CATCHWORDS TRADE PRACTICES LAW - consumer protection - misleading and deceptive conduct or conduct that is likely to mislead or deceive - statements based on third party reports - whether statements adopted as true and represented to be true - effect of disclaimers. Development Allowance Authority Act 1992 Melbourne City Link Act 1995 ss 1,6 Trade Practices Act 1974 ss 51A, 52, 80 Yorke v Lucas (1985) 158 CLR 661 James v Australia and New Zealand Banking Group Ltd (1986) 64 ALR 347 Industrial Equity Ltd v North Broken Hill Holdings Ltd (1986) 64 ALR 292 PHILLIP JAMES MOREY v TRANSURBAN CITY LINK LIMITED and CITY LINK MANAGEMENT LIMITED No VG 124 of 1996 NORTHROP J MELBOURNE 22 MAY 1996 IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY No VG 124 of 1996 GENERAL DIVISION B E T W E E N : PHILLIP JAMES MOREY Applicant A N D : TRANSURBAN CITY LINK LIMITED AND CITY LINK MANAGEMENT LIMITED Respondents COURT: NORTHROP J PLACE: MELBOURNE DATE: 22 MAY 1996 MINUTES OF ORDER THE COURT ORDERS THAT:- 1. The application be dismissed. 2. The proceeding be adjourned to a date to be fixed for the purpose of settling the form of an order for costs. NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY No VG 124 of 1996 GENERAL DIVISION B E T W E E N : PHILLIP JAMES MOREY Applicant A N D : TRANSURBAN CITY LINK LIMITED AND CITY LINK MANAGEMENT LIMITED Respondents Index to Reasons for Judgment Page 1. Statutory Basis and Structure 1 - 5 2. The Application 5 - 8 3. Structure and Content of Prospectus 8 - 23 4. Nature of Conduct Alleged to Contravene section 52 of the Trade Practices Act 23 - 28 5. Allegations made by the Applicant 28 - 37 6. Analysis of Applicant's Allegations 37 - 45 A The Group 3 and the Group 4 representations 37 - 41 B The Group 1 and the Group 3 representations 41 - 45 7. Legal Considerations and Conclusions 46 - 49 8. Relevance of Evidence 49 - 50 9. Orders 51 IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY No VG 124 of 1996 GENERAL DIVISION B E T W E E N : PHILLIP JAMES MOREY Applicant A N D : TRANSURBAN CITY LINK LIMITED AND CITY LINK MANAGEMENT LIMITED Respondents COURT: NORTHROP J PLACE: MELBOURNE DATE: 22 MAY 1996 REASONS FOR JUDGMENT 1. Statutory Basis and Structure The Melbourne City Link Act 1995 ("the City Link Act") came into operation on 12 December 1995. It contains a large number of very complex provisions. As stated in section 1, the main purposes of the City Link Act include:- "(a)to ratify the Agreement for the Melbourne City Link Project; and ... (c)to give the Link corporation certain powers in relation to the construction, maintenance, management and operation of roads in the Project area; ..." For the purposes of the City Link Act, the Link corporation is Transurban City Link Limited ("Transurban"). The Melbourne City Link Project ("the Project") is described in the Agreement which is contained in Schedule 1 to the City Link Act. The Agreement is made between the State of Victoria, Transurban, described in the Agreement as "the Company", Perpetual Trustee Company Limited, described in the Agreement as "the Trustee" and City Link Management Limited, described in the Agreement as ("the Manager"). Section 6 of the City Link Act provides:- "6. In this Act a reference to the Project is a reference to the project, as described in the Agreement, for- (a) a southern link involving a freeway link connecting the West Gate Freeway east of Kingsway to the South Eastern Arterial incorporating road tunnels passing under Kings Domain and the Yarra River and South Richmond and upgrading of part of the South Eastern Arterial west of Toorak Road; and (b) a western link involving upgrading of part of the Tullamarine Freeway, from near Bulla Road to Flemington Road and a link from Flemington Road to Footscray Road and to the West Gate Freeway." The nature of the Project and how it is to be financed is summarised in two letters each dated 20 February 1996 from the chairman of Transurban and from the chairman of City Link Management Limited respectively. Each letter is set out at the beginning of the Melbourne City Link Prospectus ("the Prospectus") parts of which will be considered in some detail later in these reasons. The Transurban letter includes the following paragraphs:- "The Melbourne City Link Project is the first major infrastructure development in Victoria in which the public will have the opportunity to participate. This is a landmark project for the City of Melbourne in terms of the economic, transport and lifestyle benefits it will deliver. An investment in an infrastructure project such as the Melbourne City Link presents a different range of risks and rewards compared to a traditional equity investment and prospective Investors should familiarise themselves with these risks prior to investing. Investors should read this Prospectus in detail prior to making an investment decision. If you have any questions, you should consult your financial adviser or one of the Equity Underwriters listed in the Corporate Directory inside the back page. The Project utilises a unique financial and ownership structure designed to enable Investors to participate in the infrastructure funding initiative announced by the Prime Minister in the Commonwealth Government's "One Nation" statement and to enable the majority of distributions to be made by pre-tax trust distributions. Consequently this Prospectus is jointly issued by two entities, Transurban City Link Limited ("the Company"), and City Link Management Limited, the manager of the Transurban City Link Unit Trust ("the Trust"). The funding raised pursuant to this Prospectus is a key element of the financing arrangements for the Project. The initial role of the Company is to oversee construction of the Melbourne City Link. Construction will be undertaken by a joint venture between Transfield Construction Pty Ltd and Obayashi Corporation ("the Transfield Obayashi Joint Venture or TOJV"). Following completion of construction, the primary responsibility of the Company will be to oversee the operation and maintenance of the entire Melbourne City Link. The majority of operation and maintenance functions have been contracted to Translink Operations Pty Limited, a company ultimately 50% owned by Transroute International SA and 50% by Transfield Infrastructure Investments Pty Limited. Notwithstanding these arrangements, Transurban City Link Limited will remain ultimately responsible for the day to day management of the Melbourne City Link. Following completion of the Melbourne City Link, the Company will derive its income principally from the collection of tolls, however, additional revenue is expected to be generated from the leasing of advertising space along parts of the Link." The City Link Management Limited letter includes the following paragraphs:- "It is with great pleasure that I invite you to become an Investor in the Transurban City Link Unit Trust. City Link Management Limited has been appointed Manager of the Trust. City Link Management Limited is a wholly owned subsidiary of Macquarie Bank Limited. In October 1995, the Trust, along with other Project participants, entered into formal contracts with the State of Victoria for the provision and operation of the Melbourne City Link for a Concession Period (including the Construction Phase) of approximately 38 years. At the expiration of the Concession Period, all rights in respect of the Melbourne City Link will revert to the State. This Prospectus provides an opportunity to participate in the growing level of involvement by the private sector in the provision of infrastructure facilities that have traditionally been funded by the public sector. Each Unit subscribed for in the Trust will be "stapled" to a Share in Transurban City Link Limited ("the Company") and 499 Equity Infrastructure Bonds issued by the Company. The Company is responsible for the design and construction of certain sections of the Link and for the ongoing operation and maintenance of the entire Link. The role of the Trust is primarily to design and construct certain sections of the Link, to lease to the Company the Trust land required by the Company to operate the Link, and to lend monies raised for the Project to the Company. As such, the two primary sources of income for the Trust will be lease rentals from the land leases and interest receipts under the subordinated loans. However, prospective Investors should note that the Company's ability to meet its rental and interest obligations to the Trust, and therefore the Trust's ability to make the projected distributions to Investors, principally depends upon the level of traffic revenue generated from the Link. Application will be made to Australian Stock Exchange Limited within three days after the date of issue of this Prospectus for the Bonds, Shares and Units to be quoted on the ASX as a single stapled security. Investors will not be able to deal in Bonds, Shares and Units separately." By the Prospectus which was issued to the public on Wednesday 28 February 1996, Transurban and City Link Management Limited invited potential investors to apply for Parcels of Securities ("Parcels"). The Prospectus was issued pursuant to the Corporations Law. Each Parcel comprised 499 Equity Infrastructure Bonds issued by Transurban at a price of $1.00 each, 1 Share in Transurban issued at 1 cent and 1 Unit in the Transurban City Link Trust, managed by City Link Management Limited, at 99 cents. The total issue price for each Parcel was $500.00 but applicants were required to apply for a minimum of two Parcels. Thus, the minimum subscription price was $1000. Applications for Parcels closed at 12 noon Friday, 1 March 1996. Thus the time between the issue of the Prospectus and the closing time for applications was, in one sense three days, but was limited to Wednesday, Thursday and part of Friday, the year of 1996 being a leap year. The Parcels were due to be listed on the Australian Stock Exchange on Thursday 14 March 1996. 