FEDERAL COURT OF AUSTRALIA De Bortoli Wines Pty Limited v HIH Insurance Limited (in liq) [2011] FCA 645 Citation: De Bortoli Wines Pty Limited v HIH Insurance Limited (in liq) [2011] FCA 645 Parties: DE BORTOLI WINES PTY LIMITED (ACN 000 146 672) v HIH INSURANCE LIMITED (IN LIQ) ACN 008 636 575, ANTHONY GREGORY MCGRATH IN HIS CAPACITY AS LIQUIDATOR OF HIH INSURANCE LIMITED (IN LIQ) ACN 008 636 575 and CHRISTOPHER JOHN HONEY IN HIS CAPACITY AS LIQUIDATOR OF HIH INSURANCE LIMITED (IN LIQ) ACN 008 636 575 File number: NSD 147 of 2010 Judge: STONE J Date of judgment: 9 June 2011 Catchwords: CORPORATIONS – s 1321 Corporations Act 2001 (Cth) and reg 5.6.54 Corporations Regulations 2001 – appeal from liquidators rejection of formal proof of claim –consideration of role of liquidators in determining whether to admit or reject proofs – role is quasi-judicial – appeal from liquidators' decision is interlocutory EVIDENCE – hearsay evidence – consideration of exceptions to hearsay rule – whether transcript of examination under s 596B Corporations Act admissible – s 597(14) Corporations Act not relevant – whether transcript admissible under s 69 Evidence Act 1995 (Cth) as business record – whether admissible under s 75 Evidence Act because interlocutory proceeding – section requires particular identification of the maker of representation – even if maker identified transcript not admissible merely because interlocutory proceeding – Court has discretion to exclude evidence where prejudice outweighs probative value – transcript not admissible under exceptions to hearsay rule TRADE PRACTICES – applicant claims shares purchased in reliance on misleading and deceptive conduct in breach of s 52 Trade Practices Act 1974 (Cth) – consideration of causation and reliance – conduct need not be sole cause of loss – carelessness not a bar to recovery of damages under s 82 Trade Practices Act – question of reliance to be considered in light of the circumstances surrounding each purchase – applicant relied on own judgment and experience – reliance not established Legislation: Trade Practices Act 1974 (Cth) ss 52, 82 Corporations Act 2001 (Cth) ss 471B, 553D, 553(1), 596B, 597(14), 1321 Evidence Act 1995 (Cth) ss 59, 69, 75, 128, 136 Corporations Regulations 2001 (Cth) regs 5.6.49, 5.6.50, 5.6.54, Federal Court (Corporations) Rules 2000 reg 1.7(1), 1.5, 2.2 Cases cited: Australian Competition and Consumer Commission v Advanced Medical Institute Pty Ltd (2005) 147 FCR 235 Australian Medic-Care Company Limited v Hamilton Pharmaceutical Pty Ltd (No 4) (2008) 170 FCR 9 Bray v F Hoffman-La Roche Ltd (2002) 118 FCR 1 Chappel v Hart (1998) 195 CLR 232 Como Investments Pty Ltd (in liq) v Yenald Nominees Pty Ltd (1997) 19 ATPR 43,617 Digi-Tech (Australia) Ltd v Brand [2004] NSWCA 58 Environment Agency v Empress Car Co (Abertillery) Ltd [1998] 2 AC 22 Fitzgerald v Penn (1954) 91 CLR 268 Fodare Pty Limited v Shearn [2010] NSWSC 737 Ford Motor Company of Australia Limited v Arrowcrest Group Pty Limited (2003) 134 FCR 522 Gould v Vaggelas (1985) 157 CLR 215 Griffin v Pantzer (2004) 137 FCR 209 Henville v Walker (2001) 206 CLR 459 I & L Securities Pty Limited v HTW Valuers (Brisbane) Pty Limited (2002) 210 CLR 109 Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (2008) 73 NSWLR 653 Jameson v Professional Investment Services Pty Ltd (2009) 72 NSWLR 281 Janssen-Gilag Pty Limited v Pfizer Pty Limited (1992) 37 FCR 526 March v Stramare (E & MH) Pty Limited (1991) 171 CLR 506 Marks v GIO Australia Holdings Ltd (1998) 158 ALR 333 McCarthy v McIntyre [1999] FCA 784 MGICA (1992) Limited v Kenny and Good Pty Limited (1996) 140 ALR 313 Proctor & Gamble Australia Pty Ltd v Medical Research Pty Ltd [2001] NSWSC 183 Re Jay-O-Bees Pty Ltd (in liq); Rousseau Pty Ltd (in liq) v Jay-O-Bees Pty Ltd (in liq) [2004] NSWSC 818, (2004) 50 ACSR 565 Registrar of Aboriginal Corporations v Murnkurni Women's Aboriginal Corporation (1995) 137 ALR 404 Smith v Chadwick (1884) 9 App Cas 187 Tanning Research Laboratories Inc v O'Brien (1990) 169 CLR 332 Thomas v State of New South Wales (2008) 74 NSWLR 34 Wardley Australia Limited v Western Australia (1992) 175 CLR 514 Law Reform Commission Report on Evidence (No 38) Cross on Evidence, JD Heydon, 7th Australian Edition 2007 (Heydon) RV Miller, Miller's Annotated Trade Practices Act 31st ed, 2010 J Allsop, "Causation in Commercial Law" presented at the Torts in Commercial Law Conference in Sydney on 17 December 2010 Date of hearing: 14 and 15 September 2010 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 113 Counsel for the Applicant: MR Gracie with M Klooster Solicitor for the Applicant: Noyce Salmon & D'Aquino Solicitors Counsel for the Respondents: F Gleeson SC with KJ Williams Solicitor for the Respondents: Blake Dawson IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 147 of 2010 BETWEEN: DE BORTOLI WINES PTY LIMITED (ACN 000 146 672) Applicant AND: HIH INSURANCE LIMITED (IN LIQ) ACN 008 636 575 First Respondent ANTHONY GREGORY MCGRATH IN HIS CAPACITY AS LIQUIDATOR OF HIH INSURANCE LIMITED (IN LIQ) ACN 008 636 575 Second Respondent CHRISTOPHER JOHN HONEY IN HIS CAPACITY AS LIQUIDATOR OF HIH INSURANCE LIMITED (IN LIQ) ACN 008 636 575 Third Respondent JUDGE: STONE J DATE OF ORDER: 9 June 2011 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The application be dismissed with 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. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 147 of 2010 BETWEEN: DE BORTOLI WINES PTY LIMITED (ACN 000 146 672) Applicant AND: HIH INSURANCE LIMITED (IN LIQ) ACN 008 636 575 First Respondent ANTHONY GREGORY MCGRATH IN HIS CAPACITY AS LIQUIDATOR OF HIH INSURANCE LIMITED (IN LIQ) ACN 008 636 575 Second Respondent CHRISTOPHER JOHN HONEY IN HIS CAPACITY AS LIQUIDATOR OF HIH INSURANCE LIMITED (IN LIQ) ACN 008 636 575 Third Respondent JUDGE: STONE J DATE: 9 June 2011 PLACE: SYDNEY REASONS FOR JUDGMENT 1 The first respondent in this proceeding (HIH) is a company in liquidation. The company was registered in Australia and listed on the Australian Securities Exchange (ASX). Together with its associated companies, HIH carried on the business of general insurance underwriting both in Australia and internationally, operated insurance underwriting agencies and engaged in investment funds management all in the areas of general insurance, workers' compensation, public professional liability insurance and property and commercial insurance. The second and third respondents are the joint liquidators of HIH (Liquidators) and were appointed on 27 August 2001. HIH went into provisional liquidation on 15 March 2001 and final liquidation on 27 August 2001. 2 The applicant, De Bortoli Wines Pty Limited (DBW), is a corporation registered in Australia, carrying on business as a wine producer. On 15 March 2001 the applicant, held 19,683,138 shares in the company. The shares had been acquired in 66 separate transactions between 11 August and 22 December 2000 for a total cost of $7,140,179.01. During that period the HIH share price dropped from $1.04 to 22 cents. The chronological order of share purchases was set out in a document that was Exhibit B in the proceeding. At all relevant times Mr Darren De Bortoli was the managing director of DBW and was instrumental in the purchase of the shares. 3 On 9 February 2009, DBW submitted a proof of debt to the Liquidators claiming to be owed $9,213,510.19, being the total cost of the HIH shares acquired by DBW and a related company, Aabrofay Pty Limited (Aabrofay). DBW alleged that the shares had been acquired in reliance on misleading and deceptive information provided, directly or indirectly, by HIH in breach of s 52 of the Trade Practices Act 1974 (Cth). Presumably the debt alleged by DBW is based on a claim to damages pursuant to s 82 of the Trade Practices Act. On 17 August and 19 October 2009, Mr De Bortoli was examined in the Supreme Court of New South Wales before a Senior Deputy Registrar in accordance with s 596B of the Corporations Act 2001 (Cth). On 4 February 2010, the Liquidators rejected DBW's claim on the basis that: (a) the cost of shares purchased by Aabrofay ($2,073,331) was not a loss suffered by DBW; and (b) there was insufficient evidence to establish that the balance of the claim was a true liability of HIH. In particular the liquidators were of the opinion that the materials and evidence provided in support of the claim did not support that reliance on HIH's alleged misleading and deceptive conduct caused the loss claimed by DBW. 4 On 17 February 2010 DBW filed an originating process and statement of claim seeking to have the liquidators' decision set aside in relation to the shares purchased by DBW and its formal proof of debt admitted with the exception of that part of the claim relating to the shares purchased by Aabrofay. The application is brought pursuant to s 1321 of the Corporations Act 2001 (Cth) and reg 5.6.54 of the Corporations Regulations 2001 (Cth). The section provides that the Court may "confirm, reverse or modify the act or decision, or remedy the omission" of the liquidators and "make such orders and give such directions as it thinks fit". 5 The conduct that DBW alleges to be misleading and deceptive and to have caused the company's loss falls into three categories: 1. information contained in documents released by HIH such as financial statements and reports as well as media releases by HIH which were published in the Australian Securities and Investment Commission (ASIC), the ASX, shareholders and the public generally; 2. advices given by third party expert analysts such as stockbrokers based on information provided by HIH to the public and the ASX; and 3. oral representations made by certain officers of HIH, namely Mr John Clarke, General Manager of Public Affairs and the late Mr Randolph Wein, a director of HIH at the relevant time. 6 The Liquidators admit that some of the representations pleaded by DBW were misleading or deceptive however they submit the applicant has failed to establish a causal connection between that conduct and the loss claimed by DBW. The role of the Liquidators 7 The Liquidators have a duty to distribute the assets in accordance with the statutory framework established by the Corporations Act and Regulations. Section 553(1) provides: Subject to this Division, and Division 8, in every winding up, all debts payable by, and all claims against, the company (present or future, certain or contingent, ascertained or sounding only in damages) being debts or claims the circumstances giving rise to which occurred before the relevant date, are admissible to proof against the company. It is not in contention that the relevant date for the purposes of s 553(1) is 15 March 2001, being the date when HIH was placed in provisional liquidation. The Liquidators may require a debt or claim to be formally proved; s 553D. This requires detailed particulars of the debt or claim to be provided in a specified form; Regulations 5.6.49 and 5.6.50. 8 The rules governing the determination in relation to a proof of debt are laid down in s 553E of the Corporations Act which provides: … in the winding up of an insolvent company the same rules are to prevail and be observed with regard to debts provable as are in force for the time being under the Bankruptcy Act 1966 in relation to the estates of bankrupt persons (except the rules in sections 82 to 94 (inclusive) and 96 of that Act), and all persons who in any such case would be entitled to prove for and receive dividends out of the property of the company may come in under the winding up and make such claims against the company as they respectively are entitled to because of this section. 