FEDERAL COURT OF AUSTRALIA Clifford v Vegas Enterprises Pty Ltd (No 5) [2010] FCA 916 Citation: Clifford v Vegas Enterprises Pty Ltd (No 5) [2010] FCA 916 Parties: PHILIP GEORGE CLIFFORD v VEGAS ENTERPRISES PTY LTD (ACN 009 078 148), RODNEY DESMOND HART and GEOFFREY BRIAN BACKSHALL File number: WAD 28 of 2009 Judge: BARKER J Date of judgment: 24 August 2010 Catchwords: TRADE PRACTICES - misleading or deceptive conduct – applicant alleged respondents made misleading or deceptive representations to induce share purchase in first respondent – whether representations were in relation to the supply or possible supply of financial services – whether Part V of the Trade Practices Act 1974 (Cth) applies – Part V held not to apply CORPORATIONS – misleading or deceptive conduct – whether alleged representations were in fact made – whether in any event applicant relied on alleged representations – whether respondents failed to disclose material facts – whether respondents had reasonable grounds for non-disclosure – Corporations Act 2001 (Cth), s 1041H, s 1041I Legislation: Corporations Act 2001 (Cth) s286, s 763A, s 764A, s 761A, s 1041H, s 1041I, s 1325, Fair Trading Act 1987 (WA) s 10, s 77, s 79 Trade Practices Act 1974 (Cth) s 51A, s 51AF, s 52, s 82, s 87 Cross on Evidence (8th Australian Edition, 2010) JD Heydon Cases cited: Arktos Pty Ltd v Idyllic Nominees Pty Ltd [2004] FCAFC 119 Austin v Keele (1987) 72 ALR 579 Australian Securities and Investments Commission v Cycclone Magnetic Engines Inc [2009] QSC 58; (2009) 71 ACSR 1 Australian Securities and Investments Commission v Macdonald (No 11) [2009] NSWSC 287; (2009) 256 ALR 199; Australian Securities and Investments Commission v Narain [2008] FCAFC 120; (2008) 169 FCR 211; Avoca Consultants Pty Ltd v Millennium3 Financial Services Pty Ltd [2009] FCA 883; (2009) 179 FCR 46 Bennett v Minister for Community Welfare [1992] HCA 27; (1992) 176 CLR 408 Clifford v Vegas Enterprises Pty Ltd (No 4) [2010] FCA 326 Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 Donald Financial Enterprises Pty Ltd v APIR Systems Ltd [2008] FCA 1112 Draper v Official Trustee in Bankruptcy [2006] FCAFC 157; (2006) 156 FCR 53 Flinn v Flinn [1999] VSCA 109; [1999] 3 VR 712 Fraser v NRMA Holdings Ltd (1995) 55 FCR 452 Grant v Edwards [1986] Ch 638 Green v Green (1989) 17 NSWLR 343 Green v Green [2003] UKPC 39; (2002-03) 5 ITELR 888 Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83 HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd [2004] HCA 54; (2004) 217 CLR 640 Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets (No 6) [2007] NSWSC 124 Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd [2008] NSWCA 206; (2008) 73 NSWLR 653 Pain v Pain [2006] QSC 335 Payne v Parker (1976) 1 NSWLR 191 Port Kennedy Golf Country Club Pty Ltd v Port Kennedy Resorts Pty Ltd [1999] WASC 253 Re Glory Rise Limited [2008] HKCFA 48 Stowe v Stowe (1995) 15 WAR 363 Sui Mei Huen v Official Receiver [2008] FCAFC 117; (2008) 248 ALR 1 Tooheys Ltd v Commissioner of Stamp Duties (1961) 105 CLR 602 Townsend v Roussety & Co (WA) Pty Ltd (2007) 33 WAR 321 Vitek v Estate Homes Pty Ltd [2010] NSWSC 237 Watson v Foxman (1995) 49 NSWLR 315 Western Australia v Watson [1990] WAR 248 Winterton Constructions Pty Ltd v Hambros Australia Ltd (1992) 39 FCR 97 Dates of hearing: 22 - 26 March 2010, 29 March 2010, 31 March 2010, 1 April 2010 and 16 April 2010 Place: Perth Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 456 Counsel for the Applicant: Mr AP Rumsley Solicitor for the Applicant: Alan Rumsley Counsel for the First Respondent: Mr DN Galbally QC and Mr BD Luscombe Solicitor for the First Respondent: Cochrane Lishman Carson Luscombe Counsel for the Second and Third Respondents: Ms PE Cahill SC and Mr AD Bereyne Solicitor for the Second and Third Respondents: Jackson McDonald IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 28 of 2009 BETWEEN: PHILIP GEORGE CLIFFORD Applicant AND: VEGAS ENTERPRISES PTY LTD (ACN 009 078 148) First Respondent RODNEY DESMOND HART Second Respondent GEOFFREY BRIAN BACKSHALL Third Respondent JUDGE: BARKER J DATE OF ORDER: 24 AUGUST 2010 WHERE MADE: PERTH THE COURT ORDERS THAT: 1. The application be dismissed. 2. The applicant to pay the first respondent's and the second and third respondents' costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website. INDEX OVERVIEW................................................................................................................... [1] A BRIEF HISTORY of the parties' involvement in vegas.................. [10] the applicant's pleaded case........................................................................ [22] whether part v of tpa applies...................................................................... [50] dealings between the parties..................................................................... [56] the sales representations............................................................................ [195] the bank debt representations................................................................. [244] the product representations..................................................................... [265] non-disclosure of material facts........................................................... [284] entitlement to relief...................................................................................... [378] orders........................................................................................................................ [456] IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 28 of 2009 BETWEEN: PHILIP GEORGE CLIFFORD Applicant AND: VEGAS ENTERPRISES PTY LTD (ACN 009 078 148) First Respondent RODNEY DESMOND HART Second Respondent GEOFFREY BRIAN BACKSHALL Third Respondent JUDGE: BARKER J DATE: PLACE: PERTH REASONS FOR JUDGMENT OVERVIEW 1 At material times: · The first respondent (Vegas) was in the business of design and marketing of surfing apparel and surfing related products and the wholesale distribution of surfing apparel and surfing related products; · The second respondent (Mr Hart) was a director and company secretary of Vegas and the sole director of a company that owned shares in Vegas; · The third respondent (Mr Backshall) was a director, chief executive officer of Vegas and the owner of shares in Vegas in his capacity as trustee of a family trust; · Between them, Mr Hart and Mr Backshall controlled Vegas; and · The applicant (Mr Clifford) was a barrister who provided legal services directly to Vegas. 2 On 19 December 2006, Sheraz Pty Ltd (Sheraz) – a company associated with Mr Clifford – acquired 600,160 newly issued shares in Vegas for $2,370,986.57 and a further 41,229 shares from an existing shareholder (C Breeze Pty Ltd) for $170,000. 3 Mr Clifford claims that the acquisition of those shares was affected by the misleading or deceptive conduct of the respondents who, he alleges, made representations to him about Vegas' bank debts, sales and product and failed to disclose material facts to him, as a result of which he has suffered loss and damage. He says the shares are now unsaleable. Mr Clifford seeks in substance an order that he be refunded the price paid for the shares and compensated for other related costs he has incurred (with interest) upon return of the shares to Vegas. 4 In the result, I do not consider that the applicant has made out the case of misleading or deceptive conduct he has brought against the respondents. 5 So far as alleged bank debt and product representations pleaded by the applicant are concerned, I am not satisfied they were made. 6 So far as the sales representations pleaded by the applicant are concerned, I do not consider the applicant has established that he relied on information he received from Mr Backshall in about mid November 2006 about the projected income from sales. I consider, in any event, the respondents have established they had reasonable grounds for the projections made. 7 So far as the alleged non-disclosure of material facts or misrepresentation by silence is concerned, I consider that, in the unusual circumstances of this case, the respondents were entitled to expect that the applicant would request from them any particular information he considered material to his due diligence in relation the acquisition of the Vegas shares. In particular, I do not consider that the non‑disclosure by the respondents of information about Vegas' sales performance, movements in its overdraft account and shareholders' loans prior to the acquisition of the shares, constitutes misleading or deceptive conduct. I consider this information was not or would not have been material to the applicant's investment decision in any event. I also find that an allegation that the respondents used the applicant's share acquisition funds to pay down the overdraft facility and shareholders' loan accounts is not proved. 8 If the applicant had established that the respondents were liable to him for misleading or deceptive conduct as alleged, I would have considered it appropriate to make a refund order. I would have considered that damages alone would have been an inadequate remedy in the circumstances of the case as there seemed not to be a ready market for the shares and, in practical commercial terms, the applicant had established the shares he continued to hold beneficially were unsaleable. I would also have awarded damages for costs associated with acquiring and holding the shares. 9 However, because the applicant has failed to make out the misleading or deceptive conduct case he has brought, his case must fail. A BRIEF HISTORY of the parties' involvement in vegas 10 In 1983, Mr Hart took a 40% equity investment in Vegas (then known as Santosha Surfboards) as a silent investor. Vegas was then primarily a surfboard manufacturer with four retail outlets in Western Australia, which sold mainly surfboards, sailboards, surf and sailboard accessories and surf apparel. The business was supported by a licence from Mr Rusty Preisendorfer, a respected United States surfboard shaper and designer, to use the "Rusty" brand in Australia. 11 In 1986, Mr Clifford first had contact with Vegas. Mr Hart, who had previously dealt with Mr Clifford in his capacity as a lawyer at the Perth office of the law firm, Freehill Hollingdale and Page, engaged Mr Clifford to provide legal advice to Vegas in relation to its licensing arrangements concerning the Rusty brand. Before many years passed, Mr Clifford was regularly engaged to provide legal services to Vegas on a variety of issues. 12 In 1987, Vegas decided to develop its wholesale apparel and surfboard business. Mr Backshall was then hired to assist this business initiative. From 1987-1992, he was the national sales manager and successfully grew sales. As a result, between 1988-1989 Vegas closed its retail operations to focus on the wholesale business. 13 In 1987, Mr Hart was appointed managing director of Vegas and remained in this role until 1992, when Mr Backshall was elevated from his role of national sales manager to replace him as managing director. Mr Hart then became an executive director and the company secretary of Vegas and has held those positions ever since. Mr Hart's role in Vegas has since been focussed on the company's business culture and philanthropic programs. When Mr Backshall was promoted to Managing Director of Vegas, he was given 10% of the equity of the company as an incentive to remain with it. 14 In 1999 there was a restructuring of Vegas. A shareholder retired and interests associated with Mr Chris Rayney (then the Chief Financial Officer, or CFO, of Vegas), Mr Dean Whiteman (then the New South Wales sales agent) and Mr Mark Sutton (then National Marketing Manager) each purchased 8% of the equity of the company from the retiring shareholder. As part of the restructuring, interests associated with Mr Mick Button purchased another 6% of Vegas, to take his total interest in the equity of the company to 16%. The family trust of Mr Backshall purchased another 10% of the company to take his interests to 20%. The balance of the company of 40% remained with interests associated with Mr Hart. At the time of the 1999 restructuring, the shareholders signed a Business Owners Agreement. However, both immediately before and after this restructure, until 2009, Messrs Hart and Backshall controlled the company and were its only directors. 15 In July 2006, Vegas acquired from Mr Preisendorfer a controlling stake in R … And Everything Else Inc (Rdot) (a corporation incorporated in California), which was and still is the ultimate owner of the "Rusty" trademarks and associated intellectual property, and the global licensor for the Rusty brand. Vegas also negotiated the termination of a royalty stream that it was obliged to pay to interests associated with Mr Preisendorfer for the use of the Rusty brand in Australia. At the same time, Mr Preisendorfer purchased a small stake in Vegas. 16 On 19 December 2006, 600,160 ordinary shares in the capital of Vegas, representing around 8% of the company were allotted to and registered in the name of Sheraz Pty Ltd (Sheraz). An additional 41,229 shares were also transferred to Sheraz by C Breeze Pty Ltd, an entity associated with Mr Sutton. The allotment to Sheraz followed an invitation from Mr Hart to Mr Clifford in October 2006, to become an investor in Vegas' business. 17 In 2009, 224,486 of the shares registered in the name of Sheraz were transferred to Mr Clifford then further transferred to Mr Clifford's former wife pursuant to an order of the Family Court of Western Australia made in late 2008. 18 In March 2009, following a capital raising by Vegas, a new shareholder (New Force Holdings Pty Ltd) took a controlling interest of approximately 53% in the company. This had the effect of diluting the shareholding of all the existing shareholders. 19 At the time of the hearing of this proceeding, the current shareholders of Vegas were: · New Force Holdings Pty Ltd – approximately 53%. · A company associated with Mr Hart – approximately 17.4%. · Mr Backshall's family trust – approximately 8.7%. · Mick Button and associated interests – approximately 6.95%. · A company associated with Mr Rayney – approximately 3.53%. · A company associated with Mr Whiteman – approximately 3.53%. · C Breeze Pty Ltd, a company associated with Mr Mark Sutton – approximately 3.27%. · Sheraz – approximately 1.97%. · Mr Clifford's former spouse – approximately 1%. · A trust associated with Mr Preisendorfer – approximately 0.9%. 20 For about 17 years until about April 2008, Mr Clifford was the sole lawyer providing legal advice to Vegas and its associated companies, other than some advice from other law firms regarding small debt collections and some leasing work. Initially he provided the services through Freehills, but later, after he joined the independent bar in 1995 (and undertook in 1998 to the Supreme Court of Western Australia thereafter to practice solely as a barrister and no longer as a barrister and solicitor), he provided his services directly to Vegas. When Sheraz became a shareholder in December 2006, Mr Clifford accepted an in‑house counsel role at Vegas as an agreed part of the share allocation, although he also maintained his practice as a barrister. His role as in‑house counsel of Vegas was ultimately terminated in April 2008. 21 In the period after Mr Clifford began advising Vegas regularly, he became close to both Mr Hart and Mr Backshall and was trusted by them. Mr Backshall and Mr Clifford regularly socialised and surfed together. Both Mr Hart and Mr Backshall came to rely considerably on Mr Clifford's advice. Mr Clifford was, for example, deeply involved in Vegas' acquisition of a controlling interest in Rdot, the termination of the royalty payments payable by Vegas to interests associated with Mr Preisendorfer and the dealing by which Mr Preisendorfer took a small stake in Vegas. It was following these dealings, in about October 2006 that Mr Clifford was invited to acquire equity in Vegas. However, by mid 2007, the relationship between Mr Clifford, on the one part, and Mr Hart and Mr Backshall, on the other, had soured when they disagreed regarding the future plans for Rdot and Vegas. the applicant's pleaded case 22 Mr Clifford pleads (amended statement of claim, [5] – [13]) that at the time he received the invitation to acquire the equity interest in Vegas, up to and including the time that he paid Vegas for the equity interest on 19 December 2006, he was not informed by Vegas, Mr Hart or Mr Backshall of the following material facts, namely that: · By mid August 2006, Messrs Hart and Backshall were aware that Vegas was not meeting its budgeted sales for the 2006/2007 year. · In or about late July 2006, Messrs Hart and Backshall in discussions with Westpac Banking Corporation (Westpac) as the bankers for Vegas, requested of Westpac an increase in borrowings by an additional $2,500,000 to provide working capital for Vegas to meet a shortfall in cash flow. · In or about 2 August 2006, Westpac agreed to increase the level of Vegas' borrowings by $2,500,000 until the end of September 2006 under an existing overdraft facility Vegas had with Westpac, on the condition that the existing shareholders of Vegas provide an additional $1 million as shareholder loans for working capital for Vegas. · Vegas, through Messrs Hart and Backshall, accepted the Westpac facility increase and arranged for the existing shareholders to pay an additional $1 million to Vegas for working capital of Vegas, by way of shareholders' loans to Vegas. · In or about October 2006, Messrs Hart and Backshall, who were aware that Vegas was still not meeting its budgeted sales, again met with Westpac to request an extension until the end of December 2006 of the $2,500,000 increase on the limit of the overdraft facility. Westpac agreed to extend the overdraft facility to $3 million until the end of November 2006, alternatively, December 2006, on the condition that the existing shareholders of Vegas provided an additional $500,000 as shareholder loans for working capital for Vegas. · Vegas, through Messrs Hart and Backshall, accepted the Westpac facility extension and by about late October or early November 2006 arranged for the existing shareholders to pay an additional $500,000 to Vegas for working capital of Vegas, by way of shareholder loans to Vegas. · Amounts were drawn down in excess of $1.5 million by Vegas on the Westpac overdraft account between 25 July 2006 and 30 November 2006. · On or about 19 December 2006, at the direction of Messrs Hart and Backshall, Vegas paid the $2,370,986.57 received from Mr Clifford as follows: (1) $500,000 to repay the shareholder loans pleaded; and (2) $1,870,986.57 to reduce Vegas' overdraft facility with Westpac. 23 Mr Clifford pleads (amended statement of claim [14]) that if these material facts had been disclosed to him, he would not have: · Paid to Vegas the sum of $2,370,986.57 in return for the issue of 600,160 newly issued shares in Vegas. · Paid C Breeze Pty Ltd the sum of $170,000 in return for the transfer of 41,229 existing shares in Vegas to Mr Clifford. · Borrowed the sum of $2,370,986.57, paid to Vegas, from the ANZ Bank. (I will refer to these transactions, for ease of reference, as the three transactions). 24 Mr Clifford further pleads (amended statement of claim [15]) that in or about October and November 2006, Vegas, through Messrs Hart and Backshall acting with the approval of the Vegas shareholders, invited Mr Clifford to invest about $2.6 million by purchasing 7% to 8% of the issued capital shares in Vegas and in so doing made the following representation, namely, that the $2.6 million would be used to repay part of the bank debt incurred by Vegas in July 2006 to purchase 51.4% of the issued shares in Rdot, the intellectual property holder in respect of the "Rusty" brand of apparel. Mr Clifford calls this representation the "bank debt representations". He says these representations are oral and were made in discussion in October and again in November 2006 in the offices of Vegas between Mr Clifford and Messrs Hart and Backshall. 25 Mr Clifford pleads (amended statement of claim [16]) that the bank debt representations were with respect to future matters for the purposes of the s 51A of the Trade Practices Act 1974 (Cth) (TPA) and s 769C of the Corporations Act 2001 (Cth). 26 Mr Clifford further pleads (amended statement of claim [19]) that in or about October and November 2006, Vegas, through Messrs Hart and Backshall, represented to him that Vegas could increase sales and earn international royalties, as represented in a sales, costs and EBITDA (earnings before interest, taxes, depreciation and amortisation) schedule given to Mr Clifford, because it was and had always been the case that Vegas/Australian designed, manufactured and distributed Rusty apparel was of the highest standard of all "Rusty" brand apparel worldwide and would be acceptable, alternatively, substantially acceptable in any market worldwide retailing the "Rusty" brand products, including in particular in the United States. Mr Clifford calls these representations the "product representations". He says these representations were partly oral and partly written. Insofar as they were oral, they were made in discussions in October and November in the offices of Vegas between Mr Clifford and Messrs Hart and Backshall. Insofar as they were written, they were set out in the schedule given to Mr Clifford. 27 Mr Clifford further pleads (amended statement of claim [22]) that in or about November 2006, Vegas, through Messrs Hart and Backshall represented to him the following financial performance and gross profits (EBITDA) figures for Vegas, which he collectively calls the "sales representations": (1) For the year ending 30 June 2007: · Sales would be $45,512,163; and · Taking account of costs, selling expenses and other items, the operating income (before interest, tax and depreciation) (EBITDA) would be $4,068,809. (2) For the year ending 30 June 2008: · Forecast sales were $48,400,000; · Forecast international royalties received by Vegas were $3,290,000; and · Allowing for the costs of sales and receipt of royalties the EBITDA would be $9,324,200. (3) For the year ending 30 June 2009: · Forecast sales were $52,030,000; · Forecast international royalties received by Vegas were $4,880,000; and · Allowing for the costs of sales and receipt of royalties, the EBITDA for the year ending 30 June 2009 would be $12,239,740. 28 Mr Clifford particularises the sales representations in his pleading (amended statement of claim [22]) as being in writing contained in a spreadsheet provided by the respondents to Mr Clifford in November 2006. 29 Mr Clifford pleads (amended statement of claim [23]) the sales representations were representations with respect to future matters for the purposes of s 51A of the TPA and s 769C of the Corporations Act. 30 Mr Clifford pleads (amended statement of claim [17], [20] and [24]) that in reliance upon the bank debt representations, the product representations and the sales representations he entered into the three transactions. 31 Mr Clifford further pleads (amended statement of claim [18], [21] and [25]) that had these representations not been made or each of them had not been made he would not have entered into the three transactions. 32 Mr Clifford pleads (amended statement of claim [26]) that the bank debt representations, product representations and sales representations and each of them separately continued in effect to and including 19 December 2006, at which time he paid the sum of $2,540,986.57 in total to Vegas and in part to C Breeze Pty Ltd. 33 Mr Clifford pleads (amended statement of claim [27], [28] and [29]) that each of those representations were false: · Firstly, the bank debt representations were false in that the monies paid to Vegas in reliance upon the bank debt representations was not used to pay down bank debt owing by Vegas to Westpac related to the acquisition by Vegas of the issued stock in Rdot and was used instead to repay shareholders loans of $500,000 and to reduce a short term overdraft facility which had been increased to $3 million in the period August 2006 to November 2006 which increase was not disclosed to him. · Secondly, the product representations were false in that the Australian designed, manufactured and distributed apparel was not acceptable in any market worldwide retailing the "Rusty" brand and, in particular, in the United States; · Thirdly, the sales representations were false in that: (1) For the year ending 30 June 2007: · The sales were $40,926,448 and not $45,512,163; · The EBITDA was no more than -$306,000 and not $4,068,809. (2) For the year ending 30 June 2009: · The sales were about $40,245,091 and not $48,400,000; · The international royalties received by Vegas were about $1,895,616 and not $3,290,000; and · The EBITDA was significantly less than $9,324,200. 34 Mr Clifford pleads (amended statement of claim [30]) that Messrs Hart and Backshall at material times were aware of the bank debt representations, the product representations and the sales representations and were aware of the pleaded material facts. 35 Additionally, that (amended statement of claim [31]) Mr Backshall was responsible for overseeing the preparation of the document setting out the sales representations. 36 Mr Clifford further pleads (amended statement of claim [32]) that Mr Hart was at all material times aware that Mr Backshall was responsible for overseeing the preparation of the documents setting out the sales representations and informed Mr Clifford he ought to rely upon the information in those documents provided upon the instructions or through the supervision of Mr Backshall. 37 Mr Clifford further pleads (amended statement of claim [33]) that Messrs Hart and Backshall were at all material times aware the sales figures in the sales representations were incorrect. 38 Mr Clifford pleads (amended statement of claim [34]) that Mr Backshall at all material times held the view that a global approach to design, manufacture and distribution of apparel utilising Vegas Australian products was bound to fail and licensees must be allowed to customise products for their own markets to a large degree particularly in the United States market. 39 Mr Clifford further pleads (amended statement of claim [35]) Mr Backshall was at all material times aware that allowing customised product within the various markets was a trait shown by the two market leaders in the relevant industry. 40 Mr Clifford pleads (amended statement of claim [36]) that Mr Backshall was at all material times aware that Vegas' staff responsible for the design, manufacture and distribution of apparel did not have the skill set to carry out such activities in relation to global markets and, in particular, the United States. 41 Mr Clifford pleads (amended statement of claim [37]) that Mr Backshall at all material times informed Mr Hart of these matters concerning customised product. 42 Mr Clifford pleads (amended statement of claim [38]) that it follows that by not informing him of the pleaded material facts and in making the bank debt representations, the product representations and the sales representations, Vegas engaged in conduct which was misleading or deceptive or likely to mislead or deceive contrary to s 52 of the TPA including, without limitation, by operation of s 51A of the TPA. 43 Mr Clifford further pleads (amended statement of claim [39]) that it follows that Messrs Hart and Backshall were directly or indirectly knowingly concerned in or a party to the contravention of s 52 of the TPA constituted by the conduct of Vegas, by the operation of s 75B of the TPA. 44 Mr Clifford pleads (amended statement of claim [40]) that Vegas' conduct in breach of s 52 of the TPA was a cause of the loss or damage suffered by Mr Clifford for the purposes of s 82 and s 87 of the TPA and particularises his loss as follows: (1) The cost and expense Mr Clifford has incurred to 17 February 2009 in the sum of $2,713,871.47. (2) "Minority shareholdings in Vegas are unsaleable". 45 To this point, these claims are all dependent upon the TPA. However, Mr Clifford pleads further and in the alternative (amended statement of claim [41]), that the shares issued in Vegas and the existing shares in Vegas transferred to Vegas were respectively a "financial product" for the purposes of s 764A(1) of the Corporations Act and that the pleaded conduct of the respondents that led Mr Clifford into entering into the three transactions constitutes "dealing in a financial product" for the purposes of s 766C(1) and s 766A(1) of the Corporations Act. 46 Mr Clifford pleads (amended statement of claim [42]) that it follows that by engaging in the conduct of inviting him to acquire an equity interest in Vegas, of not informing him of the material pleaded facts and in making the bank debt representations, and/or the product representations and/or the sales representations, Vegas engaged in conduct which was misleading or deceptive or likely to mislead or deceive, contrary to s 1041H of the Corporations Act, including, without limitation, by operation of s 769C of the Corporations Act. 47 Mr Clifford pleads (amended statement of claim [43]) that it also follows that Messrs Hart and Backshall were directly or indirectly knowingly concerned in or a party to the contravention of s 1041H of the Corporations Act constituted by the pleaded conduct, by operation of s 79 of the Corporations Act. 48 Mr Clifford pleads (amended statement of claim [44]) that Vegas' conduct in breach of s 1041H of the Corporations Act was a cause of the loss or damage suffered by Mr Clifford for the purposes of s 1041I and s 1325 of the Corporations Act. Mr Clifford pleads and particularises that the loss or damage in the same terms as that claimed and particularised in relation to the TPA. 49 Finally, Mr Clifford pleads (amended statement of claim [45]) that the conduct of Messrs Hart and Backshall in breach of s 10 of the Fair Trading Act 1987 (WA) (FTA) was a cause of the loss or damage suffered by Mr Clifford for the purposes of s 77 and s 79 of the FTA. Mr Clifford again particularises his loss and damage in the same terms as he particularises his loss and damage under the s 52 TPA misleading and deceptive conduct claims. whether part v of tpa applies 50 The applicant's primary claim is that the non-disclosure of material information and the making of the pleaded representations is conduct that contravenes s 52 of the TPA, which provides that a corporation shall not, in trade or commerce engage in conduct that is misleading or deceptive or is likely to mislead or deceive, although the applicant also seeks to maintain actions in respect of this alleged misleading or deceptive conduct under the Corporations Act and the FTA. 51 However, s 51AF(1) of the TPA provides that Pt V of the TPA, which includes s 52, does not apply to the supply, or possible supply, of services that are financial services. The respondents submit that the conduct alleged against them relates to the sale and acquisition of shares – and so involves the supply of financial services – with the result that s 51AF applies in this case. The applicant submits otherwise and frames his submissions this way: · The material difference between the different statutory regimes is that individuals are not principally liable under the TPA and Corporations Act, but may be liable as accessories to the conduct of a corporation. However, under the FTA, an individual may be held liable as a principal for contravening conduct. In Arktos Pty Ltd v Idyllic Nominees Pty Ltd [2004] FCAFC 119 at [13], the Full Federal Court observed that such principal liability is incurred on the basis that a director of a corporation who acts on its behalf in the course of trade or commerce "also acts for himself or herself in trade or commerce" and if the corporation is liable the director may also attract "primary liability" under the State legislation. In such cases it is not necessary for an applicant to establish that a respondent director has knowledge of or is aware of the ingredients of the contravention, as is required to establish accessorial liability under the TPA or Corporations Act. · Section 1041H of the Corporations Act does not replicate s 52 of the TPA by proscribing a company from engaging in misleading conduct per se. Rather, s 1041H relevantly applies where a person has engaged in conduct "in relation to" a financial product or a financial service that is misleading or deceptive or is likely to mislead or deceive. This point was recognised by Jacobson and Gordon JJ, in a joint judgment, in Australian Securities and Investments Commission v Narain [2008] FCAFC 120;(2008) 169 FCR 211, at [29]. · By s 9 of the Corporations Act a "financial product" has the meaning given to it in Ch 7 of that Act. Section 763A provides that a financial product is a facility through which or through the acquisition of which, a person does one or more of the following: makes a financial investment; manages financial risk; makes non-cash payments. Section 764A(1)(a) provides that subject to Subdiv D a "security" is a financial product. A "security" is defined by s 761A to mean, amongst other things, "a share in a body". · Accordingly, for the applicant to establish that the Corporations Act applies in place of the TPA in this case, it is necessary to establish that the relevant conduct was "in relation to the shares" of Vegas. However, as the relevant misleading and deceptive conduct may be seen to go to matters in relation to the business of Vegas, rather than the shares in Vegas, the preferable view is that the TPA provisions apply. 52 The respondents submit that by virtue of s 51AF of the TPA, the TPA does not apply as each of the representations alleged, including the allegation of non-disclosure of material facts (as a species of misrepresentation by silence), has occurred in connection with the acquisition of financial products or financial services, being 600,160 newly issued shares in Vegas and a further 41,229 shares from an existing shareholder. 53 In my view, the respondents' submissions should be accepted. Section 1041H of the Corporations Act is complementary to s 51AF TPA, and fixes on and proscribes conduct "in relation to a financial product or a financial service". It ensures that, following the operation of s 51AF of the TPA, there is no gap in the Commonwealth legislation governing fair dealing in relation to financial products and services. As noted above, the term "financial product" is defined in Pt 7.1, Div 3 to include security (s 764A(1)) and the term "financial service" is defined in Pt 7.1, Div 4 to include a "dealing" in a financial product. A "security" includes " a share in a body" (s 761A). The term "dealing" is defined to include applying for or requiring, or issuing, a security (s 766C(1)). Having regard to s 1041H(2), in Donald Financial Enterprises Pty Ltd v APIR Systems Ltd [2008] FCA 1112 (Donald Financial Enterprises) Edmonds J at [176], considered it clear that s 1041H applied to conduct which consisted of the applicant's application for and respondent's issues of shares as well as the applicant's acquisition of shares from an existing shareholder. The force of this finding, with which I agree, is emphasised by the breadth of the words "in relation to" that appear in s 1041H(1). They are words with a very expansive meaning: see Tooheys Ltd v Commissioner of Stamp Duties (1961) 105 CLR 602 at 620. The same finding should be made here, for the same reasons, in relation to the conduct concerning the acquisition by Sheraz of the shares in Vegas on 19 December 2006. 