2. The Application On the morning of 14 March 1996 Phillip James Morey, as applicant, caused an application to be issued in this Court in which he named Transurban and City Link Management Limited as respondents seeking declarations that the respondents, in issuing the Prospectus, had engaged in conduct in contravention of section 52 of the Trade Practices Act 1974 in that the Prospectus contained information that was misleading or deceptive or likely to mislead or deceive. The applicant sought orders including an interlocutory injunction restraining the respondents from proceeding with the listing of the Parcels on the Australian Stock Exchange and from processing the applications for Parcels made pursuant to the Prospectus without first notifying the persons concerned that the Prospectus was inaccurate in the manner claimed. The interlocutory injunctions were to apply until the hearing and determination of the application or further order. Perpetual injunctions were sought also. On the same day the Court, constituted by Cooper J, made the following direction:- "1. The respondents advise the Australian Stock Exchange for the information of intending purchasers or potential purchasers and any persons making inquiry from the contact number contained in the prospectus of these proceedings and the allegations that the projections in the prospectus and the availability of tax concessions are alleged to be misleading and deceptive and may not in fact ultimately prove to be true, these allegations being denied by the parties who issued the prospectus." At the same time the Court gave directions relating to the further hearing of the application. The hearing of the application came on before the Court as presently constituted on 3, 4, 24 and 26 April 1996. The applicant and Transurban were each represented by counsel. City Link Management Limited appeared by a solicitor who, apart from adopting the submissions made on behalf of Transurban, took no part in the hearing. On 4 April 1996 the Court ordered that the respondents be relieved of the obligation to comply with the direction made by the Court on 14 March 1996. The applicant has no intention and has never had any intention of applying for or purchasing Parcels as described in the Prospectus. He was, and is, a member of the Public Transport Users Association of Victoria. He commenced this proceeding at the request of members of that association. That Association is opposed to the construction of the Project. Nevertheless, the applicant has a statutory right to bring this application in the Federal Court; see section 80 of the Trade Practices Act. The parts of that section presently relevant are:- "80.(1)... where, on the application of the Minister, the Commission or any other person, the Court is satisfied that a person has engaged ... in conduct that constitutes ...: (a) a contravention of Part ... V ...; (b) ... the Court may grant an injunction in such terms as the Court determines to be appropriate." In addition the Court has power, in such a case, to make many other orders including declarations and the giving of directions. Section 52 is within Part V of the Trade Practices Act. Subsection 52(1) provides:- "52.(1) A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive." During the course of the hearing, the orders sought and the grounds for the making of the orders were amended from time to time both by the deletion and the addition of grounds and orders. In the event, the applicant relied upon four groups of representations which were alleged to constitute conduct in contravention of section 52 of the Trade Practices Act. These groups were identified as follows:- 1. The use of the definition of Light Commercial Vehicles (LCV) being 1.5-4.5 tonnes referred to on page 42 of the Prospectus. 2. The status of what is called the Ratio Report. The Ratio Report is not referred to by that name in the Prospectus but the representation is said to be referred to on page 41 of the Prospectus. 3. The uncertainty of the legal advice referred to on page 40 of the Prospectus. 4. The financing risks referred to on pages 66-67 of the Prospectus. 3. Structure and Content of Prospectus In order to understand the issues to be decided, it is helpful to give a brief outline of what is contained in the Prospectus. It is a very lengthy and detailed document. The initial applicants for Parcels had a very limited time to read and comprehend the contents of the Prospectus but the orders being sought do have application far beyond those original applicants. The orders are sought to be directed to persons who may desire to purchase Parcels on the Australian Stock Exchange. Time constraints have no application to these persons who have ample time to read the Prospectus before purchasing any Parcels. On the first page of the Prospectus and before the Table of Contents, a clear warning is given. Under the bold heading "INVESTOR INFORMATION" there appears:- "Investments made pursuant to this Prospectus should be considered speculative. Investors should give careful consideration to the risks associated with an investment under this Prospectus". As illustrated by the Table of Contents appearing at the beginning of the Prospectus, the document contains the letters from the two chairmen referred to earlier in these reasons, 10 sections, some of which contain a number of sub-sections, a glossary of terms used in the Prospectus, a section containing material relating to applications for Parcels and a section explaining the corporate directory of the companies concerned. Section 1 is headed "Investment Overview" and comprises 8 sub-sections all contained within pages 1 to 5 of the Prospectus. Section 2 is headed "Details of Offer" and comprises 9 sub-sections all contained within pages 7 to 10 of the Prospectus. Section 3 is headed "Project Outline" and comprises 8 sub-sections all contained within pages 11 to 27 of the Prospectus. Section 4 is headed "Financial Structure" and comprises 9 sub-sections all contained within pages 29-40 of the Prospectus. Section 5 is headed "Traffic Estimates and Projected Returns" and comprises 9 sub-sections contained within pages 41 to 53 of the Prospectus. Section 6 is headed "Investment Risks" and comprises 10 sub-sections all contained within pages 55-69 of the Prospectus. Section 7 is headed "Directors, Senior Management and Trustee" and comprises 3 sub-sections all contained within pages 71 to 77 of the Prospectus. Section 8 is headed "Independent Expert Reports" and comprises 5 sub-sections. Each sub-section consists of a named report. The pages containing the reports are not numbered but are pages 79 to 116 of the Prospectus. The only report relevant for present purposes is contained in sub-section 8.1 "Traffic Audit Report". This report was prepared by R. J. Nairn and Partners Pty Ltd and will be referred to in these reasons as the Nairn Report. The Nairn Report is contained within 5 pages of the Prospectus. Section 9 is headed "Summary of Material Contracts" and is contained within pages 117 to 191 of the Prospectus, but contains no sub-sections. Section 10 is headed "Additional Information" and is contained within pages 192-231 of the Prospectus but contains no sub-sections. The Glossary which, in reality, is a definition section, is contained within pages 233 to 241 of the Prospectus. Sub-section 1.8 is headed "Project Risks." The sub-section lists some specific risks inherent in the Project, risks that could be new to investors. A number of specific risks are mentioned. The following sentence then appears:- "Principal amongst these are the risks that projected traffic volumes are not achieved and that the specified vehicle recognition rate of the Electronic Toll Collection System is not achieved." It will be recalled that following completion of the task, Transurban will derive its income principally from the collection of tolls paid with respect to the vehicles using the Link or parts of it. The tolls are to be identified and collected pursuant to a new electronic system known as the "Electronic Toll Collection System" or "ETCS" being terms which are defined in the Glossary to mean "A part of the ETTM comprising all tolls, traffic and telecommunications equipment and systems necessary to operate the Link." "ETTM" refers to the "Electronic Tolling and Traffic Management System." Of necessity the estimation of the number of vehicles likely to use the Link and the efficiency of collection of the tolls form a vital part in the projections of the future earnings of Transurban. Under sub-section 1.8 reference is made to the fact that investment risks are discussed in Section 8. Sub-section 4.8 is headed "DAA Certification". In the Glossary "DAA or Development Allowance Authority" is defined as "The Development Authority established under the Development Allowance Authority Act 1992 (Cth)." Sub-section 4.8 forms the basis for the group 3 misrepresentations alleged in the application. Significant tax benefits accrue to Transurban and investors under the provisions of the Development Allowance Authority Act ("the DAA Act") Those benefits have been granted but the DAA Act contains provisions allowing "a person who is affected by a reviewable decision" to apply to the DAA to reconsider the decision made by it. The whole of sub-section 4.8 is set out:- "4.8 DAA Certification The DAA has issued certificates to qualify the infrastructure borrowing program for the prescribed tax treatment under Division 16L of the Tax Act. The issue of these certificates satisfies a condition precedent to Financial Closing. The Company has received notification of a possible application to the DAA to reconsider the issue by the DAA of the infrastructure borrowing certificates. Under the Development Allowance Authority Act 1992 (Cth), only a person who is affected by a decision, and is dissatisfied with the decision, by the DAA, may apply to the DAA for such reconsideration. The Company has obtained legal advice that any prospective applicant (other than the Company or Debt Providers) should not have standing and that any request for review or appeal should be unsuccessful. Investors should note that the decision of the DAA to grant, or the validity of, the DAA certificates which have been granted may be the subject of judicial review. In certain circumstances, if any application or legal proceedings associated with such judicial review remains unresolved, an event of default will occur under the Infrastructure Loan Agreement and Infrastructure Note Facility Agreement. The circumstances where this event of default will arise, and the consequences of the occurrence of an event of default are described in greater detail in Section 9." Attention is drawn to the last paragraph of this