Oztech Pty Ltd v Public Trustee of Queensland

Background 14 As I have explained in previous reasons for judgment, this proceeding is a representative proceeding commenced under Pt IVA of the Federal Court of Australia Act 1976 (Cth). It concerns the respondent's role as the trustee for noteholders in respect of senior unsecured notes (the notes) issued by the company now called Octaviar Investment Notes Limited (in liquidation) (OIN). The notes were issued under a trust deed and an amending trust deed (together, the Trust Deed) and certain terms of issue (the Terms of Issue). At all relevant times, OIN was part of the Octaviar Group. The holding company for the Octaviar Group was the company now called Octaviar Limited (receivers and managers appointed) (in liquidation) (OL). OL and other companies in the Octaviar Group guaranteed OIN's obligations under the notes (the Guarantors). The applicant was a noteholder as at 25 February 2008. In these reasons, I will refer to the relevant companies by their present corporate names and designations. 15 The essence of the applicant's claims is that, following a sharp drop in OL's share price in January 2008 and OL's sale of a business (the Stella Group), which was completed on 29 February 2008, the respondent acted too late and too slowly in demanding repayment of the notes and in protecting the interests of noteholders, including by failing to wind up OIN and OL by 29 February 2008. The applicant says that if the respondent had acted promptly then at least some of the funds received from the sale of the Stella Group would have been available to the applicant and group members, as noteholders. By the time the respondent took action, the assets available to satisfy OIN's indebtedness to noteholders had been substantially dissipated.

Evidence act: Relevant provisions 16 Section 55(1) of the Evidence Act provides: The evidence that is relevant in a proceeding is evidence that, if it were accepted, could rationally affect (directly or indirectly) the assessment of the probability of the existence of a fact in issue in the proceeding. 17 Section 57(1) of the Evidence Act provides: If the determination of the question whether evidence adduced by a party is relevant depends on the court making another finding (including a finding that the evidence is what the party claims it to be), the court may find that the evidence is relevant: (a) if it is reasonably open to make that finding; or (b) subject to further evidence being admitted at a later stage of the proceeding that will make it reasonably open to make that finding. 18 Section 76(1) of the Evidence Act provides: Evidence of an opinion is not admissible to prove the existence of a fact about the existence of which the opinion was expressed. 19 Section 79(1) of the Evidence Act provides: If a person has specialised knowledge based on the person's training, study or experience, the opinion rule does not apply to evidence of an opinion of that person that is wholly or substantially based on that knowledge. 20 Section 135 of the Evidence Act provides: The court may refuse to admit evidence if its probative value is substantially outweighed by the danger that the evidence might: (a) be unfairly prejudicial to a party; or (b) be misleading or confusing; or (c) cause or result in undue waste of time.

Other relevant provisions 21 Section 283BB of the Corporations Act 2001 (Cth) (the Corporations Act) provides: The borrower must: (a) carry on and conduct its business in a proper and efficient manner; and (b) provide a copy of the trust deed to: (i) a debenture holder; or (ii) the trustee; if they request a copy; and (c) make all of its financial and other records available for inspection by: (i) the trustee; or (ii) an officer or employee of the trustee authorised by the trustee to carry out the inspection; or (iii) a registered company auditor appointed by the trustee to carry out the inspection; and give them any information, explanations or other assistance that they require about matters relating to those records. Note: The borrower also has a duty to call a meeting of debenture holders in certain circumstances (see section 283EA). 22 Clause 5.4(a) of the Trust Deed provides: The Company agrees to provide the Trustee such information as the Trustee reasonably requests about the Company and any of its Related Bodies Corporate to enable the Trustee to carry out its duties under this Deed and the Corporations Act. 23 Clause 6.2 of the Trust Deed provides: The Company will make available for inspection by the Trustee or any registered company auditor appointed by the Trustee the whole of the accounting or other records of the Company and will give to the Trustee such information as it requires with respect to all matters relating to the accounting or other records of the Company. 24 Clause 6.6(a) of the Trust Deed provides: The Company covenants to:- (a) give to the Trustee any information which it may reasonably require for the purposes of this Deed or the Corporations Act; …