54 While in his written opening submissions counsel for the applicant tended to leave open the question whether s 51AF of the TPA applied in this case, in his closing written submissions he submitted that it did not and referred to my earlier decision in Avoca Consultants Pty Ltd v Millennium3 Financial Services Pty Ltd [2009] FCA 883; (2009) 179 FCR 46 at [231]-[238]. In Avoca, I held that a representation conveyed in an agreement whereby one person authorised another person to be their representative for the purpose of providing financial product advice was not an instance of the first person "engaging in conduct in relation to the providing of financial product advice". However, the circumstances of that case were quite different from those here. In my view, there is little doubt that the conduct and representations pleaded by Mr Clifford, in order to fix liability on the respondents for misleading or deceptive conduct, are "in relation to a financial product or a financial service", because they are connected with the acquisition of a security or securities. 55 I find, therefore, that the provisions of Pt V of the TPA are not relevant to the applicant's claims. Consequently, it is only his claims pursuant to the Corporations Act and the FTA that remain open for consideration. These claims, however, also depend on the applicant establishing that the conduct of the respondents complained of constituted misleading or deceptive conduct. dealings between the parties 56 Put shortly, Mr Clifford says the respondents misled and deceived him by: · Failing to disclose to him: changes in Vegas' borrowing facilities with Westpac; that Westpac had made it a condition of a $2.5 million loan facility increase that shareholders should provide Vegas with loans of $1 million for working capital; that shareholder loans had been increased by a further $500,000 in October/November 2006; their intention to use Mr Clifford's investment monies of $2,370,987 to pay down the undisclosed increase in Vegas' loans. · Making the sales representations. · Making the product representations. · Making the bank debt representations. 57 Mr Clifford's basic contention is that, from at least 19 July 2006, when Vegas purchased the termination of the royalty stream to interests associated with Mr Preisendorfer and gained control of Rdot, Vegas was under significant financial pressure. He says the evidence of this is incontrovertible. He seeks to imply the respondents were anxious to invite his investment in Vegas because of the financial pressure Vegas was under, and held back vital information that would have disclosed the problem and caused Mr Clifford to decline the investment opportunity. Indeed, Mr Clifford says he did not initiate the investment discussions; rather, Mr Hart did. 58 The respondents deny the applicant's pleaded case, reject the proposition that Mr Hart initiated investment discussions with Mr Clifford, refute the construction that the applicant places on known facts, seek to clarify the sequence of events, say that Mr Clifford knew all he needed to know about Vegas' financial position when he chose to take up the investment and should have asked for more information if he needed it, and contend none of the representations or conduct complained of was material to Mr Clifford's investments decision in any event. 59 To properly consider the applicant's basic contentions and the respondents' denial of them, it is necessary to fill out the evidence with an outline of Mr Clifford's involvement in Vegas. Much of the account I will provide is not in dispute and is drawn from the uncontested evidence of the parties. However, I will make findings in the course of providing this account about some disputed facts. Other disputed facts will be left for determination when considering whether the pleaded representations and other conduct said to be misleading or deceptive have been made out. 60 In the course of the hearing and also in closing written submissions, counsel for the applicant maintained objections concerning the relevance of evidence led by the respondents and in particular arising from the line of questioning and documents put to the applicant in cross‑examination. Broadly speaking, the applicant submitted that only the evidence closely related in time to the three pleaded representations and the pleaded undisclosed material facts was admissible evidence. The respondents, however, took a broader view. They submitted that the question of the knowledge that the applicant had about Vegas affected the extent to which it could be said, in a practical sense, that the respondents owed any duty to disclose information to him in connection with the acquisition of the shares, as well as his general credibility in relation to the pleaded representations, entitling them to pursue the line of questioning that they did. 61 In general terms I accepted, and accept, the submissions made on behalf of the respondents in this regard. I allowed into evidence a range of materials on this basis. In the event, some of that evidence – for example, evidence disclosing what ordinary, day‑to‑day or week‑to‑week legal advice the applicant provided to Vegas, did not bear on the issues that finally needed to be determined. But nonetheless it was of marginal relevance in helping to define the nature of a relationship between the applicant and Vegas, and the second and third respondents at material times. 62 As I say the credibility of the applicant was also placed firmly in issue by the respondents, if not from prior to the commencement of the trial then certainly from the commencement of the trial. It was well understood by all concerned that there is a finality rule in relation to cross‑examination on collateral facts, that is to say facts not constituting the matters directly in dispute between the parties or those which are not facts in issue or facts relevant to a fact in issue. Under this rule, those facts could be pursued but, in effect, the questioner would be bound by the answers given. That is not to say, however, that the questioner may not in cross‑examination endeavour to challenge or shake the answers given: see Western Australia v Watson [1990] WAR 248 at 288 – 9. See generally in relation to the finality rule in relation to collateral questions Cross on Evidence (8th Australian Ed, 2010) by JD Heydon at [17580]. 63 In this case, I do not consider the finality rule was breached. While the applicant plainly considered that the respondents, particularly the first respondent, during the cross‑examination of the applicant went to unnecessary lengths, that is a matter of judgment. As I say the applicant took the view that the case could be and should have been confined to the dealings between the parties in a very narrow compass – namely, during the latter part of 2006, whereas the respondents took the view that it was necessary to have a much more detailed understanding of the relationship between the parties in order to be able to deal with the defences they had put on and the applicant's credibility. As I have indicated, I generally accepted and accept the submissions made on behalf of the respondents. The respondents had put the applicant to proof about his claimed lack of knowledge of pleaded material information. Vegas, by [23(c)] of its defence, put in issue that if the applicant had suffered loss or damage, then it was due wholly or party to his failure to take reasonable care before investing in Vegas, in that he failed to undertake a detailed and proper due diligence of Vegas before investing. The second and third respondents expressly pleaded that the applicant relied on his own due diligence inquiries (see second and third respondents' defence [17(c)], [20(c)], [24(c)], [40(b)], [44(b)], [46(b)]). 64 As noted above, Mr Clifford first provided advice to Vegas in 1986 in relation to its licensing arrangements concerning the Rusty brand. He was then a lawyer with Freehills, Hollingdale and Page in Perth. 65 At that time, in 1986, Vegas held the exclusive rights to design, market, manufacture and sell products bearing the Rusty trademark in Australia and New Zealand. 66 The Californian corporation, Rdot, was originally controlled by Mr Preisendorfer and some other Californian investors. However, in 1989, C&C Partners LLC (C&C) entered into an agreement with Rdot to become the worldwide master licensee for the Rusty brand. This allowed C&C to grant sub-licences in countries around the world and to collect royalties for the use of the Rusty trademark. C&C retained the rights for North America. 67 Around that time, Vegas entered into an agreement with C&C whereby Vegas remained the exclusive sub-licensee in Australia and New Zealand. 68 Vegas' licence arrangements with C&C were renegotiated in the early 1990s, and in 1998 they were renegotiated again to extend the sub-licence for Australia and New Zealand to 2009 and to modify and reduce fees. 69 In the early 1990s, C&C acquired equity in Rdot up to 42%. 70 In January 2000, Vegas again renegotiated the sub-licence with C&C to incorporate a sliding scale in respect of the royalties payable to C&C and Mr Preisendorfer and to further extend the sub-licence for Australia and New Zealand to 2017. 71 Ultimately, in June 2007 – after the primary events in issue in this proceeding – Vegas replaced C&C as the global master licensee of the Rusty trademarks. More recently, in March 2009, Vegas acquired C&C's remaining interests in Rdot to take Vegas' interests to around 99.66%. In November 2009, Vegas acquired the remaining interests in Rdot so that it now wholly owns it. 72 From the time Mr Backshall became managing director in 1992, Mr Clifford advised Vegas regarding the Vegas sub-licence from C&C. Mr Backshall says, and I accept, that from that time, Mr Clifford expressed the view to him that getting control of the Rusty trademarks and global licence was the only way to truly secure Vegas' future and the investments he and others had made in Vegas. 73 In February 2004, Mr Clifford and Messrs Hart and Backshall met Mr Preisendorfer and his advisers at Eagle Bay in Western Australia and discussed the potential buyout of a controlling stake in Rdot and the worldwide master licence. The discussions were based in part on Mr Clifford's advice in December 2003, regarding potential breaches by C&C of its sub‑licence agreement with Rdot. 74 In April 2004, Mr Clifford prepared a memorandum, draft letter and draft confidentiality deed regarding the due diligence associated with this potential deal, and drafted letters for Mr Backshall to send to Rdot and C&C. This advice concerning the potential deal was in addition to commercial legal advice that Mr Clifford continued to provide to Vegas from time to time. 75 In June 2004, Mr Hart, Mr Backshall, Mr Clifford and other senior Vegas accounting staff travelled to the United States of America to undertake due diligence regarding C&C's and Rdot's financial records and to negotiate with both Mr Preisendorfer and C&C. Mr Clifford's travel was arranged and paid for by Vegas. Mr Clifford reviewed the Rdot and C&C sales and financial figures for the USA and Europe. He was provided with copies of all relevant documents. 76 In June 2004, Mr Clifford also drafted a heads of agreement regarding the proposed deal. He also assisted Mr Backshall with a draft business plan for Vegas. This will be referred to again later in relation to the pleaded product representations. 77 In July 2004, Mr Clifford prepared a memorandum for Messrs Hart and Backshall entitled "Working capital, debt & equity funding alternatives". 78 In July, he also prepared a memorandum for Messrs Hart and Backshall regarding financing options for Vegas. The memorandum included a suggestion that Mr Clifford take a management role in Vegas. According to Mr Backshall, Mr Clifford had not been instructed by Vegas to undertake these investigations or prepare the memorandum. I accept this evidence. Mr Clifford plainly was taking a proactive role and it may be seen that his role was moving between that of a traditional commercial lawyer providing legal advice on matters requested by the client, to that of a strategic adviser providing strategic commercial advice that he considered Messrs Hart and Backshall would appreciate. There is no evidence to suggest that either Mr Hart or Mr Backshall resisted Mr Clifford's initiatives in this regard. 79 In August 2004, Mr Clifford organised advice from US lawyers regarding the possible termination of C&C's worldwide master licence. 80 Also in August, Mr Clifford provided Vegas with advice as to whether it could provide Rdot with information obtained from C&C during the due diligence process. 81 On 20 August 2004, Mr Clifford updated Mr Backshall regarding his discussions with Mr Preisendorfer's lawyer on the potential value of the "Rusty brand assets" held by C&C and Rdot, excluding the Australian sub-licence to Vegas. 82 In December 2004, Mr Clifford prepared a further memorandum regarding the Rusty transaction and a further draft heads of agreement. 83 Mr Clifford also settled letters to go from Mr Backshall to Rdot and C&C. 84 In early 2005, Mr Clifford corresponded with Mr Preisendorfer's lawyers regarding the Rusty transaction. 85 In March 2005, Mr Clifford advised Mr Backshall regarding a potential new purchase of the Rusty assets and the Australian sub-licence. 86 In May 2005, Mr Clifford advised Vegas regarding a variation of the sub-licence agreement with C&C to include Singapore in Vegas' territory; 87 In September 2005, Mr Clifford provided a memorandum to Vegas regarding funding options for Rdot. 88 From September onwards he worked closely with a business adviser brought in to assist Vegas with the negotiations with C&C and Mr Preisendorfer. 89 In October 2005, Mr Clifford organised tax advice for Vegas regarding the proposed Rusty transaction. 90 By mid December 2005, Mr Backshall had negotiated a price with Mr Preisendorfer regarding Vegas' potential purchase of Mr Preisendorfer's shares in Rdot and the royalty stream to Rusty Inc which he owned. But, around March 2006, Mr Preisendorfer visited Vegas in Australia and informed Mr Backshall that he and C&C had agreed to sell their interests to a third party. This sale did not proceed, however, and in mid May 2006, negotiations recommenced between Vegas and Mr Preisendorfer. 91 Mr Clifford continued to provide advice regarding the negotiations with Mr Preisendorfer. 92 I accept the evidence of Mr Backshall that throughout this time he updated Mr Clifford on all correspondence and information received from C&C. This included an email from C&C regarding Rdot's debt. It also included an email from C&C regarding a 10% drop in sales at Vegas in the first half of the calendar year 2006. 93 The funds for the acquisition of Mr Preisendorfer's shares in Rdot and the buyback of the royalty stream came from Westpac, via two commercial bills. 94 As at July 2006, in addition to the two commercial bills, Vegas had a number of other facilities with Westpac which included an overdraft facility of $1.5 million. 95 In July 2006 the shareholders of Vegas provided guarantees to Westpac for varying percentages of the monies owing by Vegas to Westpac under the finance arrangements overall. 96 At this time, Mr Backshall obtained Mr Clifford's advice regarding the Westpac documentation for this transaction. Mr Clifford also provided a letter of undertaking to Westpac in respect of the transaction. 97 On 7 July 2006, Mr Clifford provided a closing checklist to Vegas in respect of the purchase of Mr Preisendorfer's shares in Rdot. 98 I accept Mr Backshall's evidence that in June and July 2006 Mr Clifford sat in on at least two of the weekly budget meetings that were generally held on Thursdays at the Vegas offices, and attended by all shareholders of Vegas (who were also the executive management team). At these meetings, Mr Clifford updated shareholders on the progress of negotiations with Mr Preisendorfer. 99 In July 2006, as part of the final closing of the purchase from Mr Preisendorfer, Mr Hart, Mr Backshall and Mr Clifford undertook a further due diligence of Rdot in the USA. As part of this process they were given access to the books and records of Rdot, including the bids that Rusty and C&C had received for their assets in 2005. These included one from Mitsui which valued Rdot and the global licence and royalty streams at $US26 million. 100 On 18 July 2006, while in the USA, Mr Clifford sought taxation advice for Vegas and Rdot from KPMG. As part of that request he noted that C&C had threatened litigation against Rusty Inc to prevent the sale to Vegas. 101 On 19 July 2006, the transaction with Mr Preisendorfer was closed at the offices of his lawyers, Sheppard Mullin in San Diego. Mr Clifford was present for the closing negotiations. The ultimate purchase price for Mr Preisendorfer's shares in Rdot and the buyback of the royalty stream that Vegas paid to Mr Preisendorfer's personal interests was around $US6.5 million (AUD$8.5 million), plus 2% of Vegas and an option to acquire a further 5% of Vegas. The strike price of Mr Preisendorfer's option was based on a valuation of Vegas that had been prepared by Sheppard Mullin some time previously. Mr Backshall says he was not provided with a copy of the valuation, but was informed by Sheppard Mullin that it valued Vegas at US$26.66 million. Mr Backshall says Mr Clifford was present when this valuation was discussed with Sheppard Mullin. I accept that this is so, something discussed in more detail below. 102 On 21 July 2006, following Vegas' acquisition of a controlling stake in Rdot, there were meetings of shareholders and directors of Rdot at which Mr Hart, Mr Backshall and Mr Clifford were appointed to the board representing Vegas, and Messrs Dac Clarke and Paul Carr were re-elected as directors representing C&C. Messrs Hart and Backshall asked Mr Clifford to be a director and chairman of Rdot. He accepted. Mr Backshall was appointed president of Rdot, the equivalent of a managing director in the Australian corporate governance system. Mr Clifford acted in his roles until 2008. 103 Mr Backshall says that during Rdot board meetings the directors discussed the need for Rdot to raise about US$1 million in working capital. I accept this is so. 104 During the trip to the US, Messrs Hart and Backshall met with C&C to discuss how Vegas and C&C could work together cooperatively. Part of the proposal was that Vegas would purchase from C&C the global master licence, C&C would retain the US sub‑licence, and together they would investigate the possibility of an IPO (public float of the company) in four to five years time. Mr Backshall says, and I accept, that while Mr Clifford did not attend that meeting with C&C (as he was at the offices of Sheppard Mullin continuing his review of Rdot's records), he kept Mr Clifford informed of the discussions with C&C. 105 At this point in July 2006, Mr Backshall says, and I accept, Vegas approached Westpac to increase its overdraft facility to meet an anticipated shortfall in its cash flow in August. However, Westpac would only provide a further $500,000. As a consequence, Mr Backshall approached the shareholders to loan $1 million in aggregate to Vegas. 106 On 2 August 2006, Westpac agreed the variation to Vegas' finance arrangements to increase the limit on the overdraft facility by $500,000 to $2 million on the basis that the limit was to reduce to $1.5 million by 8 September 2006. 107 Between 4 and 23 August 2006, all of the shareholders of Vegas provided shareholder loans to Vegas in the aggregate sum of $1 million to provide working capital. 108 On 5 August 2006, the company secretary of Rdot, Cindy Halleman, emailed Mr Clifford and Mr Backshall to advise that Rdot had little cash and required additional funds to pay team contracts and payroll. 109 In August 2006 all of the shareholders of Rdot provided the company with loan funds of US$500,000 pro rata to their respective interests in Rdot. The total contribution from Vegas was AUD$339,746, one instalment being paid on 15 August and another on 24 August 2006. 110 Around 10 August 2006, the monthly board package was sent out to shareholders of Vegas for the August board meeting. It showed Vegas' actual sales figures from 1 July 2006 to the end of July 2006. Total income was AUD$2.011 million against a budget of AUD$2.632 million. Total expenses were $1.322 million against a budget of $1.362 million. There was then a net loss before tax and interest of $619,000 against a budgeted loss of $405,000. 111 There is an issue whether this and other monthly "board packages" were sent to Mr Clifford. Mr Backshall explained in his evidence, which I accept, that it was standard practice at Vegas for shareholders to collect their monthly shareholder packs containing management accounts from the offices of Vegas. To the best of his knowledge, from the time of Sheraz's investment in Vegas, until around early 2008, shareholders packs were made available to Mr Clifford. There is no suggestion, however, or evidence to ground the submission that prior to the Sheraz acquisition, Mr Clifford had ordinarily received the monthly board pack. Mr Clifford says that he only received the monthly shareholder packs from mid 2008. In the light of the evidence as a whole, I find Mr Clifford did not receive the monthly board packs at material times in the latter part of 2006 leading up to 19 December 2006. However, I am inclined to accept that after that into 2007, once Sheraz had become a shareholder, the board packages were made available to all shareholders including Mr Clifford (as representative of Sheraz) and that he did take advantage of this access. I find Mr Clifford's evidence to the contrary implausible in light of his overall diligence in relation to his oversight of his interests, through Sheraz, in the affairs of Vegas at material times. 112 I have already accepted Mr Backshall's evidence above, that in June and July 2006, Mr Clifford sat in on at least two of the weekly budget meetings that were generally held on Thursdays and attended by all shareholders at which shareholders were updated on the progress of negotiations with Mr Preisendorfer. This emphasises that even before the investment proposal was raised and discussed in September/October, something I will shortly come to, Mr Clifford was kept actively involved in the matters concerning Rdot, C&C and Mr Preisendorfer. The items in the monthly board packages for those months were dealt with at those meetings. 113 In early September 2006, Vegas reduced the overdraft facility with Westpac to $1.5 million as they had agreed to do on 2 August 2006. 114 Around 10 September 2006, the monthly board package was circulated which contained the Vegas actual sales figures from 1 July 2006 to the end of August 2006. The total income was AUD$6.398 million against a budget of AUD$9.366 million. Total expenses were $3.202 million against a budget of $3.289 million. There was net loss before tax and interest of $681,000 against a budget profit of $476,000. 115 On 14 September 2006, Mr Backshall received an email from Mr Clarke at C&C regarding a proposal to purchase all of C&C's Rusty assets for US$15 million. Mr Backshall forwarded this email to Mr Clifford. Mr Clifford during this period provided legal advice in relation to C&C performance issues. 116 In late September 2006, Mr Hart, Mr Backshall and Mr Clifford met at the offices of Vegas to discuss raising capital for Vegas. On 29 September 2006, Mr Clifford sent Mr Backshall a memorandum summarising the discussion. In the memorandum, Mr Clifford noted (in part) that there were two primary sources of capital raising from an equity investor. His comments concerning "the individual investor" are worthy of note in light of what then occurred: The first private like minded individuals. The second is from the equity markets meaning seed capital investors prior to a full float. Individuals The individual investor will, not unreasonably, want equity in Vegas. This is good but ideally ought include investors who bring more than money to the table. They ought also bring some expertise for use in the future workings of R.dot. Seed Capital Investors It is unlikely there will be a seed capital investor who brings some form of operational expertise to R.dot (Vegas). 117 In the memorandum, Mr Clifford went on to discuss structures, which included obtaining a public unlisted shell with sufficient capital in it (a cashbox) into which ultimately the Vegas business would be sold. The structures discussed in the memorandum prepared by Mr Clifford were designed to ensure a public float of a new company that Vegas controlled. On all counts the issue of concern continued to be the performance of the organisation holding the US sub-licence, as well as performance in Europe. 118 On 29 September 2006, Westpac agreed a further variation to increase the limit on the overdraft facility to $2 million again on the basis that it was reduced to $1.5 million on 30 November 2006. The shareholders of Vegas then provided updated guarantees in respect of the liability to Westpac. Mr Backshall says that the reason for Vegas requesting the increase in the overdraft facility was a delay in the shipping of product in the July–September period which would have the consequence of reducing the October–December receivables. He says the delays were in part caused by the fact that in June 2006, Vegas had implemented a new computer operating system responsible for the management of inventory and sales and they had experienced teething problems associated with the implementation. He also anticipated that Vegas may have to contribute further loan funds to Rdot in the event C&C and other shareholders failed to contribute. He was concerned about this because a cheque for shareholder loan funds payable to Rdot from Mr Carr of C&C had bounced in August and C&C had subsequently provided Rdot with the funds. I generally accept Mr Backshall's explanation for these delays. 119 Around 10 October 2006 the next monthly board package was circulated which contained Vegas' actual sales figures from 1 July 2006 to the end of September 2006. Total income was AUD$11.042 million against a budget of AUD$12.213 million. Total expenses were $4.436 million against a budget of $4.627 million. There was therefore a net loss before tax and interest of $102,000, against a budgeted profit of $319,000. 120 Around 16 October 2006, forward orders for January-April 2007 received by Vegas were up 7.8% from the orders received for the same period in 2006. 121 On 17 October 2006, Mr Clifford advised Messrs Hart and Backshall that C&C "wanted to be carried along on an IPO to cash in on the success of Vegas". 122 Around this time, Mr Backshall was copying Mr Clifford into all emails regarding Rdot and C&C. 123 On 18 October 2006, Mr Backshall copied Mr Clifford into an email to Mr Clarke at C&C in which he proposed that the shareholders of Rdot provide further loan funds to Rdot. Mr Clifford settled the wording of the email. In late October 2006, Mr Clifford advised Vegas regarding correspondence with C&C. 124 During October the question of the invitation to Mr Clifford to invest in Vegas developed. In the period 24 October to 26 October it was finally settled. On 25 October 2006, Mr Backshall sent an email to Mr Clifford about the new share register, attaching a copy for his reference and noting that he was coming in at the same price as Mr Preisendorfer. He specified that the correct calculation was $2,553,894.60 for 7.2786%. The calculation was done at 76 cents – a reference to the Australian – US exchange rate. Mr Backshall noted that "we would prefer settlement to be Nov 30, 2006 for the reasons discussed last night" – although the reasons were not elaborated on in the email. Having refreshed his memory from reading that email, Mr Backshall recalled that he and Mr Hart had met with Mr Clifford at Vegas' offices in later October, shook hands and welcomed him to Vegas as a shareholder. Mr Backshall believes this meeting took place on 24 October 2006. Having regard to the email of 25 October 2006, which was sent at 12.29pm, and Mr Clifford's response by email on 26 October, I would infer that there was such a meeting on 24 October 2006 in the evening, when the matter of Mr Clifford's investment was discussed in detail, and that Mr Backshall said to Mr Clifford that he could come in at the same price as Mr Preisendorfer and at the same percentage as Mr Sutton, Mr Rayney and Mr Whiteman, and that Mr Clifford mentioned his desire to do due diligence. Mr Backshall also stated Mr Clifford should contact Mr Rayney for any financial information he required for his due diligence. 125 On 26 October 2006, Mr Clifford provided Mr Backshall with a letter giving Vegas notice of his intention to take up the invitation to take equity in Vegas. That is a reference to the third paragraph of the email of 25 October 2006 in which Mr Backshall noted that Mr Clifford was "going to draft a letter showing your acceptance to come on board as a new shareholder subject to due diligence". In the letter Mr Clifford acknowledged the invitation he had received and gave notice of his intention to take up the invitation: subject to due diligence work on the last three years' audited accounts with a focus on use to be made of the funds, revenues, expenditures and the history of dividend payments to shareholders, and asked Mr Backshall to provide him with a copy of the audited accounts and the financial statements for the last three years to expedite the process. Mr Clifford also indicated that subject to taxation advice, the share purchase would either be in his name or the name of his trustee, Sheraz Pty Ltd. 126 Just how the invitation to take up this equity in the company came about is the subject of some contention. Mr Hart says that in early September 2006, Mr Clifford telephoned him and said that he wanted to have a conversation with him without Mr Backshall being present. They arranged to meet at a café in Cottesloe. They met and Mr Clifford advised Mr Hart that he believed he had ten good working years left in him. The logical path for him would be to become a judge, but that was not his choice. Nor was the option of him turning his focus to business in a large public company, as had previously been offered to him. He said, however, that he was interested in investing in and joining Vegas. Mr Hart says that he told Mr Clifford that he was open to the idea and thought it was a positive move for Vegas and that he would speak to Mr Backshall and the other shareholders regarding his potential investment. 127 Mr Clifford's recollection is a little different. He says that in about mid August or early September 2006, in a conversation with Mr Hart in Perth, he said words to the effect, "As mentioned by you in California if your plans for the Rusty brand reach the stage of you inviting additional equity investors who can also make a contribution to some aspect of the business that is an investment I would look at". Mr Clifford says that Mr Hart then said words to the effect, "I'll keep that in mind as we go forward". Mr Clifford then recalls that on or about 24 October 2006, Mr Hart said to him in a telephone conversation words to the effect that he would like to talk to him about becoming a shareholder in Vegas, as a result of which he responded with a suggestion that they should meet to discuss it. They did so soon after. At the meeting, Mr Clifford recalls that Mr Hart invited him to become a shareholder and in response he thanked him and asked, "Is the invitation from all shareholders?". Mr Hart indicated that he was speaking for all shareholders and particularly said that Mr Backshall was "cool with the idea". Mr Clifford recalls that Mr Hart said that he would like Mr Clifford to invest about $2.5 million in return for about 7.5% of Vegas or some other amount, "if you are comfortable with that". Mr Hart also said that he saw him as becoming involved in the legal aspects of the business as well as in the commercial structure the business ought to take. 128 Mr Clifford also says that he responded to Mr Hart by saying that he would like to think about the proposal and asked who he should deal with "in doing due diligence". He says Mr Hart responded by saying that he could deal with Mr Backshall who "looked after all the figures and all the details". Mr Clifford recalls that Mr Hart said that Mr Backshall had all the information and details "from our people and from his extraordinary knowledge of the industry". Mr Clifford said he responded by saying that he would "like to look at things like the financials, sales, past and present and use to be made of my investment monies". He asked whether Mr Backshall could do all that. 129 In response to Mr Clifford's account of their early discussion, Mr Hart says that some of the early introductory things mentioned by Mr Clifford may have passed between the two of them in the course of setting up a meeting, but he did not telephone Mr Clifford to tell him he would like to talk to him about becoming a shareholder. He agrees, however, that in early October he telephoned Mr Clifford and told him that the shareholders had approved his investment and that he could have a minor shareholding in Vegas equal to the shareholding then held by Mr Sutton, Mr Whiteman and Mr Rayney at a price in line with the recent valuation prepared for the transaction with Mr Preisendorfer. He said that Vegas would also like him to come on board as in-house legal counsel and help with any future IPO. He said that he should deal with Mr Backshall regarding the numbers. He does not, however, recall Mr Clifford or himself using the words set out at paras 25-28 of Mr Clifford's witness statement dated 19 October 2009, the substance of which is set out above, concerning, amongst other things, the "use to be made of my investment monies". 