Taylor v Stav Investments Pty Ltd as trustee for the Stav Investments Family Trust; Taylor v LK Group Investments Pty Ltd

Background to the appeal

1. The appellants did not give evidence and they did not call any witnesses in their case: [244]. Mr Stavretis and Mr Kestelman gave evidence for the respondents and were cross-examined. The primary judge declined to make adverse findings against either of Mr Stavretis or Mr Kestelman. Nonetheless, her Honour concluded that "more weight should be placed on contemporaneous documents than oral accounts some years later of events by persons who have a personal interest in the dispute": [279].
2. In addition to the evidence of Mr Stavretis and Mr Kestelman, the respondents relied on the evidence of Bradley Apps, who was the principal of a software development company known as Appscorp, to which I will turn shortly. Mr Potter was also called for the respondents as an expert on the issue of damages. As the primary judge noted at [243], the appellants did not challenge Mr Potter's expertise, although they challenged his conclusions.

The agreement between Yatango Mobile and BJYP Pty Ltd

1. In August 2012, Mr Taylor established the "Yatango" business, incorporating Yatango Mobile and Yatango Pty Ltd (which was subsequently renamed Yatango Holdings Pty Ltd). According to the primary judge, on or about 14 August 2012, Mr Taylor signed a proposal put forward by Appscorp: [25]. The proposal related to a generic software system, called ECSuite, which Appscorp had developed: [26]. ECSuite, which was used by other telecommunications companies, was described in the proposal as a web-based application, the software modules of which provided "the backbone and features needed to run a telecommunications company" and which could be customised to meet the needs of an individual company: [28].
2. In September 2012, Yatango Mobile entered into an Intellectual Property Transfer Agreement with a company associated with Mr Apps, BJYP Pty Limited ("BJYP"). Mr Apps caused BJYP to be incorporated so as to acquire the "Base Code" from Appscorp; he described the Base Code as "the base source code that would be used to create the online platform for the Yatango Mobile business". Pursuant to cl 1.1 of the agreement, which the primary judge defined as the "2012 BJYP Agreement", Yatango Mobile was to establish a new entity, Yatango Mobile Labs, on or around the date that the last party signed the agreement. Clause 1.2 summarised the proposed business of Yatango Mobile Labs (which was referred to in the agreement as "YML") as follows: "(a) acquiring a copy of the Intellectual Property from BJYP for YML; (b) engaging ECConnect [the trading name of Appscorp], at YML's cost, to customise and develop the Intellectual Property to the requirements of YML (Developed Material/Developed Materials); and (c) licensing the Developed Materials to [Yatango Mobile], and [Yatango Mobile's] subsidiaries and Related Bodies Corporate at a cost in accordance to market standards."
3. The term "Intellectual Property" was defined in cl 15 to mean, relevantly, "all intellectual property used in the Code", while "Code" was defined to mean "version 1 of the EC source code base, the specification for which is set out in Schedule 1 to this agreement". Mr Apps' evidence was that the "Base Code" performed the functions described in Schedule 1 of the 2012 BJYP Agreement: [283].
4. Pursuant to cl 1.3 of the 2012 BJYP Agreement, BJYP agreed to transfer to Yatango Mobile Labs "a copy of the Intellectual Property". As consideration for that transfer, cl 2(c) provided that Yatango Mobile would offer, and BJYP would accept, 20 per cent of the issued shares of Yatango Mobile Labs. The clause further provided that Yatango Mobile would hold the remaining 80 per cent of the issued shares in Yatango Mobile Labs, in consideration for which it was required "from time to time endeavour to contribute, at [its] cost, to [Yatango Mobile Labs'] ongoing research and development".
5. In that regard, cl 1.4 provided that Yatango Mobile Labs would, at its cost, engage ECConnect to provide services to customise and develop the Intellectual Property to the requirements of Yatango Mobile Labs; that arrangement was the subject of a separate agreement. Pursuant to cl 3 of the 2012 BJYP Agreement, Yatango Mobile Labs was then to exclusively license the "Developed Material" to Yatango Mobile and its subsidiaries at cost in accordance with market rates. "Developed Material" was defined in cl 15, in more detail than in cl 1.2(b), to mean: "the Intellectual Property including all material, documents, equipment, information and data (however stored), wholly and solely created, developed, customised or implemented under the ECConnect Agreement or for the purposes of the venture between the parties." (Emphasis added.)
6. Clause 5.1 of the BJYP Agreement provided that all intellectual property rights in the Developed Material, with certain exclusions, was to vest in Yatango Mobile Labs. At the same time, however, cl 5.5 provided that the intellectual property rights the subject of the Agreement would revert to BJYP in certain circumstances, including if Yatango Mobile Labs became Insolvent as defined in the Agreement.
7. The BJYP Agreement thus contemplated that the incorporated entity, Yatango Mobile Labs, would be the vehicle which held the Developed Material (as defined. Yatango Mobile Labs would then license the Developed Material to Yatango Mobile at market rates, in circumstances where Yatango Mobile would own 80 per cent of Yatango Mobile Labs, and BJYP 20 per cent.
8. In cross-examination, Mr Apps elaborated upon the process of incorporating the base code into Yatango Mobile's business as follows (in answering questions about the initial August 2012 proposal): "A. So all customer systems started from the one base code base and then were customised to suit their requirements. So the base billing system would have been used, the same for every customer. And then so, obviously, Yatango wanted to go to the market with different types of plans so that billing system would have been customised to suit them. Q. You say that, so far as Yatango was concerned, you modified an existing system. Is that what you did? A. That's right. And that's reflected in paragraph 1 where it says, 'Tried and trusted system. The quickest time to launch and benefit from a tried and trusted system.' Q. Your recollection; you've got a tried and trusted system and you modified that system so to meet the requirements [of] Yatango. Is that correct? A. That's correct. That's reflected in point - paragraph 2 as well. Q. You're aware, aren't you, that from 2012 or thereabouts, Yatango Mobile Pty Ltd had, what's referred to in IT terms, as a platform? A. Yes. That's correct, yep. Q. In terms of your billing system, is it correct that what you did is you basically plugged your billing system into the platform? A. You could say that, yes."
