Oztech Pty Ltd v Public Trustee of Queensland

BACKGROUND 7 The background to the proceeding and the involvement of numerous entities in relevant events are described in the Reasons for Judgment at [1]-[13]. We shall refer to only so much of the background as is necessary to provide context to the questions raised in this appeal. 8 The principal proceeding was a representative proceeding commenced under Pt IVA of the Federal Court of Australia Act 1976 (Cth). The appellant was a holder of unsecured notes issued under the arrangements to which we shall refer. The respondent was the trustee for the noteholders. 9 Between November 2006 and March 2007, a company now called Octaviar Investments Notes Limited (in liq) (OIN) issued unsecured notes with a total face value of about $348.6 million. OIN was at all relevant times a company within the Octaviar Group, the head entity of which was Octaviar Limited (receivers and managers appointed) (in liq) (OL). In November 2006, OL executed a deed poll in favour of the respondent as trustee of the noteholders by which it guaranteed OIN's payment obligations under the notes. 10 By about May - June 2007, OL had identified a cash deficiency of more than $200 million. OL announced that it proposed to sell an asset, being a part interest in a tourism business known as Stella, in the first half of 2007. However, by 18 May 2007, it had not sold an interest in Stella. OL had also attempted to obtain a $450 million commercial banking facility but had been unable to do so.

The Fortress facility 11 OL required bridging finance and on 1 June 2007 a related entity (referred to as OC in the Reasons for Judgment) took a facility with a non-bank lender, Fortress Credit Corporation (Australia) II Pty Limited (the Fortress facility). The Fortress facility was repayable on 1 September 2007 and was secured by fixed and floating charges given by OL, OC and a third Octaviar entity (referred to as OFS in the Reasons for Judgment) over nearly all of the non Stella assets in the Octaviar Group (Fortress charges). 12 The Fortress facility is of particular significance to the alternative cause of action which the appellant says it was prevented from pursuing as we shall explain below. OL and OFS were Guarantors of OIN's obligations under the trust deed (the OIN Trust Deed) which attached to the terms of issue of the notes. 13 OL and OFS were required under s 283CC of the Corporations Act 2001 (Cth) to notify the respondent of the Fortress charges. They failed to do so. 14 The Fortress charges were lodged with the Australian Securities and Investments Commission (ASIC). On 6 June 2007 the respondent received an automatic notification of their lodgement by email (the 6 June notification). The 6 June notification did not contain particulars of the Fortress charges. The respondent's practice was to request a copy of any document referred to in such a notification. For reasons which were not explained by the respondent, no documents were requested following the 6 June notification. The relevant officers within the respondent's office remained unaware of the Fortress facility and the Fortress charges until much later.

The financial position of the Octaviar Group 15 On 8 June 2007, the respondent received a report from PricewaterhouseCoopers (PwC) which stated that based on the information on hand, it was unable to form an opinion as to whether OL would have the ability to repay the notes on maturity. PwC had been provided with a financial statement and assumptions by OL, but these documents were provided prior to the Fortress facility being entered into and did not show the Fortress facility. 16 On 13 June 2007, OL announced to the Australian Stock Exchange (ASX) that it did not intend to sell an interest in Stella until after the first quarter of the 2008 financial year (after 30 September 2007). 17 By early July 2007, as we have said above, OL was unable to obtain a commercial banking facility of $450 million to meet its forecast cash flow deficiencies. As a result of the deferral of the Stella sale and OL's inability to obtain a commercial banking facility, on 17 August 2007 the Fortress facility was amended. The date for repayment was extended to 1 December 2007. 18 On 21 August 2007, OL released its annual report for the 2007 financial year. The OL balance sheet recorded an increase in current borrowings. The notes to the accounts explained this was primarily attributable to "bank loans" of $254.34 million secured by a fixed and floating charge over the assets of the Octaviar Group. This was a reference to the Fortress facility, though not expressly stated. The relevant officers of the respondent reviewed the 2007 annual report but did not notice the increase in current borrowings. 19 On 28 November 2007, OL announced to the ASX that it was not going to sell an interest in Stella at all. OL did not have the means of repaying the Fortress facility due to be repaid on 1 December 2007. However, on 30 November 2007, the Fortress facility was again amended. The amendments required that $100 million be repaid immediately, with the remaining $150 million deferred until 29 February 2008. 20 The Octaviar Group did not have $100 million in cash on 30 November 2007. To meet the partial repayment of $100 million, the officers of OL caused a related entity, referred to as MFS IN in the Reasons for Judgment, to borrow $147.5 million from the Royal Bank of Scotland and transfer $130 million of those funds to Octaviar Administration Pty Ltd (in liq) (OA). MFS IN was the responsible entity for a managed investment scheme called the Premium Income Fund (PIF). OA transferred $103 million to Fortress to repay the $100 million and pay an "extension fee" of $3 million. This transaction is referred to in the Reasons for Judgment as the PIF Transaction. 21 It was common ground at the hearing that the PIF Transaction was fraudulent. The respondent did not know of the PIF Transaction or appreciate its fraudulent character until much later. 22 The Octaviar Group collapsed in January 2008. On 18 January 2008, OL announced to the ASX that it proposed to seek to raise $550 million through a renounceable entitlement offer of shares in Stella. The announcement was received badly by the market and subsequently on 4 June 2008 the respondent commenced proceedings in the Supreme Court of Queensland to wind up, inter alia, OL, OIN and OFS.