130 Mr Hart, when he gave evidence after Mr Clifford had given his, was not cross‑examined about the apparent differences between his and Mr Clifford's account of the initial discussions that led to the invitation for Mr Clifford to take equity in Vegas. However, Mr Clifford was cross-examined about these events. In cross-examination, Mr Clifford (transcript 402) accepted that he had telephoned Mr Hart sometime in September and that they had a meeting at the café. He confirmed that he informed Mr Hart that if he was interested in an investor, then he, Mr Clifford, was too. Mr Clifford insisted, however, that there had been an earlier discussion in July or August when Mr Hart had asked him if he would be interested. He also suggested there had been an even earlier discussion with Messrs Hart and Backshall when they had made a similar inquiry of him. He said (transcript 403) that the first time this had been raised was before the closing of the Rusty deal on Rdot, possibly as early as late 2005. 131 As to the differences in the two accounts, I prefer the account given by Mr Hart. As I say, Mr Hart was not cross-examined about the differences. This of itself lends some support for an inference that Mr Clifford, having heard the evidence and having already been cross‑examined on this aspect of the case, did not seriously wish to dispute Mr Hart's differing account. In my view, though, and more significantly, the context, following the settling of the Rdot acquisition and the IPO discussions, the content of the conversation with Mr Clifford recounted by Mr Hart, including Mr Clifford's explanations of the business options open to him, and its general tenor, Mr Clifford's letter of 29 September describing the ideal "individual investor", and, significantly, the documentary record of 25 and 26 October, to which I have already referred, lead me to prefer Mr Hart's account of the initial meeting. I consider that after some preliminary sounding out by Mr Clifford, Mr Hart ascertained there was support for Mr Clifford's proposal and the men then met on 24 October to settle the details of the investment. In circumstances where Messrs Hart and Backshall held the controlling interest in Vegas, it seems to me much more likely that in September/October 2005, Mr Clifford would have been approaching Mr Hart to ascertain whether there might be a future for him with Vegas, rather than the other way around. I say this even though it is also clear Mr Hart held Mr Clifford in high regard and plainly was open to the suggestion, as was Mr Backshall and the other shareholders, that Mr Clifford be brought "on board". 132 I should also say I have generally formed the view that in the circumstances of this proceeding I should approach with caution accounts of apparently significant events that tend to go against how the evidence of the subsisting ordinary relationship of the parties would tend to suggest they would have acted, especially in the absence of a context or documentary evidence suggesting the contrary. My latter observations in this regard are also intended to recognise the relevance of the observations of McLelland CJ in Equity in Watson v Foxman (1995) 49 NSWLR 315 at 318 – 319, to the effect that there can often be serious difficulties of proof for an applicant who relies upon alleged oral representations as the foundation of an action based on misleading and deceptive conduct, in the absence of some reliable contemporaneous record or other satisfactory corroboration. This is because the question of what was said may depend on relatively subtle nuances following from the use (or absence) of particular words, phrases or grammatical constructions. Ordinary human experience is that memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time. This is particularly likely when the conversation becomes the subject of dispute or litigation. It is often the case in such circumstances that perceptions or self interest in conscious attention to what should or could have been produces plausible details of a conversation which are, in truth, nothing more than a subconscious construction from a more vague memory or impression of what was in fact said or may have been generally discussed on prior unrelated occasions. Accordingly, the precise words alleged to have been said can be very important. For a witness to identify the substance of the words spoken can in many cases be dangerous: see Ingot Capital Investments Pty Ltd v Macquarie Equity Markets (No 6) [2007] NSWSC 124 at [353] ­– [355]. 133 In this regard, I should also say I am not satisfied that, in his early discussion with Mr Hart, Mr Clifford ever said anything quite as particular as what he states in paras 26-28 of his witness statement concerning "due diligence" or that he would "like to look at things like the financials, sales, past and present and use to be made of my investment monies". What I do not have any doubt about is that, following the clear expression by Mr Clifford of his interest in becoming an investor in early September 2006, Mr Hart took soundings from Mr Backshall and other shareholders and spoke again with Mr Clifford by telephone in early October and told him the things that he states at para 24 of his witness statement dated 2 December 2009. A meeting involving Mr Backshall then occurred on 24 October that made things more concrete as the subsequent correspondence indicates. Mr Clifford's due diligence was expressly mentioned at the meeting of 24 October and confirmed in the correspondence of 25 and 26 October. Mr Backshall also indicated, as he did in the email of 25 October, that Mr Clifford could seek further financial information from the CFO, Mr Rayney. 134 While that was happening, around 25 October 2006, Vegas received a reservation of rights letter from lawyers acting for C&C, which was addressed to Mr Clifford. 135 On 26 October 2006, Mr Backshall also emailed Mr Clarke regarding the shareholder loans into Rdot, after taking Mr Clifford's advice on the terms of that email. He copied Mr Clifford into the response. On 28 October 2006, he and Mr Clifford received an email from Mr Clarke. On 30 October 2006, Mr Backshall received further correspondence via Mr Clifford from C&C as well as advice regarding that correspondence. 136 Mr Backshall says that some time in late October, he asked Mr Clifford whether he was interested in buying half a percent of the company from Mr Mark Sutton (whose nickname was "Mogga"). Mr Clifford said he was definitely interested and asked why. Mr Backshall indicated that Mogga wanted to reduce his personal debt. Mr Clifford asked what the deal was and Mr Backshall said the purchase would be at the same value as he was paying to come into Vegas. He then left it to Mr Clifford and Mr Sutton to deal with that part of the transaction. Mr Clifford agrees in substance with this evidence but locates this discussion in another meeting he had with Mr Backshall in November at which he says other material things were discussed. 137 Mr Sutton's recollection, which is not contradicted by Mr Clifford, is that the two of them met in late October or early November to discuss the details of the sale of these shares that Mr Sutton held through C Breeze Pty Ltd and that they agreed a price. Mr Sutton says that at that point he was keen to settle in mid November as he wished to use the funds from the sale to ease his financial situation in relation to the purchase of a holiday home. I will return to the evidence concerning this discussion as Mr Sutton also says that he mentioned to Mr Clifford that he had put money back into Vegas' loan funds and was not sure when he was going to get that money back. I should also mention in passing that the evidence of Mr Sutton, which I generally accept and discuss in more detail later, tends to place the meeting with Mr Clifford in late October or early November, sufficiently in advance of a possible mid November settlement of the share transfer. 138 On 30 October 2006, Mr Rayney and Mr Backshall completed a draft profit and loss (P&L) for the purpose of discussions with Deloittes on funding options to hypothetically allow Vegas to acquire from C&C both the shares it held in Rdot that Vegas did not already own and the global master licence. Part of the proposed plan was that following the hypothetical acquisition, Vegas would on-sell the US sub-licence and the US operating business acquired from C&C to a new licensee. Mr Backshall says he did not prepare the draft P&L for the purpose of providing Mr Clifford with any forecasts regarding Vegas' sales or profitability. In fact, he says at no time did Mr Clifford ever request that he provide him with any forecasts regarding Vegas' sales or profitability. 139 In the draft P&L, Mr Backshall says he assumed a hypothetical acquisition of the Rdot shares and the global master licence in 2007 and that additional sub-licences would be granted in China, India, and the Arab States in 2009/10. He knows that the document was completed on 30 October 2006 from the information on his computer and I accept this is so. The draft P&L was eventually sent to Deloittes on 17 November 2006. Mr Backshall explained in evidence the information he used to prepare the draft P&L and why he considered its forecasts to be based on reasonable grounds. 140 In November, or a date not clearly identified, but I would estimate to be early to mid November, Mr Backshall provided Mr Clifford with this draft P&L document or "spreadsheet", as Mr Clifford described it, containing projections about sales. The circumstances in which this occurred are disputed as are the basis of and the use to be made of the document. I will deal with this clash of evidence and submissions concerning the use to be made of the document below. 141 In late October, early November 2006, the shareholders of Vegas provided further interest free shareholder loans to Vegas in the aggregate sum of $500,000 for working capital. Mr Backshall says this was required as a result of a $500,000 overpayment made by Vegas to the ATO in June 2006, which occurred because of an error made by the CFO of Vegas. Despite requests, it had not been possible to recover it promptly, although the refund was made later on 16 November 2006. I accept Mr Backshall's evidence in this regard. It fits with the sequence of payments and the late ATO refund. 142 On 1 November 2006, Mr Backshall received a further email from Mr Clarke of C&C who threatened litigation unless certain issues were addressed. Mr Clifford assisted him in drafting a response. 143 In November 2006, all the shareholders of Rdot provided Rdot with further loan funds pro rata to their interests. Vegas contributed loan funds on behalf of itself and two minor shareholders of Rdot. The total contribution from Vegas was AUD$457,000, paid in three tranches: two on 9 November and one on 21 November 2006. 144 On 7 November 2006, Mr Backshall forwarded to Mr Clifford his email of the same date to Mr Clarke regarding a 25%-30% drop in C&C sales in the US. 145 Around 10 November 2006 the monthly board package was circulated to shareholders. It contained the Vegas actual sales figures from 1 July 2006 to the end of October 2006. Total income was AUD$15.903 million against a budget of AUD$15.849 million. Total expenses were $5.621 million against a budget of $5.788 million. Net profit before tax and interest was $992,000 against a budget of $772,000. 146 On 14 November 2006, Mr Backshall caused his personal assistant to email Mr Clifford's secretary in order to remind Mr Clifford that he was going to provide Vegas with a list of requirements for Vegas to put a package together for another lawyer to review the deal that Vegas hadoffered him. This came about because, as I infer, before that time (not later, as Mr Clifford suggests) Mr Clifford had advised Mr Backshall that it would be appropriate for Vegas to take independent advice in relation to the proposed dealing, given that Mr Clifford had such a longstanding relationship with Vegas. 147 On 14 November 2006, the Vegas overdraft facility was varied to increase the limit from $2 million to $3 million for a period of two weeks to assist with working capital requirements. I accept Mr Backshall's evidence that Vegas, however, did not use this increased limit other than for a short period from 14 – 27 November 2006, during which it peaked at AUD$2.3 million. By 28 November 2006, the overdraft had reduced AUD$1.5 million. 148 Mr Backshall says that during this time he continued to update Mr Clifford on the situation with C&C and Mr Clifford continued to settle Mr Backshall's correspondence with C&C. 149 Mr Clifford says that during November he had further meetings with Mr Backshall and Mr Hart. He describes this as being a little later in November 2006, that is to say after the meeting he had with Mr Backshall alone,at which the draft P&L/spreadsheet document was discussed. At this subsequent meeting, the purpose for which Mr Clifford does not say, he says that he asked of Mr Backshall words to the effect "Are you still confident the Vegas product will sell worldwide and in particular the US?". Mr Backshall said "Yes" and words to the effect "Our product is hot" and "C&C product is crap". Mr Clifford says that he said words to the effect "Thanks" and "I assume my investment funds will be used to pay down the borrowings to acquire the Rusty interests?". Mr Backshall said "Yes" and words to the effect "The plan is no dividends will be paid this year but I fully expect dividends will be paid in 2008" and "Perhaps not for the full amount but surely thereafter back into the range of $2 - $3 million". Mr Clifford says Mr Backshall also said or said words to the effect "While you are at it, could you also buy some of Mogga's shares as part of the deal". Mr Clifford then asked why he wanted to sell and he was told that Mr Sutton wanted to pay down some debts on his house. He indicated then that he would be prepared to make the purchase. 150 Mr Clifford says that a "little later" after this meeting with Mr Backshall he had a discussion with Mr Hart, in which he said words to the effect "I have spoken with Geoff" and "just to check it I am operating on the assumption that my investment will be used to pay down part of the $8.5 million borrowing to buy out Rusty?". Mr Hart, he says, said words to the effect "Yes, that is the plan". Mr Clifford says he then said words to the effect "I am also operating on the basis Vegas product will sell worldwide and in particular the US". He says Mr Hart said words to the effect "Yes, one thing we do really well is product". 151 Mr Backshall says that at no time prior to or after Mr Clifford's investment in Vegas did Mr Clifford ever ask him how his investment funds were to be used by Vegas. He did not make any statements as to how his investment funds would be used. Mr Backshall says that Mr Clifford never said to him words to the effect that "I assume my investment funds will be used to pay down the borrowings to acquire the Rusty interests?". 152 He does recall, however, that prior to the time of the investment he had a discussion with Mr Clifford in which he said that no dividends would be paid in the short term but that he hoped by 2008 dividends would recommence. He did not say, however, words to the effect that shortly after 2008 dividends would be back into the range of $2-3 million. 153 Mr Hart denies there was any occasion when he said the things Mr Clifford attributes to him. 154 It was following these meetings, Mr Clifford says, that he wrote a letter dated 29 November 2006 to Mr Hart and Mr Backshall. Mr Clifford says that at the time of writing the letter he expressly said to Mr Backshall words to the effect, "You must get separate written independent legal advice on this transaction", and "I can't even recommend who the lawyers you get the advice from can be". 155 On 28 November 2006, Vegas released its annual report for year ended 30 June 2006. 156 Mr Clifford sent a draft of the letter of 29 November by email to Mr Backshall. It was addressed to Vegas, attention Messrs Hart and Backshall. He signed a hard copy the next day. In the letter he formally confirmed the invitation to acquire between 7-8% of Vegas at a price to be finally set, measured against the value of the Australian dollar to the US dollar on settlement being approximately AUD$2.6 million, and noted: In due diligence you have provided me with substantial information relating to the last 3 years operation of Vegas. In addition as a provider of legal services to you for the past 15 plus years I have acquired a reasonable historical knowledge of the company. I have discussed this information, with your permission, with my accountant [Mr Boyce] … Mr Boyce has advised me, depending on the method of valuation, that the value of the equity interest being considered is between AUD$1.8 million (bare dividend expectations over 2005 to 2006 years) and AUD$3.3 million (projected income upon the acquisition of the Global licence and a moderately improved performance by C&C in the North American market). Because I have been a provider of legal services to you for many years it is important that you take independent legal advice on the question of whether or not Vegas enter into the agreement to sell me an equity interest in Vegas. As a matter of law I am not permitted to enter into the transaction unless and until you have taken independent advice on the transaction. To assist in the provision of that independent advice, I also set out the following: 1. There will be no dividend declared by Vegas to its shareholders for this financial year; 2. I will become a part-time employee of Vegas providing advice on matters such as structure of acquisition of the "Rusty assets"; 3. I will be assisting in the negotiations related to those acquisitions; 4. I will be advising on the structure and timing of an IPO of the Rusty assets; 5. I will advise Vegas generally on "governance" issues; 6. I will remain as chairman of Rdot, the holder of the Trademark rights and rights to receive royalties; 7. My income for this work as an employee will be, initially set at around $100 per hour rather than charged at approximately $400 per hour as an independent provider of legal services; 8. I will make myself available to Vegas in priority to other work and wherever possible on short notice to undertake Vegas work. 157 Despite Mr Clifford's evidence that, at the time he wrote the letter of 29 November, he expressly told Mr Backshall to obtain independent legal advice, I find that the independent legal advice suggestion had been made earlier to Mr Backshall. Mr Backshall, as noted above, through their secretaries on 14 November, had been chasing up Mr Clifford for a "list of requirements" for Vegas to put a package together for a lawyer to review the deal Vegas had offered him. The letter of 29 November was obviously the letter that Mr Backshall had been expecting. To the extent Mr Clifford implies he was prompted to write the letter following the separate (disputed) meetings with Mr Backshall and Mr Hart in November, I also am not satisfied this is so. 158 All parties otherwise rely on this letter of 29 November to argue their cases. I will deal with the letter's significance below. 159 The letter having been signed, Mr Backshall, almost immediately, around 1 December 2006, caused his personal assistant to contact Mr Clifford's secretary to see if Mr Clifford could advise of anyone he knew at a particular firm of solicitors whom Mr Backshall could instruct in the matter. Mr Backshall recalls that he telephoned Mr Clifford and asked him to assist in this regard, which he did. On 1 December 2006, Mr Backshall then sent the letter to the independent lawyer. 160 During this period, Mr Clifford continued to advise regarding correspondence with C&C. He also reviewed Rdot cash flow documents which showed poor cash flow. 161 Around 10 December 2006 the monthly board package was circulated. It contained Vegas' actual sales figures from 1 July 2006 to the end of November 2006. Total income was AUD$22.153 million against a budget of AUD$21.977 million. Total expenses were $6.959 million against a budget of $7.125 million. Net profit before tax and interest was $2.348 million against a budget of $2.037 million. On these figures, sales had been restored during the first five months of the 2006/2007 financial years against budget after a shaky start. I will consider the significance of this evidence below. 162 On 13 December 2006, Mr Backshall sent Mr Clifford a memorandum he had prepared regarding potential breaches by C&C of its licence agreement with Rdot. 163 On 14 and 15 December 2006, Vegas repaid the Vegas shareholder loans of around AUD$500,000 that had been made in October/November. 164 On 15 December 2006, Mr Backshall received a telephone call from Mr Clifford while Mr Backshall was at the Vegas Christmas party. Mr Clifford said he had some "great news": the litigation threatened by C&C had been commenced and that was the "worst thing" C&C could have done – implying this would suit Vegas' ends. I accept Mr Clifford did and said these things. 165 On 15 December 2006, Mr Backshall received an email which was copied to Mr Clifford and which attached a letter and a copy of a writ that had been filed in the Orange County Superior Court of California, USA by C&C which named Rdot, Vegas, Mr Hart, Mr Backshall and Mr Clifford as defendants. 166 Mr Backshall duly obtained independent legal advice from the solicitors Philips Fox as to Mr Clifford's equity purchase. It seems on or about 18 December he advised Mr Clifford by telephone that the advice had been received and the transaction could proceed. 167 On about 18 December, Mr Clifford signed a loan agreement with the ANZ Bank to borrow the funds necessary to purchase the shares to be issued by Vegas. 168 On 19 December 2006, Mr Clifford paid the funds by cheque to Mr Rayney, Vegas' CFO. Vegas then issued 600,160 newly issued ordinary shares in the capital of Vegas to Sheraz. The share certificate was issued in the name of Sheraz Pty Ltd. On that day, Mr Sutton also transferred 41,229 ordinary shares to Sheraz. 169 As a matter of fact, immediately prior to Vegas receiving the funds from Sheraz, the Vegas overdraft facility was in credit. 170 Mr Backshall insists that Vegas did not use the funds from Sheraz to pay out shareholder loans. The funds were retained in the Vegas overdraft facility so that Vegas did not have to rollover a $1.5 million trade finance bill line from Westpac for January 2007. This finance line was used as additional working capital for the business. I will return to this issue below. 171 On 20 December 2006, Mr Backshall sent a letter to C&C announcing that Mr Clifford had joined Vegas as a new shareholder. 172 In January 2007, Mr Clifford signed an agreement to become in-house counsel at Vegas, although based at Francis Burt Chambers where he conducted his independent practice as a barrister. 173 Around 10 January 2007 the monthly board package was sent out. It contained Vegas actual sales figures from 1 July 2006 to the end of December 2006 – that is, for the first half of the financial year. Total income was AUD$23.722 million against a budget of AUD$24.640 million. Total expenses were $8.164 million against a budget of $8.231 million. Net profit before tax and interest and before an extraordinary item was $1.775 million against a budget of $2.096 million. The extraordinary item was a royalty termination expense of $7.378 million which represented the one-off expense associated with the purchase of the royalty stream from Mr Preisendorfer. Taking into account this extraordinary item, there was a loss for the period of $5.603 million. 174 Around January 2007 further funds were injected into Rdot by Vegas. Other Rdot shareholders, including C&C, did not contribute. Vegas contributed AUD$10,691.98 on 9 January 2007, AUD$274,169.89 on 29 January 2007 and AUD$11,619.26 on 8 February 2007. In February, Mr Clifford travelled to the US regarding the dispute with C&C. 175 On 11 June 2007, following the discharge of a preliminary injunction C&C had obtained against Rdot and Mr Clifford, Mr Clifford and Mr Backshall attended a meeting of directors of Rdot by telephone. The board of Rdot resolved to appoint Vegas as the interim global master sub-licensee. Mr Clifford was instructed to draft the new global licence between Rdot and Vegas. 176 In June 2007, Messrs Hart, Backshall and Clifford travelled to the US for meetings with prospective North American sub-licensees. Ultimately they negotiated an agreement in principal with La Jolla, who were Vegas' preferred sub-licensee of the Rusty brand. Mr Backshall says that on the final day of the trip, he and Mr Hart met with La Jolla without Mr Clifford. Following the meeting, Mr Hart and he tried to contact Mr Clifford to discuss terms and progress of the deal, but he did not respond. He tried to contact Mr Clifford a further 12 times over the following ten days and Mr Clifford failed to respond. I accept Mr Backshall's evidence. 177 On 19 July 2007, Mr Clifford emailed a long memorandum to Mr Hart and the shareholders of Vegas in which he opposed the La Jolla transaction and advocated the sale of the Vegas business. In this memorandum, he concluded that on any view of Vegas "it is worth between the 2 and 3 times more than it was on 5 June 2007" – the date being a reference to the date C&C's interim injunction was discharged in California. In that memorandum, Mr Clifford argued that if the brand was successfully relaunched in the US and Europe in five years, the value of the current partners' equity would be many multiples higher than it was then. He said the key to this was "discipline and cohesion". 178 On 23 July 2007, Mr Backshall and Mr Clifford attended an informal meeting of the shareholders of Vegas during which Mr Clifford said he was strongly opposed to the appointment of La Jolla and he wanted Vegas to own and operate the North American business and float the company on the London Stock Exchange. However, the majority of the shareholders (with the exception of Mr Clifford and Mr Rayney) wanted to proceed with the La Jolla deal and did not want to own and operate the US business. 179 Mr Backshall says that his difference of opinion with Mr Clifford regarding the timing of the float of Vegas and the appointment of a US licensee caused a major rift in his relationship with him. I accept this was so. From that time, Mr Clifford refused to speak to him other than as was required in a shareholders' or board meeting and refused to respond to any of his individual emails or telephone calls and when he did return emails, it was only as part of a group email. Nevertheless, because of Mr Clifford's importance to the defence of the C&C litigation, Mr Backshall endeavoured to re‑engage with him. 180 As it turned out, Mr Backshall was obliged to negotiate the heads of agreement between Vegas and La Jolla regarding the grant of the North American sub-licence without Mr Clifford's assistance. Mr Clifford subsequently criticised his draft term sheet. Mr Backshall suggested he would take advice from Deloittes. On 30 July 2007, Mr Clifford sent a memorandum, copied to shareholders of Vegas in which he resigned as general counsel and put forward a proposition that he be appointed head of the "international division" of the Vegas/Rdot business at an annual salary of US$300,000 plus a US$750,000 "parachute" payment, paid on early termination of his employment for any reason. This came to nothing. In August 2007, the board resolved to appoint La Jolla as the US sub-licensee. 181 Following further exchanges concerning the C&C litigation and the La Jolla sub‑licence, on 19 October 2007, Mr Clifford emailed Mr Backshall that as a director of Rdot he could not agree the La Jolla sub-licence as it would create a problem for any IPO that may occur in the next few years. Thereafter, Mr Backshall became frustrated with the refusal of Mr Clifford to respond to his requests for assistance regarding the La Jolla sub‑licence and other sub-licences. 182 In March 2008, Mr Clifford travelled to the USA and negotiated with the lawyers for La Jolla regarding the North American sub‑licence. I find, as stated by Mr Backshall and Mr Hart that Mr Clifford undertook this trip without authorisation or instructions. Mr Backshall was away in Fiji at the time and did not find out about Mr Clifford's trip until 25 March 2008, when Mr Clifford gave him a memo documenting his meetings with La Jolla and the terms agreed. In early April 2008, Mr Hart and Mr Backshall travelled to the USA and negotiated terms with La Jolla. Mr Clifford provided advice regarding those terms. 183 On 14 April 2008, Mr Clifford issued a notice of director's meeting in respect of Rdot. On 22 April, Mr Backshall responded to Mr Clifford's memorandum on the topic. 184 On 23 April 2008, Vegas requested that Mr Clifford make all of his Vegas files concerning the C&C litigation available to a firm of solicitors, Mallesons Stephens Jacques. Mr Backshall says that despite repeated requests, Mr Clifford did not make any of his files or any material available as requested. Vegas then also informed Mr Clifford that he was not authorised to undertake any further legal work for Vegas unless expressly authorised in writing. 185 By memo dated 27 May 2008 from Mr Clifford to Messrs Hart and Backshall, with a copy to Mr Rayney, Mr Clifford addressed the continuing C&C litigation and noted that he had been asked to accept instructions to assist Rdot (and others) with the C&C litigation. He indicated that he would not lend his time and expertise if the work is not done "carefully, fully, competently and to a plan". He then set out conditions upon which he was prepared to undertake the work. One of the conditions that he would not take instructions directly from either from Mr Backshall or Mr Hart. He also required the instructions to Mallesons to be terminated immediately and required a substantial termination fee in the event his services were terminated for any reason. That proposal was not taken up by Vegas. 186 Mr Backshall recalls that in September 2008, he and Mr Hart met with Mr Clifford and Mr Rayney at Mr Clifford's barrister's chambers in Perth. The applicant objected to the Court receiving evidence concerning what was discussed at this meeting on the basis it was legally privileged. Following a voir dire (or mini trial) on the objection, I overruled the objection and received the evidence. Mr Backshall took with him some notes to make a presentation to update them regarding the capital raising that was proposed through Deloittes. He had started to make a presentation when Mr Clifford said that what he and Mr Rayney wanted was to be bought out of the company for a total of AUD$6.9 million. Mr Backshall says this is the first time that Mr Clifford had indicated that he wanted to be bought out. Mr Clifford wanted $3.7 million and Mr Rayney wanted $3.2 million. Mr Rayney had resigned from his position earlier that year. Mr Clifford said he did not agree with the direction the company was going and wanted a clear separation from Vegas. He said his investment had not gone the way he had envisaged and he would now like to put his experience in Vegas behind him and move on with life. Mr Clifford said that if they could settle quickly then they could see their way to assisting Vegas with the evidence required for the depositions in the US litigation with C&C. Mr Backshall said that he and Mr Hart were due to fly out in a few days and what was being proposed would not happen. Mr Backshall indicated they were not prepared to "write up a deal" over the weekend. Mr Hart said that they would use their best endeavours to facilitate the needs of Mr Clifford and Mr Rayney as part of the capital raising process but they could not do anything at that point. However, in late September Mr Hart and Mr Backshall flew to the USA in connection with the C&C litigation and on 26 September Vegas settled the litigation and purchased from C&C its shares in Rdot and the global master licence. Mr Backshall says the legal and accounting costs incurred by Vegas in the US in connection with the C&C litigation in 2007 and 2008 totalled around USD$1.5 million (around AUD$2 million). 187 Mr Hart has a similar recollection but believes there were two meetings a short period apart. The first meeting he recalls is in substance of that described by Mr Backshall at the chambers of Mr Clifford at which the two directors as well as Mr Clifford and Mr Rayney were present. Mr Clifford raised the question of he and Mr Rayney selling their shares in Vegas as a part of a potential capital raising. Mr Hart cannot recall whether any numbers were discussed. They also discussed the upcoming deposition and mediation processes in the US. 188 Then, a few days prior to Mr Backshall and Mr Hart departing for the US, around 20 September, Mr Hart recalls participating in a conference call in Mr Backshall's office with Mr Clifford and Mr Rayney. Again, Mr Clifford and Mr Rayney indicated they wanted to sell their shares for a total of AUD$7.1 million. The figure was broken down between the two but he cannot recall the details. Mr Clifford said that if Vegas could guarantee the sale of their shares for that sum, they would support Vegas in the forthcoming deposition and mediation process by making themselves available to Vegas' US attorneys. He said that he wanted an agreement before they got on the plane. Mr Hart asked if they were aware of the global financial crisis and said the capital markets were drying up and that was creating difficulties for Vegas. He said there was no guarantees that the capital raising would be successful. He said Mr Clifford asked if they would consider his proposal and speak to them the following day, to which he and Mr Backshall agreed. Mr Hart recalls that the next day, he and Mr Backshall called Mr Clifford and Mr Rayney at Mr Clifford's office. He said that he and Mr Backshall would act in the best interests of shareholders to sell their shares at the price they requested but were unable to give any guarantees that they would achieve that result. He also said that they would give Mr Clifford and Mr Rayney a commitment regardless of whether or not they supported Vegas in the forthcoming deposition and mediation process. Mr Hart says that Mr Clifford said "that doesn't work for me". Mr Rayney said that if they would not do the deal he also doubted that another employee would assist in the upcoming deposition and mediation process. Mr Hart indicated his disappointment and the meeting ended. 189 Mr Clifford does not deny the fact there was a meeting (or meetings) which discussed these matters and, in particular, now relies on Mr Hart's offer to consider the sale of Mr Clifford's shares as evidence supporting their unsaleability, an issue I will deal with later. 190 In late November 2008, Mr Backshall and Mr Marcus Gracey, the Chief Operating Officer (COO) of Vegas met with Mr Clifford at a café in Cottesloe. Mr Clifford wanted an update regarding the Vegas capital raising process as he was still looking to sell his shares. Mr Backshall updated him. He said that it had been a difficult process but they would look after each shareholder as best they could. He asked Mr Clifford if he knew of anyone who would be interested in investing in Vegas. The meeting plainly came to an inconclusive end. 191 In early December 2008, Mr Backshall was subpoenaed by lawyers acting for Mr Clifford's ex-spouse to appear in the Family Court of Western Australia at a hearing regarding the value of Mr Clifford's shares in Vegas. As it transpired he was ultimately not required to give evidence. 