9. When asked by the primary judge to explain what he meant by a "platform", Mr Apps said: "A. So my definition of platform would be a … cumulative collection of IT systems, altogether, is what is referred to as a platform. And so the base code, the customised codes, which includes the billing system, is all part of that platform. You could also consider like the Yatango website as a platform, which Appscorp or BJYP didn't work on, as well as the mobile app as part of the platform. And I believe that's what Yatango would have been selling the idea of that [to] the investors, would have been selling them a platform which is a - the whole thing altogether."
10. It was common ground that between the signing of the 2012 BJYP Agreement and September 2014, when a further agreement with BJYP was signed, Yatango Mobile Labs was not incorporated; that did not occur until 1 May 2015. In the absence of that entity, a number of provisions of the 2012 BJYP Agreement could not operate: Yatango Mobile Labs was the entity to which the Base Code was to be transferred, and which was then to license the Developed Materials (being the Base Code with whatever modifications might be made for the Yatango Mobile business) to Yatango Mobile.
11. Notwithstanding that Yatango Mobile Labs was not incorporated, work proceeded in terms of developing the Yatango Mobile platform. Employees of Mr Apps' companies worked in the offices of Yatango Mobile, including on customising the billing system and building what was described as a "client dashboard" according to design elements provided by Yatango Mobile. As Mr Apps said in cross-examination, the dashboard design "would be classed as customised code because it didn't exist at the time of this proposal".
12. In their submissions on the appeal, the appellants described what remained outstanding under the 2012 BJYP Agreement as "administrative tasks". They relied in this respect on the evidence of Mr Apps in his first affidavit affirmed on 16 April 2019. Mr Apps there recalled that in various phone calls with Mr Taylor and Mr Wilkinson during September 2012, he told them that everything was in place to transfer the Base Code and whatever else was necessary for BJYP to do under the 2012 BJYP Agreement. He then asked who was preparing the documents to effect the transfer of the Base Code and the licensing of any customised code from Yatango Mobile Labs to Yatango Mobile. The appellants submitted that this was significant when considering the question of what "if anything" the respondents lost when they purchased the shares and what they would have done had the true position been made known to them. The "true position" in this respect, they submitted, was that although the 2012 BJYP Agreement had not been completed, "the other party to it was pressing for it to be completed."
13. In 2014, Yatango Mobile entered into a second agreement with BJYP, titled "Intellectual Property Transfer and Licence Agreement" (the 2014 BJYP Agreement). The 2014 BJYP Agreement post-dated the transactions that were the subject of the proceedings. Relevantly, however, cl 1 of the Agreement, titled "Background", contained the acknowledgement and agreement of the parties to the Agreement (being BJYP and Yatango Mobile) that "some obligations under the 2012 Agreement were not performed by the parties" (subcl (a)). Clause 1.1(b) also recorded the parties' acknowledgement and agreement that "since about 2012, BJYP has licenced [sic] the Intellectual Property Rights in the Base Code and Customised Code to [Yatango Mobile]" (emphasis added). As the primary judge noted at [149], the term "Customised Code" was defined in the 2014 BJYP Agreement in similar terms to "Developed Materials" in the 2012 BJYP Agreement, albeit with some differences: "Customised Code means all customisations and developments to the Base Code and all material, documents, equipment, information and data (however stored) which is created, developed or customised at the cost and direction of [Yatango Mobile] or New Co."
14. Relevantly, the definition of "Customised Code" in the 2014 BJYP Agreement allowed for the fact that in the absence of the incorporation of Yatango Mobile Labs, Yatango Mobile had been working with ECConnect to develop and customise the Base Code, producing the Customised Code: [149]. Mr Apps gave the following evidence in this regard, when asked about cl 1.1(b): "Q. …The bottom line is - as I just want to get a time marker - you agree, do you, that since about 2012, that's referred to as 1.1B [scil 1.1(b)], until at least the date of [the 2014 BJYP Agreement] which I think you've said, doing your best is about June 2014, the base code and customised code was, firstly, on the Yatango Mobile Proprietary Limited's [server]; do you agree with that proposition? A. Yes, at least the server that they were using for their business, yes. Q. Yes, and that was the next point I was going to come to. If it was able to be used, so far as you are aware, in Yatango Mobile Proprietary Limited's business? A. Yes, that's correct."
15. Mr Apps' responses in this respect were consistent with the evidence he subsequently gave in relation to the customisation of the Intellectual Property as defined in the 2012 BJYP Agreement, parts of which I have set out above. The primary judge noted the respondents' acceptance that although the 2012 BJYP Agreement had not been performed, Yatango Mobile had a licence by which it could use the Base Code and the Customised Code in its business: [322]. The existence of that licence took on particular significance in relation to Mr Potter's evidence.

