FEDERAL COURT OF AUSTRALIA Caason Investments Pty Limited v Cao [2014] FCA 1410 Citation: Caason Investments Pty Limited v Cao [2014] FCA 1410 Parties: CAASON INVESTMENTS PTY LIMITED (ACN 089 590 858) and WISE PLAN PTY LIMITED (ACN 007 008 577) v CAO, SIMON XIAO FAN and others named in the attached Schedule A CAASON INVESTMENTS PTY LIMITED (ACN 089 590 858) and WISE PLAN PTY LIMITED (ACN 007 008 577) v SIMON JEREMY NEWTON GRAY and others named in the attached Schedule B File number: NSD 1558 of 2012 NSD 341 of 2013 Judge(s): FARRELL J Date of judgment: 23 December 2014 Catchwords: PRACTICE AND PROCEDURE – class action – misleading and deceptive conduct – application to amend pleadings – causation – market based causation – whether market based causation arguable in Australia – whether necessary to demonstrate reliance – whether amendments would expand class of group members – prejudice PRACTICE AND PROCEDURE – class action – misleading and deceptive conduct – application to amend pleadings – date amendments should take effect – prejudice – whether amendment would add time-barred claims Legislation: Corporate Law Reform Bill (No 2) 1992 (Cth) Federal Court of Australia Act 1976 (Cth) Federal Court Rules 2011 (Cth) Corporations Act 2001 (Cth) Australian Securities and Investments Commission Act 2001 (Cth) Fair Trading Act 1999 (Vic) Trade Practices Act 1974 (Cth) Cases cited: Abigroup Contractors Pty Ltd v Sydney Catchment Authority (No 3) (2006) 67 NSWLR 341 ABN AMRO Bank NV v Bathurst Regional Council [2014] FCAFC 65 Agtrack (NT) Pty Ltd v Hatfield (2003) 7 VR 63 Alexander v Perpetual Trustees WA Limited (2004) 216 CLR 109 Allianz Australia Insurance Ltd v GSF Australia Pty Ltd (2005) 221 CLR 568 AON Risk Services Australia Limited v Australian National University (2009) 239 CLR 175 Australian Securities and Investments Commission v Australian Property Custodian Holdings Ltd (No 2) (2013) 213 FCR 289 Australian Securities and Investments Commission v Chemeq Limited (2006) 234 ALR 511 Bolitho v Banksia Securities Ltd [2014] VSC 8 Bowen Energy Limited v 2KD Drilling Pty Ltd [2012] FCA 275 Bray v F Hoffman-La Roche Ltd [2003] FCA 1505 Butcher v Lachlan Elder Realty Pty Limited (2004) 218 CLR 592 Byrne v Cooke [2010] QSC 76 Cadence Asset Management Pty Ltd v Concept Sports Limited (2006) 58 ACSR 435 Champtaloup v Thomas [1976] 2 NSWLR 264 De Bortoli Wines Pty Limited v HIH Insurance Limited (in liq) (2011) 200 FCR 253 Digi-Tech (Australia) Limited v Brand (2004) 62 IPR 184 Dorajay Pty Ltd v Aristocrat Leisure Limited [2009] FCA 19 Dye v Commonwealth Securities Limited [2010] FCA 720 Dye v Commonwealth Securities Ltd (No 2) [2010] FCAFC 118 Finishing Services Pty Ltd v Lactos Fresh Pty Ltd [2006] FCAFC 177 Ford Motor Company of Australia Ltd v Arrowcrest Group Pty Ltd (2003) 134 FCR 522 General Steel Industries Inc v Commissioner for Railways (New South Wales) (1964) 112 CLR 125 Gibson v Parkes District Hospital [1991] 26 NSWLR 9 Halliburton Co v Erica P John Fund Inc 134 S.Ct. 2398 (2014) Henville v Walker (2001) 206 CLR 459 HIH Insurance Ltd v Adler [2007] NSWSC 633 Hospitals Contribution Fund of Australia Ltd v Hunt (1982) 44 ALR 365 I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109 Ingot Capital Investments v Macquarie Equity Capital Markets Ltd (2008) 73 NSWLR 653 James Hardie Industries NV v Australian Securities and Investments Commission (2010) 274 ALR 85 Janssen-Cilag Pty Limited v Pfizer Pty Limited (1992) 37 FCR 526 King v GIO Australia Holdings Ltd [2001] FCA 1487 Manday Investments Pty Ltd v Commonwealth Bank of Australia (No 3) [2012] FCA 751 Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 McCarthy v McIntyre [1999] FCA 784 McGrath v HNSW Pty Ltd [2014] FCA 165 Medich v Bentley-Smythe Pty Ltd [2010] FCA 494 Murphy v Overton Investments Pty Limited (2004) 216 CLR 388 Nyoni v Chee Koon Hee (No 2) [2013] FCA 703 P Dawson Nominees Pty Ltd v Brookfield Multiplex Ltd (No 4) [2010] FCA 1029 Pathway Investments Pty Ltd v National Australia Bank Ltd (No 3) [2012] VSC 625 Perpetual Trustee Company Ltd v Kwok [2011] NSWSC 422 Potts v Miller (1940) 64 CLR 282 QS Holdings Sarl v Paul's Retail Pty Ltd (2011) 92 IPR 460 Research in Motion Ltd v Samsung Electronics Australia Pty Ltd (2009) 176 FCR 66 San Sebastian Pty Limited v Minister Administering the Environmental Planning and Assessment Act 1979 (1986) 162 CLR 340 Smith v Moloney (2005) 92 SASR 498 Smith v Noss [2006] NSWCA 37 Spencer v Commonwealth (2010) 241 CLR 118 Travel Compensation Fund v Tambree (2005) 224 CLR 627 University of Sydney v ResMed Limited (No 5) [2012] FCA 232 Weldon v Neal (1887) 19 QBD 394 Williams v FAI Home Security Pty Ltd (No 4) (2000) 180 ALR 459 Woodcroft-Brown v Timbercorp Securities Limited (in liq) [2013] VSCA 284 A Watson and J Varghese, "The Case for Market-Based Causation" (2009) 32 UNSW Law Journal 948 Date of hearing: 12 June 2014 Date of last submissions: 27 June 2014 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 127 NSD 1558 of 2012 Counsel for the Applicant: Mr MBJ Lee SC and Mr EAJ Hyde Solicitor for the Applicant: Piper Alderman Counsel for the First Respondent: The first respondent did not appear Counsel for the Second to Fourth Respondent: Mr GA Sirtes SC and Mr SA Lawrance Solicitor for the Second to Fourth Respondents: Wittens & McKeough Counsel for the Fifth Respondent: The fifth respondent did not appear Counsel for the Sixth Respondent: Mr D Hughes Solicitor for the Sixth Respondent: Swaab Attorneys Counsel for the Seventh Respondent: Mr DW Rayment Solicitor for the Seventh Respondent: Robert Saxton Primrose Dunn NSD 341 of 2013 Counsel for the Applicant: Mr MBJ Lee SC and Mr EAJ Hyde Solicitor for the Applicant: Piper Alderman Counsel for the Respondents: Mr DL Williams SC Solicitor for the Respondents: Moray & Agnew IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 341 of 2013 BETWEEN: CAASON INVESTMENTS PTY LIMITED ACN 089 590 858 First Plaintiff WISE PLAN PTY LIMITED ACN 007 008 577 Second Plaintiff AND: SIMON JEREMY NEWTON GRAY and others named in the attached Schedule B Defendants IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1558 of 2012 BETWEEN: CAASON INVESTMENTS PTY LIMITED ACN 089 590 858 First Plaintiff WISE PLAN PTY LIMITED ACN 007 008 577 Second Plaintiff AND: CAO, SIMON XIAO FAN and others named in the attached Schedule A Defendants JUDGE: FARRELL J DATE OF ORDER: 23 December 2014 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The parties are to confer as to a form of orders to give effect to these reasons and are to provide a draft of the orders to the Court by 20 February 2015. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 341 of 2013 BETWEEN: CAASON INVESTMENTS PTY LIMITED ACN 089 590 858 First Plaintiff WISE PLAN PTY LIMITED ACN 007 008 577 Second Plaintiff AND: SIMON JEREMY NEWTON GRAY and others named in the attached Schedule B Defendants IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1558 of 2012 BETWEEN: CAASON INVESTMENTS PTY LIMITED ACN 089 590 858 First Plaintiff WISE PLAN PTY LIMITED ACN 007 008 577 Second Plaintiff AND: CAO, SIMON XIAO FAN and others named in the attached Schedule A Defendants JUDGE: FARRELL J DATE: 23 december 2014 PLACE: SYDNEY REASONS FOR JUDGMENT 1 By an interlocutory application filed on 21 March 2014 the applicants seek orders in relation to proceedings NSD 1558 of 2012 (Director Proceedings) and NSD 341 of 2013 (Auditor Proceedings) (collectively, the Proceedings): consolidating the Proceedings under s 22 of the Federal Court of Australia Act 1976 (Cth) (FCA Act) and Pt 30, r 11 of the Federal Court Rules 2011 (Cth) (Rules); stipulating that the consolidated Proceedings bear the number NSD 1558 of 2012; granting the applicants leave to file a consolidated originating application and consolidated statement of claim pursuant to s 33K of the FCA Act and rr 8.21 and 16.53 of the Rules; providing that any amendments to the proposed consolidated originating application and consolidated statement of claim take effect from 11 October 2012; and dealing with any ancillary cost orders. 2 The originating application and statement of claim for the Director Proceedings were filed on 11 October 2012 and for the Auditor Proceedings on 28 February 2013. The Proceedings are both representative proceedings under Pt IVA of the FCA Act. 3 The first and fifth respondents in the Director Proceedings are not active respondents. Accordingly, references in these reasons to submissions put by the respondents in the Director Proceedings will relate only to the active respondents. Where necessary, I will refer to respondents in the Director Proceedings by their number, for instance, as the "second respondent", and I will refer to the respondents in the Auditor Proceedings as the "Auditors". 4 In each of the Proceedings, the originating application defined group members by reference to: the purchase of shares in Arasor International Limited (Arasor) in the period on or after 11 October 2006 and before 12 May 2008 (Period); in reliance on representations by the respondents as pleaded in the statement of claim; and loss or damage suffered by reason of the respondents' wrongful conduct. 5 The claims related to statements in or omissions from the following documents (Documents) and related conduct: a prospectus dated 14 September 2006 in relation to the initial public offering of shares in Arasor in connection with its admission to the official list of the Australian Securities Exchange Limited (ASX) and trading of Arasor shares on ASX's market (September Prospectus); a short form prospectus dated 23 March 2007 (March Prospectus); Arasor's 2006 Financial Statements and its 2007 Financial Statements; and the half-yearly financial statement dated 31 August 2007 released by Arasor to the ASX. 6 The originating applications claim contraventions of: Section 728 of the Corporations Act 2001 (Cth) (Corporations Act) which prohibits the offering of securities under a disclosure document which contains a misleading or deceptive statement or from which there is an omission of material required (relevantly) by ss 710 or 712; Section 1041H of the Corporations Act which prohibits a person from engaging in conduct in relation to a financial product or a financial service which is misleading or deceptive or likely to mislead or deceive; Section 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) which prohibits, in trade or commerce, a person from engaging in conduct in relation to financial services which is misleading or deceptive or likely to mislead or deceive, in each case not being conduct which would contravene s 728 of the Corporations Act; and In the Director Proceedings, s 9 of the Fair Trading Act 1999 (Vic) (and equivalent legislation in other states) (FTA) which prohibits a person from engaging in conduct in trade or commerce which is misleading or deceptive or likely to mislead or deceive. 7 The applicants seek declarations of contravention of those provisions and damages. The statutory bases for compensation claimed by the applicants are: (1) under s 729 of the Corporations Act, for loss or damage "because an offer of securities under a disclosure document contravenes s 728(1)"; (2) under s 1325 of the Corporations Act, for loss or damage "because of conduct of another person in contravention of [Ch 6D (including ss 728 and 729) and Pt 7.10 (including s 1041H)]"; (3) under s 1041I of the Corporations Act and s 12GF and s 12GM of the ASIC Act, for loss or damage occasioned by conduct of another person that contravenes s 1041H of the Corporations Act and s 12DA of the ASIC Act; (4) under s 159 of the FTA, for loss, injury or damage suffered "because of a contravention of a provision of this Act", relevantly, s 9. 