192 On 18 December 2008, Vegas received a letter from Mr Clifford requesting that certain shares registered in the name of Sheraz be transferred to his ex‑spouse in consequence of orders made by the Family Court of Western Australia. 193 On 12 January 2009, Mr Backshall, Mr Hart and Vegas' lawyers met with Mr Clifford and his lawyer at the offices of Mallesons Stephens Jacques and held without prejudice discussions regarding the matters the subject of these proceedings. 194 On 18 February 2009, Mr Clifford commenced these proceedings. Mr Backshall says that at no time prior to without prejudice discussions held on 12 January 2009 with him and Mr Hart and their lawyers, did Mr Clifford ever raise with him or Vegas, verbally or in writing, the alleged representations the subject of these proceedings. Mr Hart says likewise. I accept this is so. the sales representations 195 I will deal in turn with the alleged specific representations the applicant has labelled the Sales Representations, the Bank Debt Representations and the Product Representations before considering the claim based on non‑disclosure of relevant facts – the so‑called misrepresentation by silence. 196 The applicant's case concerning the Sales Representations boils down to this. The applicant says that, in the last half of 2004, the respondents provided him with a copy of a document called "final draft proposal" of which he and Mr Backshall had prepared a draft earlier during 2004. Mr Hart and Mr Backshall confirmed to him that its contents were correct. He says the proposal set out the respondents' views as to the Rusty apparel product and financial capabilities of Vegas. 197 The applicant then says that when he was invited to become a shareholder in Vegas in October 2006, Mr Hart told him he could deal with and rely upon information provided to him by Mr Backshall in resolving the matters he wanted information about, in particular, the financial, expenditure, sales revenue, history of dividend payments and use to be made by Vegas of any investment funds matters. 198 As to the evidence of the applicant concerning his early dealings with Mr Hart in September/October 2006, I have already found that I prefer the evidence of Mr Hart to that of Mr Clifford. I do not accept that Mr Clifford made the literal statements he says he made to Mr Hart, such as he wanted "to look at things like the financials, sales, past and present and the use to be made of any investment monies". What I have found was a much more important meeting on the evening of 24 October 2006, the substance of which was confirmed by an email on 25 October from Mr Backshall to Mr Clifford, which was followed in turn by Mr Clifford's letter accepting in a formal way the invitation to become an investor and raising, amongst other things, the question of his due diligence. At the meeting on 24 October, Mr Clifford was specifically advised to contact Mr Rayney, the CFO, for financial information. 199 The applicant, in fact, relies expressly on the following paragraphs of his letter dated 26 October, following this meeting, to press the alleged representation about sales: Please take this letter as notice of my intention to take up that invitation subject to due diligence work on the last 3 years audited accounts with a focus on use to be made of the funds, revenues, expenditures and the history of dividend payments to shareholders. If you could provide me with a copy of the audited accounts and financial statements for the last 3 years that will expedite the process. Also to meet the 30 November 2006 date it may, and probably will, be necessary to secure bridging finance for a period. 200 The applicant then says that in early November 2006, Mr Backshall, acting on behalf of Vegas and with the endorsement of Mr Hart, provided him, as part of this request for information, sales figures, revenue figures and advice as to the use to be made of the investment funds, the audited accounts of Vegas for the financial years 2003 to 2005 and the unaudited accounts of Vegas for the financial year 2006, as well as a spreadsheet setting out actual, budget and forecast sales for the financial years 2002 to 2012, the cost of goods sold (COGS) for the same financial years, EBITDA for the same financial years, and expected royalties from 2008 to 2012 for royalties associated with Vegas' acquisition of a controlling interest in Rdot, plus royalties earned from the expectation of the sale of Rusty apparel product (product) worldwide designed and merchandised by Vegas at Vegas' premises in Australia. 201 Mr Clifford claims that he relied on the document and that sales representations in it were in fact false: · He says the budget sales figure for the 2007 financial year is said to be $45,512,163 and the forecast sales figure for 2008 is said to be $48,400,000, when the actual sales for the 2007 and 2008 financial years respectively are $40,926,448 and $40,245,091. · This shows the represented budget sales figures for the 2007 financial year are falsely overstated by $4,550,000 and the forecast sales figures for the 2008 financial year, are falsely overstated by $8,154,909. · Similar false overstatements are made in the spreadsheet about the EBITDA for each financial year. · The represented sales figures are false and materially so. 202 The respondents dispute the circumstances in which the applicant came by the spreadsheet and the use the applicant is entitled to make of it. 203 Mr Backshall recalls that in November 2006, Mr Clifford called by his office and they discussed correspondence between Mr Clarke of C&C and Vegas and the potential of the hypothetical acquisition of C&C's global master licence. He says Mr Clifford saw a document with numbers and columns on his desk and asked what it was. He said it was a draft P&L that had been prepared for discussions with Deloittes on Vegas' funding alternatives on the assumption that Vegas acquired from C&C the master licence and shares in Rdot. He said that Vegas was profitable and "if it is throwing out that level of cash, we needed to be conscious of using the right mix of funding instruments to minimise dilution of the original shareholders". He says he and Mr Clifford discussed the types of investors Deloittes would bring to the table and the general fundraising process. He said that Vegas produced budgeted P&Ls every six months in advance. He pointed to the top line of the document (sales) and said "this is where Vegas have been (pointing to the actuals columns), this is the 06/07 budget (pointing to the 06/07 column) and these are the forecasts for 07/08 onwards (pointing to the forecast columns)". Mr Backshall says that he told Mr Clifford that Vegas had already prepared the forecasts for Westpac back in June. To the best of his recollection, he also explained how Vegas had arrived as the COGS and gross profit (GP) figures. During the discussion regarding the GP figures, he recalls that Mr Clifford queried why the GP figure dipped in the 2011/2012 column. He said this was consistent with the BIS Shrapnel forecast for the AUD/US exchange rate, and his own experience. Mr Clifford said the drop in the GP in 2011/2012 was not consistent with the percentage drop being used on the exchange rate. Mr Backshall says that he told Mr Clifford that it did not work that way and recalled explaining to him that "when we are under pressure on a weaker Australian dollar we negotiate lower price points from our suppliers on the basis we cannot afford to buy at the higher prices". He said to Mr Clifford that the drop in selling expenses in 2006/2007 took account of the fact that Vegas had now bought back half the royalty stream from Rusty and that the forecasts going forward assumed no royalties on the assumption Vegas acquired the master licence and C&C shares in Rdot. He says that he said to Mr Clifford that the forecast overheads dropped as a percentage of turnover because of forecast deficiencies through the implementation of new software. He says they then discussed the makeup of the royalties being 6% base royalties, 1% merchandising and design fee and 1% international advertising fee, and the fact that Mr Backshall had not included incentivised royalties. He said that the Rdot overheads and international advertising figures were based on historical and actual data and the assumption that, if Vegas acquired the US sub-licence operations, it would on-sell it to a third party. He explained that the reason he had separated the US only advertising support from the Rdot overheads was that Rdot had team rider expenses of around US$1.2 million for the next three years and what Vegas wanted to do was have a new US licensee pick up the majority of that expense. He felt it would be unlikely that they would accept responsibility for all of that expense so Vegas had to recognise some of it in the 2007/2008 and 2008/2009 years (at $300,000 per year). He explained that the drop in Rdot overheads was because Mr Preisendorfer's consulting contract finished in July 2011. Mr Clifford asked if he could take the draft P&L – or spreadsheet – with him and Mr Backshall said to go ahead and take it. 204 Mr Clifford recalls that about a week to 10 days after he sent his letter to Vegas dated 26 October 2006, giving notice of his intention to accept the invitation to take up equity, he was at the offices of Vegas in Mr Backshall's office for a meeting. At the end of the meeting, Mr Backshall said to him words to the effect, "I have the financial information you requested" and handed him copies of the audited accounts of Vegas for 2003, 2004 and 2005 and the unaudited accounts for 2006. He recalls Mr Backshall picking these up from the floor beside the desk together with a single page spreadsheet. When the spreadsheet was handed to him, he asked Mr Backshall to "walk" him through the document while pointing to the top line of figures. He says that Mr Backshall noted the actual sales from the accounts, budgeted sales for 2006/2007 and forecasts going forward. He asked about COGS. Mr Clifford says that he said words to the effect, "Are the international royalties a royalty that will come into Vegas through Rdot for services provided by Vegas?" Mr Backshall said "Yes". He then said words to the effect, "Is that based on the assumption Vegas has the master licence and that Vegas product will be acceptable worldwide?" Mr Backshall said "Yes" and words to the effect "We will provide the backend for design, product and distribution". He then took the papers with him and over the next few days reviewed the Vegas accounts and the spreadsheet. He says he then gave the accounts and the spreadsheet or a copy of them to his accountant, Mr Boyce, and later discussed them with him. 205 Mr Backshall says that at this meeting he did not discuss with Mr Clifford that Vegas product would be sold worldwide and this assumption was not included anywhere in the draft P&L. He states that Mr Clifford did not say to him words to the effect, "Are the international royalties a royalty that will come into Vegas through Rdot for services provided by Vegas?" Nor did he say words to the effect, "Is that based on the assumption Vegas has the master licence and that Vegas product will be acceptable worldwide?" He also did not say that Vegas would provide the backend for design, product and distribution. He did not hand Mr Clifford any financial accounts of Vegas at this meeting. Nor did he say to Mr Clifford then or in October or November 2006 words to the effect that he was "still confident the Vegas product will sell worldwide and in particular the US". 206 Vegas makes the point that the spreadsheet or draft P&L was not prepared nor provided to Mr Clifford for the purposes of the Sheraz acquisition. 207 Vegas also says, however, if it is necessary for Vegas to demonstrate that there was a reasonable basis for the figures contained in the document, Mr Backshall provides this evidence and was not cross-examined on it. Accordingly it should be accepted. 208 Vegas point to Mr Backshall's evidence as to why the forecasts in the document were not met, due to the following unforeseen circumstances: · Floods and unseasonal weather conditions on the east coast of Australia in December 2006 and January 2007. · From January 2007, C&C refused to make any shareholder loans to Rdot, so Vegas had to fund Rdot entirely. · Vegas met all of its and Rdot's costs associated with the C&C litigation. · Sales during the 2007/2008 financial year were substantially adversely affected by the Global Financial Crisis. · Vegas did not obtain clear title to the global master licence and the remaining shares in Rdot until the C&C litigation was settled and final payment of the settlement sum made in March 2009. · Vegas did not sell the US sub-licence as was envisaged in the spreadsheet document. · As a consequence of the Global Financial Crisis, no sub-licences were granted in China, India or the Arab States as had been incorporated into the spreadsheet. · Negative movements in the Australian dollar as compared to the US dollar which increased the money required in Australian dollar to pay the C&C settlement sum. 209 Vegas says that, even taking into account the unforeseen circumstances, the actual sales of goods by Vegas for the 2007 year were 5.7% below the figure in the spreadsheet and the actual sales of goods by Vegas for the 2008 year were 12% below the figure in the spreadsheet and 2% below the figure in the 2007/2008 budget set by Vegas in May/June 2007 (when the applicant was in-house counsel at Vegas); thereby suggesting the performance was tolerable. 210 Vegas also says that at no time prior to the commencement of these proceedings did the applicant make any complaint to Vegas regarding the sales representations and in all those circumstances the Court should conclude Mr Clifford did not rely on the spreadsheet forecasts in making his decision to take up the investment offer. 211 In this regard, Vegas also point to an affidavit used in the Family Court of Western Australia proceedings where the applicant swore to the circumstances leading to the Sheraz acquisition. There, Mr Clifford he referred to the spreadsheet, but did not allege that the "projected sales to 2013" were false. In commissioning an independent expert to prepare a report for the purposes of the Family Court proceedings on whether or not the Sheraz acquisition was reckless, the applicant did not instruct the independent expert that there had been any misrepresentations by Vegas in respect of the Sheraz acquisition. Vegas submits that the existence of any misrepresentations would be relevant to this report. 212 In relation to the Family Court affidavit and the independent expert report, Vegas also submit that the attempts by the applicant to prevent Vegas from obtaining the documents means that it is open to the Court to find that he did so in an attempt to prevent Vegas from obtaining relevant and discoverable evidence which did not assist his case. 213 As to the applicant's letter to Vegas dated 26 October 2006, and the further draft letter dated 29 November 2006 (signed by Mr Clifford on 30 November 2006) Vegas submits that neither makes any mention of the spreadsheet. Vegas submits the applicant's evidence that he sent the spreadsheet to his accountant ought be rejected. Mr Boyce was not called by him to give evidence to confirm the evidence or the inference contended for. 214 Vegas submits the applicant was not motivated by the sales representation at all. He was driven rather by his desire to mingle with "surfing royalty"(transcript 142-144) and that he initiated the proposal to invest in Vegas. 215 Messrs Hart and Backshall make submissions to similar effect. They say the spreadsheet document was obtained by Mr Clifford in the course of his acting as Vegas' legal advisor. It was a confidential and privileged document obtained in the context of providing legal assistance in connection with funding through Deloittes in connection with the possible acquisition of the master licence in C&C's shares in Rdot. He could not and should not have relied on this spreadsheet for the purpose of his investment decision. 216 These respondents also submit the Court should reject the applicant's testimony that he obtained the spreadsheet contemporaneously with the audited accounts and unaudited accounts for 2006 as this is not corroborated by any other witness or documentary evidence. They also make the point that the applicant's letter to Vegas dated 29 November 2006 makes no mention of the spreadsheet and rather supports the inference they contend for. 217 They also submit that the applicant's evidence, that he sent the accounts together with the spreadsheet to his accountant, Mr Boyce, sometime in November, should be rejected because it is inconsistent with Mr Backshall's evidence and also because Mr Clifford's evidence should not be accepted generally in this regard. 218 These respondents also submit that Mr Boyce should have been called as a witness in circumstances such as these, where Mr Boyce was the witness most obviously relevant to the issues of whether he received the accounts and the spreadsheet. They submit two things follow: first, an inference that the evidence Mr Boyce could have given would not have assisted the applicant; secondly, the Court may draw with greater confidence the inference contended for by the respondents that the spreadsheet was provided to the applicant separately for different purposes and the applicant did not and could not reasonably have relied upon its contents: cf Australian Securities and Investments Commission v Macdonald (No 11) [2009] NSWSC 287; (2009) 356 ALR 199 at [1137]. 219 These respondents also submit that in any event the spreadsheet contained forecasts about sales, royalties and EBITDA in future financial years and did not purport to provide guarantees, unqualified assurances or unequivocally confident predictions about those matters. 220 Messrs Hart and Backshall submit that the relevant issue is not whether the alleged representations were "false", as the applicant contends, but rather whether there were reasonable grounds for those forecasts at the time of their making. They submit that the onus is on the applicant to prove that there were no reasonable grounds, having regard to s 769C of the Corporations Act: see Australian Securities and Investments Commission v Cycclone Magnetic Engines Inc [2009] QSC 58; (2009) 71 ACSR 1 (Cycclone) at [78]. They submit this onus has not been discharged. 221 As to the claim remaining advanced under the FTA, the second and third respondents submit there is no evidence that Mr Hart was involved in the preparation or dissemination of the spreadsheet and, so far as Mr Backshall was concerned, there were demonstrably reasonable grounds for the forecast information. They point to the fact that neither Mr Hart nor Mr Backshall were cross‑examined concerning their evidence relating to the alleged sales representation. 222 So far as the draft P&L or spreadsheet document is concerned, I do not accept the applicant's evidence that he received the spreadsheet document on an occasion when Mr Backshall also gave him the requested audited accounts and the unaudited accounts for the financial year 2006. I also do not consider that the spreadsheet document was provided by Mr Backshall in response to Mr Clifford's due diligence request. Rather, I accept, as Mr Backshall explained, that the spreadsheet document was observed by Mr Clifford in the course of or at the end of a meeting, probably about mid November, on an unrelated matter to the share acquisition concerning capital raising through Deloittes in relation to the possible acquisition of the global master licence and C&C's interest in Rdot. Mr Clifford was closely involved in dealing with C&C as legal adviser to Vegas. In my view the provenance and the purpose of the document, and the reason why Mr Backshall allowed Mr Clifford to have a copy of it, was not directly linked to Mr Clifford's due diligence process and Mr Clifford understood this. 223 I have come to this conclusion for a number of reasons. First, I take into account the fact that, in my view of all the evidence, the directors in fact assumed (and as explained below, were entitled to assume) that Mr Clifford, for the purpose of his due diligence, would let them – particularly Mr Backshall or Mr Rayney, the CFO – know just what financial information he required, as indeed he began to do in the letter of 26 October by asking for the audited accounts for the preceding three years. It is inconsistent with this finding that Mr Backshall should suddenly have provided the sales information and projections in this document as part of Mr Clifford's due diligence when Mr Clifford had not asked for it. I do not consider that Mr Backshall ever considered the document fell within the due diligence request. Secondly, when on 29 November Mr Clifford eventually responded to Mr Backshall's prompt of 14 November to provide him with a document to assist Vegas in taking the independent legal advice on the proposed transaction (as Mr Clifford had advised they should) by emailing a draft letter to Vegas which was intended for provision to an independent lawyer (and which was signed by Mr Clifford the next day), Mr Clifford made no express mention of such a document being material to the advice the independent lawyer should be asked to give. While Mr Clifford argues that a reference on the second page of the letter to the "projected income upon the acquisition of the global licence and a moderately improved performance by C&C in the North American market" being AUD$3.3 million, is one drawn from this document, I am left uncertain that this is so. The fact that this reference is not contained in the first paragraph of the letter that explicitly deals with "due diligence" matters also adds to my misgivings that the document was given to Mr Clifford as part of Mr Clifford's due diligence. Thirdly, I prefer Mr Backshall's evidence that the draft P&L or spreadsheet was discussed with Mr Clifford in the context of a discussion about Deloitte's assistance with capital raising. Mr Clifford was closely involved in matters to which the capital raising related – acquiring control of Rdot and paying out C&C. Fourthly, I am left with a concern, having considered Mr Clifford's evidence overall, that Mr Clifford at times displayed a heightened sense of the significance of parts of his evidence to the ultimate success of his case, and that this is one such example. The evidence of the applicant concerning being told that Mr Backshall had "dissuaded" Mr Rayney from providing financial information to the applicant at material times, which I deal with in detail later and totally discount, is another. It serves Mr Clifford's case immeasurably to contend that the spreadsheet information was given to him by Mr Backshall as part of the due diligence process. This leads me to approach Mr Clifford's testimony (both here and generally) with caution, particularly where his evidence is not corroborated by some documentary or other cogent evidence. In the end, I am not satisfied that the spreadsheet or draft P&L was given to Mr Clifford at the same time he received the company's accounts, or as part of his due diligence. Finally, the fact that Mr Clifford's accountant was not called to give evidence – as discussed below – fortifies my conclusion in this regard. 224 While it is correct to say, as the respondents contend, that in the circumstances the document was at all times a confidential one provided to Mr Clifford in his capacity as Vegas' lawyer in connection with discussion about funding the possible acquisition of the master licence and C&C's shares in Rdot, I am not satisfied it is correct to say Mr Clifford was not entitled to regard the document at all (if he did) in connection with the pending share acquisition. Given that only a relatively short time earlier, by his letter dated 26 October, Mr Clifford had made it plain that he was taking up the invitation to invest in Vegas for a sum of around $2.5 million and wanted to conduct due diligence "on the last 3 years" audited accounts with a focus on use to be made of the funds, revenues, expenditures and the history of dividend payments to shareholders", it may be assumed the spreadsheet document was of general interest to him and that Mr Backshall understood this to be so. The fact that Mr Clifford asked if he could retain a copy of the document, and Mr Backshall said he could, to my mind intimates this is so. No immediate professional use of the document by Mr Clifford in relation to capital raising issues is indicated by the evidence. Mr Backshall must have appreciated that Mr Clifford would have found the content of the document and his explanation of it of general interest as a prospective shareholder, touching, as it did, on Vegas' projected sales performance and the discussion they had just had. In the circumstances, I do not accept the respondents' submissions that Mr Clifford was not entitled to rely upon the spreadsheet document in the share acquisition process. The question, however, is whether he did. If he did, a further question arises whether the information supplied was reasonably based. 225 As to the extent to which Mr Clifford actually relied on the projections contained in the spreadsheet document it is difficult to say having regard to the documentary record. When, on 29 November 2006, Mr Clifford eventually provided a draft letter to Mr Backshall by email, from himself to Vegas, for Mr Backshall to use when instructing an independent lawyer to advise on the acquisition transaction, Mr Clifford did not say in the letter that the spreadsheet (or information in it) it was part of the information that Vegas had provided to him in due diligence. The first paragraph of the letter, in this regard, refers only to "substantial information relating to the last 3 years operation in Vegas". I do not accept that this is a reference to the spreadsheet or information in it. 226 However, the third paragraph of the letter refers to Mr Boyce (Mr Clifford's accountant) having advised him, depending on the method of valuation, that the value of the equity interest being considered was between AUD$1.8 million (bare dividend expectations over 2005/2006 years) and AUD$3.3 million, being "projected income upon the acquisition of the global licence and a moderately improved performance by C&C in the North American market". Mr Clifford contends that the reference to the "projected income" upon the acquisition of the global licence and a moderately improved performance by C&C in the North American market, must be taken to indicate a reference to and reliance upon the spreadsheet information, because Mr Clifford could not have obtained that information from anywhere else, and the evidence does not show that Mr Clifford could have obtained this information from any other source. On the face of the evidence, a finding that the statement about the projected income was sourced in the spreadsheet is open. But is it reasonably open such that the inference should be drawn? That is the question. 227 The respondents contend that the Court should not draw the inference. They say that Mr Boyce, who could have been called to confirm what advice he had given and whether or not he had been provided with the three years accounts as well as the spreadsheet information for the purpose of giving his advice, was not called, and in the light of such unexplained conduct the Court should conclude that Mr Boyce could not have provided any evidence that would have assisted the applicant's case; and also draw, with greater confidence, an inference that the spreadsheet was provided to the applicant separately, or for different purposes, and that the applicant did not and could not reasonably have relied upon its content. 228 Having considered the evidence closely, and particularly the sequence of events at material times, I am troubled as to the true basis upon which Mr Clifford stated in this letter of 29 November that Mr Boyce had given him the advice there set out. If one assumes that the letter correctly states the position, that Mr Boyce had given such advice to Mr Clifford, as I should, then in circumstances where the issue in dispute –whether Mr Clifford received the spreadsheet with the accounts and provided them all to Mr Boyce who relied on them when giving advice to Mr Clifford – was plain for all to see. I consider this is one of those cases where the calling of a particular witness would, in all likelihood, have helped to resolve an important issue. The fact that the applicant chose not to call Mr Boyce and provided no explanation for his failure to do so, leads me to infer that Mr Boyce could not have given any evidence on that topic that would have been of assistance to the applicant's case: cf Payne v Parker (1976) 1 NSWLR 191, per Glass JA at 200 – 202. In the circumstances, the applicant's failure to call Mr Boyce adds to my doubt that Mr Clifford received the spreadsheet at the time he received the accounts from Vegas. It also leaves me doubting that Mr Boyce had access to the spreadsheet when he gave Mr Clifford advice. Critically, it also leaves me in real doubt that it can be said that Mr Clifford actually relied on the spreadsheet information when he proceeded to make the share acquisition. Rather, it supports an inference that Mr Clifford did not, in fact, rely on the spreadsheet projections when making the final investment decision, even if the reference to "proposed income" in the letter of 30 November owed itself to the content of the spreadsheet. Given that I accept that Mr Clifford was not given the spreadsheet as part of a due diligence request (and he must have understood this), I am ultimately not satisfied he actually relied on the information in it to guide his investment decisions as he claims. The totality of the evidence suggests otherwise. I refuse to draw the inference the applicant invites me to draw in this regard. 229 I should add that apart from the oblique reference to projected revenue in the third paragraph of the letter dated 29 November, there is little else in the evidence to suggest reliance on any information in the spreadsheet, apart from the applicant's assertions, in the acquisition of the shares by the applicant. I do not accept the applicant's assertions to this effect in light of all the evidence. 230 This finding means the applicant's claim based on this alleged representation must fail. However, I should also deal with the reasonable grounds defence. The applicant says the contention simply cannot be made out by reference to the spreadsheet, and that no evidence, at least in admissible form, is put on by the respondents in support of it. For example, the represented sales figures for 2007 has nothing to do with acquiring the balance of the US asset and the global master sublicense. 231 Before going to this submission, there is the preliminary question of who has onus concerning the reasonable grounds defence. So far as the Corporations Act claims are concerned, s 769C(1) of the Corporations Act provides as follows: (1) For the purposes of this Chapter, or of a proceeding under this Chapter, if: (a) a person makes a representation with respect to any future matter (including the doing of, or refusing to do, any act); and (b) the person does not have reasonable grounds for making the representation; the representation is taken to be misleading. 232 In Cycclone at [78], Martin J in the Queensland Supreme Court considered what was required to make out a successful application in respect of misleading and deceptive conduct under s 1041H of the Corporations Act. His Honour made the point that under s 769C, where a person makes a representation (in relation to a financial product or financial service) with respect to any future matter, then, in order to establish that the representation is misleading, the applicant must show that person did not have reasonable grounds for making the representation. I agree that is the effect of the provision. 233 I accept the submission of the second and third respondents that the applicant has not attempted to discharge the onus arising under the Corporations Act. The applicant seems largely to have proceeded on the assumption that it is enough to show that the representations as to future matters (the projections as to income) turned out to be inaccurate. 234 However, for the purposes of the FTA, by s 9(2) the person asserting reasonable grounds has the onus to establish them. For the reasons advanced on behalf of Vegas, it seems to me that the respondents have, in any event, made out the representations were based on reasonable grounds. 235 Mr Backshall said that he forecast sales growth for Vegas (which appeared in the line of the draft P&L headed "Forecast Sales Growth") using the following information: (1) Historical sales figures within Vegas kept in his office including the monthly board packages and management accounts for the past four or five years. The monthly board packages included summaries of sales and financial data for the seven years prior to the relevant package. For the 10 years prior to the 2005/2006 years, the growth in sales of Vegas had averaged approximately 15% per annum. For the purpose of this basic P&L he assumed growth rates well below 15%. (2) An annual economic forecast report published by BIS Shrapnel to which Vegas then subscribed, with monthly updates. This contained economic forecasts for 6-10 years and forecast the Australian economy growing at a healthy pace in 2007/2008 and 2008/2009, with dip in 2009/2010 and 2010/2011 and returning to healthier growth in 2011/2012. (3) Financial forecasts 2007/2008 and 2008/2009 that were prepared by Mr Rayney and himself for Westpac in June 2006. Those figures were substantially the same. (4) The second summer 2006 sales comparison reports from SAP (Vegas internal enterprise resource planning software). This information summarised forward sales orders (referred to as indent sales) that Vegas had received to cover the period October‑December 2006. This information showed that sales were tracking to budget. (5) His knowledge of the industry and market gained over 24 years. In this regard, the industry was generally positive at that time and sales were consistent with the budget. (6) His regular discussions with Vegas sales staff and key retail customers, some of whom he had dealt with for over 20 years. Again, the information coming in was all positive at that time. 236 Mr Backshall says the sales figures for 2003/2004 – 2005/2006, were actuals. The sales figures for 2006/2007 were taken from Vegas' budget prepared by Vegas accounting staff, Mr Rayney and himself in May/June 2006. The 2006/2007 budget assumed growth in sales from 2005/2006 of about 9%. At the time the draft P&L and was prepared, sales were consistent, in his view, with the 2006/2007 budget. 