V8 Supercars Holdings Pty Ltd v Sanpoint Pty Ltd

Surrender of REC

1. In an email to his father Frank on 12 November 2013, with copies to other members of the Fiore family, Deane Fiore suggested that the only sensible course for Sanpoint was to surrender its REC. He said that it was the "best option as it is free of any liability to run a car and/or receive a fine for not turning up". Mr Fiore suggested that there were two things that could happen if the REC was surrendered. First, the REC would get put out to tender and Sanpoint would get all of the proceeds, less legal and administrative fees. Secondly, the board of V8 Holdings might decide that it was a bad time to put the REC out to tender and the REC would get 'shelved' for a year, in which case Sanpoint could buy the REC back.
2. It may be of some significance that not only did Mr Fiore say that it would be a struggle for Sanpoint to run the car itself, but also that it would be a struggle to "lease it out properly". That suggests that Mr Fiore believed that it was unlikely that anyone who was competent to do so would be available to lease Sanpoint's REC. That may be material to the issue of whether there were potential buyers in the market for RECs.
3. In the events which happened, V8 Holdings put the REC out to tender, even though it was arguably a bad time to do so, and no bids were received. V8 Holdings did not shelve the REC as Mr Fiore contemplated by his second alternative.
4. Mr Fiore ended his email by saying: Scary to think it might come to this, but the alternative is to throw money at keeping it alive and if you look at it as every dollar spent to keep it alive is money we won't get back, then it doesn't take much before the thing is worth nothing anyway!
5. This observation by Mr Fiore is also material to the question of what the REC was worth, in the sense of the price that might be obtained for it.
6. On 1 December 2013, Mr Fiore advised James Warburton, the CEO of V8 Holdings, that Sanpoint was unable to return its REC registration form on that day. Mr Fiore sought an extension of the registration date, in order to pursue the possibility of receiving the sponsorship necessary to enable Sanpoint to race in 2014.
7. On 3 December 2013, V8 Holdings responded by saying that on 1 January 2014, the REC would be surrendered, and V8 Holdings would tender the REC to the market.
8. On 1 December 2013, two other holders of RECs, being Lucas Dumbrell Investments and Al d'Alberto, also failed to submit the necessary registration form to V8 Holdings.
9. At a meeting of the board of V8 Holdings held on 9 December 2013, Mr Warburton noted that up to three RECs could be handed back before the commencement of the 2014 season. Mr Warburton advised that "although some of the sanction agreements required a minimum number of 26 cars to race", he would take steps to manage this problem.

Events subsequent to decision to surrender REC

1. On 18 December 2013, V8 Holdings issued a press release in relation to a six-year media deal that it had entered into with Foxtel, Fox Sports and the Ten Network. The deal involved $241 million across six years, of which $196 million was in cash, and $45 million was in advertising.
2. On 20 December 2013, Mr Warburton sent an email on behalf of V8 Holdings to all of the Teams, including Sanpoint, concerning distributions and 2014 appearance money. The email dealt with over-distributions, which involved payments to Teams in a given year in excess of the amounts to which they were entitled. Over-distributions had to be repaid in subsequent years. There had been a $2.9 million over-distribution in 2012 that had been deferred until 2014. There was a further over-distribution of $2.7 million in 2013. The email included: As a result of the above the Board has set the Appearance Money for 2014 at a level to recover all of the outstanding carried forward over distribution from 2012 with the remaining element of the 2013 over distribution not being covered by the Media Rights above being deferred until 2015. With three REC's not meeting the entry date, distributions have been calculated on the basis of an equal share of 25 and on this basis the total gross distribution for 2014 per REC is $208,116 which is an increase of $40,116 on the 2013 total. Once you account for hockers, tyres, DVS costs and AGP prize money this represents a cash payment of $31,950 (excl GST) per REC.
3. The $31,950 would be the amount distributed to each of the 25 cars in the 2014 year, after payment of the costs referred to out of the gross distribution of $208,116. The email announced that, as a result of a three year fuel deal, fuel prices would be reduced by approximately 50% on 2013 fuel prices. The email forecast: "2014 will be a tough year, but with our Media Rights now locked in for 2015 at an all-time record we have an end goal of historically high EBIT for the company with much work to do".
4. On 17 December 2013, one of the existing REC holders, Nemo Racing Pty Ltd, entered into a contract with SJB Racing Pty Ltd to sell its REC, together with its share in V8 Holdings. The completion date was 1 January 2014, and the price was $800,000 excluding GST. The whole of the purchase price was required to be paid on completion.
5. There is no evidence about the circumstances in which this sale took place, other than the REC and share acquisition agreement itself. However, there is also nothing in the evidence to suggest that the agreement was other than a straight sale of the REC and share for a price payable on completion.
6. On 3 January 2014, Mr Warburton wrote an email to Dean Fiore and said: At this stage we have been talking to potential buyers of REC's and discussing options. It will be a matter for the Board to consider which will happen when everyone is back, probably not until mid Jan. I believe that we will 'shelve' the REC's for 2014 ahead of a tender for 2015 to realise the best value possible.
7. There was no evidence concerning the discussions with potential buyers of RECS or who those buyers were.
8. The parties were agreed that the suggestion that the RECS would be shelved for 2014 did not mean that the tender process would not be implemented until 2015. The racing calendar commenced in March of each year. If V8 Holdings had tried to sell the RECS by tender on the basis that the purchasers would start to race in March 2014, that would have left almost no time for the process to occur. Instead, what was suggested was that the RECS would be put to tender on the basis that any purchasers would not be expected to start to race until March 2015. The proposal would involve the tender process occurring during 2014.
9. On 28 January 2014, an adviser by the name of Tim Miles wrote a memorandum to Mr Mehrotra, one of Archer's directors on the board of V8 Holdings, with a copy to Mr Warburton, in which he considered the future of V8 Supercars racing. Mr Miles appears to have had considerable experience in motorsports over a number of decades. The memorandum dealt with risks to the sport, apparently in the context of Archer's aspiration to sell its stake in the sport. Mr Miles said : Over the past few months, I have become increasingly aware of the looming risks to V8SC - which, in my opinion, did not exist 12 months ago. Unfortunately, it has been easier to identify the risks than any potential solutions, however, I would welcome the opportunity to discuss some ideas with you.
10. Mr Miles set out his view of the current status of the V8 Supercars operation in the following terms: 2.1 Team Composition In 2014 there will be 25 cars on the grid - which could be categorised as; a) 19 cars - entered by teams operating as long-term sustainable businesses. Of these, in 2013: i. 2 - Were profitable, ii. 7 - Broke even or made a small loss, iii. 10 - Made a significant loss. b) 6 cars - entered by teams with a "benefactor owner". 2.1 Team income Requirements To run "the show" (if there are 25 cars) the total income required is at least $60M ($2.4M average per car). However, for a sustainable business, the teams need to be highly competitive and this means the actual "per car spend" varies from $2M per car to $5.25M per car. … On these estimates, there will be a (cumulative) $23M loss, to be split between; benefactor owners ($11M, or $1.8M ave per car) and team trading losses ($12M, or $650K ave per car).
11. Mr Miles identified two substantial risks to the viability of the V8 Supercars operation. The first involved, for the first time in 14 years, a competing series that was in a position to challenge V8 Supercars' position as 'the only game in town'. This was what was called the GT Championship. This was apparently a recognised class of vehicle that had championships in Europe, America, Japan and Australia. The second risk was the Team trading performance. Mr Miles gave the following summary: In summary, whilst these two key risks exist at the same time, there is a very real danger that AGT will (inadvertently) grow as it will continue to attract the stars. In parallel, teams are ever more likely to move to AGT - as it makes better business sense (and the international flavour of the series makes it seem like more fun).
12. Sanpoint acknowledged in submissions that any party who contemplated buying its REC during the tender process would realistically have to factor in that it would probably make a significant loss in each racing year. It submitted that V8 Supercars racing was for the passionate enthusiast who did not mind losing money in return for the opportunity to participate in the sport. The crucial question was not whether the information made available during the tender process would suggest to potential bidders that they could make a profit from the acquisition of a REC, as that was not realistic. The question was whether the information would satisfy a competent racing enthusiast that the likely losses would not be so great as to place the acquisition of a REC beyond the sensible reach of a purchaser who was willing to sustain some loss.
13. In this context, however, the views expressed by Mr Miles may be significant, as he suggested that 10 out of 19 Teams who were operating as businesses had made a significant loss, and there was a strategic risk that had arisen from the introduction of a competing racing program that was in some ways more attractive than V8 Supercars. This evidence may be relevant to the issue of the likelihood that a potential purchaser would have lodged a bid for Sanpoint's REC if the tender had been conducted differently.
14. At a meeting of the board of V8 Holdings held on 30 January 2013, Mr Roland Dane, who was one of the two Team representatives, indicated that "if there was anyone out there who was in the market to purchase a REC then we would know about it".
15. I infer that Mr Dane had reasonably significant experience in V8 Supercar racing. Mr Dane's statement is one of mere assertion without any supporting evidence, but it is at least likely to have some validity. Such evidence as there is in the case suggests, unsurprisingly, that participation in V8 Supercar racing is an exceptionally technical exercise that requires considerable money, expertise and passion. While it will always be possible for a suitably qualified but previously unknown party to signify interest in acquiring a REC, there is at least a substantial probability that any such qualified party would have shown some interest in the sport over a period leading up to its decision to acquire a REC, and accordingly that the party would be known to existing participants in the sport.
16. On 8 April 2014, Mr Dane wrote an email to Mr Miles in which he said that he believed that there were only 12 cars that were "good bets for being on the grid next year". Mr Dane's email was apparently in response to an article that Mr Miles had circulated that was published in The Daily Telegraph on 6 April 2014, about the daughter of a rich family who had spent $40 million on the Erebus Motorsport V8 Team and the Erebus GT Team and was "personally" broke.
17. The significance of isolated evidence of this nature cannot be assessed objectively. However, it must be borne in mind that there was at least some 'colourful' evidence that had been published in a mass circulation newspaper like The Daily Telegraph that spread a story of a rich person expending a spectacular amount of money on her racing Teams, and being left with the need to rely upon handouts from a family trust.
18. On 28 April 2014, Mr Dane sent an email to Mr Mehrotra in which he said: I have cancelled my overseas trip this week and am staying here. We should therefore take advantage of that to sit down together later this week and try to work out the way forward for this business. We are near breaking point now as I'm sure you're aware and we need to urgently ensure that we create a structure that encourages the teams to stay the course.
19. Sanpoint complained that no steps had been taken by the V8 Holdings to do anything to sell its licence before this time.
20. At a board meeting of V8 Holdings held on 4 May 2014, Mr Warburton indicated that an entity called Polestar was potentially looking for two further RECs, and the other Team representative on the board, Mr Brad Jones, advised that a New Zealand consortium was also looking to purchase a Team. The minutes recorded the following: • RD commented that we need to find a different sustainable business model to assist the teams to ensure the longevity of the category. RM indicated that if we had a model of continuous payments then there would be sustainability. BL added that Archer had investigated several options including approaching the Banks, however, this had not been successful. • RD indicated that a sustainable model would require the business to provide each of the teams with $750K in value each year which would potentially include the provision of tyres and fuel together with cash. RM indicated that Archer had considered options and were working through their position with respect to finding a potential buyer of the business to allow their exit. It was confirmed that two issues had to be resolved, Event ownership and deliver and either an exit or bridging strategy for Archer. • JW advised that he felt we had this year to work through the sustainability issues, however, he believed that RD was not overstating the difficulties facing some teams. RM added that we needed to create a pipeline of new entrants to take ownership of RECS in 2015. • Given the above discussion RD was satisfied that the sustainability issue was being considered and agreed to sign the accounts, as did the other directors.
21. The person described as RM in the minutes was Mr Mehrotra. RD was Mr Dane, JW was Mr Warburton, and BL was another representative of Archer, Brad Lancken.
22. This discussion took place in the context of the directors satisfying themselves whether V8 Holdings was sufficiently financially viable to justify them signing the statutory accounts.
23. Sanpoint placed reliance on the fact that Mr Dane indicated to the board that a sustainable model would require the provision to each Team of $750,000 in value each year, before expenditure on racing costs.
24. On 5 May 2014, one of the owners of the Teams, Mr Rod Nash, wrote an email to Mr Warburton to express his concern about the parlous state of V8 Supercars racing. Among other things he said that "the chances of a Train Wreck of risk to loosing (sic) some Teams is of great concern to me".
25. On 19 May 2014 in an email to Mr Mehrotra, Mr Dane spoke of "extreme short-term fragility around three or four RECs as well as high 2015 risk around those and others". He said: The team owners are clear in the expectation that Brad and I arrive at a mutually equitable solution with Archer, on their behalf, in the next few weeks for their consideration. Therefore, I would ask that you forward to us both your proposal for a restructure as a matter of urgency so that we can try and reach a conclusion as quickly as possible and, not only avoid cars ceasing to compete, but also start the rebuilding process of making the category attractive enough for potential new REC investors.
26. Mr Mehrotra replied to Mr Dane on the same day saying "we think we have a structure that could make sense for all".
27. There was apparently a meeting between Mr Dane and Mr Mehrotra, and perhaps Mr Jones, the other Team representative, on 20 May 2014, but the evidence does not disclose what happened at that meeting.