8 For each of the laws alleged to have been contravened and declarations and damages claimed, the limitation period is six years after the cause of action "arose" or "accrued". 9 The amendments now proposed in the consolidated statement of claim go beyond those necessary to effect consolidation. Among other things, they seek to redefine group members by deleting reference to reliance on representations made by the respondents and introduce so-called "market based causation" claims. The respondents say that this would have the effect of including in the group for the first time members whose claims would be statute barred if brought now. 10 The market based causation claims are that alleged contraventions by the respondents caused the market to inflate the price of Arasor shares in the Period beyond their true value or the market price which would have prevailed but for the alleged contraventions, thereby causing loss. The respondents say that such a claim is unknown to Australian law and should not be permitted. 11 On 8 April 2014, I dismissed an interlocutory application in the Director Proceedings made by the second to fourth respondents pursuant to s 25(6) of the FCA Act on 21 March 2014. The application was to reserve to a Full Court the question of whether the market based causation claims in the consolidated statement of claim disclose a cause of action. 12 The proposed consolidated originating application and consolidated statement of claim give rise to three central issues: Whether the Proceedings should be consolidated or merely heard together; Whether any or all of the amendments proposed in the consolidated statement of claim should be allowed; and As at what date any amendments proposed in the consolidated statement of claim should take effect. Consolidation 13 The right of the applicants to apply for an order consolidating the Proceedings and the power of the Court to do so under r 30.11 of the Rules is not in issue. The applicants properly point out that the Proceedings involve a common factual matrix, there are common issues of fact and law and witnesses in each Proceeding are likely to be witnesses in the other. The second to fourth respondents consent to consolidation but all other active respondents and the Auditors object. 14 The objections go to discretionary issues. The Court's discretion is broad. Considerations relevant to the exercise of the discretion are the desirability of avoiding multiple actions, saving time and expense, and whether any party would be prejudiced: Cameron v McBain [1948] VLR 245 at 247. 15 The sixth and seventh respondents in the Director Proceedings suggest that it would be inefficient and costly to require them to plead to causes of action pleaded by the Auditors and vice versa, especially where a director has relevant skill or knowledge which might make a "do not know" response problematic. I accept the applicants' contention that this argument should be accorded little weight as the directors are required to plead to the Auditor's cross-claim against them filed on 4 September 2013 in any event, and the proceedings are likely to be simplified if there is a consolidated statement of claim to which all respondents must plead. Although the respondents in the Proceedings have incurred cost in pleading defences to the original statements of claim, the applicants acknowledge that they should be responsible for the cost thrown away. 16 The Auditors suggest that there is no utility in consolidation as I made orders on 2 May 2013 that the Proceedings be case managed together and that evidence in one Proceeding be evidence in the other. I do see benefit in consolidated pleadings. Where cases are managed together, parties to one Proceeding will often wish to be heard on applications made in the other. An example is the hearing on 8 April 2014 in relation to the application made in the Director Proceedings to refer to the Full Court the question of whether a market based causation claim could be made. While it was straightforward to make orders as to costs in relation to the parties in the Director Proceedings, issues arose as to the basis for making a costs order in relation to the Auditors; the same thing would have occurred in the Full Court had the application been successful. Further, as a practical matter, it avoids duplicated filing of evidence and other documents. 17 The real substance to the opposition to the order is the concern raised by the Auditors and the sixth and seventh respondents that an order that the consolidated originating application and consolidated statement of claim take effect from 11 October 2012 would be unfairly prejudicial. In relation to the Auditors and the directors who are subject to a cross-claim by the Auditors, that would enliven claims already statute barred on 28 February 2013 (when the Auditor Proceedings were commenced). 18 While it may be that there is marginal difference to the directors (as they are already subject to claims in the Director Proceedings which may be statute barred in the Auditor Proceedings), to address this issue the sixth respondent proposed that the order for consolidation should contain a note that for the purposes of any limitation periods, the Auditor Proceedings should be taken to have commenced on 28 February 2013 and the Director Proceedings on 11 October 2012 and that both proceedings should be taken to have continued separately. The applicants indicated that they would not oppose that course. 19 I am persuaded that it would be appropriate to make an order consolidating the Proceedings subject to the proposed qualification and (subject to the resolution of the matter next referred to) it would not result in unfairness to any party. 