237 Mr Backshall also gave evidence as to the calculation of growth, COGS, GP (gross profit), selling expenses, overheads and royalties, income and expense. 238 On the basis of the information available to him at the time he prepared the draft P&L, and taking into account the fact that it made assumptions regarding a hypothetical acquisition of assets by Vegas, the sale of the US sub-licence and the granting of sub-licences in China, India and the Arab States, Mr Backshall believed he had reasonable grounds for making the forecast contained in the draft P&L. 239 In fact, although Vegas eventually obtained the global master licence in June 2007, in December 2006 that issue became subject to litigation instituted by C&C that it had threatened in October 2006. Vegas did not obtain clear title to the global master licence and the remaining shares in Rdot until the litigation was settled and final payment of the settlement sum was made in March 2009. Vegas did not sell the US sub-licence despite an attempt to do so, although a new US sub-licensee did subsequently meet some of the Rdot US marketing expenditure. As a consequence of the global financial crisis, no sub-licences have been granted in China, India or the Arab States. 240 I accept Mr Backshall's evidence concerning the basis upon which this document was prepared. I also accept Mr Backshall's explanation (referred to above) as to how the forecasts were affected by a number of unforeseen circumstances. Additionally, the extensive evidence of Mr Clifford's involvement in dealings and strategies designed to oust C&C from Rdot and the North American market were very well understood by Mr Clifford, at all material times, to be plans in progress, not in any way unequivocal predictions as to the success of those corporate strategies and so he cannot be said to have been misled about the projections made on that basis. 241 I consider therefore that the respondents have made out reasonable grounds for the projections represented by the spreadsheet/draft P&L. 242 For the sake of completeness, as to the misleading and deceptive conduct claims advanced under the FTA, the second and third respondents submit there is no evidence that Mr Hart was involved in the preparation or dissemination of the spreadsheet. While that is so in a physical sense(in that Mr Hart did not prepare the document), I accept the submission made on behalf of the applicant that it was understood by Mr Hart that Mr Backshall, as managing director, would deal with Mr Clifford on his behalf and on behalf of the company following Mr Hart's initial conversations with Mr Clifford and particularly the meeting of 24 October. In my view, Mr Backshall's conduct should be treated as Mr Hart's in such circumstances. 243 In the result, I am not satisfied that the applicant relied on the pleaded sales representations. In any event, I consider the representations were reasonably based. While optimistic perhaps, I accept Mr Backshall had reasonable grounds for making the projections and that in a number of relevant respects their achievement was frustrated by unforeseen events. the bank debt representations 244 The applicant says that in late October and early November 2006, he was aware that Vegas had borrowed $8.5 million from Westpac in order to purchase the controlling interest in Rdot and to cancel the royalty stream being paid by Vegas to interests associated with Mr Preisendorfer. 245 He was also aware of the fact Vegas revenues were directly tied to the sale of surf apparel products designed and merchandised by Vegas in Australia. 246 The applicant says that in a discussion with Mr Backshall in November 2006, a little after the meeting concerning the spreadsheet document, Mr Backshall, in answer to a question in, or substantially in, terms "Are you still confident the Vegas product will sell worldwide and in particular in the US?", Mr Backshall said "Yes" and words to the effect "Our product is hot" and "C&C product is crap". 247 The applicant says that Mr Backshall at this time also confirmed the applicant's investment monies would be used to pay down the Westpac $8.5 million borrowing. 248 At this meeting Mr Clifford says Mr Backshall also said words to the effect that no dividends would be paid for 2007 but he expected dividends to recommence in 2008 in the range of $2 – $3 million. 249 Mr Clifford then says that, following this meeting, he had another meeting with Mr Hart where a substantially similar exchange took place. The words used by Mr Hart confirmed the applicant's assumption that the investment monies were to be used to pay down the Westpac $8.5 million borrowing and that the Vegas/Rusty product would sell worldwide. 250 The applicant says these answers reflected and confirmed for him what was set out in the draft proposal that Mr Backshall had prepared in 2004 about Vegas designed product selling worldwide, meaning that 70% to 80% of Rusty product sold worldwide would be product designed and merchandised in Australia. 251 The applicant says that in his meeting with Mr Backshall, Mr Backshall also asked him whether, in addition to placing the investment monies with Vegas, he could also buy some of "Mogga's" shares as part of the deal. 252 Mr Backshall and Mr Hart deny that these oral representations were ever made. Mr Backshall agrees that he raised with Mr Clifford the question of him buying Mogga's shares. He says this was in late October but that it was not linked to any such discussions as those suggested by Mr Clifford. 253 Mr Backshall also denies that at no time prior to or after Mr Clifford's investment in Vegas, did Mr Clifford ever asked him how the investment funds were to be used. He did not make any statements to Mr Clifford as to how investment funds would be used by Vegas. Mr Backshall unequivocally states that Mr Clifford never said to him words to the effect that, "I am assume my investment funds will be used to pay down the borrowings to acquire the Rusty interests?". 254 However, Mr Backshall does recall a conversation with Mr Clifford prior to his investment being taken up in which he said that no dividends would be paid in the short term but that he "hoped" that by 2008 dividends would recommence. But he did not say words to Mr Clifford to the effect that shortly after 2008, dividends would be back in the range of $2 million to $3 million. 255 Mr Hart states that, in his presence, Mr Clifford never asked any of these questions about the use of the investment funds or the paying down of borrowings taken to acquire the Rusty interests or words to that effect. Further, he never said to Mr Clifford that his investment funds would be used to pay down the borrowings to acquire the Rusty assets or words to that effect. He never asked how his investment funds were to be used by Vegas. 256 Mr Hart also states that from the time Mr Backshall took on the role of managing director, he has been responsible for the financial side of the business. Accordingly, Mr Hart says that, even if in 2006 Mr Clifford had asked it of him, he would not have been in a position to answer a question of this kind. 257 Dealing first with Mr Hart's response to the evidence levelled against him, I find his evidence to be compelling and relevant to the assessment I must make of Mr Clifford's evidence concerning this alleged representation (and generally). Given the whole background to the acquisition arrangements, whereby Mr Clifford first sounded out Mr Hart in a coffee shop meeting, and then Mr Backshall in effect took over the handling of the matter, it seems to me most unlikely and, in light of the role that Mr Hart then played in the company as an executive director, improbable that he would, on a quite separate occasion, without Mr Backshall being present, have made the statements or confirmed the assertions in the manner attributed to him by Mr Clifford. 258 Similarly, the whole sequence of events makes it, to my mind, improbable that, in the middle of November 2006, these particular matters would have been discussed in the way that Mr Clifford suggests. In any event there is very little, if any, other evidence to support a finding of meetings at this point on these topics involving the three men. 259 Further to this, I have noted earlier that Vegas had a range of banking facilities available to it in July 2006. The Vegas acquisition of a controlling interest in Rdot and termination of the royalty scheme was funded through two commercial bills from Westpac. The interest rates on these commercial bills was 6.03%, well below the 10.2% interest rate payable on the overdraft facility. I accept the submission made on behalf of Vegas that it would make no commercial sense for Vegas to have used the applicant's funds at this point to pay down the least expensive debt. 260 I also accept the submission made on behalf of Vegas that the funds provided to permit the Sheraz share acquisition were not used to repay shareholders loans of $500,000 as alleged by the applicant or to reduce a short term overdraft facility. In fact immediately prior to the Sheraz share acquisition, the Vegas overdraft facility was in credit. The funds were used as an additional working capital for the Vegas business. The applicant did not cross‑examine Vegas witnesses on these issues. 261 The alleged bank debt representations are not supported by any documentary evidence that corroborates them. The first time that the allegations were raised was in these proceedings. While I do not doubt that, in the absence of documentary evidence, oral evidence of representations made might be persuasive in the circumstances of some cases, I am not persuaded by the applicant's evidence that the oral representations he pleads were in fact made. 262 In light of my finding that the alleged bank debt representations were not made, it is strictly unnecessary for me to deal with the respondents' submissions that, in any event, the alleged representations could not have been material. They contend it is inherently implausible to suggest that the proceeds of the investment should have been applied to reduce the $8.5 million long term structured debt as opposed to any other debt. They say no advantage would flow from reducing this debt in preference to any other, and the possibility that the applicant relevantly relied upon such representations must be considered remote. If I had been requested to decide this issue, I would have accepted the respondents' submissions. 263 It is also unnecessary for me in these circumstances to deal with the issues whether there were reasonable grounds for making the alleged representations. 264 In the result, I am not satisfied that Mr Clifford has discharged the onus he bears to prove the bank debt representations were made. the product representations 265 The evidence relied upon by the applicant in claiming misleading and deceptive conduct by reference to these representations has been set out in the preceding section dealing with the bank debt representations. I need not repeat it here. The applicant says these representations were made in separate meetings he had, first with Mr Backshall and then with Mr Hart in November. 266 In respect of these representations, unlike the representations pleaded in respect of the bank debt and the sales, the applicant does not allege the representations were in respect of future matters. 267 Messrs Backshall and Hart deny that the oral representations were ever made. 268 Vegas submits that the suggestion that Vegas "manufacture and sell" product worldwide was contrary to the whole licensing business model that had been established by Rusty, as Mr Hart explained. Vegas does not generally manufacture its products in Australia. Most of the manufacturing takes place in Asia by third parties. Vegas says the applicant was well aware of the business model from his existing knowledge of the operation of the company and his skills in intellectual property and licensing. This plainly is so. 269 Vegas notes that the submission made by the applicant's counsel in opening the case that the contents of annexure E to the applicant's witness statement, dated 19 October 2009, was a continuing representation relied on by the applicant was not set out in the applicant's witness statement nor supported by the evidence. Nor does his evidence in his witness statement at [33], [42] and [45] support his pleading at [19] of his amended statement of claim or the particulars provided. The applicant conceded in cross‑examination that his [19] "could be better worded" (transcript, 418). 270 Vegas also points out that the language used by the applicant to describe the alleged representation changed from the time he made his Family Court affidavit (see exhibit 9 at [132]) to these proceedings. 271 Vegas says the applicant was aware that, in October and November 2006, C&C held the US sub-licence, and therefore it was not possible for Vegas/Australian designed, manufactured and distributed Rusty apparel to be sold in the US market. 272 Vegas says the applicant also understood the need to keep contemporaneous records documenting conversations and events of transactions as they occurred, but did not do so. 273 Vegas contends that, to the extent the product representations are alleged to be in writing, the document referred to by the applicant , that is to say the spreadsheet, does not support the alleged misrepresentation. The spreadsheet was not prepared, nor provided to the applicant, for the purposes of the acquisition of the shares. Mr Backshall was not cross‑examined on this issue. 274 The second and third respondents submit that while the draft 2004 proposal that the applicant relies on as "background" is mentioned, it is not pleaded that it comprised in whole or in part a representation upon which the applicant relied. These respondents say the 2004 proposal was entirely hypothetical and was provided to the applicant two years earlier in an entirely different context of a solicitor/client relationship and was privileged and confidential and concerned a possible transaction with Mr Preisendorfer. 275 These respondents submit that, absent the draft 2004 proposal, the statements the applicant alleges were made to him are meaningless. But in any event, that proposal does not in its terms support the pleaded representation. Again the importance of the applicant proving precise words used rather than asserting their substance or effect has significance in this context. 276 The second and third respondents submit that the applicants evidence (transcript 412, lines 31 – 39) was that Vegas could force C&C to take the Australian designed product and sell it in the USA. However, this evidence was entirely inconsistent with the terms of the 2004 draft proposal which contemplated the termination or acquisition of the C&C licence and the appointment of a new licensee, namely Vegas USA. 277 The allegation from the 2004 draft proposal was that 70% - 80% of Vegas designed and merchandised product would be sold in the USA market: transcript 60, lines 2 -30. However, the product representations pleaded in [19] of the amended statement of claim relate to a Vegas Australian "designed, manufactured and distributed" Rusty apparel and alleged that it was represented that such apparel would be acceptable in any market worldwide retailing Rusty brand products. The respondents contend the answers to particulars concerning [19] of the statement claim (answers 7 (b) and (c)) make it clear that the applicant's allegation relates to product manufactured by Vegas. In fact Vegas does not manufacture product at all as it subcontracts third party manufacturers to do it. 278 These respondents contend that the only evidence relied upon by the applicant as to the alleged falsity of the product representation is Mr Backshall's memo of 22 April 2008. However, the relevant comment from this memo was that "licensees must have the ability to customise products for their markets". This is entirely consistent with the draft 2004 proposal that a USA design team would be responsible for developing the 20% - 30% of product required to suit the different needs of the USA market and does not support the falsity claimed. 279 The balance of the product representations are alleged to be in writing in the form of the spreadsheet. These respondents submit that there is nothing in that spreadsheet to support any representation of the sort alleged. The applicant does not seek to plead or prove any surrounding circumstances that would support a finding that the spreadsheet carried the relevant representation as pleaded. 280 I accept the submissions made by the respondents. Ultimately, the submission made on behalf of the applicant is that, because the saleability of Vegas designed and merchandised Rusty product in Australia (and worldwide) is critical to the revenue Vegas earns, a note made by Mr Clifford on the front page of the unaudited 2006 statutory accounts as to interest payable on a $2.5 million loan and dividends payable to a 7.5% Vegas shareholder, on the history of dividends paid by Vegas to shareholders since 2002, supports the conclusion that he sought and obtained an assurance that Vegas designed, or designed and merchandised product would sell worldwide or substantially worldwide. In my view, the evidence simply does not go to support such a "conclusion", that is to say, such an inference. 281 I do not doubt that at different times the topic of the worldwide sales of Rusty product developed, generally speaking, by Vegas was touched upon and discussed by the partners. I consider the more probable inference to be drawn from all the evidence is that Mr Clifford made a close examination of the spreadsheet forecasts to produce his own independent assessment of what would be required, by way of sales in the US, to meet the forecasts. However, I am not satisfied the document itself carries any inference that conforms with Mr Clifford's personal assessment, especially in the absence of any other proved conduct or surrounding circumstances. Mr Clifford knew exactly at material times what was necessary to advance Vegas' interest in the Rusty world – namely, to remove C&C from Rdot and North America. The product representations are inconsistent with his knowledge and understanding at that time. In my view, it is not open to the applicant to attempt to ground an inference in the 2004 proposal that was prepared 2 years or more earlier, on a distinct occasion for another purpose. 282 I do not accept that Mr Backshall and Mr Hart made representations as alleged in any meetings such as those alleged by the applicant in November. I prefer the evidence of Messrs Backshall and Hart to that of the applicant in that regard. 283 In the result, I am not satisfied that the applicant has discharged the onus he bears to prove the making of the alleged product representations. non-disclosure of material facts 284 Applicant's case: Finally, Mr Clifford points to the following undisclosed information and sequence of events to prove he was misled and deceived by the respondent's silence: · The monthly board package issued to shareholders (but not him) on or about 10 July 2006 showed sales for June 2006 were $1,069,319 under budget and sales for January to June 2006 were $2,639,289 under budget. · On 28 July 2006, Vegas' overdraft facility with Westpac had a limit of $1,500,000 and was drawn to $1,900,548, being $400,548 in excess of the limit. · On 3 August 2006, Vegas' overdraft facility with Westpac had its limit of $1,500,000 increased to $2 million and was drawn to $2,194,513, being $684,513 in excess of the original limit. Mr Clifford says the limit had been $1,500,000 since at least 2002, as disclosed in Vegas' financial reports. · Or about 10 August 2006, the monthly board package showed sales for July 2006 was $621,166 under budget and sales for January to July 2006 were $3,260,455 under budget. · On 31 August 2006, shareholders of Vegas in combination paid $1 million to Vegas as long term shareholder loans. · On 7 September 2006, Mr Hart met with Mr Clifford to discuss Mr Clifford's "investing and joining Vegas". Mr Hart informed Mr Backshall that Mr Clifford was "interested in becoming a shareholder" and Mr Backshall discussed the issue with other shareholders of Vegas but some of the foregoing information was mentioned. · On or about 10 September 2006 the respondents were aware that sales for August 2006 were $2,348,115 under budget and sales for January to August were $5,607,893 under budget. · On 29 September 2006, Vegas' overdraft facility with Westpac had a limit of $1,500,000 which was drawn to $1,780,201 being $280,201 in excess of the limit. · On 24 October 2006, Vegas' CFO, Mr Rayney, met with Westpac and, in an email exchange on 25 October 2006, explained the use to be made of Mr Clifford's funds "going into Vegas" to Westpac, including "repayment of any existing or planned shareholder loans" from the "Clifford injection". · On 26 October 2006 Mr Clifford wrote to the respondents confirming an intention to take up an invitation to invest, "subject to due diligence work on the last three years audited accounts with a focus on the use to be made of the funds, revenues, expenditures and the history of dividend payments to shareholders". · The next day, on 27 October 2006, Vegas' overdraft facility with Westpac of $1.5 million was increased to $2 million and was drawn to $2,474,001, being $474,001 in excess of the new limit to $974,001 in excess of the limit disclosed in the statutory accounts; · On 3 November 2006, Vegas' overdraft facility with Westpac had its limit of $1.5 million increased to $2.5 million and was drawn to $2,421,946; · On 17 November 2006, Vegas' overdraft facility with Westpac had its limit of $1.5 million increased to $3 million and was drawn to $1,739,899.77, being $239,899.77 in excess of the original limit. · On 30 October 2006, shareholders of Vegas provided shareholder loans of $260,000, $100,000 of which was from Mr Backshall. · On 30 November 2006, shareholders of Vegas provided shareholder loans of $240,000, $200,000 of which was from Mr Hart. · On 30 November 2006 he met with Mr Backshall at the offices of Vegas at which time he signed his letter to the respondents dated 29 November 2006. The letter said in part that he had relied upon the statutory accounts provided to him by the respondents and Vegas' "projected income upon the acquisition of the global licence and a moderately improved performance by C&C in the North American Market". The only material provided to Mr Clifford with "projected income" was that contained in the spreadsheet and the explanation given to him by Mr Backshall of the "forecast sales growth for Vegas" he had prepared. · On 10 December 2006, by the monthly board package, the respondents were aware that sales to November 2006 were only $155,809 (or 0.75%) ahead of sales to November 2005 and sales for December 2006 to June 2007 needed to beat the 2005 annual results by $4,027,399 to even be anywhere near the sales for 2007 represented to Mr Clifford by the respondents in the spreadsheet. · The respondents received updates of sales orders for periods up to six months in advance. The sales orders for the period January to June 2007 were $18,870,555 against required sales to make the 2007 budget ($45,512,163) of $21,790,091. Of the $18,870,555 of sales orders for January to June 2007, $2,885,343 was rejected. This was 15.3% of sales, significantly higher than the "comfortably under 5%" resulting from the respondents' "focus on minimising amount of excess inventory". This meant that, by about 10 December 2006, on the respondents own figures, to the knowledge of each respondent, Vegas was going to fall short of its represented sales by $3,863,064, even if the rejected orders were only 5% and not 15.3%. · Vegas' sales for December 2006 were $1,568,760 under budget for December 2006. · On 14 December 2006, Vegas repaid shareholders' loans of $490,000, $200,000 to Mr Hart, $100,000 to Mr Backshall. · On 19 December 2006, Vegas paid the applicant's funds into its overdraft facility. 285 The applicant says the respondents did not disclose any of these matters, not even at or after the 30 November 2006 meeting (a reference to the occasion on which he signed the 29 November letter to Vegas) when he made known his intention to invest in reliance on the information provided by the respondents, subject to Vegas obtaining independent legal advice on the transaction. 286 Vegas' case: Dealing with the non-disclosure of sales figures, Vegas recognises that the monthly board package issued around 10 August 2006 showed that for the month of July 2006 actual sales were below the budget that had been prepared. However, Vegas refers to Mr Backshall's evidence (witness statement at [108]) (upon which he was not cross-examined) to emphasise that the sales figures for 03/04-05/06 were "actuals". There Mr Backshall says the sales figure for 06/07 was taken from Vegas' budget prepared by Vegas accounting staff, Mr Rayney and himself in May/June 2006. The 06/07 budget assumed growth in sales from 05/06 of about 9%. At the time the draft profit and loss statement was prepared, sales were consistent with the 06/07 budget. 287 Vegas also challenges the accuracy or completeness of the account of the dealings between Vegas and Westpac referred to by Mr Clifford. Vegas says that Mr Clifford had been the lawyer to Vegas since the late 1980s and no important decisions were made by Vegas without consulting with him. Mr Clifford was a friend and business adviser to both Mr Backshall and Mr Hart (Mr Backshall's witness statement at [36]; Mr Hart's witness statement at [17]; transcript, 131). Mr Clifford and Mr Backshall surfed together (Mr Backshall's witness statement at [36]; transcript, 132-134). From July 2006, Mr Clifford was chairman of Rdot and one of Vegas' nominated directors on that company (Mr Backshall's witness statement at [78]; exhibit 80; exhibit 81; transcript, 125). Vegas says Mr Clifford advised Vegas extensively on all aspects of the acquisition of Mr Preisendorfer's interests of 51.4% of the issued shares in Rdot and termination of the royalty stream that Vegas had previously paid to Mr Preisendorfer's interests (see Mr Backshall's witness statement at [38]-[51], [56]-[58], [66]-[67], [73]; transcript, 123, 128‑129). The Vegas acquisition of Mr Preisendorfer's interests, Vegas emphasise, was funded by Westpac (Mr Backshall's witness statement at [68] and exhibit 218 at 1126). 288 Vegas say that, as of July 2006, Vegas had various financing facilities with Westpac, including an overdraft facility with a limit of $1.5 million. The shareholders of Vegas each provided guarantees to Westpac. Vegas point to the fact that Mr Clifford gave advice regarding the Westpac documentation and signed documents associated with the Vegas acquisition (see, for example, Mr Backshall's witness statement at [71]; exhibit 77; transcript at 390). Vegas submits it can be inferred from these matters that, in July 2006, Mr Clifford knew of the guarantees provided by Vegas shareholders to Westpac. At transcript 391, Mr Clifford, when pressed about these matters, said he "might have known" but does not remember. 289 In or about August 2006, Vegas says it was in discussions with Westpac and requested of Westpac an increase in borrowings to provide working capital for Vegas to meet a shortfall in cash flow. On 2 August 2006 Westpac agreed a variation to Vegas' finance arrangements to increase the limit of the overdraft facility to $2 million on the basis that it was to reduce to $1.5 million by 8 September 2006. In these circumstances, Vegas contends there is no evidence that the Westpac overdraft facility was increased by $2.5 million at any time as is alleged in para 7 of the amended statement of claim. 290 Vegas say that as Westpac would only increase the limit of the overdraft facility by $500,000, Mr Backshall approached the shareholders to loan $1 million to Vegas (see Mr Backshall's witness statement at [80A]). 291 Vegas point out that by early September 2006, the limit on the overdraft facility was reduced to $1.5 million (Mr Backshall's witness statement at [89]). 292 As to the shareholders' loans, Vegas says there is no issue that in August 2006 all of the shareholders of Vegas provided shareholders' loans to Vegas in the aggregate sum of $1 million for working capital, and refer to Mr Backshall's witness statement at [81A]. 293 Vegas says that, by at least November 2006, Mr Clifford knew of these shareholder loans. In this regard, Vegas referred to the evidence of Mr Sutton (witness statement at [11]), which was not challenged. Mr Sutton's evidence was that he mentioned the loans to Mr Clifford at the time he agreed the sale of C Breeze Pty Ltd shares to Mr Clifford. Mr Clifford, at transcript 424, said he "can't say [Mr Sutton] definitely didn't say it, but I don't remember him saying it". 294 Vegas contends that by reference to the knowledge that Mr Clifford had concerning discussions between Vegas and Westpac in July and August 2006, it is open to find that he knew of the shareholder loans before November 2006 when Mr Sutton says he spoke with him. Vegas submits that Mr Clifford's evidence to the contrary (transcript, 399) should not be accepted. 295 In relation to the September/October discussions with Westpac, Vegas says that on 29 September 2006, Westpac agreed a variation to Vegas' finance arrangements to increase the limit of the overdraft facility by $500,000 on the basis that it was to reduce to $1.5 million by 30 November 2006 (see Mr Backshall's witness statement at [89] and p 1423). 296 Vegas says the monthly board package issued around 10 October 2006 showed that actual sales were slightly below budget (Mr Backshall's witness statement at [91]). By 16 October 2006, forward orders received by Vegas for the period January to April 2007 were up 7.8% from the orders received in the same period in 2006 (Mr Backshall's witness statement at [92] and p 1511). 297 In early November 2006, Westpac agreed a variation to Vegas' finance arrangements to increase the limit of the overdraft facility by $500,000 to $2.5 million (see Mr Backshall's witness statement at [124] and pp 2869, 2871 and 2885). 298 On 14 November 2006, Vegas says Westpac agreed a further variation to Vegas' finance arrangements to increase the limit on the overdraft facility by a further $500,000 to $3 million, on the basis it was to reduce to $1.5 million by 30 November 2006 (see Mr Backshall's witness statement at [124] and pp 2869, 2871 and 2885). 299 Around November 2006, Vegas says it drew down on the overdraft facility to a maximum of around $2.3 million (Mr Backshall's witness statement at [124] and pp 2948-2966). By 28 November 2006, Vegas says the limit on its overdraft facility was reduced to $1.5 million (see Mr Backshall's witness statement at [124] and p 2901 ‑ 2906). Thus Vegas say there is no evidence that the Westpac overdraft facility was increased by $2.5 million as alleged in the amended statement of claim at any time. 300 Vegas submits the documents relied on by Mr Clifford (annexure AA to Mr Clifford's witness statement of 2 December 2009) does not support Mr Clifford's proposition, namely, that increases to the Westpac overdraft facility in October or November 2006 were conditional upon Vegas' shareholders loaning $500,000 or any sum. 301 As to the shareholders' loans in October/November 2006, Vegas says the facts are as follows. In October and November 2006, shareholders of Vegas provided shareholder loans totalling $500,000 to provide further working capital by reason of an overpayment to the Australian Taxation Office (see Mr Backshall's witness statement at [119]). 302 By 10 November 2006, actual sales and profit for 2006/2007 were ahead of budget (Mr Backshall's witness statement at [122] and p 2931). 303 On 16 November 2006, Vegas received a refund of around $500,000 from the ATO. 304 By 10 December 2006 actual sales and profits for 2006/2007 were ahead of budget (see Mr Backshall's witness statement at [133]). 305 On 14/15 December 2006 (prior to the Sheraz acquisition of shares), the shareholder loans were repaid. 306 Vegas says, to the extent it is relevant at all, given the shareholders' loans were repaid prior to the Sheraz acquisition, by at least November 2006, Mr Clifford knew of the shareholder loans, having regard to the evidence of Mr Sutton which was not challenged. By reason of all of these matters, Vegas submit it is open to find that the Mr Clifford knew of the shareholders' loans before December 2006. 307 So far as the overdraft facility in the period 25 July to 30 November 2006 is concerned, Vegas relies on the facts set out above and says that by 28 November 2006 the limit of Vegas' overdraft facility was reduced to its pre-August 2006 level of $1.5 million. The $1.5 million overdraft appears in the un-audited accounts for the year ended 30 June 2006 (Mr Clifford's witness statement dated 19 October 2009, at 283). Mr Clifford concedes that he reviewed these un-audited accounts prior to acquiring the shares. 308 Vegas says the overdraft facility was in credit immediately prior to the acquisition of shares by Sheraz. 309 It follows, Vegas submits, that the funds provided for the Sheraz acquisition were not used to repay the $500,000 in shareholder loans. These were paid out on 14/15 December 2006 prior to the Sheraz acquisition. At the time the Sheraz funds were paid into the overdraft facility on 19 December 2006 the account was in credit and remained in credit until late January 2007. Mr Clifford's funds could not, therefore, "reduce" the overdraft facility, given it was already in credit. 