The respondents are introduced to Yatango Mobile

1. Yatango Mobile was looking for additional capital, and an existing investor, Ryan O'Hare, approached Mr Stavretis and Mr Kestelman about a potential investment through a purchase of shares. Mr Stavretis and Mr Kestelman were sophisticated investors with significant experience in the telecommunications industry.
2. The appellants provided the 2012 BJYP Agreement to Mr Stavretis as part of a suite of "due diligence" documents, the links to which were emailed to him on 17 September 2013 for the purpose of his consideration of the proposal. In an email dated 30 September 2013 to Mr O'Hare, Mr Stavretis indicated that he had "a very quick look at some [of] the DD material" and that of the risks in the business that he had identified "the main risk is the IP is not controlled by them which can lead to any input cost for licensing the IP of the platform". Mr Stavretis' evidence was that when he raised ownership of the intellectual property with the appellants in a phone call on or around 15 October 2013, there was an exchange in the following terms: "[Mr Stavretis]: 'I sent you an email yesterday asking about the IP issues. I just want to run through these with you. I'm concerned about Yatango not owning the IP underlying its online platform. This IP needs to be transferred from BJYP. It's essential that Yatango owns the underlying IP because the online platform is where the value in this company is.' Mr Taylor: 'Don't worry, the IP will be sorted, and Yatango will own it. We're already in the process of sorting this out and we will have assurances in the form of warranties in the term sheet that reflect that Yatango owns the IP.' [Mr Stavretis]: 'When will this be sorted out?' Mr Wilkinson: 'Don't worry, it'll all be sorted before you sign the term sheet.'"
3. By email dated 21 October 2013 at 9.43 am, Mr Stavretis followed up with Mr Wilkinson for "an updated corporate structure on how it will look." By way of response later that morning, Mr Wilkinson sent an advice that the appellants had received from the Pinnacle Group on 9 October 2013. The advice presented two options in relation to whether to locate the "Group IP company" and any franchise companies in Australia or overseas. It is apparent from the structural diagrams for the two options that the "IP company" was to be owned as to 80 per cent by Yatango Mobile, and 20 per cent by "Brad [Apps]", consistently with the arrangement contemplated in the 2012 BJYP Agreement for Yatango Mobile Labs (upon its incorporation).