Overview of the reports 25 In Joseph 1, Mr Joseph expresses opinions as to what steps the respondent, as the trustee for noteholders, should have taken under the Trust Deed and/or the Corporations Act by 29 February 2008 in order to discharge his duties as trustee, including when those steps should have been taken. 26 By way of broad overview, Mr Joseph says that, at least by 17 May 2007, the respondent should have put in place a monitoring regime by which he received regular (monthly) information from OL. Further, after the respondent received a high-level report from PricewaterhouseCoopers (PwC) in June 2007 to the effect that PwC was unable to form an opinion as to whether OL would have the ability to meet scheduled debt repayments in December 2011, the respondent should have requested, or have PwC or another investigative accountant request, further information from OL to enable PwC or another investigative accountant to prepare a more extensive and thorough report on the ability of OL (presumably, OIN) to meet the scheduled debt repayments. Mr Joseph says that such information was required in order to determine whether the notes were able to be repaid and that this information would be necessary for a trustee to discharge its obligations under s 283DA of the Corporations Act. 27 Mr Borrelli was asked to assume that he had been appointed as an investigative accountant by the respondent in July 2007. Borrelli 1 is tendered as the report that Mr Borrelli, as the investigative accountant, would have provided to the respondent at that time. In Borrelli 1, Mr Borrelli says that he would have requested copies of certain information and documents in relation to the Octaviar Group in order to facilitate his work as the investigative accountant. In that report he says that, on the basis of the information that would have been provided to him at the relevant time, he could not conclude that OIN and the Guarantors were insolvent in July 2007. However, he says that, at that time, there was a risk of insolvency. He says that he would have recommended that the respondent request monthly information and documents in relation to the financial and operational affairs of the Octaviar Group. Mr Borrelli also says that he would have recommended that the respondent send a letter to OL in certain terms, requesting the provision of information and documents falling within 18 specified categories (the 15 August 2007 draft letter). 28 In Joseph 2, Mr Joseph expresses opinions as to what action the respondent should have taken in August 2007 as a result of receiving Borrelli 1. Mr Joseph says that, amongst other things, he would have followed the investigative accountant's recommendations and engaged an investigative accountant on an ongoing basis to undertake the monitoring recommended in Borrelli 1. 29 Borrelli 2 is tendered as the report that Mr Borrelli would have provided to the respondent as the investigative accountant. Borrelli 2 advises on: the financial position of OIN and the Guarantors since August 2007; whether OIN or any of the Guarantors were insolvent; whether OIN and/or the Guarantors would be able to repay the amounts owing under the notes on their maturity on 30 December 2011; whether there had been any breaches of the Trust Deed, Terms of Issue, Guarantee Deed Poll and/or the Corporations Act, including whether an Event of Default had occurred; and what appropriate action he, as the investigative accountant, would recommend that the respondent take in light of the above findings. 30 Borrelli 2 makes a number of recommendations, including that the respondent: confirm with appropriate legal advisers that certain events described in Borrelli 2 represent Events of Default pursuant to the Trust Deed, Terms of Issue, Guarantee Deed Poll and/or the Corporations Act and that such events would permit the respondent to issue demands or notices enforcing his rights against OIN and the Guarantors; and consider the pursuit of other options and remedies to protect and preserve the interests of noteholders and creditors, including issuing statutory demands and, if necessary and appropriate, petitioning to wind up OIN and the Guarantors. 31 In Joseph 3, Mr Joseph expresses opinions as to what action he would have taken in the periods August to October 2007, November 2007, December 2007 and January 2008 had he been trustee. These opinions purport to be based on the advice and recommendations contained in Borrelli 2. 32 It can be seen that, for the purpose of considering the expert reports, Mr Joseph is to be taken as a proxy for the respondent and Mr Borrelli is to be taken as a proxy for the investigative account reporting to the respondent. 33 As I have noted, Borrelli 3 was read on the voir dire. In Borrelli 3, Mr Borrelli gives evidence about (amongst other things): when he would have commenced monitoring the Octaviar Group (including meeting with relevant directors and officers); how the timing of his monitoring would have been adjusted in the course of his investigation (including when requesting documents and information); and the extent to which, during his investigation, he would have communicated with the respondent about the status of those investigations. 34 As I have noted, Joseph 4 was read on the voir dire. In Joseph 4, Mr Joseph gives evidence about (amongst other things): the assumptions he adopted as to when he would have been provided with the information in Borrelli 2; the information in Borrelli 2 upon which he relied when expressing his opinions about the actions he would have taken in the time periods identified in Joseph 3; and whether the information in Borrelli 3 would cause him to change the opinions he expresses in Joseph 3. 35 In Joseph 4, Mr Joseph says that he prepared Joseph 3 on the assumption that, from August 2007, the investigative accountant would be providing reports on the status of his investigation at least monthly. He says that he assumed that the "red flags" that were identified by the investigative accountant would have been reported to him at about the time they were identified by the investigative accountant. Mr Joseph says that he assumed that the information contained in Borrelli 2 was, in effect, a synopsis of all the information that would have been contained in monthly and more frequent reporting from the investigative accountant which would have been provided progressively over the period from August 2007 to February 2008. He also says that, when preparing Joseph 3, he assumed that he would have received monthly reports within a short period of the end of each month and that he would have been provided with some of the more basic information in support of those reports, including cashflows and management accounts, at about the time that such information was obtained by the investigative accountant. He says that he assumed that any documents or information obtained by the investigative accountant that raised particular issues would have been reported to him at or about the time the investigative accountant obtained them. He says that he would have ensured that the investigative accountant was actively engaged in monitoring OL throughout December 2007 and assumed that, from December 2007, the investigative accountant would have been providing him with information on a more regular basis, within days. Mr Joseph says that nothing in Borrelli 3 causes him to change the opinions he expressed in Joseph 3. 36 The applicant has indicated that it will seek leave to read Borrelli 3 and Joseph 4 in its case in chief. Leave is required because of Order 3 made on 13 April 2016. Borrelli 3 and Joseph 4 could be described as "repairing" affidavits intended to overcome the objections raised by the respondent. I hasten to add that the applicant says that Borrelli 3 and Joseph 4 are not necessary when Borrelli 2 and Joseph 3 are properly understood. Nevertheless, the applicant seeks to rely on Borrelli 3 and Joseph 4 for a dual purpose: it says that they are admissible in their own right; it also says that they provide added support for the admission of Borrelli 2 and Joseph 3.