THE CASE BELOW NOT PERMITTED TO BE ADVANCED 23 In its Outline of Submissions, the appellant describes the case theory it was not permitted to advance at the hearing, as follows: The simple case theory advanced by the appellant below was that the Public Trustee breached its duty to exercise reasonable diligence and or reasonable care by failing, at any time prior to the collapse of the Octaviar Group, to identify the Fortress Facility or the Fortress charges. The Public Trustee failed to do so, because the Public Trust Office: (a) apparently did not follow its own usual practice with respect to the 6 June Notification, i.e., to read the notifications, request a copy of the underlying charges, and bring the documents to the attention of the appropriate officers; and or (b) failed to consider properly the indication in the 2007 Annual Report that OL had created a fixed and floating charge to secure over $250 million in current debt, of which it had not notified the Public Trustee as required under s 283CC of the Act. The appellant developed a counterfactual for the purposes of causation, in summary, as follows. Any reasonably diligent trustee who learned of the Fortress Facility would have been concerned as to why the Octaviar Group needed to borrow from Fortress and would have asked OL how the debt would be repaid. This is particularly so given that the Fortress Facility was initially a short term loan pending the part sale of Stella, and on 13 June 2007 it had been announced that the Stella sale had been delayed until 30 September 2007, which was after the maturity date of the Fortress Facility. The trial judge found that in such circumstances OL would have responded that the Stella sale was still on track, and that the facility would be extended. Accepting that, a diligent trustee would still have been concerned to monitor whether the extension of the facility would proceed and how the debt would be repaid. The Public Trustee would therefore have been informed at around 17 August 2007 that the facility had been extended and now fell due on 1 December 2007, and it was still planned to repay it from the Stella sale proceeds. When, on 28 November 2007, it was announced that an interest in Stella was not going to be sold at all, this would have caused the Public Trustee some alarm. Any diligent trustee would have been asking, at about this time, what was being done to ensure that the Fortress Facility would be repaid by the due date. When the Fortress Facility was partly repaid and partly extended on 30 November 2007, the Public Trustee, acting with reasonable care, would have wanted to know where the money had come from to repay Fortress. When the answer came back that the funds had come from a related entity that was a responsible entity for a managed investment scheme, that would naturally have raised alarm bells. Any trustee would have wanted to ensure that the transaction was properly authorised and documented. There was, however, no documentation in existence which OL would have been able to provide the Public Trustee to demonstrate that the PIF Transaction was bona fide. The Public Trustee, acting diligently, would have identified that the PIF Transaction was contrary to statements made in the PIF PDS and was likely unlawful. On learning that the PIF Transaction was likely unlawful, a diligent trustee would have pressed for an explanation for the transaction. When no explanation could be given, any trustee would have formed the view that the transaction was an improper one entered into because the Octaviar Group had no other way to repay Fortress. Any trustee would have formed the view that the Octaviar Group was insolvent, as well as affected by serious management integrity issues, and would have called in the Notes and wound up OIN and OL. The appellant's case was OIN and OL would have been wound up by 29 February 2008 or shortly thereafter, avoiding the outflow of funds from the Octaviar Group which took place between 29 February 2008 and when the Public Trustee actually applied to wind up OIN and OL. As events turned out, the Public Trustee was ignorant of all this information. It did not even know that the Fortress Facility existed. It found out about the Octaviar Group's troubles when the public did, in January 2008. At that point it was scrambling around for information and was not in a position to act decisively to protect noteholders' interests. (numbering and internal references omitted)

The evidentiary ruling 24 As has been noted, the gravamen of the appeal is a ruling by the primary judge in which his Honour upheld an objection to a question concerning the 6 June notification. The witness under cross-examination was Mr G E Klein, who at the time of the relevant events held the office of Public Trustee of Queensland. Mr Klein was asked if he recalled that ASIC sent a notification in mid-June 2007 in respect of a charge that had been created in June in favour of the Fortress Credit Corporation. The question was directed to Mr Klein's knowledge of the 6 June notification. Mr Klein said he could not recall the 6 June notification. He was then asked to assume that the 6 June notification was given to the respondent on that date. On the basis of that assumption, Mr Klein was asked whether he would have expected that certain relevant officers, Mr Kelly or Mr Prostamo, or those reporting to one or other of them, would have read and understood the 6 June notification. 25 At that point in the cross examination, the respondent objected to the question on grounds that no part of the appellant's case involved a failure to read the 6 June notification. The respondent submitted the pleaded case was that if an investigative accountant had been appointed, the Fortress charges would have been discovered as well as the breach of s 283CC of the Corporations Act, arising from the failure of OL and OFS to notify the respondent of the charge. 26 The appellant argued below that the question concerning Mr Klein's awareness of the 6 June notification was directed to the reasonableness of the respondent's conduct in informing itself of matters relevant to the financial position of the Octaviar Group. Further, the appellant submitted that the case as opened on that issue was broad and that the pleading contained allegations concerning the respondent becoming aware of the Fortress charges. The following exchange occurred between his Honour and counsel for the appellant: HIS HONOUR: But there's no allegation of breach of duty, is there, resulting out of a failure to read or act on an ASIC notification in relation to a charge? MR LANCASTER: Would your Honour pardon me? HIS HONOUR: Yes. MR LANCASTER: Your Honour, one aspect of the claim that is clearly before your Honour, in our submission, is - and the expert addresses this - is what was the appropriate response had there been full information in respect of various matters in 2007 that cumulatively created a position that the applicant says demanded more attention and action. And the existence and effect of the $250 million facility with Fortress is one indicia in that path through 2007. So the purpose is not to bolster what I accept is a non-existent specific claim about not reading the ASIC email but it is directed to what Mr Klein would have expected of his officers if the true information had come to light, including in this instance the Fortress facility. HIS HONOUR: Well, that it seems to me really goes to the very point that Mr Sofronoff [Counsel for the respondent] was objecting to. Mr Klein has given evidence that he didn't know about it. He wasn't Business Services. Maybe they're questions you can ask Mr Prostamo and Mr Kelly, but to ask questions which seek to elicit an answer from Mr Klein as to whether it was appropriate that a particular email should have been brought to his attention, when, in fact, there's no allegation that failure to act on this email or to bring it to his attention is a breach - it seems to me to be a matter that's irrelevant. I can understand how you might wish to rely on the existence of the Fortress facility, but not this particular matter. MR LANCASTER: May it please the court. HIS HONOUR: So I reject the question. (emphasis added) 27 His Honour's reasons for rejecting the question are revealed in the above exchange. The objection was made against the background of a substantial interlocutory dispute concerning the adequacy of particulars of breach of duty by the respondent. We shall refer below to the dispute concerning particulars and the resolution of it prior to the hearing of the proceeding. It is sufficient for present purposes to note that the resolution of the particulars dispute involved the appellant providing particulars in the form of an expert report upon which it proposed to rely at trial and also for the purpose of answering numerous requests for particulars by the respondent.

