RRG Nominees Pty Ltd v Visible Temporary Fencing Australia Pty Ltd [2019] FCA 686 | Case summary

RRG Nominees Pty Ltd v Visible Temporary Fencing Australia Pty Ltd [2019] FCA 686 | Case summary | Zoe

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WHITE J: Introduction [1] The parties [11] The investment in the State Companies [21] The pleaded representations [42] The first representation [43] The second representation [45] The third representation [46] The fourth representation [47] The sixth representation [48] The seventh representation [49] The eighth representation [50] The 10th representation [51] The 11th representation [52] The 12th representation [53] The 13th representation [54] The 14th representation [55] The 15th representation [56] The 16th representation [57] The 17th representation [58] General matters [59] The statutory provisions and principles [62] The witnesses [80] The factual setting [99] The involvement of Mr Schirripa [125] The February 2014 café meeting [128] Mr Schirripa meets Mr Nestorovic [137] The early March 2014 Paralowie meeting [141] Events subsequent to Mr Schirripa's first investment [142] The representations - introductory matters [156] The 17th representation - the Manufacturing Representation [158] The relationship between Status and Linhai Hedda [162] Status was not the manufacturer [182] The significance of the Manufacturing Representation [186] The 16th representation - the Matching Representation [193] The making of the Matching Representation [199] Conclusion on the Matching Representation [217] The submission that the Matching Representation was not false or misleading [224] The first representation - price and income projections [230] The making of the first representation [232] The representation as to price was misleading or deceptive [236] The second representation - extensive market research [239] The making of the second representation [242] The second representation was misleading or deceptive [248] The third representation - Brisbane Airport [250] The making of the third representation [252] The third representation was misleading or deceptive [268] The fourth representation - Coober Pedy Council [270] The making of the fourth representation [275] The fourth representation was misleading or deceptive [286] The sixth representation - Rio Tinto [289] The making of the sixth representation [292] The sixth representation was not misleading or deceptive [306] The seventh representation - Transfield [309] The making of the seventh representation [313] The seventh representation was misleading or deceptive [325] The eighth representation - the Melbourne Grand Prix [326] The making of the eighth representation [330] The eighth representation was misleading or deceptive [334] The 10th representation - VicRoads [336] The making of the 10th representation [338] The 10th representation was misleading or deceptive [342] The 11th representation - the Alice Springs Airport Road [344] The making of the 11th representation [348] The 11th representation was misleading or deceptive [358] The 12th representation - agreement with Mr Lynch [360] The making of the 12th representation [363] The 12th representation was not misleading or deceptive [367] The 13th representation - Parliament House [369] The making of the 13th representation [372] The 13th representation was misleading or deceptive [381] The 14th representation - Liverpool Council [383] The making of the 14th representation [385] The 14th representation was misleading or deceptive [390] The 15th representation - Blacktown Council [392] In trade or commerce [404] The losses [407] Reliance and causation [410] The decision-makers [416] The Applicants' conduct [419] The 17th representation - the Manufacturing Representation [422] The 16th representation - the Matching Representation [425] The first representation - price and income projections [426] The second representation - extensive market research [427] The third representation - Brisbane Airport [432] The fourth representation - Coober Pedy Council [433] The seventh representation - Transfield [436] The eighth representation - the Melbourne Grand Prix [440] The 10th representation - VicRoads [441] The 11th representation - the Alice Springs Airport Road [442] The 13th to 15th representations - Parliament House, Liverpool Council and Blacktown Council [444] Summary of findings of causation and reliance [446] An independent cause of loss? [447] The Misrepresentation Act claim [450] The claim in deceit [456] Conclusion [463]

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Introduction 1 Temporary fencing made up of connected panels is commonly used in Australia at construction sites, road works, work sites, temporary entertainment venues and the like. Frequently, the panels are hired from third party providers rather than purchased by their users. 2 In 2011 and 2012, the Second Respondent (Mr Nestorovic) saw the potential for a business hiring temporary fencing panels containing features making them highly visible in both daylight and in darkness. He referred to this form of fencing as "Visible Temporary Fencing" (VTF) and I will do likewise. 3 On 26 August 2013, Mr Nestorovic incorporated the First Respondent, Visible Temporary Fencing Australia Pty Ltd (VTF Aust), with the intention that it develop a business of hiring out VTF panels. The initial directors of VTF Aust were Mr Nestorovic and the Third Respondent (Ms Pinneri), who is his daughter. Neither Mr Nestorovic nor Ms Pinneri had had any previous experience in hiring out fencing panels. 4 Subsequently, separate companies were established in South Australia, Western Australian, Queensland, the Northern Territory, Tasmania, Victoria and New South Wales to undertake the hire of VTF panels. These were respectively the Fourth Respondent, Visible Temporary Fencing (SA) Pty Ltd (VTF (SA)), the Fifth Respondent, Visible Temporary Fencing (WA) Pty Ltd (VTF (WA)), the Sixth Respondent, Visible Temporary Fencing (Qld) Pty Ltd (VTF (Qld)), the Seventh Respondent, Visible Temporary Fencing (NT) Pty Ltd (VTF (NT)), the Eight Respondent, Visible Temporary Fencing (Tas) Pty Ltd (VTF (Tas)), the Ninth Respondent, Visible Temporary Fencing (Vic) Pty Ltd (VTF (Vic)) and the 10th Respondent, Visible Temporary Fencing (NSW) Pty Ltd (VTF (NSW)). The parties referred to these companies as "the State Companies" and, again, I will do likewise. 5 The First Applicant, RRG Nominees Pty Ltd (RRG), was incorporated on 30 September 2013 to be the trustee of the RRG Unit Trust. The RRG Unit Trust was to be the vehicle through which investments could be made in the VTF businesses. It was established by Mr Robert Falzon, Mr Robert Forrest and Mr Glen Stephens (collectively, the RRG Founders). Subsequently, RRG did make investments into at least three of the State Companies. 6 Through Mr Falzon, Mr Rocama (known as Rick) Schirripa (Mr Schirripa) was introduced to the VTF group of companies. Commencing on 14 April 2014, in the circumstances to be described shortly, companies with which Mr Schirripa is associated invested in RRG and later directly into the State Companies (other than VTF (Qld)). The investing companies are the Second Applicant, Schnik Nominees Pty Ltd (Schnik), and the Third Applicant, Frank Schirripa Nominees Pty Ltd (FSN). 7 In August 2014, Mr Schirripa or the companies with which he was associated bought out the interests of Messrs Falzon and Forrest in RRG and in the RRG Unit Trust. He did not buy out the interest of Mr Stephens. 8 The contemplated businesses of hiring the VTF panels failed. Each of the State Companies, as well as VTF Aust and the 11th Respondent, Status Shop Maintenance Pty Ltd (Status), entered into voluntary administration on 5 July 2017 and each is now being wound up. The proceedings against these Respondents have been stayed. The trial proceeded against Mr Nestorovic and Ms Pinneri only and I will hereafter refer to them as "the Respondents". 9 This judgment concerns the Applicants' claims that they were induced to invest in the State Companies by the misleading or deceptive conduct of the Respondents. The Applicants seek in the alternative damages pursuant to the Misrepresentation Act 1972 (SA) and for common law deceit. They rely on the same conduct for each of these causes of action. 10 For the reasons which follow, I am satisfied that the Applicants have made out most of the pleaded causes of action and that they are entitled to the relief which they seek.

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The parties 11 Until 19 August 2014, the directors of RRG were its founders. On 19 August 2014, Mr Schirripa was appointed as director and it seems that Messrs Falzon and Forrest resigned as directors on or about the same date. Since then, Messrs Schirripa and Stephens have been the decision-makers within RRG. Mr Schirripa was appointed a director of each of the State Companies (other than VTF (Vic) and VTF (Qld)) but resigned his directorships on 15 October 2015. 12 The Second Applicant (Schnik) is the trustee of the RJ Schirripa Family Trust. Mr Schirripa and his wife Jacqueline have been the directors of Schnik at all material times. 13 The Third Applicant (FSN) is the trustee of the Frank Schirripa Family Trust. Mr Frank Schirripa is Mr Schirripa's father. He and his wife have been directors of FSN at all material times. FSN contributed funds to VTF (Tas) only. 14 Each of the Respondents has been a director of VTF Aust since its incorporation on 26 March 2013. Mr Nestorovic has also been a director and secretary of each of the State Companies from the time of their incorporation. With the exception of VTF (Qld), whose shares it wholly owns, VTF Aust holds 55% of the shares in each of the State Companies. 15 The 11th Respondent (Status) was incorporated on 31 January 2006. The Respondents are its shareholders. The principal business of Status has been the importation of manufactured goods from China and their sale in Australia. The items it has imported have principally been equipment for use in restaurants and bakeries, and safety equipment such as cones, bollards, gloves and glasses, for use in the mining industry. 16 Mr Nestorovic has been the person who has travelled to China sourcing products and who, within Australia, has had the principal role in locating customers. Ms Pinneri has been principally involved in the administrative aspects of Status' business. In some communications, Ms Pinneri described herself as the "Director/Marketing Manager" of Status and of Visible Temporary Fencing. 17 The Respondents have been the directors of Status at relevant times. On 6 April 2011, Status entered into joint venture and exclusivity agreements with Linhai Hedda Import & Export Co Ltd (Linhai Hedda). Linhai Hedda is a Chinese company through which Status obtained a variety of products which it imported into Australia. These included the VTF panels. There are issues in the trial concerning the relationship between Status and Linhai Hedda and the manufacture of the VTF panels in China to which it will be necessary to return. 18 Status maintained showrooms on Prospect Road, Prospect (a suburb of Adelaide). It has also operated from Mr Nestorovic's home at Burton Road, Paralowie, another suburb of Adelaide. 19 At one stage, Mr Nestorovic and the initial directors of RRG had contemplated the appointment of distributing agents in the various States and Territories who would be responsible for the hire of the panels. Mr Schirripa had contemplated becoming such an agent for South Australia but did not pursue that course. In the events that happened, neither VTF Aust nor any of the State Companies ever appointed an agent. 20 The Respondents did not have legal representation at the trial. However, they had had legal representation in the proceedings until two months before the commencement of the trial, when their previous solicitors, Griffins Lawyers, had ceased to act for them. Griffins Lawyers had been acting for Mr Nestorovic and Ms Pinneri at the time the affidavits containing their evidence in chief and the tender books containing the documents which the parties wished to adduce into evidence were prepared. It is also appropriate to record that the evidence indicates that Griffins Lawyers had carried out legal work for Status or VTF Aust in 2013, 2014 and 2015. That work appears to have been extensive as the bank records of Status indicate that Status paid a total of $101,340.98 to Griffins Lawyers in the period between 21 October 2013 and 14 September 2015.

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The investment in the State Companies 21 Although the amounts outlaid by the Applicants in respect of the VTF businesses are readily identifiable in the evidence, it is less easy to identify all the amounts paid in respect of each State Company and the character of those payments. In particular, it is not always apparent whether some amounts were outlaid as contributions of capital or as loans and, in some instances, it is not clear to which State Company amounts paid directly to Status were to be credited. 22 I commence with my findings as to the amounts outlaid by RRG. Date Amount Entity making the payment Payee entity 11/10/2013 $25,000.00 RRG Status 15/10/2013 $10,000.00 RRG Status 18/10/2013 $20,000.00 RRG Status 28/10/2013 $20,000.00 RRG Status 30/10/2013 $10,000.00 RRG Status 31/10/2013 $20,000.00 RRG Status 01/11/2013 $6,600.00 RRG Status 04/11/2013 $1,150.00 RRG Status 11/11/2013 $10,000.00 RRG Status 11/11/2013 $25,000.00 RRG Status 20/11/2013 $20,000.00 RRG Status 29/11/2013 $20,000.00 RRG Status 20/12/2013 $3,000.00 RRG Status 22/01/2014 $20,000.00 RRG Status 15/04/2014 $103,200.00 RRG VTF (WA) 15/04/2014 $184,800.00 RRG VTF (NT) 15/04/2014 $123,200.00 RRG VTF (SA) 01/05/2014 $20,000.00 RRG VTF (WA) 01/07/2014 $14,100.00 RRG Status 21/08/2014 $184,800.00 RRG VTF (WA) 21/08/2014 $184,800.00 RRG VTF (NT) 29/08/2014 $200.00 RRG VTF (SA) 29/08/2014 $3,806.00 RRG VTF (SA) 29/08/2014 $13,475.00 RRG VTF (SA) 01/09/2014 $9,900.00 RGG VTF (SA) 12/12/2014 $23,900.80 RRG VTF (SA) 13/02/2015 $150,000.00 RRG VTF (SA) 26/02/2015 $244,240.00 RRG VTF (SA) 03/03/2015 $178,640.00 RRG VTF (NT) Total $1,649,811.80

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33 The amounts paid by RRG include the amounts contributed by Schnik which were recorded earlier. The moneys paid to the State Companies were usually paid straight to Status. The evidence did not disclose who was responsible for effecting these transfers, but I infer that it was Ms Pinneri. 34 Shortly after RRG, Schnik and FSN made their respective initial investments into the State Companies, they entered into shareholder agreements (SHAs) with VTF Aust (which was the majority shareholder) and the State Company concerned. 35 The following table contains my findings regarding the SHAs and the acquisition of shares in the State Companies. Company Name Date of Incorporation Approximate Date of Shareholders Agreement between RRG, Schnik, FSN, VTF Aust and the State Companies Acquisition of shareholdings RRG Schnik FSN VTF (SA) 09/10/2013 00/10/2013 09/10/2013 VTF (WA) 06/11/2013 06/11/2013 06/11/2013 VTF (Qld) 20/12/2013 N/A N/A N/A N/A VTF (NT) 20/12/2013 20/12/2013 20/12/2013 VTF (Tas) 18/08/2014 18/08/2014 18/08/2014 18/08/2014 VTF (Vic) 30/12/2014 00/07/2015 06/10/2015 VTF (NSW) 11/03/2015 00/07/2015 06/10/2015