Relevant allegations in the statement of claim 37 It is important to understand that Borrelli 1 and Borrelli 2 are tendered for a dual purpose. The first is to establish the financial position of OIN and the Octaviar Group during the period July 2007 to and including February 2008. The second is to establish a link in the chain of proof of what information was or would have been available to the respondent, acting reasonably, in respect of the financial position of OIN and the Octaviar Group at relevant times during that period and what steps the respondent, acting reasonably, should have taken, as the trustee for noteholders, based on that information, as so provided. 38 Paragraph 81 of the further amended statement of claim (the statement of claim) alleges that, if certain companies were Material Subsidiaries (as defined in the Terms of Issue), the respondent knew or ought to have known by 26 February 2008 that, amongst other things, those companies had not provided Guarantee Deed Polls, as required by the Trust Deed, and that such failure was an Event of Default under the Terms of Issue. 39 Paragraph 82.11 of the statement of claim alleges that, by no later than 29 February 2008, the respondent knew or ought to have known that certain events had taken place. Those events are pleaded in paragraphs 41 to 77 of the statement of claim. 40 Paragraph 92C of the statement of claim alleges that, had the respondent taken certain steps before 18 January 2008 (being the steps pleaded in paragraph 92B of the statement of claim), he would have formed the view that an Insolvency Event and an Event of Default under the Terms of Issue had occurred and was continuing, and given notice to OIN that the notes were due and payable within two weeks. It is appropriate that I set out paragraph 92C in full, as it shows the extent to which reliance is placed on the expert reports in pleading what the applicant says the respondent should have done: 92C If the Respondent had taken any or all of the actions pleaded in paragraph 92B above, it would have: 92C.1 formed the view no later than the end of January 2008, that an Insolvency Event and an Event of Default had occurred by that time and was continuing under the Terms of Issue in respect of OL and OIN; Particulars 1. Had the Respondent taken the actions pleaded in paragraph 92B above in about July or August 2007, the Respondent would have (either by itself or by appointing an investigative accountant) requested further information and documents from OL (Report by P Joseph dated 8 April 2016 particularly at [35]-[44]; Report by C Borrelli dated 8 April 2016 particularly at [1], [3]-[4]). 2. If the Respondent had done so, OL would have produced the information and documents so requested because otherwise the Respondent could have engaged the Australian Securities and Investments Commission or external lawyers to compel the production of this information under clauses 5.4, 6.2, 6.6, 7.3 of the Trust Deed or ss 238BB and 283CB of the Act. Had the information and documents not been provided, the Respondent could and should have taken those steps (Report by P Joseph dated 8 April 2016 at [27]). 3. If the Respondent had taken the steps in particulars 1 and 2 above in about July or August 2007, the documents and information the Respondent and/or the investigative accountant obtained as a result would have caused the Respondent to form the view in about August 2007 that: (a) the cashflows forecasts prepared by OL since May 2007 projected substantial shortfall in cash required by OL; and (b) the risk of insolvency of OL was evident from July 2007 (Report by C Borrelli dated 8 April 2016 particularly at [28]-[29], [99]-104]; Report by P Joseph dated 20 April 2016 at [4]). 4. If the Respondent had formed the view in particular 3 above, the Respondent (either by itself or by appointing an investigative accountant) ought to have from about August 2007: (a) requested further information and documents and monthly updates in relation to the financial and operational affairs of the OL Group and in particular those relating to: (i) short and long term cashflow forecasts; (ii) any potential sale and purchase of substantial assets and their impact on the cashflow position of the OL Group; (iii) the OL Group's short and long term repayment obligations to old material creditors and the discussions and correspondence with these creditors; (iv) whether any current financial facilities were or were likely to be in default; and (v) any equity and/or debt raising activities; (b) monitored the cashflow position of the OL Group regularly; (c) monitored and assessed any sale and purchase of substantial assets and the repayment obligations of the OL Group; (d) monitored and assessed any breaches of the Trust Deed, Terms of Issue, Guarantee Deed Poll and/or the Act and the action to be taken in the case of any breaches; and (e) enforced immediate payment of the Notes upon identification of any events of default pursuant to the Terms of Issue in circumstances of any deterioration of the OL Group's financial and operational position (Report by C Borrelli dated 8 April 2016 at [34]-[35], [113]-[117]; Report by P Joseph dated 20 April 2016 particularly at [5]. 5. If OL resisted the steps set out in particular 4 being taken, the Respondent ought to have engaged ASIC and/or an external lawyer to compel the production of this information under clauses 5.4, 6.2, 6.6, 7.3 of the Trust Deed or ss 238BB and 283CB of the Act (Report by P Joseph dated 20 April 2016 at [9]-[10]). 6. If the Respondent had taken the steps in particulars 4 and 5 above, the Respondent would have received information that would have or ought to have caused the Respondent to form the view that by about the end of January 2008 that an Event of Default had occurred on the basis of the following matters each of which constitute an Event of Default: (a) an Event of Default occurred on or about 31 July 2007 (and was continuing thereafter) when OIN provided a quarterly report to the Respondent that, in breach of clause 6.5(b) of the Trust Deed, was misleading because it failed to notify the Respondent of the: (i) fixed and floating charges as more particularly pleaded in paragraphs 48AX.2 and 48AX.3 above, information which OIN was required to give pursuant to s 283CC of the Act and clauses 7.2 and 7.3 of the Trust Deed); (ii) Fortress Facility Agreement as more particularly pleaded at paragraphs 48AV to 48AY above, which was materially prejudicial; (iii) UBS loan facility as more particularly pleaded at paragraphs 48AN to 48AT above, which was materially prejudicial; (iv) amounts owing to the Australian Taxation Office as more particularly pleaded at paragraph 48L above, which was materially prejudicial; and (v) forecasted cashflow shortfalls for the OL Group since May 2007, which was materially prejudicial (Report by C Borrelli dated 8 April 2016 at [98]-[99] and Report by C Borrelli dated 22 April 2016 at [121]-[122]; (b) an Event of Default occurred on or about 29 October 2007 (and was continuing thereafter) when OIN provided a quarterly report to the Respondent that, in breach of clause 6.5(b) of the Trust Deed, was misleading because it failed to notify the Respondent: (i) of the amendments to the Fortress Facility Agreement as more particularly pleaded at paragraphs 48AZ to 48BA above, which was materially prejudicial; (ii) of the failure to obtain the Commercial Banking Facility as more particularly pleaded at paragraphs 48BD to 48BI above, which was materially prejudicial; (iii) that the Stella sale had not occurred as more particularly pleaded at paragraph 48AU above, which was materially prejudicial; (iv) that a substantial change in the nature of OL's business had occurred (Report by C Borrelli dated 22 April 2016 at [121]-[122]; and (v) of the forecasted cashflow shortfalls for the OL Group from May 2007, which was materially prejudicial (Report by C Borrelli dated 8 April 2016 at [98]-[99] and Report by C Borrelli dated 22 April 2016 at [121]-[122]; (c) an Event of Default occurred by 31 December 2007 because by reason of the matters pleaded at paragraphs 48T to 48BL above, OL was in breach of clauses 7.2 and 7.3 and s 283CB(a) of the Act because it was not carrying on and conducting its business in a proper and efficient manner; (d) an Event of Default occurred on or about 16 January 2008 (and was continuing thereafter) when OIN provided a quarterly report to the Respondent that, in breach of clause 6.5(b) of the Trust Deed, was misleading because it failed to notify the Respondent (i) of the amendments to the Fortress Facility Agreement as more particularly pleaded at paragraphs 48BB and 48BC above, which was materially prejudicial; (ii) that the Stella sale had not occurred as more particularly pleaded at paragraph 48AU above, which was materially prejudicial; (iii) that a substantial change in the nature of OL's business had occurred (Report by C Borrelli dated 22 April 2016 at [121]-[122]; (iv) of the forecasted cashflow shortfalls for the OL Group from May 2007, which was materially prejudicial (Report by C Borrelli dated 8 April 2016 at [98]-[99] and Report by C Borrelli dated 22 April 2016 at [121]-[122]; and (v) of the payment of $130 million on or about 30 November 2007 from OA to Fortress (in the circumstances set out in the Report by C Borrelli dated 22 April 2016 at [20.6], [103]-[107], [126], and tab 8), which was a breach of s 283CB(a) of the Act and clauses 7.2 and 7.3 of the Trust Deed; (e) an Event of Default occurred on 30 January 2008 because, any security given by the OL Group for any indebtedness for borrowed money became enforceable by reason of the default, and steps were taken to enforce that security by Tasovac Pty Limited under clause 2.4(d) of the Deed of Charge dated 27 October 2006 for an event of default under clause 9. 1(b) of the loan agreement between MFS Investment Management Limited and the Royal Bank of Scotland plc dated 29 June 2007; and (f) an Event of Default occurred by about 31 January 2008 as an Insolvency Event occurred because OIN and/or OL were insolvent under the Act and continued to be so (Report by C Borrelli dated 22 April 2016). Further or in the alternative, an Event of Default occurred by 23 January 2008 as an Insolvency Event occurred because OIN and/or OL were insolvent under the Act and continued to be so. The Respondent ought to have formed that view because on that date OL announced that its net debt was approximately $1.5 billion. An Event of Default occurred on 31 January 2008 as OL failed to have consolidated net assets of at least $280,000,000 on 31 December 2007 and this could not be rectified within 30 days of notice from the Respondent of such failure. The Respondent ought to have formed that view and issued a notice if it had taken the steps set out in paragraphs 92B. 41 Paragraph 92D of the statement of claim alleges that, if the demand referred to in paragraph 92C was unsatisfied, the respondent would have (ought to have) applied to wind up OIN, OL and another company in the Octaviar Group by no later than 29 February 2008. 42 One aspect of the applicant's particularised case is that the documents identified in Tab 5 of Borrelli 1, and the documents identified in Tab 3 of Borrelli 2, would have been provided by the Octaviar Group to an investigative accountant on request - by reason of the respondent exercising the rights under, for example, s 283BB(c) of the Corporations Act and clauses 5.4(a), 6.2, and 6.6(a) of the Trust Deed - and that the investigative accountant would have provided copies of these documents to the respondent on a rolling basis as part of the investigative accountant's monitoring process. As I will explain below, these are the documents that were given to Mr Borrelli by the applicant's solicitors for the purpose of Mr Borrelli preparing Borrelli 1 and Borrelli 2. Mr Borrelli did not rely on all these documents. He made a selection from them. This selection represented the documents and information that Mr Borrelli said were relevant and necessary in forming his opinions.