General principles 28 The question of whether a pleading adequately raises a claim or defence is not concerned with the expression of the pleading as a matter of style, or of phrasing, or the structure of the pleading. Neither is it concerned with the formality of the process by which the issues in the proceeding are identified; be it a statement of claim, statement of contentions, concise statement, points of claim or points of defence. The verbal formulation of the allegations of fact, or the contentions of law, need not conform to a particular style guide or to any pro forma template. 29 The sole objective of a pleading is to clearly identify matters in dispute and difference by and between the parties to the dispute. This objective necessarily involves expressing the factual basis of each claim or defence. It is necessary that the legal elements of each cause of action or defence are expressed by reference to allegations of fact required to establish each element. It is not necessary to plead the legal conclusions that follow from the facts, but it is often convenient to do so. These are trite propositions but nevertheless vital to ensuring that the pleading serves its purpose. 30 There should be no doubt about whether any particular cause of action is relied upon. At a minimum, the pleading should be pellucidly clear about the causes of action, or claims, relied upon by the applicant, including any claims made upon an alternative hypothesis. The explicit clarity with which a claim is expressed should ensure that there be no need for the opposite party to closely scrutinise the pleading in a process of textual construction to determine whether a particular fact is relied upon, or the purpose for which it is alleged, much less to decide whether a particular cause of action is raised. The same basic requirement applies to any defence raised in answer to a claim. 31 Clarity in pleading is by no means an unattainable objective, even in the most complex litigation. Often the elements of a cause of action require careful and precise identification to ensure that the relevant integer is properly characterised having regard to the context in which the claim arose. The pleading should always be a bespoke articulation of the dispute between the parties, even though the warp and the weft of its fabric may be the same as other claims based upon the same, or a similar, cause of action. 32 There are occasions when such definition can be difficult and may require reference to technical or scientific material, including cases where the material requires specialist explanation by reference to expert evidence to be given at trial. In some instances, the contended facts may be asserted based upon inferences to be distilled from a web of other facts. In other instances it may be necessary to define an implicit representation drawn from the contextual background against which express statements were made or from the failure to make an express statement contrary to the apparent common assumption of the parties. While the limits of text may in some cases impose linguistic limitations beyond a certain level, such linguistic limitations would not generally present any obstacle to expressing the substantive causes of action with sufficient clarity to ensure that the parties are able to reach a shared understanding of the issues in the dispute. 33 In this case, there was no linguistic or other limitation upon the opportunity to plead that the respondent should have read and acted upon the 6 June notification as a particular of its breach of duty. 34 The importance of explicit clarity was discussed by Allsop J (as his Honour then was) in White v Overland [2001] FCA 1333 at [4]: … by way of general principle I would simply like to make perfectly plain my view that in the efficient and proper conduct of civil litigation, even civil litigation hard fought between parties, it should always be recognised that in the propounding of issues for trial the parties should take steps to ensure that all relevant parties to the dispute are cognisant of what the issues are. Any practice of quietly leaving footprints in correspondence or directions hearings to be uncovered some time later in an attempt to reveal that a matter was always in issue should be discouraged firmly. Even if something has been said, where it is evident, or indeed suspected, that the other side is proceeding on the basis of a misconception or has not appreciated something, as a general rule, efficiency, common sense and an appreciation of the costs and resources (both public and private) likely to be wasted by confusion in litigation will mandate that a party through his or her representative ensure that the other is not proceeding on a misconception or that the other does appreciate something that has been said. Litigation is not a game. …In the long run, the only consequence of keeping issues hidden or not clearly identifying them is to disrupt the business of the court leading to the waste of valuable public resources and to lead to the incurring of unnecessary costs by the parties, costs which ultimately have to be borne by someone. (emphasis in original) 35 These observations have been referred to with approval in several authorities, including Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (2008) 73 NSWLR 653. In Ingot Capital Investments, Ipp JA at [412]-[428] discussed the general principles which govern the obligations of parties to plead issues clearly, citing at [422] what was said by Mason CJ and Gaudron J in Banque Commerciale S.A., En Liquidation v Akhil Holdings Limited (1990) 169 CLR 279 at 286-287: The function of pleadings is to state with sufficient clarity the case that must be met: In this way, pleadings serve to ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her and, incidentally, to define the issues for decision. The rule that, in general, relief is confined to that available on the pleadings secures a party's right to this basic requirement of procedural fairness. Accordingly, the circumstances in which a case may be decided on a basis different from that disclosed by the pleadings are limited to those in which the parties have deliberately chosen some different basis for the determination of their respective rights and liabilities. Ordinarily, the question whether the parties have chosen some issue different from that disclosed in the pleadings as the basis for the determination of their respective rights and liabilities is to be answered by inference from the way in which the trial was conducted. It may be that, in a clear case, mere acquiescence by one party in a course adopted by the other will be sufficient to ground such an inference.