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The statutory provisions and principles 62 The Applicants plead four causes of action: (a) damages pursuant to s 236 of the Australian Consumer Law (which comprises Sch 2 to the Competition and Consumer Act 2010 (Cth) (the CC Act)) in respect of contraventions of s 18 of the ACL; (b) damages pursuant to s 1041I of the Corporations Act 2001 (Cth) in respect of contraventions of s 1041H of the Corporations Act; (c) damages pursuant to s 7 of the Misrepresentation Act in respect of the misrepresentations; and (d) damages in deceit. The Applicants also sought other forms of relief, which will be identified later. 63 Section 18(1) of the ACL provides: A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. 64 Insofar as the pleaded representations are representations concerning future matters, the Applicants rely upon s 4 of the ACL. Section 4 provides (relevantly): 4 Misleading representations with respect to future matters (1) If: (a) a person makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act); and (b) the person does not have reasonable grounds for making the representation; the representation is taken, for the purposes of this Schedule, to be misleading. (2) For the purposes of applying subsection (1) in relation to a proceeding concerning a representation made with respect to a future matter by: (a) a party to the proceeding; or (b) any other person; the party or other person is taken not to have had reasonable grounds for making the representation, unless evidence is adduced to the contrary. … 65 The effect of s 4 is that a representation with respect to a future matter is taken to be misleading if the maker of the representation does not have reasonable grounds for the representation. Further, it is the maker of the representation who has the onus of establishing the presence of reasonable grounds. 66 As the Applicants acknowledged, the application of the ACL, including ss 4 and 18, in relation to their claims is subject to the operation of s 131A of the CC Act. Before referring to s 131A, it is appropriate to note some aspects of the Applicants' claim in respect of contraventions by the Respondents of s 1041H(1) of the Corporations Act. That section provides: A person must not, in this jurisdiction, engage in conduct, in relation to a financial product or a financial service, that is misleading or deceptive or is likely to mislead or deceive. 67 The term "financial product" used in s 1041H is defined in s 763A. It includes the shares in a company: see s 763B. The Applicants allege that 10 of the 15 representations which they pursued at trial had been made in relation to shares. Their pleading as to the shares to which the representations related are as follows: (a) the first, second, third, 16th and 17th representations were made in relation to shares in VTF (SA), VTF (NT) and VTF (WA); (b) the ninth, 16th and 17th representations were made in respect of shares in VTF (Tas); (c) the 13th, 14th, 15th, 16th and 17th representations were made in respect of shares in VTF (NSW); and (d) the eighth, 10th, 16th and 17th representations were made in respect of shares in VTF (Vic). 68 The representations which were not claimed to have been made in relation to a financial product or a financial service are the fourth, sixth, seventh, 11th and 12th representations 69 The term "financial service" appearing in s 1041H is elaborated in Ch 7 Div 4 of the Corporations Act. By s 766A(1), a person provides a "financial service" if they: (a) provide financial product advice (see section 766B); or (b) deal in a financial product (see section 766C); or … 70 Section 766B(1) identifies when a person provides "financial product advice": (1) For the purposes of this Chapter, financial product advice means a recommendation or a statement of opinion, or a report of either of those things, that: (a) is intended to influence a person or persons in making a decision in relation to a particular financial product or class of financial products, or an interest in a particular financial product or class of financial products; or (b) could reasonably be regarded as being intended to have such an influence. 71 Section 766C of the Corporations Act identifies when a person "deals in a financial product": 766C Meaning of dealing (1) For the purposes of this Chapter, the following conduct (whether engaged in as principal or agent) constitutes dealing in a financial product: (a) applying for or acquiring a financial product; (b) issuing a financial product; (c) in relation to securities or managed investment interests - underwriting the securities or interests; (d) varying a financial product; (e) disposing of a financial product. (2) Arranging for a person to engage in conduct referred to in subsection (1) is also dealing in a financial product, unless the actions concerned amount to providing financial product advice. … (3) A person is taken not to deal in a financial product if the person deals in the product on their own behalf (whether directly or through an agent or other representative), unless: (a) the person is an issuer of financial products; and (b) the dealing is in relation to one or more of those products. (3A) For the purposes of subsection (3), a person (the agent) who deals in a product as an agent or representative of another person (the principal) is not taken to deal in the product on the agent's own behalf, even if that dealing, when considered as a dealing by the principal, is a dealing by the principal on the principal's own behalf. … 72 By s 131A(1) of the CC Act, Pt 2-1 of the ACL (which includes s 18) has no (presently relevant) application to the supply of "financial products" or of "financial services". These terms are defined in Sch 2 by reference to ss 12BAA and 12BAB of the Australian Securities and Investments Commission Act 2001 (Cth). The Applicants accepted that these definitions are, for relevant purposes, identical to the corresponding definitions in the CC Act. This had the consequence, the Applicants accepted, that they could not rely on s 18 of the ACL with respect to those of the pleaded representations found to relate to the acquisitions of shares. 73 The Respondents did not, understandably, make any submissions concerning the effect of s 131A in this case. That being so, I will proceed on the basis conceded by the Applicants, that being the basis most favourable to the Respondents. 74 Whether it be s 18 or s 1041H which is applicable, the principles for assessing whether or not the impugned conduct was misleading or deceptive are, subject to the matter to be mentioned next, the same. It is sufficient for present purposes to refer to the following passage in the judgment of McHugh J in Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; (2004) 218 CLR 592: [109] The question whether conduct is misleading or deceptive or is likely to mislead or deceive is a question of fact. In determining whether a contravention of s 52 has occurred, the task of the court is to examine the relevant course of conduct as a whole. It is determined by reference to the alleged conduct in the light of the relevant surrounding facts and circumstances. It is an objective question that the court must determine for itself. It invites error to look at isolated parts of the corporation's conduct. The effect of any relevant statements or actions or any silence or inaction occurring in the context of a single course of conduct must be deduced from the whole course of conduct. Thus, where the alleged contravention of s 52 relates primarily to a document, the effect of the document must be examined in the context of the evidence as a whole. The court is not confined to examining the document in isolation. It must have regard to all the conduct of the corporation in relation to the document including the preparation and distribution of the document and any statement, action, silence or inaction in connection with the document. (Citations omitted) 75 One difference between s 18(1) of the ACL and s 1041H of the Corporations Act is that the latter Act does not contain any equivalent of s 4(1) of the ACL concerning representations with respect to future matters. 76 Predictions or opinions which prove incorrect, are not, without more, misleading or deceptive: Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 at 88. An expression of opinion may, however, convey that the opinion expressed is held and that there is a reasonable basis for it: Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304 at [33]. 77 Dishonesty or an intention to mislead or deceive are not elements of contraventions of either s 18(1) of the ACL or s 1041H of the Corporations Act. However, the Appplicants allege that some of the conduct of the Respondents was dishonest or that they were, at the least, reckless as to the truth of their statements. Dishonesty or recklessness as to the truth of a statement is of course an element of the tort of deceit. 78 Section 7(1) of the Misrepresentation Act, on which the Applicants rely for their third cause of action, provides (relevantly): 7 - Damages for misrepresentation (1) Where a contracting party is induced to enter into a contract by a misrepresentation made - (a) by another party to the contract; or (b) by a person acting for, or on behalf of, another party to the contract; or (c) by a person who receives any direct or indirect consideration or material advantage as a result of the formation of the contract, and any person (whether or not he or she is the person by whom the misrepresentation was made) would, if the misrepresentation had been made fraudulently, be liable for damages in tort to the contracting party subjected to the misrepresentation in respect of loss suffered by him or her as a result of the formation of the contract, that person is, subject to subsection (2), so liable to that contracting party, in all respects as if the misrepresentation had been made fraudulently and were actionable in tort. (2) It is a defence to an action under subsection (1) - (a) that the person by whom the representation was made had reasonable grounds to believe, and did believe, that the representation was true; or (b) that the defendant was not the person by whom the representation was made and did not know, and could not reasonably be expected to have known, that the representation had been made, or that it was untrue. … (6) In assessing any damages under this section, a court must take into consideration any award of damages under any other provision of this section, or of damages or compensation under any other law, and in assessing damages or compensation in any proceedings under any other law relating to a contract, a court must take into consideration any award of damages under this section. 79 I will refer later in these reasons to relevant aspects of the tort of deceit.

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The witnesses 80 The Applicants led evidence from seven witnesses. 81 The first was Mr Simon Miller, who is one of the joint and several liquidators of the State Companies, VTF Aust and of Status, concerning the prospect of the Applicants recovering their investments from the companies in liquidation. I regarded Mr Miller's evidence as honest and reliable. 82 Mr Schirripa was the Applicants' principal witness. He has some experience in business and management. Over a period of 22 years, he worked in the Schirripa family business, Adelaide Mushrooms. That business, which was very successful, was sold in 2013. Mr Schirripa's position in Adelaide Mushrooms at that time was Sales Manager. This involved him in supervising staff and having day-to-day responsibility for a market store. In addition to his position in Adelaide Mushrooms, Mr Schirripa was President of the South Australian Chamber of Fruit and Vegetable Industries for 10 years. He was also a director of the Australian Chamber of Fruit and Vegetable Industries for an equivalent period. 83 It was apparent that Mr Schirripa believes that he had been deceived by Mr Nestorovic and Ms Pinneri and that the Respondents had used the monies he was induced to advance for their own personal expenditures. I thought that those beliefs coloured his evidence to an extent as it was evident that Mr Schirripa feels strongly about the wrong which he perceives to have been done to him. However, I considered that Mr Schirripa gave his evidence well and, while taking into account the matters just mentioned, regard his evidence as generally reliable. 84 I have reservations about the evidence of Mr Falzon. He had as much interest as did the Respondents in inducing persons to invest in the VTF business, and ultimately received a return of $80,000 for the sale of his interest in RRG without having invested any funds into it. I had the distinct impression that Mr Falzon sought in his evidence to minimise his own involvement in the establishment of the VTF businesses and to attribute matters giving rise to culpability to Mr Nestorovic. I consider that care is to be exercised before acting on his evidence. 85 Mr Mark Dimech invested in RRG before Mr Schirripa became involved. He was induced to do so by Mr Glen Stephens. I considered that Mr Dimech's evidence was generally reliable although I thought that there was some tendency in his evidence to enlarge matters suggesting culpability by Mr Nestorovic. 86 I considered that the remaining witnesses called by the Applicants (Ms Jacqueline Schirripa, Mr Lynch and Mr Frank Schirripa) were honest and reliable and am willing to act on their evidence. 87 The Applicants had provided, in advance of the trial, an affidavit containing the proposed evidence in chief of Mr Stephens. However, they did not call him to give evidence. Counsel explained that Mr Stephens was overseas, and the Respondents did not dispute that that was so. In these circumstances, it would not be appropriate to draw any adverse reference by reason of the Applicants' failure to lead evidence from Mr Stephens. 88 Mr Nestorovic and Ms Pinneri gave evidence themselves and did not lead any other oral evidence. I keep firmly in mind that they did not have legal representation in the trial and were participating in a process with which they were unfamiliar. I also take into account that English is not Mr Nestorovic's first language. He speaks with a pronounced accent and there were some questions whose meaning he did not understand immediately. In her final submissions, Ms Pinneri submitted that it may have been appropriate for Mr Nestorovic to have given his evidence with the assistance of an interpreter. I record, however, that even when the Respondents had legal representation, there was no suggestion that an interpreter would be appropriate. Further, it was obvious, that for the most part, Mr Nestorovic grasped immediately the import of a question and often sought to answer questions even before they had been completed. I am satisfied that Mr Nestorovic's comprehension was more than adequate for him to have given evidence in English. 89 I did not regard either Mr Nestorovic or Ms Pinneri as an impressive witness. I have maintained that assessment of reading and re-reading the transcript. 90 Much of Mr Nestorovic's evidence was marked by implausibility. There were occasions when I had the strong impression that he was fabricating matters as he thought convenient from time to time. There were numerous inconsistencies in his evidence. Some instances of the implausibilities or inconsistencies in Mr Nestorovic's evidence are these: (a) he claimed to have spent $1-$2 million in research and development of the fencing panels but, remarkably, did not produce any records to support expenditure of that magnitude. The claim is in any event inherently implausible because, as counsel for the Applicants submitted, the VTF is not a sophisticated product, and there is no evidence that Status itself or the Respondents had had the resources to expend such a sum on "research and development"; (b) he claimed that his factory in China had acquired an injection moulding machine with which to make plastic components for the fencing panels, whereas it became obvious from his description of the use of the machine that he did not know what an injection moulding machine is, or how it works. I had the firm impression that Mr Nestorovic was prompted to make the claim concerning the injection moulding machine by reason of a question asked in the cross-examination of Ms Pinneri, who had given evidence before him; (c) he claimed to have remembered precise dates of travel to China in 2009 and 2010 without reference to his passport; (d) he claimed to have spent six to eight months a year in China in relation to the research and development of the fencing panels, when that was inconsistent with his presence in Australia, as indicated by business records received in the trial; (e) it was very apparent that Mr Nestorovic would "talk up" the use of the fencing panels, even when his statements were not truthful. An example is his attempt in January 2015 to induce Mr Lynch to participate in the hiring out of panels in Alice Springs. Mr Nestorovic told Mr Lynch that he had a job at a Tennant Creek mine and for some road works on a section of the Old South Road outside Alice Springs. Neither claim was correct. Mr Lynch's evidence and other evidence indicated that Mr Nestorovic generally had a tendency to equate a conversation with a person about possible use of the VTF panels with a commitment by the person's entity to use the panels; and (f) he claimed in the affidavit containing his evidence in chief that it was not until about September or October 2015 that he had realised that, when quoting for jobs, it was necessary to consider not just the cost of providing the VTF panels, but the extra cost of delivering and installing them and of removing them at the conclusion of the hire. Mr Nestorovic contradicted himself on this topic in his cross-examination by asserting that he had told Mr Falzon and Mr Stephens in September 2015 that account had to be taken, in fixing the rental price of the cost of delivering, installing and retrieving the VTF panels. He claimed that he had given regular attention to these costs. When confronted with the inconsistency, Mr Nestorovic said that the statement in his affidavit was incorrect. 91 It is very apparent that Mr Nestorovic was enthused by his development of the VTF panels. He had invested a good deal of time and energy in developing the concept and how it could be realised. The Respondents were prone to describe this as "research and development" but I think that this overstates the position. Instead, Mr Nestorovic worked out how the concept could be converted into reality. 92 Mr Nestorovic also is a natural salesman. He has the innate ability to see opportunities to promote his product. He also knew how to interest others in investing, in particular, by promoting the potential returns. On my assessment, he was prepared to "talk up" the VTF concept and its potential even when that meant exaggerating beyond the bounds of truth, the actual circumstances. 93 I considered that Ms Pinneri gave her evidence in a capable manner. In addition, she conducted the Respondents' defence in the trial. Again, I considered that she did so in a competent manner, taking into account her lack of familiarity with the trial process. I also considered that Ms Pinneri was quick to appreciate where the interests of the Respondents lay in the trial as it developed, and understood ways by which adverse points could be addressed. She had a strong inclination to defend the Respondents' position from the witness box. Some of her evidence was argumentative in nature and there were occasions when I considered that she sought to avoid answering directly questions which she regarded as inconvenient. 94 In the first affidavit containing her evidence in chief made on 14 July 2017, Ms Pinneri deposed to Status being the manufacturer of the VTF panels. However, in cross-examination she acknowledged that she had told the administrators appointed to Status, VTF Aust and the State Companies that there was a "separate" manufacturer of the panels. That must have been before 31 July 2017 because the administrators referred to the debt to the manufacturer in the report of 31 July 2017. 95 Ms Pinneri's credibility was not enhanced by her action on the final day of trial in tendering for admission into evidence a bundle of invoices said to have been provided directly to Status from Ms Zheng in China. These documents were of doubtful authenticity and had not been discovered pursuant to the Court's orders concerning discovery. 96 The effect is that I do not consider that the evidence of Mr Nestorovic or Ms Pinneri can be regarded as reliable on key issues and that I should be circumspect before accepting their evidence about disputed matters. 97 The Court also received a considerable volume of documents comprising business records. 98 In my findings of fact on disputed matters, I have relied generally on the evidence of Mr Schirripa, and indicate now that, with few exceptions, I have rejected the evidences of Mr Nestorovic and Ms Pinneri when it was in conflict with his.