Commencement of tender process

1. On 20 May 2014, on about the same date as the need for a financial solution for V8 Supercars was coming to a head between the drivers' representatives and Archer, Mr Dane wrote an email to the other members of the board on the subject of the need to initiate the process in clause 10.1(a) of the RECs that had been surrendered. Mr Dane said: Given that any potential purchasers of these RECs will need to work on sponsorship arrangements for 2015, I believe that we now need to offer these RECs for sale by tender as per Clause 10.1(b). Therefore I propose that, given the proximity of the end of the financial year (and the impact that can have on planning that can impact the 2015 season) we go to tender as soon as practical with a view to having a closing date on (sic) later than 30 of June. The proposal that I would ask the Chairman to seek a vote on is broadly: • That the Board initiates a tender process for the three RECS with a closing date of no later than 30 June 2014. • That there is a 21 day tender period - so we would put the tender out no later than 6th June. • That tenders invite the running of a car commencing with the 2015 season and as such (given the terms of clause 5.1(e)) the new entrant would not sign the RECs until 1.1.15, but would sign a binding commitment in July upon successful tender and make payment at the same time. • The offers received may differ in financial quality (remember that the Board may decide that one tender is of better quality than another for reasons other than the quantum) and in such circumstances any higher offer should be attributed to the REC with the longest period of continual ownership attached to it leading up to 1.12.13 except that any period of previous lease should count against the REC in the event of a tie. This should have the effect of rewarding those that have been REC holders for the longest time. • The tender process should make it clear that any submission must be supported by a business plan. Given that parties may want to see a REC before tendering, and remembering that this is a confidential document, we will need to be ready with confidentiality agreements for applicants that need to include a requirement to destroy any REC copy if they are unsuccessful.
2. Sanpoint submitted that "out of the blue" Mr Dane began to push a very urgent and truncated tender process. It submitted that there was evidence that the Teams had to work out their budgets, including sponsorship, by the end of September 2014. I will come to the evidence that supports this assertion below.
3. Sanpoint noted that in an email to Mr Mehrotra of 20 May 2014, Mr Warburton said: "We have never been here and the 'Process' in the REC etc… is very loose…"
4. The thrust of Sanpoint's submission was that, although the relevant officers of V8 Holdings appeared to be aware that cl 10.1(b) of the REC required V8 Holdings to ensure that the price paid for the Rights was as commercially advantageous as possible having regard to the current market situation, there was little evidence that the officers positively set about determining how to achieve that outcome. Rather, by the process initiated by Mr Dane, who was one of the representatives for the remaining Teams on the board, V8 Holdings acted in the interests of the remaining Teams for the purpose of preserving V8 Supercars racing, and in this sense they had a conflict of interest. What they were required to do was to work out and implement a tender process calculated to ensure that the price received was as commercially advantageous as possible. That had to be done in the interests of a Team that had surrendered its REC. Sanpoint also submitted that there was an inevitable conflict, which was not resolved by V8 Holdings, that was presented by the need to put three RECs out to tender in the same timeframe.
5. Mr Anthony Hogarth, V8 Holdings' general counsel, sent an email on 20 May 2014 to Mr Warburton and other officers of V8 Holdings, in which he raised a number of questions concerning the contents of Mr Dane's 20 May 2014 email. Mr Warburton sent that email to Mr Dane the next day, and Mr Dane responded to its contents by inserting his replies in Mr Hogarth's email.
6. Mr Hogarth raised the problem of the need to sell all three RECs. Mr Dane said that it was necessary for V8 Holdings to put all three RECs out to tender. He said: "In any case, V8SC will almost certainly match the prices and buy back and sit on the RECs if the prices are low enough. It is very doubtful that any REC will be left unsold. V8SC can then choose to reactivate and sell those RECs that it buys back at some later time if market conditions warrant it".
7. Mr Hogarth observed that all three RECs were required to be tendered simultaneously and if there was only one bid, the REC holders should draw lots "but this might be moot if this all needs to be wrapped up pre-restructure, as V8HPL will need to step into the breach to buy back any RECs not taken in the tender".
8. This comment introduced the issue of the conjunction between the sale of the RECs and the completion of any restructure of V8 Supercars racing. It raised the suggestion that the sale may need to take place before the restructure. Although Mr Hogarth only raised the need for the tender process to be completed before the restructure as a possibility, as will be seen, that order of events became a significant feature of the process.
9. Mr Hogarth raised the suggestion that it might be safer for V8 Holdings to retain an external corporate adviser to run the tenders. The risk was that V8 Holdings could be exposed to a claim that it did not run the tender process correctly "and/or optimise the price received for the RECs". Mr Dane added: "Everyone has signed the REC on the basis that the Board has absolute discretion". As that was Mr Dane's response to the suggestion by Mr Hogarth that there was an obligation to optimise the price, there is a fair inference that the message Mr Dane sought to convey was that the discretion of the board was paramount.
10. Mr Hogarth raised the question of what would happen if there were no bids or if a "low ball" number was received. Existing Teams may not want to know what the current "market" value of their RECs was. Mr Dane observed: "If no bids are received then we would have to shelve them to try again next year. We have a responsibility to the business and the shareholders now to try to put cars on the grid for 2015. As for a lowball number - all teams know that their RECs currently are arguably of very little value in any case".
11. Sanpoint made the submission, which has force, that Mr Dane's response again pushed the process towards looking after the interests of the business and the remaining Teams rather than the Teams that had surrendered their RECs. Mr Dane's stated justification was that all Teams knew that their RECs were of little value anyway. Mr Dane's response appears to suggest that V8 Holdings should look after the remaining Teams, rather than those that had surrendered their RECs, because the tender process would not yield high prices for those rights in any event.
12. Mr Hogarth also raised the question of what would happen if all three of the RECs were purchased in the tender, given that Archer's model was based on 26 RECs. This statement appears to reflect some preliminary indication made by Archer, which is not otherwise established by the evidence, that any restructure should be on the basis that there were 26 cars in the field. There is some evidence that 26 cars was the minimum that V8 Holdings' agreement with broadcasters required. It is not clear whether the 26 car number was selected after Archer became aware that three RECs had been surrendered. It is not clear whether Archer was wedded to the number 26, and not more. Mr Dane commented: "It is up to the Board to decide whether to match any tender offers and buy back. So the Board can make this determination in due course".
13. Mr Hogarth said: "Given the illiquidity of any REC market, is 21 days the right period of time for the tender?" Mr Dane's response was: "Anyone who is potentially in the market will know about the availability and will be able to act in my opinion. This will flush people out". This evidence establishes that V8 Holdings was aware that the market for RECs was illiquid. Mr Hogarth at least was aware that a 21 day period may not maximise the chances of one or more of the RECs being sold. Mr Dane repeated his assertion that potential purchasers would be able to act quickly. Even though there is some probability that potential purchasers would be well acquainted with V8 Supercars racing, it does not follow that they could put together an effective racing business model in 21 days. Mr Dane had already indicated his preference for the interests of the business and the remaining Teams.
14. Mr Hogarth suggested alternatives to running a tender, in view of the probability that "there will likely be a large process of winding up the current REC format and the constitutions and shareholder agreements for V8HPL". V8 Holdings could negotiate a buyback price with the three surrendering RECs. Current REC holders and Archer could agree on a price "as part of the broader restructure resolutions". V8 Holdings could buy back the surrendered RECs and account to the surrendering REC holders for the net proceeds. Mr Dane's response was: This will never get past the current REC holders unless there is an incentive. They have continued to back the business with their own money where these three have not. The market must decide the value of the RECs.
15. Sanpoint observed in relation to Mr Dane's response to the issues raised by Mr Hogarth that while it was true in a general sense that the board had an obligation to the remaining owners, V8 Holdings was obliged by the terms of the RECs to get the best price commercially available for the RECs that were being sold "and not to be blinkered by an obligation to the business in general, to the shareholders that are still there, and to the event next year" (T 22.33).
16. Mr Hogarth prepared a process paper dealing with the surrendered RECs, and circulated it to Mr Mehrotra, Mr Warburton, and another officer of Archer. He said: I attach a short paper that speaks briefly to the processes required for implementing either of the following options to "clean up" the 3 surrendering RECs: 1. Conduct a tender process in line with the RECs, in advance of any corporate restructure; or 2. Wave the tender process and negotiate a buy-back price for the surrendered RECs, to occur simultaneously with the corporate restructure.
17. It appears that by this time it had become accepted that the tender process was to be completed before any corporate restructure. There is no evidence that V8 Holdings gave any thought to whether the completion of the tender process before the restructure would be inconsistent with its obligation to ensure that the price paid for the rights was as commercially advantageous as possible having regard to the current market situation in the manner in which the rights were offered to the market by tender.
18. Sanpoint said that it was the heart of its case that, knowing that there was a corporate restructure in the offing, a deliberate and conscious decision was made by V8 Holdings to sell the three RECs prior to the corporate restructure, knowing that the corporate restructure would increase the value of the RECs (T 23.50). It added that there was an extraordinary lack of information about the potential corporate restructure that was put in the tender documents. It submitted that clause 10 of the RECs required V8 Holdings "to put in place a tender process that is best placed to achieve the central tenet of clause 10 which is to get the best price. Yet, Mr Hogarth has obviously been instructed that option one is to conduct the tender process in advance of any corporate restructure" (T 24.5). Sanpoint suggested that option 2 should have been: "To conduct the tender process after the corporate restructure".
19. In Mr Hogarth's process paper, Mr Hogarth observed concerning option 1: • A "tender pack" of the key information and documents regarding V8 Supercars, running a V8 team, the legal framework and documentation that V8 teams must sign up to, and information regarding the potential restructure (amongst other documents), will be compiled for review by bidders. [Emphasis added]
20. Mr Hogarth said that bidders would have 21 days to conduct due diligence and submit a binding bid, and then there would be an additional 10 days to negotiate terms and execute documentation.
21. Mr Hogarth also dealt with the possibility that no bids were received. In that case V8 Holdings could: • exercise its "absolute discretion" under the RECs to deem the price to be zero (albeit, the value may actually be negative given the over-distributions and cost of running the tender) and can move to terminate the REC and undertake a buy-back/redemption/cancellation of the corresponding share in V8 Holdings…; • allow the REC to remain "surrendered", but available for tender at a later date; or • proceed with "Option 2" below.
22. In relation to option 2, which could only be undertaken by the consent of all interested parties, Mr Hogarth observed that the price to be paid to the surrendering REC holders would involve negotiation: "and the surrendering holders will negotiate being aware of the upcoming restructure and the value of the RECs post restructure. Any price will have to take into account V8 Holdings' costs of the negotiation, the over-distributions and any outstanding race fines/sanctions/penalties".
23. In this context Sanpoint complained that although Mr Hogarth acknowledged in the process paper that the surrendering REC holders would be able to negotiate a higher price by knowing of the upcoming restructure, that information was not made available to people tendering to buy the surrendered RECs.
24. It appears that by this time Mr Dane's proposal to shorten the due diligence period to 21 days had been accepted.
25. Mr Hogarth also considered the possibility that there would be one or more compliant third-party bidders. He said: "V8 Holdings can exercise its "absolute discretion" to rank the bidders in order of descending price, rank the surrendered RECs in order of longest tenure to shortest tenure in the sport, and transfer the surrendered RECs accordingly". As it happened, there were no compliant third-party bids for Sanpoint's REC, or either of the other two surrendered RECs. The board of V8 Holdings was not required to deal with the problem of bidders offering different prices, or there being fewer bidders than RECs on sale. However, it is significant that from this point V8 Holdings gave consideration to how it would deal with these problems. That is a matter that may be relevant to the determination of whether Sanpoint has demonstrated that it suffered a loss as a result of any breach of the REC by V8 Holdings, and if so, the quantification of that loss. It would be necessary to consider what benefit Sanpoint would have enjoyed if the tender process had been conducted differently, and one or more compliant bids had been received at perhaps different tender amounts.
26. There is some basis for inferring that by 27 May 2014 Archer had made a proposal that would have guaranteed payments to each Team of $400,000 gross for the coming seasons, compared with the amount of $208,116 estimated gross for the 2014 season. On that date Mr Dane sent an email to Mr Mehrotra in which he said: We won't get enough support for the proposal discussed to get up. 75% is necessary. The figures are too far away. You're aware of my original thoughts and if we can't do something closer to that then we will have to move on unfortunately.
27. This email suggests that, at about the same time as V8 Holdings was making practical arrangements for putting the three surrendered RECs out to tender, Archer had made an offer to improve the financial outlook for the Teams, but Mr Dane thought that the Teams would not support Archer's offer. Mr Dane's reference to moving on is not explained, but it appears to convey that if Archer was not able to make an offer much closer to what Mr Dane thought was sustainable, then the V8 Supercars racing program would collapse.
28. On 31 May 2014, Mr Hogarth advised Mr Warburton of Ernst & Young's proposal for the tender process, which involved 2 weeks to prepare a bid pack of information that a bidder would need, 2 weeks for registration of interested bidders, 3 weeks for registered bidders to undertake due diligence and submit a bid, and then 1 week for selection of winning bidders and execution of legal documents. Sanpoint submitted that that was clearly a very tight timeframe. Mr Hogarth said: "I pushed and will keep pushing to get some overlap between points 1 and 2…" That comment suggests that Mr Hogarth understood that his instructions were to ensure that the tender process would be completed with some urgency.
29. As I have observed above, Mr Hogarth started from the point that because the market for RECs was illiquid, the timeframe for the proposed tender process might be too short. The proposal then became fixed that the tender process had to be completed before the restructure. By 31 May 2014, Mr Hogarth had adopted the course of pushing to contract even the tight timetable suggested by Ernst & Young.
30. On 3 June 2014, Mr Warburton sent an email to Greg Minton at Archer, in which Mr Warburton set out where "the Teams deal has got to". Mr Warburton said: • … 10% of the field handed their REC's back last year • 7× REC's are at risk (could be boy that cried wolf) for 2015 • Contractually we need 26 (we are getting by on 25 this year) • Ford are pulling out (still desperately trying to stop them) • Teams are burning about $1 mill in losses per car • Competitive threat from GT's and FOM as well as 7 • Teams deal is a good one - $400k plus tyre and fuel about $600k of value (worth $45 mill of EBIT@35%) • Having teams locked in for 6 years good for us - stability and kills competitive threat • Without strong teams we have no show to promote or sell • They give up tag along and drag along rights - good for exit • We own the business 100% We need to break the deadlock/stalemate and bring them along (assuming we want to do the deal). Roland says he wants $600K plus fuel and tyres, he would settle closer to $500K or we could shape it. We must have good and sustainable teams to get the right result in the exit and there must be a deal to be done that suits both parties before we all take our chances.
31. Sanpoint submitted "critically this document is not in the data room for tenderers to consider as part of their due diligence process (T 27.41)". Mr Warburton's email seems to reflect the then current state of negotiations between V8 Holdings and Archer. $600,000 of value per Team is said to be worth $45 million of EBIT. Sanpoint submitted that this figure should be compared with what the bidders were eventually given in the data room, which was the 2013 figure of EBIT of $20 million, which equated to a net payment to each Team of $37,000 after payment out of the gross share of EBIT of the costs that were required to be borne by the Teams.
32. It may be observed that, although the current state of negotiations may have been much more attractive to potential bidders than the historical situation, the first six bullet points in the email would have been challenging to potential bidders. A possible future receipt of $500,000-$600,000 gross per year, if a restructure was implemented, would have to be judged against the fact that Teams were burning about $1 million in losses per car, and that Ford was pulling out, as well as the fact that 10% of the RECs had been surrendered, and seven were at risk.
33. On 29 May 2014, Mr Hogarth advised Amanda Evans at Ernst & Young: "As you know, we are keen to conduct the required tender as soon as possible, and I am receiving increasing pressure from the board to start the process". Mr Hogarth added: At the same time, and this is subject to complete confidentiality, a restructure of the shareholdings of V8 Supercars Holdings Pty Ltd is being considered and there is now an urgency to deal with the 3 surrendered RECS in advance of such a restructure. There is an interest in having 26 competing RECs for 2015.
34. Mr Hogarth said that V8 Holdings intended to "move the process forward asap", and further: The bid pack will contain the RECs and ancillary documents, potentially some disclosure regarding what the potential restructure will look like, some financials given that a Share will be part of the sale, and the legal documents that will need to be entered. [Emphasis added]
35. By this stage, therefore, what had initially been in Mr Hogarth's mind a doubt about the sufficiency of the time to be given to the tender process, which had passed through a stage where Mr Hogarth was pushing to truncate the process had, as a result of pressure on Mr Hogarth from the board, become a process that was urgent and must be completed ASAP before the completion of the proposed restructure.
36. V8 Holdings signed Ernst & Young's engagement letter on 5 June 2014.
37. Mr Hogarth sent an email to Mr Dane and a copy to Mr Warburton on 11 June 2014. He explained that the timing of the launch of the REC tender was being determined by the requirements of the "bid pack". He said that one of the contents of the bid pack would be : • Disclosure regarding the V8 Supercars corporate structure and the potential changes to the V8 Supercars Holdings ownership structure being negotiated between the teams and Archer.
38. Mr Hogarth said that there would be a two week period for interested bidders to register their interest in the RECs. Bidders would then have a four week period to review the bid pack, complete due diligence and submit responses.
39. Mr Hogarth said in the penultimate paragraph: As always, nothing is simple, but I am working on this as the top priority. This process would typically take months, but I'm trying to expedite it whenever possible.
40. Thus, Mr Hogarth clearly expressed a personal opinion that the whole of the tender process would typically take months, but he was trying to expedite it wherever possible. The only reason for Mr Hogarth taking that course, under pressure as he put it from the board of V8 Holdings, was so that the tender process could be completed before the proposed restructure. The reason for urgency was that the need for the restructure was itself urgent, the V8 Supercars program was on the verge of financial collapse, and there was a real possibility that the Teams would simply walk away from the program.
41. Mr Dane responded by asking Mr Hogarth whether it was necessary to give bidders four weeks for the due diligence process.
42. Mr Hogarth responded to Mr Dane on 12 June 2014, by noting that the REC "is extremely light on in terms of what the process should involve". He said that he and Ernst & Young were "trying to build a bullet-proof process to protect the business (and you as directors) from any claims from the surrendering REC holders (e.g. - that you didn't run a proper process that maximised their sale price) and from successful bidders (e.g. - that you didn't properly disclose all necessary information and give them adequate time to consider the information)".
43. Mr Dane in turn responded on 12 June 2014 by saying, among other things: I don't think you're coming at it from the wrong perspective at all. What I do think is that there is a balance to be struck here… I believe that we are entitled to come from the point of view that any genuine prospective bidder is going to have an in-depth understanding of the Sport and also a good understanding of the V8 Supercar business and how it works. Frankly, if they don't then they're not going to (sic) eligible to bid. We should be perfectly entitled to weed out the dreamers very early on in the piece. We have enough potential damage to the business with one of our more "colourful" owners right now without adding to that.
44. The evidence may not be exhaustive concerning who was involved in driving the tender process for the sale of the RECs, but it is reasonable to conclude from the documentary evidence that Mr Dane, who represented the remaining Team owners, was a primary force in guiding the process.
45. On 10 June 2014 representatives of V8 Holdings and Ernst & Young met to discuss the tender process documentation. The plan put together for the meeting referred to the need for registrants to execute a confidentiality agreement, and considered what should be included in the information pack. It included: • Historic V8 Supercar financials (ideally last 3 financial years). Highlighting past distributions made to V8 Supercar team. • The current rule set for running a V8 Supercar • Forecast operational budget for FT 2014/15 • Disclosure statement on the potential Archer buyout and the potential additional benefits from TV rights and tyre and fuel agreements
46. Sanpoint complained in particular that what would be included was a forecast operational budget for the 2014/2015 year rather than an actual budget taking into account the potential benefits from the restructure that was being negotiated with Archer. This complaint is probably misguided, as the benefits of any restructure were more likely to appear in any budget for 2015/16.
47. A meeting of the board of V8 Holdings was held on 16 June 2014. The minutes recorded the following: RD commented that anyone who is interested will know the price and, therefore, we should be able to shorten the bidder due diligence period. RD added that ultimately this is really about ensuring the process is fair. AH also commented that we should ensure that we protect ourselves from any allegations of impropriety from both bidders and surrendering REC holders.
48. AH is a reference to Mr Hogarth. Mr Hogarth also "stressed that the board should nonetheless disclose potential matters that could impact REC price if they were becoming more certain".
49. The minutes of the board meeting also contain a note of a statement made by Archer's Mr Lancken that: "we should retain the right for the board to decide apportionment of bids which could mean a lottery".
50. Mr Hogarth informed Ernst & Young's Ms Evans on 18 June 2014 that the board had decided upon a two week period for registration of interest and a two week period for due diligence. The board had also decided that if there were no bids, the RECs would stay surrendered. Mr Hogarth added: "We don't have a budget for next year, and the board is resistant to producing one now just for this purpose. Maybe we can discuss?"
51. Sanpoint accepted that it was reasonable for the board of V8 Holdings to be unwilling to do a budget until the fate of the restructure had become clear, but it complained that the consequence was that the tender pack that would be made available to bidders would disclose nothing about that possibility.
52. On 23 June 2014, Mr Warburton wrote a letter to Dean Fiore to advise Sanpoint that, commencing on 24 June 2014, the REC would be tendered to the market pursuant to cl 10 of the REC. The rights under the two other surrendered RECs would be tendered simultaneously. The letter set out the timing of the tender process. The letter said that the board would exercise its absolute discretion to consider the most equitable way of dividing the price offered by any successful bidders for the three RECs under tender. The letter included: We will keep you updated regarding the progress and outcome of the Tender, but urge that you contact us immediately should you have any concerns or questions regarding the conduct of the Tender.
53. Sanpoint did not at any time complain to V8 Holdings or suggest any change to the tender process.