The pleaded claim 36 The appellant's pleadings, so far as is relevant to this appeal, contained allegations to the following effect. In paragraph 36 of the Further Amended Statement of Claim (FASOC), it was alleged that pursuant to s 283DA of the Corporations Act the respondent had duties to exercise reasonable diligence to ascertain whether the property of OIN was sufficient to repay the amount owed to group members, to exercise reasonable diligence to ascertain whether the OIN Guarantors or any subsidiaries had committed a breach of the OIN Trust Deed, and to do everything in its power to ensure that it remedied any breach of the OIN Trust Deed. In paragraphs 37 to 38B of the FASOC, the appellant articulated the respondent's duties in equity and at common law. In paragraph 38 the appellant alleged that the respondent owed a duty to group members to act with reasonable skill and care in the exercise of its functions and discharge of its duties, which included obligations to make decisions on an informed basis, upon material information reasonably available to it in accordance with rational decision making processes. 37 The scope of the duties alleged, and in particular the duty pleaded in paragraph 38 of the FASOC, plainly allowed for a pleading to the effect that the respondent's failure to consider and act upon the 6 June notification constituted a breach of its duties. The exchange between counsel for the appellant and the primary judge extracted at [26] above reveals that counsel considered, as he was bound to do, that there was no specific claim about not reading the 6 June notification. There was no linguistic difficulty in articulating this omission as a specific particular of breach, and no other reason was advanced on appeal to explain why such an apparently obvious omission was not pleaded as a specific particular of breach. 38 Returning to the structure of the pleading, in paragraph 82 it was alleged that by no later than 29 February 2008, the respondent knew or ought to have known, if it discharged its duties set out in paragraphs 36 to 38, a range of facts concerning the financial position of OIN, including the existence of the Fortress facility, the Fortress charges and the PIF Transaction, among other events which had a bearing upon the ability of OIN to repay the notes. In sub-paragraph 82.11, the pleading picked up a sequence of events pleaded in paragraphs 41 to 77 of the FASOC which it was alleged the respondent ought to have known on 29 February 2008. In none of these paragraphs was there any reference to the 6 June notification. 39 In paragraph 83 of the FASOC, it was alleged that by reason of the respondent's knowledge of the matters referred to in paragraphs 78 to 82 (which included the matters referred to in paragraphs 41 to 77) the respondent should have formed the view by no later than 29 February 2008 that the assets of OIN and the Guarantors were unlikely to be sufficient to repay the notes when they became due. In paragraph 84 it was alleged that had the respondent formed the view, as it ought to have done, it would immediately, and by no later than 29 February 2008, have given notice to OIN declaring all notes to be due and payable. In paragraphs 85 to 89 the appellant alleged that had it formed the view it ought to have formed no later than 29 February 2008, steps ought to have been taken, among other things, to apply for orders that OIN and the Guarantors be wound up. 40 The relevant allegations of breach of duty were contained in paragraph 90 of the FASOC. In paragraph 90.2 it was alleged that the respondent breached its duties by failing to form the views described in paragraph 83. In paragraph 90.1 there was a naked allegation that the respondent failed to undertake its obligations described in paragraphs 36 to 38. 41 As we have said, there was no allegation of breach, harnessed to any failure to read or act upon the 6 June notification, and indeed no reference whatsoever to the fact of the notification in the pleading, including within the chronology of relevant events and transactions pleaded in paragraphs 41 to 77. The closest the pleaded allegations got to any fact relevant to the disputed evidentiary ruling were the facts pleaded in paragraphs 48AV to 48BC concerning the Fortress facility and the extension of the repayment date for that facility. Further, the events pleaded in paragraphs 41 to 77, as well as the matters pleaded in paragraphs 78 to 82, were directed to a conclusion in paragraph 83, namely that by no later than 29 February 2008 the respondent should have formed the view that OIN and the Guarantors were unlikely to be able to pay the notes when they became due. 42 Given the way in which the appellant framed its claim below as we have described, we can find no error in the ruling by the primary judge or his Honour's reasons for the ruling as revealed in the exchange with counsel set out in [26] above. 43 We are fortified in that conclusion by the antecedent procedural history of the proceeding and specifically the resolution and determination of a dispute concerning the adequacy of particulars given by the appellant prior to the commencement of the hearing, which we will now address.