The contractual warranties in the First Contract

1. The First Contract took the form of a term sheet, the terms of which were the subject of negotiations between the parties before they were executed in final form. On 2 December 2013, Mr Stavretis received the fully executed First Contract for the first tranche of shares in Yatango Mobile for which the respondents respectively subscribed: [117]. Clause 2.17 of the First Contract was headed "Warranties", (a) to (d) of which formed the basis of the respondents' claims and provided as follows: "The Company [being Yatango Mobile] and each of Taylor and Wilkinson personally warrant, jointly and severally, the following: (a) the Company (or one of its subsidiaries) owns the intellectual property used in relation to the Company's business (Intellectual Property) both legally and beneficially; (b) all code used by the Company which has been developed by employees of the Company or third parties (Developers) has been assigned to the Company or a subsidiary of the Company; (c) the Company has a valid license [sic] to use all Intellectual Property in the software used by the Company that is held by a subsidiary of the Company and such license [sic] is exclusive, perpetual and has been granted for nominal consideration; (d) the use of the Intellectual Property by the Company does not infringe any rights (including the intellectual property rights or moral rights) of any third party; …"
2. The respondents submitted that by providing the executed First Contract containing these warranties, the appellants represented that Yatango Mobile or its subsidiaries owned the intellectual property and coding used by the business, including that constituting the platform: [314].

The contractual warranties in the Second Contract

1. On or about 2 April 2014, Mr Taylor approached Mr Stavretis about the need to raise additional funds, in the context of a "Pre IPO Funding Investment Round": [124]. One of the options that was discussed was a "scrip for scrip" rollover, pursuant to which the shareholders in Yatango Mobile would exchange their shares in the company for shares in Yatango Pty Ltd: [126]. On 21 May 2014, Mr Stavretis sent an email to Mr Taylor, in which he asked about the rationale for transferring them into Yatango Pty Ltd, with which Mr Stavretis was not familiar and on which he had done no due diligence: [127]. The appellants relied on this in support of a submission that Mr Stavretis was resistant to the idea of the rollover: [126].
2. The Second Contract was also in the form of a term sheet. The executed Second Contract for Stav Investments was dated 16 July 2014, while that for LK Investments was dated 18 July 2014. Mr Stavretis transferred the further funds on behalf of both respondents ($262,500 each) on 18 July 2014. The Second Contract included warranties to the same effect as had been in the First Contract, with minor amendments that are not material to the issues in dispute. The Second Contract contained an additional warranty, in cl 2.17(k), which was in the following terms and was referred to in the proceedings as the "roll-up representation": "(k) Taylor and Wilkinson will effect a 'roll up' of all shareholders in the Company such that their respective shares in the Company will be exchanged on a one for one basis for shares in Yatango Pty Ltd by no later than August 31 2014, resulting in the Investor having the same percentage of shares in the new entity as the Investor holds in the Company and all rights attaching to the shares and granted to the Investor under this Term Sheet (or previous Term Sheet(s) executed by the Investor) will be transferred to apply to the shares held in the new entity."