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The factual setting 99 Mr Nestorovic, who was born in the former Yugoslavia in 1948, came to Australia in 1972. Most of his work in Australia has been as a self-employed businessman. The businesses which he has conducted have been diverse: truck driving, a vigneron, a service station proprietor, operator of chicken shops, import/export, small farming, cleaning and shop maintenance. 100 In 2006, Mr Nestorovic incorporated Status and commenced importing items from China for sale in Australia. As noted earlier, the principal items it has imported have been equipment for use in restaurants and bakeries and safety equipment for use in the mining industry. Mr Nestorovic would travel to China periodically with a view to sourcing products which could be imported. 101 In about 2008, as a result of an inquiry from one customer, Mr Nestorovic commenced investigating the potential for importing panels of temporary fencing from China. In particular, he spoke to Nancy Zheng and her father who operated Linhai Hedda. Over the ensuing months, Mr Nestorovic decided on improvements which could be made to the kinds of temporary fencing panels then available. Some of these were of a structural kind; others involved galvanising so as to inhibit rusting; and a third involved the addition of reflective tape covered by thin plastic so as to make the fencing panel highly visible at night. 102 The matters which I have recounted above are drawn from the evidence in chief of Mr Nestorovic. I am willing to accept that evidence as reliable. 103 I will refer later to two agreements, both dated 6 April 2011, made between Status and Linhai Hedda. 104 The VTF panels came in three sizes: 2100 mm (L) x 1800 mm (H) (sometimes referred to as "Tall" fences), 2100 mm (L) x 1800 mm (H), and 2100 mm (L) x 1200 mm (H) (sometimes referred to as "Short" fences). 105 The development of the VTF business proceeded slowly. In mid-2011, Mr Nestorovic caused two full-sized fencing panels to be included in a container of items which was delivered on his behalf to Perth. In August 2012, Status purchased 10 fencing panels from a company in Anping Hebei in Northern China. These panels were sent to Adelaide. 106 In January 2013, Mr Nestorovic caused a testing agency in Shanghai (Leading Testing International Co Ltd) to carry out testing of the VTF panels and he received favourable results. The testing related to the compliance of the panels with Australian Standards and with standards published by the International Standards Organisation and included their tensile strength, ability to withstand wind force impacts, climbing and the like. 107 Although Mr Nestorovic commenced using the name Visible Temporary Fencing Australia in late 2012 or early 2013, VTF Aust was not incorporated until 26 August 2013. 108 On 25 June 2013, an innovation patent for the VTF panels was issued to Ms Pinneri. She and her father were recorded as the inventors. 109 Mr Nestorovic caused 360 VTF panels to be delivered to Adelaide in July 2013. Another 140 panels were delivered to Adelaide in September 2013. 110 The momentum for the development of the VTF businesses increased following a chance meeting between Mr Falzon and Mr Nestorovic in May or June 2013. In that meeting, Mr Nestorovic told Mr Falzon of the nature of his business and of his proposed business with the VTF panels. Mr Falzon and Mr Nestorovic exchanged contact details. There was disagreement between the two of them as to the circumstances in which they next had contact. Mr Falzon said that two or three weeks after their chance meeting, Mr Nestorovic telephoned him and said that he had a business proposition to discuss. Within a few days of that telephone call, he met Mr Nestorovic at Status' Prospect Road showrooms. Mr Nestorovic denied that he had called Mr Falzon, who he said had just appeared at the Prospect showrooms. Mr Nestorovic said that he showed Mr Falzon "what Status did" and some sample fencing panels. He said that Mr Falzon said there and then that he wished to go into business with him in relation to the fencing. Mr Nestorovic gave Mr Falzon a sample of the fencing to take away with him. I regard Mr Falzon's account as more plausible and, as already indicated, have doubts about the reliability of much of Mr Nestorovic's evidence. I consider that Mr Falzon's account of their initial contact is more likely to be accurate. 111 On the basis of Mr Falzon's evidence, I make the following findings concerning the meeting at the Prospect Road showrooms. Mr Nestorovic showed Mr Falzon the VTF panels and said: he had invented the product after extensive research; he owned a patent on the product; he wanted to hire the VTF panels rather than selling them because he wished to be in control of his invention; there was "a massive demand" for temporary fencing panels; because the VTF panels had high visibility and no one else in Australia had them, they could be rented for much more than standard fencing panels; and he had a manufacturing plant in China which could produce the panels. 112 Mr Nestorovic asked Mr Falzon whether he would like to go into business with him in relation to the hiring of the VTF panels throughout Australia. Mr Falzon responded by saying that he was not in a financial position to invest but could bring manpower. Mr Nestorovic told him that he would need to secure some investment of funds in order to help buy VTF panels if he wished to be involved. He said that he (Mr Nestorovic) would go 50/50 with any investment made by Mr Falzon in order to buy fencing. He also said that the money would be used to pay for the cost of manufacturing the fencing in China. 113 Following the meeting, Mr Falzon contacted Mr Stephens and Mr Forrest and told them about the business proposal. Both were interested in being involved. Messrs Falzon, Stephens and Nestorovic then had another meeting at the Prospect Road showrooms. Shortly afterwards, and probably towards the end of May 2013, Mr Forrest came to Adelaide from Perth. Messrs Falzon, Stephens and Forrest had a further meeting with Mr Nestorovic at his Paralowie property. 114 In late July 2013, Messrs Falzon, Stephens and Forrest agreed to raise money to invest in the VTF business. Their discussions with Mr Nestorovic and Ms Pinneri had, by that time, developed to the extent that there was agreement that there should be a separate VTF company in each State and Territory and that VTF Aust would own 55% of the shares in each company. The number of State Companies in which the RRG Founders would become involved would depend on the amount they were able to obtain for investment. 115 Some other events occurred in the same period. Mr Falzon made a "cold call" to another hire company, Australian Temporary Fencing (ATF) and ascertained that their prices were around $9 per panel per month. This was much less than Mr Nestorovic had suggested as the available hire rates. 116 Mr Falzon and Mr Stephens prepared some spreadsheets containing projections of the income which agents could derive from the hire of the VTF panels in Western Australia, New South Wales and "All States" as well as cash flow projections. Mr Falzon claimed that Mr Nestorovic had requested that they prepare those projections and had provided the inputs for them. However, on my assessment of Mr Falzon and Mr Nestorovic, I think that unlikely. The spreadsheets are much more likely to have been the initiative of Messrs Falzon and Stephens. They were the ones who were actively trying to interest potential agents, and the spreadsheets were prepared for that purpose. 117 Mr Falzon said that Mr Nestorovic had given him the pricing figures which he and Mr Stephens used in the spreadsheets. He said that he had discussed the figures with Mr Nestorovic "a number of times". Mr Nestorovic denied having any input into the preparation of the spreadsheets. On my assessment of Mr Nestorovic, I doubt that he would be capable of preparing a spreadsheet by himself. But that does not mean that he did not provide some of the inputs used by others. 118 I have considered the evidence of Mr Falzon carefully given my reservations about the reliability of his evidence. On balance, I am willing to accept that Mr Nestorovic did contribute to the preparation of the spreadsheets. I think it unlikely that Mr Falzon would have guessed the cost of the VTF panels so as to derive the costs figures in the spreadsheets. Nor is it likely that he would simply have selected for himself the projected numbers of VTF panels which could be hired out. In his cross-examination, Mr Nestorovic agreed that he had discussed rental pricing with Messrs Falzon and Stephens, including the prices Bianco Hire had suggested would be appropriate, the need to cover delivery, installation and pick-up costs, and the variable locations to which the VTF panels may have to be delivered. It is pertinent that the rate of hire of $15 per panel per month is less than the hire rates which Mr Nestorovic was asserting at the time, but that may reflect some compromise. I also think it unlikely that Messrs Falzon and Mr Stephens would have prepared projections of an agent's income without reference to Mr Nestorovic, who was to control these agreements. 119 Finally, I note that, on 7 October 2013, Mr Falzon sent an email to Mr Stephens, Mr Forrest and Ms Pinneri attaching what he described as "my first go at fence prices". These were proposed prices to customers. It is consistent with Mr Falzon seeking the involvement of the Respondents in the pricing arrangements. For these reasons, I do not accept as truthful Mr Nestorovic's denial of any involvement in the preparation of the spreadsheets. I think it likely, and so find, that each of Messrs Falzon, Stephens and Nestorovic collaborated in the preparation of the spreadsheets and the projections. 120 Mr Falzon also prepared a promotional brochure for the VTF panels for use in the VTF business. 121 Mr Falzon said, and I accept, that he had numerous conversations with Mr Nestorovic about the proposed VTF business. Some were of a general kind but in some Mr Nestorovic spoke of the hire contracts he had in prospect: a job at Coober Pedy in relation to the redevelopment of the football oval involving the hire of 250 panels at $23 per panel per week; a job at the Brisbane Airport to be obtained through a "union contact", which could involve the hire of 10,000 panels at $18 per panel per week; and a job in Darwin involving a member of the Paspaley family which would require 1,000 panels. Other jobs too were mentioned. Mr Nestorovic told Mr Falzon repeatedly "it's all happening" and that the jobs were "ready to go". 122 Mr Falzon said, and I accept, that it was the prospect of the job at Brisbane Airport, as described by Mr Nestorovic, which really attracted his interest. He believed what he had been told. 123 Messrs Falzon, Stephens and Forrest agreed to establish an investment vehicle by which shares in the State Companies could be acquired. On 30 September 2013, RRG was incorporated and the RRG Unit Trust Deed executed. The RRG Founders then solicited investments from friends and acquaintances. 124 By the first week of October 2013, the RRG Founders had raised $100,000. Over the next few months, they raised a further $120,000. This was the source of the monies advanced by RRG to Status in the period from 11 October 2013 to 22 January 2014 as shown in the table set out earlier in these reasons.

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The February 2014 café meeting 128 The next step in Mr Schirripa becoming involved occurred in February 2014 when he met Mr Falzon and Mr Stephens at a Hindmarsh café. At this meeting, Mr Falzon or Mr Stephens told Mr Schirripa that RRG had raised over $200,000 for investment into the VTF businesses; that that money had been used to purchase most of the 45% share in the South Australian and Western Australian companies; that RRG had insufficient monies to complete the investment in the Western Australian and Northern Territory companies; that if he invested, his funds would be used to purchase the remainder of the 45% share available in the Western Australian and Northern Territory companies; that Mr Nestorovic would own the majority 55% shareholding in each of the businesses into which RRG invested; that all the money invested by RRG was to be used to buy VTF panels to be hired out; that whatever number of VTF panels RRG's investment bought, Mr Nestorovic and Ms Pinneri would make an equal contribution by providing the same number of fencing panels; and that the plan was to secure agents in other places who would assist in renting the VTF panels in consideration for receipt of a share of the profits. 129 Mr Schirripa said that he could not recall who of Mr Falzon and Mr Stephens made these statements but that each had confirmed the statements made by the other. 130 During the course of the meeting, Mr Falzon gave Mr Schirripa several documents entitled: (a) Offer of Investment; (b) Agents Cashflow per State estimated; (c) Agents and VTF Forecast - Western Australia; (d) Agents and VTF Forecast - New South Wales; (e) Agents and VTF Forecast - All States; and (f) Agents Cashflow All States. 131 Each of these documents had been prepared by Mr Falzon and Mr Stephens. Documents (b) to (f) were copies of the spreadsheets to which I referred earlier. 132 The document entitled "Offer of Investment" comprised one and a half pages. It provided (relevantly): OFFER OF INVESTMENT Preamble An offer of investment is presented to prospective investors for a new start up business in the construction industry. The offer is not an investment scheme or registered managed investment and is presented based on the assumptions and forecast of the business owner's knowledge and experience. Visible Temporary Fencing Investments The Business RRG Unit Trust is a Unit Trust being formed by Robert Falzon, Glen Stephens and Robert Forrest as trustees. Each trustee is a unit holder and holds 25% unit holdings each of the newly formed Unit Trust. The trust will hold 45% share holding in 7 newly formed companies to be called Visual Fencing SA, Visual Fencing WA, Visual Fencing Vic, Visual Fencing NSW, Visual Fencing QLD, Visual Fencing NT and Visual Fencing ACT. The Trust is allotting another 20 units to investors in minimum 1 unit lots at $40,000 per unit in order to raise $800,000.00 for the purchase of 4000 visible fencing panels as part of its 45% share holding in each newly formed company for the whole of the Australian Market. The offer and price for unit[s] may change at anytime. The other 55% of each newly formed company is owned by the inventor of the Visible Temporary Fencing product. They will also put in 4000 fences giving the shared investment 8000 fences. It is our intention over the next 3 years to get to 250,000 rented annually fence panels Australia wide and hoping to get to a figure of around 500,000 panels in the following years. Please note attached is profit and loss figures based on 1000 panels starting in Perth and growing through self funding to 50,000 panels. We have deducted 10% for agents to act for us to run the business if we feel it's a faster option. These figures are assumptions only as this is a new release product and we have no previous figures to compare to. There are over 5 million temporary fences in Australia and only Visual Fencing has the rights to Visible Temporary Fencing patent and product. The figures supplied in the attached cashflow projections are for the 100% share of the business. We being RRG Unit Trust will have 45% of the proceeds. 133 The periods to which each spreadsheet related varied but most were for the period February 2014 to November 2015 and projected handsome income in each of the months in those periods. The figures in the spreadsheets were based on an expected income of $15 per panel per month. Mr Schirripa said, and I accept, that Mr Falzon told him that he and Mr Stephens had prepared the spreadsheets using information on pricing provided by Mr Nestorovic. 134 Mr Schirripa also said, and I accept, that he was impressed by the information in the spreadsheets. He thought that, even if the VTF panels could be hired out for only half the predicted price of $15 per panel per month and the business generated only half of the predicted volumes, the hiring would still generate "a decent return". 135 At the conclusion of meeting, Mr Schirripa told Mr Falzon that he was interested in investing in VTF but that he wished to know more about RRG and the unit prices. Shortly afterwards, Mr Falzon sent the following letter to Mr Schirripa: Hi Rick RRG was originally Founded by Glen [Stephens], Robbie [Forrest] and myself. We agreed to set up on the basis that we give Michael an extra 5% of the business therefore the split was 55/45 for VTF. This way RRG had 45% share. We were asked to put in $800,000 over a period of time into the business to get all States signed up. It was also agreed that we would help Anna [Pinneri] and Michael [Nestorovic] in running the business and setting up all the States and Robbie would look after Perth and Darwin and Glen was happy to go and look after Queensland and NSW while I looked after South Australia and Victoria. Obviously now with the setting up of agencies our workload in the other states will be far easier moving forward. Michael had another party who wanted to buy into the business but not work it. However Michael chose us as he did not have the time to run the business and that we agreed not to bleed the company of funds while it was getting started. The three of us were not going to draw any wages and would only get dividen[d]s from the company when other shareholders received theirs. It is our hope to pay out dividen[d]s as we receive them with 50% going back to all investors and 50% to be used to give all investors back their initial investments. We decided to find investors in the company to help us raise the $800,000. Our plan was to sell 10 shares at $20,000 each for the first stage. We would then sell another 10 shares at $40,000 each and finally another 4 shares at $50,000 each. This would then leave us with approx 75% of the company between the 3 of us. We sold the initial 10 shares and raised $200,000 last year and since we have been in discussion with yourself re the next stage. We have also put in approx $25,000 of our own money for Legal Fees and other start up costs. I cant tell you due to confidentiality how much each person put in but I can tell you that my daughter put in $20,000 for one share last October. No one has paid under $20,000 for a share. Regards Robert 136 Mr Schirripa said, and I accept, that he ascertained from this document that none of Messrs Falzon, Stephens or Forrest had put any of their own money into RRG.

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Mr Schirripa meets Mr Nestorovic 137 Mr Falzon then arranged for Mr Schirripa to meet Mr Nestorovic. This meeting, which was also attended by Mr Falzon and Mr Stephens, occurred at a café. Mr Schirripa said that the discussion of the meeting was "broad and general" but that, during the course of the meeting, Mr Nestorovic made statements to the following effect: (a) he had been developing the VTF product for several years; (b) he had researched the demand for the product extensively; (c) he had received extremely positive market feedback regarding the level of demand for the fencing, and his research demonstrated significant interest in Australia for the product; (d) he had several national leads and contacts which would help him launch the business successfully; (e) he contemplated the business in each State being conducted by a separate company with agents secured to hire out the fencing in each State; (f) his Company, Status, manufactured the fences in China; and (g) he would provide the contacts and that Messrs Falzon, Stephens and Schirripa would do more of the "leg work" for the manual setting up of the fences in South Australia. 138 In addition, the spreadsheets were discussed at the meeting. Mr Schirripa said, and I accept, that during the course of the discussion, Mr Nestorovic said that his research indicated that rentals of $15 per panel per week could be achieved, and that he knew that was so because "I have been working on this for long time now". 139 Mr Schirripa met Mr Nestorovic for a second time at a café meeting in which Mr Falzon and Mr Stephens also participated. Mr Schirripa said, and I accept, that he could not recall whether some matters had been said at the first or the second of the café meetings, but that Mr Nestorovic had said: (a) he had made arrangements with a female member of the Coober Pedy Council for it to hire 800 VTF panels at $17 per panel per week for between six and 12 months for the upgrade to the Town's drive-in theatre and football oval. He also said that the Coober Pedy Council had a place for storage of the panels and that he, Mr Stephens, Mr Falzon and Mr Schirripa would travel to Coober Pedy to erect the fencing; (b) he had a contact with a union representative in Brisbane through which VTF would be contracted to supply panels for a development at the Brisbane Airport. This was to be a large job for which many panels would be required; and (c) that he had been to Darwin to research the potential for the use of the fencing panels there and had had a lot of interest. 140 At about this time, Mr Schirripa assisted Mr Nestorovic and Mr Falzon to erect some VTF panels for display purposes on the corner of Port Road and South Road. The purpose was to promote VTF panels for use in the major Torrens to Torrens development of South Road. I reject Mr Nestorovic's claim that he met Mr Schirripa for the first time on this occasion and that Mr Schirripa had told him then that he was "involved with" RRG.