The respondent's argument 43 In Joseph 3, Mr Joseph says that, if he were acting in the role of trustee for noteholders and had received a report containing the conclusions and recommendations in Borrelli 2, he would have followed the recommendations. Mr Joseph says that, in response to the recommendations, he would have taken steps to protect the interests of the noteholders. As I have noted at [31] above, those steps are then identified by reference to steps that Mr Joseph says he would have taken in August to October 2007 (paragraph 8), November 2007 (paragraphs 9 to 13), December (paragraphs 14 to 15), and January 2008 (paragraphs 16 to 24). 44 In relation to January 2008, Mr Joseph says (in paragraph 20) that, by mid-January 2008, he would have formed the view that the trustee needed to act quickly to protect the interests of noteholders. In that connection, he says that he would have taken the following steps. 45 First, he would have provided Borrelli 2 to lawyers to advise whether an Event of Default or Insolvency Event had occurred in light of the investigative accountant's findings. He says that he would have sought advice as to what steps were available to the trustee and whether the trustee had power under the Trust Deed to enforce the repayment of the notes (in light of the investigative accountant's recommendations about OL in January 2008). 46 Secondly, Mr Joseph says that he would have provided a copy of the documents obtained by the investigative accountant from the Octaviar Group (these documents are identified in Tab 3 of Borrelli 2) to the lawyers in order for them to determine whether any additional Events of Default had occurred, which may not have been included in the investigative accountant's report. The respondent says that this particular step is directed to the allegations made in paragraph 81 of the statement of claim. 47 Thirdly, Mr Joseph says that, assuming the lawyers had confirmed that an Event of Default or an Insolvency Event had occurred and entitled the trustee to call in the notes, he would have instructed the lawyers to draft a notice declaring the notes to be payable within two weeks, and served that notice on OIN immediately. The respondent says that this particular step is directed to certain of the allegations made in paragraph 92C of the statement of claim. 48 Fourthly, Mr Joseph says that, in circumstances where other creditors of the Octaviar Group were issuing notices of default and seeking repayment as early as 21 January 2008, he would have taken the steps (referred to above) by the end of January 2008. He says that as soon as the notice had been served, he would have provided the Australian Securities and Investments Commission (ASIC) with a copy of Borrelli 2 and informed ASIC that the notice had been served. 49 Finally, Mr Joseph says that he would have adopted the recommendation in Borrelli 2 that the trustee should move to wind up OL as early as February 2008. The respondent says that this particular step is directed to the allegations made in paragraph 92D of the statement of claim. 50 The respondent says, however, that these opinions are not supported by Borrelli 2 because, when properly understood, Borrelli 2 is a hindsight analysis based on investigations made and documents received over the entire period from August 2007 (presumably after the 15 August 2007 draft letter was notionally sent) to at least 27 February 2008. The structure of Borrelli 2 is such that it cannot be read as providing information, recommendations and documents on a periodic basis during that period. Also, Borrelli 2 is not structured so as to reveal what documents and information would have been received by an investigative accountant on a periodic basis throughout that period. 51 Further, the respondent submits, the Court should proceed on the basis that Borrelli 2 would not have been available to the respondent until March 2008. The respondent submits that Joseph 3 explicitly acknowledges that only one report was considered by Mr Joseph, not several reports given in respect of the time periods specifically addressed in that report. 52 Thus, the respondent submits, Mr Joseph could not have taken the steps he says he would have taken in August to October 2007, November 2007, December 2007 and in mid-January 2008 respectively, based on Borrelli 2. Borrelli 2 was not available to Mr Joseph and, as a single report given in respect of events spanning the period August 2007 to 27 February 2008, does not provide, and cannot provide, findings and recommendations relating to the discrete periods in respect of which Mr Joseph expresses opinions. 53 The respondent submits that, for these reasons, the opinions expressed in Joseph 3 lack a proper factual foundation. In these circumstances, the respondent asks, on what basis has Mr Joseph expressed the opinions in Joseph 3? The respondent says that, without identifying that basis, the Court is not in a position to judge whether the opinions expressed in Joseph 3 are based on Mr Joseph's specialised knowledge. 54 The respondent developed this submission further by referring to paragraphs 21 to 23 of Joseph 3. In these paragraphs, Mr Joseph opines on the steps he would have taken in January 2008. The respondent points to the fact that some of the documents relied upon by Mr Borrelli - which, on the applicant's case theory, would have been passed on to the respondent - post-date that time. 55 With regard to Borrelli 3, the respondent submits that certain opinions expressed by Mr Borrelli are not based on his specialised knowledge and amount to no more than speculation on factual matters, which factual matters are, theoretically, capable of proof but cannot be proved by Mr Borrelli's say-so. In this connection, the respondent points to statements by Mr Borrelli in Borrelli 3 as to how and when documents would likely have been provided to him: paragraph 17, third sentence; paragraph 21, first sentence; and paragraph 44, first sentence. The respondent points to statements by Mr Borrelli as to the timing of his monitoring and subsequent reporting: paragraph 29, first sentence; paragraph 30; and paragraph 48. Finally in this connection, the respondent points to assumptions made by Mr Borrelli in paragraph 39 that the directors, managers and employees in the Octaviar Group would act reasonably and provide the necessary assistance to the investigative accountant as quickly as possible; that the investigative accountant would have sufficient expertise and resources to undertake the required work; and that the respondent would review and consider the investigative accountant's findings and recommendations efficiently and act in accordance with them swiftly. The respondent challenges the viability of those assumptions. 56 Finally, the respondent submits that Joseph 4 does not overcome the difficulties said to exist in Joseph 3 because there remains, at least in part, some disconformity between Joseph 4 and Borrelli 2.

The applicant's response 57 The applicant submits that the disconformity argument is based on a misreading of Joseph 3 and Borrelli 2. 58 Starting with Borrelli 2, the applicant says that the assumption on which Mr Borrelli's notional engagement proceeds is that he will be preparing a report at the end of each month to be given to the respondent. This is clear from the letter of instructions annexed to Borrelli 2. However, those instructions also ask Mr Borrelli to prepare one report. The applicant explained this by saying that, as a matter of fact, Mr Borrelli was not required to take (what the applicant says) is the unnecessary and inefficient step of dividing his report (Borrelli 2) into monthly reports. The applicant argues that although Borrelli 2 is, in fact, one report, it envisages monthly reporting, on a progressive basis, of the information obtained by the investigative accountant carrying out his assignment. 59 The applicant submits that, on a proper reading of Joseph 3, this is precisely how Mr Joseph understood Borrelli 2; Mr Joseph assumed that Mr Borrelli was reporting monthly and that, in Joseph 3, he dealt with Borrelli 2 in that way. The applicant also submits that it is apparent that this is the way in which Mr Borrelli prepared Borrelli 2 and intended it to be understood. The applicant submits that to read Joseph 3 otherwise would be to give that report an absurd interpretation. It says that, when Borrelli 2 (in the context of the instructions provided to Mr Borrelli) and Joseph 3 are read together, it can be seen that both reports reveal a common assumption of progressive reporting. Thus, the applicant submits, there is no disconformity between Joseph 3 and Borrelli 2. Further, the applicant submits that, to the extent that the disconformity argument is accepted by the Court, it should be seen as no more than an objection to the form of Borrelli 2 and Joseph 3, which can be overcome readily. 60 Here, there applicant calls in aid Joseph 4 and Borrelli 3. The applicant submits that Joseph 4 establishes the way in which Mr Joseph read Borrelli 2, and Borrelli 3 establishes the way in which Mr Borrelli assumed Borrelli 2 would be read. In other words, Joseph 4 and Borrelli 3 make explicit that which is implicit in Joseph 3 and Borrelli 2 when read together and properly understood. However, the applicant says that if the Court comes to the view that Borrelli 2 and Joseph 3 cannot be read together, Borrelli 3 and Joseph 4 "repair" the deficiency of form. The applicant submits that the substance of Borrelli 2 and Joseph 3 remains the same. 61 Relatedly, the applicant submits that, despite the objection that has been made in this regard, the respondent's own experts engage with Joseph 1, Joseph 2 and Joseph 3, and Borrelli 1 and Borrelli 2, including in relation to the opinions expressed by Mr Joseph and Mr Borrelli on the basis of periodic (monthly) reporting.