9 Having rejected DBW's proof of debt the Liquidators, in accordance with reg 5.6.54, notified the company of their decision, the grounds of rejection and the company's right of appeal. Appeal against Liquidators' decision 10 In Tanning Research Laboratories Inc v O'Brien (1990) 169 CLR 332 at 338-40, Brennan and Dawson JJ outlined the principles that should govern a liquidator in relation to proofs of debt: In determining whether to admit or reject a proof of debt, a liquidator has been said to act in a quasi-judicial capacity … according to standards no less than the standards of a court or judge … This description of the liquidator's function reflects his duty to distribute the assets in his hands or under his control among the persons truly entitled. That duty was stated by Viscount Simonds in Government of India v Taylor [1955] AC 491 at p 509; [1955] 2 WLR 303: I conceive that it is the duty of the liquidator to discharge out of the assets in his hands those claims which are legally enforceable, and to hand over any surplus to the contributories. I find no words which vest in him a discretion to meet claims which are not legally enforceable. It will be remembered that, so far as is relevant for this purpose, the law is the same whether the winding up is voluntary or by the court, whether the company is solvent or insolvent, and that an additional purpose of a winding up is to secure that creditors who have enforceable claims shall be treated equally, subject only to the priorities for which the statute provides. The principles which determine enforceability of the liability to which a proof of debt relates are, in the main, the same as the principles which would be applied in an action brought directly against the company to enforce that liability. Those principles include the law relating to the barring of actions by time … But this general rule is qualified. As the parties whose interests are affected by admission of a proof of debt are the general body of creditors and the contributories rather than the company in liquidation, there are some liabilities which would be enforceable against the company but which a liquidator is not bound to admit to proof of debt lest the interests of creditors and the contributories may be unjustly affected. A liquidator may properly reject a proof of debt if the liability, though enforceable against the company, is not a true liability of the company but is founded merely on some act or omission on the part of the company which unjustly prejudices the interests of the creditors or contributories in the assets available for distribution. In this respect there is no reason to distinguish between the position of a liquidator and that of a trustee in bankruptcy: see Ayerst v C & K (Construction) Ltd [1976] AC 167. In In re Van Laun; Ex parte Chatterton [1907] 2 KB 23, at 31, Buckley LJ said: Whether the creditor alleges that there has resulted, and that he relies upon an account stated, or a covenant entered into by the debtor, or a judgment which he has obtained, the principle, I apprehend, is exactly the same, and is this – that the trustee is not the person who has stated the account, it is not the covenantor, is not the judgment debtor, but is entitled to say, "It is my business to see that those who seek to rank against this estate are persons who are really creditors of that estate. If there be a judgment it is not necessary to shew fraud or collusion. It is sufficient, in the language of Lord Esher, to shew miscarriage of justice – that is to say, that for some good reason there ought not to have been a judgment. Exactly the same, I think, is true of an account stated or of a covenant. 11 Justices Brennan and Dawson, at 340-1, also outlined the approach that the court takes on an appeal from a liquidator's rejection of a proof of debt: The proceedings thus instituted, though often referred to as an "appeal" from the liquidator's decision to reject, are originating proceedings which the court hears de novo … In such a proceeding a liquidator who defends his decision to reject a proof of debt is no longer acting in a quasi-judicial capacity; he is cast in the role of an adversary defending the assets available for distribution against a liability which, according to the view he formed when acting quasi-judicially, is not legally enforceable. The liquidator may defend those assets against the creditor's claim on any ground on which the company might have defended the claim had it been sued by the creditor. … The issue in the proceeding is whether the liability referred to in the proof of debt is a true liability of the company enforceable against it. The issue is contested between the putative creditor on the one hand and the liquidator on the other; the liquidator a party litigant. And none the less so though the liquidator is required to act fairly in conducting the litigation. 12 In Re Jay-O-Bees Pty Ltd (in liq); Rousseau Pty Ltd (in liq) v Jay-O-Bees Pty Ltd (in liq) [2004] NSWSC 818, (2004) 50 ACSR 565 Campbell J, in discussing procedural aspects of an appeal from rejection of a proof of debt, expressed the opinion that such an appeal is an interlocutory application. His Honour explained [54]: When the court makes an order that a company be wound up in insolvency it appoints an official liquidator to be the liquidator of the company (s 472(1) Corporations Act) whose powers are subject to the control of the court (s 477(6) Corporations Act). The order that the company be wound up in insolvency is an order that a process be gone through, under the supervision of a court-appointed officer, all of whose powers are subject to the control of the court. The process is, in the broadest terms, that the assets of the company be ascertained and got in, its liabilities ascertained, its contributories ascertained, any uncertainties about the respective entitlements of particular creditors or contributories decided, the assets distributed among those creditors and contributories entitled to them, and the company then dissolved. An appeal against rejection of a proof of debt is one matter which the court decides, as an incident of the carrying through of the process which the court has ordered, for the winding up of the company. That is why such an application is one which is made "in a proceeding already commenced in the Court", namely the winding up proceedings. 13 Justice Campbell's comments were made in the context of a hearing for the purpose of determining whether rectification of a contract could be brought by way of interlocutory process, filed in winding up proceedings and whether leave should be granted under s 471B of the Corporations Act to allow the applicant to proceed against a company subject to winding up. His Honour refused to grant leave for a number of reasons including that not all the necessary parties to a rectification suit were before the Court and that all the issues that either the party claiming rectification or the liquidator wished to raise could be raised in appeal proceedings. 14 No issues such as were central to the dispute in Re Jay-O-Bees Pty Ltd arise here however Mr Gracie, counsel for the applicant, made oral submissions as to the application being interlocutory. Mr Gracie was not concerned that the present application was brought by originating process rather than an interlocutory process in accordance with Form 3 as required by reg 2.2 of the Federal Court (Corporations) Rules 2000 for, as he submitted, reg 1.7(1) provides that it is sufficient compliance "if the document is substantially in accordance with the form required". Nevertheless he pressed the point that the application was in fact, interlocutory, in the context of a dispute between the parties as to the admissibility of part of the applicant's evidence. I accept that this is an interlocutory proceeding however that does not, of itself, resolve the evidentiary issues which are discussed below. In accordance with the definitions in reg 1.5 however, the parties should be referred to as applicant and respondent not plaintiff and defendant. OBJECTIONS TO EVIDENCE 15 Before moving to the substantive issues of causation and reliance, it is necessary to discuss the respondents' objections to evidence which the applicant sought to adduce. The applicant relied on two affidavits of Mr De Bortoli sworn respectively on 28 July and 13 September 2010; two statutory declarations of Mr De Bortoli made respectively on 6 February and 21 May 2009; an affidavit of Terrence David Rowney sworn on 14 September 2010; an affidavit of Cary Olavi Helenius sworn on 30 July 2010, as well other documentary evidence much of which was tendered as exhibits to the Amended Statement of Claim. Statutory declarations 16 The first statutory declaration (6 February 2009) describes DBW's acquisition of HIH shares and gives details of various financial reports, media releases and statements made by HIH as well as stockbroker advices said to be influential in DBW purchasing HIH shares. 17 The second statutory declaration (21 May 2009) annexes a chain of correspondence between DBW's solicitors and those of the Liquidators. The letters follow the lodgement of DBW's proof of debt and comprise DBW's responses to requests for further particulars and clarification of its claim. In the statutory declaration Mr De Bortoli affirms that the statements made in the letters from DBW's solicitors are true and correct. 18 The respondents objected to the admissibility of the whole of the two statutory declarations. In relation to the first statutory declaration, it also objected to particular parts of the declaration. In my view, the specific objections were well made however it is not necessary to consider them in detail as the applicant did not press the challenged passages. The respondents' objections to the whole of the declarations were based on hearsay to which none of the exceptions to the rule in s 59 of the Evidence Act 1995 (Cth) applied. They were, however, content for the declarations (excluding the challenged passages of the first declaration) to be considered, pursuant to s 136 of the Evidence Act, as Mr De Bortoli's evidence in chief, that is as evidence of the matters asserted as particulars of DBW's claim. The applicant did not dissent from this proposal and the statutory declarations were admitted on this basis. Mr De Bortoli's affidavits 19 Mr De Bortoli's first affidavit (28 July 2010) refers to the Proof of Debt/Claim dated 6 February 2009 and to the letters from his solicitors, Noyce Salmon & D'Aquino which are exhibit 22 to the Amended Statement of Claim. The letters were sent in reply to requests for particulars by the Liquidators' solicitors, Blake Dawson. Mr De Bortoli states: Where there are statements of fact or opinion made by me in the Proof of Debt/Claim or by my solicitors on my instructions in the Replies to Requests for Particulars and which are based on my personal knowledge or belief, I say that those facts, matters and opinions are true and correct to the best of my knowledge and belief. 20 This affidavit cannot be accepted as evidence of the truth of the material to which it refers. The correspondence between the parties' solicitors is long and complex. No attempt has been made to identify specific statements of fact or opinion that were made by Mr De Bortoli or his solicitors on his instructions and which were based on his personal knowledge and belief. As the respondents submitted, it is not possible for the Court or the respondents to identify which statements meet these criteria as "only Mr De Bortoli can know which statements were based on his personal knowledge and belief and which statements had some other basis". In any event, even if such statements could be identified they would not be relevant to the central issue here which is whether DBW, acting through Mr De Bortoli, relied on misleading and deceptive conduct by HIH in such a manner as to cause loss to DBW. 21 The respondents also objected to the affidavit on the ground of hearsay to which none of the exceptions to the rule in s 59 of the Evidence Act apply. In particular the exceptions in ss 63 and 64 do not apply. There is no evidence that Mr De Bortoli or his solicitors would not be available to give evidence. Mr De Bortoli's assertion as to the truth of the statements made in the Proof of Debt/Claim or in the letters from his solicitors cannot be admitted as evidence of their truth. The documents referred to in the affidavit are exhibits to the Amended Statement of Claim and as such are available as evidence of the particulars of DBW's claim. 