Request for registrations of interest

1. V8 Holdings published a press release on 24 June 2014, inviting expressions of interest in racing in the V8 Supercars Championship. The press release stated that three racing entitlement contracts were currently available for purchase by parties wishing to race in 2015 and beyond, and stated that all registrations of interest must be submitted by 5 PM on Tuesday 8 July 2014.
2. V8 Holdings' submissions accurately set out the manner in which the Notice of Tender was released to the market as follows: 1. it was sent by email to all current Teams; 2. it was the subject of news articles in the Sydney Morning Herald, The Daily Telegraph, The Age, the Northern Territory News, the Herald Sun, the Launceston Examiner, the Western Australian, the Gold Coast Bulletin, the Brisbane Courier Mail, News.com.au, Local Today, Perth Now, the Sydney News and Adelaide Now; 3. it was published on the websites of V8 Supercars, the Confederation of Australian Motorsports and "Speedcafe.com", an Australian motorsports news website; 4. it was the subject of a media release by V8 Supercars, which was sent to over 1300 people in the news and media industry; and 5. it was the subject of sports reports on radio stations including Triple M, 4BC and River FM, and on Channel Seven's "Sunrise".
3. A total of 16 people requested a copy of the registration form, but only five people registered. Only three registrants were not already associated with V8 Supercars racing. They were that Mr Tony Klein, Mr Michael Johnson and Mr Paul Morris. The other two registrants were the companies that had surrendered the other two RECs.
4. The negotiations between the Teams, V8 Holdings and Archer apparently continued during the tender process.
5. Mr Warburton sent an email to Mr Mehrotra on 23 June 2014, in which he said: Spent the weekend with the Teams. Same old fragility, the reality is that they are all living beyond their means without EBIT growth relative to their distribution. GT's have approached 4 of the leading Teams to run in their category next year, my view is that it is a wait-and-see approach as they would prefer to do V8 Supercars, however, the GT's and to an extent Seven are actively pushing to hurt us and if they see the sport as fragile they may get some traction…
6. Mr Warburton set out his view of the Teams under most pressure for the next year. One owner of a REC would not race in 2015 unless the deal was done, and he may not survive 2014. The owner of four RECs was losing sponsors. The manager of two RECs (in addition to those already mentioned) had advised Mr Warburton that 2015 would be the last year for him if the proposed deal did not get up "as he is already funding $2 mill from HSV plus losing a further $2 mill a year on current trend". Mr Warburton said: So all in all, if you still have an appetite to do the deal for 100% of equity this is an area of significant risk we need to have a plan to solve and something I have actively stepped out of. I still recommend strongly that it gets done but that is your call.
7. In another email to Mr Mehrotra on 24 June 2014, Mr Warburton said: "They need to know we are in the shit ie: 20 EBIT next year before they overplay the (sic) hand. Good to settle down and minimise risk but deal needs more work".
8. This email referred to a proposed meeting between Mr Warburton and the Teams in conjunction with a V8 Supercars race in Townsville.
9. A meeting of the V8 Supercar Team owners was held at Townsville on 3 July 2014. The PowerPoint presentation prepared for the meeting contained a financial projection for 2015 in the absence of a restructure agreement with Archer that forecast $20 million EBIT @ 35% and 26 RECs ($269,000 per REC) from which owners would have to pay for their tyres and fuel.
10. Mr Warburton advised Mr Mehrotra by email on 3 July 2014, concerning the meeting with Team members at Townsville: "Team Owners meeting went well, if not a sobering message. They understand clearly the trajectory of the business (and actions we are taking) and likely distributions, which makes the Team deal offer pretty plain to see in value terms".
11. On 14 July 2014, Mr Hogarth sent an email to Mr Warburton concerning the disclosure of information to registrants and said: Given the directors will be the ones that have to answer any legal claims from potential bidders and sellers (which seem likely given more threats from Dumbrell's lawyers this afternoon), I think they should review this. The danger is that there is something that they have knowledge of (e.g. - more relevant detail regarding the Archer/teams deal) that they don't disclose and we therefore need to give them the opportunity to include any information they are aware of.
12. On 15 July 2014, Mr Hogarth sent an email to all of the directors of V8 Holdings in which he stated: "Legally, we need to ensure that all material information that can impact the value of the surrendered RECs (including the V8 Supercars Holding shares) and that is known to board members, is disclosed to bidders". [Emphasis in original]
13. Mr Hogarth listed in bullet point form the proposed contents of the data room including: "Financial information - being basic operating information for 2012 and 2013 (but no 2015 forecasts)". Mr Hogarth also said: Additionally, we have put together the attached document (which is still in draft) as a basic summary of information regarding V8 Supercars. It is this document which should contain any other information within the knowledge of directors which could affect valuation. You will see that I have included a brief reference to the current Archer/teams negotiation and some brief details regarding the new media rights deal and unsold sponsorship assets. Dumbrell has already complained that there will be insufficient 2015 financial information on which a bidder can propose a price, so it would be helpful if we can provide more detail with respect to these matters - eg, the revenue/EBIT uplift between 2014 and 2015 given the new media rights deal.
14. Mr Mehrotra responded to Mr Hogarth by saying: "… We should be able to provide an estimate for 2015 Ebit based on the latest 2014 forecast and impact of media deal".
15. Sanpoint stated that it was its case that all of the relevant information that was known to board directors was not disclosed in the bid documents. The vice, according to Sanpoint, was that that the EBIT forecast provided to potential bidders for 2015 was based upon an EBIT of $20 million, which did not take into account all of the potential impacts of any Archer restructure.
16. Mr Hogarth stated in an email to Mr Mehrotra on 16 July 2014 that he was trying "to form a 2015 EBIT forecast".