sub-section. Reference is made there to the Infrastructure Loan Agreement and Infrastructure Note Facility Agreement which, by the Glossary, refer to financial facilities to enable the Project to be constructed and what is to happen in the event of default which could arise under these agreements. Those matters form part of the basis of the group 4 misrepresentations alleged in the application. Hence the reference to section 9. Section 5 "Traffic Estimates and Projectal Returns" formed the basis upon which much evidence was led at the hearing. Parts of Section 5 form the basis for the group 1 and the group 2 misrepresentations alleged in the application. It will be necessary to set out large parts of Section 5. Subsection 5.1 provides:- "5.1 Introduction The principal factor that will affect the actual level of returns to Investors is the volume of traffic using the Link. To assist the directors in assessing the likely traffic volumes, a report was commissioned to estimate traffic volumes and revenue that could be reasonably expected on the Link. An expert team of traffic engineers comprising Acer Wargon Chapman (specialising in traffic planning and engineering), DJA/Maunsell (specialising in traffic modelling), and the Transport Research Centre (RMIT) (specialising in traffic data and specialist research including stated preference surveys), was assembled to provide this advice. These parties, (collectively "the Traffic Experts"), have extensive experience in traffic engineering and planning, including involvement in toll road and major transport projects. The Traffic Experts prepared a traffic report which estimates the traffic volumes on the road segments which will make up the Link in the years 2001 and 2011 and provides a growth rate assumption for traffic volumes beyond 2011. In addition, the traffic report includes an estimate of traffic revenue based on the selected tolling strategy. The years of 2001 and 2011 were chosen as they correspond with the years the Victorian Government uses to produce its official demographic planning estimates. RJ Nairn and Partners have undertaken a comprehensive audit and review of the work and results of the Traffic Experts. RJ Nairn are expert traffic planning engineers and their report is contained in Section 8." The Glossary defines the phrase "the Traffic Experts" to mean the three traffic engineers named in the second paragraph of subsection 5.1. The traffic report prepared by the Traffic Experts is not contained in the Prospectus. The Nairn Report referred to in the last paragraph is contained in subsection 8.1 of the Prospectus. This report is a summary of the detailed report prepared by Nairn entitled "Audit of Traffic and Revenue Estimates for Melbourne City Link" dated 4 December 1995 in which Nairn presented its findings on the audit and review of the Traffic and Revenue Forecasts prepared by the Traffic Experts for expected traffic flows on the Link. The estimates are outlined in Section 5 of the Prospectus. No attack was made on the professionalism of the Nairn Report. The summary of the conclusions contained in the Nairn Report are set out:- "F Conclusions With regard to the Traffic Experts' report on traffic volume and revenue estimates on the Link, we confirm that: . the work undertaken was, in our experience, conducted to a very high standard; . the assumptions used to underpin the estimates of average weekday traffic volumes and revenue for 2001 and 2011 were reasonable and appropriate; . the Traffic Experts' estimate of the annualisation factor was within the expected range; . the ramp-up profile is likely to be sensitive to the Transponder distribution programme, the Traffic Experts' estimate of the profile for the Western Link is within the expected range but the estimate for the Southern Link is slightly above the expected range; . the methodology and processes used to derive the traffic volume and revenue estimates were sound; and . the estimates of traffic volumes and revenue are reasonable and carry our support." The first two paragraphs of subsection 5.2 of the Prospectus are set out:- "5.2 Traffic Forecasting Methodology The traffic volume estimates were derived utilising the TRIPS traffic network model. TRIPS is a widely used computer simulation tool which is considered by the Traffic Experts to be appropriate for the Melbourne City Link Project. Calibrating the TRIPS traffic model so it reflected conditions on the Melbourne road network involved the import of data from the VITAL project, a study undertaken by the Transport Research Centre (RMIT) into travel patterns in Melbourne. In addition, further surveys were conducted to validate the travel time parameters used in the base road network model and the most recent actual traffic count data available from VicRoads was also incorporated into the base road network model. The estimating of future traffic volumes on the Link required assumptions to be made in relation to the form of the road network that would be in place for each of the two forecast years (2001 and 2011). The description of the road network as at 2001 and 2011 was labelled "Ground Zero". The road network model assumes the completion (at the scheduled time) of a number of major projects including the Western Ring Road and the Eastern Ring Road also known as the Scoresby Freeway (notwithstanding that the Government has not given any commitment to this road development). On the basis of the assumed Ground Zero road network and utilising the published Government forecasts relating to the expected demographics of Melbourne over the next 15 years, untolled traffic volume estimates were developed. These estimates were derived from models which estimate the peak period, 24 hour and commercial vehicle volumes." This subsection describes the method used by the Traffic Experts in forecasting future traffic volumes particularly with respect to the tollable sections of the Link. The second paragraph set out refers to the fact that the Traffic Engineers utilised "the published Government forecasts relating to the expected demographics of Melbourne over the next 15 years." In the sentence the word "utilising" is used. The basis for the group 2 misrepresentations is that the Traffic Experts had regard to the Ratio Report which, it was alleged, was not a "published Government forecast relating to the expected demographics of Melbourne". Subsection 5.3 of the Prospectus is set out:- "5.3 Traffic Estimates Utilising the methodology outlined above, average weekday traffic estimates by class of vehicle have been prepared for each of the proposed toll zones for years 2001 and 2011. These are the Base Case Traffic Estimates adopted by the directors in the preparation of the financial forecasts. Estimated Average Weekday Volumes (000's) by Class of Vehicle for Year 2001 Toll Zone Locations Toll Zone Cars LCVs HCVs Total North of Brunswick Road 1 104 21 7 132 Western Link Section 1 2 85 17 6 109 Western Link Section 2 3 82 17 6 104 Domain Section 4 78 16 5 99 SE Arterial (Punt Rd to Burnley St) 5 87 18 6 110 SE Arterial (Burnley St to north-west of Toorak Rd) 6 85 17 6 108 Total 520 106 36 662 Note: LCV - Light Commercial Vehicles (1.5-4.5 tonnes) HCV - Heavy Commercial Vehicles (>4.5 tonnes) Totals subject to rounding Refer to Route Map in Section 3 for locations of toll zones." The City Link Act, by section 14, ratifies the Agreement described earlier in these reasons and provides that the Agreement has effect as if it had been enacted in that Act. The Act contains provisions for the charging of tolls on vehicles using the tollable sections of the Link. The toll charged depends upon the type of vehicle. Schedule 3 to the Agreement includes definitions of the types of vehicles to be charged. To this end different rates are charged with respect to cars, light commercial vehicles and heavy commercial vehicles respectively. For present purposes, it is sufficient to say that a light commercial vehicle is defined to mean a two axle rigid truck having a gross vehicle mass which exceeds 1.5 tonnes, but does not exceed 4.5 tonnes. The note at the end of the table set out in subsection 5.3 of the Prospectus relating to LCV conforms to this definition. Similarly, the note relating to HCV conforms to the definition of heavy commercial vehicles in the Agreement. Thus, in calculating the anticipated revenue to be received from vehicles using the tollable sections of the Link, it is necessary to make the traffic estimates having regard to the definitions contained in the Agreement. Sub-section 5.3 of the Prospectus states the Base Case Traffic Estimates which were adopted by the directors of the respondents in the preparation of the financial forecasts. A reference to the Glossary shows that these estimates are based upon the traffic model prepared by the Traffic Experts from which the traffic volume and revenue estimates were received. The relevant traffic volume estimates model of the Traffic Experts are set out in the table contained in subsection 5.3 of the Prospectus. These estimates are stated to be based on the estimate of vehicles as defined in the Agreement. The basis for the group 1 misrepresentations is that in making the Traffic Report the Traffic Experts adopted a different definition for light commercial vehicles to that in the Agreement with the result that the traffic estimates are misleading and deceptive or are likely to mislead or deceive. Before leaving this aspect of the outline, the first paragraph of subsection 5.5 of the Prospectus is set out:- "5.5 Projected Investor Returns The financial forecasts and projections made by the directors of the Company and the Manager have been premised on a detailed examination of the estimated revenue and expense components of the project. The directors have relied on detailed analysis and the professional judgement of various experts and in particular, on the estimates of traffic volume and revenue produced by the Traffic Experts and the audit of the Traffic Experts' work undertaken by RJ Nairn." This aspect is taken further by the paragraph headed "Traffic Revenue" contained in subsection 5.7:- "Traffic Revenue A key assumption in the generation of the projected returns is the estimate of traffic volume and revenue. For the purposes of the projected returns contained in this Section, the directors have adopted the traffic volume and revenue