The findings of the primary judge

1. Her Honour summarised the respondents' claim at [298]: "In essence, the plaintiffs' position is that, in 2013 and again in 2014, they agreed to purchase shares in Yatango Mobile because they believed in the online platform used by its business (being a conglomeration of software described as Yatango Mobile's differentiator from its competitors) (see Mr Stavretis' first affidavit at [9]); part of which online platform was the billing and provisioning software by which Yatango Mobile [was able] to bill its customers in line with Optus' requirements. The plaintiffs' case is that, before investing in the company they were concerned to ensure that the intellectual property and coding used by the business was owned by Yatango Mobile; that the defendants reassured each of the plaintiffs that this was so and provided contractual warranties to that effect; and that, unbeknownst to the plaintiffs, the truth was otherwise. Broadly, I accept their account of events which I consider to be consistent with the contemporaneous documents."
2. Both respondents relied on the contractual warranties as conveying a number of representations, but for which they would not have entered into the First Contract or the Second Contract. In addition, Stav Investments relied on pre-contractual representations said to have been made in the discussions and communications between Mr Stavretis and the respondents in the period preceding entry into the First Contract and entry into the Second Contract. LK Investments' case did not include the pre-contractual representations.
3. The primary judge concluded that the appellants breached the warranties in cll 2.17(a), (b) and (c). As to cl 2.17(a), her Honour held that at the time of the First Contract there was intellectual property being used in the Yatango Mobile business, being the code from Mr Apps' company "with whatever degree of customisation had by then been necessary for the Yatango website to go 'live'": [504]. However, that code was not owned by Yatango Mobile, as was "obvious from the fact that there was an agreement on foot for it to be transferred and that had not happened": [504].
4. Her Honour concluded that by the time the First Contracts were entered into, the respondents were "on notice that the IP was in the process of being moved". However, this did not assist the appellants "because the representation that had been made was to the effect that it was being moved from where it was then located (Yatango Mobile Labs) which was a subsidiary of Yatango Mobile" and that was "simply false": [507]. It followed that there was a breach of the warranty in cl 2.17(a) in the First Contract: [508]. There was also a breach of the identical clause in the Second Contract, at which time "it was plain that ownership of the code or Base code had not earlier been assigned to Yatango Mobile or any of its subsidiaries": [509]. The primary judge found that there was a corresponding representation that was misleading or deceptive: [508].

Challenge to the finding of a "no transaction" case (Grounds 1-6 and 10)

1. In his oral submissions, Senior Counsel for the appellants described her Honour's conclusion on the "no transaction" case as lying at the heart of the appeal, together with her Honour's treatment of the expert evidence. The representations on which the primary judge concluded that Yatango Mobile had engaged in misleading or deceptive conduct related to the intellectual property used in its online "platform". In the appellants' submission, the critical question for the purpose of the "no transaction" case was what the respondents would have done had the true position regarding the intellectual property been known. The appellants submitted that the respondents had failed to discharge their onus to establish, as a matter of objective fact, that they would not have entered into the First Contract or the Second Contract (or an alternative transaction). There was, in their submission, no reasonable basis on which to conclude that the respondents would not have proceeded if they had known that no formal transfer of the intellectual property had occurred but that the transfer was only a matter of completing what they described as "administrative" requirements.
2. The appellants relied on Abigroup Contractors Pty Ltd v Sydney Catchment Authority (No 3) (2006) 67 NSWLR 341; [2006] NSWCA 282 ("Abigroup (No 3)") at [57]-[59] for the proposition that it was for the Court to determine what would have been required for a defendant not to have engaged in conduct that was misleading or deceptive. In circumstances where the evidence supported a finding that Yatango Mobile controlled the intellectual property, immediately pursuant to a licence and otherwise pursuant to the executed but unperformed 2012 BJYP Agreement, the appellants submitted that the respondents had not established that if they had been told that the intellectual property had not been transferred, they would not have entered into the First Contract or Second Contract, as opposed to either: 1. insisting that the transfer of the intellectual property take place first (in which case they would not have suffered any loss); or 2. relying on the contractual warranties and suing for breach of contract.
3. In relation to the first alternative, the appellants emphasised the existence of the warranties in the First and Second Contract and the absence of a rescission clause (noting that solicitors acted for Mr Stavretis and Mr Kestelman at all times). In their submission, if the respondents really did not intend to proceed in the event of non-transfer of the intellectual property, the agreements would have contemplated rescission as a possible remedy and would not have only provided for claims for contractual damages.