Due diligence period

1. The due diligence period commenced on 18 July 2014, at which time the five registrants were given access to the information in the data room.
2. When the due diligence period commenced, potential bidders were given a document called "Tender Process and Rules". Among other documents, the data room included a standard form REC and annexures. Bidders were required to complete and return their bids by 5 PM on Friday, 1 August 2014.
3. The Tender Process and Rules contained the following statement concerning the fact that the tender process related to three separate RECs: Each of the Surrendered RECs is being tendered for sale individually and any sale proceeds will not be pooled across the Surrendered RECs but will instead be apportioned directly to the Surrendered REC to which those proceeds relate. Although the Surrendered RECs are identical in their terms, the Surrendered RECs have been given the codenames Echo, Gamma and Bravo in order not to disclose the details of the surrendering REC holders. Ernst and Young is administering this aspect of the tender and only Ernst and Young knows which of Echo, Gamma and Bravo refer to each Surrendered REC.
4. The bid documents included an "Information Memorandum". The information concerning the group structure of V8 Supercars included : Again, there are currently confidential discussions taking place between the Archer Capital funds and the teams which may result in the Archer Capital funds acquiring some or all of the teams' interests in V8SH in return for a guaranteed annuity payment which is expected to be in excess of the current annual distribution made to teams. No further detail is currently available to V8SH and there is no guarantee that any such acquisition will proceed or that it will result in higher annual distributions to teams.
5. Part 7 of the Information Memorandum dealt with appearance money paid to Teams. It included: By way of example, the distributions per REC (although not applicable to the Surrendered RECS) for 2014 are: Gross cash distribution to teams based on 2014 budgeted annual V8SH profit: $208,116 Less: Tyre charge: $119,851 Catering hoecker: $18,246 Misc costs: $38,069 Plus: GST: $3,195 NET CASH DISTRIBUTION (2014): $35,145 The number of operating RECS will impact the amount of the distributions, and the above 2014 distributions are based on there being 25 of operating RECs (that is, it does not take into account the 3 Surrendered RECs which may become active in 2015).
6. The statement concerning the confidential discussions taking place between Archer and the Teams that is set out above was then restated.
7. Rule 4 of the Tender Process and Rules included an encouragement to potential bidders to request any additional information that they required that did not appear in the data room.
8. Sanpoint stated that its case was that there was simply insufficient detail on what was actually known to V8 Holdings about the state of negotiations with Archer and that it was not true that no further detail was currently available to V8 Holdings (T 37.28).
9. The Financial Information included in the Information Memorandum disclosed EBIT for the calendar years 2012 and 2013 of $23 million and $11.4 million respectively. The forecast EBIT for 2014 and 2015 was $14.9 million and $20.0 million respectively.
10. The gross distributions before the deduction of costs was given as $309,000 and $142,500 for the 2012 and 2013 years, and estimated $208,116 and $279,760 for the 2014 and 2015 years.
11. The notes state for the 2014 figure that it was "the budgeted EBIT figure on which gross distributions to teams are based for 2014".
12. The notes in relation to the 2015 figure state that it "represents Management's forecast of EBIT for FY 2015 (including, without limitation, the increase from the new media rights agreement with Fox Sports commencing in 2015)". The Information Memorandum then included in the note in relation to the 2015 figure a statement in bold and underlined that stressed that the figure was based on numerous assumptions, and set out other qualifications.
13. Note (f) repeated the statement referred to above concerning the current confidential discussions taking place between the Archer and the Teams.
14. Paragraph 3 under the heading "Financial Information" invited the reader who required any further financial information to contact V8 Holdings.
15. Sanpoint made the submission (T 37.40) that the invitation given to potential bidders to seek further information was of no significance given that the paragraphs that advised of the confidential discussions that were taking place stated: "No further detail is currently available".
16. Sanpoint also submitted (T 38.20) that what the bidders needed to be told was precisely where the negotiations were up to so that they could make their judgment as to what they thought the likelihood of those negotiations being consummated was.
17. The Information Memorandum also contained a list of the "typical capital and infrastructure equipment that a two car team may need to acquire in order to be self-sufficient". Although the list relates to a two-car Team, it gives some idea of the infrastructure required for a Team to compete in V8 Supercars. The list is: • Race meeting equipment: • Two race cars • Complete race car as spare • Five engines • Prime mover truck • Transporter with custom built A & B trailers • Two full suspension sets as spares • 80 wheels and tyres • Consumables and general spares • Factory and showroom fit out • Workshop equipment: • Hoists • Compressors • Tools • Fabrication and manufacturing equipment: • CNC machines • Lathes • Fabrication equipment (drill press, benders, etc) • Engine shop: • Dynamometer • Spintron • Head bench
18. While the evidence does not permit the court to make any comprehensive or detailed findings concerning the complexity of operating a V8 Supercars racing Team, it is reasonable to act on the basis that this list gives some idea of the nature of the exercise, and permits a conclusion that it is a very expensive and technically complex one.
19. On 21 July 2014, a document called "V8 Supercars - Archer Portfolio Evaluation" was prepared for Archer's internal purposes. Sanpoint relied upon the fact that the information in the document was known to the two directors of V8 Holdings who represented Archer.
20. The Executive Summary included the following statement in relation to "Sustained poor financial performance putting pressure on teams": "discussions are underway to explore new models pending outcome of three RECs currently under tender".
21. This statement tends to confirm that Archer's objective was that the discussions would only come to fruition after the outcome of the tender of the three surrendered RECs was known.
22. The document contains an agenda for an internal Archer meeting.
23. A document setting out a graph of historical distributions per REC is included for the period 2007 to 2013 with a forecast for 2014. The graph shows that the distribution was $900,000 per REC in 2011 from an EBIT of $33.6 million, before the implementation of the deal whereby the team owners sold 65% of the V8 Holdings business to Archer. The distributions then fell to $288,000, $143,000 and an estimated $208,000 in the years 2012 to 2014. Those amounts were gross before the deduction of various racing costs.
24. The document also included an estimate of EBIT for 2015 of $14,865,000, which would lead to a net cash distribution of $53,000 per REC.
25. The document included the following statement: "In order to drive team stability, we are considering providing a model that guarantees revenue per REC in exchange for their 35% equity in the business".
26. A key assumption was that there would be 25 RECs and each would receive $450,000.
27. No agreement was ever made between Archer and V8 Holdings and the Teams in terms of this proposal. It should be noted that the gross receipt of $450,000 per REC was only $50,000 more than the amount that Mr Dane had already rejected on 27 May 2014.
28. Communications continued between the representatives of the Teams, primarily Mr Dane, and Mr Warburton during the time that the due diligence process was open, in relation to the need for a new deal to be done with Archer. This included Mr Dane advising Mr Warburton of Teams that would not be able to compete in 2015 without a satisfactory deal being done.
29. Sanpoint observed that the market was not told about these communications, although it also recognised that being told about the likelihood that a significant number of Teams would pull out in 2015 "would of course scare the market off" (T 39.50). The point made by Sanpoint was that if prospective bidders had been shown the relevant email they would have made an enquiry about the deal with Archer that was being discussed.
30. The due diligence period ended on 1 August 2014. No bids were received for Sanpoint's REC. Bellmont Nominees Pty Ltd, which had earlier surrendered its REC, made an "indicative" and non-conforming bid for its own REC, which was conditional upon it receiving $1.25 million in sponsorship.
31. An electronic record of when the registered bidders accessed the data room, what documents they opened and how long they reviewed the documents was maintained. Each of the three external registrants spent relatively little time reviewing the information in the data room (Mr Klein 3 hours and 7 minutes; Mr Johnson 1 hour and 41 minutes; and Mr Morris 45 minutes). Mr Klein accessed the data room on 18 and 22 July 2014, Mr Johnson on 18 July 2014, and Mr Morris on 28 July 2014. Mr Morris did not look at the Information Memorandum or the Financial Information Document.

Events after end of tender period

1. Mr Warburton sent an email to Mr Mehrotra on 3 August 2014, in which he effectively took stock of the present position. He said: As I've said a few times, we need to control things on our terms and provide the leadership in terms of the deal and the timing. However, on the same basis, we can't have the Teams, led by Roland making the plays or calling shareholder meetings or threatening to do so or spiralling negatively and convincing themselves not to race. By announcing the date and timing this shifts the balance to us.
2. It appears that things had reached the point where Mr Warburton was concerned of the possibility that the Teams would unilaterally decide to stop racing.
3. Mr Warburton suggested that the Teams should be told that V8 Holdings and Archer would be in a position by 1 September 2014 to put a formal offer to them. Mr Warburton suggested that the offer should be as follows: "At this point and based on $20 mil of EBIT - this is the deal $400k plus fuel ($41k) and Tyres ($38k) plus the new calendar ($100k engine saving). This is plus CPI".
4. A board memorandum was prepared by Mr Hogarth on 5 August 2014 to deal with the consequences of the REC tender. The document records that Dean Fiore was keen to have his surrendered REC "retired" for the right price. It noted that the last traded REC price was $800,000 in early 2014. It noted that V8 Holdings did not currently have the cash to buy the surrendered RECs back at a price the surrendering holders would be likely to agree to.
5. The board memorandum canvassed the possibility of leaving the RECs surrendered pending a future successful tender process.
6. The final option considered was to "unilaterally "retire" the surrendered RECs". Mr Hogarth observed: : There is a technical argument to say that the market price for the Fiore and Dumbrell surrendered RECs… is zero and to unilaterally, in accordance with the REC terms, buy those RECs back at zero and invoice the surrendering holders for the costs of the REC tender and historic over-distributions.
7. Mr Dane sent an email to Mr Warburton on 4 August 2014, in which he said, on the issue of how V8 Holdings should respond to the results of the tender process: I'm thinking that we should "retire" two of the three RECS, and then seek to sell the third one. I believe that, as and when we can get a restructure of the business in place with guaranteed earnings for the RECs, then we will actually be able to sell that third REC. Then divide the proceeds of that between the three parties as a final settlement. If a restructure goes ahead, then we will have to rewrite the REC in any case. We can then say that anyone actually handing back a REC gets nothing, as there is no longer a share attached to it. However, they are still entitled to sell the REC themselves as long as it is entered and performing its obligations. I'd bring forward the entry date for the following year to 1st October each year in order to have clarity for the business. All these things can be covered with the rewriting of the REC that will be necessary anyway. If Archer are reasonable and sensible, my proposal will be of huge benefit to all the parties - the business, Archer and also the teams.
8. Mr Dane asserted in an email to Mr Hogarth on 5 August 2014 "that the market price today for the RECs is nil".
9. A meeting of the board of V8 Holdings occurred on 6 August 2014. Mr Hogarth is reported as having said to the meeting: "Teams need to have secured their funding budgets for 2015 by the start of October or they will be in trouble".
10. Sanpoint relied upon this statement to support its argument that V8 Holdings had started the tender process too late, as it did not give potential bidders enough time, as it only left them between 1 August and 1 October to secure funding.
11. The outcome of the board meeting, as summarised by Mr Dane, was that if there were no bids then V8 Holdings would retain the RECs at zero market value, waive the over-distributions and share of legal fees of the surrendered RECs holders but welcome them to come back and purchase RECs at a later date should they want and be in a position to do so.
12. Apparently Archer made an offer to the Teams on 6 August 2014, as the proposal is mentioned in an email that Mr Dane sent to Mr Mehrotra on 7 August 2014. Mr Dane advised that he and Mr Jones did not feel able to take the proposal in its existing form to the Teams as it was extremely unlikely to be accepted by 75% of the Teams.
13. Mr Dane made a counter proposal to Archer which involved Archer again guaranteeing $500,000 plus GST cash payment per REC per annum for a minimum of six years, plus additional terms including that the number of events be 16 per annum. In exchange the Teams would give to Archer their 35% shareholding in the business.
14. On 18 August 2014, Mr Mehrotra responded to Mr Dane and Mr Jones with a Term Sheet for the period 2015 to 2020. The primary aspects of the proposal were that Teams would be guaranteed a payment of $500,000 plus GST cash for six years, a fuel payment of $20,000 would be made, over-distributions of $62,000 per REC would be waived, events would be capped at 16 per annum for 2015 and 2016, but revert to 18 from 2017 onwards, the kilometres raced would be capped, and a new deal would be made in respect of tyres. In exchange the Teams would transfer to Archer their 35% shareholding in the business, and various changes would be made to the RECs.
15. Mr Mehrotra stated that the Term Sheet outlined Archer's "best effort of the deal we are willing to support". Mr Mehrotra asked Mr Dane and Mr Jones to put the proposal to the Teams.
16. Sanpoint submitted that if the timing of the tender had just been slightly different, if it had been pushed out to closing on 18 August 2014, then the information contained in the Term Sheet could have been disclosed to bidders (T 48.5). Sanpoint submitted that the reason that this did not happen was that V8 Holdings made a deliberate decision to get the tender out of the way before the proposal was consummated. It submitted that there was no certainty that a restructure would be agreed with Archer "but there was certainly an expectation that a deal would be done".
17. One aspect of the proposal made by Archer was that it "assumes that the 3 RECS being tendered are cancelled and that there are 25 RECs subject to the new structure".
18. Sanpoint submitted in relation to this aspect of the proposal (T 48.26) that there was no evidence that the maximum number of RECs of 25 was ever the subject of negotiation, and that it had not been established that Archer was committed to this limitation. However, according to Sanpoint, even if Archer was committed to there being only 25 RECs, any purchaser of the RECs that were put to tender would have a contractual right to enter a car into each race if conforming tenders had been received for the three RECs, and there would have been 28 REC owners entitled to enter a car into the races. Sanpoint submitted (T 48.40): "Somehow there would have to be crafted a situation where three of the cars would get retired, or shelved, or whatever the arrangement was". The RECs would still have value because they had a right to be part of V8 Supercars.
19. The Term Sheet submitted by Archer contained a comparison between the position of the owner of a Team in 2015 depending upon whether the proposal was or was not accepted: COMPARISON 2015 NO TEAMS DEAL • $269,000 distribution per REC (based on $20m EBIT). • $100,000 of over distribution. 2015 TEAMS DEAL • $500,000 distribution per REC. • $20,000 fuel subsidy per REC. • $100,000 over distribution forgiven. • $97,000 K MS saving per REC. • Distribution equivalent to $46m of EBIT (on distribution, over distribution forgiveness and fuel subsidy).
20. On 19 August 2014, Mr Warburton said in an email to Mr Mehrotra, Mr Dane and Mr Jones : The deal must happen and to suggest any alternative path is possible or viable by either side will produce simply catastrophic results and will see the inevitable demise of our sport. I send this email in the attempt to provide the solution and final recommendation from Management to both stakeholders to ensure that the deal that is tabled on Friday is one which can be approved.
21. Mr Warburton then made some suggestions concerning alterations to the proposal and said : This deal if agreed by both stakeholders MUST be the solution and NEEDS to be tabled immediately. We are absolutely kidding ourselves if we believe we have any other options and as CEO of the Sport I really can't be any more frank than that.
22. Mr Dane and Mr Jones sent an email to Mr Mehrotra, apparently on 19 August 2014 or thereabouts, concerning the proposal, in which they said : Our proposal seeks to rebuild value for all parties including the Teams. By creating a real value for the RECs the business itself becomes, once again, sustainable and therefore, for Archer, ultimately saleable. Currently, the business is completely unsaleable.
23. On 7 August 2014, Mr Dane advised Mr Mehrotra that the proposal that was presented to the Team meeting gained 100% support.
24. A board meeting of V8SCA was held on 28 August 2014. One purpose of the meeting was to deal with the consequences of the three RECs not attracting a bid. The minutes recorded : In the last few days the V8 teams and Archer Capital have agreed in principle to a conditional deal for the V8 teams to sell to Archer Capital their shares in V8 Holdings in return for, amongst other things, the payment to the teams of defined cash amounts over the next 6 years. There are a number of conditions precedent to this transaction, including a condition that there be only 25 Racing Entitlement Contracts in place next year. If the REC was sold to any party wishing to race next year this condition would not be met and the transaction with Archer Capital would not proceed. No offers have been received for the RECs at any price. The board of V8 Holdings is of the view that the value of the RECs is therefore unchanged since the tender process was held.
25. A board meeting of V8 Holdings was held on the same date. The directors resolved in the following terms: After due and careful consideration of the documents tabled and considering carefully the position that the Company was acting as agent for the Surrendering Teams as well is acting in its own capacity in relation to the Transaction, it was RESOLVED that: 1. the Company proceed with to act as agent for each of the Surrendering Teams and transfer the share held in the Company and novate the rights under the RECs held by each Surrendering Team to Australian Motor Racing Partners Pty Limited…
26. The board of V8 Holdings resolved that the company, acting as agent for the Teams that had surrendered their RECs, would transfer the surrendering REC holders' shares in V8 Holdings to AMRP and would transfer the RECs to that company by way of novation.
27. As matters proceeded, the restructure negotiated by Mr Mehrotra and Mr Dane and Mr Jones on behalf of the Teams did not go ahead.
28. Mr Peter Wiggs, the Chief Executive Officer of Archer, intervened. On 13 October 2014, Mr Wiggs sent an email to Mr Dane and Mr Jones, in which he said : We haven't met but as you may be aware I am the Founding Partner and CEO of Archer Capital. I know you have had to deal with a lot of executives from Archer over the past 3+ years and I suspect that hasn't been a great experience for you. For that I apologise. You are both aware that [Mr Mehrotra] is leaving Archer ASAP. I don't pretend to know everything that has been communicated between [Mr Mehrotra] and the two of you, but I do know that until the long weekend I had no specific knowledge of what was being negotiated to restructure the ownership of the business. For that I am embarrassed and I am also apologetic. I do however understand there is an urgent need to provide the teams with better economics than they currently have and that need is immediate and necessary for a successful 2015 season and beyond to both protect the sport and my investors' money. I know you are both very busy at this time of year but can I suggest we all get in a room ASAP and try and land on something that works for all of us (including our debt providers). I am three all day Wednesday and up to 11am Thursday. If Wednesday works I am happy travelling to you.
29. The new agreement that was negotiated between Archer and the Teams did not involve Archer acquiring the Teams' remaining 35% shareholding in V8 Holdings.
30. The principal benefit to be provided by the Teams was as set out in par 1 of the Term Sheet, as follows: 1. Grid fee: Finco will enter into a new service agreement with teams ("the grid fee agreement"), under which Finco agrees to pay a variable fee to the teams. The fee, to be split equally between each REC, will in aggregate be equal to 46.15% of the total distributions from V8H received by Finco up to a maximum of $5.76m pa. The fee will be paid in monthly instalments at the same time as distributions are received by Finco. Grid fee payments will be contingent on 24 RECs being entered at all times and teams being compliant with their RECs.
31. There were additional benefits to be provided including contributions to the cost of tyres and a limitation in the racing mileage.

