrs Porz and Cowan objected to the admission of Mr Clark's report, and argument was duly had. On 21 May 2013, her Honour ruled that the expert evidence of Mr Clark was inadmissible. That was because, in summary, Mr Clark had in part based his opinion on facts and matters that had occurred after 29 October 2008 in considering what would have been the position if Austexx, post October 2008, had sought to borrow to repay the Nominexx loan. His opinion was thus irrelevant. Furthermore, the references to facts that could only have occurred after October 2008 did not merely go to the weight to be given to the evidence but to admissibility. That was because the references to pre and post October 2008 facts and matters were so intertwined that they could not be reliably separated. In these circumstances the whole report was inadmissible.

109 Following that ruling, on 23 May 2008, counsel for Texxcon and Nominexx sought an adjournment for the purpose of allowing Mr Clark time in which to prepare a report that conformed with the ruling. No revised report was then and there available. The application was opposed. Her Honour refused the application. In brief but succinct reasons, her Honour said:

The application is made without the availability of the revised report. The revised report is not in existence yet so that neither the probative value nor any potential prejudice to the defendants by the provision of the revised report at this final stage of the trial can be evaluated.

A party should not likely [sic] be deprived of the opportunity to adduce probative evidence but considerations of fairness to the plaintiffs in the way in which they seek to put their case are not determinative of the application. There are also the broader considerations of the potential prejudice to the defendants and the impact on the orderly conduct of this trial.

Given the late stage at which it is sought to rely upon the revised report, and in light of the fact that the revised report is not available at this point in time, it is my view that the broader considerations should prevail over the consideration of unfairness to the plaintiffs and, accordingly, the application is refused.

110 It is in this context that one comes to Ground 9 of Appeal in the Texxcon and Nominexx notice of appeal, namely:

The learned trial judge erred in excluding the evidence of Mr Clark, because:

(a) Mr Clark had not relied impermissibly upon matter post-dating 29 October 2008 in forming his views, but rather had referred to such matters because they vindicated the pre-29 October 2008 experiences upon which he relied in forming his views; and

(b) the plaintiffs were denied the opportunity to deliver a supplementary report addressing the criticisms made of Mr Clark's report or to call Mr Clark to address those matters in the witness box.

The same ground is relied on in the Texxcon and Nominexx notices of cross appeal in the appeals of Messrs Wieland and Goldberger, and Porz and Cowan.

111 The question that immediately arises is, where does this ground lead to? In the course of argument counsel for Texxcon and Nominexx said that the matter went to the question of costs. That is, it was not sought to rely on a revised Clark report on this appeal, and it was not desired that the case be remitted for retrial. Rather, Ground 9, if upheld, would be a basis upon which to attack her Honour's Orders 2 and 3 in respect of the 20 per cent reduction in the plaintiffs' recoverable costs and the specific orders relating to the allowance, and payment, of costs relating to Mr Clark. That is, Ground 9 was a gateway through which to contend that the deduction of 20 per cent of Texxcon and Nominexx's costs, and the order as to who should pay Mr Clark's costs, be set aside. The result sought is that Texxcon and Nominexx receive 100 per cent of their costs - or such amount above 80 per cent as this court would allow, and all of the costs in relation to Mr Clark - or to such extent as this court would order.

112 In their written outline, counsel for Texxcon and Nominexx addressed only Ground 9(a), that is, the ruling on admissibility. It was only in their oral address that something was said about Ground 9(b). As to admissibility, counsel submitted that it was permissible for Mr Clark to have regard to later events in assessing whether representations were misleading or deceptive when made. That, however, did not address, or meet, the difficulty identified that Mr Clark had addressed the wrong question and that his report was infected with an inseparable mixture of the relevant and irrelevant. Indeed, so much is evident from a perusal of Mr Clark's report which was provided to the court in the course of the hearing. With respect, her Honour was surely right in her analysis and ruling.

113 In these circumstances, the real ground of complaint must be the subsequent refusal of her Honour to allow time for the preparation and filing of a revised Clark report. Counsel for Texxcon and Nominexx submitted that, in denying them the right to call Mr Clark, her Honour's exercise of discretion miscarried. All that had been required, they said, was the allowance of a little further time.

114 These submissions must be rejected. Her Honour's succinct reasons, given immediately, constitute a sufficient and proper basis for her ruling. As mentioned earlier, the lay-evidence was complete. Thus, counsel had led their evidence, and cross-examined, on the basis of the materials then known to them. And, as no revised report had been provided, neither the judge nor counsel could know the extent to which counsel might have conducted the evidence differently, or whether as a result of any such report (if provided), it would be necessary to recall a witness or witnesses for further examination, or even (possibly) a further witness. The evident possibilities bespoke potential unfairness to the defendants, the nature and extent of which could not be determined, as her Honour indicated.

115 Of course, Mr Clark's report should always have been in proper form; and yet even, at the time of the hearing in this court, there is yet no revised report. None has ever been proffered.

116 The considerations mentioned by her Honour in her ruling were relevant considerations in determining upon the course that was just and appropriate in all of the circumstances. The complaint is that her Honour should have concluded to the contrary. But it was not suggested that she had taken into account an irrelevant consideration, failed to take into account a relevant consideration or had acted on a wrong principle. Manifestly, the ruling was open to her Honour, and was properly made in the circumstances.

118 For the purpose of completeness we now deal with the issues concerning costs raised by the notices of appeal, cross-appeal and applications for leave to appeal.

119 It is convenient to commence by noting the actual terms of her Honour's orders on costs. They ordered that:

The Fourth to Seventh Defendants pay eighty per cent of the Plaintiffs' and Eighth to Tenth Defendants' costs of and incidental to the proceeding, assessed:
1. up to and including 28 March 2013, on a party/party basis; and
2. thereafter on an indemnity basis;

to be taxed by the Costs Court in the absence of agreement, with the exception of costs incurred by the Plaintiffs and Eighth to Tenth Defendants in relation to the witnesses Messrs Torrington and Kennedy and the expert witness Mr Clark.

The costs of the Fourth to Seventh Defendants incurred in relation to the witnesses Messrs Torrington and Kennedy and the expert witness Mr Clark are to be set off against the costs payable pursuant to Order (2) above.

120 By their notices of appeal and cross-appeal, Texxcon and Nominexx seek the amendment of these orders by:

(a) the deletion of the words 'eighty per cent of' in paragraph 2, and

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