Consideration and conclusion 62 In considering the respondent's objection and the applicant's responses, I bear in mind that I am ruling on admissibility, not making final findings. I therefore proceed with some caution in the way in which I express these reasons. I will express them as economically as I can. 63 For my own part, the form of Borrelli 2 is such that I have some difficulty in reading it in the way in which the applicant argues. That said, I do not reject the possibility that it, or at least some parts of it, can be read in that way. In the course of oral argument, the applicant certainly pointed to some matters not otherwise apparent to me, which support that view. I also wish to make perfectly clear that I make no comment whatsoever on how Mr Joseph says in Joseph 4 he read Borrelli 2 or how Mr Borrelli says in Borrelli 3 he understood the task he was asked to undertake in providing Borrelli 2. 64 In light of Borrelli 3 and Joseph 4, I would not reject Joseph 3 on the basis of the disconformity argument. I would grant leave to the applicant to read and rely on Borrelli 3 and Joseph 4 as supplementing Borrelli 2 and Joseph 3. I accept the applicant's submission that Borrelli 3 and Joseph 4 are in the nature of "repairing" reports. 65 As to the respondent's objection to certain parts of Borrelli 3, I would not reject: paragraph 29, first sentence; paragraph 30; and paragraph 48 concerning Mr Borrelli's statements as to the timing of his monitoring and subsequent reporting. I am satisfied that these opinions as to hypothetical events are within Mr Borrelli's expertise and experience; paragraph 39 concerning the assumptions that Mr Borrelli has made. I am satisfied that these assumptions represent facts that are open to be found, subject to any qualifying evidence to be adduced by the respondent; and paragraph 17, third sentence; paragraph 21, first sentence; and paragraph 44, first sentence concerning Mr Borrelli's statements as to how and when documents would likely have been provided to him. I accept that these statements inherently involve a degree of speculation. However, I am satisfied that Mr Borrelli's expertise and experience as an investigative accountant provide a basis for his appreciation of the kinds of documents involved and the likelihood of how and when these kinds of documents would be provided to an investigative accountant by a group the size of the Octaviar Group carrying on the businesses concerned. 66 I accept that it is open to argument that there may remain aspects of disconformity between Joseph 3 read with Joseph 4 and Borrelli 2 read with Borrelli 3. This is a matter that can be taken up by the respondent and no doubt advanced in cross-examination, if need be. For present purposes, I am not satisfied that such aspects of disconformity that might be pointed to have the consequence that Joseph 3 or, for that matter Joseph 4, should be rejected. I see this as a matter of weight, not admissibility.