Did V8 Holdings breach cl 10.1 of the REC?

1. Sanpoint alleges that V8 Holdings breached cl 10.1 of the REC in four ways, which, because of the dispute as to whether one of those claims was raised by Sanpoint's cross claim, gives rise to the following questions: 1. Did V8 Holdings breach cl 10.1(b), by conducting a tender process concluding 1 August 2014, so that any successful tenderer would have a period of less than 4 months to put itself in a position to submit an Early Registration Form on 1 December 2014 (cross claim par 23(a))? 2. Did V8 Holdings breach cl 10.1(b), by failing to disclose to the market information relevant to the sale of the Rights including the existence of negotiations for the sale of shares in V8 Holdings by all Teams to Archer with the effect that each team would become entitled to receive the sum of approximately $500,000 per year for 6 years in exchange for the sale of that Team's shares in V8 Holdings (cross claim par 23(c))? 3. Did V8 Holdings breach cl 10.1(b), by providing potential purchasers of the Rights with a period of only two weeks from the announcement of the Tender to submit a mandatory Registration of Interest Form (cross claim par 23(d))? 4. Is Sanpoint permitted by its cross claim or the manner in which the case was conducted to pursue a claim that V8 Holdings breached cl 10.1(b), by conducting the tender process so that it would be completed before Archer and the Teams could reach agreement on a restructure of the V8 Supercars business structure, or alternatively by failing to extend the period of the tender process so that bidders could gain the benefit of the outcome of that restructure, and if so in either case did V8 Holdings breach the provision by so doing?
2. It will be convenient to deal with each of these issues in turn.

Delay in concluding tender process

1. V8 Holdings became aware that it would be necessary for it to implement a tender process in accordance with cl 10.1(b) of Sanpoint's REC when Sanpoint failed to submit an Entry Registration Form on 1 December 2013.It knew that it would be free to sell the Rights at any time from 1 January 2014, when the surrender of the REC became effective, following the conduct of the tender.
2. V8 Holdings did nothing to initiate the tender process until 20 May 2014 when one of its board members, Mr Dane, raised the need for V8 Holdings to do so. The evidence does not provide any explanation for why V8 Holdings did not initiate the tender process earlier. Sanpoint has accepted that it was reasonable for V8 Holdings to decide not to try to sell the REC so that any purchaser would be able to, and be obliged to, commence racing in the 2014 season beginning in March 2014. V8 Holdings 'shelved' the REC for the 2014 year, but that does not appear to have had a bearing on the time when V8 Holdings should have commenced the tender process to give potential bidders an optimal time to prepare bids and make appropriate arrangements to acquire the REC and commence racing in March 2015.
3. The question is whether the evidence establishes that by commencing the tender process on 24 June 2014, on the basis that bids were required to be returned by 1 August 2014, V8 Supercars failed to act so as to ensure that the price paid for the Rights was as commercially advantageous as possible having regard to the current market situation by offering the REC to the market by tender.
4. However, this aspect of Sanpoint's claim was not put on the general basis that the amount of time allowed for the tender was too short per se, in the sense that there was insufficient time for all potential bidders to undertake the process necessary to enable them to submit bids at the highest levels the market would bear.
5. The only basis alleged for the delay being a breach of cl 10.1(b) is that the consequence would be that any successful tenderer would only have a period of less than 4 months to put itself in a position to submit an Entry Registration Form by 1 December 2014.
6. The case that is alleged in Sanpoint's cross claim is slightly different to the case that it put in final submissions. In its final written submissions, Sanpoint complained that the evidence disclosed that "it would be necessary for any team to have its sponsorship and other contractual arrangements finalised" by September, and that the period between the end of the tender and September was too short: par 14. The claim as pleaded was that the time from the end of the tender process was too short to enable the successful tenderer to submit an Entry Registration Form 1 December 2014.
7. There is a considerable amount of evidence in the documents that might justify the suspicion that V8 Holdings arbitrarily shortened what would otherwise have been an appropriate bid process, because it started late, and then decided that the tender should be completed before the restructure agreement between Archer and the Teams was finally made. But, as I have just noted, Sanpoint confined its case to the breach occurring because of a particular consequence of the period of the tender being too short.
8. The only evidence that I am aware of that is capable of directly supporting the underlying factual allegation is the statement made by Mr Hogarth at a meeting of the board of V8 Holdings on 6 August 2014, after the tender closed, that: "Teams need to have secured their funding budgets for 2015 by the start of October or they will be in trouble": see par 256 above. That statement in context related to the remaining Teams, and inferentially the need for any restructure agreement between Archer and the Teams to be reached as soon as possible, to avoid the risk of a number of Teams not being able to submit Entry Registration Forms by 1 December 2014.
9. Mr Dane had earlier said, on 20 May 2014, when he first raised the need for V8 Holdings to initiate the tender process for the sale of the three surrendered RECs, that the potential purchasers of the RECs would need to work on sponsorship arrangements for 2015, which was a reason for commencing the tender with a closing date before the end of the financial year, 30 June 2014: see par 141 above.
10. As V8 Holdings submitted, a successful bidder would not have been required to have a car on the grid until the first race in March 2015. However, before a bidder committed itself by 1 August 2014 by lodging a bid, commercial common sense would require that it either had all arrangements in place by that date, or a high level of confidence that all remaining issues that had not finally been determined could be completed in a manner that would allow the bidder to lodge an Entry Registration Form on 1 December 2014. Given the onerous sanctions contained in the REC on a Team that did not lodge the required Entry Registration Form by the due date, or compete in all races, any bidder would need to be satisfied before it made its bid and became committed to acquire the REC that it was safe to do so.
11. The real issue was likely to be whether potential bidders could satisfy themselves that it was prudent to lodge a bid by 1 August 2014, not whether the time left to the end of September, or 1 December 2014, was sufficient to enable them to finalise contractual arrangements or lodge an Entry Registration Form. If bidders were not ready by 1 August 2014, they had until March 2015 to get ready. However, V8 Holdings' primary submission in response to Sanpoint's claim was that the evidence to which I have referred above was either insufficient or irrelevant, and Sanpoint's case was really one sought to be made from the bar table.
12. Sanpoint did not call any evidence at all as to the process that would have to be undertaken by bidders before they submitted their bids or by Teams before they could submit an Entry Registration Form. As Sanpoint's principals were experienced V8 Supercars racers, they ought readily to have been in a position to give the court real evidence to enable the court to make a judgment about whether V8 Holdings started the tender too late to enable potential bidders to make bids that would ensure the most commercially advantageous price that was possible.
13. I accept V8 Holdings' submission. I do not accept that Sanpoint has put forward evidence that would justify the court in finding that V8 Holdings breached cl 10.1(b) of the REC by conducting a tender process that did not finish until 1 August 2014, whether that gave rise to a problem in obtaining sponsorship by the end of September, or in lodging an Entry Registration Form by 1 December 2014.
14. The evidence of the statement of Mr Hogarth upon which Sanpoint relies is too insubstantial to provide a sound basis for the court to make any finding sufficient to establish a breach of cl 10.1(b) by V8 Holdings in relation to the appropriate timing for the tender, and the time by which the tender had to finish to enable the successful bidder to know that it would have sufficient time to be safely able to race by March 2015. For the reason I have suggested above, Mr Hogarth's statement was in any event taken out of context.

Provision of insufficient information to bidders

1. As pleaded, the allegation is that V8 Holdings failed to disclose to the market information concerning the existence of negotiations for the sale of shares in V8 Holdings to Archer with the effect that each Team would become entitled to receive the sum of approximately $500,000 per year for 6 years in exchange for the sale of that Team's share in V8 Holdings.
2. The first question for consideration is as to what cl 10.1(b) required in relation to the disclosure of information to potential bidders.
3. As recorded above, the parties appear to agree that the use of the word "ensure" required V8 Holdings to provide information to potential bidders in a manner that was calculated to encourage those persons to bid the highest prices that were commercially possible, subject to the qualification that it was to be the outcome of the tender that determined what the price was to be.
4. It is necessary to consider whether the other components of cl 10.1(b), which is a composite obligation, effected what V8 Holdings was required to do.