22 In his affidavit of 13 September, Mr De Bortoli testified "as to the truthfulness and accuracy" of the transcripts of his examination on behalf of the Liquidators pursuant to s 596B of the Corporations Act. This approach was adopted as a late measure to address the respondents' objection to the transcript being admitted into evidence however those objections require separate consideration. Examination transcript 23 The examination, which took place on 17 August and 19 October 2009, was before Senior Deputy Registrars of the Supreme Court of New South Wales. The respondents objected to the whole of the transcript for a number reasons including that it contains a great deal of irrelevant and inadmissible material; it is not in the form of non-leading questions that would be permitted in adducing oral evidence in chief; and, in so far as the applicant seeks to rely on the transcript to prove a reliance claim rather than giving evidence in chief at the hearing it deprives the Court of the opportunity to observe Mr De Bortoli's demeanour and the credibility of his evidence. Finally, the respondents averred that the only relevant purpose for which the transcript could be tendered was a hearsay purpose, namely, as evidence of the truth of statements made by Mr De Bortoli in the examination. 24 The applicant submitted that as the Liquidators had expressly stated that they relied on Mr De Bortoli's statements under examination in concluding that the applicant's claim was not a liability of the company, it was "a somewhat unmeritorious and surprising admission on behalf of the liquidators". It was also a source of complaint that the respondents "have not sought to adduce evidence by the liquidators themselves of those matters to which they purportedly had regard in rejecting the Proof of Claim". 25 These submissions take no account of the nature of the present proceeding. The present proceeding is not a review of the Liquidators' decision but a hearing de novo. While the reasons given for rejecting the applicant's proof of debt might be forensically useful in identifying and analysing objections that might or might not be made to the proof, with respect, the Liquidators' reasons are irrelevant. It is for this Court to decide, on the evidence, if the proof should be accepted. 26 Clearly Mr De Bortoli's statements recorded in the transcript of the examination are previous representations within s 59 of the Evidence Act and therefore, subject to any relevant exception to the rule, they are hearsay evidence and not admissible; s 59(1). Section 597(14) of the Corporations Act provides that the written record of an examination signed by the person examined, "may be used in evidence in any legal proceedings against the person" however, this proceeding is not "against" Mr De Bortoli. Consequently, the provision is not relevant to the present question; Fodare Pty Limited v Shearn [2010] NSWSC 737 at [39]-[40]. The business record exception to the hearsay rule 27 The applicant pressed for the admission of the transcript in reliance on one or other of two exceptions to the hearsay rule: (a) the business record exception; Evidence Act s 69(2), and (b) the exception in relation to an interlocutory proceeding; Evidence Act s 75. 28 The business record exception does not apply because the representations recorded in the transcript were obtained in connection with "an Australian or overseas proceeding"; s 69(3)(a). An "Australian or overseas proceeding" is defined in the Dictionary of the Evidence Act as "a proceeding (however described) in an Australian court or a foreign court". 29 For the reasons given in Jay-O-Bees Pty Ltd (see [12] above) the winding up of an insolvent company by a liquidator appointed by the court is a process which is ultimately subject to the control of the court and is a proceeding in the court. An examination pursuant to s 596B in relation to a proof of debt lodged in the liquidation is part of the winding up process which involves ascertaining the assets and liabilities of the company. Examination for the purpose of assessing a proof of debt is directed to establishing whether the alleged debt is a true liability of the company. That evidence is, in my view, obtained "in connection" with an Australian proceeding. 30 The decision of the Full Federal Court in Griffin v Pantzer (2004) 137 FCR 209 should be distinguished. There the Court was concerned with an examination pursuant to s 81 of the Bankruptcy Act 1966 (Cth), in particular with the obligation of the bankrupt, Mr Griffin, to produce, at the examination, books relating to his examinable affairs pursuant to s 77(1)(a). Mr Griffin sought to avoid the production by claiming a privilege against self incrimination both under the Bankruptcy Act and under s 128 of the Evidence Act which gives protection from self-incrimination where the court gives the witness a certificate under s 128(6). Section 128(7) provides that where a certificate is given the evidence cannot be used against the person in "any proceeding in an Australia court". 31 In considering whether such a privilege was applicable under the Bankruptcy Act, Allsop J, with whom Ryan and Heerey JJ agreed, attached considerable importance to the fact that, subject only to specific exceptions, under the Bankruptcy Act all property of the bankrupt vests in the trustee and is required to be available to the trustee in the administration of the bankrupt estate. Following an extensive review of the English and Australian authorities both judicial and statutory, his Honour concluded, at [177]: Giving the fullest recognition to the strength of the expressions of view by the High Court as to the fundamental and deeply rooted nature of the privilege, it appears to me to be plain and unmistakable that the obligation to hand over books and records provided for by s 77(1)(a) is fundamental to the trustee carrying out his or her necessary task in the interests of creditors, the public and indeed the bankrupt himself or herself, and that the administration of bankruptcy would be frustrated in a case such as the present if books and records could be held back by the bankrupt because of the claim of privilege. This compels me to the conclusion that the privilege has been abrogated in respect of the obligation in s 77(1)(a). 32 Justice Allsop also referred to s 81(11AA) of the Bankruptcy Act which, "subject to any contrary direction by the Court, the Registrar or the magistrate", specifically abrogates the privilege against self-incrimination in relation to questions put to a bankrupt under examination. Although, his Honour held that section to be a sufficient response to any claim of privilege under s 128 of the Evidence Act, he nevertheless expressed the opinion, at [207], that an examination under s 81 was not a proceeding of the kind contemplated by s 128 and therefore the bankrupt could not invoke the protection of that section. 33 In reaching this conclusion his Honour noted that s 4(1) of the Evidence Act states that the Act "applies in relation to all proceedings in a federal court or an ACT court" and that the word, "proceedings" is not defined in the Act. His Honour observed, at [201]-[202], that although the Australian Law Reform Commission Report on Evidence (No 38) specifically included "bankruptcy proceedings" under the heading "Proceedings", it does not follow that an examination after the sequestration order is made and the debtor is made a bankrupt is such a proceeding. The paragraph makes clear that it is proceedings "whenever evidence is to be adduced". It is not easy to see how an examination under s 81 is such a proceeding. It is not between parties. It is not the resolution or agitation of a lis at which evidence is adduced under the rules of evidence. It does not have parties or witnesses properly so-called. It is an interrogation – a fact-finding exercise of the kind discussed by Lord Hanworth MR in Re Paget. The notes or transcript of the "evidence given at the examination" … can be used as evidence, but the "evidence" is only the answers on oath to an interrogation by the trustee or creditor. 34 It considering whether, in the light of Griffin v Pantzer, s 69(3) of the Evidence Act applies to the transcript of the examination of Mr De Bortoli it is necessary to take account of the different concerns to which s 69(3) and s 128 are respectively directed. Section 128 is not concerned with the reliability of evidence but whether a witness should be compelled to give evidence over the witness's objection on the ground of self-incrimination. It was this circumstance that the Full Court in Griffin v Pantzer was considering. Notwithstanding the conclusion reached by Allsop J in that circumstance, his Honour accepted that such an examination "may for some purposes, or in some legislative contexts, be a proceeding" and gave a long list of authorities in support of the proposition. In my view, s 69(3) provides such a legislative context. It is a context which it was not necessary for the Full Court to consider in Griffin v Pantzer and which was not considered there. 35 Section 69 is directed not to the taking of evidence from a witness but with the reliability of evidence. In relation to the transcript of an examination, the issue is whether the evidence that has been taken can be admitted in other proceedings under an exception to the hearsay rule in respect of a document that is a business record. The hearsay rule reflects scepticism about the credibility of indirect evidence. The rationale is summarised in Cross on Evidence, JD Heydon, 7th Australian Edition 2007 (Heydon) at 974: It is largely because of the increased dangers of impaired perception, bad memory, ambiguity and insincerity, coupled with the decreased effectiveness of conventional safeguards, that hearsay is regarded as so particularly vulnerable as to require a special exclusionary rule. 36 The business records exception in s 69 reflects greater confidence, often referred to as the rationale of reliability, in the truth of a representation recorded as part of business records, in a form that is not transitory or evanescent, by a person who might reasonably be supposed to have personal knowledge of the asserted fact, or on information provided by such a person: see Australian Competition and Consumer Commission v Advanced Medical Institute Pty Ltd (2005) 147 FCR 235 at [27]; Australian Medic-Care Company Limited v Hamilton Pharmaceutical Pty Ltd (No 4) (2008) 170 FCR 9 at [8]. 37 Section 69(3) is specifically directed to circumstances in which the business record exception to the hearsay rule does not apply. It is an exception to an exception based on a 'rationale of unreliability'. In Thomas v State of New South Wales (2008) 74 NSWLR 34 at [27] Campbell JA said: I would readily accept that a very important reason for drawing the dividing line between evidence admissible by reason of section 69(2), and evidence not admissible by reason of section 69(3) was the likely reliability of evidence that fell within section 69(2) but not within section 69(3), and the risk of unreliability of evidence that fell within section 69(3). His Honour added at [29]: [I]t is daily experience in the courts that evidence given on oath or affirmation is rejected or found to be unreliable. The process of litigation frequently involves a witness telling his or her story several times out of court, and being questioned about it, and being questioned about whether the witness can say anything on other topics of relevance to the case. This has the effect that by the time the witness gives evidence in court, the evidence lacks the spontaneity and freshness that attaches to most facts recorded in business records. … Evidence given in the course of a proceeding does not, as a class, have the same inherent likelihood of reliability as attaches to statements in business records. Thus it is in accord with the rationale of section 69(3)(a) for representations contained in a transcript of evidence given in a proceeding to fall within section 69(3)(a). 