estimates provided by the Traffic Experts and referred to in Sections 5.3 and 5.4." Section 6 of the Prospectus deals with "Investment Risks", some of which are relevant to considering the group 1, the group 3 and the group 4 misrepresentations. Relevant parts of Section 6 are mentioned. Sub-section 6.1 is headed "Overview" and directs attention to a number of risks and includes these two paragraphs:- "In addition to these general risks, there are various risks specific to this Project. This section outlines the material Project risks to which Investors will be exposed. An investment in the Melbourne City Link should be considered speculative on the basis that the Project is a start up operation with no trading history." Parts of sub-section 6.2 are set out:- "6.2 Traffic Risk Traffic volume risk is a key economic risk to which Investors will be exposed. Returns to Investors during the Operations Phase will be a function of the volume of traffic using the Link and the level of tolls. Investors have no direct mitigation against this risk and are relying on the traffic volume estimates prepared for the directors by the Traffic Experts and audited by RJ Nairn. An overview of the methodology employed by the Traffic Experts in developing the traffic volume projections is included in Section 5.2. Investors will bear the risk of reductions in traffic volume and revenue brought about by various factors including: – incorrect projections; – economic conditions; – changing travel patterns and habits; – new technologies; or – increases in the price of petrol." Sub-section 6.6 is headed "Financing Risks". A number of specific matters are referred to in this sub-section including risks that would arise under provisions contained in agreements relating to the financing of the Project. The risks are highlighted in the first paragraph of what appears under the heading "Events of Default" namely;- "The Security Trust Deed, the Infrastructure Loan Facility, Infrastructure Note Facility and CPI Bond Facility contain a number of Finance Defaults, the main ones of which are outlined in the summaries in Section 9. Investors should note that the occurrence of any of these events or the potential occurrence of any of these events, may result in the Debt Providers taking action which may lead to distributions to Investors being withheld and/or disallowing future debt drawdowns under the Debt Facilities and/or appointing a controller to the Project Vehicles." The essence of the group 4 representations relates to the Infrastructure Loan Agreement, the Infrastructure Note Facility Agreement and the DAA Certification and the consequences of an event of default. The two agreements contain provisions for the facilities referred to by similar names in the paragraph just quoted. A summary of the provisions to be contained in the two Agreements, which had not been executed at the date of the Prospectus, are contained in Section 9 of the Prospectus. The summary of the Loan Agreement is numbered 23 and commences at page 166 of the Prospectus. The summary includes a reference to events of default entitling the provider of the finance to cancel its commitment and require immediate repayment of the moneys owing. One of the events of default, which relates to the group 3 misrepresentation, is set out:- "any application for review or legal proceedings challenging the decision of the Development Allowance Authority to issue, or the validity of, any direct or indirect infrastructure borrowing certificate or any other proceedings which, if successful, would result in the cancellation of such a certificate is not finally resolved (including the expiration of any right of appeal) on the date which is 12 months after Financial Closing and a Queen's Counsel selected and briefed by the Co-Ordinator in accordance with the procedure set out in the agreement states that he or she can not confirm that the person making the application or bringing the proceedings has no standing to do so, or, if the Queen's Counsel states that the person does have standing, that there is no real prospect that the relevant proceeding will result in cancellation of a direct or indirect infrastructure borrowing certificate with effect from a date earlier than the date of final determination of the application or proceedings." The summary of the Note Facility Agreement is numbered 24 and commences at page 169 of the Prospectus. It makes reference to "termination events" which entitle the provider of finance to terminate its obligations under the agreement and require the immediate payment of all money owing to it. One of the termination events which, for present purposes, can be treated as essential is the event of default arising out of delays following challenges to the DAA Certification. Having noted these two agreements, reference can be made to other parts of sub-section 6.6. A clear warning is given in sub-section 6.6. of the Prospectus to the risks associated with events of default occurring. An express reference is made to the summaries in Section 9. Further reference is made in sub-section 6.6 to the Infrastructure Loan Facility and the Infrastructure Note Facility respectively. The nature of the Loan Facility is explained under the heading "Infrastructure Loan Facility" and the following paragraphs then appear:- "If the making of, or change in the interpretation of any law makes it unlawful or impracticable for an Infrastructure Lender or its Infrastructure Parent to make or maintain its commitment under the Infrastructure Loan Facility or the funding agreement between the Infrastructure Lender and its Infrastructure Parent, the Infrastructure Lender may terminate its commitment and demand repayment of all moneys owing under the Infrastructure Loan Facility to that Infrastructure Parent. If this occurs, Investor returns will be adversely affected. The circumstances in which this will occur are outlined in greater detail in the summary of the Infrastructure Loan Agreement in Section 9. Investors should note that the decision of the DAA to grant, or the validity of, the DAA certificates which have been granted may be the subject of judicial review. In certain circumstances, if any application or legal proceedings associated with such judicial review remains unresolved, an event of default will occur under the Infrastructure Loan Agreement and Infrastructure Note Facility Agreement. The circumstances where this event of default will arise, and the consequences of the occurrence of an event of default, are described in greater detail in Section 9." Under the heading "Infrastructure Note Facility" warnings are given with respect to results that would flow from other matters arising under the Agreement. Sub-section 6.7 is headed "Tax Risk" and contains a number of references to matters coming within the group 3 representations. The following paragraph is one of the paragraphs included in this sub-section:- "If the DAA cancels the Infrastructure Borrowing Certificates issued to the Company, then the Company will be liable for an Infrastructure Certificate Cancellation Tax equal to 15% of non-deductible interest paid by it. If the Infrastructure Borrowing Certificates are held by a Court to be void, then the taxation treatment for Investors will be determined outside the concessional provisions of Division 16L of the Tax Act and in accordance with the assessable income rules of the Tax Act. The directors recommend that Investors obtain their own tax advice prior to investing." 4. Nature of Conduct Alleged to Contravene section 52 of the Trade Practices Act At the hearing, much evidence was led in relation to matters of fact relating to the group 1 and the group 2 representations. Limited evidence was led in relation to group 3 while, apart from the Prospectus itself, no evidence was led in relation to group 4. Before turning to consider each of the groups and the evidence relevant to each group, some general observations are made. The Court must determine for itself whether conduct is in contravention of section 52 of the Trade Practices Act. The Court must decide whether, on all the material properly before it, the conduct complained of constitutes conduct which is misleading or deceptive or is likely to mislead or deceive. In determining this, the Court must have regard to the class of persons who may be affected by the conduct. It is accepted that the respondents are corporations under the Trade Practices Act and in trade or commerce, have engaged in conduct. In the present case, the conduct complained of is contained in statements, often referred to as representations, contained in the Prospectus. The Prospectus constitutes an invitation to members of the public to invest in the Project by making an application for Parcels in the respondent companies. The Prospectus contains a detailed explanation of what the Project is all about and attempts to create the impression that any investment will be desirable but at the same time many warnings and qualifications are given. The Prospectus was prepared, obviously, having in mind the requirements of the Corporations Law. Of necessity, the Prospectus makes reference to what might happen in the future, or forecasts of future events. The exact limits on the accuracy of the forecasts are obvious. In this respect the provisions of section 51A of the Trade Practices Act may be relevant. That section provides:- "51A(1) For the purposes of this Division, where a corporation makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act) and the corporation does not have reasonable grounds for making the representation, the representation shall be taken to be misleading. (2) For the purposes of the application of sub-section (1) in relation to a proceeding concerning a representation made by a corporation with respect to any future matter, the corporation shall, unless it adduces evidence to the contrary, be deemed not to have had reasonable grounds for making the representation. (3) Sub-section (1) shall be deemed not to limit by implication the meaning of a reference in this Division to a misleading representation, a representation that is misleading in a material particular or conduct that is misleading or is likely or liable to mislead. This section was referred to in the course of the hearing but the applicant made no submissions based upon subsection 51A(2). The