Meaning of "current market situation"

1. Although the expression "as commercially advantageous as possible" required V8 Holdings to try to obtain the highest price the market would bear, the issue is whether the obligations to do so "having regard to the current market situation" and to offer the RECs by tender imposed any constraints on the obligation to "ensure" the specified outcome.
2. The first question is as to what is meant by the use of the word "current". In this case the range of relevant times could be between 1 January 2014, when the REC was surrendered, and 1 August 2014, when the tender period closed. The natural place to start would be to regard the word "current" as applying to circumstances at the date the REC was surrendered, but as cl 10.1(b) required V8 Holdings to ascertain the most commercially advantageous price by offering the REC to the market by tender, there would inevitably be a delay between the date of the surrender and the completion of the tender. The information that was available to be provided to potential bidders might change over that period.
3. It follows from Sanpoint's submissions that its case is that the information that formed part of the current market situation was the whole of the information that became known between the surrender of the REC and the end of the tender process. The effect of Sanpoint's submission is that cl 10.1(b) imposed a continuing obligation on V8 Holdings to provide all of the evolving information to potential bidders through the tender process.
4. As I understand it, V8 Holdings did not make any specific submissions directed at the meaning of the word "current" in the provision. The only qualification that V8 Holdings relied upon concerning its obligation to provide information to potential bidders was that cl 10.1(b) did not require V8 Holdings to act in a way that put it at risk of liability to any bidder by reason of having provided misleading and deceptive information to potential bidders. That qualification relates more, however, to the significance of the requirement that V8 Holdings offer the REC to the market by tender.
5. In fact, V8 Holdings decided what information should be included in the data room, and having created the data room material with the assistance of Ernst & Young, did not alter it during the due diligence period before the close of tenders. There is no evidence that V8 Holdings even considered the possibility of the need to revise information in the data room.
6. The real practical question that arises is as to how V8 Holdings could properly have appraised potential bidders of changing developments in the information that was relevant to the prices that bidders may be prepared to offer. Obviously, it could not do so publicly to parties who had not registered to be permitted access to the data room or signed a confidentiality agreement.
7. If cl 10.1(b) required V8 Holdings to revise the information available to potential bidders, that would be a continuing and potentially constant obligation (and possibly also an onerous one, given the need to avoid misleading and deceiving potential bidders).
8. In fact, V8 Holdings implemented the tender as if "current" in cl 10.1(b) required V8 Holdings to have regard to all price-sensitive information that was available up until potential bidders were given access to the data room at the beginning of the due diligence period. It did not include information that became available after that date. V8 Holdings did not act as if it was required to implement some procedure that involved the continual revision of the information in the data room.
9. In my view, that is the better construction of the provision, at least where there was no subsequent event that on a clear-cut basis was so obviously relevant to the price that bidders may have been prepared to offer for the RECs that the obligation to "ensure" may have required V8 Holdings to interrupt the tender process and formally and openly renew or extend the tender. It is possible that such an event may have been the making of a restructure agreement between Archer and the remaining Teams that substantially improved the financial viability of the RECs. That did not happen in the present case. It is therefore not necessary for the court to decide whether in fact on its proper construction cl 10.1(b) could have required V8 Holdings to react to some fundamental development in the information that was available to interrupt, renew or extend the tender process.
10. I do not accept that cl 10.1(b) obliged V8 Holdings to continuously provide potential bidders with revised information of a relatively minor and inconclusive nature concerning day-to-day developments that would tend to be relevant to the prices that potential bidders may have been prepared to offer.
11. Furthermore, it is significant that cl 10.1(b) required V8 Holdings, through the use of the word "by", to offer the REC for sale by tender. The obligation to conduct a tender may also impose implicit restraints on what V8 Holdings was required to do by reason of the fact that a tender must be conducted in a conventional way that treats all potential bidders fairly and equally.

Information known to V8 Holdings

1. A further relevant restraint on the information that V8 Holdings could have provided to potential bidders pursuant to cl 10.1(b) was that only information actually known to V8 Holdings, or information that could have been obtained by reasonable enquiry, could have been provided by V8 Holdings to potential bidders.
2. As will be seen, Sanpoint has sought to make its case by analysing the documents that have come into its possession as part of the process of preparing its claim for hearing, and to identify information that it claims ought to have been provided to potential bidders in the period up to the end of the tender process. While some of that information could reasonably be considered as being information that was available to V8 Holdings, other information was information that was private and confidential to Archer. This information formed part of Archer's internal processes in relation to the issue of whether it should offer a restructure to the remaining Teams and if so what the terms of the offer should be.
3. Archer's internal information would have been known to the two representatives of Archer on the board of V8 Holdings. The question is whether Sanpoint is entitled to treat the information available to the two Archer directors of V8 Holdings as being information known to that company.
4. It is significant that all of the relevant information was inherently confidential, as it related to commercial negotiations between Archer and the remaining Teams. It must be remembered that there were two representatives of the Teams on the board of V8 Holdings, and if the Archer directors had been required to disclose the information to the other members of the board of V8 Holdings, that may have been damaging to Archer's bargaining position in the negotiations. The Archer directors did not disclose this information, so it was not known to the board of V8 Holdings generally.
5. The parties did not explore in their submissions the legal principles relevant to the question of whether V8 Holdings should be taken to know information known to individual directors who were appointed to represent the interests of particular stakeholders in the V8 Supercars Championship. Mr Mehrotra and Mr Lancken were nominee directors for Archer, and Mr Dane and Mr Jones were representatives of the Teams.
6. Where V8 Holdings received communications, such as emails, between the representatives of Archer and the Teams concerning the negotiations, it seems likely that any confidentiality had been waived by the senders, and V8 Holdings would have been free to disclose the communications to the registrants who were given access to the data room. The position may be different where some document that has now come to light was in fact a private document of one of the stakeholders.
7. In practical terms the issue is whether V8 Holdings must be taken to know information known only to the representative directors for a particular party relevant to that party's position concerning the restructure negotiations. The document that appears to be most relevant in this regard is the internal Archer document considered at pars 235 to 242 above.
8. The evidence does not fully disclose the relationship between Mr Mehrotra and Mr Lancken and Archer. It is not known whether they were directors of the company, but they were clearly officers. In the absence of any evidence to the contrary I would infer that they owed confidentiality obligations to Archer.
9. The present is not a case where it is necessary to consider whether Mr Mehrotra and Mr Lancken were bound by their fiduciary duty to act in the interests of V8 Holdings to disclose their knowledge of Archer's negotiating position in relation to the restructure to V8 Holdings. It cannot be said that V8 Holdings' personal interests depended upon having full knowledge of Archer's negotiating position and intentions in relation to the proposed restructure.
10. In my view the following statement of principle by the authors of Company Directors Principles of Law & Corporate Governance (LexisNexis Butterworths, 2005) at [14.17] concerning the knowledge of common directors also applies to the situation where a person gains knowledge as an officer of one company while being at the same time the director of another company: Whether a person is a director of two companies, C1 and C2, but not the directing mind and will of both and acquires information in the course of acting for C1, that knowledge is not automatically imputed to C2: Re Marseilles Extension Railway Co (1871) LR 7 CH App 161. That is so even when C1 and C2 are mutually transacting a matter: Re Hampshire Land Co [1896] 2 Ch 743 applying Re Marseilles Extension Railway Co. The position in respect of knowledge of a common director was stated by Vaughan-Williams J in Re Hampshire Land Co, above, at 748 as being: …that the knowledge which has been acquired by the officer of one company will not be imputed to the other company, unless the common officer had some duty imposed upon him to communicate that knowledge to the other company, and had some duty imposed on him by the company which is alleged to be affected by the notice to receive the notice.
11. It is therefore not proper to treat V8 Holdings as if it was aware of all of the information known to the Archer representatives on its board, when those representatives were entitled to keep that information secret from the other members of the board on the basis that it was confidential to Archer.
12. The result of these considerations is that, even though it is true that cl 10.1(b) imposed a positive obligation on V8 Holdings to provide as part of the tender process all of the information known or reasonably available to it that would tend to encourage potential bidders to offer the highest prices possible for Sanpoint's REC, there were limitations on the information that the term required V8 Holdings to provide. The information that had to be provided included all material information that was available up to the beginning of the due diligence process when registered bidders were given access to the data room. It did not include information that may have been known to members of the board of V8 Holdings who represented other parties, where the directors were not under a duty to disclose that information to the other members of the board.

Adequacy of information provided by V8 Holdings as at opening of tender

1. It is then necessary to decide whether or not Sanpoint has made good this aspect of its case on the facts.
2. First, it is obvious that the case as pleaded must fail. As I observed above, the information that Sanpoint claims should have been made available to potential bidders was the existence of negotiations for the sale of shares in V8 Holdings to Archer with the effect that each Team would become entitled to receive the sum of approximately $500,000 per year for 6 years in exchange for the sale of that Team's shares in V8 Holdings. While negotiations of a preliminary nature had been undertaken in relation to the proposed restructure, not only did those negotiations not involve the specified terms as at the commencement of the due diligence period, the negotiations did not coalesce into those terms until about 18 August 2014, when Archer provided the Term Sheet referred to in par 261 above to the remaining Teams. The negotiations did not include the proposed terms set out in par 23(c) of the cross claim until after the tender period closed on 1 August 2017.
3. Sanpoint in its submissions responded to the realisation that the specific terms only emerged after the end of the tender process by submitting, first, that V8 Holdings ought to have captured the change by extending the tender process for the appropriate number of weeks (which is a claim that I will consider below); and secondly, it submitted that even though the negotiations had not by the close of the tender period evolved as fully as pleaded in its cross claim, information was available to V8 Holdings that it could have disclosed to potential bidders that would have allowed the bidders to make their own assessment of the likelihood that Archer and the remaining Teams would reach an agreement generally in the terms pleaded. Sanpoint submitted that V8 Holdings was obliged to make that information known to potential bidders, right up to the end of the tender period.
4. This submission invites attention to the detail of the information that was available to V8 Holdings between 1 January 2014 and 1 August 2014 that it could have made available to potential bidders.
5. Quite properly, Sanpoint did not submit that the obligation on V8 Holdings to "ensure" the outcome stated in cl 10.1(b) required that company to 'sell' the RECs as if it was a sales agent. V8 Holdings was not obliged to maximise the attractiveness of the RECs, but was required to conduct an arm's length tender in a proper and conventional manner.
6. Consequently, when considering the information that was available to V8 Holdings to be provided to the market, it is necessary to proceed in a balanced way, having regard to the information that would tend both to increase and depress the prices that bidders may have been prepared to offer to purchase the REC.
7. The court should not ignore the relationship between the different information available to be disclosed by V8 Holdings. That company was required to "ensure" the specified outcome, but at the same time was not required or permitted to mislead or deceive potential bidders. The more positive the information that V8 Holdings disclosed that would have the tendency to 'talk up' the value of the REC to potential bidders, the more necessary it would be for V8 Holdings to be careful and balanced and to disclose countervailing negative information.
8. That is a real consideration in the present case as, although there was information known to V8 Holdings that in a positive, albeit inconclusive, way may have encouraged potential bidders to bid for the REC, there was also a substantial amount of negative information that would tend to discourage bidders. As it has happened, Sanpoint has complained about V8 Holdings' failure to inform the market of all positive information known to it about the possibility that Archer and the remaining Teams would negotiate a restructure that made the REC substantially more viable than it was at the date it was surrendered by Sanpoint. But V8 Holdings was also constrained by its obligation to potential bidders, had it acted in the manner that Sanpoint asserts it was obliged to do by cl 10.1(b), to ensure the commensurate disclosure of all other information known to it that would tend to have a countervailing effect on the positive information that Sanpoint now claims ought to have been disclosed.
9. Realistically, there is a possibility that if V8 Holdings had acted in a balanced way and disclosed all of the information known to it that was capable of influencing whether potential bidders would bid, there still would have been no bids, and Sanpoint could have complained that it was the disclosure of the negative information that was the cause of no bids being received.
10. It is necessary to consider in a specific way what information was available to V8 Holdings, and the form in which it could have been provided to the market.
11. The actual information that V8 Holdings included in the Information Memorandum is contained in a single paragraph that is set out above at par 220. The same paragraph was repeated at two other places in the Information Memorandum. It is a relatively uninformative statement, and includes the statement that no further detail was currently available to V8 Holdings.
12. In submissions, V8 Holdings made the point that, given the relatively diffuse and disconnected way information had become known to V8 Holdings concerning the progression of negotiations between Archer and the Remaining Teams, Sanpoint had not specified in any precise way what additional information should have been given to the market. Sanpoint responded by saying that, if necessary, V8 Holdings could simply have included in the data room all of the email communications and related documents that constituted the negotiations or discussions about the negotiations.
13. It will be appropriate to consider first the information that was available to V8 Holdings up to the day when access was given to the data room to the five parties who had registered for that purpose, which included two representatives of Teams who had surrendered their RECs.
14. So far as the negotiations between Archer and the remaining Teams are concerned, the information available to V8 Holdings included Mr Dane's statement to the board meeting on 4 May 2014 that a sustainable model would require the business to provide each of the Teams with $750,000 in value each year, which would potentially include the provision of tyres and fuel together with cash (see par 140 above). Mr Mehrotra simply indicated that Archer had considered options and was working through its position with respect to finding a potential buyer of the business to allow its exit.
15. Mr Dane's email to Mehrotra on 19 May 2014 asked that Archer forward to the remaining Teams "your proposal for a restructure as a matter of urgency".
16. It appears that by 27 May 2014, Archer had made a proposal that would have guaranteed payments to each Team of $400,000 gross for the coming seasons, compared with the amount of $208,116 gross for the 2014 season: see par 173 above. Mr Dane responded by advising Mr Mehrotra that the Teams would not support the proposal "and if we can't do something closer to [Mr Dane's original thoughts, being presumably the $750,000 that he had stated was necessary on 4 May 2014] then we will have to move on unfortunately".
17. In Mr Warburton's 3 June 2014 email to Mr Minton at Archer (see par 177 above), he referred to a proposed deal with the Teams worth about $600,000 for each Team, which he described as "a good one". It is clear that Mr Warburton was referring to an offer that Archer might make to the remaining Teams, as he suggested that Mr Dane "would settle closer to $500 K".
18. That is the highest the prospect of an agreed restructure between Archer and the remaining Teams could have been put in the period before the Information Memorandum was completed, and the data room was opened to potential bidders.
19. Archer did not make an offer in the terms suggested by Mr Warburton in the remaining time between 3 June and 17 July 2014.
20. It is by no means clear that, if V8 Holdings had provided all of this information explicitly to participants in the tender process, it would have encouraged them to make a bid for the REC, as it was essentially inconclusive concerning the prospect of a satisfactory restructure agreement being reached.
21. However, for the reasons that I have given above, if V8 Holdings had provided this information to potential bidders, it would also have been required to provide countervailing information that would tend to deter potential bidders from making a bid. Indeed, in most cases the countervailing information was included in the emails or board records that recorded the positive information.
22. There was information concerning the emergence of the GT Championship as "a very real danger" by way of competition to the viability of the V8 Supercars Championship: see pars 129 to 131 above, and the information in Mr Warburton's email to Mr Mehrotra on 23 June 2014 that "GT's have approached 4 of the leading Teams to run in their category next year": see par 205. The information that the GT Championship was competitive with V8 Supercars was probably well known, but it would not have encouraged potential bidders to know that the emergence of the GT Championship was believed by the CEO of V8 Holdings to be an existential danger to the continuation of the V8 Supercars Championship.
23. The documents are replete with statements suggesting the "extreme short-term fragility" of many of the Teams. To take one example, see par 145 above. Mr Dane on 8 April 2014 had stated that only 12 cars were "good bets for being on the grid next year": see par 136. The statement by Mr Nash on 5 May 2014 that he was concerned about a "train wreck" would have been very bracing to any potential bidder: see par 144.
24. As I have already observed, the very email of 3 June 2014 in which Mr Warburton referred to the possible deal that might be valued between $500,000 and $600,000 to the Teams also included in its first six bullet points problems that cast doubt on the continuing existence of the V8 Supercars Championship, including seven RECs being at risk, Ford pulling out, Teams burning $1 million in losses per car, and the competitive threat from the GTs: see par 177 above.
25. There is also the consideration that Mr Hogarth's 20 May 2014 email referred to the probability that the restructure would be undertaken on the basis that there were 26 cars in the field: see par 159 above. Any potential bidder who became aware of that information would understand that if any more than one of the three RECs that were on offer was acquired by a new Team, one or more of the new Teams may have to contend with the possibility that there would be no place on the grid for their Team.
26. In submissions, Sanpoint responded to this possibility by making the correct observation that, if new Teams had acquired more than one of the RECs on offer, they would contractually have been in the same position as all of the remaining Teams, and have as against V8SA the same right to race as the remaining Teams. That would mean that any new Teams would be in the same position as the remaining Teams when it came to bargaining as to who should be excluded from the V8 Supercars Championship, and for what compensation.
27. Perhaps alternatively, any potential bidder who noticed the effect of cl 10.1(c) of the REC might have understood that if offers were made for more than one of the RECs, it was likely that V8 Holdings would retire the number of RECs above 26, in order to conform to any agreement between Archer and the remaining Teams.
28. The obvious point to be made is that it would not have made the prospect of bidding for any one of the three RECs on offer attractive to potential bidders to be told that two of the three RECs may be superfluous to the arrangements with Archer.
29. All of these considerations lead to the conclusion that it would have been problematic for V8 Holdings to have included in the data room all of the emails and other records that gave a reasonably complete picture of the state of negotiations between Archer and the remaining Teams, and all of the other difficulties facing the Teams. There is no reason to conclude that any further disclosure of information by V8 Holdings, particularly if it was properly balanced, would have been likely to encourage persons who did not bid to do so and to bid a substantial price.