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Events subsequent to Mr Schirripa's first investment 142 Mr Schirripa then discussed the agency proposal with his accountant, Mr Letcher, in the firm of Letcher Moroney Chartered Accountants. Following that discussion, he sent an email to Ms Pinneri raising a number of queries about the proposed arrangement. One question which Mr Schirripa asked was: In relation to supply is the factory in China owned or contracted out by Status? 143 Ms Pinneri responded by email on 17 March 2014. In response to the query concerning the ownership of the factory in China, Ms Pinneri said: [T]he company in relation to Status is owned and run by Status which has nothing to do with VTF, Status is the supplier of the fence to VTF there will be a contract between the 2 parties for supply. 144 At about the same time, Mr Schirripa telephoned another temporary fencing hire company, ATF, and enquired as to their hiring costs. However, he did not obtain a clear answer because ATF made it plain that any quotation which it was prepared to give would depend upon details of the proposed hire including, the number of panels, the period, the location and circumstances in which the panels would be used. 145 Following discussions with his wife, Mr Schirripa decided not to become an agent because he would not have any control over the VTF panels. At the same time, he told Mr Falzon that he was still interested in making a direct investment into RRG. 146 During the remainder of March 2014 and in early April 2014 before Mr Schirripa made a decision to invest, he had numerous discussions by telephone with Ms Pinneri in which she asked him to indicate whether he was "in or out". In the course of those conversations, Ms Pinneri made a number of statements to Mr Schirripa which I am satisfied included the following: (a) the price of each VTF panel was $224 plus GST; (b) the VTF panels made by Status were of high quality and that was the reason for the cost; (c) if Mr Schirripa invested in the business to buy VTF panels, they (the Respondents) would match his investment by putting in the same value of stock and so provide the same number of VTF panels for the business; (d) the Respondents would make their contribution through VTF Aust; and (e) Mr Nestorovic did not want the VTF business to be held up because Mr Schirripa did not invest, as they had VTF panels ready to come from China. The third of these statements is particularly pertinent to my findings concerning the 16th representation. 147 At about this time, Mr Schirripa made the decision in principle to invest in the VTF business by purchasing units in RRG. He and his wife agreed that the investment would be made through Schnik. 148 Mr Schirripa was absent from Australia on a holiday from 2 April to 17 May 2014. Before he left, he discussed the investment with Mr Letcher and provided him with a copy of the RRG Unit Trust Deed and the SHA for VTF (SA). He also transferred $435,000 from Schnik to the Letcher Moroney Trust Account as he had been told by Mr Falzon and Mr Stephens that this was the amount which RRG would need to fund the purchase of VTF panels for the Northern Territory and Western Australia. While absent from Australia, Mr Schirripa received advice from Mr Letcher to the effect that he and a solicitor had reviewed the documents and were satisfied that they were complete. Mr Schirripa then authorised Mr Letcher to pay the sum of $435,000 on behalf of Schnik to RRG and the latter did so on 14 April 2014. This was the first investment of monies by interests associated with Mr Schirripa. 149 Shortly after Mr Schirripa's return to Australia, on 20 May 2014 he was appointed a director of each of VTF (SA), VTF (WA) and VTF (NT). Mr Stephens had resigned as a director of each of those companies a month earlier and Mr Schirripa was appointed director in his place. 150 One of the means by which Mr Schirripa sought to locate potential jobs was by accessing the Cordell website. That was a website, accessible only by subscription, which listed with appropriate details, invitations to tender for construction and like jobs. 151 I will make findings regarding subsequent events when addressing the individual pleaded misrepresentations. In the meantime, I record that Mr Schirripa commenced spending time at the Prospect office of Status, where he had his own desk and associated equipment. In discussions between himself and the Respondents, it was agreed that he would promote the VTF panels to potential customers and seek to obtain contracts for their hire. He also participated in the unloading and storage of the VTF panels as they arrived in Adelaide. These generally were the kinds of activities in which Mr Schirripa engaged. 152 There was disagreement at the trial as to the number of contracts for the hire of the panels which had actually been achieved. I am satisfied on the evidence that there were the following contracts: (a) January 2015: VTF (SA) for the supply of 140 panels for seven days in relation to the Tour Down Under; (b) 20 August 2015: VTF (SA) for the supply of 50 panels at $3 per panel per week to Ace Traffic Control for two weeks; (c) August 2015: VTF (SA) for the supply of 122 panels at $3 per panel (as well as the supply of shade cloth) to the Tea Tree Gully Council; and (d) 2 June 2015: VTF (Vic) for the supply of five panels at $5 per day to Caulfield RSL. 153 There is also evidence that VTF (NT) may have obtained a job at Darwin Airport, but the evidence did not disclose the details. 154 It is not possible on the evidence to make findings about whether there were any other contracts but I am satisfied that, if there were, they were in the period between April 2014 and October 2015 and of limited number. 155 On 15 October 2015, Mr Schirripa resigned as a director of the State Companies, other than VTF (Qld) and VTF (Vic) of which he had never been appointed director. Thereafter, he ceased to have any active involvement in the VTF business. Thereafter, the Respondents were the active participants in the business. As already noted, all the VTF companies and Status passed into administration in 5 July 2017.

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The relationship between Status and Linhai Hedda 162 Mr Nestorovic described Ms Nancy Zheng and her father as "people in China who assisted Status in relation to the Status business". He also said that Ms Zheng was paid commissions by Status. He deposed to actions he had undertaken in China with Ms Zheng to locate suitable fencing panels and to suggestions which he had made for their improvement. 163 Mr Nestorovic deposed that, in relation to the actual manufacture of the VTF panels, Ms Zheng and her father had established Linhai Hedda. Subsequently, on 6 April 2011, Status entered into two agreements with Linhai Hedda: a Joint Venture Agreement (JVA) and an Exclusivity Agreement. The substantive parts of the JVA were: COMMENCEMENT DATE: 06/04/2011 Linhai Hedda takes on the commitment and undertaking to commence a joint venture with Status Shop Maintenance Pty Ltd. Joint Venture meaning that both parties Linhai Hedda and Status Shop Maintenance Pty Ltd will be working in conjunction with each other exclusively to source various products from various companies throughout China. Status Shop Maintenance Pty Ltd to use all sourcing relations through Linhai Hedda and Linhai Hedda to not work with any other company but Status Shop Maintenance Pty Ltd. Status Shop Maintenance to bare (sic) all costs in relation to all expenses that are incurred within the joint venture - Rent commitments - Outgoings - Travel expenses throughout China - Freight expenses within China - Product purchases and sample purchases - Payments to be made in full on commencement of orders All costs to be bared (sic) by Status Shop Maintenance Pty Ltd in relation to any work that is to be done at the request of Linhai Hedda. Linhai Hedda to fully commit to obtaining the correct sources of various companies and factories relating to any product lines that Status may request. Linhai Hedda to pay only company costs in relation to Linhai Hedda and ensure all requirements are fulfilled. Status Shop Maintenance to bare (sic) all costs within Australia. Joint venture is valid until both parties are no longer willing to commit. 164 The substantive terms of the Exclusivity Agreement are: COMMENCEMENT DATE: 06/04/2011 Linhai Hedda takes on the undertaking to work exclusively with Status Shop Maintenance Pty Ltd in relation to any new product that needs to be developed, deigned (sic), tested, patented, produced and manufactured by Status Shop Maintenance Pty Ltd. Any products that Status has rights or undertakings and ownership with, will be produced under the leadership of Status Shop Maintenance Pty Ltd. All costs in relation to any ownership deals will be at the cost of Status Shop Maintenance Pty Ltd. Linhai Hedda takes the undertaking to full fill (sic) all obligations of physical production under the leadership and guidelines of Status Shop Mainteance Pty Ltd. All manufacturing costs will be paid by Status Shop Maintenance Pty Ltd to formulate - Factory, manufacturing, production costs - Testing requirement costs if and when needed - All outgoing costs in relation to the manufacturing of any product lines directly through Linhai Hedda Linhai Hedda to make a full exclusive commitment to ensure - All exclusive manufacturing in China warehouse to be running smoothly and in timely fashion while Status directors are not in China - Ensure all monies that are sent are used for the manufacturing process and expenses - Ensure all information is to stay within Linhai Hedda and no other Chinese manufacturers or companies are able to obtain exclusive information or designs that are introduced by Status Shop Maintenance Pty Ltd Exclusivity agreement is to be full filled (sic) until both parties are willing to end. All product designs, information, rights and patented products are owned outright either by Status Shop Maintenance Pty Ltd or by the directors individually. 165 As is apparent, neither of the two agreements was prepared professionally. 166 The subject matter of the JVA appears to be the sourcing of products in China. It does not purport to be an agreement concerning manufacture. 167 The effect of the Exclusivity Agreement is not altogether clear, but it does seem to contemplate that Status would manufacture some products in China. 168 Mr Nestorovic deposed in the affidavit containing his evidence in chief that, in April 2013, Status and Linhai Hedda had established "a bigger factory space" to start making more VTF panels. He said that the factory was operated by Status and Linhai Hedda pursuant to the JVA and the Exclusivity Agreement; that Status paid all outgoings such as rent and the expenses relating to the manufacture of the VTF panels; that the factory operated in accordance with his directions; and that he had referred to the factory as "my" or "our" factory. The Respondents had pleaded the same matters in their filed Defence, at [16.17]. In his oral evidence, Mr Nestorovic claimed that the factory was about 4,000 m2 and that ordinarily six to eight people worked in it, more if they wished to increase production. He said that the raw materials in the form of tubing, mesh and the reflective tape came from elsewhere but the fabrication of the panels and the manufacture of the feet for the panels occurred in the factory. 169 Mr Nestorovic deposed that some of the costs associated with the manufacture of the VTF panels were paid directly by Status and the balance by Linhai Hedda. Linhai Hedda would invoice Status a certain amount in relation to each item that was manufactured and transported. Throughout his evidence, Mr Nestorovic referred to Status as having manufactured the VTF panels. At times, he insisted that Linhai Hedda had not produced the panels but was just a trading company. 170 Ms Pinneri deposed in the affidavit containing her evidence in chief that Status had been liable for all the manufacturing costs and outgoings, including rent, in relation to the manufacture of the VTF panels. She said that, because of this, she had been accustomed to refer to the factory in China making the VTF panels as "Status' factory" or as "our factory". She agreed that she had made statements to that effect to Mr Schirripa. 171 Apart from the JVA and the Exclusivity Agreement, the documentary evidence does not support the Respondents' claims that Status was the manufacturer of the VTF panels. Instead, it indicates that Status acquired the VTF panels (and other products) from Linhai Hedda and that the two companies operated on an arms-length basis as importer and exporter respectively. 172 Linhai Hedda (describing itself as "Linhai Hedda Import & Export Co. Ltd") rendered invoices (each entitled "Commercial Invoice") to Status in relation to each supply of VTF panels. Commonly, the invoices also included charges for other products supplied by Linhai Hedda to Status. 173 I summarise the details on the Linhai Hedda invoices concerning the supply of VTF panels as follows: Date Quantity Unit Price AUD Amount AUD 07/11/2012 500 $36.00 $18,000.00 30/07/2013 360 (with feet) $50.00 $18,000.00 16/09/2013 140 (with feet) $50.00 $7,000.00 02/12/2013 425 $57.00 $24,225.00 30/05/2014 495 $48.50 $24,007.50 13/06/2014 507 $48.50 $24,589.50 16/07/2014 529 (2.1 m) $62.00 $32,798.00 16/07/2014 500 (1.2 m) $48.50 $24,250.00 11/08/2014 940 (2.1 m with feet) $62.00 $58,280.00 11/08/2014 500 (1.2 m with feet) $48.50 $24,250.00 25/08/2014 840 (2.1 m with feet) $62.00 $52,080.00 17/09/2014 1,216 (2.1 m with feet) $62.00 $75,392.00 14/10/2014 194 (2.1 m) $62.00 $12,028.00 29/10/2014 982 (2.1 m with feet) $62.00 $60,884.00 08/12/2014 1,354 (2.1 m with feet) $62.00 $83,948.00 08/12/2014 500 (1.2 m) $48.50 $24,250.00 12/03/2015 1,632 (2.1 m with feet) $68.20 $111,302.40 12/03/2015 95 (1.2 m) $53.35 $5,068.25 25/03/2015 1,020 (2.1 m with feet) $68.20 $69,564.00 25/03/2015 406 (1.2 m) $53.35 $21,660.10 18/04/2015 201 (2.1 m with feet) $68.20 $13,708.20 18/04/2015 213 $53.35 $11,363.55 21/04/2015 1,047 (2.1 m with feet) $68.20 $71,405.40 21/04/2015 300 (1.2 m) $53.35 $16,005.00 22/06/2015 700 (2.1 m with feet) $68.20 $47,740.00 13/07/2015 252 (2.1 m with feet) $68.20 $17,186.40 13/07/2015 695 (1.2 m) $53.35 $37,078.25 25/08/2015 1,041 (2.1 m with feet) $68.20 $70,996.20 25/08/2015 64 (1.2 m) $53.35 $3,414.40 25/08/2015 125 (2.1 m with feet) $68.20 $8,525.00 25/09/2015 1,009 (2.1 m with feet) $68.20 $68,813.80 25/09/2015 159 (1.2 m) $53.35 $8,482.65 25/01/2016 25 $68.20 $1,705.00 25/01/2016 32 (1.2 m) $53.35 $1,707.20 17/02/2016 332 (1.8 m with feet) $68.20 $22,642.40 17/02/2016 503 (1.2 m) $53.35 $26,835.05 17/02/2016 202 (2.1 m) $72.20 $14,584.40 25/05/2016 32 (1.2 m) $53.35 $1,707.20 25/05/2016 333 (1.8 m with feet) $68.20 $22,710.60 01/06/2016 63 (2.1 m) $72.20 $4,548.60 01/06/2016 1,261 (1.8 m) $60.00 $75,660.00 01/06/2016 189 (1.2 m) $53.35 $10,083.15 10/07/2016 63 (2.1 m) $72.20 $4,548.60 10/07/2016 189 (1.8 m) $60.00 $11,340.00 10/07/2016 32 (1.2 m) $53.35 $1,707.20 Total $1,346,075.00

[52]

176 The total amount paid by Status by way of international transfers (these being payments to Linhai Hedda) in the period 11 October 2013 to 22 July 2016 was $1,648,689. The difference between that figure and the figure of $1,346,075 shown in the above table appears to relate principally to products which Status acquired from Linhai Hedda other than VTF panels and ancillary equipment. This meant that there was no, or very little, money which could have been expended by Status in China on rent, wages, raw materials and the like. 177 The Linhai Hedda invoices indicated that payment was to be "T/T", which I understand meant that it was to be in accordance with the terms of trade between Linhai Hedda and Status. Further, the invoices included the notation "The items on the above commercial invoices are new and unused and have not been field tested or factory trialled". 178 The provision of a commercial invoice of the kind provided by Linhai Hedda to Status in respect of the VTF panels would not have been necessary had the relationship between the two companies been that as described by the Respondents. Nor would the notations concerning terms of trade and the character of the items have been necessary in that circumstance. Mr Nestorovic's claim that Linhai Hedda had raised the invoices only for the purposes of satisfying government requirements and to facilitate customs clearance was not credible. 179 There is no documentary evidence of Status having paid the rent and other outgoings of a factory in China. There is no documentary evidence of Status having purchased machinery and other equipment for a factory, as Mr Nestorovic claimed. Nor is there evidence of Status having purchased the raw materials or components with which to make the VTF panels. Nor is there any documentary evidence of Status having engaged in the activities which would be expected incidents of the operation of a factory. Mr Nestorovic accepted that Status had not been registered to manufacture in China. It is in any event implausible that Status would have owned and operated its own factory in China. It is also implausible that, as Ms Pinneri claimed, Linhai Hedda had in late 2011 or early 2012, rented a factory for the sole purpose of manufacturing VTF panels. The development of the product at that stage was still embryonic and there had not been any orders for the factory to fill. 180 Ms Pinneri acknowledged in her cross-examination that Status did not have a business address in China and that it was Linhai Hedda which had supplied the VTF panels to Status. She said that she had "deemed" Status to be the manufacturer because the VTF panels had not been manufactured previously, because the Chinese company had been "opened … just to do our fence in conjunction with us" and because "we paid the expenses, we paid the rent … we paid freight and transport charges and all that within China". 181 Ms Pinneri acknowledged that the Tender Bundle of Documents (which had been prepared by the parties through a process of consultation and at a time when the Respondents were legally represented) did not include any documents evidencing payments by Status to Linhai Hedda for rent. She also acknowledged that Linhai Hedda had not manufactured any of the other products acquired from it by Status, saying that Linhai Hedda manufactured only the VTF panels and the associated equipment such as the feet.