38 The rationale of unreliability coupled with the clear terms of s 69(3)(a) and the definition of the compound expression "Australian or overseas proceeding" as "a proceeding (however described) in an Australian court or a foreign court" all indicate that the transcript of Mr De Bortoli's evidence should not be admitted as a business record; Fodare Pty Limited v Shearn at [53]-[56]. Interlocutory proceeding exception to the hearsay rule 39 In the alternative to s 69 the applicant submitted that the transcript was admissible under s 75 of the Evidence Act. Section 75 provides that in an interlocutory proceeding the hearsay rule does not apply to evidence if the party adducing the evidence also adduces evidence of its source. Under s 75 it is not necessary, in contrast to the position in various Rules of Court (see Heydon at 1172, footnote 868), for the deponent to assert a belief in the truth of the fact asserted. I accept, for reasons given above, that the present proceeding is interlocutory. I also accept that, as Merkel J said in Bray v F Hoffman-La Roche Ltd (2002) 118 FCR 1 at [117], "there is no proper basis for importing a requirement that s 75 is limited to first hand hearsay as defined in s 62". There are, however, other formidable obstacles to the admissibility of the transcript. 40 Section 75 provides that there be evidence of the source of the otherwise hearsay evidence. This requires that the person who made the representation be identified; Levis v McDonald (1997) 75 FCR 36 at 43 per Lindgren J. In Registrar of Aboriginal Corporations v Murnkurni Women's Aboriginal Corporation (1995) 137 ALR 404, RD Nicholson J held that certain paragraphs of an affidavit which referred to representations made by the Australian Federal Police should be excluded because the maker was not identified. His Honour said, at 413: The absence of the particular identification of the person acting on behalf of the Australian Federal Police in giving the knowledge means that the source of knowledge has not been identified: the source has only been identified institutionally and that is an inadequate identification of source. The case is also reported at (1995) 58 FCR 125 however the relevant parts of the judgment are omitted from that report. Justice Nicholson's views are to be contrasted with the approach of Hunter J in Proctor & Gamble Australia Pty Ltd v Medical Research Pty Ltd [2001] NSWSC 183 where his Honour said, at [55]: I think the requirements of s 75 have been satisfied, notwithstanding the failure of Lucas, in respect of each of the hearsay statements in para 4 of his January affidavit, to particularise who, among the persons referred to in para 3 of that affidavit, was the source of his instructions. I think it is sufficient compliance with the section to identify the source of the hearsay statements in the compendious way Lucas has expressed himself in para 3 and para 4 of his affidavit. 41 Insofar as representations in the transcript were made by Mr De Bortoli that requirement has been met, however, there are other representations referred to by Mr De Bortoli where the person has not been identified. For instance, representations made in stockbroker reports or an unidentified person from the Shareholders' Association. 42 Even if this difficulty could be overcome, it does not follow that the transcript should be admitted into evidence. As Merkel J observed in Hoffman-La Roche, at [117]: The safeguard against reliance on hearsay evidence, where its prejudice outweighs its probative value, is s 135 which confers upon the Court a discretion to exclude such evidence. In my view this is so with respect to the transcript taken as a whole. The mixture of admissible and inadmissible material is such that it would be impracticable to distinguish between them and for that reason at the hearing I was not prepared to permit the whole transcript to be admitted as evidence. 43 Ultimately, as a result of some constructive discussions between the parties, the applicant tendered selected parts of the transcript in which the material to be adduced in evidence was highlighted. The respondents indicated that they did not object to the tender of the highlighted material, but otherwise, they pressed their objection to the whole of the transcript. That being so I admitted the selected parts, marked them as exhibit A in the proceeding and ruled that the balance of the transcript was not admissible. Respondents' tender bundle 44 The applicant, in its written submission, questions the admissibility of material in the respondents' tender bundle which exemplified adverse media coverage relating to HIH. The applicant submits that there is no applicable exception to the hearsay rule and that the material "appears to be tendered as to the truthfulness of the matters asserted". No objection was made at the hearing to the admission of the tender bundle and no question whether the material was tendered as evidence of truth was raised. In any event, I do not see any difficulty as to admissibility in relation to that material. The fact that there was media coverage of HIH's financial position is, irrespective of its truth, relevant to the issues in this proceeding and therefore the material is admissible. Once admitted then pursuant to s 60 of the Evidence Act 1995 (Cth), the hearsay rule does not apply. CAUSATION AND RELIANCE 45 The debt that DBW says it is entitled to prove in the liquidation of HIH is said to consist of damages arising from HIH's false and misleading conduct in breach of s 52 of the TPA. Section 82(1) of the TPA provides for the award of damages where the claimant suffers loss or damage "by conduct of another person" done in contravention of nominated provisions of the TPA. 46 In the Amended Statement of Claim DBW claims that HIH contravened s 52 by providing false and misleading information either directly by way of documents issued by the company and statements of its officers such as Mr Clarke or indirectly, by way of analysts' reports that were based on information provided by the company. For this contravention to entitle DBW to damages under s 82 it is necessary for DBW to establish that its loss was occasioned "by" the conduct of HIH. This inevitably raises the vexed question of causation. As Mason CJ observed in Wardley Australia Limited v Western Australia (1992) 175 CLR 514 at 525: The statutory cause of action arises when the plaintiff suffers loss or damage "by" contravening conduct of another person. "By" is a curious word to use. One might have expected "by means of", "by reason of", "in consequence of" or "as a result of". But the word clearly expresses the notion of causation without defining or elucidating it. In this situation, s 82(1) should be understood as taking up the common law practical or common-sense concept of causation recently discussed by the Court in March v Stramare … Except in so far as that concept is modified or supplemented expressly or impliedly by the provisions of the Act. 47 In March v Stramare (E & MH) Pty Limited (1991) 171 CLR 506 both Mason CJ and Deane J stressed the importance of common sense in determining causation, acknowledging (in separate judgments) that causation at law involves a question of fact into which value judgments and policy considerations necessarily enter; see RV Miller, Miller's Annotated Trade Practices Act 31st ed, 2010 at 908. Their Honours cautioned against overemphasising the "but for" test and noted that the legal concept of causation differs from philosophical and scientific notions of causation. In this regard Mason CJ, with whom Toohey and Gaudron JJ agreed, said at 509: In law … problems of causation arise in the context of ascertaining or apportioning legal responsibility for a given occurrence. The law does not accept John Stuart Mill's definition of cause as the sum of the conditions which are jointly sufficient to produce it. Thus, at law, a person may be responsible for damage when his or her wrongful conduct is one of a number of conditions sufficient to produce that damage … 48 In relation to the "but for" test Mason CJ said, at 516, that the results yielded by the test "must be tempered by the making of value judgments and the infusion of policy considerations". Justice Deane expressed a similar view, observing, at 524, that "whether conduct is a 'cause' of injury remains to be determined by a value judgment involving ordinary notions of language and common sense". 49 The theme was further explored in Henville v Walker (2001) 206 CLR 459, where McHugh J referred to the difference between the common law concept of causation and scientific and philosophical notions of causation and said, at [97] The common law has avoided the technical controversies inherent in the logic of causation. Unlike science and philosophy, the common law is not concerned to discover universal connections between phenomena so as to enable predictions to be made. The common law concept of causation looks backward because its function is to determine whether a person should be held responsible for some past act or omission. Out of the many conditions that combine to produce loss or damage to a person, the common law is concerned with determining only whether some breach of a legal norm was so significant that, as a matter of common sense, it should be regarded as a cause of damage. [Footnotes omitted] 50 McHugh J accepted that the "common sense" approach to causation means that it cannot be reduced to a test that "can be applied across the spectrum". His Honour added, at [106]: If the defendant's breach has "materially contributed" to the loss or damage suffered, it will be regarded as a cause of the loss or damage, despite other factors or conditions having played an even more significant role in producing the loss or damage. As long as the breach materially contributed to the damage, a causal connection will ordinarily exist even though the breach without more would not have brought about the damage. In exceptional cases, where an abnormal event intervenes between the breach and damage, it may be right as a matter of common sense to hold that the breach was not a cause of damage. But such cases are exceptional. 51 Given the mixed fact/value nature of causation at law, the context in which the issue arises is especially important. In Environment Agency v Empress Car Co (Abertillery) Ltd [1998] 2 AC 22 Lord Hoffmann endorsed the common sense approach to causation adding, at 29: The first point to emphasise is that common sense answers to questions of causation will differ according to the purpose for which the question is asked. Questions of causation often arise for the purpose of attributing responsibility to someone … In such cases, the answer will depend upon the rule by which responsibility is being attributed. … 52 Justice Allsop, President of the New South Wales Court of Appeal, in a paper entitled "Causation in Commercial Law" presented at the Torts in Commercial Law Conference in Sydney on 17 December 2010 gave, if I may say so, a masterly overview and analysis of the topic in the course of which his Honour discussed Lord Hoffmann's views. In relation to the dependence on the rule by which responsibility is being attributed his Honour said: This recognition leads to the reality that the open question: Who caused X? is misleading. The proper question is: Did the defendant cause X, in the context and framework of the relevant rule of responsibility? … The purpose and scope of the rule needs to be understood before common sense becomes helpful. 53 Lord Hoffmann's approach found favour in the High Court of Australia. In Chappel v Hart (1998) 195 CLR 232 at 238 Gaudron J said: "Questions of causation are not answered in a legal vacuum. Rather, they are answered in the legal framework in which they arise"; see also Gummow J at 256. Nevertheless it has been widely recognised that there is probably no simple test and that the legal concept of causation is not reducible to a single formula; Fitzgerald v Penn (1954) 91 CLR 268 at 278 per Dixon CJ, Fullagar and Kitto JJ. 54 In this case the question is did HIH cause the claimed loss to DBW? In ascertaining the purpose and scope of a statutory rule, the object and purpose of the particular statute may assist. In the case of the TPA, however, the object of the Act as stated in s 2 is expressed in such general terms as to be of little assistance. Section 2 states the object of the Act to be "to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection". Greater guidance was given by Gummow J in Marks v GIO Australia Holdings Ltd (1998) 158 ALR 333 at 359: The TP Act is a fundamental piece of remedial and protective legislation which gives effect to "matters of high public policy".107 It is to be construed so as to give the fullest relief which the fair meaning of its language will allow".108 107 ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248 at 256; 110 ALR 47 108 Bull v Attorney-General (NSW) (1913) 17 CLR 370 at 384; Devenish v Jewel Food Stores Pty Ltd (1991) 172 CLR 32 at 44; 99 ALR 275; Webb Distributors (Aust) Pty Ltd v Victoria (1993) 179 CLR 15 at 41; 117 ALR 321. 