The case as particularised 44 During a period of approximately four months prior to the commencement of the hearing, there was detailed correspondence concerning, among other things, the particulars to paragraph 82 of the FASOC insofar as it incorporated allegations relating to the Fortress facility alleged in paragraphs 48AV to 48BC. On 3 March 2016 the respondent made the request for particulars of those paragraphs. On 4 March 2016 the appellant responded to that request, stating that any request for particulars be made after filing of expert evidence if any aspect of the case remained unclear at that time. On 9 March 2016, the respondent filed an application seeking, among other things, an order that the appellant provide the particulars it had requested. On 8 April 2016, the appellant served expert reports of Mr Joseph and Mr Borrelli (referred to as Joseph 1 and Borrelli 1). On 13 April 2016, there was a hearing before the primary judge at which the respondent pressed its request for particulars. In response to the application, the appellant argued that the particulars would be provided by an expert report to be served on 22 April 2016. The primary judge indicated that the case could be managed so that expert evidence was served as particulars of the appellant's case. On 19 April 2016 the primary judge handed down his reasons in Oztech Pty Ltd v Public Trustee of Queensland (No 6) [2016] FCA 391. His Honour said at [67] that: I would expect that a large number of the respondent's complaints of inadequate particularisation concern matters that should appear in the expert reports on which the applicant proposes to rely. Indeed, as I have noted, the applicant submits that information corresponding to the particulars necessary to guard against surprise at trial will be set out in its expert reports. And at [72]: For these reasons, the course I propose to adopt is to stand over the respondent's interlocutory application in so far as it concerns the relief sought in paragraphs 3, 4 and 5, pending the respondent's receipt and consideration of the balance of the applicant's expert reports, which will be filed and served by 22 April 2016. I would urge the respondent to then give careful consideration to what further particulars, if any, he really needs. 45 On 22 April 2016, the appellant served three further expert reports of Mr Joseph and Mr Borrelli (referred to as Joseph 2, Borrelli 2 and Joseph 3). It is important to note that the case as set out in the expert evidence (including Joseph 1 and Borrelli 1) was that the respondent would have discovered the Fortress facility through the investigations of an investigative accountant it was said should have been appointed in July 2007. On 29 April 2016 the respondent wrote to the appellant saying: … the case advanced in [the expert] evidence bears little resemblance to the case that has been pleaded in the Amended Statement of Claim. 46 In response on 4 May 2016, the appellant wrote to the respondent saying: You can proceed on the basis that our client's case is as set out in our client's expert evidence. We are currently preparing amendments to the Amended Statement of Claim so that our client's pleading conforms with its expert evidence. 47 On 5 May 2016, the respondent wrote to the appellant seeking any proposed amended pleading by 4 pm on 9 May 2016, in the absence of which the respondent would seek to re-list the proceedings at the earliest possible date. 48 The letter of 5 May 2016 further observed that: … most of the particulars of the pleaded case that were sought by our client have in fact not been provided by your client's expert reports … 49 On 6 May 2016 the appellant responded, stating amongst other things: The amendments to which we refer in our letter of 4 May 2016 as identified… are further particulars to the claim already pleaded. Those particulars are the matters that had been identified in our client's expert evidence. You can assume that we will be pleading that if your client had taken the steps described in the trustee expert report and appointed an investigative accountant your client would have known the information described in the investigative accountant's report at the time he says that information was available. 50 On 10 May 2016, the appellant wrote to the respondent indicating an intention to re-list the matter to seek the particulars identified in Annex A to that letter on the basis that the particulars of those paragraphs had not been provided as evidence. It is important to note that Annex A did not include a request for particulars of paragraph 82 of the Amended Statement of Claim (ASOC) insofar as it picked up paragraphs 48AV to 48BC concerning the Fortress facility. 51 On 13 May 2016 the respondent filed an affidavit of Mr Sharry. He deposed to the effect that having reviewed the appellant's expert evidence as at 22 April 2016, the particulars sought in Annex A had not been provided as evidence. The balance of the request had been answered through the expert evidence. 52 On 25 May 2016, the appellant filed an application for leave to file the FASOC which included further amendments. The matter came on for hearing on 30 May 2016. The respondent's written submissions (dated 27 May 2016) also dealt with the respondent's application for particulars by reference to a further amended version of the table as originally annexed to the 10 May 2016 letter (Annex A version 2). Annex A version 2 narrowed the respondent's application further and did not press some of the requests that were included in the letter of 10 May 2016. 53 On 7 June 2016, the appellant filed the FASOC pursuant to orders made on 6 June 2016. 54 On 9 June 2016, the primary judge considered the respondent's application for further particulars which had been stood over. The primary judge observed during the hearing (inter alia): … the fact is, if it is not in the expert's report, you've got to be able to point to now where - how you say - how the applicant says the respondent know or ought to have known the existence of these pleaded facts. 55 After the luncheon adjournment on that day, counsel for the appellant informed the court that he would provide a document by the following morning setting out where certain facts are addressed in the expert evidence and if they are not in the expert evidence "how it is we say that the respondent would have known about them". 56 At the hearing on 10 June 2016, the appellant handed up a document which it described as one which "explains where in the expert evidence the respondent will find all of the material which supports the various pleadings about which particulars have been sought" and "a very clear roadmap for the respondent about how the expert evidence interacts with the pleading". This document made reference to the Fortress facility and described the respondent becoming aware of the Fortress facility through the investigations of an investigative accountant. Importantly, no reference was made to the 6 June notification. The Court directed that the appellant provide further particulars by 14 and 15 June 2016. 57 On 14 June 2016, the appellant filed a response to the request for particulars which, insofar as paragraphs 82.11 and 48AP of the FASOC are concerned, described the respondent becoming aware of the Fortress facility through the investigations of an investigative accountant. Again, no reference was made to the 6 June notification. 58 On 15 June 2016, the appellant provided a response to the particulars concerning documents it said would have been provided to an investigating accountant, and when those documents would have been provided to the respondent and his lawyers. Again, no reference was made to the 6 June notification.