Whether Yatango Mobile was a going concern (Ground 7)

1. The only expert evidence on damages was given by Mr Potter. He provided separate reports for Stav Investments and for LK Investments. As he reached the same conclusions for each respondent, for convenience, I will refer to the report for one of the respondents, Stav Investments, which was dated 18 April 2019. In that report, Mr Potter recorded that he was instructed to calculate the value of the loss and damage suffered by the respective respondents under the following alternative scenarios: "1.13.1 Scenario 1: Yatango Mobile books and records prior to entering into the First Contract and Second Contract are to be relied upon in my assessment of the loss suffered by Stav Investments; 1.13.2 Scenario 2: the values contained in the Yatango Mobile Group balance sheet as at 30 June 2013, which was provided to Stav Investments prior to entry into the First Contract and enclosed in the spreadsheet titled 'Yatango Mobile Group FY13 Results', have a proper basis and are to be relied upon in my assessment of the loss suffered by Stav Investments; and 1.13.3 Scenario 3: the valuation of Yatango Mobile provided to Stav Investments by Mr Taylor, which was in the order of $15 million, had a proper basis, is accurate and is to be relied upon in my assessment of the loss suffered by Stav Investments."
2. The difference between the three scenarios in terms of the loss suffered can be seen from tables that Mr Potter inserted towards the conclusion of his report, setting out the assessed loss for each scenario, being the difference between the assessed value of the respondent's shares (on the instructed assumptions for each scenario) and the price that the respondent paid. In relation to the shares purchased pursuant to the First Contract, Mr Potter's assessment was as follows:
3. For the shares purchased pursuant to the Second Contract, Mr Potter's assessment was as follows:
4. It is apparent from both tables that for Scenario 1, the assessed loss was the amount of the purchase price. Mr Potter expressed that opinion on the basis that Yatango Mobile was not a going concern and, as such, the assets should be assessed on their liquidation value. The liabilities of Yatango Mobile exceeded the value of the assets, from which it followed that the shares did not have any value.
5. In the section of the report addressing his methodology, Mr Potter elaborated on the impact of Yatango Mobile not being a going concern, noting his instruction that "the underlying intellectual property in the billing system was not owned or the subject of a licence for use in favour of Yatango Mobile". He continued: "In circumstances where the majority of the assets of the company are related to expenditure on the billing and associated systems to resell telecommunications systems, the billing systems are not owned or subject to licences to utilise them, the company has incurred trading losses in 2013 and 2015 and although I was not provided with financial report for 2014, the company had forecast to incur trading losses in this period also, I am of the opinion that the company cannot be considered a going concern for valuation purposes. An important consideration for market value is that the assets necessary to trade are owned by the entity being valued and the revenues are legally permissible. The liquidation or forced sale is an appropriate premise of value." (Emphasis added; footnotes omitted.)

The scope of LK Group Investments' misleading or deceptive conduct claim (Ground 8)

1. At [532], the primary judge held that the appellants' misleading and deceptive conduct had been established by reference to "the combination of the representations made in oral conversations and email communications together with the final warranties in term sheets as executed". The appellants accepted that this finding was open to her Honour in respect of the claim brought by Stav Investments. However, they contended that her Honour erred in reaching that conclusion with respect to both respondents, when LK Group Investment's claim for misleading or deceptive conduct was based solely on the terms of the warranties, and no evidence was adduced on the issue of reliance other than in respect of the contract.
2. I have set out [532] in [49] above. The respondents submitted that the paragraph should be construed as an assessment of the conduct constituted by the provision of the warranties "as a whole and in context", in order to determine whether the impugned conduct had a sufficient tendency to lead a person exposed to the conduct into error: Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640; [2013] HCA 54 at [39]; Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25 at [25]. That the primary judge appreciated the more limited nature of LK Group Investments' claim as compared to that of Stav Investments was evident, they submitted, from the various references to the distinction between the representations arising from pre-contractual negotiations and those arising from the contractual warranties themselves (only the latter of which were common to both proceedings).
3. I agree with the respondents that her Honour dealt with Stav Investments' claims regarding the pre-contractual representations separately from the contractual warranties at [534]ff, having earlier identified at [447] that the pleaded case on behalf of LK Group Investments was "limited to the representations said to have been made by the provision of the contractual warranties." Her Honour's conclusion in [532] was limited to consideration of that issue. It does not follow from her Honour's reference in that paragraph to the context in which those warranties were given that her Honour expanded the claim that LK Group Investments made beyond what it pleaded. Accordingly, Ground 8 should be dismissed.