310 Vegas strongly contends that the Court should infer that Mr Clifford knew that the limit on Vegas' overdraft facility varied during the second half of 2006 and his evidence that he did not know of this (at transcript 446) should not be accepted. In this regard, Vegas relies on the following evidence: · As the provider of legal services to Vegas for approximately 17 years, Mr Clifford has acquired a reasonable historical knowledge of Vegas (Mr Backshall's witness statement at [35]-[36] and Mr Clifford's witness statement dated 19 October 2009 at page 294). · Mr Clifford was the sole lawyer to Vegas for 17 years, a commercial barrister in Western Australia, a close and trusted advisor to Mr Hart (Mr Hart's witness statement at [15] and [17]) and someone who Mr Backshall trusted completely and highly valued his opinions and guidance (Mr Backshall's witness statement at [35] and [36]). · Mr Clifford was a director of Rdot and the chairman of Rdot and in those positions was very aware of solvency issues facing Rdot (see transcript 425) and Rdot's need for financial support from its shareholders who included Vegas (Mr Backshall's witness statement at [82], [83] and [121A]). · Mr Clifford was in regular contact with the CFO of Vegas, Mr Rayney (see transcript 176, 180 and 217). An example of the relationship is the fact that Mr Clifford maintained contact with Mr Rayney after Mr Rayney resigned from Vegas (transcript 247). · In late 2006, Mr Clifford was regularly at the offices of Vegas (Mr Backshall's witness statement at [74], [96A] and Mr Hart's witness statement at [23] and [26]) and Mr Sutton's witness statement at [11] and transcript 160). · Vegas made available to Mr Clifford all of its documents, including financial records (Mr Backshall's witness statement at [96A]). · As a legal practitioner and commercial lawyer skilled in a variety of commercial areas Mr Clifford was well aware of the steps that ought to be taken in a due diligence of any company prior to investing in it. In fact, Mr Clifford prepared a 20 page memorandum on 1 April 2004 on this topic (Mr Backshall's witness statement at [217]). Mr Clifford was in a better position to know what documents and information he required for the purpose of his due diligence. · To the extent that it is necessary to accept one version of events to another, Mr Clifford's evidence should not be accepted because: (1) Mr Clifford was selective in the preparation of his witness statement (transcript 167) and selective in his discovery (transcript 168, 678-679); (2) Mr Clifford was evasive in cross-examination (see, for example, the "dancing bear" topic at transcript 141-144); (3) Mr Clifford should not be accepted as a witness of credit. In general he created the impression of a person who is willing to invent evidence rather than concede any matter which might be unfavourable to him (see his answers regarding the date he received the C&C process at transcript 180-199; Mr Clifford's fresh allegation that Vegas' CFO was "discouraged" from providing Mr Clifford with full disclosure of Vegas' financial records in 2006 at transcript 431-432); (4) Where there are contemporaneous documents, those documents should be preferred to Mr Clifford's versions of events. By way of example, Mr Clifford's memorandum of 19 July 2007 to shareholders of Vegas candidly shows his assessment, 7 months after the Sheraz acquisition, of the value he ascribed to the Sheraz acquisition. In that memorandum he concluded: "on any view of Vegas it is worth between two and three times more than he was at 5 June 2007 …If the brand is successfully relaunched in the US and Europe in five years, the value of the current partners' equity will be many multiples higher than it is today…" (See Mr Backshall's witness statement at [163] and p 4954/exhibit 142) 311 Second and third respondents' case: Messrs Hart and Backshall generally support the submissions made by Vegas. Messrs Hart and Backshall say, in respect of the allegation that Vegas was not meeting its budgeted sales in the period July-October 2006, that Mr Clifford has only attempted to prove the knowledge of Messrs Hart and Backshall of the position for the months of July and August 2006 (see transcript 701-703). This was at the very beginning of the relevant financial year to which the budgeted sales figures related and was well before the acquisition by Sheraz of the shares. They submit Mr Clifford has not attempted to rebut the evidence contained in the monthly board packages annexed to the witness statement of Mr Backshall that evidences the facts alleged in para 5 of the substituted defence of Messrs Hart and Backshall. In particular, Mr Clifford has not disputed the evidence of Mr Backshall that by 10 December 2006 actual sales for July to November 2006 were ahead of budget. In his witness statement at [133], Mr Backshall says that around 10 December 2006 he received a monthly board package which contained the Vegas actual sales figures from 1 July 2006 to the end of November 2006. Total income was AUD$22.153 million against a budget of AUD$21.977 million. Total expenses were $6.959 million against a budget of $7.125 million. Net profit before tax and interest was $2.348 million against a budget of $ 2.037 million. 312 Thus, these respondents contend that Mr Clifford's case based on non-disclosure of an alleged failure to meet budgeted sales is based on allegations of fact that have not been proven. To the extent that certain limited facts are proved they are immaterial. 313 Messrs Hart and Backshall support the factual position contended for by Vegas and submit there is no evidence to suggest that it was a condition of any agreement with Westpac to increase the overdraft facility limit that Vegas' shareholders provide loans to Vegas for working capital. 314 They also submit there is no evidence to suggest that Mr Hart knew of the status of the overdraft facility in this period. 315 Messrs Hart and Backshall submit that the increases to the overdraft facility limit were temporary and did not extend to or beyond the date of Sheraz's acquisition of shares. Accordingly, they submit Mr Clifford's case based on non-disclosure of increases in, or exceeding, the overdraft facility limit depends on allegations of fact that are incorrect or, to the extent that they are correct, are immaterial. 316 Messrs Hart and Backshall submit the true factual position in relation to the shareholders' loans is: · In August 2006, the shareholders of Vegas provided loans to it in the aggregate sum of $1 million to provide working capital (Mr Backshall's witness statement at [81A]); · In October and November 2006, the shareholders of Vegas provided further loans to it in the aggregate sum of $500,000 to provide further working capital by reason of an overpayment of $500,000 to the ATO made in June 2006 (Mr Backshall's witness statement at [119]); · On 16 November 2006, a refund of $466,710 was received from the ATO (Mr Backshall's witness statement at [119]; and p 2953 thereto); · Vegas repaid the $500,000 to shareholders on 14 December 2006 (Mr Backshall's witness statement at [139] and pp 3333-3339 thereto and exhibit 220); · The balance of the shareholders' loans in the amount of $1 million remains outstanding (Mr Clifford's witness statement dated 19 October 2009 at p 347 and p 395). 317 Messrs Hart and Backshall also rely on the evidence of Mr Sutton who said that Mr Clifford was advised in late November 2006 that shareholders had made loans to Vegas. Mr Clifford's evidence was that he could not definitely say that Mogga did not say that he had to put money back into Vegas, but he did not remember him saying it (transcript at 424). They point out that Mr Sutton was not cross‑examined as to this evidence. 318 They deny that $500,000 of the proceeds of $2,370,986.57 received by Vegas for the issue of shares to Sheraz was used to repay shareholders' loans. Rather the $500,000 had been repaid on 14 December 2008 (139] of Mr Backshall's witness statement, pp 3333-3339 thereto and exhibit 220). 319 Messrs Hart and Backshall further contend that the purchase price paid by Mr Clifford for the shares was not used to "pay down the undisclosed increase in Vegas' loans" as alleged by the applicant. In fact: · By 28 November 2006 (before the relevant share issue and acquisition) the amount drawn down by Vegas from the overdraft facility had been reduced to $1.5 million (Mr Backshall's witness statement at p 2942). · At 18 December 2006 (the day before the share issue and acquisition by Sheraz), the amount drawn down by Vegas from the overdraft facility was only $74,732.84 (Mr Backshall's witness statement at p 2928). · On 19 December 2006 (the day of the share issue and acquisition) and immediately prior to receipt of the proceeds of the share issue, the overdraft facility had a positive balance of $368,088.73 (see Mr Backshall's witness statement at [143] and p 2928 thereto). · The proceeds of the share issue were paid by Vegas on 19 December 2006 to the overdraft facility account (Mr Backshall's witness statement at [143], [146] and p 2928 thereto). 320 Messrs Hart and Backshall submit that it can be concluded there were no material facts or matters regarding shareholder loans that were not disclosed to Mr Clifford. 321 They also submit further to these submissions and in any event that the whole of the relevant circumstances concerning Mr Clifford's involvement with Vegas permit only the following conclusions: · Mr Clifford already knew much (if not enough) that was relevant to his investment decision from his longstanding position as legal advisor to Vegas, particularly his detailed involvement in the purchase of Rusty Preisendorfer's interest in Rdot. · Mr Clifford knew better than the respondents what information to request in order to conduct a proper due diligence for the purpose of his investment decision. · Against that background, it must have been assumed that Mr Clifford knew all he needed/wanted to know to make his investment decision and, if he did not, he would have asked for more information. · Accordingly, Vegas and its directors could not have been or expected or assumed they were, under any obligation to consider what Mr Clifford might or might not know, or what he might or might not be interested in or need to know for the purposes of his investment decision. 322 Messrs Hart and Backshall submit that the relevant circumstances that support these conclusion are: · Mr Clifford was a trusted advisor of Vegas and had been for some 15 years. · Specifically, he advised Vegas in great detail on what due diligence was, what it entailed and how it was to be carried out (exhibit 22). · He proffered to Vegas, Messrs Hart and Backshall his views as to he value of Vegas and thereby held himself out as someone sufficiently informed and capable of forming that opinion (Mr Backshall's witness statement at [47] and p 317 thereto transcript at 130 and transcript at 322-323). · He advised Vegas on commercial matters, including the Rusty Preisendorfer transaction (see Mr Backshall's witness statement at [35] and [36]). · He initiated the proposal to invest in Vegas as the idea did not come in the first instance from any of the respondents (see Mr Hart's witness statement at [19] and [20] and Mr Backshall's witness statement at [84]). · His proposal came on the back of Rusty investing in Vegas and the price of Mr Clifford's acquisition was set by the price struck in the Rusty transaction (see Mr Backshall's witness statement at [96A] and [97]; exhibit 92; transcript at 409; annexure M at p 293 of Mr Clifford's witness statement dated 19 October 2009). · Mr Clifford was the chairman of Rdot and knew it was in deep financial trouble and that Vegas had to contribute to alleviate that stress (transcript at 397; Mr Backshall's witness statement at [120]-[125] and [153]; exhibits 100-111 and 113-122). · As chairman of Rdot, it could be assumed that Mr Clifford was obliged in that role to ascertain the financial health of Vegas as the (interim) licensor. · The due diligence work Mr Clifford sought to undertake was limited to Vegas' audited accounts for the financial years 2004, 2005 and 2006, that is to say, historical financial information (see Mr Clifford's witness statement dated 19 October 2009, annexure G and annexure M). · The factual matters Mr Clifford alleges ought to have been disclosed are said to have arisen in the 2007 financial year, subsequent to the last of those accounts. 323 Consideration: It is well understood that whether a party has a duty to disclose information to another, such that their conduct in not making disclosure will be considered misleading or deceptive, or likely to mislead to deceive, will depend upon the circumstances of the case. The authorities establishing this proposition are too numerous to mention all of them. In Winterton Constructions Pty Ltd v Hambros Australia Ltd (1992) 39 FCR 97, Hill J found that the respondent merchant banker had no duty to disclose to the applicant information concerning a developer's financial affairs and other matters between the merchant banker and the developer, and so no contravention of s 52 of the TPA was established. Hill J made a number of points (at 113-114) that should be borne in mind, including that s 52 is directed against a class of conduct, namely, that which is misleading and deceptive or likely to mislead or deceive, therefore, one should not too readily categorise a case as a "silence case". His Honour noted that in Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83, Lockhart J at 95 had emphasised that silence may be relied on in order to show a breach of s 52 when the circumstances give rise to an obligation to disclose relevant facts. Hill J, by reference to other authority, noted that the failure to advise may, in a particular case, be conduct which is misleading and deceptive, but only because the person to whom the representation was originally made is entitled to expect to be informed of that information. Hill J drew his analysis of the authorities together and stated (at 114), "Whether such a duty exists will clearly depend upon all the circumstances of the case". In Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31, the Full Court of the Federal Court (Black CJ, Gummow and Cooper JJ) had occasion to deal with the circumstances in which silence may constitute a contravention of s 52 of the TPA. Black CJ, at 32, observed that silence is to be assessed as a circumstance like any other. The Chief Justice added: To say this is certainly not to impose any general duty of disclosure; the question is simply whether, having regard to all the relevant circumstances, there has been conduct that has misleading or deceptive… To speak of 'mere silence' or a duty of disclosure can divert attention from that primary question. More recent authorities, such as Townsend v Roussety & Co (WA) Pty Ltd (2007) 33 WAR 321 (Buss JA at [89] – [90]) and Vitek v Estate Homes Pty Ltd [2010] NSWSC 237 (Vitek) (Barrett J at [34] – [40]) survey the authorities and confirm this same approach has consistently been taken over time in "silence" cases. In Vitek, at [40], Barrett J considered that the test is one of "reasonable expectation". That is to say, an entitlement to expect or infer that the other party will disclose, if it exists, will be found in the whole of the circumstances in which the parties dealt with one another. I respectfully agree this test may be drawn from the authorities. In the end though, whether or not particular conduct complained of is misleading or deceptive, or likely to mislead or deceive, is to be determined by reference to all the relevant circumstances. 324 Mr Clifford, as applicant, also bears the onus of establishing the materiality of the alleged non-disclosure. This too is well understood. In Fraser v NRMA Holdings Ltd (1995) 55 FCR 452, a case which confirms that the question whether or not there is a contravention of s 52 depends upon all the circumstances of the case (see, for example, the discussion at the Full Federal Court at 463-465), the Full Federal Court, at 467, emphasised that where the contravention of s 52 alleged involves a failure to make a full and fair disclosure of information, the applicant carries the onus of establishing how or in what manner that which was said involved error or how that which was left unsaid had the potential to mislead or deceive. Errors and omissions to have that potential must be relevant to the topic about which it is said that the respondents' conduct is likely to mislead or deceive. The Court (Black CJ, von Doussa and Cooper JJ) at 468, then added: The need for an applicant to establish materiality is of particular importance in a case like the present one where the proposal is complex, and involves difficult questions of commercial judgement in matters of degree and conjecture as to the future about which there is room for a range of honestly and reasonably held opinions. If every possible formulation of the commercial objective of the proposal, and arguments for and against every theoretical possibility, was set forth the total package of information to members would be likely to confuse rather than to illuminate the issue for decision, even if the people having a familiarity with corporate law and commerce. These comments were made at a time when s 51AF of the TPA had not been enacted. They are apposite to a misleading or deceptive conduct claim under the Corporations Act and the FTA. 325 From all the evidence, I am left with the strong impression that Mr Clifford was very pleased to take up the invitation to invest in Vegas when it was offered to him by the company's directors in October 2006. I have found above that the essential details of the invitation were settled at a meeting at Vegas' offices between Messrs Hart and Backshall and Mr Clifford on the evening of 24 October 2006. While he had not been involved in the management of the business, Mr Clifford had come to understand much about Vegas' operations during his 15 or so years close involvement as the company's trusted legal adviser. His evidence overall disclosed a detailed appreciation of what Vegas did and, generally speaking, how it did it. He liked the idea of the business. He liked surfing. He enjoyed his association with such legendary surfing people as Rusty Preisendorfer. He was a good friend socially of Mr Backshall and surfed with him. By mid 2006, following the Vegas acquisition of a controlling stake in Rdot, and associated dealings with Mr Preisendorfer, all concerned including Mr Clifford considered Vegas' star was on the rise. The directors and Mr Clifford were talking about an IPO – the floating of the company on a securities exchange. This offered the shareholders the prospect of turning their current holdings in a small private company into highly valuable holdings in a much larger, potentially world-wide public company. While the possibility of Mr Clifford joining Vegas may well have been mentioned at earlier times by Mr Hart, as Mr Clifford suggests it was, I have no doubt that Mr Clifford ultimately initiated the possibility of his becoming an investor in Vegas in September 2006, following Vegas' significant commercial plays. He chose first to speak to Mr Hart on his own to sound out the idea. Mr Hart was the major shareholder. Without his support the idea could effectively go nowhere. As it transpired it suited Mr Hart and Mr Backshall (and the other shareholders) to have Mr Clifford "on board", as they put it, in order to advance the IPO options, as well as to provide a range of ordinary legal services to Vegas effectively on a reduced fee basis. It was agreed that Mr Clifford should become a "partner" and part of the executive management team (like most of the other "partners") and paid as such, not at the higher rates of a senior independent barrister. 326 Mr Clifford, soon enough after Sheraz was registered as the holder of the Vegas shares, found himself defending the C&C litigation that C&C had been threatening since at least October. He, along with Rdot, Vegas and Messrs Hart and Backshall, was a party to the litigation. He handled the litigation in house for Vegas and instructed lawyers in California to defend the proceedings. An interim injunction soon complicated matters. However, Mr Clifford did not necessarily see the litigation as a setback for Vegas. He told Mr Backshall as soon as the proceedings were launched that C&C had made the wrong move in bringing the litigation. I do not doubt that he said this and meant it. He considered that C&C were in fact playing into Vegas' hands, by presenting Vegas with a means of hastening the removal of C&C as a rival in the operation of Rdot and the North American Rusty operation. 327 All the evidence, including Mr Clifford's own testimony, suggests Mr Clifford is, and was at material times, not only an astute lawyer and a good judge of a commercial opportunity, but also a disciplined and resolute person. I have no doubt that the good estimation the directors had made of him, over the years he had been advising the company, was well based. His advice and commercial stratagems were based on a deep understanding of how his client's business worked and an appreciation of where its strengths and weaknesses, and future, lay. His legal expertise combined with his apparent commercial savvy was invaluable to them. The level of confidence the directors had in Mr Clifford was exemplified by their invitation to him to become a director and chairman of Rdot when Vegas gained its controlling interest in Rdot in July 2006. Mr Clifford's detailed knowledge of Rdot and Vegas' ambitions made him the obvious candidate for the job. 328 Mr Clifford's performance in giving evidence and responding to cross-examination over nearly six days was also instructive in this regard. Mr Clifford listened intently to every question put to him and responded politely, if not crisply on occasions, to every question with a carefully crafted answer. His answers were designed to answer only the question asked. Usually he avoided embellishment. He seemed, however, on occasion to take care to avoid what he feared might be viewed as an admission or concession. Mr Clifford seemed very concerned at all times not to leave the transcript of his evidence open to reinterpretation, from his point of view. He also displayed a precise understanding of the formal pleadings filed in the proceeding, as one might expect of a litigant/barrister, and of the finer points of his claims. Counsel for the respondents were equal to the task that Mr Clifford set them, not permitting any question to be left unanswered or, from their perspective, half answered, or amenable to a later submission that the answer given was ambiguous. This explains in part why the cross‑examination was as lengthy as it was. 329 I have little doubt that, when Mr Hart and Mr Backshall responded to Mr Clifford's proposal that he become an investor in Vegas, they saw this as a boon, not because they considered Vegas was in straightened financial circumstances – as Mr Clifford implies – and could take Mr Clifford for a business novice whose investment of around AUD$2.4 million would help them out of a financial hole, but because he was a person with the legal expertise, commercial savvy, personality and drive to help Vegas take the next steps towards an IPO. To accept Mr Clifford's proposal would result in Mr Clifford having the motivation to work hard to achieve his own interests and, in doing so, advance their own. In such a commercial setting I have little doubt that the directors treated Mr Clifford's proposal as a fair proposal. 330 I also have little doubt that the two directors, as persons who had closely worked with Mr Clifford for some 15 or so years, and who trusted his advice and valued his friendship – mostly recently in relation to the successfully concluded Vegas dealings over Rdot and Mr Preisendorfer's interests – took Mr Clifford at his word when he raised the investment proposal. They assumed he would raise whatever queries he may have with them as part of his due diligence. He knew the business well and he was obviously pleased to be buying in. And he was not commercially naďve. On the evening of 24 October 2006, he told Mr Hart and Mr Backshall he wanted to do 'due diligence' and confirmed this in writing on 26 October. He wanted to take his own steps to evaluate the proposed share acquisition. They were all well aware of the notion of 'due diligence' – something Mr Clifford had advised on and assisted Vegas with in respect of C&C's contractual arrangements with Rdot not long beforehand. He also told Mr Backshall that the company needed to take independent legal advice on the transaction given their long and close association. 331 In the circumstances just mentioned, though, just what Mr Clifford's due diligence required was not entirely clear. In my view, in the circumstances, the directors were entitled to assume that Mr Clifford was knowledgeable about Vegas in all respects relevant to the proposed purchase and would ask for whatever information he required to complete his due diligence. He knew about its past. He was a complete authority on its intellectual property rights. He understood perhaps better than they did exactly what IPO options lay ahead of the company – and like them he was motivated to exploit the opportunities that might enable all shareholders to reap the rewards of an IPO. He knew generally about the company's recent trading history, and that generally speaking its sales were down in the 2005/2006 financial year compared with the previous financial year. As chairman of Rdot, he well knew what financial demands Rdot was placing on Vegas and the difficulties this created for Vegas. He also knew (at least constructively) from what Mr Sutton had told him around November 2006, when he was discussing the purchase of the shares Mr Sutton controlled in Vegas, that the existing shareholders had recently made loans to Vegas. In my view, if there was anything in particular that Mr Clifford felt he needed to know about Vegas that he considered material to the proposed investment, then the directors were entitled to assume that he would make it known to Vegas through them as part of his due diligence. Mr Backshall had already made it clear in his email on 25 October, that Mr Clifford could approach Mr Rayney, the CFO, for financial information. The reasonable expectation in the circumstances was not that the respondents would disclose anything in particular to him, but that they would respond to Mr Clifford's reasonable requests for information in the course of his due diligence. 332 What Mr Clifford actually asked for in his email to Vegas sent to Mr Backshall on 26 October 2006, knowing at that point that Mr Backshall was hopeful that the acquisition could be settled as of 30 November – just over a month away – as explained in his email to Mr Clifford of 25 October, was the audited accounts for the preceding 3 years. They were provided. However, there is no evidence that Mr Clifford ever asked for any other information he considered material to the share acquisition. 333 At this point, I should also deal with an evidentiary matter that bears on the question whether the respondents ever took any steps, at material times, to prevent Mr Clifford or to make it more difficult for Mr Clifford to obtain financial information from Vegas through Mr Rayney, the CFO. In the course of cross‑examination of the applicant by senior counsel for Vegas (transcript 431‑433) Mr Clifford suggested that he had been told in January 2009 by Mr Rayney that he had been "dissuaded" from giving financial information to the applicant by Mr Backshall. However, there was no reference to any such advice in the applicant's witness statement. Nor in cross‑examination of Mr Backshall did the applicant put such allegations to Mr Backshall. The allegations made by the applicant in the course of cross‑examination were simply not corroborated by any other evidence. In my view they indeed run counter to the evidence and were made gratuitously. In fact, Mr Backshall expressly invited Mr Clifford in his email on 25 October 2006 to approach Mr Rayney. There is no evidence to support the allegations made by Mr Clifford in cross‑examination that at some point Mr Rayney had been dissuaded by Mr Backshall from giving any financial information if it were requested by Mr Clifford. I discount Mr Clifford's evidence in this regard completely. 334 As a matter of fact the applicant had available to him the draft P&L or spreadsheet document that he had discussed with Mr Backshall. As noted above, Mr Backshall recalls discussing its content in November. Mr Clifford has a similar timing sequence as to when he received it. As best one can say, the draft P&L document was received by Mr Clifford from Mr Backshall in early to mid November 2006. It was not provided, however, for the purposes of the due diligence, as I have found above. Nonetheless it was a document having a serious purpose – the one explained by Mr Backshall at the time Mr Clifford received it from him. I have accepted Mr Backshall's testimony as to what the provenance of the document was, its purpose and intended purpose and what he said to Mr Clifford about its content. I am not satisfied that Mr Backshall said the things that Mr Clifford claims he said during the discussion about the document or at any other time material to the events the subject of this proceeding. I have little doubt, as I have also found above, that over the course of dealing with Rdot's affairs and with C&C concerns, such matter as international royalties and their manner of payment, and the sale of Vegas product in various parts of the world, had been discussed as part of the range of topics to do with the Vegas' future strategies, but were not the subject of the representations alleged by Mr Clifford. As I have already found above, I do not consider the applicant has made out the three pleaded representations, including this concerning the sales representations. 335 In these circumstances I find that Vegas and Messrs Hart and Backshall were entitled to assume that Mr Clifford was knowledgeable about Vegas in all respects relevant to his proposed purchase and would ask for whatever information he required to complete his due diligence. The reasonable expectation was that Mr Clifford would ask for whatever information he needed. In such circumstances, the respondents did not labour under any practical duty to disclose any of the matters that the applicant alleges in this proceeding they should have disclosed. Consequently, I find that the failure of the respondents to disclose information to him at material times concerning the undisclosed facts pleaded, did not in the circumstances of this case constitute misleading or deceptive conduct or conduct that was likely to mislead or deceive, for the purposes of the claims brought under the Corporations Act and the FTA. (If I am wrong about the non‑application of s 52 of the TPA, in the circumstances of this case, then I would also have found that the respondents had no "duty to disclose" such information to the applicant under s 52 either and that no such contravention had been proved for the purposes of the TPA.) 336 I should however proceed to deal with each of the specific areas of alleged non‑disclosure during the material period. So far as the non-disclosure of sales figures is concerned, I have found that Mr Clifford did not receive the monthly board packages issued to shareholders at material times from July through to December 2006. I accept that that package for July 2006 showed sales for June 2006 were $1,069,319 under budget and sales for January to June 2006 were $2,639,239 under budget, as alleged by Mr Clifford. I also accept that the monthly board package of 10 August 2006 showed sales for July 2006 were $621,166 under budget and sales for January to July 2006 were $3,260,455 under budget (see exhibit 218, DD0439 and exhibit 219). I accept that these figures also were not disclosed to Mr Clifford. I also accept, as Mr Clifford alleges, that sales for August 2006 were $2,348,115 under budget and sales for January to August were $5,607,893 under budget (exhibit 218, DD0459 and exhibit 219). Similarly, I accept that the monthly board package for 10 December 2006 showed that sales to November 2006 were only $155,809 (or 0.75%) ahead of sales to November 2005. 337 Nonetheless, as Mr Backshall explained, by 10 December 2006, actual sales for July to November 2006 were ahead of budget. In his witness statement at [133], Mr Backshall states that around 10 December 2006 he received a monthly board package which contained the Vegas actual sales figures from 1 July 2006 to the end of November 2006. Total income was AUD$22.153 million against a budget of AUD$21.977 million. Total expenses were $6.959 million against a budget of $7.125 million. Net profit before tax and interest was $2.348 million against a budget of $2.037 million. I accept this was so. In my view, the apparent underperformance of sales against budget in the period July through to November 2006 was, on the face of it, arrested by November having regard to this evidence. A decline in sales was improving. 338 The question though, is whether Mr Clifford was entitled to have this sales information produced to him monthly or at least to be fully updated on the 2006/2007 performance from the time he accepted the invitation to invest in late October 2006. Were the respondents obliged to provide it to him, even if he did not ask for it? 339 As found above, Mr Backshall provided Mr Clifford with the last three years' audited accounts of Vegas as requested. He also gave Mr Clifford the draft P&L or spreadsheet following an incidental discussion about it. At no time did Mr Clifford make any specific request for sales data, either at about the time of September and October 2006 when the question of the invitation was being discussed or at any time up to and including 19 December 2006. 340 The evidence also needs to be assessed in the context that the accounts provided to Mr Clifford showed that sale of goods in the 2005/2006 financial year was $38.9 million against a higher sales figure of $41.8 million in the previous year, 2004/2005. Similarly, the consolidated net profit was $2.1 million in the 2006 year, versus $3.9 million in the 2004/2005 year. The franked dividends were $2.5 million however in the 2006 year compared with $2 million in the previous year. There is no detailed evidence about this but this suggests that dividends were not linked to sales performances or profit, as they were higher in the 2006 year against falling sales and falling profit. The point is the applicant was aware of this information, and that sales had fallen in the 2005/2006 year from the year before. 341 So many aspects of this proceeding and the facts that pertain to the various causes of action are unusual. It is so unlike a case where an unrelated, uninvolved third party seeks to buy a business or a share of a business whose profits depend on sales and revenue, thus dictating the level of investment that ought prudently be made. One simply expects in such circumstances that the prudent investor will demand and scrutinise sales information. At no stage did Mr Clifford, on the findings I have made, do that. He received the spreadsheet information in mid November concerning the projected sales, but as I have found above in relation to the sales representation, did not rely on it. That he did not rely on such information also suggests, for present purposes that the sales information the applicant says should have been disclosed to him was not and would not have been material to his decision to invest, and I so find. After 24 October 2006, time was very much of the essence in concluding the deal. The parties were initially seeking to conclude the acquisition by 30 November. Nothing in the sequence of events suggests that Mr Clifford wanted any more information on sales than he had. 342 In the case that he has run in this proceeding, the applicant has placed much focus, as the second and third respondents submit, on the shortfall of sales over forecasts in the July and August 2006 period. The reality is that the sales position in fact improved so that, immediately prior to the date of the share acquisition on 19 December 2006, the board pack circulated around 10 December suggested that the position had been arrested. 