The case as opened 59 The case as opened below by the appellant was consistent with its pleaded reliance upon a causal thesis which centred upon the contention that had the respondent discharged its obligation it would have retained an investigative accountant instructed with information it ought to have had, and this would have led to the respondent informing an opinion alleged in paragraph 83 of the FASOC on 29 February 2008. 60 During opening submissions on behalf of the appellant on the first day of the hearing, counsel for the appellant identified a number of documentary categories to be tendered in opening. Counsel said that: So we have a documentary tender, both to make good the basis for our experts' opinions but, of course, they're also their own evidence about the events in question that we rely upon, if we have to, independently of any expression of expert opinion. There are, perhaps, three general categories of issue to which the documentary case and, for that matter, the expert evidence goes, one is to prove what the Public Trustee ought to have known in the course of 2007 and 2008, in other words, if, as we will, we show what the contemporaneous records of the company showed about its operations, then that will support our contention that the Trustee, complying with his duties making appropriate inquiries of the companies, would have obtained either document- those documents precisely, or documents with that information in, or that information in the course of those inquiries. And the following exchange occurred concerning the appellant's proposed tender: HIS HONOUR: …My concern is that insofar as you seek to make a case which goes beyond what the experts say in what the Trustee ought to have known and what he would have found out, I was most definitely told that that would all be in the experts' evidence, and that's the way on which case management decisions have been made, including in applications for your client to amend its pleadings - or at least in applications for further and better particulars. So the Trustee has a concern, as, indeed, I have a concern, that we don't depart from that model. Now, the experts say what they would have got and what that would have told them and what recommendations they would have then made. I don't see any reason why our client should depart from that case in any significant respect. But, of course, insofar as events are in dispute, naturally if that can be proved by documents, those documents, if relevant, could be tendered. And: MR LANCASTER: And we don't seek to go beyond the pleading, but there are examples of pleaded conduct that aren't addressed specifically by Mr Borrelli. For example, we rely on certain events being events of default that we will prove by documents, and Mr Withers took your Honour to the quarterly reports in this respect, which is an example. But there are - we will be making submissions that, as we have pleaded, there were events of default other than those Mr Borrelli referred to, and that your Honour is --- HIS HONOUR: That are otherwise particularised in your pleading. MR LANCASTER: That are particularised in the pleading, yes. And we don't seek to take the case outside of the pleading- the documentary case outside of the pleading in any respect, but we don't accept, with respect, that the four walls of Mr Borrelli's report, and the 200-odd documents that he specifically says he relied upon, is the documentary limit of what we're entitled to tender in the proceedings in our documentary tender. We're confined by our pleading and the particulars to our pleading, we entirely accept that, and to the extent that's denied or not put in issue, we will need to address that by the documents. But in our submission there's no warrant for confining the applicant's documentary tender only to those documents that Mr Borelli has referred to, because we wish to proceed on the pleading in the presently approved form, subject to the minor matters that we've already said we're not pressing, and the documentary tender won't go outside that pleaded case. 61 Plainly the case as opened was confined to the pleaded case as particularised through the provision of expert reports. Of course, the appellant was not prevented from pursuing any allegation of breach, or from advancing a causal thesis that was pleaded and particularised outside the expert evidence. However, as we have described above, there was no case for breach, nor any causal thesis pleaded beyond the case advanced upon the hypothesis that an investigative accountant would have been retained and that accountant would have recommended certain further enquiries or steps. 62 As we have already concluded, the primary judge did not err in upholding the objection to the question asked of Mr Klein concerning the 6 June notification. It is clear that the appellant conducted its case upon the explicit basis that it would be confined insofar as the allegations of breach and causation concerning the Fortress facility are concerned to the relevant opinions provided in its expert reports. As we have said, there was no separate pleaded or particularised allegations concerning a further or alternative means by which the respondent might have become aware earlier of the Fortress facility and specifically no allegation of breach in this regard by having failed to consider and act upon the 6 June notification. 63 We note further that his Honour's ruling did not preclude questions being asked of others concerning the 6 June notification insofar as that fact was relevant to other issues in the proceeding. It was open to the appellant to ask the relevant officers of the respondent questions about the 6 June notification in connection with the respondent's defence that it acted honestly and reasonably and ought to be excused from liability under s 76 of the Trusts Act 1976 (Qld) or s 85 of the Trustee Act 1925 (NSW). However, any evidence concerning the 6 June notification relevant for this purpose would not avail the appellant in relation to the claim.