Information known to V8 Holdings after opening of tender

1. It will then be appropriate to consider the additional information that became known to V8 Holdings during the due diligence period between 17 July and 1 August 2014.
2. For the reasons I have given above, I consider that the information in the document that I have discussed at pars 235 to 242 above was an internal document of Archer which its directors on the board of V8 Holdings were entitled to keep confidential. The information in the document was not relevantly known to V8 Holdings for the purpose of its compliance with cl 10.1(b) of the REC.
3. In any event, the document contemplated that only 25 RECs would be active. That would cast doubt on the viability of all of the three surrendered RECs that were on offer through the tender process.
4. Furthermore, the document contemplated that the Teams would only be offered $450,000 per year (see par 242 above). That was only $50,000 more than Mr Dane had already rejected, and much less that than the $750,000 that Mr Dane had already asserted was necessary for the financial viability of each of the Teams.
5. Senior counsel for Sanpoint acknowledged in submissions that the disclosure of the information of which V8 Holdings became aware during the due diligence period "would of course scare the market off": see par 245 above. He was clearly right.
6. The only additional information concerning the possibility that Archer would agree to the restructure with the remaining Teams after the data room was opened is to be found in Archer's internal document dated 21 July 2014. Even if cl 10.1(b) required V8 Holdings to disclose any of this information to the registered bidders, which I have found that it was not required to do, it would have been necessary for it to find a way to contact the bidders and to inform them that there was additional information in the data room that they may find material to their deliberations. Sanpoint's submissions did not deal with this problem. It is questionable that the obligation imposed upon V8 Holdings to conduct a tender process obliged that company to revise the information in the data room, if that introduced a concomitant requirement that V8 Holdings monitor the access by registered bidders to the data room, and communicate with them to ensure that all had equal access to the information included after the commencement of the process.
7. All of this analysis leads to the conclusion that, when the evidence is considered in detail, there is no reason to conclude that the provision of that information would have encouraged potential bidders to make a bid. On the contrary, it would probably have tended to scare them away.
8. Although Sanpoint challenged the sufficiency of the information that V8 Holdings included in the data room concerning the state of negotiations between Archer and the remaining Teams about the restructure, it did not plead that there was anything specifically wrong with the actual disclosure included in the Information Memorandum. That is, Sanpoint did not specifically challenge the wording of the disclosure.
9. That wording, in any case, was more expansive than the wording recommended by Ernst & Young in the course of the preparation of the Information Memorandum, where Ernst & Young made the recommendation: "We would perhaps limit the information on the implications of the Archer transaction to something like 'this may impact the final arrangements for future years'".
10. There is force in V8 Holdings' submission that, if anything, the actual disclosure that was made may have been more optimistic than was shown to be warranted by future events. Although, after the tender process ended, Mr Mehrotra negotiated a deal with the remaining Teams that would have given them a fixed distribution for six years in return for the transfer of the Teams' remaining 35% interest in V8 Holdings to Archer, that deal was subsequently withdrawn by Archer, and replaced by an agreement that gave the Teams a greater share in the EBIT that was generated by the V8 Supercars Championship. As finally agreed, the Teams' entitlement to distributions was proportional to the actual profits generated. Had V8 Holdings created too strong an impression that the incomplete negotiations were likely to lead to guaranteed distributions each year, it would have been at risk of having misled and deceived potential bidders.
11. I conclude that Sanpoint has failed to make out the case that it alleged in par 23(c) of the cross claim.

Adequacy of two week period for registrations of interest

1. The only specific complaint that Sanpoint pleaded concerning the adequacy of the time allowed by V8 Holdings for the tender process was the complaint that two weeks was insufficient time for the submission of a Registration of Interest Form: see cross claim par 23(d).
2. I do not understand Sanpoint to have submitted in its final submissions that allowing only two weeks for expressions of interest was a separate breach of cl 10.1(b) of the REC.
3. I would, in any case, accept V8 Holdings' submission that the evidence does not establish that the two week period was inadequate.
4. The evidence establishes that the appropriateness of the two week period was recommended by Ernst & Young, and was specifically considered by the board of V8 Holdings.
5. The advertising undertaken by V8 Holdings of the opening of the period for lodging expressions of interest was thorough and extensive: see par 202 above.
6. There is force in the view expressed by Mr Dane on a number of occasions that it was highly likely that parties who were realistically in a position to contemplate buying a REC would have been closely connected with V8 Supercar racing, and be in a position to take the simple step of registering their interest in a short space of time.
7. Registrants were required to complete a form expressing interest, and to execute a confidentiality deed. Thirteen requests for those documents were received on 24 or 25 June 2014, within a day or two of the first notice to the market of the tender. After the initial expression of interest in the first two days, only one other independent person contacted Mr Hogarth to request the expression of interest documents. That person, Mr Grove, requested the documents on 6 July 2014 but did not return them. No other person requested the expression of interest documents after 25 June 2014.
8. Finally, Mr Dean Fiore was told of the timeframe for the tender (including the two week period for submission of registrations of interest), and invited to contact V8 Holdings if he had any concerns regarding the content of the tender. Mr Fiore made no complaint about the adequacy of the two week period.
9. Sanpoint has failed to establish that allowing only two weeks for the submission of expressions of interest was a breach by V8 Holdings of cl 10.1(b) of the REC.

Completion of tender before restructure

1. Sanpoint seeks to make a case that V8 Holdings breached cl 10.1(b) by limiting the time for the tender process to a shorter time than was usual or appropriate, in order for V8 Holdings to decide what to do following the tender (being to decide whether to compensate Sanpoint for the surrender of the REC under cl 10.1(c)) in order to facilitate the subsequent completion of the restructure negotiations between Archer and the remaining Teams, which was essentially for the benefit of the remaining Teams rather than Sanpoint. Alternatively, Sanpoint claimed that V8 Holdings should have extended the tender period to capture the benefit of the initial restructure agreement that was struck between Mr Mehrotra and the Teams (but subsequently abandoned by Archer).
2. In my view Sanpoint is precluded by the terms of its cross claim from making either of these claims.
3. First, neither claim is specifically pleaded in the cross claim.
4. Secondly, Sanpoint was specifically warned during its oral opening that it was exceeding the boundaries of its pleaded claim (see par 89 above). Sanpoint did not seek to amend its cross claim.
5. Thirdly, I am satisfied that the parties (and in particular V8 Holdings) did not contest these claims in any substantial way, and I accept the assurance from senior counsel for V8 Holdings that they raise evidentiary questions that had not been addressed by V8 Holdings' witnesses or its documentary evidence.
6. In terms of the principles discussed by the Court of Appeal in the Ingot Capital Investments case, set out above at par 102, Sanpoint should be confined to its pleaded case.
7. The evidence (such as it is) does establish that Mr Hogarth at least initially thought that the tender process was too short. It also establishes that the board of V8 Holdings decided to complete the tender process before the remaining Teams and Archer finally addressed the terms of the restructure in earnest. The restructure was agreed in principle soon after the tender period ended (before the CEO of Archer intervened and rejected the tentative agreement, with the result that it was replaced by a materially different one in October 2014).
8. However, it would not follow from those circumstances alone that it would be a breach by V8 Holdings of cl 10.1(b) for it to decide to complete the tender process before the terms of any restructure were agreed.
9. There was no certainty that Archer and the remaining Teams would ever reach an agreement on the restructure, even though all interested parties probably thought that a restructure had to be agreed because the alternative of the collapse of V8 Supercars racing was unthinkable.
10. Any delay by V8 Holdings of the tender process until a restructure agreement had been made may have been indefinite. As it is, the delay would have had to be to at least October 2014.
11. V8 Holdings was obliged by cl 10.1(b) of the REC to put the REC to tender in a way that had "regard to the current market situation". It is highly doubtful that on its proper construction of the word "current" was elastic enough to extend to requiring (or even entitling) V8 Holdings to defer the tender until the conclusion of negotiations of uncertain duration or outcome.
12. Further, the new case that Sanpoint sought to raise was inconsistent with the case that it pleaded.
13. Sanpoint alleged in its pleaded case that the tender process finished too late, because any party that had bid to acquire its REC would not have had sufficient time to take specific steps necessary to enable it to be in a position to start racing in March 2015. As Sanpoint also pleaded that the registration of interest period was too short, the implication of Sanpoint's pleaded claim is that cl 10.1(b) of the REC required V8 Holdings to commence the tender process and end it significantly earlier than occurred.
14. The only way Sanpoint could have run its pleaded case consistently with its new case is it if it was in a position to establish that V8 Holdings could have caused the parties who were negotiating the restructure to reach an agreement before the earlier end of the tender process. Although V8 Holdings was an interested party, and through Mr Warburton attempted to facilitate the agreement, the parties to the negotiations were Archer and the remaining Teams. V8 Holdings was not in a position to ensure that the negotiating parties ever reached an agreement, let alone that they did so within a time frame measured against an earlier end to the tender process.
15. Whatever may be the validity of these considerations, I am satisfied that the new case that Sanpoint sought to run at the hearing raised many contentious issues that were not fully addressed in the evidence, and it would not be procedurally fair to V8 Holdings to permit Sanpoint to run its new case.
16. Sanpoint's claim that V8 Holdings ought to have extended the tender period to capture the agreement reached in principle between Archer and the remaining Teams in August 2014 seemed to be somewhat of an afterthought. It also was not pleaded.
17. There is no basis to support Sanpoint's claim that V8 Holdings, having formally committed itself to a tender process on specific terms, was obliged to casually extend the due diligence period for whatever time it may take for Archer and the remaining Teams to reach a final restructure agreement. As there was no assurance that an agreement would be reached, such a casual extension of the tender process would have been a breach of cl 10.1(b) of the REC, and also in all probability of V8 Holdings' obligations to parties who had registered to participate in the tender process.