[54]

The significance of the Manufacturing Representation 186 The falsity of the 17th representation is significant in a number of ways. First, it meant that instead of the State Companies acquiring the VTF panels from the manufacturer, as the Applicants believed, they were acquiring them from an intermediary and, further, an intermediary controlled by the Respondents. Amongst other things, this meant that there was the potential for the intermediary to be charging its own margin. 187 Secondly, the representation had the effect of obscuring the nature of the price of the VTF panels invoiced to the Applicants. Instead of the amounts which the Applicants were invited to invest from time to time being determined by reference to the manufacturer's costs of manufacturing the VTF panels and the cost of transporting them to Australia, these amounts were, in effect, determined at the discretion of the Respondents because they determined the mark-up Status would charge on the cost of the acquisition from China. The representation had the effect that the Applicants were not alerted to that fact. Although as a director of each of the State Companies, Mr Nestorovic had duties to each, he did not bring this significant information to the attention of his co-director, Mr Schirripa. Instead, Mr Nestorovic and Ms Pinneri induced him to believe that the price which the State Companies were paying for the VTF panels was the manufacturer's price together with the transport and importation costs. 188 Thirdly, the 17th representation bears on the 16th representation (the Matching Representation), to which I will turn shortly. It meant that instead of the Respondents, by VTF Aust or Status, making their contributions to the State Companies by providing VTF panels which Status itself had manufactured, they would do so by providing panels obtained from an intermediary. 189 Mr Schirripa explained the significance to him of the representation that Status was the manufacturer of the VTF panels as follows: Believing Status was the manufacturer was one of the main reasons I invested because I thought the manufacturer would be able to provide the fences for the best price. If I knew that Status was not the manufacturer, I would have thought the State Companies would engage directly with the manufacturer to purchase fencing. If I had known that Status was not the manufacturer of the fencing, I do not believe I would have caused Schnik to invest the way it did, either directly or via RRG. If I had known that [Mr Nestorovic and Ms Pinneri] were being untruthful to me about who the manufacturer of the fencing was, there is no way I would have caused Schnik to invest any money in the VTF business, whether directly or via RRG. 190 Mr Schirripa also explained the significance to him of Status not being the manufacturer in the following answer in his cross-examination: Why would I go down to the shop and pay $200 for a jug when I can go to the manufacturer myself and pay $20 for it? It makes no sense. Why would I want to be involved with someone who represented to me to be the manufacturer and then turned out not to be the manufacturer just so they could take and pocket an extreme amount of money from investors that were being genuine and honest with their investment? 191 The Respondents sought to counter that answer by pointing out that, because of the patent which they held, it would not have been open to the Applicants to have acquired the products from the manufacturer without their consent. Mr Schirripa's response was straightforward: he simply would not have been interested in investing his funds to acquire the product at a mark-up on the manufacturer's price. 192 Evidence of this kind has to be treated with caution as it involves a witness giving evidence of his or her attitude in a hypothetical situation and in which the potential for ex post facto rationalisation is obvious: Rosenberg v Percival [2001] HCA 18, (2001) 205 CLR 434 at [26]; Campbell v Backoffice Investments at [146]. Nevertheless, I accept Mr Schirripa's evidence: partly because of my assessment of his evidence generally and partly because Mr Schirripa had indicated contemporaneously the importance to him of knowing the identity of the manufacturer.

[55]

The 16th representation - the Matching Representation 193 The Applicants referred to the 16th representation as the "Matching Representation". There are two parts to the pleading of the representation. In the first part, the Applicants allege that between September 2013 and July 2015, Mr Nestorovic represented to RRG, Schnik and Mr Schirripa that VTF Aust would match, or had matched, any funding provided to the State Companies by RRG, Schnik and FSN by providing the State Companies with fencing panels and ancillary equipment to a value equivalent to the amount of the investment of RRG, Schnik or FSN, as the case may be. In the second part, the Applicants allege that Ms Pinneri had made the same representation to RRG, Schnik and Mr Schirripa in the period between March 2014 and July 2015. 194 The representation was to the effect that the Respondents would, through VTF Aust, make the same level of contribution to the VTF business as did the investors. They would do so by a contribution in kind (by providing VTF panels) rather than in cash. At times in the submissions, counsel for the Applicants put the claim slightly differently, namely, that the representation was that the Applicants' money would be used to purchase half the required stock from Status and that the Respondents would match that by contributing, from their own resources, the other half of the required stock. This was said to be a misrepresentation because in fact, the Respondents used the investors' money to acquire the whole of the VTF panels for the State Company in question. They were able to do this by acquiring the panels at a cheaper price than that represented to the investors. 195 The Respondents deny making the Matching Representation. Despite the Respondents' denial, there is a good deal of evidence indicating that a form of representation that they would match the Applicants' investments was made, and that it was made more than once. The issue is whether that representation was in the form, or to the effect, alleged by the Applicants. 196 The Applicants accepted that, if the conduct they allege is established, the 16th representation had been made with respect to the acquisition of shares in all the State Companies, with the consequence that they could not rely on s 18(1) or s 4(1) of the ACL. 197 The Applicants emphasised that, in considering whether the Matching Representation had been conveyed in the pleaded terms, it was the conduct of the Respondents viewed as a whole which should be considered: Campbell v Backoffice Investments at [25] (French CJ); Butcher v Lachlan Elder Realty at [109] (McHugh J). This meant that regard should also be had to all the surrounding facts and circumstances. They submitted that, in the context in which the Respondents had told the Applicants that they would match the number of VTF panels which they funded, the Respondents had represented that they would provide VTF panels of equivalent value. 198 Although some of the Applicants' submissions suggested that the Respondents had made misrepresentations by silence, there was no pleading to that effect.

[56]

The making of the Matching Representation 199 I have already referred to the evidence of Mr Schirripa that, in March 2014, Ms Pinneri had told him that if he invested in the business to buy VTF panels, the Respondents would match his investment by putting in the same value of stock, and so provide the same number of VTF panels. He also said that, in about May 2014, Ms Pinneri had told him that "Status did not make any money off the fences". She explained that this was because the Respondents wanted "to get the VTF business going". In addition, Mr Schirripa deposed to having been told by Mr Nestorovic in August 2014, at a time when the Respondents were soliciting further investment by RRG, that "the deal would be the same as before, and … he would put in the same amount as me in stock". 200 Mr Schirripa said that, in relation to the investment in VTF (Tas) and VTF (NSW), Mr Nestorovic and the Respondents together had told him that his investment would be done in the same way as before ("everything is the same no matter where we go" and "everything is the same"). 201 Mr Dimech, who was introduced to the VTF business before Mr Schirripa, gave a similar account. He said that in around September 2013, Mr Nestorovic had told him that he (Mr Nestorovic) "would put in the same amount as anything we put in". 202 The accounts of Mr Schirripa and Mr Dimech are supported by the evidence of Mr Falzon who said that, at his first meeting at the Prospect premises of Status, Mr Nestorovic had told him that "he would go 50/50 with any investment I got to buy fencing". Although, as already indicated, I am proceeding on the basis that caution should be exercised before acting on Mr Falzon's evidence, I consider that its consistency with the evidence of Mr Schirripa and Mr Dimech makes it appropriate to do so in this instance. 203 The oral evidence concerning the Respondents having made a form of the Matching Representation is also consistent with the documentary evidence. As noted earlier, shortly after RRG, Schnik and FSN made their respective initial investments into the State Companies, they entered into a SHA with VTF Aust and the State Company concerned. The SHAs were in template form and had been prepared by the Respondents or persons retained by them for that purpose. Clause 6.2 provided as follows: [6.2] Initial Loan [6.2.1] The Company acknowledges that each of the initial Members set out in clause 5.1.1 or their respective Related Entities have made the following loans to the Company on or about the Operative Date as follows: … 204 Each SHA then recorded that VTF Aust and the investor or investors had made matching loans. So, for example, in the case of VTF (SA), it recorded that VTF Aust and RRG had each made loans of $107,000. The amounts recorded in cl 6.2 in each SHA are summarised in the table concerning the SHAs set out earlier in these reasons. It is pertinent that cl 6.2 recorded the contributions by VTF Aust and the investor in monetary terms, and not in terms of the number of VTF panels each had contributed. By including matching dollar figures, VTF Aust (and the Respondents) were representing that its contribution matched, in dollar terms, the contribution by the investor. 205 Clause 6.2 contained, in effect, an express representation that a contribution matching that of the investor had been made by VTF Aust. Although the representation was made after the initial advance of monies by the investor, its content is consistent with the Matching Representation alleged by the Applicants. It is appropriate to record, however, that the Applicants do not assert that they relied on the statements in cl 6.2 of the SHA. None of Mr Schirripa, Mr Falzon, Mr Dimech or Mr Frank Schirripa said that he had been aware of the clause. Nevertheless, those statements do form part of the circumstantial background by which the issue of whether the Respondents did make the pleaded representations is to be determined. 206 The Respondents also represented to the investors that the whole of their investment was used for the purchase of VTF panels or associated equipment. They did this by the invoices which Ms Pinneri caused Status to issue to the State Company involved. These indicated that the whole of the invested monies had been applied to the purchase of VTF panels or associated componentry at the identified prices. Coupled with the Manufacturing Representation, this was a representation that the whole of the monies had been used to pay for the manufacture of the VTF panels and associated equipment. 207 Much of the Respondents' own evidence also supports the conclusion that they had each made a form of representation that they, through VTF Aust or Status, would match the contributions of the Applicants, although not exactly in the form alleged by the Applicants. I list the following aspects of their evidence: (a) Mr Nestorovic said that in meetings with Mr Falzon and Mr Stephens in mid to late 2013 "I also discussed how they would put in cash to purchase the fencing products from Status and I would arrange for a matching set of the fencing products to be provided. I mentioned that the price Status was going to charge for the fencing was about $200, plus GST, for one panel"; (b) later, Mr Nestorovic said: Initially 1,000 fence panels were purchased from Status for [VTF (SA)] and 1,000 fences were purchased from Status for [VTF (WA)], with half [of] each amount being purchased using funds provided by RRG and the other half being procured by [VTF Aust]. Prior to making any payment, RRG was provided an invoice regarding, amongst other things, the portion of the fencing products that its funds were paying for. Upon making the payment, [VTF Aust] would procure for the VTF State/Territory company from Status a set of products that matched the products in the invoice sent to RGG. (c) at [96] of his affidavit, Mr Nestorovic said "[t]he arrangement was always the same. RRG would provide funds to purchase half the amount from Status, and then [VTF Aust], [VTF (WA)] and [VTF (NT)] would procure from Status the provision of the other half"; (d) Mr Nestorovic made other statements to like effect, at [116], [118], [121], [133] and [145] of his affidavit; (e) in his cross-examination, Mr Nestorovic accepted that he had told Mr Falzon, at the time that VTF (SA) was being established, that he would "go fifty-fifty on any money that Mr Falzon or his colleagues contributed" and that he had told Mr Dimech that, if he brought 1,000 fences, he (Mr Nestorovic) would also buy 1,000 fences; (f) Mr Nestorovic admitted in cross-examination that he had told Mr Schirripa in relation to his investments in VTF (WA) and VTF (NT) that the money he invested would be used to buy half of the fencing panels required by the business and that he (Mr Nestorovic) would match that by putting in the other half. He agreed that he had wanted Messrs Falzon, Stephens and Dimech to believe that all of the money they invested would be used to pay for half of the fences; and (g) Mr Nestorovic agreed in his cross-examination that he had wanted "the RRG investors" to believe that he would be matching them dollar for dollar with their investment. 208 In her affidavit, Ms Pinneri deposed that, at the meetings in 2013 in which she participated with her father, Mr Falzon and Mr Stephens, "it was discussed and agreed that to obtain fencing and related products for the business, Glen, Rob and David would provide cash to purchase products from Status and my father [and] I would produce a matching set of the products from Status. This was always how the arrangement was". In several other places in her evidence, Ms Pinneri referred to the procuring or the provision of matching sets of fencing products. See for example, [31], [33], [39], [41], [46], [50] and [53]-[55]. 209 The Respondents submitted that they had represented only that they would, through VTF Aust, procure the same number of VTF panels as purchased with the investors' funds and, further, that they had honoured that commitment. That is to say, for each VTF panel acquired with the investors' funds, VTF Aust had supplied, or procured the supply of, a matching panel. The Respondents denied that they had said anything about providing panels to a value equivalent to those funded by the Applicants. They submitted that it had been a matter for them how they acquired the matching panels, whether by inter-company loans with Status, or otherwise. Ms Pinneri acknowledged that she had not told Mr Schirripa the amount which Linhai Hedda was charging to Status for each panel. 210 The Applicants accepted that matching numbers of VTF panels had been received by each State Company, but did not accept that they had been "provided by" either VTF Aust or Status. Instead, the Applicants contended that the matching panels had been provided using the funds which they themselves had advanced for the acquisition of the VTF panels whose purchase they were to fund. That is, they contended that the funds advanced by the investors had paid for all the VTF panels acquired by the State Companies. 211 The unit prices which Linhai Hedda charged Status for the VTF panels contrast with the unit prices which Status charged the State Companies for the VTF panels. I summarise the latter prices, derived from the Status invoices in evidence, in the following table: Date State Company No of Units Price per 2.1 m VTF $ Price per 1.8 m VTF $ Price per 1.2 m VTF $ 09/10/2013 VTF (SA) 500 203.50 08/11/2013 VTF (WA) 500 203.50 03/04/2014 VTF (SA) 500 246.40 03/04/2014 VTF (WA) 250 246.40 03/04/2014 VTF (WA) 250 246.40 23/06/2014 VTF (NT) 500 224.00 23/06/2014 VTF (NT) 250 224.00 23/06/2014 VTF (WA) 750 224.00 18/08/2014 VTF (Tas) 750 224.00 18/08/2014 VTF (Tas) 250 224.00 21/08/2014 VTF (WA) 500 246.40 21/08/2014 VTF (WA) 250 246.40 17/11/2014 VTF (SA) 97 224.00 06/02/2015 VTF (SA) 1,350 246.40 06/02/2015 VTF (SA) 250 246.40 06/02/2015 VTF (NT) 575 246.40 06/02/2015 VTF (NT) 150 246.40 01/07/2015 VFT (Vic) 1,250 253.00 01/07/2015 VTF (Vic) 500 253.00 01/07/2015 VTF (NSW) 2,500 253.00 01/07/2015 VTF (NSW) 500 253.00

[57]

212 As is apparent, the prices charged by Status to the State Companies were many multiples of the price charged by Linhai Hedda to Status. The evidence indicates that Status used the balance of the funds advanced by the investors to pay for the VTF panels which VTF Aust was to contribute, to pay for other products imported from China by Status, to pay for the general operating expenses of Status, and to fund the personal expenditures of the Respondents. 213 One indication of the reliance of Status on the funds advanced by the Applicants is that, in the period between October 2013 and September 2015 during which the Applicants advanced a total of $3.147 million, Status received only $597,085.18 from other sources. It was common for the Status bank account to be overdrawn until the funds of the Applicants were received. This meant that neither VTF Aust nor Status had the funds from its own resources to provide VTF panels matching those purchased with the Applicants' funds. I am satisfied that both Respondents knew that that was so. 214 The Respondents submitted that Status had, in addition to paying the Linhai Hedda invoices, also paid for the shipping, customs and other transport costs associated with importing the VTF panels. I accept that that was so. The total amount paid by Status for logistics and customs services between 1 October 2013 and 30 September 2015 was of the order of $384,000. The total amount paid by Status for logistics and customs services between 1 October 2013 and 17 August 2016 was $477,460.12. However, some of the logistics and customs services encompassed in these aggregate figures related to the importation by Status of products other than the VTF panels and associated equipment and so cannot be attributed entirely to them. 215 In other words, there was a considerable surplus available to Status from the funds contributed by the Applicants. That surplus was more than sufficient to pay for the entire costs of acquiring and importing all the VTF panels, including the matching panels to be supplied by VTF Aust. It follows that Ms Pinneri's statements (which she acknowledged making to Mr Schirripa in March/April 2014 before he made his first investment) that all of the money invested by RRG would be used to acquire half of the VTF panels for the State Companies were false. Ms Pinneri's denial in her cross-examination that that was so did her no credit. 216 It was common ground that VTF Aust itself had not made any payment in respect of the matching quantities of VTF panels it was to provide. That conclusion is in any event supported by the statements for the bank account operated by VTF Aust, from Ms Pinneri's evidence, and from the annual financial statements of VTF Aust.