THE RESPONDENT'S CAUSATION ANALYSIS 64 The appellant advanced two causation hypotheticals at the trial. The first entailed the respondent requesting monthly management accounts and cash flow statements by July 2007 identifying that OL was forecasting significant cash shortfalls for September to October, including by reason of the Fortress facility, and appointing an investigative accountant in July 2007. The second hypothetical involved the appointment of an investigative accountant in July 2007 in response to a further report from PwC (referred to as PwC3 in the Reasons for Judgment). Each hypothetical would have led the respondent's case to a report from the putative investigative accountant in terms described by the respondent's expert, Mr Borrelli. Either hypothetical pathway would have led to the same outcome, namely that by the end of January 2008 the investigative accountant would have concluded that OL, OIN and the Guarantor committed material breaches of their obligations under the terms of the notes issue. That conclusion in turn would have led to the respondent calling in the notes and those companies being wound up. 65 The primary judge noted there were aspects of the first hypothesis referred to above which were not pleaded or particularised. His Honour at [837]-[838] of the Reasons for Judgment said: … Thus, there is considerable justification for the respondent's complaint that the first counterfactual advances a new and unpleaded case as to why, had he not allegedly breached his duties, the respondent would have appointed an investigative accountant in July 2007. The applicant should be held to its pleaded case. But, even so, I am not persuaded that the first counterfactual materially advances the applicant's case on causation, given that it converges with the second counterfactual at the point of the respondent appointment an investigative accountant in mid-July 2007 to prepare an initial report… (emphasis added) 66 In addition to the above two causation hypotheses, the appellant advanced a third hypothetical for the first time in its submissions in reply at the trial. His Honour said at [845]-[846]: The second matter is that, in reply submissions, the applicant advanced what is, in substance, a third counterfactual. It submitted that the respondent had failed to engage with "the simple path to causation developed in the [applicant's closing submissions]", the salient features of which are: • the respondent would have identified the Fortress facility; • given the short-term cash flow projections (presumably those on which Mr Borrelli relied), the respondent would have been concerned to know how the Fortress facility was to be repaid absent a sale of Stella; • the Fortress facility was extended on disadvantageous terms on 17 August 2007, so that it would be repayable on 1 December 2007; • on 28 November 2007, it was announced that the sale of Stella would not proceed; • this would have raised concerns as to how funds could be raised to repay the facility; • when, on 30 November 2007, the loan was partly repaid, questions would have been asked as to how the funds to part pay the facility had been obtained, given the previous cash flow forecasts and the fact that Stella had not been sold; • by December 2007 or January 2008, any competent investigative accountant would have identified that money had been misappropriated from PIF; and • when OL's share price collapsed on 18 January 2008, any competent investigative accountant would have concluded that the Octaviar Group entities must be insolvent. This submission can be answered immediately by recognising that this "simple path" is not the case on causation which the applicant has pleaded and particularised; nor is that the case which the applicant advanced through Mr Joseph's and Mr Borrelli's evidence. Thus, it is not the case on causation which the respondent was called on to meet. It is an argument the applicant has erected in final submissions despite its pleaded and particularised case. (emphasis added) 67 It was for the primary judge to decide what, if any, consequences followed the appellant's failure to plead and particularise the causation argument. However, his Honour rejected the "simple path" analysis for other reasons: [850]-[853]. 68 The "simple path" hypothesis advanced on appeal to this Court bears a significant gloss on the "simple path" hypothesis advanced at the trial. As referred to above, the "simple path" hypothesis advanced at trial identified the provision of management accounts (including cash flow projections) to the respondent, or to an investigative accountant as the opportunity to discover the Fortress facility, or alternatively that opportunity was available from an examination of the 2007 annual report of OL. On appeal, a further alternative opportunity to discover the Fortress facility is identified, namely, the 6 June notification. 69 The primary judge gave detailed consideration to the analysis of causation: [558]-[982]. His Honour's consideration included, where necessary, further detailed factual findings in relation to the events relied upon by the appellant as part of the critical path of causation. 70 His Honour (at [558]-[563]) noted that the appellant's case upon causation depended on three critical matters being established. The first critical matter was that by the end of January 2008, an investigative accountant appointed by the respondent would have come to the conclusion that OL was insolvent. The second critical matter was that by the end of January 2008 the investigative accountant would have advised the respondent to call in the notes and the respondent would have done so. The third critical matter was that, on the basis that the notes were not repaid, the respondent would have applied immediately to wind up OIN and the Guarantors. His Honour noted at [562] that the first two critical matters depended, first, on the appointment of an investigative accountant by July 2007 and, second, the investigative accountant providing a report on certain matters identified in the expert evidence given in a report by Mr Joseph (Joseph 1) and then, on further instructions carrying out the very kind of detailed monthly monitoring recommended by Mr Borrelli in Borrelli 1. Thirdly, the first two critical matters depended upon the investigative accountant ascertaining the matter in Borrelli 2, which Mr Borrelli says the investigative accountant would have ascertained by carrying out the monitoring, having regard to the timing referred to in Borrelli 3. It is unnecessary to describe the details of the matters available to be ascertained according to Mr Borrelli's evidence. 