55 Justice Lockhart's decision in Janssen-Gilag Pty Limited v Pfizer Pty Limited (1992) 37 FCR 526 (Janssen) is consistent with this approach. (I note, in passing, that the applicant's name in 109 ALR 638 in the judgment on the Federal Court website is spelt "Janssen-Cilag".) In Janssen, at 529, Lockhart J said: What emerges from an analysis of the cases (and there are many of them) is that they do not impose some general requirement that damage can be recovered only where the applicant himself relies upon the conduct of the respondent constituting the contravention of the relevant provision. … Loss or damage must directly result from or be caused by the respondent's conduct. The respondent's conduct must be the real or direct or effective cause of the applicant's loss; it must have been 'brought about by virtue of' the conduct which is in contravention of s 52. 56 His Honour added at 530, that there was "nothing in the language of the Act or its purpose to warrant the suggestion that the right of an applicant for damages under s 82 is confined to the case where he has relied upon or personally been influenced by the [contravening] conduct of the respondent". To illustrate the point his Honour gave the example of a respondent manufacturer who, using a name deceptively similar to that of an applicant with an established reputation, enticed customers away from the applicant. The applicant would be entitled to recover its loss even though it had not, itself, relied on the respondent's conduct. 57 Justice Lockhart's views were quoted with approval by Gummow J in Marks v GIO Australia Holdings Limited (1998) 196 CLR 494 at 528. Janssen was also followed by the Full Court in McCarthy v McIntyre [1999] FCA 784 which stated, at [48]: All that is necessary, in our opinion, is that there be a sufficient and direct link (ie causation) between the loss or damage alleged to have been suffered. 58 The Full Court in McCarthy v McIntyre added that the contravening conduct need not be the sole cause of the loss. Causation must be established but the impugned conduct need only be a cause of the loss not the cause. This was accepted by all members of the High Court in Henville v Walker (2001) 206 CLR 459 at [14] per Gleeson CJ, [59]-[61] per Gaudron J, [106]-[109 per McHugh J and [163] per Hayne J. Justice Gummow agreed with McHugh and Hayne JJ. 59 The High Court's rejection of any argument that the contravening conduct be the sole cause of a loss that is compensable under s 82 is based on the purpose of the statute being to proscribe misleading and deceptive conduct. In I & L Securities Pty Limited v HTW Valuers (Brisbane) Pty Limited (2002) 210 CLR 109 Gleeson CJ referred to that purpose at [33] and said: In aid of that purpose, the statute provided for compensation, by an award of damages, to a victim of such conduct. The measure of damages stipulated was the loss or damage of which the conduct was a cause. It was not limited to loss or damage of which such conduct was the sole cause. In most business transactions resulting in financial loss there are multiple causes of the loss. The statutory purpose would be defeated if the remedy under s 82 were restricted to loss of which the contravening conduct was the sole cause. The Chief Justice also held that there was no reason to distinguish between principal and interest in assessing an applicant's loss; see also McHugh J at [69]. 60 While personal reliance on the contravening conduct by the applicant is not necessary to establish a compensable loss, reliance at some point is necessary to provide the causative link to the loss claimed. As the Full Court of the Federal Court held in Ford Motor Company of Australia Limited v Arrowcrest Group Pty Limited (2003) 134 FCR 522. Lander J, with whom Hill and Jacobson JJ agreed, said at [123]: None of the cases relied upon support Ford's contention that causation can be established in a misrepresentation case without proof that the misrepresentations were relied upon. They support a different (but irrelevant proposition for the purpose of this case) that an applicant may establish causation in such a case by proving that a third party relied upon the misrepresentations and that party's reliance caused the applicant's damage. 61 In many cases it is personal reliance that provides the link between the loss suffered and the contravening conduct. The case advanced by DBW is based on personal reliance; it claims that it "relied upon" information that was: (a) provided directly by HIH in Financial Reports, Media Releases and Statements issued by HIH and in direct communications with HIH personnel; and (b) provided in analysts' reports based on information supplied by HIH. DBW asserts that it would not have purchased the shares had it known HIH's true financial position. That assertion, even if made out, is not sufficient in itself to establish that DBW's loss was "by" the conduct of the respondent. 62 In Finishing Services Pty Ltd v Lactos Fresh Pty Ltd [2006] FCAFC 177 the Full Federal Court, referring to Janssen, McCarthy v McIntyre and others, accepted that third party reliance may cause an applicant's loss but added, at [31] that "the authorities require there to be a 'sufficient and direct link' or a 'requisite element of proximity' in order for the section to be satisfied". 63 To succeed in its claim in respect of each share purchase transaction DBW must show that it was induced to enter into the transaction by the impugned conduct of HIH. In so far as it claims to have relied on analysts' reports it must show that the misleading or deceptive information in those reports emanated from HIH. This case must be distinguished from that in the example given by Lockhart J in Janssen. It is not a case where the innocent party's act by its very nature causes the applicant's loss. Here reliance is critical to the applicant's claim; DBW must show that it relied on the misleading information and that that information emanated from HIH. 64 This distinction between Janssen and cases that depend on establishing reliance was recognised by the New South Wales Court of Appeal in Digi-Tech (Australia) Ltd v Brand [2004] NSWCA 58 at [155]-[158]. The issue was also discussed in Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (2008) 73 NSWLR 653 where, at [12]-[13] Giles JA said: The appellants' reliance on the reference in par [156] of Digi-Tech (Australia) v Brand to the category of claim "when plaintiffs suffer loss because they themselves are induced by misleading representations to perform an act or omission by which they are prejudiced" was in my view misplaced. Their Honours were contrasting the kinds of claim, and were not restricting what followed to where there was direct inducement of the plaintiff; they were identifying the kind of claim in which inducement of the plaintiff played a part. The distinction drawn in Digi-Tech (Australia) v Brand is between cases where conduct on the part of the plaintiff "forms a link in the causation chain" … and where it does not. Where it does, there must be reliance on the misleading conduct in the manner next explained. Where it does not, there may be recovery if the act of the innocent party induced by the misleading conduct "by its very nature, causes the plaintiff's loss" … but that is where the plaintiff passively suffers loss from another's act (as in Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 37 FCR 526 at 529–530, where consumers were led by the misleading conduct to buy less of the plaintiff's product). In saying that in a case of "misrepresentation inducing a transaction" reliance on the misrepresentation was required for proof of causation … they meant a case where the plaintiff was not a passive sufferer from another's act, but was someone who made a decision to enter into the transaction to which the representation was material. Their Honours did not mean direct inducement, but that the decision and the materiality to it of the representation was a link in the causal chain. Similarly, in the same case Ipp JA said at [618]: The rationale of Digi-Tech (Australia) is that loss incurred by plaintiffs in acting (or refraining from acting) to their prejudice can only be loss caused "by" conduct contravening s 52 if the plaintiffs are misled by that conduct. Likewise, in my view, such plaintiffs can only succeed in cases based on a contravention of s 995 if, in fact, they are misled. I stress that by "such plaintiffs" I mean plaintiffs who claim to have suffered loss brought about by their own actions or omissions coupled with misleading conduct by the defendants. As was noted in Digi-Tech (Australia), were it otherwise, such plaintiffs could succeed on the ground that, by making false representations, the defendants engaged in misleading conduct, even though the plaintiffs well knew the truth of the representations or were indifferent to them. As I have noted, different considerations apply to the Janssen-Cilag Pty Ltd v Pfizer PtyLtd category of case. 65 The applicant has placed much emphasis on the Court being able to infer the fact of reliance from the fact that HIH engaged in misleading or deceptive conduct and the fact that the applicant invested in HIH shares. In its submissions the applicant quoted the comment of Lord Blackburn in Smith v Chadwick (1884) 9 App Cas 187 at 196: I think that if it is proved that the defendants with a view to induce the plaintiff to enter into a contract made a statement to the plaintiff of such nature as would be likely to induce a person to enter into a contract, and it is proven that the plaintiff did enter into the contract, it is a fair inference of fact that he was induced to do so by the statement. 66 Lord Blackburn's observation must, however, be considered in context. His Lordship added in relation to such evidence: Its weight as evidence must greatly depend upon the degree to which the action of the plaintiff was likely, and on the absence of all other grounds on which the plaintiff might act. I quite agree that being a fair inference of fact it forms evidence proper to be left to a jury as proof that he was so induced. But I do not think that it would be a proper direction to tell a jury that if convinced that there was such a material representation they ought to find that the plaintiff was induced by it, unless one of the things that the late Master of the Rolls specified was proved; … I think there are a great many other things which might make it a fair question for the jury whether the evidence on which they might draw the inference was of such weight that they would draw the inference. 67 Lord Blackburn's comment as to fair inferences of fact has been referred to many times however the courts have recognised, as did Lord Blackburn, that a factual inference may be rebutted by other evidence. In Gould v Vaggelas (1985) 157 CLR 215 at 236 Wilson J in summarising the principles applicable to the granting of relief in respect of misrepresentation, acknowledged the factual inference identified by Lord Blackburn but said: The inference may be rebutted, for example, by showing that the representee, before he entered into the contract, either was possessed of actual knowledge of the true facts and knew them to be true or alternatively made it plain that whether he knew the true facts or not he did not rely on the representation. 