Damages

1. The question whether Sanpoint has established that it suffered recoverable damage as a result of any breach by V8 Holdings of cl 10.1(b) of the REC does not, given the findings I have made above, arise.
2. However, in case I am wrong in those findings, I should set out my reasons for finding that Sanpoint has also not established that it is entitled to an award of damages.
3. In submissions, Sanpoint put a case that it suffered damage that should be measured in terms of the value of the chance that it lost that someone would have submitted a bid to acquire its REC at a price greater than $20,000.
4. V8 Holdings complained that Sanpoint had not formulated its damages claim in its cross claim in terms of the value of a chance that it lost as a result of the alleged breaches of the REC by V8 Holdings. I am satisfied, however, that the terms in which Sanpoint pleaded its cross claim do not preclude it from seeking damages based on the loss of a chance.
5. The parties were agreed that the principles governing how the court should determine whether a loss has been suffered in these circumstances, and how that loss should be quantified, were as considered by the High Court in Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at 355; [1994] HCA 4 at [38]-[39], in the following terms: Notwithstanding the observations of this court in Norwest, we consider that acceptance of the principle enunciated in Malec requires that damages for deprivation of a commercial opportunity, whether the deprivation occurred by reason of breach of contract, tort or contravention of s 52(1), should be ascertained by reference to the court's assessment of the prospects of success of that opportunity had it been pursued. The principle recognised in Malec was based on a consideration of the peculiar difficulties associated with the proof and evaluation of future possibilities and past hypothetical fact situations, as contrasted with proof of historical facts. Once that is accepted, there is no secure foundation for confining the principle to cases of any particular kind. On the other hand, the general standard of proof in civil actions will ordinarily govern the issue of causation and the issue whether the applicant has sustained loss or damage. Hence the applicant must prove on the balance of probabilities that he or she has sustained some loss or damage. However, in a case such as the present, the applicant shows some loss or damage was sustained by demonstrating that the contravening conduct caused the loss of a commercial opportunity which had some value (not being a negligible value), the value being ascertained by reference to the degree of probabilities or possibilities. It is no answer to that way of viewing an applicant's case to say that the commercial opportunity was valueless on the balance of probabilities because to say that is to value the commercial opportunity by reference to a standard of proof which is inapplicable.
6. The first step is that Sanpoint must prove on the balance of probabilities that it has sustained some loss or damage as a result of the alleged breaches by V8 Holdings. As Sanpoint put it in par 25 of its final written submissions: The question of damages needs to be analysed with care. The first step is can Sanpoint prove on the balance of probabilities that had the tender process been properly conducted, a better price would have been obtained. If that question is answered in the affirmative then what is in essence a loss of a chance can be valued by assessing the chance…
7. Sanpoint had to establish that, if the tender process had been conducted in a manner that did not involve the breaches alleged by Sanpoint, on the balance of probabilities a bid would have been made for Sanpoint's REC that would have led to Sanpoint receiving a greater return for the sale of its REC than it in fact received.
8. I accept V8 Holdings' submission that the common law test of balance of probabilities will not be satisfied by evidence that fails to do more than establish a possibility: Seltsam Pty Ltd v McGuiness (2000) 49 NSWLR 262; [2000] NSWCA 29, [81] (Spigelman CJ). As Beach J said in Siegwerk Australia Pty Ltd v Nuplex Industries (Aust) Pty Ltd [2016] FCA 158; (2016) 334 ALR 443: [86] It is not sufficient that the circumstances give rise to conflicting inferences of an equal degree of probability or plausibility or that the choice between them can only be made by conjecture (Coastwide Fabrication & Erection Pty Ltd v Honeysett [2009] NSWCA 134 at [60] per McDougall J, Ipp and Young JJA agreeing). I accept though that the process of inference may involve an intuitive element that is not susceptible to detailed support or explanation (at [64] per McDougall J). [87] There is a distinction between inference and conjecture even if the reasoning process occurs on a continuum in which there is no bright line division (Seltsam Pty Ltd v McGuiness (2000) 49 NSWLR 262; [2000] NSWCA 29 at [84]-[88] per Spigelman CJ). A conjecture, even though plausible, is no more than a guess, whereas an inference is a deduction from the evidence. If the deduction is reasonable, the inference may rise to legal proof (Jones v Great Western Railway Co (1931) 144 LT 194 at 202). But there must be objective facts from which the inference could be drawn, otherwise what is left is mere speculation or conjecture (Caswell v Powell Duffryn Associated Collieries Ltd [1940] AC 152 at 169 and 170; [1939] 3 All ER 722 at 733 and 733 per Lord Wright). [88] Generally, the proper inference to be drawn on the balance of probabilities depends upon a practical and reasonable assessment of the evidence as a whole (BGC Residential Pty Ltd v Fairwater Pty Ltd [2012] WASCA 268 at [51] and [54] per Pullin JA).
9. The evidence does not rise above speculation that any of the changes that Sanpoint claims ought to have been made in the tender process would have caused a bidder to offer a price of more than $20,000 for Sanpoint's REC, and by no means establishes that it is more likely than not that such a result would have occurred.
10. Sanpoint accepted in its submissions that it must generally have been known that a substantial proportion of the Teams were experiencing dire financial circumstances. For the reasons I have given above, if V8 Holdings had more fully disclosed all of the communications and documents relating to the need for a restructure and the negotiations to achieve a restructure, the reality of the situation would have been made clear to any potential bidder who registered its interest.
11. The article in The Daily Telegraph mentioned above at par 136 would probably have brought home to potential bidders who were close to the V8 Supercars Championship that spectacular losses could be made.
12. The very fact that Teams holding three RECs had surrendered them at the one time would naturally tend to accentuate the appearance that the holder of any REC was likely to incur substantial financial losses each year.
13. The financial burden of racing a V8 Supercar was exacerbated by the fact that the right to receive Car of the Future payments had been exhausted.
14. It was probably common knowledge that the GT Championship was exerting substantial competitive pressure on V8 Supercars racing.
15. Any potential bidder who accessed the terms of the RECs in the data room would quickly have learned of the onerous terms discussed above at pars 26 to 37 above.
16. The disclosure that Archer contemplated that only 26 cars would race in 2015 (later reduced to 25 cars) created a real risk to a party who tendered to buy a REC that it would have acquired the right to an onerous contract but not be guaranteed the ability to actually participate in the V8 Supercars Championship. The significance of this risk would depend upon whether other parties acquired the other RECS on offer, a matter beyond the control of any potential bidder. A bidder would understand that it would have the same rights in respect of an acquired REC as would all other REC owners, but that would still leave a substantial measure of commercial uncertainty.
17. In my view it is not an adequate response to this difficulty to say, as did Sanpoint, that any purchaser of its REC would still have a valuable right. That may be so, but the value would depend upon the uncertain process of how V8 Supercars, Archer and the Teams resolved the issue of which RECs should not be permitted to compete in the V8 Supercars Championship. Why would a potential bidder offer a substantial price for the right to a REC with knowledge that circumstances beyond the bidder's control might deny the bidder the enjoyment of the REC, and where the entitlement to receive compensation was unpredictable?
18. The information in the data room concerning the estimated gross cash distributions for 2014 (see par 221 above) would not have encouraged bidders, as it was plainly at a level that had historically been insufficient to permit many of the Teams to avoid suffering very substantial annual operating losses.
19. In my opinion, far from the available information concerning the likelihood of a restructure agreement encouraging potential bidders to bid to acquire a REC, on balance that information was likely to depress the enthusiasm of potential bidders to bid a substantial price for a REC. When added to the uncertainty as to the number of Teams that would be permitted to race in 2015, the most rational course for potential bidders was to wait and see the outcome of any negotiations.
20. The most significant factor, however, is that save for the possibility that more potential bidders would have registered their interest if the two week registration period had been longer, and the whole tender process had been timed to end earlier, the names of all of the three registrants who were not surrendering Teams are actually known. It is entirely a matter for speculation that the timing issues would have led to more registrations of interest if the tender had been conducted in accordance with Sanpoint's case. The widespread advertising and the relatively immediate registration of a small number of interested parties suggests otherwise.
21. The likelihood that any of the three external registrants would have bid substantial prices for Sanpoint's REC had V8 Holdings provided to them all of the information that was available is so doubtful that I would not be able to find on the balance of probabilities that a substantial bid would in fact have been made without hearing evidence to that effect from one of the registrants.
22. These considerations do not even take into account the possible consequences that could flow from substantial bids being made in respect of one or two RECS, when three RECS were on offer.
23. On the evidence, not only is it a matter of speculation whether any substantial bid would have been made if the tender process had been conducted differently, but there is an inherent contingency in the entitlement of Sanpoint to receive anything for its REC that flows out of the fact that there were three RECS on offer, that were separately identified.
24. On the evidence, it is a matter for speculation as to how the board of V8 Holdings would have dealt with the situation if one or two but not all of the three RECs on offer had been sold. The board may have elected to compensate the Teams who surrendered their RECs under cl 10.1(c), but there is evidence to suggest that V8 Holdings was not in a financial position to do so, unless the prices offered were relatively low.
25. I have set out above at par 219 the terms of the Rules governing the tender process that dealt with the fact that three RECs were available for purchase at the one time. Each REC was identified by a name that only Ernst & Young could attribute to a particular Team. Intending bidders were required to bid for a particular REC, even though the terms of each REC were identical. It may be that technically the board of V8 Holdings was not bound by the Rules in its dealings with the Teams who had surrendered their RECs, but on the balance of probabilities V8 Holdings would have acted in accordance with the Rules.
26. The existence of the Rules concerning the making of bids for specific RECs logically increases the difficulty faced by Sanpoint in establishing on the balance of probabilities that it suffered some actual loss. The parties did not in their submissions suggest any mathematical way to deal with this problem. As the RECs were identical, it should be the case that if only one bid was made, there would be a one third chance that the subject of the bid would be Sanpoint's REC. If two bids were made, there would be a two thirds chance that Sanpoint's REC would be the subject of a bid. Of course, as no conforming bids were made, these mathematical considerations remain theoretical. As a practical matter, the court can do little more than to act on the basis that the evidence would need to be particularly persuasive that the tender proceeds would have yielded bids above $20,000 if the alleged breaches had not occurred before the court could be satisfied on the balance of probabilities that a bid would have been made for Sanpoint's REC.
27. The difficulties that arise from the fact that three RECs were on offer, and substantial prices may not have been bid in respect of all of them, is not decisive against the possibility that Sanpoint suffered a loss on the balance of probabilities. However, when added to the other uncertainties considered above, it causes me to conclude that the likelihood that Sanpoint suffered a loss rises no higher than a matter of speculation.
28. In saying this I have not ignored the evidence that on 17 December 2013, one of the existing REC holders sold its REC for a price of $800,000 excluding GST. Nor have I ignored the evidence that after the restructure was finally agreed, five sales of the new RECs occurred between 1 January 2015 and 1 January 2016.
29. There is no evidence about the circumstances in which the 17 December 2013 sale took place. It is inherently likely that it will be a rare event that a party is prepared to acquire a REC in circumstances where that party either has the expertise to make the operation of the REC profitable, or has the passion and financial resources sufficient to allow the party to carry on regardless of loss.
30. At the end of the day, the court should not lose sight of the fact that a professional tender process was carried out by V8 Holdings with the assistance and advice of experts at Ernst & Young. That process did not yield any substantial bidders. Notwithstanding the complaints made by Sanpoint, there is no reason for the court to find that the tender process was otherwise not an effective one.
31. Accordingly, I would not have found that Sanpoint has established on the balance of probabilities that it suffered some actual loss, if I had found that V8 Holdings had breached the RECs in any of the ways alleged by Sanpoint.

Quantification of loss

1. As I have decided that Sanpoint has not established that V8 Holdings breached cl 10.1(b) of the REC, or that it has suffered any recoverable loss, I will not attempt to value the loss that would have been recoverable had I found in favour of Sanpoint on those issues.
2. It is often appropriate for a court to determine the damages to which a plaintiff would have been entitled had the plaintiff established a relevant breach against the defendant, against the possibility that the plaintiff will succeed on the issue of liability on appeal. The reasons I have taken a different course in the present case are, first, the quantum of loss depends upon the assessment of the value of a lost chance, and that assessment depends upon the precise nature of the chance that was lost; and secondly, there is a paucity of evidence relevant to the determination of quantum.
3. As to the first reason, it will be pointless and speculative for this court to assess the value of any particular lost chance, until the precise nature of that chance has been identified on any appeal in which Sanpoint is successful.
4. As to the matter of quantum, there is little evidence other than the sales of RECS in the period June 2011 to 1 January 2016 that are summarised in Schedule 2 of Sanpoint's submissions.
5. I would find it to be a very difficult exercise to attempt to value the loss of any chance suffered by Sanpoint on the evidence in this case, but if that must be done at some time, it will be better that it be done with a complete understanding of the chance that was lost.

Conclusion

1. In principle, the court should make the orders sought by V8 Holdings in its summons, and should also dismiss Sanpoint's cross claim. Sanpoint should be ordered to pay V8 Holdings' costs of the proceedings, save in respect of any costs order that has already been made, including the particular costs order made by Pembroke J upon the determination of the separate questions.
2. It is appropriate that I invite the parties to confer and provide to my Associate appropriate short minutes of order to give effect to these reasons for judgment.

Amendments 18 August 2017 - amendment to parties legal representatives DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 18 August 2017