343 The applicant contends, however, that the respondents received updates of sale orders for periods up to six months in advance. The applicant says the sales orders for the periods January to June 2007 were $18,870,555 and refers in this regard to exhibit 221. That figure is shown against required sales to make the 2007 budget ($45,512,163) of $21,790,091 (which is to be found in exhibit 218). The applicant submits that of the $18,870,555 of sale orders for January to June 2007, $2,885,343 were rejected, as indicated in exhibit 221. This was 15.3% of sales, significantly higher than the 5% the respondents had at earlier times considered they would be comfortable with. The applicant says this means that by about 10 December on the respondents own figures, to the knowledge of each of the respondents, Vegas was going to fall short of its represented sales by $3,863,064 even if the rejected orders were only 5% and not 15.3%. None of this was disclosed. 344 Vegas says there is no evidence as to when exhibit 221 was created and in particular if it was created before the Sheraz acquisition. It says it can be inferred from Mr Backshall's testimony (transcript 714) and the fact that the document includes details of rejected orders for all of the calendar year 2007, that the document was created in 2008 – after the Sheraz acquisition. Vegas also submits there is no clear evidence of the period to which exhibit 221 relates. In the end I accept the provenance of exhibit 221 is uncertain and I accord the document little weight. I also accept the cross‑examination of Mr Backshall on the document was based to a large extent upon assumptions (see transcript 715 ‑ 716). As a result, I do not accept the evidence supports the unequivocal contention made on behalf of the applicants, that by about 10 December, Vegas knew it was going to fall short of represented sales. 345 In the circumstances of the relationship between the applicant and the respondents and the manner in which the investment proposal initially broached by Mr Clifford had developed – first the preliminary discussions with Mr Hart and then the detailed resolutions with the two directors at the meeting on the evening of 24 October – I do not consider Mr Clifford was entitled to expect that the respondents would provide him with sales information. To some extent, of course, as noted, he was both privy to such information generally speaking when the spreadsheet was provided to him in November. But on the findings I have made, while Mr Clifford found that information of general interest, I am not satisfied that he in fact relied upon any representations conveyed by that document as to projected revenue. He certainly did not follow up with any queries as to current performance. 346 Ultimately, in my view, it is the unusual nature of the relationship developed over 15 or 17 years between the applicant and the second and third respondents that explains why they and Vegas in the period that the applicant was conducting his own due diligence laboured under no duty to disclose the progressive sales performance of Vegas during the 2006/2007 financial year, to Mr Clifford. 347 But I also consider that the actual (upward) movements in the sales figures over the period between 24 October and 19 December 2006, was such that there was no reasonable entitlement to expect such figures would be disclosed. 348 Finally, having regard to my findings above concerning the sales representations, I am not satisfied that the applicant has established that in light of such knowledge as he had, the sales information was, or would have been, material to the applicant's investment decision. 349 In relation to the alleged failure to disclose the shareholders' loans, first in August 2006 in the aggregate sum of $1 million and then in October/November 2006, in the aggregate sum of $500,000, I am quite satisfied that those loans were made to provide Vegas with working capital and that the evidence including the communications between Westpac and Mr Rayney, properly construed, does not constitute a condition that such shareholder loans be made before the overdraft account with Westpac was extended. 350 I should comment in passing however in relation to the applicant's submission in relation to the evidence that on 30 October 2006, shareholders of Vegas provided shareholder loans of $260,000, $100,000 of which was from Mr Backshall. This submission is made on the basis of exhibit 220, an extract from the general ledger. I accept the submission made on behalf of Vegas that at its highest the first page of exhibit 220 is evidence of the posting date of the aggregated shareholder loans, not evidence of the date when those loan funds were paid to Vegas. Similarly, I find that in relation to that exhibit at its highest it is evidence of the posting date of aggregated shareholder loans of $240,000 on 30 November 2006 and not evidence that the loan funds were paid to Vegas on that date. It was never put to Mr Hart that his funds were paid to Vegas, for example, on 30 November 2006. 351 Mr Sutton, who agreed to sell some of his shares to Mr Clifford, said that around late October or early November, Mr Clifford came to see him in his office at Vegas. He explained to Mr Clifford that he wanted to sell some shares because in the last six months he had put money back into Vegas' loan funds and was not sure when he was going to get that money back. He told Mr Clifford that he did not want to borrow more money from the bank to complete his holiday house. He also told Mr Clifford about his holiday house at Molloy Island and how excited he was about the opportunity to have such a great place. Mr Sutton says that Mr Clifford told him how much he and his family loved his place at Yallingup. They agreed to a share transfer for the sum of approximately $170,000. Mr Sutton said he told Mr Clifford that this would be enough to ease his financial situation. He asked Mr Clifford if they could settle in mid November, as final handover for the holiday home was the last week in November. Mr Clifford said this would not be a problem as he had the money sorted. They then shook hands on the deal and went on talking about surfing. 352 Mr Sutton says that around the time they were supposed to settle in mid November, he spoke to Mr Clifford on the telephone and Mr Clifford advised him that there had been a delay with his financing and that settlement would have to be delayed until the end of November. The settlement ultimately occurred on 19 December 2006 and it was on that date that he received a $170,000 from Mr Clifford. He left the share transfer issues to Mr Rayney, the CFO, and Mr Clifford to sort out. 353 Mr Sutton was not cross‑examined about this evidence when he gave it. Earlier, however, Mr Clifford was cross‑examined concerning the substance of this evidence. When asked about the conversation with Mr Sutton, Mr Clifford recalled that he had been told Mr Sutton had to sell because he wanted to complete the house he was building on Molloy Island without the need for bank borrowing. When initially asked whether Mr Sutton also told him that he had to make a contribution to Vegas financially, Mr Clifford said no. But when he was asked whether he was sure about that, whether he might have, Mr Clifford at first stated that "It's possible but…" and then when further asked whether he could not recall it, answered "It's something I'd be likely to recall if he'd said it and I can't recall it". He then further denied that Mr Sutton had told him that he'd also put some money back into Vegas. 354 I accept the evidence given by Mr Sutton. He was not shown to be a witness who had any particular motivation to colour his evidence one way or the other. While there was an objection on behalf of the applicant to the reception of Mr Sutton's witness statement because it was late, I ruled that the evidence could be received: see Clifford v Vegas Enterprises Pty Ltd (No 4) [2010] FCA 326. When Mr Sutton gave his evidence, his witness statement was tendered. He was not cross‑examined on behalf of the applicant. 355 In those circumstances, taking into account the earlier responses by Mr Clifford in the course of cross‑examination to the substance of Mr Sutton's evidence, and the fact that there was no cross‑examination of Mr Sutton to test the veracity of his evidence, I have little hesitation in accepting the account given by Mr Sutton. 356 The substance of Mr Sutton's evidence is that he actually told Mr Clifford in the October/November period, but well before the end of November (that being when the two men initially hoped the share transfer would be effected), words to the effect he had made shareholder loans to Vegas and that he had paid some money back. It is reasonable to infer that other shareholders must have been asked to do the same thing and that Mr Clifford would have understood that. However, at no time did Mr Clifford make any inquiries of Vegas or the directors (or anyone else such as Mr Rayney, apparently) concerning the position with shareholders' loans. 357 In all the circumstances, I do not consider that the respondents laboured under any practical duty to inform the applicant of the making and repayment of shareholders loans in the period leading up to the share acquisition on 19 December 2006. The applicant had no reasonable entitlement to expect this information would be given to him. 358 Further, in the light of the evidence of Mr Sutton, I find that Mr Clifford in fact had knowledge of the making of shareholder loans sufficient, if he were materially interested in the details of the shareholders' loans, to have made inquiries for further details concerning those loans. 359 In these circumstances, I also do not consider that the shareholders' loans in question were, or would have been, if more information had been provided about them, material to the investment decision made by Mr Clifford. 360 In relation to the proceeds of the share acquisition received by Vegas, in the sum of $2,370,986.57, I find that contrary to the allegation of the applicant, the sum of $500,000 from that payment was not used to repay shareholders' loans. The facts recounted above disclose that the $500,000 in shareholders' loans had been repaid on 14 December 2006, five days prior to the settlement of the share acquisition involving Vegas and the applicant. 361 I also generally accept the respondents' submissions that the funds paid by the applicant on the share acquisition were not used to pay down the "undisclosed increase in Vegas' loans" as alleged by the applicant and that, in fact: · By 28 November 2006, the amount drawn down by Vegas from the overdraft facility had been reduced to $1.5 million. · At 18 December 2006, the amount drawn down by Vegas from the overdraft facility was only $74,732.94. · On 19 December and immediately prior to the receipt of those proceeds from Mr Clifford, the overdraft facility had a positive balance of $368,088.73. · The proceeds of the share issues were paid by Vegas on 19 December 2006 to the overdraft facility account. 362 So far as the overdraft facility is concerned, Vegas had various financing facilities with Westpac, as Mr Backshall explained in his evidence, including an overdraft facility with a limit of $1.5 million. The shareholders had provided guarantees to Westpac in respect of these facilities. In fact, Mr Clifford had given advice regarding the Westpac documentation and signed documents associated with the Vegas acquisition. He was, therefore, not lacking in knowledge about the general financing position. However, I do not accept the submission of Vegas that it can reasonably be inferred that in July 2006, Mr Clifford knew of the guarantees provided by Vegas shareholders to Westpac. Knowledge of Vegas' financing for the Vegas acquisition, in my view, does not necessarily support such an inference, at least not without additional primary facts. 363 When working capital was then needed in August, Westpac agreed on 2 August 2006 to a variation of the finance arrangements to increase the limit on the overdraft facility to $2 million on the basis that it was reduced to $1.5 million by 8 September 2006. By early September, the limit on the overdraft facility was reduced back to $1.5 million. 364 Again, the correspondence between Westpac and Mr Rayney, the CFO of Vegas, in my view does not support Mr Clifford's contention that the increases to the Westpac overdraft facility in August or September were conditional on Vegas shareholders loaning $1 million or any sum. No doubt the bank understood what Vegas was doing in respect of its working capital, but in my view, it cannot reasonably be contended that the bank had made it a condition of the increase in the overdraft facility they were prepared to grant that the shareholders loan that sum. 365 I should say, however, that despite a submission on behalf of Mr Hart that he had no knowledge of the status of the overdraft facility during the relevant period, it seems to me in all the circumstances that he must have. He had dealings himself with the bank and I infer, in any event, that the knowledge of Mr Backshall was his during that period. 366 In any event, in September, Westpac agreed to a further variation to increase the limit of the overdraft facility by $500,000 on the basis that it was reduced to $1.5 million by 30 November. In early November, Westpac agreed to a further variation to increase the limit by $500,000 to $2.5 million. 367 On 14 November, Westpac agreed a further variation to increase the limit on the overdraft facility by a further $500,000 to $3 million on the basis it would be reduced to $1.5 million by 30 November. 368 I find, as Vegas contends, that Vegas drew down on the overdraft facility to a maximum of around $2.3 million and that by 28 November 2006, the limit was reduced to $1.5 million, as Mr Backshall stated in his witness statement at [124]. 369 In these circumstances, I accept the respondents' contention that there is no evidence that the Westpac overdraft facility was increased by $2.5 million as alleged in the amended statement of claim at any time. 370 The next question is whether the evidence discloses or it may be inferred that Mr Clifford knew that the Vegas overdraft facility varied during the second half of 2006. 371 The evidence does not disclose that the applicant had express knowledge of the variations in the facility agreed with Westpac at various times, as just set out, or the draw downs and repayments at various times on the facility. The question then is whether it may be inferred that the applicant had a general knowledge that the facility varied during the second half of 2006. The respondents contend for the position that the applicant must have had this knowledge, particularly when one has regard to the surrounding circumstances. Vegas, for example, as noted above, points to the following factors: · Mr Clifford was the provider of legal services to Vegas for 17 years and had acquired a reasonable historical knowledge of Vegas. · Mr Clifford was the sole lawyer to Vegas for 17 years, a commercial barrister, a close and trusted adviser to Mr Hart and someone who Mr Backshall trusted completely and highly valued his opinions and guidance. · Mr Clifford had become a director of Rdot and the Chairman of Rdot, in mid 2006 and in those positions was very aware of solvency issues facing Rdot and Rdot's need for financial support from its shareholders, including Vegas. · Mr Clifford was in regular contact with the CFO of Vegas, Mr Rayney, and indeed maintained contact with Mr Rayney after Mr Rayney resigned from Vegas (sometime after the share acquisition in question). · In late 2006, Mr Clifford was regularly at the offices of Vegas. · Vegas made available to the applicant all of Vegas' documents, including financial records. · As a commercial law practitioner with skills in a variety of commercial areas, the applicant was well aware of the steps that ought be taken in undertaking a due diligence of any company prior to investing in it. · To the extent that it is necessary to prefer one version of events to another, the applicant's evidence should not be accepted: 372 I am not satisfied that any of these factors or these factors taken as a whole permit the drawing of a reasonable inference that the applicant had any particular knowledge about variations or fluctuations in the overdraft facility that Vegas had with the Westpac bank. I think the most that can be said is that the evidence suggests that Mr Clifford might not have been surprised to learn that was the case, if he had been informed expressly about the position. In particular, given his historical knowledge of the company and the circumstances of Rdot, after he became a director and chairman in mid 2006, he understood the financial demands were fairly constantly being placed on Vegas to support Rdot. It is one thing, however, to say or infer that Mr Clifford was or may have been aware that the business of Vegas depended on the overdraft facility, but another to infer he had knowledge of the fluctuations or variations to that overdraft facility by agreement between Vegas and Westpac during the latter half of 2006. 373 The question really is whether, in all of the circumstances, where the overdraft facility did vary from time‑to‑time but was repaid from time‑to‑time and indeed was in credit at the time of the share acquisition by Sheraz, the respondents had any obligation to disclose the variations in the overdraft facility to the applicant at material times before 19 December 2006. While I have little doubt that, in a different circumstance of an unrelated, uninvolved third party considering purchasing a business or an interest in a business that third party would wish to know about what liabilities the business had incurred – including in the nature of variations to its ordinary overdraft facility – in the circumstances of this case, I consider that Vegas and its directors could not have been, or expected or assumed that they were under any obligation to consider what the applicant might or might not know or what he might or might not be interested in or need to know, for the purposes of his investment decision. 374 When one takes into account as well that in late October or into November 2006, on the findings I have made, Mr Clifford was aware that Mr Sutton had made shareholder loans to Vegas around that time, it would reasonably follow that the applicant was on notice that the operations of Vegas required some cash injections. Any such inquiries would, it may reasonably be said, have led to the applicant making general inquiries as to the current financial arrangements between Vegas and Westpac if he considered the matter material to the proposed investment. He was of course already aware that Vegas maintained financing facilities with Westpac and that the shareholders had provided guarantees in respect of the funds provided for the acquisition of a controlling interest in Rdot and the termination of the royalty stream enjoyed by interests associated with Mr Preisendorfer. 375 In those circumstances, I do not consider that the conduct of the respondents in failing to disclose variations in the overdraft facilities with Westpac was misleading or deceptive conduct. Put shortly, as in relation to the other alleged issues of non‑disclosure, the circumstances were such that the respondents were entitled to expect that Mr Clifford would raise with them any issues concerning the operation of the company that might touch on such issues. He did not. 376 Additionally, in these circumstances, I do not consider the applicant has established that the fluctuations in the overdraft facility were, or would have been, material to his decision to invest. 377 In the result, the applicant has failed to discharge the onus he has to prove that the pleaded non‑disclosure of information constitutes misleading or deceptive conduct, or conduct likely to mislead or deceive, for the purposes of the Corporations Act or the FTA. entitlement to relief 378 The primary relief sought by the applicant is a refund of the price paid for all the shares acquired by Sheraz on 19 December 2010, of $2,553,894.60 upon payment of which the applicant will deliver a properly executed transfer of 641,389 shares in Vegas favour of such transferee as the respondents direct. 379 Alternatively, the relief sought is a payment in the sum of $2,363,894 (the payment price, less a maximum discount of $200,353 based on the purchase of a controlling interest in Vegas in March 2009), upon payment of which the applicant will deliver a properly executed transfer of 416,903 shares in favour of such transferee as the respondents direct. This reflects a refund for the shares currently registered in Sheraz's name and does not include the 224,486 transferred to the applicant's ex‑spouse. 380 The applicant also claims: · interest, stamp duty and bank fees in the sum of $206,964.69 to March 2010 on monies borrowed from the ANZ Bank to pay the investment monies to Vegas. · interest on the amount of $2,553,894.60 pursuant to s 51A of the Federal Court Act 1976 (Cth) from 19 December 2006 at a fixed rate under O 35, r 8 of the Federal Court Rules 1977 (Cth). 381 For the sake of completeness, I should indicate that, if the applicant had made out his case against the respondents of misleading or deceptive conduct, I would have been prepared to make in substance the orders sought by the applicant by way of primary relief: (1) I would have effectively ordered the refund of the price paid for total number of shares acquired by the applicant (those allotted by Vegas and those acquired from C Breeze Pty Ltd), being 641,389, on the applicant's production of a properly executed transfer or transfers of that number of shares in favour of such transferee or transferees as the respondents may nominate, but on the condition that the applicant's former spouse be the transferor of 224,486 of such shares, that is to say of the parcel she now holds following the execution of the Family Court of WA order; (2) I would have ordered that the respondents pay the applicant damages in respect of the amounts particularised in [1.3] and [1.4] of Schedule A to the further particulars of claim dated 18 September 2009 up until judgment, without deduction on account of taxation advantages or deductions the applicant may have obtained during the period of the loan to purchase the shares referred to in those particulars; (3) I would also have allowed the applicant interest on the total purchase share price of $2,553,894.60 from 19 December 2006 (the date of payment) until judgment at a fixed rate under O 35 r 8 of the Federal Court Rules; (4) I would have invited the applicant to bring forward a minute of orders to give effect to these orders. 382 The second and third respondents, supported by the first respondent, attack the applicant's claims to relief on three broad grounds: first, that the applicant has not established he is entitled to any relief as the beneficial owner of the Sheraz shares; secondly, that he has not established loss and damage; and thirdly, that a refund order is not appropriate in any event. I will deal with each of these ground of opposition to the relief sought in turn. 383 Beneficial ownership issue: The respondents contend that, if the applicant is entitled to relief, the applicant has not proved that he owns the shares registered in the name of Sheraz and this must affect his capacity to prove his own loss. Vegas in its defence ([1a]) does not admit the applicant at material times has been the beneficial owner of any shares issued in Vegas. The second and third respondents make a similar plea in their defence ([1a]). Each further pleads to the transfer in January 2009 of some of the shares initially issued to Sheraz to the former spouse of Mr Clifford. Each notes that Sheraz currently holds only 416,902 ordinary shares in the capital of Vegas. 384 The applicant contends that the issue raised by the respondents is beside the point. The applicant says the respondents do not plead a positive case such that the Terranora Family Trust (of which Sheraz is the trustee) is the beneficial owner of the Vegas shares. The applicant says the starting point is to look to see if the applicant suffered loss and damage in reliance upon the respondents' conduct. In this regard the applicant says, to his detriment, he provided all the monies for the Vegas share acquisition. It is enough for him to establish detrimental reliance on the misleading and deceptive conduct and thereby make good the cause of action, no matter in whose name the Vegas shares are registered. 385 The applicant submits that the position is analogous to a parent purchasing a motor vehicle in reliance on misleading and deceptive conduct but registering the motor vehicle in the child's name for the child's use. The loss is the loss of the parent acting in detrimental reliance on the impugned conduct. It is not the child in whose name the registered motor vehicle is registered who has suffered the detriment. 386 In broad terms, I accept the applicant's submission. At all material times, the respondents fully understood that it was Mr Clifford, who one way or another, was proposing to arrange funds in order to take up an investment of equity in Vegas. In his letter to Vegas, dated 26 October 2006, he indicated his acceptance of the offer to invest and that he was taking advice on the entity to hold the shares and that either he or "my trustee", Sheraz, would hold the shares. 387 Throughout the course of dealings over the share acquisition from September/October 2006 through to their closing on 19 December 2006, the respondents dealt with Mr Clifford. If Mr Clifford can demonstrate that he, himself, has suffered loss and damage, in reliance on proven misleading or deceptive conduct, in the course of the process by which the shares were acquired, then it seems to me it should not matter who in fact holds the shares acquired. However, in such circumstances, the applicant would need to establish that he himself in fact suffered loss. He cannot simply point to loss suffered by the entity holding the shares, unless of course the shares acquired were beneficially owned by him. 388 Consequently, the applicant argues that, in any event, he holds a 100% beneficial interest in the shares. He says this interest is engaged under a bare trust. 389 The respondents suggest, however, that Sheraz is the legal and beneficial owner of the shares it holds. 390 As to the type of trust we are here dealing with, the applicant contends the Vegas shares are impressed with a common intention constructive trust such that Sheraz holds the shares on trust for the applicant. 391 He says Sheraz, were it to argue otherwise (which it does not), would be estopped from denying the shares are owned by the applicant beneficially. He also contends that when ordered to do so by the Family Court , the applicant transferred 224,486 Vegas shares as directed. The respondents are fully cognisant of this fact because they consummated the transfer. 392 The applicant contends that the view has been expressed that a "common intention constructive trust" is really a manifestation of proprietary estoppel: Austin v Keele (1987) 72 ALR 579 at 587 per Lord Oliver of Aylmerton; Pain v Pain [2006] QSC 335, Lyons J at [31]; Draper v Official Trustee in Bankruptcy [2006] FCAFC 157; (2006) 156 FCR 53, Rares J at [96]. Accordingly, any complaint about whether the applicant's right to "ownership of the shares" is one of constructive trust or proprietary estoppel is "hair splitting". The applicant emphasises that Sheraz has made no claim to the Vegas shares. 393 As to the elements of a common intention constructive trust, the applicant contends: · There was a common intention the applicant would have a 100% beneficial interest in the Vegas shares. Such a common intention need not be formed at the time of the acquisition of the shares but may occur later (Austin v Keele). · The applicant has acted to his detriment on the basis of that common intention (see Green v Green (1989) 17 NSWLR 343, Gleeson CJ at 353G - 356A: Stowe v Stowe (1995) 15 WAR 363 at 367 – 368). 394 The applicant says proof of a common intention can be direct (for example, by evidence of express communications or agreement or the making of admissions), or a common intention may be inferred from conduct (for example, the making of contributions to the cost of the property or to expenses in maintaining it: see Green v Green at 355). The applicant says, by the admission of all respondents, the applicant paid the money. 395 The applicant further contends that where one of the parties is a company, the Court may also look to the intention of the appropriate natural persons within the company in deciding whether or not it had the alleged intention, and submits that inferentially Austin v Keele at 581, 586 and 588 supports this view. In this case the applicant controlled Sheraz. 396 The applicant also places reliance on what was said by the Hong Kong Court of Final Appeal in Re Glory Rise Limited [2008] HKCFA 48 in which Mr Justice Ribeiro PJ (with whom other members of the Court, including Sir Gerrard Brennan, former Chief Justice of Australia, agreed) said, at [38]: Where a constructive trust is alleged to arise on the basis of the parties' common intention, it is the intention commonly held by the property owner and the claimant regarding their shared beneficial interests in the property that matters. The trust is constituted by the claimant's detrimental reliance on their common intention and the unconscionability of the property owner departing therefrom. 397 In the judgment of Ribeiro PJ, his Lordship went on to touch upon the position where a company is interposed between individuals acquiring property. At [45] his Lordship generally identified the issue as "whether persons causing the property to be vested in a company had intended (or by a presumption of a resulting trust were presumed to have intended) the company to hold such property as their nominee or trustee; or whether, on the other hand, they had intended the company to hold it beneficially (treating, for example, the purchase monies they had provided as a loan)". 398 The applicant says the detrimental reliance evidence in this case is all one way. It shows that Sheraz holds the Vegas shares on a bare trust for the applicant. 399 The applicant emphasises that the relevant acts of detrimental reliance need not be "inherently referable" to the gaining of a beneficial interest (see Green v Green at 357) although on the facts of this case the applicants that they are. 400 He submits that the conduct he undertook in arranging the acquisition of the shares by Sheraz could not reasonably be expected to have been embarked upon by him unless he was to have a beneficial interest in the shares (see Green v Green (Jamaica) [2003] UKPC 39; (2002–03) 5 ITELR 888 at [12] per Lord Hope of Craighead; Grant v Edwards [1986] Ch 638 at 648G-H per Nourse LJ). 401 He says the common intention, representation or assumption need only have been an inducement to his conduct, that is to say, the detrimental reliance he made on it: see Flinn v Flinn [1999] VSCA 109; [1999] 3 VR 712 at [117] per Brooking JA (with whom Charles and Batt JJA agreed). 402 I generally accept the submissions made by the applicant as to what is required to constructively establish a bare trust by the common intentions of the relevant parties to a transaction, such as the Sheraz share acquisition transaction in issue here. 403 In Austin v Keele, Lord Oliver of Aylmerton, at 587, on behalf of the other members of the Privy Council, confirmed that a common intention constructive trust does not come into being merely from a gratuitous intention to transfer or create a beneficial interest. There has first of all to be the additional ingredient of an intention or at least an expectation that the beneficiary will act in a particular way, normally, though not necessarily exclusively, by making some contribution towards the cost of acquisition of the property in which the interest is intended to subsist. Moreover, there is the further essential element that the trustee has so behaved that it will be inequitable to allow the trustee to deny to the beneficiary the beneficial interest which it is proved the beneficiary was intended to have. What Lord Oliver had to say was applied by Gleeson CJ (Priestley JA concurring) in Green v Green at 354 – 355. See also Sui Mei Huen v Official Receiver for Official Receiver in Bankruptcy [2008] FCAFC 117; (2008) 248 ALR 1 at, [72]; and Green v Green (Jamaica) at [12]. 404 These (and other authorities referred to in them) make clear that two matters need to be demonstrated to establish such a trust: · First, that there was a common intention that one or both parties should have the beneficial interest in the property. Where parties have not used express words to communicate their intention with the result that there is no direct evidence of it, their intention can be inferred from their conduct or from other circumstances. · Secondly, it must be shown that the claimant has acted to the claimant's detriment on the basis of that common intention. There must be a sufficient link between the common intention and the conduct which is relied upon to show that the claimant has acted on the common intention to his or her detriment. 405 The issue here is whether such a common intention constructive trust can be made out on the evidence. The applicant initially stated in his letter to Vegas on 26 October 2006, that he was deciding if the shares would be held by him personally or by "my trustee", Sheraz. Given the evidence in this case shows that Sheraz, at material times, acted as trustee for the Terranora Family Trust (a discretionary trust of which the applicant was a beneficiary) the statement does not unequivocally support a bare trust and may be considered ambiguous. 406 The respondents contend there is no evidence of any intention by Sheraz to hold the shares on trust for the applicant. Specifically, they say: · There is no written declaration of trust. · There is no resolution of the directors of Sheraz to hold the shares on trust. · There are no books or records of Sheraz that evidence any such intention when such records should exist if Sheraz genuinely held such an intention, having regard to s 286 of the Corporations Act. 407 The respondents contend the applicant only belatedly before trial relied on a bare trust and that previously he had relied on, at least up until receiving the letter from the solicitors for the second and third respondents, dated 16 February 2010, his position as a beneficiary of the Terranora Family Trust to establish his beneficial trust in the shares. 