Prospectus itself sets out the grounds relied upon for the making of the representations in the Prospectus. The Prospectus must be considered as a whole. It is not permissible to take a passage out of context and without reference to other parts of the text. The Prospectus is a lengthy and complex document which requires careful reading and understanding. Although the Prospectus is directed to members of the public at large, of necessity, the relevant class is limited to those members of the public who have the ability to invest at least $1000 in the Project. This is not a case where the applicant is seeking damages under subsection 82(1) of the Trade Practices Act by reason of the conduct of the respondents. The relevant parts of that subsection provide "A person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part -- V may recover the amount of the loss or damage by action against that other person ..." In a claim for damages, the person seeking damages must show a relationship between the conduct and the loss or damage. Such a person would need to show a reliance on the Prospectus resulting in loss or damage. That requirement has no application to the present case but it is important to note that the members of the public to which the Prospectus is directed are those members, who, in addition to having at least $1000 dollars to invest, are likely to apply for a copy of the Prospectus and to take the trouble to read it. This, in itself, is a daunting task and of necessity imposes a limit on the class of persons to whom the representations in the Prospectus are directed. This is a very different type of case from one where, for example, a large advertisement containing misleading statements, is published in a newspaper, a television commercial or is broadcast on radio. At the same time, it must be remembered that it is not necessary, in a case such as that presently before the Court, to establish that any person has been misled or deceived. The Prospectus makes it clear on the first page that the investment is speculative. Accordingly any person who is seeking a safe investment would not proceed further. A certain risk is associated with an investment in the Project but this carries with it a higher duty on the promoters to ensure that any representation in the Prospectus does not constitute a conduct in contravention of section 52 of the Trade Practices Act. Nevertheless, the speculative nature of the investment would limit the class of persons to whom the prospectus is directed. Finally, these general comments should note that the respondents have been careful to state the basis of their forecasts which constitute the representations. This will be considered in more detail later in these reasons. The respondents do not claim to be experts in the area of traffic estimates and projected returns. In this regard, the whole of section 5 of the Prospectus is of great significance. The directors make it clear that they are relying on the opinions of experts, opinions which have been audited and verified by another expert. In this regard the last paragraph of subsection 5.1 is of importance. At the same time reference is made to what is set out in the first paragraph of subsection 6.2 "Traffic Risk" and in particular to the following sentences set out in that paragraph:- "Investors have no direct mitigation against this risk and are relying on the traffic volume estimates prepared for the directors by the Traffic Experts and audited by RJ Nairn. An overview of the methodology employed by the Traffic Experts in developing the traffic volume projections is included in Section 5.2." The use of the word "investors" at the beginning of this passage seems unusual. Section 6 of the Prospectus is headed "Investment Risks". The whole of Section 5 appears to be directed to show that the directors of the companies have relied upon the reports of experts while Section 6 is directed to risks facing the investor. Subsection 6.2 draws attention to the fact that the return to investors depends upon "the volume of traffic using the Link and the level of tolls." But investors are told that they "have no direct mitigation against the risk." They are being told they have no way by which they can reduce this risk except, possibly, in that they are "relying on the traffic volume estimates prepared for the directors (of the companies) by the Traffic Experts and audited by RJ Nairn." No submissions were directed to this aspect. Nevertheless, for present purposes, it can be used to detract from the general assertion of the directors as set out in Section 5. 5. Allegations made by the Applicant Difficulties arise with respect to the statement of claim in its final amended form relied upon by the applicant. It is headed "CLAIM AGAINST THE RESPONDENTS". It contains 7 paragraphs. Paragraphs 1,2 & 3 are formal. Paragraph 4 was not pursued. Paragraph 5 reads:- "5. In the Prospectus the statement of projected returns for the three years following opening is misleading or deceptive or is likely to mislead or deceive in breach of s.52 of the Act." There are then set out what are said to be "Particulars". The particulars are set out on six pages. They comprise a strange mixture of allegations of fact and contention raising many matters not contained in the Prospectus. The particulars set out a large number of statements contained in the Prospectus most of which have been set out earlier in these reasons, but contain no reference to what appears in subsection 1.1 of the Prospectus where, after setting out the projected financial returns following the opening of the tolling sections of the Link, the Prospectus states that the estimates are "largely dependent on the actual traffic revenue generated from vehicles using the Link." The particulars then given are as follows:- "The Prospectus includes a "independent traffic audit report" from R.J. Nairn & Partners Pty Ltd dated 19 February 1996. That report confirms that - (a) "the growth and distribution of road-based traffic in 2001 and 2011 will largely reflect growth due to demographic changes (ie, population and employment changes)" (page 3 of the report); (b) "the estimated road-based travel for 2001 and 2011 were strongly oriented towards the Central Activities District and adjacent areas ["the Central Area"], as was the case for 1991" (page 4); (c) "the continuing Central Activities District orientation reflects the Department of Planning estimates of future population and employment" (page 4). The only reasonable interpretation of the Prospectus is that - (a) the forecasts of expected demographics of Melbourne used as the basis for the modelling were official published forecasts of the Victorian Government; (b) the demographics included both population and employment figures; (c) the figures included those related to the Central Activities District of Melbourne and the adjacent areas. The last published official Victorian Government demographic forecasts were as follows - (a) for population, a study entitled "Victorian Demographic Forecast Paper No 4 - preliminary Forecast February 1995 - Melbourne Statistical Division Statistical Local Areas population by age and sex 1991 - 2011" published in February 1995 by the Department of Planning and Development, Victoria ("the Population Forecasts"); (b) for employment, a study entitled "Working Paper 6 - Statewide Employment Projections: The next 40 years, based on residence, location and industry" published in 1990 by the Department of Planning and Urban Growth, Victoria ("the Employment Forecasts"). The use of the Employment Forecasts in the Prospectus was misleading and deceptive because - (a) as at the date of the Prospectus, the information contained in the Employment Forecasts was out-of-date and recognised as wrong; (b) although updated official published Victorian Government estimates of population had been produced in the form of the Population Forecasts, no such forecasts of future employment had been produced; (ba)the Ratio Consultants Pty Ltd Summary Report dated December 1994 does not meet the description of official demographic figures produced by the Victorian Government or "published government forecasts relating to the expected demographics of Melbourne"; (bb)the Ratio Consultants' Summary Report does not contain forecasts of total employment for the year 2001 for the Central Area or its constituent local government areas; (c) a reasonable estimate of future employment for the Central Area for the year 2001 is approximately 392,000. This reflects Australian Bureau of Statistics figures for employment since 1961; (d) the figure used in the modelling for the Prospectus for the Central Area is an employment forecast for 2001 of approximately 500,000. The figures in the Employment Forecasts are: 1991 443,000; 1996 475,000; 2001 503,000; (e) actual figures from the 1991 Census released by the Australian Bureau of Statistics in 1993 show employment of 392,000 for the Central Area. No current figure is available, although a special survey by the Australian Bureau of Statistics dated 24 August 1995 gave an employment figure of 364,000 for the Central Area as at October 1994. If accurate employment forecasting for the year 2001 had been employed and a figure of 392,000 rather than approximately 500,000 used, the toll income would be as follows: Year 1 Year 2 Year 3 Prospectus toll income $212m $239m $247m Corrected toll income $170m $191m $206m The percentage returns to investors and the sensitivity analysis on page 49 of the Prospectus would recalculate as follows - Year 1 Year 2 Year 3 Projected return 5 7 7 +10% sensitivity 8 10 11 -10% sensitivity 1 3 3 " This paragraph of the statement of claim and its particulars were said by counsel for the applicant to be within the group 2 representations. Paragraph 6 of the claim is as follows:- "6. Further, in the Prospectus the statements concerning the standing of appellants and the likely success of appeals from the decisions of the Development Allowance Authority to issue infrastructure borrowing certificates are misleading or deceptive or are likely to mislead or deceive in breach of s.52 of the Act." The particulars are set out on five pages. The same comment is made with respect to these particulars as that made with respect to paragraph 5. The particulars are set out:- "PARTICULARS (b) Section 4.8 of the Prospectus (at page 40) misleads or is likely to mislead the ordinary investor contemplating investment in a $500 parcel or more in the City Link Project, into the belief that, alternatively represents to such an investor that - (i) no prospective applicant (other than the Company or Debt Providers) would have standing to mount a legal challenge by way of review or appeal against the DAA decision on any basis and that such an opinion was reasonably open to be expressed without qualification, when it was not. (ii)that any such legal challenge by way of review or appeal should be unsuccessful on the merits of the case and that such an opinion was reasonably open to be expressed without qualification, when it was not. There were no reasonable grounds for making either representation without qualification because: (1) the applicable law as to standing is uncertain, and is uncertain in its application to the circumstances of prospective applicants; (2) it would not be possible in advance of a determination of the facts concerning the standing of prospective applicants to determine with certainty whether they had standing; (3) it would not be possible to determine with certainty whether prospective applicants had standing based upon a hypothetical assessment limited to a consideration of the classes of possible applicants; (4) the law relating to the operation of s.119 of the Development Authority Act 1992 ("DAA Act") in relation to standing is as yet untested and is not able to be stated with certainty; (5) the law relating to the operation of s.93 O and in particular s.93 O(2)(b), in relation to the merits of a legal challenge based thereon, is as yet untested and is not able to be stated with certainty; (6) it would not be possible in advance of a determination of the facts going to the merits of a legal challenge by way of review or appeal based upon s.93 O(2)(b) to determine with certainty the outcome of the proceedings. (c) The Prospectus misleads or is likely to mislead the ordinary investor contemplating investment in a $500 parcel or more in the City Link Project into the belief that, alternatively represents to such an investor that, there would be no risk alternatively no risk in the investment worth considering, which could result from a legal challenge, which is not the case, alternatively there are no grounds for the making of such a representation. The following matters are referred to in particular: (i) under section 4.8 of the Prospectus (at page 40), there is no cross-referencing to section 6.6 ("Financing Risks"); (ii) under section 4.8 of the Prospectus there is no reference (which appears in section 6.6) to the fact that the Infrastructure Loan Agreement and the Infrastructure Note Facility Agreement are regarded as being including [sic] in the "key commercial arrangements" for the Project ("the key commercial arrangements"); (iii)no other part of the Prospectus purports to assess adequately or at all the commercial consequences of any default under the key commercial arrangements in terms of the viability of the City Link Project as a whole or the impact upon any investor's position; (iv) under section 6.6 (at page 67) "Infrastructure Note Facility" it is noted that: "If the making of, or change in the interpretation of any law makes it unlawful or impracticable for an Infrastructure Parent to make or maintain its commitment or to exercise its rights under the Infrastructure Note Facility (including the sale to retail investors of the notes), the Infrastructure Parent may terminate its commitment and demand repayment of all moneys owing to it. If this occurs, it will significantly adversely affect an investor's position". However, no such assessment of the impact upon any investor's position has been undertaken in respect of an event of default arising from any application for review or legal proceedings being commenced in respect of the DAA decision, which could significantly adversely affect an investor's position. Further, no reference is made under the heading "Infrastructure Notice Facility" on page 67 of the Prospectus concerning such application for review or legal proceedings being commenced in respect of the DAA decision. (v) under section 4.8 section 6.6 and section 9 (at pages 166-171) of the Prospectus, no attempt has been made to assess the degree of risk of the events of default occurring which relate to legal challenges to the DAA decision; (vi) no recommendation is contained in the Prospectus (in contrast to the recommendation made in respect of the "Tax Risk", section 6.7 at page 68) that a prospective investor should seek independent legal and financial advice as to; (1)the likelihood of a legal challenge to the DAA decision being successful; (2)the likelihood of a legal challenge being made which in itself results in an event of default under the key commercial arrangements; (3)the commercial effect of an event of default under the key commercial arrangements on the viability of the project as a whole and the impact upon an investor's position. (d) the Prospectus conveys the false impression that it contains all that an investor sought to know about the risk associated with any legal challenge to the DAA decision to issue borrowing certificates which are material to a decision to invest when it does not. The Prospectus fails to state: (1) the applicable law as to standing is uncertain, and is uncertain in its application to the circumstances of prospective applicants; (2) it would not be possible in advance of a determination of the facts concerning the standing of prospective applicants to determine with certainty whether they had standing; (3) it would not be possible to determine with certainty whether prospective applicants had standing based upon a hypothetical assessment limited to a consideration of the classes of possible applicants; (4) the law relating to the operation of s.199 of the Development Allowance Authority Act 1992 ("DAA Act") in relation to standing is as yet untested and is not able to be stated with certainty; (5) the law relating to the operation of s.93 O, and in particular s.93 O(2)(b), in relation to the merits of a legal challenge based thereon, is as yet untested and is not able to be stated with certainty; (6) it would not be possible in advance of a determination of the facts going to the merits of a legal challenge by way of review or appeal based upon s.93 O(2)(b), to determine with certainty the outcome of the proceedings; (7) the likelihood of a legal challenge to the DAA decision which in itself results in an event of default under the key commercial arrangements; (8) the commercial effect of an event of default under the key commercial arrangements on the viability of the project as a whole and the impact upon an investor's position." This paragraph of the statement of claim and its particulars were said by counsel for the applicant to be within the group 3 and group 4 representations. Paragraph 6A of the claim is as follows:- "PARTICULARS 6A Further, in the Prospectus, the statement of projected returns for the three years following opening is misleading or deceptive or is likely to mislead or deceive in breach of s.52 of the Act insofar as the traffic revenue from traffic volume uses inaccurate projections for the use of City Link by Light Commercial Vehicles." The particulars are subject to the same comments as the particulars to paragraphs 5 and 6. They are as follows:- "PARTICULARS" The projected returns from the Project are calculated using figures for predicted toll income based on estimates of traffic volumes in the years 2001 and 2011 (pages 42-43). These estimates anticipate that approximately 21% of the vehicles using City Link will be Light Commercial Vehicles or Heavy Commercial Vehicles. This figure accords with data published by the Australian Bureau of Statistics ("ABS") for 1991 entitled "Survey of Motor Vehicle Use Australia, 30 September 1991". The definition by ABS of Light Commercial Vehicles is "vehicles constructed primarily for the carriage of goods and not exceeding 3.5 tonnes gross vehicle mass (GVM). Included are utilities, panel vans, cab chassis and forward control load carrying vehicles (whether 4WD or not)". In the Concession Deed, included as Schedule 1 to the Melbourne City Link Act 1995, Light Commercial Vehicle is defined as "a two axle rigid Truck having a gross vehicle mass which exceeds 1.5 tonnes, but does not exceed 4.5 tonnes". Light Commercial Vehicles, so defined, will be charged a toll representing 1.6 times the appropriate toll for a car. The estimates of traffic volumes in the Prospectus purport to estimate traffic volumes for Light Commercial Vehicles defined as being a vehicle between 1.5 - 4.5 tonnes (note to table on page 42). The figure of 21% would not be appropriate for vehicles defined in this way as a large proportion of Light Commercial Vehicles (as defined by ABS) would have a capacity of less than 1.5 tonnes and would be classified as a car for the purpose of tolls. The traffic estimates therefore are inflated and inaccurate as they appear to be based on estimates for vehicles differently defined. This results in an overestimate of the toll income. The toll income figures in the Prospectus should be reduced by approximately 5%." It should be noted that logically, if the wrong definition of light commercial vehicles had been used by the Traffic Experts, there would have been a greater number of heavy commercial vehicles, big trucks exceeding 3.5 tonnes gross vehicle mass thereby increasing the estimate of returns since the toll paid with respect to them is greater than for light commercial vehicles. This paragraph of the statement of claim and its particulars were said by counsel for the applicant to be within the group 1 representations. Paragraph 7 of the claim is as follows:- "7. Further, insofar as the statements referred to in paragraph 5 and 6 relate to future matters, they were made by the Respondents in circumstances where they did not have reasonable grounds for making the statements and they are therefore misleading or deceptive within the terms of s.51A of the Act." 6. Analysis of Applicant's Allegations The Court proposes to consider the particular groups of representations which are alleged to constitute conduct in contravention of section 52 of the Trade Practices Act in the following order - Group 4 and Group 3 together, then Group 2 and Group 1. Evidentiary material relating to Group 2 and Group 1 will be considered together. 