The characterisation of the roll-up representation as relating to a future matter (Ground 9)

1. As the respondents pointed out in their submissions, this ground challenges only one of the misleading representations that the primary judge found had been made and relied on in their entering into the Second Contract. In circumstances where I have concluded that the respondents did not establish that they would not have entered into the transaction but for this representation (on the assumption that it was misleading), it is strictly unnecessary to consider the proper characterisation of the clause. I will consider it briefly.
2. The appellants submitted that the primary judge erred in concluding that the reference to the shareholder roll-up in cl 2.17(k) was a representation as to a future matter. Instead, they submitted that properly construed, it was a contractual promise the breach of which would sound in contractual damages. Relying on Secure Parking Pty Ltd v Woollahra Municipal Council [2016] NSWCA 154 ("Secure Parking") at [95], they contended that the representation was as to a present intention to carry out a future obligation, and the present ability to do so. On that construction, there was no representation as to a future matter that operated to impose the evidentiary onus on the appellants to establish reasonable grounds for making it.
3. The respondents submitted that in adopting this position on appeal, the appellants were resiling from a concession made in the proceedings below. However, the appellants did not make a clear concession. In the passages to which Senior Counsel for the respondents took this Court, counsel for the appellants initially submitted that it was common ground that the representation was as to a future matter. However, he immediately withdrew that submission. In what followed, counsel again appeared to submit that he was not disputing that it was a future matter, but again said he had withdrawn the submission and was "trying to be more precise because I misspoke". The primary judge then asked him to "start again", following which counsel made a submission regarding reliance, which proceeded on the assumption that, at its highest, the representation was as to a future matter. Counsel's position ultimately was, first, that there was a contractual warranty, and no separate representation; secondly that the respondents had proved reliance, and, thirdly, that there was documentary evidence of a reasonable basis on which to make a representation as to future facts, "if it is a representation": Tcpt 13/10/21, p 386(17).

Apportionment of damages (Grounds 11-16)

1. As with the grounds on the "no transaction" case, the appellants addressed the grounds globally, submitting that the primary judge erred in failing to find that Yatango Mobile was a concurrent wrongdoer and should have apportioned the amount awarded accordingly. The issue raised by these grounds did not loom large in the appellants' written or oral submissions; the conclusion I have come to on Ground 7 can only further reduce its significance.
2. The appellants focused upon her Honour's conclusion that Yatango Mobile should be treated as the emanation of the appellants, such that it was not a separate legal entity that gave separate contractual warranties and was therefore a concurrent wrongdoer. They submitted that her Honour's reasoning was inadequate, was unsupported by authority, and could not merely be accepted based on the fact that the appellants held shares in Yatango Mobile. The appellants next submitted that her Honour gave insufficient weight to the fact that at the respondents' request, the draft term sheet that became the First Contract was amended to ensure that the contractual warranties were provided not only by the appellants in their own right, but also by Yatango Mobile. The respondents had pleaded that each of the impugned representations was made jointly and severally by each of the appellants and Yatango Mobile, which reflected the importance of the joint and several warranty. Finally, the appellants submitted that Yatango Mobile derived the benefit, given it was the company's shares that were purchased.
3. The respondents submitted that it was necessary to read her Honour's conclusion together with [496], where her Honour set out the respondents' submissions in Reply on the question of whether Yatango Mobile was a concurrent wrongdoer and referred to Robinson v 470 St Kilda Road Pty Ltd (2018) 263 FCR 572; [2018] FCAFC 84 ("Robinson") at [39]-[56]. In that paragraph, her Honour summarises the respondents' submissions, although her Honour's conclusion is consistent with the reasoning in Robinson, which involved an act by the director of a sole-director company which was sought to be apportioned as between the director and the company.
4. The provisions of the Corporations Act, the Competition and Consumer Act, and the ASIC Act on which the appellants relied are cognate provisions which apply in relation to "apportionable claims". By way of example, s 87CB of the Competition and Consumer Act, in Part VIA, provides: 87CB Application of Part (1) This Part applies to a claim (an apportionable claim) if the claim is a claim for damages made under section 236 of the Australian Consumer Law for: (a) economic loss; or (b) damage to property; caused by conduct that was done in a contravention of section 18 of the Australian Consumer Law. (2) For the purposes of this Part, there is a single apportionable claim in proceedings in respect of the same loss or damage even if the claim for the loss or damage is based on more than one cause of action (whether or not of the same or a different kind). (3) In this Part, a concurrent wrongdoer, in relation to a claim, is a person who is one of 2 or more persons whose acts or omissions (or act or omission) caused, independently of each other or jointly, the damage or loss that is the subject of the claim. (4) For the purposes of this Part, apportionable claims are limited to those claims specified in subsection (1). (5) For the purposes of this Part, it does not matter that a concurrent wrongdoer is insolvent, is being wound up or has ceased to exist or died.