The respondent's argument 67 The documents which are referred to in Borrelli 1 and Borrelli 2 as documents that would have been provided to the investigative accountant by the Octaviar Group at the relevant times find their ultimate source, for the purposes of Borrelli 1 and Borrelli 2, in the production of documents in answer to subpoenas issued by the applicant to various third parties. 68 In Borrelli 1, Mr Borrelli (as the notional investigative accountant) recommended that a monitoring process be initiated by, amongst other things, requesting information and assistance from the directors and officers of the Octaviar Group. Mr Borrelli recommended that the 15 August 2007 draft letter be sent for this purpose. 69 At the stage of preparing Borrelli 2, Mr Borrelli was provided with a large number of documents by the applicant's solicitors. Mr Borrelli says that he did not review and consider all these documents. Rather, he considered the documents which he considered relevant and necessary in forming his opinions in Borrelli 2. In short, he made a selection from the documents he had been given, using his expertise. The respondent does not criticise this step, as such. The focus of the inadequate proof argument is the larger body of documents with which Mr Borrelli was provided. The respondent says that the applicant must establish on the balance of probabilities that the larger body of documents given to Mr Borrelli for the purposes of preparing (here) Borrelli 2 would be substantially similar to the body of documents that would have been provided to an investigative accountant upon request at the relevant time. More specifically, the respondent says that, following the recommendations in Borrelli 1, the applicant must prove that the documents given to Mr Borrelli for the purposes of preparing Borrelli 2 would be substantially similar to the body of documents that would have been provided by the Octaviar Group in response to the 15 August 2007 draft letter. According to the respondent, only then can it be said that the selection made by Mr Borrelli simulates, arguably, the documents that would have been before an investigative account in the counterfactual that is raised by the applicant. 70 A similar argument is raised in respect of the documents provided to Mr Borrelli for the purposes of preparing Borrelli 1. Mr Borrelli made a selection from these documents on which he based his recommendations in Borrelli 1. 71 As I have noted, the ultimate source of the documents in Borrelli 1 and Borrelli 2 is the production of documents in answer to subpoenas. One of these subpoenas was addressed to Octaviar Administration Pty Ltd (in liquidation) (OA). It sought, amongst other things, the production of documents referred to in a report made by Mr Borrelli on 14 October 2012 for the purpose of proceedings in the Supreme Court of Queensland. Just over 10,000 documents were produced in answer to that subpoena. These documents were reviewed by the applicant's solicitors for relevance and those documents that were considered to be relevant by the solicitors were briefed to Mr Borrelli for the purpose of making his reports in this proceeding. In other words, there was a sifting process. 72 It is necessary at this point to refer to certain historical matters. Mr Fletcher (see [9] above) is one of the liquidators of OA and OL. Mr Fletcher caused his then lawyers to brief Mr Borrelli in June 2011 to prepare a report on the solvency of OL and OA. The documents sought in the subpoena addressed to OA in this proceeding are the documents that were briefed to Mr Borrelli in June 2011 to prepare his solvency report (the Borrelli briefing documents). In his affidavit, Mr Fletcher explains how the Borrelli briefing documents were collated. Apart from the records of OL and OA (amounting to some 4,000 boxes of documents), the collation involved obtaining documents from third parties, including the audit file maintained by the Octaviar Group's auditors, documents from various firms of solicitors, and other sources. The collation of documents was a large exercise. The liquidators incurred costs of some $10 million in undertaking this exercise which took 1.5 years and involved a team of approximately 11 accountants and consultants and a number of solicitors from one law firm. 73 The documents provided to Mr Borrelli by the applicant's solicitors for the purposes of Borrelli 1 and Borrelli 2 have been provided to the respondent's solicitors and analysed. By far, most of the documents provided to Mr Borrelli were those produced in answer to the subpoena addressed to OA (83% of the documents in Borrelli 1 and 92% of the documents in Borrelli 2). As I have noted, in the liquidators' hands, these documents came from a variety of sources. That does not mean, however, that the documents themselves did not come originally from the Octaviar Group or that the documents are not documents or copies of documents that the Octaviar Group itself would have held at relevant times. I should add that, generally speaking, the source of all the documents in the liquidators' hands can be identified by codes that were assigned to them at the time of collation. 74 The point of present significance is that the respondent submits that Borrelli 1, and Borrelli 2 in particular, are fatally flawed because the applicant cannot establish that the documents given to Mr Borrelli via the applicant's solicitors, through the production made pursuant to the subpoenas that were issued, are the documents that, at the relevant time, the investigative accountant would have obtained from the Octaviar Group. The respondent submits that, because that fact cannot be established, the factual foundation on which Borrelli 1 and Borrelli 2 are based cannot be established. 75 Here, the respondent makes two points. First, the respondent says that Mr Borrelli can give evidence about what documents and information he would have asked for, but he cannot give evidence about what documents or information he would, in fact, have been given. 76 Secondly, the respondent places great significance on the collation exercise undertaken by the liquidators of the Octaviar Group. Ultimately, the respondent says that the documents given to Mr Borrelli for the purposes of making Borrelli 1 and Borrelli 2 do not simulate the documents that the investigative accountant would have obtained at the relevant time. Thus, the collation undertaken by the liquidators for the purpose of Mr Borrelli providing a solvency report in 2012 cannot establish the relevant underpinning facts. 77 Relatedly, the respondent submits that if the body of documents provided to Mr Borrelli does not simulate the body of documents that would have been provided to the investigative accountant at the relevant time, the Court could never be satisfied that the selection of documents made by Mr Borrelli for the purposes of Borrelli 1 and Borrelli 2 simulates the selection of documents that an investigative accountant would have made for the purpose of providing information and giving recommendations to the respondent, at the relevant time. The respondent encapsulated the issue in the following way: Mr Borrelli's opinions as to the selection of the relevant and necessary documents for his conclusions can only function as a proxy for what an investigative accountant would have selected if the documents given to Mr Borrelli by the applicant's solicitors accurately reflect what an investigative accountant would have got from the Octaviar Group at the relevant time. According to the respondent, this has the consequence that Mr Borrelli's opinions as to the information and recommendations he says he would have given to the respondent cannot be tested. 78 To illustrate his argument, the respondent says that, in relation to the documents produced to Mr Borrelli for the purposes of making Borrelli 1, the documents cover a date range from 30 June 2003 to 9 September 2008, including 56 documents dated after 31 January 2008. The documents bear codes which indicate that a large number of them came from sources other than the records of the Octaviar Group. As to the documents selected by Mr Borrelli for Borrelli 1, the documents cover a date range from 1 January 2005 to 12 February 2008, including two documents dated after 31 January 2008. The documents bear codes which indicate that 15 of them came from sources other than the Octaviar Group. The sources of these documents can, however, be determined. 79 In relation to the documents produced to Mr Borrelli for the purposes of making Borrelli 2, the documents cover a date range from 1 April 2003 to 9 September 2008, including 379 documents dated after 31 January 2008. The documents bear codes which indicate that a large number of them came from sources other than the records of the Octaviar Group. As to the documents selected by Mr Borrelli for Borrelli 2, the documents cover a date range from 1 December 2005 to 21 April 2008, including 17 documents dated after 31 January 2008. The documents bear codes which indicate that 37 of them came from sources other than the records of the Octaviar Group. Once again, the sources of these documents can be determined. 80 The respondent submits that, properly considered, Borrelli 1 and Borrelli 2 are exercises in hindsight rather than an attempt to make a real time assessment of what an investigative accountant could reasonably have discovered and reported to the respondent as to the financial position of the Octaviar Group by the end of January 2008. The respondent submits that Borrelli 1 and Borrelli 2 are hypothetical reconstructions of what perfect insight and full access to all relevant information could have revealed as to the financial state of the Octaviar Group. The respondent says that this is apparent from the manner in which documents were briefed to Mr Borrelli and from the form of Borrelli 1 and Borrelli 2. In written submissions, the respondent referred to a number of findings by Mr Borrelli in Borrelli 2 which, the respondent says, could only have been arrived at by hindsight. He says that the findings and recommendations in Borrelli 1 and Borrelli 2 have been arrived at by a process of reverse engineering and demonstrate the artificial and contrived nature of the case that the applicant seeks to make.