71 The causation analysis was critically affected by the collapse of OL's share price on 18 January 2008 and the series of events that occurred thereafter, including the making of demands and claims by creditors in the second half of January 2008. His Honour concluded at [933] that having regard to his findings and conclusions as to the position as at 31 January 2008, an investigative accountant advising the respondent as at mid-February 2008 would not have been in a position that was different to the position in which the respondent's actual advisors found themselves at the time: In other words, at this point in time - either at mid-February 2008 or 29 February 2008 - the counterfactual world and the real world converge. 72 In our opinion, his Honour's reasoning was correct. As a consequence of this analysis, even if it be assumed that the appellant should have been permitted to advance an alternative cause of action for breach based upon the failure to consider the 6 June notification, the chain of events necessary to connect the notification to the engagement of an investigative accountant and then to the critical events referred to by the primary judge would have been the same, and the obstacles to the causation analysis advanced by the appellant would have been the same. Having regard to the primary judge's detailed factual findings in relation to each of the essential elements to the critical path of causation advanced by the appellant at the trial, a case put on the basis of the alternative cause of action would have failed on causation for the same reasons that its pleaded case, as well as the "simple path" case, failed. 73 The result of course may have been different had the appellant pleaded a case of breach based upon the failure of the respondent to consider the 6 June notification together with a different case concerning the causal chain, or critical path, that would have flowed from the impetus of discovering the charges as a result of the 6 June notification. Such alternative causal analysis requires articulation in the pleading and proof in the evidence. 74 The case advanced for the first time in this appeal, both in relation to the alternative cause of action and the "simple path" hypothesis referred to in [67] above, invites this Court to conduct a rehearing of a case not put by the appellant below, not met by the respondent below and not adjudicated by the primary judge. This is an appeal in the nature of a rehearing but the scope of such rehearing does not, and should not, extend to a re-determination of the matters in dispute and difference between the parties outside the boundaries of the dispute as framed by the pleadings. The reasons for such constraint are so obvious that they hardly bear mention. It is sufficient to say that if a rehearing were permitted to embrace a case not put below that would retrospectively infringe the fundamental right of a party to know the allegations it is to meet at trial. In a recent decision of this Court in CCL Secure Pty Ltd v Berry [2019] FCAFC 81, McKerracher, Robertson and Lee JJ at [19]-[23] reviewed the established principles of appellate review. The Court referred at [20] to the task of the intermediate appellate court to conduct a real review of the evidence given at first instance and the judge's reasons to determine whether the judge erred in fact or law. After discussing these principles the Court at [23] said: The consideration of the grounds said to justify intervention in accordance with these principles must start by identifying the case pleaded … 75 In Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424, Allsop J (as his Honour then was), with whom Drummond and Mansfield JJ agreed, discussed at [33]-[36] the principles governing the departure by the parties from the approach they adopted to the controversy at the hearing. His Honour said at [36]: The roles of the trial and the appeal need to be kept distinct. The appeal is not a reworking of the trial taking account of such impediments as are thrown up by the judge's findings which alter the landscape. As was said in Coulton v Holcombe [(1986) 162 CLR 1] at 7: It is fundamental to the due administration of justice that the substantial issues between the parties are ordinarily settled at the trial. If it were not so the main arena for the settlement of disputes would move from the court of first instance to the appellate court, tending to reduce the proceedings in the former court to little more than a preliminary skirmish. His Honour further observed at [39]: Whether or not a point was raised at the hearing should not be decided narrowly or technically. The pleadings and the particulars will ordinarily mark the boundaries of the dispute. Due regard also should be had to the direction of the conduct of the hearing within or outside these marked boundaries: Water Board v Moustakas [(1988) 180 CLR 491] at 497-98. 76 The respondent's causation argument was essentially, as we have said, that had the alternative cause of action been allowed, it would have failed for want of causation. As the respondent confined its causation argument to this contention, it is unnecessary for us to consider whether the "simple path" hypothesis raised for the first time in the appeal should be disallowed upon the well-established ground that if a new matter is raised on appeal and evidence could be given which by any possibility could have prevented the point from succeeding, the point cannot be taken: Coulton v Holcombe at 7-8; Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd at [37]. It is sufficient to note that the "simple path" hypothesis was not pleaded below and that the appellant raised for the first time on appeal a variant to that hypothesis emanating from the 6 June notification. As we have found that the "simple path" hypothesis would have failed to establish a causal link between the 6 June notification and any loss, it is unnecessary to say any more about the consequences of the evidentiary ruling in relation to the allied causal theory advanced under the so called "simple path" analysis. If we are wrong in this conclusion, for the reasons given we would in any event disallow any reliance upon the unpleaded "simple path" causation hypothesis as a ground for impugning the ruling, for establishing its materiality or for remitting the proceeding for a new hearing before a different judge. 77 For these reasons the appeal should be dismissed with costs. I certify that the preceding seventy-seven (77) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Middleton, Perram and Anastassiou.