408 The respondents further contend that the applicant effectively (and correctly) conceded under cross‑examination that he had no beneficial interest in the shares if they were held by Sheraz as the trustee of the Terranora Family Trust, a discretionary trust (see transcript, 566). Yet, against that background, the applicant's reference to and reliance upon the Terranora Family Trust in evidence in chief was not explained in re‑examination. 409 In that regard, in [2] of the witness statement of Mr Clifford dated 19 October 2009, the applicant stated that "Sheraz Pty Ltd was appointed trustee of my family trust on 3 July 1985". He then explained how Sheraz also acts as his agent in paying practice bills. The respondents contend that if Sheraz as trustee of the Terranora Family Trust is totally irrelevant to the beneficial interest issue now under consideration, why was the family trust mentioned at all in the applicant's examination in chief. 410 The respondents also contend that there is an inference to be drawn that, in respect of the Family Court proceedings, the applicant represented to the Family Court and Vegas that he held both the legal and the beneficial interest in the shares. In this regard, the failure of the applicant to discover his financial statements that he swore in the Family Court is relevant to drawing that inference. Further, the applicant appears to have represented to his bank for the purpose of his application for finance that he does not own beneficially any shares. Finally, the payment of any interest on the applicant's borrowings to fund the purchase of the shares has been made from a bank account styled "Sheraz Pty Ltd as Trustee for the Terranora Family Trust". (The respondents submit those same factors also effectively remove the possibility of any presumed resulting trust in favour of the applicant – even though none is pleaded or asserted by him.) 411 As to the respondents' contention that s 286 of the Corporations Act has not been met, the applicant says first that this is not a pleaded issue. I do not consider this is a pleading issue. The respondents are entitled to cross‑examine the applicant on his evidence when on the pleadings he has been put to proof of ownership. The second argument put by the applicant is that there is no evidence at all that Sheraz is not in compliance with s 286. In my view this has more substance. 412 Section 286(1) of the Corporations Act provides: (1) A company, registered scheme or disclosing entity must keep written financial records that: (a) correctly record and explain its transactions and financial position and performance; and (b) would enable true and fair financial statements to be prepared and audited. The obligation to keep financial records of transactions extends to transactions undertaken as trustee. 413 Section 9 of the Corporations Act relevantly defines "financial records" as: financial records includes: (a) invoices, receipts, orders for the payment of money, bills of exchange, cheques, promissory notes and vouchers; and (b) documents of prime entry; and (c) working papers and other documents needed to explain: (i) the methods by which financial statements are made up; and (ii) adjustments to be made in preparing financial statements. 414 It must be noted that the definition of financial records provided in the Corporations Act is an inclusive one and does not limit the scope of the expression. The s 9 definition may possibly bear upon settlement accounts relating to a land purchase under (a), but it is difficult to see how (b) or (c) are relevant to this case. Overall, I am not completely satisfied that s 286 applies in this case. I am not sure that the settlement accounts bearing on the purchase of the shares are the type of financial records recording and explaining the company's transactions to which s 286 refers. 415 The applicant thirdly submits that there is no evidence at all that Sheraz is not in compliance with s 286. The point may equally be made that there is no evidence to show that it is, if it applies. 416 The fourth submission made by the applicant is that Sheraz is a small proprietary company (see s 45A(2) of the Corporations Act)not falling within the exceptions set out in s 293 and s 294 of the Corporations Act and thereby is not a corporation required to file annual financial reports or directors reports. Thus, it is submitted there is nothing in the s 286 point as cross-examined without notice or at all. I accept this is relevant, at least in light of the s 9(b) and (c) definitions of "financial records". 417 The overall point about the s 286 argument is not that a breach of the obligation by a company in circumstances such as those raised in this proceeding would automatically deprive Sheraz, or the applicant, of the ability to explain the true nature of a transaction; rather, the point is that the failure of the applicant to produce any written documentation concerning the transaction (especially if there is a statutory obligation to keep such a record), places some doubt on whether or not the characterisation of the applicant's pleaded beneficial ownership now contended for by the applicant is of recent invention since the "ownership" point was targeted by the second and third respondents' solicitors in correspondence prior to trial. 418 The applicant, as I have noted, initially on 26 October 2006, advised Vegas that he would either acquire the shares in his name or in the name of "my trustee, Sheraz". That statement concerning Sheraz, does not, of course, make it clear whether if Sheraz were to be registered as the legal owner of the Vegas shares it would hold them as trustee for Mr Clifford or as trustee for the family trust. There is of course, nothing to prevent Sheraz from acting as a trustee in different capacities. The question is in what capacity did it hold the shares in trust here. In circumstances where the evidence shows that Sheraz has in fact acted as the trustee of the family trust and that the only current bank account that it operates is as trustee for the Terranora Family Trust, the answer to the question is not clear cut. In such circumstances, one cannot simply say that the reference in the letter of 26 October to "my trustee" necessarily meant "my bare trustee". 419 The amended statement of claim pleads that the applicant was at all material times the beneficial owner of 641,389 shares issued in Vegas. In the applicant's answers to particulars, filed on 18 December 2009, he pleaded in substance that: (1) Sheraz Pty Ltd is the trustee of a "trust" the beneficiary of which is the applicant; (2) After 7 January 2009, the beneficial interest in 224,486 shares was transferred to his former spouse. 420 By letter dated 16 February 2010, the solicitors for the second and third respondents wrote to the solicitor of the applicant pointing all this out and advising that the inference they drew from the witness statements of the applicant filed in the proceedings was that the trust referred to in the particulars was the Terranora Family Trust. They asked for confirmation that this assumption was correct. By letter, dated 26 February 2010, the solicitor for the applicant, by way of clarification, simply confirmed that [1] of the amended statement of claim accurately pleaded that the applicant was at all material times the beneficial owner of the shares. The solicitors for the second and third respondents then wrote to the applicant's solicitor again pointing out that the reply did not address the queries made and further pointing out (correctly) that the applicant cannot derive a beneficial interest in property in his capacity as a beneficiary of a discretionary trust. By letter dated 5 March 2010, the applicant's lawyer advised that the trust was a "bare trust". That advice then led to the solicitors for the second and third respondents complaining that this advice was not properly particularised. The applicant was requested to state whether the trust was wholly or partly in writing, wholly or partly oral or partly to be implied. By letter dated 17 March 2010, the applicant's solicitor advised that: The trust arises upon the purchase of the relevant shares by the applicant, where the shares were registered in the name of Sheraz Pty Ltd by the first respondent. 421 While I entertain some doubt about the matter, I am satisfied on the balance of probabilities that at the time the Vegas shares were registered in the name of Sheraz on 19 December 2006, Sheraz held the shares beneficially for Mr Clifford on a bare common intention constructive trust. The reasons why ultimately, with some misgivings, I have come to this conclusion on the balance of probabilities, are: (1) There is nothing on the face of the letter from Mr Clifford to Vegas dated 26 October 2006, to suggest that Sheraz, if it held the shares, would be holding them as the trustee of the family trust. The statement was simply made that if Sheraz were to hold the shares it would do so as "my trustee". (2) The context, revealed by the applicant's letter dated 26 October 2006, was that it was either he, or his trustee, Sheraz, who would hold the shares. It was simply a matter of accounting advice. The primary indication that Mr Clifford was buying the shares is an important one. It is confirmed by the facts that right up until this point, the invitation to become an investor or "partner" in Vegas was made to Mr Clifford, not some other entity. While it no doubt was expected that tax and commercially effective arrangements ought to be made concerning the shareholding (as was the case with most if not all other directors and persons with management functions within the company) the offer was to Mr Clifford. Given that Mr Clifford controlled Sheraz (as he did), Sheraz understood this too. (3) In the Family Court proceedings, Mr Clifford, as husband, was personally ordered to effect a transfer of shares to his former spouse. While this may be considered a little equivocal, there was no doubt that Mr Clifford was understood to be the person who controlled Sheraz in relation to the shares. This is at least consistent with Mr Clifford having represented in those proceedings he was the beneficial owner of the shares. That Mr Clifford was invited by senior counsel for the second and third respondents during cross‑examination to produce his Family Court documents that might shed some light on this issue and did not do so, is, in all the circumstances, not a factor that causes me not to draw an unfavourable inference that such documents might not have helped the applicant's case. (4) When pressed by the solicitors for the second and third respondents about the nature of the trust, eventually it was clarified as a "bare trust". While this suggests that it took Mr Clifford and his solicitor a little time to understand precisely what sort of trust was being pressed in the circumstances of this case, it must be remarked that at no time in the course of the pleadings and particulars was it squarely put that the beneficial interest arose by virtue of the applicant being the beneficiary of a discretionary family trust of which Sheraz was the trustee. The reference in [2] of Mr Clifford's witness statement dated 19 October 2009, does not support the inference that this was his argument. The fact that Mr Clifford, through his solicitor, eventually firmly asserted a bare trust, following the second and third respondents' solicitors identifying a problem with claiming beneficial interests through a discretionary trust, is relevant, but in the end in light of the primary facts I have identified, is not sufficiently compelling for me to be not satisfied on the balance of probabilities that Sheraz held the shares on a bare trust for Mr Clifford. He did not approbate and reprobate. (5) Similarly, while the absence of any documentation held by Sheraz produced by the applicant to corroborate the bare trust and to negative the holding through the family trust by Sheraz indicates a ground for not being satisfied about the applicant's claim of beneficial ownership, again, in the end, having regard to the way the transaction was developed and completed, and the fact that the applicant plainly considered at all times his actions were the actions of Sheraz and the actions of Sheraz were his actions, and as inadequate as his conduct or the conduct of Sheraz might be said to be by not keeping some records of this transaction, in the end the absence of records does not dissuade me from finding on the balance of probabilities that Sheraz held the shares for Mr Clifford on a bare trust. (6) I consider the fact that the payment of interest on the applicant's borrowings to fund the purchase of the shares had been made from a bank account styled "Sheraz Pty Ltd as Trustee for the Terranora Family Trust", is equivocal. The evidence does not suggest Sheraz had the need for any other account. As Mr Clifford in [2] of his written statement explains, he also used it. 422 In the result, (although finely balanced) I am satisfied by the preponderance of the evidence, and the absence of sufficiently persuasive evidence to negative the inference that it must have been Mr Clifford's and Sheraz's (inferred) intention that Sheraz should hold the shares on a bare trust for the applicant. Mr Clifford and Sheraz have acted throughout as though this were so. It would be unconscientious for Sheraz to assert otherwise now. In fact, Sheraz has not done so. I therefore find that, at all material times, the applicant was the beneficial owner of the Sheraz shares. 423 Loss and damage issue: As noted above, the primary claim of the applicant is for a refund of the price paid for the shares on 19 December 2006, as well as other costs and interest incurred. At [40] of the amended statement of claim, the applicant particularises his loss or damage in these terms: 40.1 The cost and expense the applicant has incurred to 17 February 2009, is $2,713,871.47. 40.2 The minority shareholdings in Vegas are unsaleable. 424 As to the particular that "minority shareholdings in Vegas are unsaleable" the applicant contends that the only sale of shares in Vegas, other than the sale of the C Breeze Pty Ltd shares (of Mr Sutton), which should not be considered relevant here, occurred in 1999, or earlier. The most recent transaction was the allocation of 11,205,437 shares to the entity that now has a controlling interest in Vegas (New Force Holdings Pty Ltd) for $10,000,000 which included a premium for control. 425 The applicant says that Mr Hart's attempts to sell the applicant's Vegas shares in September 2008 were unsuccessful and pre‑dated the New Force Holdings Pty Ltd transaction in March 2009. The applicant says this is consistent with minority holdings in closely held companies not being saleable. He contends the value of the Vegas shares to the applicant is nil. 426 The applicant also points to the opinion that Mr Harvey Pickup provided for the purposes of the Family Court proceedings involving Mr Clifford and his former spouse (exhibit 206). There, Mr Pickup stated that in the circumstances set out in his report, "We are not able to provide a current valuation of the 7.2876% holding in any way which would be meaningful". The applicant says the opinion of Mr Pickup is consistent with the Vegas shares having no value to the applicant. 427 The applicant also says that it was clearly established in his cross‑examination by counsel for the second and third respondents that he attributed no value to the Vegas shares in 2007 in a sworn financial statement filed in the Family Court (exhibit 209) and similarly in December 2009 in a personal statement of financial position provided to the ANZ (exhibit 216). 428 It was in these circumstances that the applicant contends that in choosing the correct remedy the Court can accept a value of the Vegas shares of nil for the purpose of assessing any damages suffered by the applicant. Accordingly, the Court should accept that the usual or preferred approach to assessing damages (by reference to the difference between the price paid and the value as at the date of purchase) is not the only approach. 429 The applicant submits that on the evidence before the Court, a valuation at $0.89 (the buy‑in price) will not properly compensate him as the premium for control is not able to be identified. It is open to accept a value of nil and to grant relief under s 1325 Corporations Act or s 77 FTA, by requiring a re-transfer of the shares to avoid any issue of uncertainty, as Edmonds J did in Donald Financial Enterprises. 430 The respondents contend that the applicant is constrained by its pleaded case and that he has not discharged his onus to establish loss and damage in the nature of his liability in respect of the borrowings, for at least the following reasons: · First, the allegation takes no account of the position, on his own case, that he received the beneficial interest in the newly issued shares in Vegas in return for payment to Vegas of the monies he had borrowed. If he did receive the beneficial interest then the value of the shares at the date of the acquisition needs to be brought to account to demonstrate whether or not the applicant has in fact suffered any loss or damage as a result of the respondent's conduct. · Whether or not the applicant received the beneficial interest in shares, a substantial portion of the interest costs was incurred not by reason of any conduct of the respondents, but because of the applicant's decision to roll over the loan at its expiration on 19 December 2008 (exhibits 213 and 214 and transcript 594 – 596). · In any event, the applicant obtained benefits from his borrowings that he has not attempted to take account of or quantify, namely: (1) He has obtained the benefit of claiming the interest costs of the borrowings as a tax deduction for the purposes of his personal income tax liability in the financial years 2007-2009 inclusive (transcript 559, 594 and 596). (2) He has had the benefit of using some of the shares to facilitate a property settlement with his former spouse (exhibit 211). 431 As to the contention that if the applicant did receive the beneficial interest then the value of the shares at the date of acquisition needs to be brought into account to demonstrate whether or not the applicant has suffered any loss or damage as a result of the respondent's conduct, is (perhaps self evidently) of primary importance if the Court decides that this is a case where only damages are appropriate and there is no entitlement to a refund. This, in turn, is tied to the question of whether or not the shares may be considered unsaleable, an issue to which I will turn shortly. 432 As to the contention that a substantial portion of interests costs was incurred not by reason of the conduct of the respondents but because of the applicant's decision to roll over the loan at its expiration on 19 December 2008, it seems to me that it cannot reasonably be argued that that decision somehow broke a chain of causation. The second and third respondents do not clearly indicate what it was that the applicant should have done at that point, instead of rolling over the loan. In my view a chain of events by that stage was in place such that the rollover decision was part of the chain of events to which, if there was liability, the respondents would be liable: cf Bennett v Minister for Community Welfare [1992] HCA 27; (1992) 176 CLR 408. 433 As to the contention that the applicant has not brought to account for the purpose of assessing loss the benefits he may have received in claiming interest costs as a tax deduction in the financial years 2007 – 2009, I am not satisfied that the true loss suffered by the applicant would be revealed by taking that into account. The fact is that the deductions (if any) may have reduced the applicant's liability for income tax, but it did not have the effect of reducing the interest costs that he actually paid out. 434 As to the contention that the applicant has not taken any account of the benefit he has gained from using some of the shares to facilitate a property settlement with his former spouse, again I do not see that as a quantifiable gain to be set off against the actual loss suffered. Under the Family Court order, the applicant was obliged to transfer shares he held (presumptively beneficially) to his former spouse. He presumably was obliged to make that transfer on the basis that the shares had value, a value of course that he had paid for when he took out the loan, the interest of which he then became liable to pay. 435 The more particular question is whether the applicant has suffered loss or damage on the basis that the shares the applicant now beneficially owns are "unsaleable". As to whether or not the minority shareholding in Vegas is generally speaking "unsaleable", the respondents contend that there is no evidence before the Court that they are. They point to the evidence that the applicant offered the shares for sale at a price in the vicinity of $3.7 million, well in excess of the total cost to the applicant of the purchase price of the shares and borrowing costs (exhibit 209, transcript 605-607 and 638). The respondents say that, having regard to that evidence, the applicant's evidence in chief was incomplete and misleading. The respondents also say that the applicant's claim, that without prejudice privilege existed in respect of the evidence of the second and third respondents relevant to the topic, was disingenuous and lacked any proper foundation and so the Court is entitled to conclude that the applicant made his claim improperly in an attempt to conceal from the Court relevant evidence that he knew amply disproved his baseless allegation that the shares were "unsaleable". The respondents also say that the applicant's own position in April 2008 was that the shares were unsaleable, but only because of the C&C litigation, which was then shortly after settled and not because of any conduct of the respondents. The respondents contend that the reality is that having offered his shares for sale for about $3.7 million the applicant can be taken to have admitted that the shares were not worthless. The respondent also submit that it is "paradoxical" that the applicant seized upon the sale to him of Mr Sutton's small parcel of shares. 436 For my part, I am satisfied on the balance of probabilities that the minority shareholding beneficially held by Mr Clifford is "unsaleable". 437 While, as the respondents submit, Mr Clifford himself proposed that his shares be sold for about $3.7 million in 2008, and Mr Hart agreed to consider the proposal, this was well in excess of the total cost to the applicant of the purchase price of the shares and borrowing costs. It was something in the nature of an ambit claim by which the applicant hoped that, by one means or another, he would be "taken out" of Vegas. The proposal itself was quite disingenuous as it was tied to a proposal that, if the sale of Mr Clifford's (and Mr Rayney's) shares could be arranged, Mr Clifford would be able to see his way free to assist Vegas in the forthcoming steps in the C&C proceedings. As opportunistic as this conduct may be considered to be, to characterise the applicant's conduct neutrally, I do not consider it is good evidence of a real market for sales of Vegas' shares. 438 The position of a minority shareholder in a private company (where shares cannot be sold on an exchange to the public) is no doubt difficult but not necessarily to be equated with the shares having no value. However, if there is no market for the shares, the value may only be determined on a winding up of the company by referring to the assets that back the shares. At particular times, Mr Clifford plainly considered the shares had value. He continued to do so in May 2007. And he obviously thought they were of value in 2008 (albeit it at a high price) when he proposed to Mr Hart that he find a buyer for them. Mr Clifford's evidence and submission, however, is that the shares are now of no value to him. In my view, while the value of the shares has not been established (as the respondents contend), I accept there are or would be real difficulties in trying to sell them. Despite occasional movements, particularly following restructuring – including the 2009 restructuring – I consider in practical commercial terms the shares are unsaleable in the applicant's hands. The expert report of Harvey Pickup, used in the Family Court proceeding and tendered without qualification in this proceeding, tends to support this conclusion in that the expert had difficulty placing a value on the shares. 439 Finally, I should note that to the extent the respondent's press a plea that the applicant contributed to his own losses, if I had found the respondents were liable to the applicant I would not have been satisfied the applicant did or failed to do anything in particular had a bearing on his entitlement to damages. 440 The refund order: This conclusion affects the extent to which, if Mr Clifford had established liability in this case, the relief should include, in effect, an order that he be refunded the price he paid for the shares (or the portion that he continues to hold beneficially) upon presentation of a transfer or transfers to a transferee or transferees nominated by the respondents. 441 The parties accept, as is the case, that the Court has a very wide discretion under s 77 of the FTA and s 1325 of the Corporations Act to give such relief. The parties also accept that the common approach to the assessment of damages under provisions like s 79 of the FTA or s 1041I(1) of the Corporations Act is to assess the difference between the purchase price paid for an asset and its "real value", usually at the date of acquisition: see HTW Valuers Pty Ltd v Astonland Pty Ltd [2004] HCA 54; (2004) 217 CLR 640 at [34] ‑ [45]; Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd [2008] NSWCA 206; (2008) 73 NSWLR 653 at [169] – [191]. Thus, the respondents contend that if the applicant is entitled to claim in respect of loss and damage suffered then he should receive an award of damages – and nothing more – and he has failed to establish his loss in relation to the share value. 442 However, the respondents recognise that if shares are in fact "unsaleable" so that a present "real value" is not easily determined, then a remedy may be fashioned under s 77 FTA and s 1325 Corporations Act in order to appropriately "compensate" a person for the loss or damage suffered. They recognise that in Donald Financial Enterprises the Court found expressly, at [190], that a transaction should be set aside because an assessment of loss or damage was exceedingly difficult, if not impossible. 443 The respondents repeat their submissions, in effect, that here the applicant has not attempted to demonstrate that there is any difficulty in this case in assessing loss or damage based on the retention of the shares and, more generally, has not attempted to demonstrate why the refund orders, proposed is preferable, alternatively, the only available remedy. 444 So far as a refund order by way of compensation is concerned the second and third respondents also submit that if they are not to receive the benefit of any of the shares transferred pursuant to the proposed orders (and they say it is difficult to see how they could) it is neither fair nor just to require them to contribute to what is in effect a refund of the purchase price: see Port Kennedy Golf Country Club Pty Ltd v Port Kennedy Resorts Pty Ltd [1999] WASC 253 at [36]. 445 These respondents also argue that nothing they did could be considered to have reduced the value of the shares that were purchased in December 2006 by the applicant. 446 The respondents submit that the delay of the applicant in pressing his case for a refund, for which he offers no explanation, should also be taken into account. They say that the reality is that the applicant has been motivated to institute these proceedings because of a falling out over matters unrelated to the applicant's claim, namely, whether and on what terms the first respondent should sub‑licence a third party to exploit the intellectual property of the "Rusty" brand in the United States. 447 Finally, the respondents say the applicant has taken advantage of the share acquisition, in that he took up a position as in‑house counsel and has received remuneration. He also used some of the shares to facilitate a property settlement with his former spouse, and this was at a time when this litigation was (apparently) in his contemplation (transcript, 587). Further, he has derived tax benefits from the costs of his borrowings in respect of the years 2008 and 2009, at a time when the litigation was in contemplation. 448 If I had found that the respondents were liable to the applicant by reason of their misleading or deceptive conduct in contravention of the Corporations Act or FTA, I would have exercised the remedial powers of the Court under s 1041I of the Corporations Act, or s 79 of the FTA in favour of the applicant. My reasons are these. First, as I have found, I consider that it can properly be said, on the balance of probabilities, that the shares beneficially held by Mr Clifford are, in a practical commercial sense, "unsaleable". 449 I also consider that, if there had been a finding of misleading and deceptive conduct upon which the applicant had materially relied, this finding would have fundamentally undermined a contention that it was not that conduct which ultimately motivated Mr Clifford to sue for compensation. In other words, if the alleged contravening conduct had been proved, it would be no defence to a refund order, and largely irrelevant to say, that a commercial dispute between the applicant and the directors was the cause of the dispute and the ultimate action. 450 As to the point that a refund order made against all three respondents would not take account of the fact that the second and third respondents did not receive the purchase price, my view is that in circumstances where Vegas did receive the purchase price, and the second and third respondents were accessories to the contravention – or in the case of the proceeding under the FTA, have a primary liability in respect of the contravention – it is nonetheless appropriate that they bear a liability to respond to the refund order. The order would be so framed as to enable the respondents to indicate who ultimately should receive a transfer of particular shares tendered. In ensuring that the applicant receive just compensation in these circumstances, it would be inappropriate to relieve the second and third respondents of any liability in relation to the refund order, even if they did not personally receive the purchase price or any portion of it in the first instance. At one level, of course, they did receive some benefit from it by virtue of their shareholding in Vegas at material times when Vegas received and applied the purchase funds from the applicant and the improvement of Vegas' financial bottom line from this receipt of funds. 451 As to the point that the applicant has not brought these proceedings in a timely manner, while it is true his disenchantment can be dated from mid 2007, his settlement proposals were formulated in late 2008 and these proceedings were commenced soon after, in early 2009 – more than two years after the investment. If the contravening conduct had been made out then I do not consider on balance the delay can be said to have led to any particular prejudice. 452 Nor would I have considered that the applicant had gained any relevant advantages that would suggest a refund order would be inappropriate. The suggestion that the share acquisition enabled him to take up the position of in‑house counsel is, in my view, of no consequence. There was in effect a requirement for the applicant to take up the in‑house counsel position. He was paid for doing productive legal work in that period. He would have been paid, in all probability, much more if he had remained as an independent barrister for performing that work, if he had not taken up the investment opportunity. Nor do I consider that the use of some of the shares to facilitate a property settlement with his former spouse is relevant. Orders made in the Family Court of Western Australia worked on the apparent assets of the applicant. It cannot be said he obtained any relevant advantage as a result of the transfer of shares made to this former spouse under the Family Court order. Similarly I do not consider that any tax benefits he may have derived from the costs of his borrowings in 2008 and 2009 make a refund order inappropriate. The actual investment and costs paid out on the loan are real, regardless of any tax advantage he might have received. 453 The factors militating in favour of a refund order are, on the other hand, strong. The applicant holds a minority interest in a company which is in a practical commercial sense unsaleable. If the Court had found, as a matter of fact, that Mr Clifford had been misled or deceived at the time he made his investment, and that he had materially relied on the conduct complained of, then the position would have been that he had lost the practical benefit of his $2.5 million investment, the interest on which he has been paying out ever since. In that regard, not to order a refund of his shares would be unfair. The value of the holding is unclear. In such circumstances a damages claim in respect of the difference between the price paid and the true price of acquisition, would be unrealistic. To attempt to award damages for the applicant's loss would not see the applicant properly compensated. 454 I would therefore have been prepared to make an order in substance in the terms primarily proposed by the applicant, but on condition that the transferors of the shares to be tendered to the respondents include the 224,486 shares currently held by the applicant's former spouse. Given that the purpose of the compensation order would be to compensate the applicant in respect of the whole of the initial share acquisition he made, of which those shares constitute part, they would necessarily need to be part of the refund. 455 However, for the reasons set out above, I have found the applicant has failed to make out his case of misleading or deceptive conduct and so these findings concerning relief are not in fact relevant to the outcome of the proceeding. I have dealt with them for the sake of completeness. orders 456 The applicant's case should be dismissed with costs. I will hear from the parties as to the terms of the final orders to be made. I certify that the preceding four hundred and fifty-six (456) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Barker. Associate: Dated: 24 August 2010