68 The applicant referred to a number of authorities in which such a factual inference has led the court to find that a misrepresentation has been a cause of the applicant's loss. In most of these cases the inference has not stood alone but rather, has been buttressed by other evidence. An example is MGICA (1992) Limited v Kenny and Good Pty Limited (1996) 140 ALR 313 in which MGICA had indemnified a mortgagee against loss occasioned by the mortgagor's default. MGICA claimed to have been induced to grant the indemnity by the respondent's valuation which contained misleading opinions and representations. 69 The respondents pointed out that Mr Anderson (for MGICA) did not actually say that the applicant had acted in reliance on the misleading valuation and submitted that the true cause of MGICA's loss was Mr Anderson's carelessness. Justice Lindgren had no hesitation in rejecting that submission however it is clear that his Honour's conclusion, at 357, that MGICA was "at the very least, substantially induced by Mr Kenny's valuation to enter into the transaction" was based not only on the factual inference. His Honour noted that Mr Anderson had made a contemporaneous file note that it was necessary to rely on the valuation. At 358, Lindgren J accepted Mr Anderson's evidence: His evidence was that he read every part of it and that … : The valuation was pretty important to us. It had to be correct for us to be able to proceed with the transaction. He ticked and highlighted the valuation report as he studied it and concluded that if the valuation of $5.5 million was correct there would be no claim on MGICA if it became necessary for the property to be sold. On 30 April 1990 he wrote to MBL advising that the special condition that there be a "satisfactory valuation by MSL panel valuer" had been satisfied. His Honour added: The opinions and the implied representations in the [valuation] report to which I referred earlier were, moreover, regarded objectively, of a kind calculated to influence MGICA's decision whether to grant the mortgage insurance. Therefore a fair inference of fact arises that MGICA was induced to do so by them. The authorities show that it is not fatal to a claim of reliance that a witness does not give express and direct evidence of reliance. 70 The weight of the factual inference will vary with the circumstances in which the representation is made. In Como Investments Pty Ltd (in liq) v Yenald Nominees Pty Ltd (1997) 19 ATPR 43,617 the vendor under a contract for the sale of a certain building advised the purchaser that the tenant "was a good tenant" and concealed the fact that the tenant was in a precarious financial position and had a history of defaults in payment of rent. The Full Federal Court held that the representations had induced the purchaser to enter into the contract of sale and that the vendors were liable for its loss, notwithstanding that the purchaser had made extensive and detailed enquiries for itself. The Full Court said that the suggestion that the purchaser relied only on the information it had obtained for itself and not on that provided by the vendor was "a two-edged argument" as the purchaser's efforts would have "provided confirmation of its importance in the eyes of those responsible for these investigations". The Court held that in the absence of the purchaser's enquiries revealing any reason to doubt the truth of the vendor's representation, the representation did not cease to have effect. In relation to that effect the Full Court said at 43,619: The law does not consider cause and effect in mathematical or in philosophical terms. The law looks at what influences the actions of the parties. Acknowledging that people are often swayed by several considerations, influencing them to varying extents, the law attributes causality to a single one of those considerations, provided it had some substantial rather than negligible effect. As Brennan J said in San Sebastian Proprietary Limited v Minister administering the Environmental Planning and Assessment Act 1979 (1986) 162 CLR 340 at 366: The representation must be a real inducement or one of the real inducements to engage in the conduct which occasions the loss. Where a representation is relevant to the decision in question, and in its nature persuasive to induce the making of that decision, it accords with legal notions of causation to hold that it has a causative effect. And where a respondent, who may be taken to know his own business, has thought it was in his interests to misrepresent the situation in a particular respect, the Court may infer that the misrepresentation was persuasive. These inferences arise from the making of the representation followed by the respondent doing the thing it was calculated to induce him to do. 71 The applicant claims that it is entitled to the benefit of the factual inference arising from the fact (admitted by the respondents) that HIH made misleading and deceptive statements and the fact that it, acting through Mr De Bortoli, purchased shares in the market. The inference is, according to the applicant, that its purchase was induced by HIH's representations. In support of this proposition, the written submissions of the applicant quoted a comment made by Spigelman CJ (with whom Allsop P and Ipp JA agreed) in Jameson v Professional Investment Services Pty Ltd (2009) 72 NSWLR 281. Referring to a representation that the obligations of the issuer of promissory notes would be guaranteed by the parent company, the Chief Justice said, at [96]: [T]he importance of the allegedly misleading or deceptive features of the representation is, if accepted, likely as a practical matter to reduce the salience of issues of reliance and damages in the conduct of the individual cases. 72 Jameson involved an appeal from the order of the trial judge that the proceeding no longer continue as a representative proceeding. The comment was made in the context of a submission that there were sufficient common issues for the representative proceeding to continue as such. The Chief Justice held that the common issues outweighed the differences in respect of causation and reliance in the individual investors' cases and, at [131], that this fact was entitled to "significant weight". His Honour's comment is not relevant to the issues of causation and reliance in this case. 73 In my view, any factual inference must be weighed in the light of all the evidence. If, as the respondents submit, the evidence is such as to show that some or all of the share purchases were made without regard to the HIH representations then the inference will be rebutted and the causal link required under s 82 will not be made out. 74 It must be noted, however, that carelessness on the part of the applicant is not necessarily fatal to establishing a causal connection between contravening conduct and the loss suffered. The issue was specifically addressed in Henville v Walker particularly by Gleeson CJ who said, at [13] of his reasons: It will commonly be the case that a person who is induced by a misleading or deceptive representation to undertake a course of action will have acted carelessly, or will have been otherwise at fault, in responding to the inducement. The purpose of the legislation is not restricted to the protection of the careful or the astute. Negligence on the part of the victim of a contravention is not a bar to an action under s 82 unless the conduct of the victim is such as to destroy the causal connection between contravention and loss or damage. See also at [140] per McHugh J (with whom Gummow J agreed). 75 The qualification in the last sentence of the Chief Justice's comment is relevant here. The respondent accepts that any causal connection between DBW's loss and the admitted misleading conduct of HIH would not be negated by carelessness on the part of DBW or Mr De Bortoli. The respondent's primary submission is that the applicant has not established reliance. Its alternative submission is that even if reliance were established at some point, there came a time when that ceased to be the case because Mr De Bortoli relied on his own judgment to the neglect of other influences. THE EVIDENCE The respondents' tender bundle 76 The respondents tendered copies of articles published concerning HIH published in the Australian Financial Review and The Australian newspaper and reports issued by Salomon Smith Barney during the period from 26 May 2000 to 28 December 2000. The coverage in those articles and reports is generally negative about HIH and its prospects. The flavour is captured in the following examples of headlines to the newspaper articles: "Flailing HIH Has Only Itself to Blame" – 26 May 2000; "HIH Alarm as Shares Plum New Depths" – 15 June 2000; "HIH Hype Can't Hide Grim Reality – Future of HIH is Too Grim to Ignore" – 18 July 2000; "HIH Shares Are Suspended as Sharks Circle" – 12 September 2000; "HIH Insurance on a Hiding to Nothing" - 15 September 2000; "Williams Exits Ailing HIH" – 13 October 2000; "HIH Quits Loss Maker, But Market Slide Goes On" – 1 November 2000 "HIH Chair Looks to Sue FAI Directors" – 8 December 2000; "Adler Unloads Last of Stake in HIH for $143,000 – 28 December 2000. Documents issued by HIH 77 In his statutory declaration made on 6 February 2009, Mr De Bortoli refers to documents containing statements, facts and figures regarding HIH's financial position. At paragraph 4 of his declaration he says: The following Financial Reports, Media Releases and Statements regarding HIH which are annexed hereto were submitted from March 2000 to 31st December 2000 in writing by HIH to the Australian Securities and Investments Commission ("ASIC"), ASX, Shareholders of HIH and were accessed by members of the Public including myself. 4.1 Results Review of HIH 1999/2000 Interim Results for the 6 Months ended 31st December 1999 (obtained from HIH and from HIH's website). 4.2 HIH Media Release to ASX dated 15th June 2000 (obtained from the website of ASX). 4.3 Statement to Shareholders from the Chairman and Chief Executive of HIH dated 13th September 2000 (obtained from HIH). 4.4 Media Release HIH to ASX dated 31st October 2000 (obtained from the website of ASX). 4.5 HIH Concise Annual Report 1999/2000 (obtained from HIH). 4.6 HIH General Purpose Financial Report for the Year Ended 30th June 2000 (obtained from HIH). 4.7 HIH Media Release to ASX dated 2nd November 2000 (obtained from Salomon Smith Barney). 4.8 HIH Media Release to ASX dated 3rd November 2000 (obtained from the website of ASX). 4.9 HIH Media Release to ASX dated 7th November 2000 (obtained from Salomon Smith Barney). 4.10 HIH Media Release to ASX dated 17th November 2000 (obtained from ASX). 4.11 Chairman's address Annual General Meeting 2000 (obtained from HIH). 78 The applicant submits that in deciding to purchase HIH shares Mr De Bortoli, who acted for the applicant company, was influenced by the misleading or deceptive statements in the documents. In relation to those documents Mr De Bortoli says, at paragraph 6 of his statutory declaration: I read all the documents at the [De Bortoli Wines'] Head Office, Griffith from March 2000 as and when I received them and thereafter. I took particular notice of the statements marked in yellow on the documents. 79 The respondents admit that HIH issued the documents listed above. The respondents also admit that certain statements in documents 4.1, 4.3 and 4.5 are misleading or deceptive or likely to mislead or deceive. They make no admission in relation to the other documents or in relation to the stockbroker advices discussed below. In so far as the respondents admit that misleading and deceptive representations were made, the difference between the parties hinges on whether there is a causal connection between the misleading or deceptive conduct of HIH and the loss sustained by the applicant. Stockbroker advices 80 Mr De Bortoli also claimed to have read and relied on stockbroker advices received at DBW's head office. At paragraph 8 of his statutory declaration Mr De Bortoli listed stockbrokers' advices which he said had been received by the applicant. Mr De Bortoli stated that he had read those advices at the head office of DBW in Griffith "as and when I received them and particularly the statements marked in yellow". As listed the stockbroker advices were: 8.1 Results Analysis from Salomon Smith Barney dated 3rd March 2000 Analysis: Outperform (received from Salomon Smith Barney) 8.2 Insurance Sector Commentary JB Were dated 17th March 2000 (obtained from JB Were) 8.3 Barra Research – recommendation as of 13th July 2000 – Strong Buy – Moderate Buy and Hold Recommendations (received from the Yahoo Finance Website). 