6A The Group 3 and the Group 4 representations The particulars given to paragraph 6 of the statement of claim provide a useful reference to the submissions made on behalf of the applicant with respect to these two groups. The group 3 representations are considered. The Prospectus contains information designed to advise intending applicants for Parcels with regard to the Project. An essential aspect for the success of an investment in the project is the existence of tax benefits flowing from the existence of certificates issued pursuant to the DAA Act. This is made very clear by reference to a number of statements in the Prospectus. Subsection 4.8 of the Prospectus is devoted to one aspect of the DAA certification. Under the DAA Act "a person who is affected by a reviewable decision" may request the DAA to reconsider that decision. The decision to issue the certificate is a reviewable decision. Any request for a review must be made within 21 days after the date on which the decisions first came to the notice of that person. A decision of the DAA may be reviewed by the Federal Court under the Administrative Decisions Judicial Review Act 1977. A decision may be reviewed by the Administrative Appeals Tribunal Act 1975 and an appeal on a question of law to the Federal Court may be taken on the decision of the Tribunal. Sub-section 4.8 of the Prospectus describes the fact that Transurban has received notification of a possible application for a reconsideration of the decision to grant the certificate. Acting prudently, it obtained advice from a reputable firm of solicitors as to the necessary standing of a person to seek such a reconsideration. The legislation limits the right to persons affected by the decision. This is designed to prevent the officious bystander or inter-meddler from seeking a reconsideration. Sub-section 4.8 discloses the result of the advice so received. The essence of the complaint of the applicant is that this is not sufficient. It was contended that the Court should go behind the fact of the advice being disclosed and determine whether the advice was reasonable having regard to the matters set out in the particulars. The Court rejects this contention. Sub-section 52(1) of the Trade Practices Act proscribes conduct of a particular kind. The conduct in the present case consists of statements appearing in the Prospectus. The existence of the legal advice is disclosed and the substance of the advice is stated namely that "any prospective applicant (other than the Company or Debt Providers) should not have standing and that any request for review or appeal should be unsuccessful" (emphasis added). The word "should" in this context is used as connoting a probability, not a certainty. The word "would" connotes more certainty. Transurban is relying on an opinion as to an uncertain outcome. The applicant cannot in truth contend that the advice is, of necessity, wrong. A copy of the advice, a confidential document, was in evidence, but the Court has declined to read it on the ground that it is not relevant. The last paragraph of sub-section 4.8 of the Prospectus straddles the group 3 and the group 4 representations. The problems with delays in reaching a final decision relating to the DAA Certificate decision is mentioned with reference to reviews and appeals. If the time scale exceeds the 12 months period, then there is the possibility that an event of default may occur, with respect to the Infrastructure Loan Agreement and the Note Facility Agreement. How this could happen, and the consequences, are said to be described in Section 9 of the Prospectus. Before referring to Section 9, reference should be made to sub-section 6.6 Section 6 of the Prospectus is headed "Investment Risks". Sub-section 6.6 is headed "Financing Risk". The first paragraph under the heading "Events of Default" has been set out in these reasons. Here special reference is made to the Infrastructure Loan Facility and the Infrastructure Note Facility and the summaries in Section 9. These matters are taken up further under the headings "Infrastructure Loan Facility" and "Infrastructure Note Facility" also in sub-section 6.6. In sub-section 6.7 "Tax Risks" a further reference is made to the certificate issued under the DAA Act and the consequences which are likely to follow if any such certificate is set aside. Section 9 provides summaries of material contracts including the Infrastructure Loan Agreement and the Infrastructure Note Facility Agreement and what constitutes an event of default including long delay in determining the outcome of legal proceedings relating to the DAA certificates. A full disclosure has been made. In the circumstances, the applicant has failed to make out a case insofar as is alleged in paragraph 6 of the statement of claim. 6B The Group 1 and the Group 2 representations The particulars given to paragraph 6A of the statement of claim provide a useful reference to the submissions made on behalf of the applicant with respect to the group 1 representations. In many respects, those particulars are tied in with the particulars given to paragraph 5 of the statement of claim. Paragraph 5 refers to "the statement of projected returns for the three years following opening". Paragraph 6A refers to "the statement of projected returns following opening ... insofar as the traffic revenue from traffic volumes uses inaccurate projections for the use of City Link by Light Commercial Vehicles." In truth, the particulars, with the possible exception of one matter, show that these complaints are not based on what appears in the Prospectus, but are based on allegations that the expert reports obtained by the respondents from professionals of high standing in their area of expertise are flawed. It is alleged that they are based on wrong data and cannot be relied upon. As a result, it is said that the projections made of the respondents based on those reports are likewise flawed and in error. Therefore it was contended that the projections given by the respondents in the Prospectus constituted conduct which contravenes section 52 of the Trade Practices Act. The conduct, so it was contended, was the making of statements, called representations, based upon reports from professional experts in circumstances where it was alleged those reports were false. Although not set out in the statement of claim in any detail, the conduct alleged is that consisting of publishing Section 5 "Traffic Estimates and Projected Returns" in the Prospectus. In particular reference is made to the whole or parts of sub-sections 5.1, 5.2, 5.3, 5.5 and 5.7 as set out earlier in these reasons. The reference to certain tables and sensitivities in the particulars to paragraph 5 of the statement of claim does not affect the issue to be decided. In addition reference should be made to those parts of sub-section 6.1 and 6.2 of the Prospectus set out earlier in these reasons. The relevant parts of Section 5 state that the directors of the respondents sought expert advice to assist them "in assessing the likely traffic volumes ... to estimate traffic volumes and revenue that could be reasonably expected on the Link." The Prospectus then identifies the Traffic Experts and the fact that they prepared a traffic report which estimated the traffic volumes on the relevant road sections and relevant returns and provided a growth rate assumption for traffic volumes beyond 2011. The report included an estimate of traffic revenue. The directors obtained a "comprehensive audit and review of the work and results of the Traffic Experts"; the Nairn Report. A summary of the report is set out in the Prospectus which stated its conclusions as set out in Section 8. The conclusions are clear and confirm the view that the report of the Traffic Experts could be relied upon. The Prospectus then explains the forecasting methodology used by the Traffic Experts. The Prospectus states that in forming their opinion the Traffic Experts utilised published Government Forecasts relating to the expected demographics of Melbourne over the next 15 years. Included in the methodology was the traffic estimates based upon the types of vehicles described in the Agreement. Taking those traffic estimates, the report of the Traffic Experts calculated the estimated revenue returns. Particular reference is made to the following extracts from sub-sections 5.5 and 5.7 of the Prospectus respectively:- "The directors have relied on detailed analysis and the professional judgement of various experts and in particular, on the estimates of traffic volume and revenue produced by the Traffic Experts and the audit of the Traffic Experts' work undertaken by RJ Nairn." "A key assumption in the generation of the projected returns is the estimate of traffic volume and revenue. For the purposes of the projected returns contained in this Section, the directors have adopted the traffic volume and revenue estimates provided by the Traffic Experts and referred to in Sections 5.3 and 5.4." With one possible exception, it was not submitted on behalf of the applicant, that any of the statements made by the directors in the Prospectus were wrong. In other words, the statements were correct. It follows that with the one possible exception, within themselves the statements in the Prospectus do not constitute conduct in contravention of section 52 of the Trade Practices Act. The one possible exception arises from the word "utilising" in sub-section 5.2 of the Prospectus. Counsel for the applicant, by implication, asserted that the word "utilising" should be construed to mean "using and using only" the published Government forecasts and that evidence given before the Court showed that the Traffic Experts "used" the Ratio Report which, it was asserted, was not a published Government forecast. Further, it was asserted that the demographics of Melbourne should be construed as meaning "demographic changes (i.e. population and employment changes)" when the Traffic Experts used the word "demographic" as referring to population changes only. This submission on behalf of the applicant must be rejected. Normally the word "utilise" connotes the making use of something. The Macquarie Dictionary gives the meaning "to put to use; turn to