The applicant's response 81 In oral submissions, the applicant made a number of overarching submissions which include the submission that the Court must bear in mind that one purpose of the tender of the expert reports is to address the hypothetical exercise that is required to determine what documents and information the Octaviar Group had at the relevant time that would have been available to the respondent properly discharging his duties as trustee for noteholders. The applicant submits that, in undertaking that exercise, it must be remembered that in 2007 to 2008 the Octaviar Group was a functioning group of companies that was subject to the obligations of disclosure which I have briefly noted at [21]-[24] above. The opinions expressed in Borrelli 1 and Borrelli 2 are opinions as to what an investigative accountant would have recommended to the respondent in those circumstances at that time, had the respondent, in fact, taken the step of appointing an investigative accountant. Further, and in any event, the applicant notes that the tender of Borrelli 1 and Borrelli 2 serves a dual purpose, which includes the purpose of establishing the actual financial circumstances of the Octaviar Group at the relevant time. 82 The applicant submits that in Borrelli 1 and Borrelli 2, Mr Borrelli has specified the documents on which his opinions are based. These documents are listed with corresponding paragraph references in the reports relating to the opinions in question. Mr Borrelli has also identified, with precision, the larger body of documents with which he was provided. The applicant submits that nothing in the form of Borrelli 1 and Borrelli 2 makes it impossible or even difficult for the Court to identify the information and documents on which he relied or to conclude, by reference to that material, that his findings and opinions are based substantially on his specialised knowledge as an investigative accountant. 83 The applicant submits that the admissibility of Borrelli 1 and Borrelli 2 does not depend on those reports establishing that the documents provided to Mr Borrelli represent the bulk of the documents that would have been supplied to an investigative accountant in July 2007 to January 2008. The applicant submits that the respondent's contrary submission should be rejected because it is tantamount to the Court determining on a voir dire what is a live issue in the proceeding, namely the body of documents that would have been available to an investigative accountant in the counterfactual. 84 The applicant argues that, in any event, in terms of the admissibility of Borrelli 1 and Borrelli 2, the applicant does not need to show that an investigative accountant would have received the documents on which Mr Borrelli has placed no reliance in forming his opinions as expressed in those reports. The applicant submits that the respondent's contrary submission is a "manufactured technicality". 85 In this connection, the applicant says that what is necessary for Mr Borrelli's opinions to be relevant and admissible is that the applicant establish that it is reasonably open for the Court to find, in due course, that, if an investigative accountant had been appointed by the respondent in July 2007, the body of documents supplied to the investigative accountant would have substantially included the documents and information actually relied upon by Mr Borrelli or that the information contained in the documents would have been otherwise conveyed in substance to Mr Borrelli (for example, through meetings and discussions with management in the Octaviar Group). The applicant also accepts that it may be necessary for it to establish that it is reasonably open for the Court to find that the relevant documents and information are likely to have been supplied to an investigative accountant in sufficient time for the investigative accountant to form by January 2008 the conclusions expressed by Mr Borrelli. Thus, the applicant submits, the Court can admit Borrelli 1 and Borrelli 2 under s 57(1) of the Evidence Act if the Court is satisfied that it is reasonably open to make those findings or subject to evidence being admitted at a later stage of the proceeding that will make it reasonably open to make those findings. 86 In support of these submissions, the applicant points to (amongst other things) the obligations of OIN to provide information to the respondent; Mr Joseph's evidence in Joseph 1 that the nature of the Octaviar Group's business was such that a trustee would require monthly cash flows, management accounts and information surrounding the sale and purchase of assets; Mr Borrelli's evidence that, as an investigative accountant, he would have met and discussed the financial and operational affairs of the Octaviar Group with relevant directors and officers on (at least) a monthly basis and adjusted that timing when specific aspects of his monitoring required it; and the evidence that other creditors of the Octaviar Group in fact implemented such monitoring at the relevant time. The applicant also submits that the tender of the documents upon which Mr Borrelli actually relied in Borrelli 1 and Borrelli 2, taken with these matters, will make available the inference that, considered as a whole, they are documents that would have been available to an investigative accountant and taken into account at the relevant time, and that the opinions in Borrelli 1 and Borrelli 2 are reasonably based on those documents. 87 The applicant also submits that, on considering the admissibility of Borrelli 1 and Borrelli 2, the Court should also take into account the further explanations provided in Borrelli 3. 88 The applicant submits that a conclusion that one or more of the documents (on which Mr Borrelli actually relied) would not have been available to an investigative accountant at the relevant time would not, of itself, mean that the whole of either Borrelli 1 or Borrelli 2 would be inadmissible. The applicant submits that such a finding should properly go to the weight to be attributed to the opinions expressed in those reports. In any event, the applicant points to a number of issues concerning the respondent's analysis of the documents summarised at [78]-[79] above. The applicant also submits in this connection that the codes assigned to the documents in question are not necessarily a good indicator of the origin of some of the documents. The applicant provided illustrative examples. As to the "real time" availability of documents, the applicant points to the fact that an investigative accountant appointed in August 2007 (the counterfactual here) would have had the advantage, after an initial briefing, of receiving and reviewing new information as it became available from the Octaviar Group and with the advantage of accumulating knowledge gained through that process. 89 The applicant challenges the respondent's submission that Borrelli 2 is a hindsight analysis. It argues that there is "a healthy element of hypocrisy" in the respondent's submission when the respondent himself alleged in other proceedings that, had he not been misled by OL's directors, he would have appointed an investigative accountant to take the exact same steps that Borrelli 2 recommends to wind up OIN and other companies in the Octaviar Group.

Consideration and conclusion 90 In considering the respondent's objection and the applicant's responses, I bear in mind, once again, that I am ruling on admissibility, not making final findings. I therefore proceed with the same caution I expressed at [62] above. 91 It is necessary for me to make some preliminary observations. 92 First, when s 55(1) of the Evidence Act expresses the fundamental rule of relevance, it speaks in terms of evidence that, if it were to be accepted, could rationally affect (directly or indirectly) the assessment of the probability of the existence of a fact in issue in the proceeding. 93 Secondly, and relatedly, I bear in mind that, in this hearing, the expert witnesses will be giving their oral evidence concurrently, following the making of a joint report setting out the points of disagreement between them and the reasons for that disagreement. For various reasons which I need not explain here, that report will not be provided until 22 August 2016. Obviously, I do not have the benefit of such a report at the present time. Thus, I do not have a ready means of determining what disagreements exist between the experts in terms of detail or the significance of that detail to the overall case opened by the applicant. Also, the applicant's case will not be closed until after the concurrent evidence is given and the applicant's experts are cross-examined. 94 I have come to the view that, for the purpose of determining the admissibility of Borrelli 1 and Borrelli 2, I need not determine now, once and for all, the fundamental question that divides the parties on the inadequate proof argument, namely the question of whether (as the respondent contends) the acceptance of the opinions expressed in Borrelli 1 and Borrelli 2 depends on the applicant establishing that the documents provided to Mr Borrelli, in the way I have described above, are the documents, or substantially represent the documents, that an investigative accountant would have obtained from the Octaviar Group at the relevant time. I am satisfied that it is open to the applicant to argue that all it needs to establish is that the documents actually relied upon by Mr Borrelli are the documents, or substantially represent the documents, or perhaps the information, that an investigative accountant would have obtained from the Octaviar Group at the relevant time, and that those documents or that information would have been available to the investigative accountant in a timely manner. This, in my view, provides a sufficient basis to accept the tender of Borrelli 1 and Borrelli 2 now. The fundamental question will remain open to be argued and, depending on how that question is determined, may affect the weight I can place on Mr Borrelli's opinions. It will be up to the applicant to make its own forensic decisions as to what documents it should tender in that regard. 95 I also accept that inferences may be available, based on the documents themselves or taken with other evidence given by Mr Borrelli as to the steps that an investigative accountant, in the circumstances posed by the applicant's counterfactual, would have taken, and Mr Joseph's evidence as to the steps that would or should have been undertaken by a trustee in the position of the respondent. Whether such inferences can and should be translated into findings of fact, is a matter to be determined on all the evidence. The complexity of this case is such that I do not think that it would be a safe or just course to forecast what those findings might ultimately be simply on the basis of a ruling on admissibility, no matter how important that ruling might be. 96 I draw some comfort from the general nature of the documents on which Mr Borrelli says he relied, although I note that, based on some illustrations provided by the respondent, some of the documents may well be open to challenge, particularly as to whether they are documents which answer the description given to them by the applicant. The extent to which such challenge might, in the event, erode the opinions in Borrelli 1 or Borrelli 2, or the consequent opinions expressed by Mr Joseph, remains to be seen. It is sufficient for me to say that I am not satisfied at the time of making this ruling that such a challenge is of such a magnitude that it strikes at the wholesale rejection of Borrelli 1 or Borrelli 2. 97 Put another way, I am not persuaded that the respondent's challenge shows that, at the time of making this ruling, I can be satisfied that Mr Borrelli's opinions in Borrelli 1 and Borrelli 2 are incapable of being accepted because of a want of foundational proof. 98 In expressing my reasons in this way, I wish to make it clear that I am cognisant of the fact that the respondent has raised a number of important matters which, if not striking at the admissibility of Borrelli 1 and Borrelli 2, may well have significance as to the weight that should be given to that evidence, and its ultimate acceptance. However, there is much evidence to be heard and the points raised by the respondent will no doubt be further explored and developed in the course of that evidence and in final submissions. These points no doubt will include the question of whether Borrelli 2 is, in truth, a hindsight analysis of the kind described by the respondent. 99 I would add that, as I have noted, Borrelli 1 and Borrelli 2 are tendered for a dual purpose which includes establishing the actual financial circumstances of the Octaviar Group at the relevant time. The respondent does not argue that Borrelli 1 and Borrelli 2 are not relevant and admissible for that purpose. 100 In these circumstances, I would not reject Borrelli 1 or Borrelli 2 on the basis of the inadequate proof argument.