20 The Auditors pointed out that an order in the terms proposed by the sixth respondent would not overcome the effect of broadening the class of group members because of the proposed amendment to [2] of the originating application and to [3] of the consolidated statement of claim which would remove the requirement for reliance, in effect giving a claim to a class of members who would now be statute barred from making it. I will deal with this issue later in these reasons. Amendment 21 The objections to the proposed amendments to be effected by the consolidated statement of claim fall into the categories set out in [22] and [23] below. The paragraph references are to the revised form of the proposed consolidated statement of claim supplied to the Court on 16 December 2014, which contains amendments to the form of the document filed with the application for leave as a result of responses by the applicants to issues raised by the respondents. 22 The paragraphs of the consolidated statement of claim which are addressed in detail in these reasons are: (1) [3], which the applicants propose to amend as follows: 3. The group members (Group Members) to whom this proceeding relates are those persons who: 3.1 acquired interests in Arasor Shares on or after 11 October 2006 and before 12 May 2008 (the Period); and 3.2 acquired Arasor Shares in reliance upon representations made by the Respondents; and 3.3 3.2 are alleged to have suffered losses or damage by or resulting from the wrongful conduct of the Respondents as pleaded below. (the Group Members) (2) [3] in combination with [71B] and [71C] (and in particular [71C.1(b)] and [71C.3]), which relate to alleged causation in the misleading and deceptive conduct claims under s 1041H of the Corporations Act, s 12DA of the ASIC Act and s 9 of the FTA. The basis of this objection is that these paragraphs are the core of the market based causation claim. The respondents say that market based causation is not arguable; that the amendments would expand the class of group members to persons whose claims would be time barred if brought now; and that these amendments should not be permitted as a matter of discretion because of delay and a deliberate forensic decision not to bring the claim in 2013; (3) [3], [50], [51], [58L], [58M], [58N], [58P], [58Q], [58R], [58S] on the basis that the applicants have not pleaded the material facts said to give rise to the relevant causal connection; in essence this complaint is that there is no pleading of reliance in relation to claims of contravention of s 728 and compensation for loss under s 729 in relation to the September Prospectus and the March Prospectus; (4) [58T], [69], [69A] and [71B] on the basis that they do not plead or otherwise set out what is intended by the term "the market". In a letter from the lawyers for the applicants dated 3 April 2014, the applicants advised the Auditors that "the market" is "the class of people and entities comprising the investors and potential investors in the Arasor Shares"; and (5) [47]-[53] and [58C]-[58T] on the basis that the claims are time barred if the amendment to "group members" is allowed. 23 There were a number of other complaints which appear to have been resolved by agreement and I would grant leave to the inclusion of those amendments: (1) The respondents complained that the proposed amendment to the definition of the group made in [3.2] made that criterion of membership uncertain because of the proposed inclusion of the words "are alleged to have" before "suffered losses or damage by or resulting from the wrongful conduct of the Respondents". The applicants agreed to remove those words from [3.2] of the consolidated statement of claim and [2] of the proposed amended originating application so that issue is resolved; (2) The respondents complained that [29E], [32], [32B], [32C], [32I], [32J], [32O], [33G], [36], [37], [43], [44B] and [44C] do not identify the person or persons to whom representations were alleged to have been made. This objection has been resolved by the applicants' agreement to include the words "to the market of investors in Arasor Shares" after the word "represented" in those paragraphs; and (3) The Auditors complained that the inclusion in [69A] of the words "Repeated September Prospectus Directors' Statements" in the definition of "Grant Thornton Conduct" is inappropriate. This appears to be an error and the words should be "Repeated September Grant Thornton Statements". 24 Last, the Auditors complain that [31B], [33C] and [40B] do not contain particulars of the representations said to have been made and to whom they are said to have been made. This objection centres on whether a claim that Grant Thornton made representations to Arasor as well as its Audit Committee and Board is sufficiently pleaded. These paragraphs do not particularise to what officers or bodies other than the Audit Committee or Board the applicants say the representations were made and how they were made. I accept the applicants' contention that they will not be in a position to provide particulars until after discovery or exchange of evidence and the Auditors will be in a position to plead to this claim on that basis. I do not accept the Auditors' complaint about the use of the term and/or in these paragraphs. Although the term lacks elegance and can give rise to unreasonably convoluted pleadings, I do not think the complaint is made out in this case. Leave to amend 25 Section 59(2B) of the FCA Act provides as follows: (2B) The Rules of Court may make provision for: (a) the amendment of a document in a proceeding; or (b) leave to amend a document in a proceeding; even if the effect of the amendment would be to allow a person to seek a remedy in respect of a legal or equitable claim that would have been barred because of the expiry of a period of limitation if the remedy had originally been sought at the time of the amendment. 