The Cross Appeal

1. By their respective Notices of Cross Appeal filed on 21 July 2022, the respondents argue that the primary judge erred in her assessment of damages in respect of their claim for breach of contract, in respect of which her Honour would have awarded only nominal damages. The respondents did not take issue with her Honour's conclusion on reliance damages. However, they submitted that there were two further bases on which they contended that their loss was to be assessed, by reference to the difference between what their investment would have been worth at the date of breach if the warranties had been true, as compared to what the shares were worth, which the primary judge summarised at [371]-[373], but did not address: 1. First, the respondents relied on cl 2.15 in the First Contract, which recorded an agreed value of the company as $15 million (with an agreed post-capitalisation value of $16.5 million), and cl 2.15 in the Second Contract, which recorded the agreed value as $10 million. The respondents submitted that this was the correct measure of the worth of the shares if the warranties had been correct. 2. Second, the respondents contended that the loss could be assessed by reference to what they, as sophisticated investors, were willing to pay on the basis of the truth of the warranties (relying on Mr Potter's evidence that the best evidence of value was evidence of what an informed, sophisticated investor was willing to pay).
2. The difficulty for the respondents, as the appellants submitted, was the necessary counterfactual in assessing what the shares were actually worth. In their submissions below, the respondents contended that given the warranties were not true, the shares were worthless, noting that Mr Potter had assessed them as such in Scenario 1: [375]. For the reasons I have given in allowing Ground 7 of the Amended Notices of Appeal, Mr Potter's evidence on Scenario 1 cannot be accepted. In their submissions in Reply, the respondents accepted that if the appellants succeeded on Ground 7, the cross-appeals would necessarily fail. Accordingly, the cross-appeals must be dismissed.

Conclusion

1. Although I have determined a number of grounds of appeal against the appellants, given my determination of Ground 7 the orders of the primary judge must be varied, save for order 2, which dismissed Mr Stavretis' claims and was not challenged in the Cross-Appeal brought by Stav Investments.
2. In circumstances where the appellants have had a considerable measure of success but not complete success, it may be appropriate to make some apportionment of the costs payable. The parties should have an opportunity to make submissions on the costs of the appeals and cross-appeals, together with any amendment sought to the costs orders in the court below. Those submissions should be made in writing and the Court can then determine the appropriate orders on the papers.
3. Accordingly, I propose the following orders: 1. Appeals allowed in part. 2. Vary order 1 made on 9 March 2022 to delete $1,012,500 and replace it with $27,330 (being 80 per cent of $34,162.50). 3. Vary order 3 made on 9 March 2022 to delete $1,012,500 and replace it with $27,330 (being 80 per cent of $34,162.50). 4. The appeals are otherwise dismissed. 5. The cross-appeals are dismissed. 6. With respect to the costs of the appeals, the cross-appeals and the costs order made below, the parties are to provide within 14 days of the date of these orders either- 1. short minutes of agreed orders, or 2. written submissions of no more than 5 pages, each party having a further 14 days to reply, with costs to be determined on the papers.
4. SIMPSON AJA: I agree with Mitchelmore JA.
5. BASTEN AJA: I agree with Mitchelmore JA.

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