[58]

Conclusion on the Matching Representation 217 Much turns on the precise words said to have been used. Clearly, Messrs Schirripa, Falzon and Dimech were unaware that VTF Aust and Status were, in effect, using the monies which they had advanced to fund the VTF Aust contribution of VTF panels. I accept that they thought that the Respondents were providing these funds from their own resources. 218 I am not persuaded that the Respondents ever said expressly that they would provide the matching VTF panels from their "own resources" or even that they said they would provide panels "of the same value". In my view, the weight of the evidence is to the effect that the Respondents said only that they would provide matching numbers of VTF panels, and that they did not express that commitment in terms of "value". Despite my general preference for the evidence of Mr Schirripa, I consider that his attribution to Ms Pinneri of a statement that the Respondents would contribute panels of equivalent "value" is a product of retrospective rationalisation. 219 Nevertheless, I am satisfied that, in the circumstances of the arrangements between the parties, the implication in the Respondents' statements that they would provide matching numbers of VTF panels was that they would do so as their own independent contribution to the State Company concerned. That is to say, the Respondents were representing impliedly to Messrs Schirripa, Falzon and Dimech that they would do so from their own resources. That is what they wanted the Applicants to believe, so that they would think that they, as well as the Applicants, were carrying the risk of the investment. That was part of the Respondents' reason for making the Manufacturing Representation. 220 A representation may be conveyed by implication from conduct, as well as by express words. In combination, the Respondents' statements that Status was the manufacturer of the panels, their statements that they would "match" the Applicants' contributions by the provision of panels, Ms Pinneri's statement in May 2014 that the Respondents did not make any money "off the fences", Mr Nestorovic's statement that the Respondents would go "50/50", and the Respondents' statements that the monies the Applicants contributed would be used to pay for half the fences all contributed to the making of the representation by implication. As Mr Nestorovic acknowledged, he wanted the Applicants to believe that he would be matching their contributions dollar for dollar. 221 The Applicants' understanding that they were paying the manufacturer's price for the panels also contributed to their belief that the Respondents were contributing panels of the same value. 222 The Matching Representation was plainly false, because the Respondents had set the price to the Applicants for the VTF panels at a level which meant that the Applicants' funds paid for all the VTF panels, and the Respondents did not carry any risk in that respect. 223 In short, the underlying arrangement was that the Respondents would make a matching contribution by providing an equivalent number of panels. It was implicit in the arrangement that the Respondents would do so by using their own resources. This was the effect which they conveyed to the Applicants.

[62]

The making of the first representation 232 The Applicants' claim was that Mr Nestorovic had made each of these representations in the course of the preparation of the spreadsheets. I have already made findings about that preparation. In particular, I have found that the preparation of the spreadsheets was an initiative of Messrs Falzon and Stephens and that they, together with Mr Nestorovic, collaborated in their preparation. The rental price of $15 per panel per week and the projections of the income that might be derived were the product of that collaboration. I think it likely, and so find, that each of Messrs Falzon and Stephens also contributed to the selection of the price and to the projections. In those circumstances, it would not be appropriate to find that the pleaded matters were represented by Mr Nestorovic to Messrs Falzon and Stephens. They were as much the author of the pleaded matters as was Mr Nestorovic. 233 Accordingly, I reject the Applicants' claim based on the first pleaded representation said to have been made by Mr Nestorovic to Messrs Falzon and Stephens. 234 The position with respect to the representation of the matters in the spreadsheets to Mr Schirripa in March 2014 stands differently. On the findings which I have already made, Mr Falzon gave Mr Schirripa the spreadsheets in his meeting with Messrs Falzon and Stephens in the first café meeting in February 2014. The content of the spreadsheet attracted Mr Schirripa's interest. The spreadsheets were again discussed at Mr Schirripa's first meeting with Mr Nestorovic, being at the second café meeting in about February or March 2014. I have previously held that, during the course of that discussion, Mr Nestorovic told Mr Schirripa that his research indicated that rentals of $15 per panel per week could be achieved and, further, that he knew that was so because "I have been working on this for a long time now". 235 I accept that Mr Nestorovic did make the statement to Mr Schirripa about the price which could be obtained on the rentals. He did so because he believed that his VTF panels were superior to any comparable product and should therefore command a premium in the rental market.

[65]

The making of the second representation 242 There is a considerable body of evidence supporting the conclusion that Mr Nestorovic did make the second representation, and that he did so on more than one occasion. Indeed, Mr Nestorovic admitted doing so. I will return to his admissions shortly. 243 Mr Falzon said that, at his initial meeting at the Prospect Road showrooms, Mr Nestorovic told him that there was "a massive demand" for temporary fencing panels and the high visibility feature of the VTF panels meant that they could be rented at a higher price than standard fencing panels. Mr Falzon also said that, at the meeting in about May 2013, Mr Nestorovic told both Mr Stephens and him that "he would get $23 per panel per week in hire fees, … that he definitely knew they were worth that much, … that he could basically put any pricing figure on them that he liked because he was the only one that had them", and that the panels could be rented for "around $18-23 per panel per week". Finally, Mr Falzon said that Mr Nestorovic told Mr Stephens and him that "he had a lot of friends in the industry and that he knew what they would pay for the fencing". 244 Mr Dimech gave evidence of a generally similar kind. He said that in a meeting in August 2013 in which Mr Nestorovic participated on speaker phone, he (Mr Nestorovic) said that he had done "extensive market research" and that the VTF panels could be hired out for $15 per panel per week. Mr Dimech said that he questioned Mr Nestorovic about this pricing and was told that it was "cheap". Mr Nestorovic had added that the price of $15 per panel per week was to get the VTF panels into the market and that once he had performed the "Brisbane contract", he could set his own prices. 245 Mr Schirripa said that, at his first meeting with Mr Nestorovic at the café in February or March 2014, Mr Nestorovic told him that he had been "developing the VTF product for several years, and that he had researched the demand for the product extensively". Mr Nestorovic also said that he had "received extremely positive market feedback regarding the level of demand for the fencing, … that his research demonstrated significant interest in the Australia marketplace for the VTF business to target and that he had several national leads and contacts that would help him successfully launch the business". Mr Schirripa said that, in addition, Mr Nestorovic had said that his research indicated that a price of $15 per panel per week could be achieved, and that he knew that was so because "I have been working on this for a long time now". 246 In the affidavit containing his evidence in chief, Mr Nestorovic said that, at the meeting at Paralowie in about August 2013, he had told Messrs Falzon and Stephens that "I had spoken to lots of people regarding fencing, … I thought there would be a demand for the fencing product, … [that] the fencing … was of a higher quality than was presently on the market …, … that our product was better than other products, so we should charge a little bit more than others". Mr Nestorovic also acknowledged telling Mr Schirripa in about March 2014 when he came to the Paralowie property that "I had spoken to a range of people regarding renting temporary fencing and that I considered that there was a demand for such fencing that was of a higher quality than was presently on the market, in particular fencing that was more visible". In his cross-examination, Mr Nestorovic acknowledged that, at a meeting at Mr Dimech's Camden Park premises in about September 2013, he had told Messrs Falzon, Stephens and Dimech that he had done "extensive market research into the product". He also acknowledged telling Mr Falzon, before RRG made its first investment in the VTF business, that there was "a massive demand" for the VTF panels. Mr Nestorovic went on to say that that was true because at that time there were not many companies renting out temporary fencing panels. 247 Having regard to all this evidence, I am satisfied that the Applicants have established that Mr Nestorovic did make the second pleaded representation.

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The making of the third representation 252 Mr Nestorovic denied making the third representation. There is, however, a good deal of evidence indicating that he did make statements to the effect alleged. 253 Mr Falzon's evidence concerning the Brisbane job was as follows: [48] Michael [Nestorovic] also told me that a friend of his was involved with the redevelopment of the Brisbane Airport. He said his friend was high up in the Union who controlled the job, and that he had told Michael that they would only use VTF panels due to their high visibility and his connection with Michael. It sounded like the Union contact knew everyone in the area and could guarantee VTF the work on the airport development. [49] Michael said that they needed 10,000 panels for this job at $18 per week per panel. I can't recall exactly how long he said the job was for, but I believe [it] was for a couple of years. [50] This job was really the one that got my attention, as it was obvious how much money was to be made. [51] He also said that he was going to get the contract soon and that we could take the contract to the bank and there would be no problem with the bank financing the job for us. [52] Michael even asked [Mr Stephens] at one point whether he would be interested in moving up to Brisbane to look after the job. 254 In his cross-examination, Mr Falzon said that Mr Nestorovic had spoken of the Brisbane Airport job as one that was "ready to go". 255 Mr Dimech said that he had first been told about a contract at the Brisbane Airport by Mr Stephens who said that he was relaying what he had been told by Mr Nestorovic. He said, however, that Mr Nestorovic had spoken of the Brisbane job at the meeting in which he participated by speaker phone in August 2013 and that, in that conversation, Mr Nestorovic said that he had recently been to Brisbane "to confirm the Airport contract and that it was go-ahead, … that VTF needed 8,000 panels of fencing for stage one of the Brisbane Airport development, … that [the fencing] was to fence the basic hub of the development, including the plant and equipment in portable offices, … [and] that nothing could go ahead until the fences were there to secure the initial lockdown for the development". 256 Mr Dimech said that, at a later meeting in September 2013, Mr Nestorovic said that he "had recently been to Brisbane, and that all that was holding up the contract was the manufacturing of the fencing in China". 257 Mr Dimech also deposed that, in March or April 2014, he had queried Mr Nestorovic as to "why he was trying to roll out the fencing across Australia" when there were not enough VTF panels to start the Brisbane Airport contract. Mr Nestorovic had responded by saying that he had contracts in place to supply panels in other States, including Darwin and Western Australia, that he did not want to let those customers down, that it would be embarrassing to move fences from other States to supply the Brisbane Airport contract, and that he wanted to be seen as being big enough to supply everyone. 258 In his cross-examination, Mr Dimech said that Mr Nestorovic's "words were that we had a contract with the Brisbane City Airport and the only thing that we needed now was to produce enough panels to get Stage 1 on the go". 259 Mr Schirripa said that in the second meeting in the café in February or March 2014, Mr Nestorovic said: He had a contact who was a Union representative in Brisbane, and through whom a contract had been set up for VTF to supply panels for a development at the Brisbane Airport. He said that this was going to be a very large job and the details had been worked out, it was just a matter of getting the panels in place, which would require purchasing fencing. 260 In his cross-examination, Mr Schirripa explained that he regarded what he had been told about the Brisbane job as significant because it indicated that the job "was on" and that others would be investing money into the business. He also said that at the time he decided on the initial investment into RRG, he had been contemplating investment into VTF (Qld). 261 Both Mr Dimech and Mr Schirripa said that, later, Mr Nestorovic had told them that the "Union contact" was away from work by reason of a broken leg, with the effect that he had lost the contact on whom he had being relying. 262 There is also contemporaneous documentation which is capable of supporting the Applicants' case that the third representation was made by Mr Nestorovic. On 12 November 2013, Mr Falzon sent to Ms Pinneri a draft of the proposal for a prospective agent in Queensland. Mr Falzon's accompanying email said: Hi Anna, This is a draft of what we thought for someone to run Queensland Fencing for us and also being a shareholder with RRG Unit Trust. Give us your opinion and we can all discuss next week when Michael is back. 263 The accompanying proposal included the following paragraph: Currently we already have a deal on the Brisbane Airport so at this stage this is not part of the offer. 264 Mr Nestorovic denied in his evidence ever seeing the document and it is not necessary to make a finding as to the veracity of the denial. The significance of the document lies in its reference to the "deal" at the Brisbane Airport. It is of course possible that it was Mr Falzon or Mr Stephens who was the source of the statement concerning that "deal". However, in context, I think it more likely, and so find, that Mr Falzon was referring to the Brisbane Airport contract job claimed by Mr Nestorovic. 265 Mr Nestorovic denied altogether making statements about the Brisbane Airport job and denied that he had ever been to Brisbane. He claimed that it was Mr Stephens who had had the discussions to which the Applicants' witnesses referred. As the Applicants' counsel noted, this claim had not been made in the affidavit containing Mr Nestorovic's evidence in chief. It was made in the trial only after Mr Nestorovic learnt that, contrary to what had been expected, Mr Stephens would not be called to give evidence. The Respondents also referred to an email from Mr Stephens to Ms Pinneri on 8 November 2013 which indicates that Mr Stephens was at the time "at [the] Airport in Brisbane heading home". It does not, however, cast any light on whether Mr Stephens had been engaged in any activity regarding the proposed contract at the Brisbane Airport. 266 In my view, it is implausible that each of Messrs Falzon, Dimech and Schirripa had, separately, fabricated the accounts which they gave of Mr Nestorovic's statements concerning the proposed job at the Brisbane Airport. It was not suggested that they had somehow collaborated so as to present a common account. In my view, the accounts of Mr Dimech and Mr Schirripa in particular had the ring of truth about them. Further, the statements they attributed to Mr Nestorovic seem consistent with his general modus operandi. 267 Accordingly, I find that Mr Nestorovic did make the third pleaded representation concerning the job at the Brisbane Airport.

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The making of the fourth representation 275 Each of Mr Falzon, Mr Schirripa and Mr Nestorovic gave evidence concerning the alleged fourth representation. 276 Mr Falzon said that the Coober Pedy job was the first specific job about which he could recall Mr Nestorovic telling him. He said that Mr Nestorovic had said that the job was "for a redevelopment of the football oval" and that he was in discussions with the local Council about it. His recollection was that Mr Nestorovic had said that the job would require 250 panels for which he would charge $23 per panel per week. 277 Mr Schirripa's account, which I summarised earlier in these reasons, was more detailed. He said that Mr Nestorovic told him at one or other of the two café meetings in February and March 2014 that the Coober Pedy Council was going to use 800 VTF panels at $17 per panel per week for between 6-12 months for the upgrade to the Town's drive-in theatre and football oval. Mr Nestorovic said that he had already made the arrangements with a female member of the Council and that the Council had a place for the storage of the panels. He spoke of Messrs Stephens, Falzon, Schirripa and himself going to Coober Pedy to do the job. He also said that in late March or early April 2014 before he made his initial investment, Mr Nestorovic had telephoned him and said that the Coober Pedy job "was on", that it required 800 panels and VTF's price was "several dollars" per panel cheaper than the price of ATF. 278 Mr Schirripa said that in about late May 2014 (shortly after Schnik had made its initial investment), Mr Nestorovic told him that "the Coober Pedy job would be starting shortly, and that he would be calling the Council the following Monday to confirm when it was starting". Mr Schirripa said, and I accept, that he made a contemporaneous note of the conversation in which Mr Nestorovic made this statement. That note, which was in evidence, includes "Cooper (sic) Pedy - Monday". 279 Next, Mr Schirripa deposed that Mr Nestorovic had told him in July 2014 that the Coober Pedy Council wanted 700 panels, that he had quoted $24 per panel for a two year contract, and that the Council had accepted that quote. In addition, Mr Nestorovic said that he would be telephoning the Coober Pedy Council the following week to confirm when they wanted delivery of the VTF panels. 280 In his cross-examination, Mr Schirripa confirmed that Mr Nestorovic had told him that the Coober Pedy job was "a confirmed job" to be completed by VTF (SA). 281 Mr Nestorovic's evidence concerning a job at Coober Pedy was as follows. In early 2013, he had driven to Darwin to deliver other products of Status. On the way back, he had spoken in Coober Pedy to a client of Status, Peter, who alerted him to the foreshadowed rectification works after the recent redevelopment of the Coober Pedy oval. Peter had said that he may be interested in becoming an agent of Status. Mr Nestorovic then continued: I then visited the District Council of Coober Pedy (DCCP). I met a lady whose name I do not now recall. I mentioned about my fences. She told me that DCCP had previously rented 250 fence panels from Port Augusta for the oval for about $23 per panel per week, which included delivery, installation and removal. The price of $23 was $9 for the actual fence panel, but increased with further [charges] in relation to delivery, installation and removal. She admitted there was a problem with the oval and that DCCP may need further fences but did not specify the quantity that may be needed. I said that Peter was going to be our agent. I advised her I was going to bring up 500 fences and store them in Coober Pedy with Peter. She said this was good and that DCCP often needed to rent fences. 282 In his cross-examination, Mr Nestorovic maintained this account and also said that he had shown the lady at the Council a sample of a miniature VTF panel measuring 400 mm x 400 mm. He also agreed that he did not have a record of the meeting and that he had not followed the matter up with the Council. 283 Mr Nestorovic acknowledged that he had told Messrs Falzon and Stephens about speaking to someone at the DCCP, the possible opportunity regarding the oval, that DCCP had previously rented 250 panels at $23 per panel per week which was inclusive of delivery, installation and removal, and that the lady at the DCCP had said that it may need more temporary fencing panels in the future. However, he denied telling Messrs Falzon and Stephens the number of fencing panels which would be required, denied saying that he had a contract regarding the Coober Pedy Oval and denied stating a price at which VTF panels could be supplied to the DCCP. 284 In relation to Mr Schirripa, Mr Nestorovic said that Mr Schirripa had told him in about June or July 2014 that a lady from the DCCP had telephoned and wanted him to ring back. When he had returned the call, the lady made a query about purchasing another product and the question of the VTF panels was raised only incidentally. He denied that he had ever told Mr Schirripa that a contract had been secured for Coober Pedy, saying that he had referred only to "the possible opportunity" in relation to the oval works and that VTF (SA) should be able to beat the price of $23 per panel per week. He denied making the statements attributed to him by each of Mr Falzon and Mr Schirripa. In particular, he denied ever having said that he had a "contract" for VTF panels at Coober Pedy. 285 I find that Mr Nestorovic did make statements to the effect to which each of Mr Falzon and Mr Schirripa deposed. I make that finding having regard in particular to my acceptance of Mr Schirripa's evidence and my view about Mr Nestorovic's evidence. It is improbable that Messrs Falzon and Schirripa would have made up their accounts, especially as they were not identical. Further, Mr Schirripa's evidence received some support from his contemporaneous note of the conversation in 2014. It is pertinent that Mr Nestorovic acknowledged that he had told the lady at the Council that he would be bringing 500 panels to Coober Pedy. This was at a time when Status had imported a total of 500 panels, so that Mr Nestorovic was committing his entire stock of panels to Coober Pedy.