26 Rule 8.21 of the Rules permits an originating application to be amended as follows: 8.21 Amendment generally (1) An applicant may apply to the Court for leave to amend an originating application for any reason, including: (a) to correct a defect or error that would otherwise prevent the Court from determining the real questions raised by the proceeding; or (b) to avoid the multiplicity of proceedings; or (c) to correct a mistake in the name of a party to the proceeding; or (d) to correct the identity of a party to the proceeding; or (e) to change the capacity in which the party is suing in the proceeding, if the changed capacity is one that the party had when the proceeding started, or has acquired since that time; or (f) to substitute a person for a party to the proceeding; or (g) to add or substitute a new claim for relief, or a new foundation in law for a claim for relief, that arises: (i) out of the same facts or substantially the same facts as those already pleaded to support an existing claim for relief by the applicant; or (ii) in whole or in part, out of facts or matters that have occurred or arisen since the start of the proceeding. … (2) An applicant may apply to the Court for leave to amend an originating application in accordance with paragraph (1)(c), (d), (e) or subparagraph (g)(i) even if the application is made after the end of any relevant period of limitation applying at the date the proceeding was started. (3) However, an applicant must not apply to amend an originating application in accordance with subparagraph (1)(g)(ii) after the time within which any statute that limits the time within which a proceeding may be started has expired. 27 Rule 16.53 is simple in its form: Unless rule 16.51 applies, a party must apply for the leave of the Court to amend a pleading. 28 As these are representative proceedings and the applicants propose to amend the definition of the group, s 33K of the FCA Act is also relevant: 33K Causes of action accruing after commencement of representative proceeding (1) The Court may at any stage of a representative proceeding, on application made by the representative party, give leave to amend the application commencing the representative proceeding so as to alter the description of the group. (2) The description of the group may be altered so as to include a person: (a) whose cause of action accrued after the commencement of the representative proceeding but before such date as the Court fixes when giving leave; and (b) who would have been included in the group, or, with the consent of the person would have been included in the group, if the cause of action had accrued before the commencement of the proceeding. (3) The date mentioned in paragraph (2)(a) may be the date on which leave is given or another date before or after that date. (4) Where the Court gives leave under subsection (1), it may also make any other orders it thinks just, including an order relating to the giving of notice to persons who, as a result of the amendment, will be included in the group and the date before which such persons may opt out of the proceeding. 29 Despite the heading of s 33K, the Court has power to grant leave to amend the definition of the group at any time during the proceedings and s 33K(1) should not be read down by reference to the subsequent sub-paragraphs: Bray v F Hoffman-La Roche Ltd [2003] FCA 1505 at [25]-[27]. The Court will be alert to whether any proposed amendment will or may operate to the detriment of group members: see King v GIO Australia Holdings Ltd [2001] FCA 1487 (King v GIO) at [5]-[6]. 30 Given the issues raised in the proceedings, it is appropriate to note the breadth of the power conferred on the Court by s 33ZF of the FCA Act: 33ZF General power of Court to make orders (1) In any proceeding (including an appeal) conducted under this Part, the Court may, of its own motion or on application by a party or a group member, make any order the Court thinks appropriate or necessary to ensure that justice is done in the proceeding. (2) Subsection (1) does not limit the operation of section 22. 31 The applicants concede that leave of the Court is required under r 16.53 to further amend the statement of claim as proposed in the consolidated statement of claim and that the onus is on the applicants to satisfy the Court that grounds exist to exercise the discretion in their favour: Dye v Commonwealth Securities Limited [2010] FCA 720 and Dye v Commonwealth Securities Limited (No 2) [2010] FCAFC 118. 32 The discretions conferred on the Court under rr 8.21 and 16.53 must, by virtue of s 37M(3) of the FCA Act, be exercised in the way that best promotes the overarching purpose of the civil practice and procedure rules, which is to facilitate the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible: Bowen Energy Limited v 2KD Drilling Pty Ltd [2012] FCA 275; University of Sydney v ResMed Limited (No 5) [2012] FCA 232 at [14]. 33 The powers of the Court to grant leave to amend are broad with the aim of ensuring that the real questions in the proceedings are properly agitated to avoid a multiplicity of proceedings: AON Risk Services Australia Limited v Australian National University (2009) 239 CLR 175 at [13] and [71]-[72]. The Court should take into account the nature of the proposed amendment, whether it is proposed in good faith, the stage in the proceedings at which leave is sought, the nature of the prejudice that may be caused and the means by which such prejudice might be redressed. The question of delay is relevant to these considerations. However, it is not the purpose of the Court to punish a party for delay in seeking an amendment: Medich v Bentley-Smythe Pty Ltd [2010] FCA 494 at [8]; Nyoni v Chee Koon Hee (No 2) [2013] FCA 703 at [7]-[9]. 34 Having regard to s 59(2B) of the FCA Act, the Court has power to grant leave to amend an originating application under r 8.21 and a pleading under r 16.53 so as to add a new claim for relief arising out of the same or similar facts even if that relief is statute barred, overcoming the rule in Weldon v Neal (1887) 19 QBD 394 at 395, as explained in Australian Securities and Investments Commission v Australian Property Custodian Holdings Ltd (No 2) (2013) 213 FCR 289 (APC Holdings) per Murphy J at [17]-[19] and in McGrath v HNSW Pty Ltd [2014] FCA 165 (McGrath) per Cowdroy J at [46]-[54]. 