profitable account". An example is given "to utilise water power for driving machinery." An alternative spelling is given "utilize". The Shorter Oxford Dictionary does not contain the word "utilise" but defines "utilize" to mean "to make useful, turn to account." On no view can it be said that in its context that the word in the Prospectus "utilising" is to be construed as meaning "using and using only". It follows, in my opinion, that even if the Ratio Report is not a published Government forecast, reference to that report and making use of that report by the Traffic Experts cannot make the statement in sub-section 5.2 of the Prospectus wrong. In an attempt to prove conduct in contravention of section 52 of the Trade Practices Act the applicant alleges "the only reasonable interpretation of the Prospectus" is that set out in the particulars to paragraph 5 of the statement of claim which in turn allows evidence to be given with respect to the matters set out in the particulars and which are not referred to in the Prospectus but go to the report of the Traffic Experts. The same approach is adopted with respect to the particulars to paragraph 6A of the statement of claim. In my opinion, this form of attacking the correctness of the reports of the Traffic Experts cannot be used under the guise of establishing that the statements contained in Section 5 of the Prospectus constitute conduct which is misleading or deceptive or likely to mislead or deceive in contravention of section 52 of the Trade Practices Act. 7. Legal Considerations and Conclusions In their written outline of submissions, counsel for the respondents stated the correct approach:- "2. The first task is to characterise the representations made, and these in all relevant respects were generally to the effect that the companies relied upon the expertise and competence of the Traffic Experts and legal opinion. 3. The companies were not stating that the views comprising the Traffic Estimates were their own assessments unaided, but on the contrary, the companies were representing that they had received expert advice and that expert advice contained the matters set out. In addition the companies represented that Nairn had undertaken a comprehensive audit and review of the work and results of the Traffic Experts." During submissions reference was made to a number of legal authorities. The principles of law to be applied are not in dispute. It is not necessary to refer to those authorities although some are mentioned. The basis of the legal contentions made by counsel for the applicant was that the reports of the professional experts, namely the Traffic Experts and the author of the legal advice concerning the DAA certificates contained errors which made the reports largely invalid or incorrect. It was argued that these errors have been incorporated into statements and projections contained in the Prospectus thus constituting representations which constituted conduct prosecuted by section 52 of the Trade Practices Act. The representations being in error or wrong, the representations constituted conduct so it was said that was misleading or deceptive or likely to mislead or deceive. Counsel contended that in making use of the reports, the respondents were not acting as "mere postmen" but had to take responsibility for their content. Counsel referred to what was said in Yorke v Lucas (1985) 158 CLR 661 by Mason ACJ, Wilson Deane and Dawson JJ at 666:- "It should be observed at the outset that the facts as found by the trial judge raise the question whether the Lucas company itself was guilty of any contravention of s.52. It is, of course, established that contravention of that section does not require an intent to mislead or deceive and even though a corporation acts honestly and reasonably, it may nonetheless engage in conduct that is misleading or deceptive or is likely to mislead or deceive: Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd. (1978) 140 CLR 216, at p. 228; Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at p. 197. That does not, however, mean that a corporation which purports to do no more than pass on information supplied by another must nevertheless be engaging in misleading or deceptive conduct if the information turns out to be false. If the circumstances are such as to make it apparent that the corporation is not the source of the information and that it expressly or impliedly disclaims any belief in its truth or falsity, merely passing it on for what it is worth, we very much doubt that the corporation can properly be said to be itself engaging in conduct that is misleading or deceptive. Had the Lucas company appealed from the judgment against it, it may have been necessary to form a concluded view on that question. It has not, however, done so and it is possible to resolve this appeal against the judgment in favour of Lucas upon the assumption that the finding of a contravention of s.52 on the part of the Lucas company was correct. In my opinion, this contention by counsel for the applicant is not based on a true analysis of the facts of this case. Here, the companies published the Prospectus. They made the statements including the forecasts of future financial returns. The companies stated that in so doing they relied upon reports from the experts. One of those reports was the subject of a favourable report by another professional report. The reports do not constitute the conduct which is said to be in contravention of section 52 of the Trade Practices Act. Yorke v Lucas has no application to the facts of this case. Counsel for the applicant sought support from authorities stating that mere disclaimers and qualifications do not prevent conduct being in contravention of section 52 of the Trade Practices Act. Reference was made to a number of these authorities including Hutchence v South Seas Bubble Co Pty Ltd (1986) 64 ALR 339 and Clark Equipment Australia Ltd v Goveat Pty Ltd (1987) 17 ALR 367. This line of authority has no application to the facts of this case since the respondents made the statements contained in the Prospectus stating the basis on which the statements were made. No disclosure or qualification of the type mentioned was made. In the present case there has been no attack on the honesty of the persons issuing the Prospectus. In this respect assistance is derived from the summary of legal principles given by Toohey J in James v Australia and New Zealand Banking Group Ltd (1986) 64 ALR 347 at 372-6 in relation to future events and the state of mind of the maker of a statement. Reference is made also to what Burchett J said in Industrial Equity Ltd v North Broken Hill Holdings ltd (1986) 64 ALR 292 at 300. To some extent, the problems discussed in these passages are affected by section 51A of the Trade Practices Act which was inserted into that Act in 1986, but those provisions have no application to the facts of this case. Likewise the opinions expressed in Wheeler Grace and Pierucci Pty Ltd v Wright (1989) ATPR 40-940 per Lee J at 50-251 have no relevance to the facts of this case. On all the material before the Court, the applicant has failed to make out the claims as alleged in paragraphs 5 and 6A of the statement of claim. 8. Relevance of Evidence The Court has decided this case upon a consideration of the statements contained in the Prospectus. In support of the application, evidence was led from John Patrick Moriarty, a lecturer in the Department of Mechanical Engineering at Monash University. He is a member of the Public Transport Users Association. His evidence was directed to establishing matters referred to in the particulars to paragraphs 5 and 6A of the statement of claim. The respondents led evidence from Denis Johnston an engineer with expertise in all aspects of transport consulting projects. He is the director of Transportation of DJA/Maunsell, the transport consulting division of Maunsell Pty Ltd. DJA/Maunsell is one of the Traffic Experts referred to in the Prospectus. Mr Johnston was involved personally in the preparation of the report prepared for Transurban. The respondents led evidence from Anthony Joseph Richardson, an engineer and a Professor and a Director of the Transport Research Centre of the RMIT University. The Transport Research Centre is one of the Traffic Experts referred to in the Prospectus. Professor Richardson was involved personally in the preparation of the report. The respondents called as a witness, Geoffrey Nathan Wolinski, a town planner and director of Ratio Consultants Pty Ltd. Dr Wolinski had not given evidence by affidavit but was called to enable him to be cross examined. He was responsible for the Ratio Report. A number of other witnesses were called but it is not necessary to list them here. The evidence of the named witnesses went to the issues of whether there were errors in the report of the Traffic Experts and whether the facts relied upon by the Traffic Experts were correct. This evidence was of interest but, in my opinion, not relevant to the issues to be decided by the Court. Accordingly the Court makes no finding in relation to any of the disputed facts arising from the evidence. 9. Orders The orders as finally sought by the applicant included declarations, injunctions, mandatory injunctions and corrective advertising. Having held that the applicant has not made out a case against the respondents, it is not necessary to consider the orders sought. In the result, the Court orders that the application be dismissed. Counsel for the respondents stated that if the application was dismissed, they would seek to make submission on the form of any order for costs. Accordingly the further hearing of the application will be adjourned to a future date to enable that to be done. I certify that this and the preceding fifty-one (51) pages are a true copy of the Reasons for Judgment of The Honourable Justice R.M. Northrop. Associate: Date: 22 MAY 1996 ATTACHMENT Solicitors for the Applicant: Maurice Blackburn & Co. Counsel for the Applicant: Mr. P. Vickery QC and Dr. J. Scutt Solicitors for the Respondent: Freehill Hollingdale & Page Transurban City Link Limited Counsel for the Respondent: Mr. J. E. Middleton QC Transurban City Link Limited Mr. T. Walker Solicitors for City Link Blake Dawson and Waldron Management Limited Date of Hearing: 3, 4, 24 and 26 April 1996 Signed: Dated: 22 May 1996