The respondent's argument 101 The respondent advances the alternative submission that Borrelli 1 and Borrelli 2 should be rejected on discretionary grounds under s 135 of the Evidence Act. In oral submissions, the respondent made clear that, in seeking discretionary exclusion, he does not advance unfair prejudice as a ground. Rather, he relies on the other bases for discretionary rejection under s 135 of the Evidence Act, namely the danger that the evidence might be misleading or confusing or cause or result in an undue waste of time. 102 In aid of this submission, the respondent repeats substantial parts of his attack that Borrelli 1 and Borrelli 2 should be rejected for want of foundational proof. The respondent submits that, in the end result, I should be satisfied, now, that the probative value of Borrelli 1 and Borrelli 2 is low. Proceeding from that premise, the respondent submits that Borrelli 1 and Borrelli 2 are clearly very substantial documents that, if admitted, will occupy a substantial amount of Court time. The respondent submits that, given the fundamental flaws which infect the reports and the deficiencies of proof of the crucial facts on which their relevance depends, there is a danger that their admission into evidence will cause an undue waste of time. In oral submissions, the respondent also advanced the argument that the disconformity between Borrelli 2 and Joseph 3 is such that Borrelli 2 is misleading or confusing. The respondent submits that each danger substantially outweighs the probative value of the reports in question.

The applicant's response 103 The applicant submits that the test under s 135 of the Evidence Act is a demanding test and that the respondent has not come close to establishing a basis for discretionary exclusion. The applicant submits that the fact that Mr Borrelli's evidence might occupy a substantial amount of court time does not indicate a danger that his evidence might be an undue waste of time.

Consideration and conclusion 104 I am not persuaded, at the time of making this ruling, that either Borrelli 1 or Borrelli 2 are of low probative value. Therefore, I am not satisfied that the premise for the respondent's submissions on discretionary exclusion is established. 105 I am not satisfied that Borrelli 1 and Borrelli 2 have the character of evidence that is misleading or confusing, although I accept that the way in which the parties say I should read and treat those reports is a matter of significant debate between them. 106 No doubt, rejection of Borrelli 1 and Borrelli 2 would likely truncate the hearing of this proceeding. But this alone is not a ground for discretionary rejection. 107 In the circumstances, I am not satisfied that the respondent has established a basis for the rejection of Borrelli 1 and Borrelli 2 under s 135 of the Evidence Act.

Specific objections 108 By the time of oral submissions, the respondent advanced one specific objection to Joseph 1, namely that paragraph 57 thereof amounts to a comment, not evidence of a fact. The applicant has indicated that it does not press the first three sentences of paragraph 57. It does, however, press the balance of the paragraph. I am satisfied that the balance of paragraph 57 is admissible. It is evidence of how a trustee in the position of the respondent ought reasonably to have acted in light of certain statements said to have been made by ASIC to the respondent. 109 I should note that the respondent objects to the second last sentence in paragraph 64 of Joseph 1. I have been informed that this sentence is not pressed by the applicant. 110 The respondent contends that there are specific paragraphs of Borrelli 2 that represent opinions exceeding Mr Borrelli's specialised knowledge and, hence, constitute evidence that does not comply with s 79(1) of the Evidence Act. The respondent identifies three categories of evidence in this regard. 111 First, the respondent submits that paragraphs 79, 80 and 84 of Borrelli 2 should be rejected on the basis that Mr Borrelli is simply seeking to predict the behaviour of particular commercial actors in a given set of circumstances. 112 In paragraph 80, Mr Borrelli expresses the opinion that the Octaviar Group was indebted to creditors in the amount of $1.109 billion that was due and owing by 31 January 2008. This opinion is based on Mr Borrelli's analysis in paragraph 79 of Borrelli 2 of what he regarded to be the material liabilities of OIN and the Guarantors by reference to eight creditors. In undertaking that analysis, Mr Borrelli makes observations about what, for example, National Australia Bank Limited might do in relation to a facility it had granted. Mr Borrelli provides his reasons for making his observations. The objection to paragraph 84 proceeds on similar lines. 113 I do not think that Mr Borrelli's challenged statements stand as bare predictions of future events. Rather, the statements are evidence of how an investigative accountant would understand events at the time and interpret those events for the purpose of advising and providing recommendations to the respondent, had the respondent appointed an investigative accountant. If there is a contrary interpretation, or if it is to be said that Mr Borrelli's expressed concerns are baseless, that position can be put to him. I am not persuaded that Mr Borrelli has exceeded his expertise, as the respondent submits. 114 Secondly, the respondent submits that Mr Borrelli has expressed legal conclusions in paragraphs 23 to 29 and paragraphs 114 to 128 of Borrelli 2. In these paragraphs, Mr Borrelli expresses his conclusions that there existed an Event of Default and/or breaches of the Trust Deed in or around or by January 2008. Mr Borrelli gives reasons for these conclusions. Whilst, at one level, these conclusion might represent legal conclusions, in the context in which they are given they can stand no higher than opinions formed or conclusions arrived at by an investigative accountant for the purpose of advising and making recommendations to the respondent. As other parts of Borrelli 2 make clear, Mr Borrelli's recommendation to the respondent would have been to obtain confirmation from legal advisers that the matters he had identified as Events of Default or breaches of trust bear that legal character. Read in context, the challenged conclusions are admissible and stand as an investigative accountant's conclusions for further action by the respondent, including the obtaining of legal advice. 115 Thirdly, the respondent advances similar submissions in relation to findings made and conclusions reached by Mr Borrelli in paragraphs 20.6, 103 to 108 and Tab 8 of Borrelli 2 in relation to the so-called PIF transaction. In my view, these paragraphs are tendered to represent the kind of investigation that an investigating accountant would have undertaken at the relevant time in relation to that transaction. I understand that this will be challenged by the respondent. That, of course, does not render these parts of Borrelli 2 inadmissible. As with the second category, Mr Borrelli's conclusions are admissible and stand as an investigative accountant's conclusions for further action by the respondent, including the obtaining of legal advice.

Disposition 116 For these reasons, I will: admit Joseph 1, other than the first three sentences of paragraph 57 and the second last sentence of paragraph 64; admit Joseph 2; admit Joseph 3; admit Borrelli 1, subject to the tender of the documents which Mr Borrelli says in paragraph 23 are relevant and necessary in forming his opinions; and admit Borrelli 2, subject to the tender of the documents which Mr Borrelli says in paragraph 16 are relevant and necessary in forming his opinions. 117 I will grant leave to the applicant to rely on Borrelli 3 and Joseph 4 and admit Borrelli 3 and Joseph 4. I certify that the preceding one hundred and seventeen (117) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Yates.