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The making of the sixth representation 292 Mr Schirripa's evidence concerning the Rio Tinto representation was as follows. On 5 June 2014, he and Mr Nestorovic had travelled to Perth to relocate VTF panels from one storage location to another. While that work was going on, Mr Nestorovic spoke to a cyclist who had stopped. Mr Schirripa could see that he was showing him brochures. Later, Mr Nestorovic told Mr Schirripa that the cyclist's name was Gavin and that he was from Rio Tinto. 293 Shortly after their return to Adelaide, Mr Nestorovic told Mr Schirripa that Gavin had followed up to have a further discussion about the fences. Then, on 30 June 2014, Mr Nestorovic had told him that Rio Tinto in Western Australia wanted 3,000 tall fences and 2,000 short fences on a 10-year contract and that he had quoted $14 per week for the tall fences and $12 per week for the short fences. In addition, Mr Nestorovic had said that the VTF panels would need to be swapped over every six months in order to be cleaned. This meant that there would have to be sufficient VTF panels held in storage and that Rio Tinto would pay storage fees of $12 per week and $8 per week for the tall and short fences respectively. Mr Nestorovic described Gavin as one of the people "in charge" at Rio Tinto; that he had spoken to Gavin by telephone on several occasions; and that Gavin had said that VTF would be paid on 14-day payment terms. He reported Gavin as saying that the high visibility of the VTF panels meant that Rio Tinto would save on power costs in its underground operations. Finally, Mr Schirripa said that Mr Nestorovic had said words to the effect that "we have got the deal", that "they want the fences", that it was simply a question of working out the details, and that he was waiting to speak to Gavin further to finalise the contract. 294 Mr Schirripa made a contemporaneous note of this conversation in his notebook. That note was in evidence. It adds support to the veracity of Mr Schirripa's account. 295 Mr Schirripa also deposed to later statements by Mr Nestorovic concerning the Rio Tinto contract. In mid-July 2014, Mr Nestorovic told him that Status could produce 3,000 fencing panels per week to meet the demand that would come from the Rio Tinto job. 296 Next, Mr Schirripa deposed that, on 10 August 2014, Mr Nestorovic had told him that the Rio Tinto job had changed so that now VTF would "simply drop off 5,000 panels and would not have to maintain or rotate panels at previously discussed". 297 At a meeting in late September or early October 2014, Mr Nestorovic told Mr Schirripa that he would be meeting Gavin in three weeks' time to finalise the Rio Tinto job. 298 Mr Schirripa said that Mr Nestorovic had told him during a trip to Toowoomba for the Surat Basin Mining and Expo Trade Show that he had spoken to Gavin, that Gavin was hoping to be at the Expo and to meet them, but that Gavin had said that he might be held up by reason of his work on a Rio Tinto project in Mongolia. As it happened, Mr Schirripa did not see anyone from Rio Tinto at the Expo. 299 Mr Schirripa said that the next mention of the Rio Tinto job occurred in mid-2015. Mr Nestorovic told him then that it was necessary for the storage area at which the VTF panels were held to be reorganised and tidied before Gavin was brought to inspect the panels. Mr Schirripa flew to Perth to undertake that task on 3 July 2015. In late August 2015, Mr Nestorovic told Mr Schirripa that he had been to Perth, that the current storage location of the VTF panels was "not professional enough", and that he would not bring Rio Tinto to inspect the VTF panels until they had a new agent in Perth and had moved the panels to a new location. Mr Schirripa said that he told Mr Nestorovic that he disagreed with that assessment based on his own observations of the storage location. 300 Mr Schirripa's account received support in some respects from the evidence of Mr Nestorovic. He confirmed that a cyclist, "Gavin", had stopped and spoken to him about the possible supply of the VTF panels to Rio Tinto; that Gavin was interested in 3,000 tall panels and 2,000 short panels; that he had said that he may want the panels for 5-10 years; that the panels would be used underground so that the trucks could follow the fences and Rio Tinto could thereby save on electricity costs; and that when VTF had "set up the fences properly with an agent" he would bring some people to view them. Mr Nestorovic said that he did not recall discussing prices with Gavin at that time. 301 Mr Nestorovic said that Gavin had contacted him some four weeks later and had told him that he had not been impressed with the existing location of the panels (at the premises of a business known as Bravo Hire). He did not think that the premises were "good enough" for him to bring people to. Mr Nestorovic said that he told Gavin that the charge for the hire of the panels would be between $10 and $15 per panel per week and that Gavin had said that they would talk more about prices later and that payment terms could be 14 days. Mr Nestorovic agreed that he had conveyed to Mr Schirripa what he and Gavin had discussed. 302 Mr Nestorovic said that, in late 2014, there had been an issue concerning the person acting as the agent in Perth, as they did not wish to continue in that role and Bravo Hire wanted the VTF panels stored at its premises relocated to one of their other locations. He claimed that Mr Schirripa had then been involved in locating a replacement agent, Glen Mews. 303 Mr Nestorovic deposed that, in late 2014 or early 2015, he received another call from Gavin in which Gavin had told him that he would not have to worry about washing the fences and queried whether VTF was ready to commence supply. He had responded in the negative and asked if Gavin could send a letter setting out what it was that Rio Tinto wanted. Gavin had said that he would do so once VTF had an agent and office established. Mr Nestorovic agreed that there had been other occasions when Gavin had telephoned him and that it had been on one of those occasions when the periodic washing of the panels had been raised. Mr Nestorovic agreed that he had spoken to Mr Schirripa after each of his calls from Gavin but denied telling him that a job with Rio Tinto had been secured. He also denied telling Mr Schirripa that he would telephone Gavin because he never had Gavin's contact details. 304 Mr Nestorovic confirmed that in July 2015 he had asked Mr Schirripa to go to Perth to tidy up the panels and to secure their location and that he himself had travelled to Perth between 14 and 19 August 2015 when he had inspected the places at which the VTF panels were stored. He regarded their location as unimpressive and did not think that he could take people from Rio Tinto, or from anywhere else, to that location. 305 In relation to several matters concerning the potential for a contract with Rio Tinto, there did not seem to be significant differences between the evidence of Mr Schirripa and Mr Nestorovic. Given my general preference for the evidence of Mr Schirripa, I am satisfied that conversations of the kind to which he deposed did occur.

[77]

The making of the seventh representation 313 Mr Schirripa's evidence was to the following effect. In about mid-July 2014, Mr Nestorovic had told him that extensive works were being done at the RAAF Base at Edinburgh; that he (Mr Nestorovic) had spoken to a "head person" from Transfield who he said would be supervising the works; that they (Transfield) would need 3,000 to 5,500 VTF panels; that the contract would be for five to seven years; that the contract was due to commence in December 2014; that the opportunity had come about because he had stopped when driving past the Edinburgh Base and spoken to a Transfield crew; that the "head person" from Transfield had seen the VTF panels; and that other people from the RAAF Base had taken VTF panels for testing. 314 Mr Schirripa made a note of this conversation in his diary as follows: Airport - RAAF 3,000 pieces 5-7 years December to 5,500 pieces 315 Mr Schirripa said that in a meeting with Mr Nestorovic and Ms Pinneri on 10 August 2014, Mr Nestorovic had said: he had again spoken to his contact about the Transfield job; the contact had confirmed that Transfield wanted 3,000 tall panels and 2,000 short panels; he had quoted Transfield $14 per tall panel per week and $9 per short panel per week; the contract length would be for four years with an estimated start date of September 2014; his contact in Transfield was also in charge of the Darwin and Perth RAAF Bases; there was a good possibility of securing work in those other cities; the Transfield contact had taken his Darwin counterpart to see the VTF panels in Darwin; and that Transfield would give eight weeks' notice of when the VTF panels were required so that they would have time to buy any more panels when required. 316 Again, Mr Schirripa made a contemporaneous note of part of this conversation, as follows: RAAF = 3,000 tall $14 4 years 2,000 short $9 September 317 Next, Mr Schirripa deposed that in late September or early October 2014, Mr Nestorovic had told him that the "Transfield job was going ahead, and that his contact would get back to him with formal confirmation in a month's time". Mr Schirripa recorded in his diary with respect to this information: RAAF - 1 month 318 Finally, Mr Schirripa deposed that in July 2015 he had asked Mr Nestorovic about the Transfield job, by saying "where are we at?". He deposed that Mr Nestorovic had responded by saying that the Transfield person had told him "I told you you have got the job. Do not bother me. I will call you when it is time". 319 Mr Nestorovic's evidence was quite different. He denied most of the elements of Mr Schirripa's account. 320 Mr Nestorovic deposed that he had stopped at the Transfield depot in Port Augusta in early 2013. The person to whom he spoke (who was unidentified) mentioned that Transfield may have some big projects at RAAF Bases around Australia. That person told Mr Nestorovic that he would visit the Status showroom and provide him with details of the Transfield person in Newcastle (Transfield's head office) to whom he should speak. Mr Nestorovic said that he did receive a visit from the Transfield person a month or two later and was then given the name and email address of the person in Transfield's head office in Newcastle whom he should contact. 321 Mr Nestorovic agreed that he had spoken to Mr Schirripa about Transfield in about July 2014, that he had told him about Transfield's head office being in Newcastle, and that he told him to look out for a tender regarding the RAAF Bases in South Australia, Western Australia and the Northern Territory. He denied telling Mr Schirripa that he had met the "head person" from Transfield at the RAAF Base at Edinburgh and denied telling Mr Schirripa that the opportunity had come about because of the location of the Edinburgh Base near his own farm. He also denied telling Mr Schirripa the precise details of what Transfield were looking for, let alone that a contract had been secured. 322 Mr Nestorovic said that, after speaking to a neighbour, he had gone to the RAAF Base at Edinburgh and had asked to speak to a supervisor from Baulderstones which was then working at the Base. He said that he gave that person his business card and a brochure and that, not long after, the person from Baulderstones telephoned him to say that a job at the RAAF Base was coming up for which he could put in a tender in about eight weeks. Mr Nestorovic said that he passed that information on to Mr Schirripa but that Mr Schirripa had decided not to submit a tender, being concerned that, if VTF (SA) obtained that job, it would have insufficient fences for the larger Torrens 2 Torrens job. 323 Mr Nestorovic's account of his visit to the RAAF Base was somewhat implausible. In bare outline it involved him going to the Base security gate, speaking to a security person, that security person then closing the gate while he went to find a senior Baulderstone person, that senior Baulderstone person then coming to the gate and speaking to Mr Nestorovic, he showing that person a sample of his fencing, and the Baulderstone representative telling Mr Nestorovic that Baulderstones had a number of big jobs coming up. 324 Given my general preference for the evidence of Mr Schirripa, I accept his account of the statements made by Mr Nestorovic. That account is also supported to an extent by his contemporaneous notes. Mr Nestorovic may have had some communications with a person from Transfield but the contemplated arrangements were not nearly as definite as those which he communicated to Mr Schirripa in August 2014. This was another example of Mr Nestorovic "talking up" the prospect and making what was no more than a possibility appear to be of more definite character.

[80]

The making of the eighth representation 330 Mr Schirripa's evidence was that, in a meeting in mid-July 2014, Mr Nestorovic had told him that he had been in discussions with a person involved in setting up temporary fencing for the Melbourne Grand Prix in March 2015; that that person liked the VTF panels and wanted to use 6,000 tall panels and 2,500 short panels; that he had quoted $14 per week for the tall panels and $12 per week for the short panels; and that they would not know whether they had the job until January 2015. Mr Schirripa recorded this in his notebook with the following entry: Melb Grand Prix? 6,000 tall $14 2,500 small $12 Confirm January 331 Mr Nestorovic's evidence was that he had told Mr Schirripa matters to the following effect: that in 2014 he had gone to the Grand Prix in Melbourne and had seen some people unloading temporary fencing; after asking to speak to the person in charge, a "young man" had come over and spoken to him; the young man told him that the Grand Prix used about 14,000-15,000 "fences"; he could see that they were renting the fencing panels from ATF; he had told the young man that VTF had only about 6,000 tall fences and 2,500 small fences; the young man had responded by saying that "maybe" they could rent that number and get the remainder from someone else; the young man said that he thought that the ATF contract ended in 2015 so that VTF could tender for the 2016 Grand Prix; and the young man had suggested that he contact the head office in about January 2015 when more details would be available. 332 Mr Nestorovic denied that he had told Mr Schirripa the matters which the latter attributed to him concerning the Melbourne Grand Prix. He insisted that he had told Mr Schirripa only that VTF could tender in two years' time for the Grand Prix work and denied, in particular, telling him that there was "strong interest" by the Grand Prix in the VTF panels. He said that he had not himself believed at the time that there was "strong interest" by the Melbourne Grand Prix in the VTF panels. 333 I accept Mr Schirripa's evidence, partly because of my general preference for his evidence, partly because of his contemporaneous note, and partly because it seems inherently implausible that Mr Nestorovic had the conversation which he claimed at the Grand Prix site in Melbourne. In particular, it seems improbable that Mr Nestorovic would, in a chance encounter, have been able to speak to someone within the Grand Prix organisation concerning their arrangements for the hire of temporary fencing panels. It is also inherently improbable that an existing contractor would have chosen to give Mr Nestorovic the kinds of details which he claimed. Yet Mr Nestorovic claimed that it was the action of unloading temporary fencing panels which attracted his attention and which led him to ask to speak to someone concerning the renting of the temporary fencing panels.

[86]

The making of the 11th representation 348 Mr Schirripa's evidence concerning the 11th representation was to the following effect. Mr Schirripa had telephoned Mr Nestorovic while the latter was on a trip to Alice Springs in January 2015 and had said that he had spoken to the owner of a scaffolding company who was interested in being an agent of VTF. This person had taken him to see a section of the road leading from the Stuart Highway to the Airport. Mr Nestorovic described the road as having a large amount of temporary fencing along it, up to 10 km, with the fences there to stop rocks falling onto the road. Mr Nestorovic told Mr Schirripa that vehicles had collided with panels which had been pushed onto the road because they were not very visible. In this respect, Mr Nestorovic described the temporary fencing in place as being "substandard". 349 Mr Schirripa said that Mr Nestorovic had gone on to say that, through the scaffolder's connection with the Alice Springs Council, he had spoken with someone at the Council which was going to use VTF fencing because of the safety which the reflective features provided. However, the Council had to first "get out of" its existing contract with its current fencing supplier. Mr Nestorovic had told him that lawyers and an independent occupational health and safety person had been brought in for a mediation between the Council and the existing fencing contractor. 350 Mr Schirripa said that, on Mr Nestorovic's return to Adelaide, he told him that there would be a significant amount of fencing required for the job. 351 Finally, Mr Schirripa said that in July 2015, he had questioned Mr Nestorovic about the Alice Springs job, and that a conversation to the following effect had occurred: Mr Schirripa: You told me we had the job; Mr Nestorovic: [You] should "look out for a tender"; Mr Schirripa: How has it gone from having the job to having to go to tender? Mr Nestorovic: I don't know. I spoke to somebody else. It makes no sense to me either but that is what it is. 352 Mr Nestorovic's account was confirmatory in some respects of that of Mr Schirripa, but different in other respects. He said that on his trip to Alice Springs, he had spoken to a person called Leroy who had referred to works along the Stuart Highway and to potential jobs in relation to the Alice Springs Courthouse and Police Station. Mr Nestorovic said that he had decided to leave three small panels and three large panels with Leroy and had spoken to him of the possibility of sending 500 panels in the future. Leroy had been keen and had said that he would send his truck to pick up the six panels. However, he did not do so and did not respond to Mr Nestorovic's telephone calls. Mr Nestorovic said that he had not heard from Leroy again. 353 Mr Nestorovic said that he had next obtained the name of Mr Russell Lynch from the Yellow Pages and arranged a meeting with him. The pleaded 12th representation concerns Mr Lynch. Mr Nestorovic said that Mr Lynch had expressed doubts about the prospects of a job on the Alice Springs Airport Road but had spoken of other potential opportunities in Alice Springs, including in relation to the Courthouse and Police Station. 354 Mr Nestorovic also said that on the following morning, he had spoken to a person in a chance meeting at a coffee shop and had come to understand that that person was from the Alice Springs Council. That person had said that there may be a tender opportunity coming up in relation to temporary fencing some 10 km down the Stuart Highway. 355 Mr Nestorovic then said that, in telephone calls with Mr Schirripa during his trip and on his return to Adelaide, he had told him of his discussions with Leroy, Mr Lynch and the person from the Council, and that each of Leroy and Mr Lynch had mentioned possible opportunities regarding the Courthouse and the Police Station. He denied telling Mr Schirripa that he had been shown part of the Stuart Highway or of a road off the Stuart Highway to the Airport and had suggested that he look out for tenders in relation to those places. 356 Again, I prefer the account of Mr Schirripa. There were inconsistencies in Mr Nestorovic's account. Further, and in any event, Mr Schirripa's account received support from Mr Lynch. He deposed that Mr Nestorovic had told him that he would be securing a job for some roadworks on Old South Road, being a road coming off the Stuart Highway near the Airport. He also said that Mr Nestorovic had told him that the Alice Springs Council would specify that the fencing for works at the hospital and Courthouse needed to be high-visibility, with the consequence that he (Mr Nestorovic) would obtain those jobs. I regarded the evidence of Mr Lynch as important evidence because it was independent of the parties and gave a good insight into Mr Nestorovic's proneness to exaggeration. 357 Accordingly, I am satisfied that the Applicants have established that the 11th representation was made.