35 With some force, the respondents submitted that the views expressed in McGrath and APC Holdings relate to the addition of a new claim arising out of the same facts by the same applicant. The Auditors argue that the impact of the proposed amendments is to introduce new group members whose claims would be statute barred, and to add claims arising from "new facts"; being the acquisition of Arasor shares by new group members based on the alleged effect of the representations complained about on the "market". 36 The respondents say that in those circumstances it is inappropriate that amendments should relate back to the commencement of the proceeding. They rely on Agtrack (NT) Pty Ltd v Hatfield (2003) 7 VR 63 at [42]-[44] per Ormiston J. [42] Interestingly Brandon LJ said (obiter) in Liff v Peasley [1980] 1 WLR 781 that there was no reason to quarrel with the proposition that an amendment relates back to the document amended, but that: This seems to me to be an entirely sensible proposition so long as the amendment concerned does not involve the addition of a new party, either as plaintiff or defendant, or the raising of a new cause of action, but involves only the modification, by addition, deletion or substitution, of pleas or averments made between existing parties in respect of a cause or cause of action already raised. [Emphasis added.] … [43] In the end none of this discussion contained in the authorities in England and Australia provides much enlightenment as to the reason lying behind the so-called "relation back" principle. If one excludes new parties and separate factual claims as quite inappropriate subject matters for a mere amendment, then there is no reason why an amendment not affecting the substance of a claim should not be treated as affecting and varying an originating document or pleading from the outset. As I have said, that is merely the nature of an amendment, that is, to take that which is in existence and alter it. It is only because the word "amend" has a wider connotation in most systems of pleading that one gets into difficulties. In the ordinary case, where questions of limitations or other prejudice do not arise, it is convenient, whatever the common law might once have said, to allow a proceeding to be amended pursuant to the present joinder rule by the addition of a cause of action, quite separate in substance from an existing cause of action: see now O 9. Whatever the requirements were under earlier rules, in practice there is now no limit on joinder except where the court holds that it is prejudicial or inconvenient to the extent that it is desirable to hold separate trials or to order the exclusion of a particular claim. Generosity as to the extent of joinder, however, ought not to hide the fact that, when one "amends" to add a new and distinct cause of action, one is not merely amending the process but adding something quite new to it, and it is only as a matter of convenience that the court permits both old and new claims to proceed together and treats them as having commenced at the same time, albeit that further pleadings, discovery and the like will be required: cf r 36.06.91 [44] … Because the plaintiff is ordinarily seeking to amend an existing document which already has a date of filing and service, it is not customary for such orders to state the date from which the amendment is to have effect, for it is to be assumed that the plaintiff wishes it to take effect so as to vary that existing document. There is, however, no reason why the court should not explicitly state by order the date the amendment takes effect and has done so from time to time: see eg Australia & New Zealand Banking Group Ltd v Larcos. It is therefore not difficult to see why an amendment adding a party has never been treated as dating back, for the very good reason that there has been in existence no document, writ or statement of claim, between the plaintiff and the added defendant, unless and until the order adding the defendant is made. There is no high principle of common law in issue, whatever order is sought to be made, and there is simply the recognition of that which the party seeks and is permitted to achieve. It has led to difficulties only where what is sought to be achieved is not merely amendment but joinder of a new and additional cause of action, something which in strictness involves more than the amendment of an existing claim, but which is treated as an amendment of a document such as a statement of claim, because that addition of a further claim to the original claim is permitted by the rules and practice as to joinder. As recognised by Lord Brandon, however, there is no reason, except convenience, why a claim for an additional cause of action should not be treated as having come into effect at the time of amendment. ... 37 I do not accept the Auditors' argument that the market based causation claims are based on relevantly different facts from those already pleaded. The Court has the discretion to grant leave to amend the pleadings to include market based causation claims for existing group members even if the market based causation claims would now be statute barred. There was argument that leave would have no utility because anyone who could make out a claim of direct reliance would have no need of the market based causation claim. However, if leave is granted, it would have the effect that a group member who could make out a case of direct reliance on contravening conduct for some only of their purchases of Arasor Shares in the Period might also have claims based on market based causation in relation to other purchases in the Period, so the amendment would have utility for those group members. 