8.4 Barra Research – recommendation as of 18th August 2000 – Strong Buy and Hold Recommendations (received from the Yahoo Finance Website). 8.5 JB Were – Insurance Sector Commentary 17th November 2000 (obtained from JB Were). 8.6 JB Were – Insurance Sector Commentary 30th November 2000 (obtained from JB Were). 8.7 JB Were – Insurance Sector Commentary 15th December 2000 (obtained from JB Were). 81 In his statutory declaration made in 2009 Mr De Bortoli was precise in identifying not only the HIH and the stockbroker documents he claimed to have read but also in identifying specific statements, highlighted in yellow, to which he said he had given particular attention when he read the documents. He also claimed, with great certainty to have read each document in its entirety in 2000 and thereafter, however he was not able to produce any contemporaneous evidence of this. Mr De Bortoli's oral evidence 82 Mr De Bortoli was not able to point to any marking or notation that he had made on the documents, either contemporaneous with reading them or later. He agreed that all of the yellow highlighting on the documents had been made, not by him when he read them in 2000, but by his solicitors in 2009 after they had read the Report of the Royal Commission into HIH. Mr De Bortoli's evidence on cross-examination was also curiously equivocal. He confirmed that he read the documents in their entirety "as and when" he received them but prevaricated about when that was. For example, in relation to the document 4.1 (see [77] above) Mr De Bortoli would not agree that he received it in March 2000 despite the statement in his statutory declaration dating his receipt and reading of the documents from March 2000 and despite the other documents in the list dating from no earlier than 15 June 2000. Mr De Bortoli also said that he could not remember when he read the document although he claimed, with complete certainty, to remember that he had read the entirety of the document. He agreed that the document did not influence him to purchase shares in March but said "I would have read it prior to the purchasing of shares on 15 June". 83 Mr De Bortoli made similar statements when questioned about some of the stockbrokers' advices. For instance he was questioned about the two reports of March 2000 (8.1 and 8.2 above). Again, Mr De Bortoli was vague about when he had read the documents but asserted that he had read them in their entirety and that it would have been before the purchase of HIH shares on 15 June 2000. In purchasing those shares Mr De Bortoli was acting on behalf of Aabrofay. The present appeal from the liquidators' decision does not concern shares purchased by Aabrofay and the purchase is relevant only for context. 84 It was put to Mr De Bortoli that he was prompted to buy HIH shares in June 2000 because he had heard that a high profile director of HIH, Mr Rodney Adler had been buying HIH shares. Mr De Bortoli said that this had been "a catalyst" and had stimulated his interest in the company. Mr De Bortoli said that he did not recollect having been told of speculation about a takeover of HIH but agreed that it was a "logical conclusion" that a takeover would have involved a premium for shareholders. Mr De Bortoli said that in June 2000 he "felt the [HIH] shares were undervalued". 85 Mr De Bortoli said that he had "probably" been accessing the HIH website before purchasing shares for Aabrofay on 15 June 2000 however, of the documents produced to the Court from either the HIH or ASX website, the earliest was a printout dated 16 June 2000 of an HIH media release of 15 June 2000. The content of the document has some significance. It states: There appears to be what amounts to a significant level of misinformation prevalent in relation to the company and its operations. Apparently this comment did not stimulate Mr De Bortoli's curiosity. He said that he did not know what was the "misinformation" referred to, nor did it concern him as "rumours abound [about] financial markets" and that he would not have given them any credence. 86 In addition to the analysts' reports referred to in his statutory declaration (see [77] above) Mr De Bortoli also admitted receiving a report from Salomon Smith Barney dated 6 July 2000. This report stated while HIH stock "appears extremely cheap" it "has greater than average investment risk". Mr De Bortoli said that he did not regard this as a negative report apparently because it did not make a "sell" recommendation. Another report, dated 12 July, from the same analysts expressed a similar opinion. Mr De Bortoli said that as the report was in his papers he "would have received" it but could not recollect doing so. August 2000 share purchases 87 The first of the share purchases relevant to the present application occurred on 11 August 2000. At that time Mr De Bortoli, on his own admission was an experienced share trader who, before purchasing HIH shares in August 2000, had invested "in excess of $20 million" in other stocks on behalf of BDW. Between 11 and 24 August 2000, Mr De Bortoli, acting for DBW, purchased 400,000 shares in HIH for a total cost of $422,735. 88 Mr De Bortoli said that in purchasing HIH shares in August he still attached importance to the HIH interim results for the 6 months to 31 December 1999 (see document 4.1 at [77] above). He accepted that in August 2000 the information was "stale" but nevertheless said he regarded it as still relevant despite the lapse of time and the intervening pessimistic reports about HIH. Mr De Bortoli said that in deciding to purchase HIH shares in August 2000 he relied on a number of sources including the Barra reports of 13 July and 8 August 2000 which he obtained from the "Yahoo Finance" website. The Barra reports contained a summary of stockbroker recommendations and forecasts in tabular form. He agreed that these reports did not contain any financial information provided by HIH. 89 In cross-examination Mr De Bortoli was pressed to identify any material on which he relied in deciding to purchase HIH shares in August 2000 other than the documents discussed above. He was not able to do so. He made vague statements about HIH media releases and ASX statements but was not able to be more specific. Mr De Bortoli admitted that he received the Australian Financial Review in his office during 2000 but did not recall seeing articles in mid to late August 2000 about "Struggling HIH" or "Friendless HIH" or about the downgrade of the company's credit rating by the Ratings Agency, Standard and Poor's. He was aware, however, that the agency had placed HIH on CreditWatch. 90 It is clear from Mr De Bortoli's oral testimony that he had no independent recollection of reading the Interim Results Review for the 6 months to 31 December 1999 which, by the time he bought the shares, was almost 8 months old. In the absence of any contemporaneous notes or marking on the documents his assertion that he paid particular attention to statements highlighted by his legal advisors almost 9 years later cannot be regarded as reliable evidence. Moreover, Mr De Bortoli agreed that by August 2000 it was "stale would be a good descriptor" for that information but said it gave some context. 91 Mr De Bortoli was similarly vague about when he read the analyses of Salomon Smith Barney and JB Were (documents 8.1 and 8.2 at [80] above). Again, and for the same reason, it is not possible to attribute any weight to the highlighted material. It may be that he did pay some attention to reports obtained from the Yahoo Finance website on 13 July and 10 August 2000. Those reports giving a summary of stockbroker recommendations and forecasts but do not give specific information about HIH. 92 On the evidence it is more likely that his interest in HIH, and his purchase of shares for Aabrofay in June 2000, was prompted by his broker telling him that Rodney Adler was buying shares and the potential for a premium if there was to be a takeover of the company. In any event, on the evidence presented by the applicant, I am not satisfied that Mr De Bortoli relied on any misleading representations by HIH in investing in HIH shares in August. September 2000 share purchases 93 DBW continued its purchase of HIH shares in September 2000 buying 1,182,927 shares in 10 tranches at prices ranging from $0.9260 on 13 September to $0.5033 on 22 September. This dramatic fall in the share price followed the announcement on 13 September of HIH's preliminary results for the 12 months ending 30 June 2000 and the sale of its retail business into a joint venture with Allianz Australia Limited. Mr De Bortoli agreed that this decrease in value that occurred immediately following the HIH announcement was "significant" but insisted that he was not unduly concerned because he believed the net asset backing of the shares was substantial. He was similarly unconcerned when the share price again dropped on 14 September to below 60 cents regarding this as "a part of the natural cycle of purchasing shares". 94 Mr De Bortoli's approach was not shared by market analysts. In a report dated 14 September 2000, Salomon Smith Barney downgraded its forecasts and valuation. The report is headed "Allianz JV is little compensation for a shocker!". 95 Mr Gleeson SC, who appeared for the respondents, pressed Mr De Bortoli as to why he continued to purchase HIH shares when they were falling so dramatically, he said that the further the price dropped the greater the value of the shares based on the "net tangible asset backing of the shares". There was then the following exchange: But the market was telling you something different, wasn't it? People who were holding shares in HIH were selling them out at prices less than 50 cents throughout September and October? --- I reiterate, I felt they were exceptionally good value at that time. So you felt you knew better than the market; is that the case? --- Correct. And you backed your own judgment and your own assessment, didn't you? --- Correct. And you were prepared to ignore the negative press commentary about HIH and its fortunes, weren't you? --- The information I was relying on was correspondence with John Clarke, information coming from HIH, and all that information appeared to validate my faith in the company. I never assumed the accounts were dodgy in the first place, or the directors were dodgy. 96 Mr De Bortoli gave inconsistent evidence about his communications with John Clarke who was HIH's General Manager, Public Affairs. In his statutory declaration of 6 February 2009 he says that he had telephone conversations with Mr Clarke from June to December 2000. On cross-examination Mr De Bortoli said that the occasion for contacting Mr Clarke was the drop in HIH's share price. He persisted in his evidence that this was prior to September 2000 despite the fact that there was no significant drop in the share price until September 2000. The following exchange then ensued: The share price, I put to you, wasn't dropping in August 2000. It didn't start to drop significantly until 13 September 2000. So your paragraph [in the statutory declaration] is incorrect, isn't it? --- In terms of June, correct. In terms of July, possibly. In terms of August? --- I don't know. It's incorrect as well, isn't it? --- I doubt it. I suspect I would have been speaking to him by then. But you've told us the occasion for this conversation is a dramatic fall in the share price and the rumour that Rodney Adler is selling out of the company, isn't it? --- Correct. Okay, and what I suggest to you is the first time there's any suggestion of that occurring, those two events coinciding, is around about 15 September 2000? --- You're saying September. I'm suggesting that to you? --- It's possible, but I would have thought it had been earlier that I spoke to John Clarke. But you can't give any rational basis for why you're suggesting it could be earlier, can you? --- All I remember at the time was the drop in the share price prompted me to speak to John Clarke, and there may have been rumours about Rodney Adler selling, or it may have come from John Clarke. I just can't - - - Yes? --- I can't – I don't know what – which one came first. 