[92]

The making of the 13th representation 372 Mr Schirripa's evidence was as follows: [156] In around early April 2015 Michael [Nestorovic] went on a trip to Sydney and Canberra for two weeks. … [158] While Michael was in Sydney, he and I had a phone conversation during which he told me he had got a job for VTF at Parliament House in Canberra. He said that he had met with the second in charge of the Australian Federal Police, who was Serbian. (Michael is also Serbian). He said this contact had enabled him to secure the job (the Parliament House job). He said he had shown them the panels and he told me that "They want the fences". I understood this to mean that there was a done deal. … [162] During another meeting later in April 2015 at either the Show Room or the Office, Michael told me additional details about the Parliament House Job. He said that they required 1,000 panels for five years, and that he had quoted $7 per week per panel. He also told me that the job would start once the next container of fences arrived in Sydney. 373 In mid-August 2015, while Mr Nestorovic was in China, Mr Schirripa started to become concerned that he had been deceived into investing into VTF. He telephoned Mr Nestorovic in China and questioned him about the Parliament House job, asking when the job was to occur, the identity of Mr Nestorovic's contact, and to whom he should provide the paperwork for the job. Mr Schirripa said that Mr Nestorovic would not give him these details, telling him "you don't need to know who I'm talking to". He said, however, that Mr Nestorovic repeated that the job was for 1,000 panels and would proceed one month after the delivery of the panels to Sydney. 374 Mr Nestorovic's account was confirmatory in some respects of that of Mr Schirripa. He said that he was familiar with Canberra because he used to live and work there. While in Canberra he had spoken to the President of the Serbian Club, Branko, and his son Pavle who worked for the AFP. Pavle told him that he should go to Parliament House and show "them" the VTF panels because they may need some fencing there for security purposes. Pavle told him to ask for "the man in charge of maintenance at Parliament House" as he may be interested in the fences. Mr Nestorovic said that he had gone to Parliament House and had spoken to this maintenance man, showing him a small pedestrian panel. The "maintenance man" had then arranged for someone dressed more formally (wearing a tie) to speak to Mr Nestorovic. This person (who was not identified) had told the "maintenance man" that he could speak to Mr Nestorovic about renting 1,000 fences in the future for an extended period of time. Mr Nestorovic had then told the maintenance man that the fences would cost $7 per panel per week; that the maintenance man had said that that was "okay"; and that he should let him know when he would be commencing business in Canberra. 375 Mr Nestorovic went on to say that he had reported this conversation to Mr Schirripa but had pointed out that, because Canberra was in the ACT rather than in New South Wales, a separate VTF company would have to be established into which Mr Schirripa would need to make a further investment in order to buy the VTF panels. Mr Schirripa had responded by saying that he did not have sufficient money at that time to invest in the ACT. 376 Thus, there is a good deal in common between the two accounts. Mr Schirripa was not cross-examined on his account. 377 Mr Nestorovic's account changed in some respects under cross-examination. He denied telling Mr Schirripa that Parliament House wanted 1,000 panels for five years and denied telling him that he had quoted $7 per panel per week. He said that he had told Mr Schirripa only that, when the VTF panels arrived in Sydney, he was to call Parliament House, that they would then come and have a look at them, and would discuss the period and price of the hire. 378 The detail which Mr Nestorovic provided concerning his meeting with personnel at Parliament House was also implausible. He said that he had initially spoken to a gardener and had asked where to go to see "the maintenance man". He was told to wait and in due course a maintenance man had approached him in the public carpark. He said that the "maintenance man" had told him that his fence "would be very good" but he wished to see it erected and in place with feet. He then told Mr Nestorovic that, when he had fence panels and feet, to let him know so that he could come and inspect them. Initially, Mr Nestorovic said that he had not spoken to any person other than the maintenance man but, when confronted with the inconsistency with his affidavit, said that another person had approached to whom he had spoken about the VTF panels. Mr Nestorovic denied that his account of the conversations at Parliament House was a fabrication. 379 Mr Nestorovic's evidence about the proposed arrangement at Parliament House was particularly unimpressive. In particular, his account of speaking to a gardener, a maintenance man and then someone more formal with last of these persons telling "the maintenance man" that he could speak to Mr Nestorovic about renting 1,000 fences in the future for an extended period of time and that he had quoted $7 per panel per week was implausible. It is not readily to be supposed that those responsible for security at Parliament House would contemplate arrangements of this kind. 380 I accept Mr Schirripa's account. Again, I consider that it has the ring of truth about it.

[97]

The 15th representation - Blacktown Council 392 The Applicants allege that, shortly after returning from a trip to Sydney and Canberra in about July 2015, Mr Nestorovic made an oral representation to Mr Schirripa that he had spoken with the Mayor of the Blacktown Council in New South Wales regarding a contract for 24,000 fences at $7 per week and that VTF would soon conclude that contract. 393 The Respondents deny this allegation and plead that Mr Nestorovic had told Mr Schirripa in 2015 that he had had discussions with the Mayor of Blacktown about a potential opportunity but had not indicated that the potential opportunity had been secured. 394 The Applicants accepted that, if the conduct they rely upon is established, s 131A of the CC Act precludes the application of s 18 of the ACL to this representation. 395 Mr Schirripa's evidence indicated that the pleaded representation had been made in about April 2015, shortly after Mr Nestorovic's return from his trip to Sydney and Canberra in that month. Mr Schirripa said that Mr Nestorovic had told him that he had met with the Mayor and the procurement officer of the Blacktown Council; that the Council was going to switch all temporary fencing on Council projects to VTF panels; that VTF would need to provide 24,000 panels; and that he was going take Council representatives to see the fences at the storage site on 12 July 2015 when the containers were being unloaded. 396 Mr Schirripa also deposed to a further conversation with Mr Nestorovic regarding the Blacktown Council job, which he said did occur in July 2015. Mr Nestorovic said in that conversation that he had had further discussions with Stephen Bali, the Mayor of the Blacktown Council, and that he had showed Mr Schirripa Mr Bali's business card. Mr Nestorovic went on to say that the Blacktown Council job would be for 24,000 panels at $7 per panel per week; that he (Mr Nestorovic) was travelling to China to check whether Status' factory could make the required amount of fencing; and that there would be penalties if VTF did not deliver what it promised. 397 Mr Nestorovic's evidence was to the following effect: at a Serbian Club in Sydney he had been introduced to the Mayor of Blacktown, Mr Bali, and had spoken to him for about an hour; he showed Mr Bali the VTF brochure and asked him what he thought; Mr Bali gave a favourable response and said that, once Mr Nestorovic had some fencing panels in New South Wales, he would help him meet the Council's procurement officer who made decisions regarding the temporary fencing panels which the Council hired. The Mayor had also told him that a new airport was coming soon to a location around Blacktown; and that he had told Mr Schirripa of his discussions with the Mayor of Blacktown and had given him a copy of the Mayor's business card. 398 Mr Nestorovic denied telling Mr Schirripa: that a contract would conclude soon; that he had actually met the Council's procurement officer; details of any possible job; and that he would show people the fencing panels when they were being unloaded, as that would be unsuitable. 399 Mr Nestorovic said that he had said, apparently to the Mayor of Blacktown, that people would be able to view the fences once VTF had set up an office in Sydney. 400 Mr Nestorovic went on to say that he had suggested to Mr Schirripa that he (Mr Schirripa) send an email to the Mayor of Blacktown. He said that he had been told by the Mayor of Blacktown subsequently that Mr Schirripa had not done so. 401 Again, I accept Mr Schirripa's account. It is consistent with my findings about Mr Nestorovic's general manner of operation. The effect of what Mr Nestorovic conveyed was that a potentially significant contract with the Blacktown City Council was imminent. Mr Nestorovic's discussions with the Mayor of the Blacktown Council did not provide a reasonable basis upon which to make those representations. Mr Nestorovic's statement had concerned a future matter but was made without such a reasonable basis and was, accordingly, misleading or deceptive.

[101]

Reliance and causation 409 Section 1041I(1) of the Corporations Act provides that a person who suffers loss or damage "by" conduct of another person that was engaged (relevantly) in contravention of s 1041H may recover the amount of the loss or damage by action against the contravenor. 410 Section 236(1) of the ACL provides that a person who suffers loss or damage "because of" the conduct of another in contravention of a provision in Ch 2 or 3 (which includes s 18) may recover the amount of the loss or damage by action against the contravenor. 411 The High Court discussed s 82(1) of the Trade Practices Act 1974 (Cth), the counterpart of s 1041I, in Wardley Australia Ltd v The State of Western Australia [1992] HCA 55; (1992) 175 CLR 514 at 525: The statutory cause of action arises when the plaintiff suffers loss or damage "by" contravening conduct of another person. "By" is a curious word to use. One might have expected "by means of", "by reason of", "in consequence of" or "as a result of". But the word clearly expresses the notion of causation without defining or elucidating it. In this situation, s.82(1) should be understood as taking up the common law practical or common-sense concept of causation recently discussed by this Court in March v. Stramare (E. & M.H.) Pty. Ltd., except in so far as that concept is modified or supplemented expressly or impliedly by the provisions of the Act. Had Parliament intended to say something else, it would have been natural and easy to have said so. (Footnotes omitted) 412 Section 236(1) of the ACL uses the term "because of" and not the term "by". It was not suggested in this case that that difference in terminology involves any practical difference. In each case, the Court must be satisfied that there is a causal connection between the contravening conduct, on the one hand, and the loss and damage alleged, on the other: Campbell v Backoffice Investments at [102]. 413 It is not necessary that the misleading or deceptive conduct be the sole, or even the primary cause of the loss: Henville v Walker [2001] HCA 52; (2001) 206 CLR 459 at [110]-[111] (McHugh J), [163] (Hayne J). Nevertheless, common sense and practical experience may indicate that there is an insufficient connection between the contravening conduct and the loss as, for example, when a respondent's conduct merely sets the scene, or provides the opportunity for the loss to be incurred, rather than being a cause of that loss in a meaningful sense: Stone v Chappel [2017] SASCFC 72; (2017) 128 SASR 165 at [354]. 414 In some circumstances, it is helpful to consider the causal connection in two stages: first, whether the applicant relied on the misleading or deceptive conduct, and secondly, the sufficiency of the connection between the loss or damage claimed and the applicant's reliance on the misleading conduct: Stone v Chappel at [353].

[117]

The Misrepresentation Act claim 449 Sections 7(1) and (2) of the Misrepresentation Act 1972 (SA) provides as follows: (1) Where a contracting party is induced to enter into a contract by a misrepresentation made - (a) by another party to the contract; or (b) by a person acting for, or on behalf of, another party to the contract; or (c) by a person who receives any direct or indirect consideration or material advantage as a result of the formation of the contract, and any person (whether or not he or she is the person by whom the misrepresentation was made) would, if the misrepresentation had been made fraudulently, be liable for damages in tort to the contracting party subjected to the misrepresentation in respect of loss suffered by him or her as a result of the formation of the contract, that person is, subject to subsection (2), so liable to that contracting party, in all respects as if the misrepresentation had been made fraudulently and were actionable in tort. (2) It is a defence to an action under subsection (1) - (a) that the person by whom the representation was made had reasonable grounds to believe, and did believe, that the representation was true; or (b) that the defendant was not the person by whom the representation was made and did not know, and could not reasonably be expected to have known, that the representation had been made, or that it was untrue. 450 The effect of s 7(1) is that, when a misrepresentation induces a party to enter into a contract, the representor is liable for damages in tort as if the representation had been made fraudulently. 451 To constitute a representation, the statement must be a representation of fact. The essence of a misrepresentation is that it led the representee into error. This is to be tested objectively - by enquiring whether a reasonable person in the position of the representee would have been led into error by the statement: Mitchell v Valherie [2005] SASC 350; (2005) 93 SASR 76 at [71] and see the references cited therein. 452 The Applicants claim that each of the pleaded representations was a misrepresentation to which s 7(1) applies. The Respondents did not make any separate submissions concerning the application of the Misrepresentation Act. 453 I consider it appropriate to proceed on the basis that each of the representations which I have found to be misleading or deceptive constituted a misrepresentation of a factual matter. In so far as the representations related to opinion, they were representations of the fact that Mr Nestorovic held the opinions and, further, that he had a reasonable basis for those opinions. 454 Accordingly, had it been necessary, I would have found that the Applicants were entitled to the same damages under the Misrepresentation Act.

[118]

The claim in deceit 455 For the claim in deceit, the Applicants relied only on the fourth, sixth, seventh and 16th representations. As I have found that the Applicants have not established the sixth representation, it need not be considered in the present context. Accordingly, the Applicants' claim of deceit turned on the representations concerning the Coober Pedy Council job, the Transfield job and the Matching Representation. 456 The tort of deceit is established when an applicant proves five matters: (i) the respondent made a false representation; (ii) the respondent made the representation with the knowledge that it was false or was reckless or careless as to whether the representation was false or not; (iii) the respondent made the representation with the intention that it be relied upon by the applicant; (iv) the applicant acted in reliance on the false representation; and (v) the applicant suffered damage which was caused by reliance on the false representation. See Magill v Magill [2006] HCA 51; (2006) 226 CLR 551 at [114]. 457 In respect of the second of these elements, Gummow, Hayne and Heydon JJ noted in Banditt v The Queen [2005] HCA 80; (2005) 224 CLR 262 at [2] that fraud is proved when it is shown "that a false representation has been made (1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false". The plurality went on to note that the third of these cases is an instance of the second, at [2]. 458 The Applicants carry the onus of establishing each of the above matters. In relation to the third element, Wilson J noted in Gould v Vaggelas [1985] HCA 75; (1985) 157 CLR 215 at 236 that, if a material representation is made which is calculated to induce the representee to enter into a contract and that person in fact enters into the contract, there arises a fair inference of fact that the person was induced to do so by the representation. 459 The Applicants rely upon the same matters in relation to the fourth, seventh and 16th representations as they relied upon in their case of misleading or deceptive conduct. 460 On the basis of the findings made earlier, I am satisfied that the Applicants have established the tort of deceit with respect to those representations. Plainly, the Respondents did intend the Applicants to rely upon the representations and to contribute further funds. As previously noted, the Respondents were to a significant extent reliant upon the contributions of the Applicants for the operations of Status generally. 461 In summary, had it been necessary to do so, I would have found that the Applicants are entitled to judgment with respect to the tort of deceit in respect of the fourth, seventh and 16th representations. Given my earlier findings, it is not necessary to identify separately the losses resulting from these deceits.

RRG Nominees Pty Ltd v Visible Temporary Fencing Australia Pty Ltd

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Judgment (120 paragraphs)

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Cases Cited (27)

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