38 However, I do accept that if leave is granted to amend [3] as proposed the class of group members may, and probably will, be expanded to include entities which did not directly rely on the Directors' Representations and Grant Thornton Conduct (as defined in the draft consolidated statement of claim) and whose claims might otherwise be statute barred. Whether the claims would be statute barred is contested by Mr Lee, Senior Counsel for the applicants, who says that it is a "red hot issue" despite the fact that the Period is now more than six years ago. If it is appropriate to grant leave to amend [3] and the other paragraphs of the draft consolidated statement of claim to which exception is taken on the basis that the claims would be statute barred at the time the Court orders that the amendment would be effective, that leave should be subject to the qualification that it is without prejudice to the right of the respondents to plead defences based on relevant limitation periods. 39 The proposed amendments to plead market based causation raise the "vexed question" of whether "reliance" is a necessary "link in the chain of causation" between the claimed loss or damage suffered "by" or "because of" the contravention. 40 The applicants submit that where a claim raises an arguably novel point of law such as market based causation, it should be allowed to proceed so as not to "risk stifling the development of the law by summarily throwing out of court actions in respect of which there is a reasonable possibility that it will be found, in the development of the law, still embryonic, that a cause of action does lie": Hospitals Contribution Fund of Australia Ltd v Hunt (1982) 44 ALR 365 at 373-374 per Master Allen, quoted with approval by Badgery-Parker J in Gibson v Parkes District Hospital [1991] 26 NSWLR 9 (Gibson) at 35. Indeed, so much was conceded by the second to fourth respondents at the hearing of the application to refer the matter to the Full Court: see T.24.34-37: So I obviously accept that a party – my learned friend's clients are entitled to run a case at first instance, contrary to intermediate appellate authority – contrary to High Court authority, and say that they are going to submit that those decisions are wrong and they may take it all the way. … 41 Novelty should not be a basis for disallowing an amendment where the novel pleading has its origin in elements of received doctrine: Champtaloup v Thomas [1976] 2 NSWLR 264 at 271. 42 That a proposed cause of action is novel does not compel the Court to strike it out. However, the fact that such a cause of action has never before been successfully relied on in Australia is relevant to the question of whether the proposed cause of action does exist in the law: Gibson at 17. 43 Leave to amend the originating application or statement of claim would generally not be given if the amendment would be liable to be struck out or it is unlikely to succeed: Research in Motion Ltd v Samsung Electronics Australia Pty Ltd (2009) 176 FCR 66 at [21]-[22] per Kenny J. 44 The applicants suggest that the test for whether a claim should be struck out is whether the claim is so manifestly faulty that it does not admit of argument, based on the High Court's decision concerning the circumstances in which it is appropriate to order summary dismissal in General Steel Industries Inc v Commissioner for Railways (New South Wales) (1964) 112 CLR 125 at 129 per Barwick CJ. In HIH Insurance Ltd v Adler [2007] NSWSC 633 at [6]-[9] and [73]-[75], Einstein J stated that this was his guiding principle in considering a strike out application in relation (among other things) to an indirect causation claim which he refused to strike out. See also Byrne v Cooke [2010] QSC 76. 45 However, since the introduction of s 31A of the FCA Act, the test for whether summary judgment should be given is not whether a claim is "hopeless" or "bound to fail"; rather, full weight should be given to the phrase "no reasonable prospect of success" in s 31A(3), albeit that the power to render summary judgment should not be exercised lightly: Spencer v Commonwealth (2010) 241 CLR 118 at [52]-[60] per Hayne, Crennan, Kiefel and Bell JJ. 46 No hard and fast rule can be laid down as to when summary judgment is available. Much depends on the case at hand. Nonetheless, generally speaking, summary judgment would appear appropriate when well-established propositions of law deny the prospect of success. Summary judgment would appear inappropriate where there are "factual issues capable of being disputed and in dispute": see QS Holdings Sarl v Paul's Retail Pty Ltd (2011) 92 IPR 460 at [13]-[16] per Kenny J. 47 Before considering the questions of whether leave should be granted in light of limitation issues, I will deal with the issues raised by the amendments proposed to establish market based causation claims. Market based causation 48 The market based causation claims comprise: (a) The proposed amendment to the definition of "group members" at [3] to delete the "reliance" pleading; (b) The proposed amendments at [68]-[71D] dealing with misleading and deceptive conduct alleged to be in contravention of s 1041H of the Corporations Act, s 12DA of the ASIC Act and s 9 of the FTA, and in particular the claims in [71B], [71C.1(b)] and [71C.3] taken with the proposed amendment to the definition of "group members" to remove the qualification of reliance in [3]; and (c) The proposed amendments dealing with statements in and conduct in relation to the September Prospectus and the March Prospectus under ss 728 and 729 of the Corporations Act. Respondents' position on market based causation 49 The respondents acknowledge that where a plaintiff has not taken any step in the causal chain which contributes to their loss, so that the plaintiff is a "passive sufferer of loss", the plaintiff need not establish that he or she relied on the conduct in question, as in Janssen-Cilag Pty Limited v Pfizer Pty Limited (1992) 37 FCR 526. In that case, consumers were misled by conduct of the defendant to buy less of the plaintiff's product, causing the plaintiff loss without any action on its part. 50 However, the respondents say that in cases of misrepresentation inducing a transaction, the courts have required reliance on the misrepresentation as essential to establishing the causal link between the contravening conduct and loss or damage suffered. They rely on the decision of the New South Wales Court of Appeal in Digi-Tech (Australia) Limited v Brand (2004) 62 IPR 184 (Digi-Tech) at [147]-[159] and Ingot Capital Investments v Macquarie Equity Capital Markets Ltd (2008) 73 NSWLR 653 (Ingot) per Ipp JA at [612]-[619] and Giles JA at [12]-[13]. 