97 Mr Gleeson then directed Mr De Bortoli to an article by Morgan Mellish in The Financial Review of 15 September 2000, which began as follows: HIH Insurance shares slumped another 30 per cent yesterday after scathing analysts' reports that value the company as low as 50 cents a share. Several analysts said the viability of the company was now in question and a fall in its credit rating could leave it unable to write quality insurance risks. The heavy selling which lowered HIH's worth to just $273 million implies that the company's remaining insurance operations are effectively worthless. The second day of selling followed Wednesday's announcement of a disastrous result and a hastily arranged sale of its personal lines businesses to German insurer Allianz. 98 Mr Gleeson continued his cross-examination of Mr De Bortoli: You recall seeing press to this effect in mid-September, didn't you? --- No. I mean, could you please be serious about this, Mr De Bortoli? You've invested a large amount of money, on behalf of the company, in HIH shares. The share price plummets almost 50 per cent in two days, and you seriously want the court to believe that you weren't concerned to read every piece of financial press you could get your hands on so as to try and find out what was happening in relation to the company? --- Sorry, can you ask the question again, please? Are you seriously suggesting that in circumstances where you had invested a significant sum of money on behalf of the company in HIH shares, the share price drops almost 50 per cent in two days, but you weren't concerned to keep yourself abreast of whatever financial commentary there was about the company in the Financial Press? --- I would have been following the press releases coming from HIH and ASX statements. I was not necessarily following what was stated in the press. But you had The Financial Review available in your office there in Griffith, didn't you? --- Correct. And you regularly read it, didn't you? --- I didn't regularly read it, no. But it was there available for you to read in mid-September 2000, wasn't it? ---Correct. And it's likely you read it around about 15, 14, 13 September when the share price started to plummet, isn't it? --- No, it's not likely. Because you were concerned to find out what on earth was going on? --- If that was the case, I would have spoken to John Clarke. 99 The article by Mr Mellish referred to in [97] also mentioned the rumour that Mr Adler had sold his HIH shares. After some prevarication Mr De Bortoli admitted that this indicated some lack of faith in the company on the part of Mr Adler. Despite this and the continuing fall in the share price, he continued to invest in the company because, in his judgment, the shares still represented good value. Mr De Bortoli proffered the explanation that in the past he had invested in numerous companies where the share price had dropped significantly but, "by taking a longer term view, I've always been correct". He agreed with the proposition that he knew better than the market and admitted that he was "backing my own judgment". October/November 2000 share purchases 100 During October 2000 DBW purchased 3,617073 shares at prices that ranged from $0.50 on 12 October to $0.30 on 30 October. In November he bought 3,991,291 shares for between $0.43 and $0.31. Mr De Bortoli repeatedly denied that during this period he saw a significant amount of negative sentiment about HIH in the financial press. He admitted, however, that he was aware the company was selling its loss-making US and Asian operations, that it had to sell its retail operations to Allianz in a joint venture, that its credit rating had been down graded by Standard and Poor's and that it had to "offload its corporate lines to a managing agency relationship with Gerling". Mr De Bortoli characterised these events as indicating nothing more than a "business cycle" problem. It was further put to him that he was aware that the Managing Director, Mr Williams had resigned and that "HIH had conceded that it had suffered material financial damage to its balance sheet and its capital base". Mr De Bortoli responded that he was aware the company was going through a "difficult time" but that his belief, which he admitted was formed on his own assessment, was that it was not "terminal". 101 Mr De Bortoli also claimed to rely upon positive comments about HIH's value made by Mr Clarke who was General Manager, Public Affairs of HIH. He was described by Mr De Bortoli as "the investor relations manager for HIH". Mr De Bortoli and his friend, Mr Terry Rowney, had dinner with Mr Clarke at Grappa Restaurant in Sydney on the evening of 25 October 2000. Mr De Bortoli's evidence was that at the dinner Mr Clarke had said: "Buy shares in HIH it is a good company – good profits and undervalued"; and "HIH indemnity has improved and is fully reinsured for losses and catastrophes". . It was put to Mr De Bortoli that Mr Clarke's comments were "fairly general and wide" and more or less what one would expect from the company's public relations officer. They were not statements to which one would attach much weight. Mr De Bortoli resisted this suggestion and, despite all the negative press about HIH at that time, said he came away from the dinner with Mr Clarke with "no reason to be concerned … whatsoever". 102 In his affidavit sworn on 30 July 2010 Mr Rowney attested to the truth of Mr De Bortoli's account of what Mr Clarke said at that dinner. \ On cross-examination Mr Rowney admitted that it was not until he had been asked to provide an affidavit in this proceeding that he had any occasion to think back to the detail of what had been said at the dinner ten years earlier. He admitted having been shown a copy of what Mr De Bortoli had reported but insisted that, despite the lapse of time, he had an independent and precise recollection of what had been said. 103 Mr De Bortoli's actions over this period show that, far from relying on external information from HIH or any other source, Mr De Bortoli pursued his own strategy relying on his own views about investment generally and his own belief that what goes down must come up. His purchase of a large volume of shares in the face of strong independent statements in the financial press and by analysts that HIH was in severe financial trouble was not made in reliance on representations from HIH but on his own strategic plan. December 2000 share purchases 104 DBW continued with its share purchases in December 2000 acquiring an additional 10,491,897 at prices that ranged from $0.33 to $0.23. The negative indicators about HIH had not improved over this period and it would seem that Mr De Bortoli was motivated by faith in his own long term view. 105 DBW continued to hold its shares in January and February 2001, apparently making no effort to recover any of its investment before HIH went into provisional liquidation on 15 March 2001. CONCLUSION 106 It is important to have clearly in mind the exact nature of DBW's claims. In the Amended Statement of Claim DBW claims that its loss was a consequence of its reliance on information provided by HIH, whether in the documents issued by the company, the statements of its officers such as Mr Clarke or, indirectly by way of analysts' reports that were based on information provided by the company. The evidence adduced by DBW does not support this claim. 107 As noted above, at [79] the respondents have made limited admissions as to misleading and deceptive representations having been made by HIH. In so far as its allegations were not admitted, the applicant did not attempt to prove them. The respondents were apparently content to rely on their primary defence that the applicant had not established the reliance necessary to make a causal connection between representations made by HIH and its loss. 108 I am mindful of Lord Blackburn's comments both as to the inference of fact that arises where a statement made to induce behaviour is followed by that behaviour and of his Lordship's comments as to the weight to be given to such evidence; see [65]-[67] above. I am also mindful that his Lordship was speaking of an inference of fact not logic. As an inference of logic it would involve the well-known logical fallacy, post hoc ergo propter hoc, meaning 'after this, therefore because of this', however, as an inference of fact it has evidentiary weight but may be rebutted. 109 With an inference of fact the strength of the inference, or the weight of the evidence, will be greater where, as in MGCIA or Como Investments, the representation is personally directed to the person claiming to have been misled as compared with what might be called 'broadcast' representations. In the latter case it will be at least necessary for the representee to show that the representations had come to his or her attention at the relevant time. It is not sufficient merely to show that representations were made and certain conduct occurred later. Where there is personal communication of the representations this step may be assumed. 110 In this case I am satisfied that any inference of fact that Mr De Bortoli's purchase of HIH shares was induced by HIH has been rebutted. Little weight can be given to Mr De Bortoli's evidence that he could recall giving particular attention to specific statements in documents issued by HIH when he could not recall when he read them. This is more so when there was no independent evidence of him having read the documents or directed his attention to particular assertions. The credibility of the evidence is also undermined by Mr De Bortoli's assertion that he was unaware of the very considerable negative media coverage referred to at [76] above and by the inconsistencies in his evidence. 111 Mr De Bortoli was an experienced share trader who had purchased significant parcels of shares for Aabrofay as well as DBW. His assertions, made time and again, that he knew better than the market and that he relied on his own assessment are inconsistent with his claim to have relied on the representations of HIH. If Mr De Bortoli had merely been careless it would not, as explained above at [74]-[75], be sufficient to bar him from recovery under s 82. However, the problem here is not carelessness or even reckless neglect of DBW's interest. It is the absence of reliance on HIH's representations and thus the absence of the necessary causal link between representations and conduct that is fatal to DBW's claim. 112 The applicant submitted that "HIH shares only had some market value and were able to be traded at all on the share market" as a result of the representations of HIH which have been admitted to be false. In making this submission Mr Gracie expressly disclaimed any reliance on the 'fraud on the market' theory. He confined his submission to saying that the market must have been contaminated by HIH's conduct and that the respondents had not adduced any evidence to the contrary. If the true position had been known, it was submitted, the shares could not have been traded at all. This submission must be rejected for two reasons. First there is no evidence to support the proposition and secondly it is clear from the evidence that was adduced that Mr De Bortoli was betting against the market rather than relying on it. Why Mr De Bortoli chose to do so is a matter of conjecture which it is not appropriate for the Court to engage in. 113 For the above reasons it must be concluded that the applicant has not established that the loss it claims was caused by HIH and that the Liquidators were correct to reject the proof of debt submitted by the applicant on 9 February 2009. The application must therefore be dismissed with costs. I certify that the preceding one hundred and thirteen (113) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Stone. Associate: Dated: 9 June 2011