51 In Ingot at [614], Ipp JA explained the background to Digi-Tech and then went on to draw the distinction relied on by the respondents at [617]-[618]: 614 Digi-Tech (Australia) v Brand concerned s 51A and s 82 of the Trade Practices Act (Cth). Certain investors invested in a scheme based on Digi-Tech (Australia)'s products. Digi-Tech (Australia) provided misleading forecasts concerning certain of the products to a firm of accountants. The accountants devised an investment scheme based on these products and valued the scheme by assuming the correctness of the misleading forecasts. A Mr Urwin, who was not involved in the misleading conduct, proposed the scheme to investors who invested in it. The investors argued that, had Digi-Tech (Australia) not been guilty of misleading conduct, the accountants would not have given a high valuation to the products and Mr Urwin would not have proposed the scheme. On this basis, the investors would not have invested in the scheme and would not have suffered any loss. The investors' cause of action, so argued, did not involve the investors being misled. … 617 The approach adopted in Digi-Tech (Australia) is to be distinguished from cases such as Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 37 FCR 526, where a person, by misleading conduct, induces another to act to the prejudice of the plaintiff. In the Janssen-Cilag Pty Ltd v Pfizer Pty Ltd category of case the plaintiff is a passive victim of misleading conduct. No action or omission by the plaintiff affects the loss it suffers. By contrast, in the Digi-Tech (Australia) category of case, the plaintiff acts or refrains from acting to his or her prejudice by reason of conduct of a third party brought about by the defendant's misleading conduct; the plaintiff's conduct is a necessary link in the chain of causation. 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 Pty Ltd category of case. 52 In Ingot at [12]-[13], Giles JA said: 12 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" (at 54,242 [156]) 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" (at 54,242 [155]), 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). 13 In saying that in a case of "misrepresentation inducing a transaction" reliance on the misrepresentation was required for proof of causation (at 54,242 [159]), from the facts before them and their Honour's discussion 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. 53 This distinction was recognised by Stone J in De Bortoli Wines Pty Limited v HIH Insurance Limited (in liq) (2011) 200 FCR 253 at [64], and at [63] she said: 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. This reasoning was not departed from by the Full Court of this Court in De Bortoli Wines v HIH Insurance Limited (in liq) [2012] FCAFC 28 (De Bortoli) at [63]-[64]. 54 The Ingot and Digi-Tech line of authority was followed by the Full Court of the Victorian Supreme Court in Woodcroft-Brown v Timbercorp Securities Limited (in liq) [2013] VSCA 284 (Woodcroft-Brown v Timbercorp) at [227] (footnotes incorporated into text): In order to recover damages pursuant to s 1022B(2)(c) or s 1041I(1) for breach of s 1022A or s 1041H [of the Corporations Act], a plaintiff "must establish that he relied on the misleading or deceptive conduct, or the false or misleading statement or that he would have acted differently if the material omission had been disclosed" (Gardiner v Agricultural and Rural Finance Pty Ltd [2007] NSWCA 235 [142] (Handley AJA)), in other words, the vice aimed at by the legislation "is not issuing misleading prospectuses, but misleading investors by issuing misleading prospectuses." (Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (2008) 73 NSWLR 653, 664 (Giles JA)) 55 The respondents also rely on Perpetual Trustee Company Ltd v Kwok [2011] NSWSC 422 at [32]-[36] in which Einstein J struck out a claim by which a guarantor sought to avoid liability to a lender due to alleged misrepresentations made by the lender to a defaulting borrower. In Manday Investments Pty Ltd v Commonwealth Bank of Australia (No 3) [2012] FCA 751 (Manday) at [26]-[36], McKerracher J summarily dismissed a claim that a misleading valuation had caused a bank to treat the applicants unfavourably in renewing facilities because all relevant parties knew of an alleged error in the valuation so that no-one was misled. 56 The respondents say that, without the requirement of reliance, a person who knew that an alleged representation was false or was indifferent to its truth could still recover: see Digi-Tech at [159] and Ingot at [38] per Giles JA and [618] per Ipp JA. Applicants' position on market based causation 57 The applicants say that although proof of direct reliance is sufficient to establish causation, it is not necessary. Despite intermediate court authority in the Digi-Tech and Ingot line of cases, there is no judgment of a superior court which resolves the question of whether individual reliance must be proved to establish a relevant causal connection between a contravention and any loss suffered by the claimants. 58 The applicants submit that s 82 of the Trade Practices Act 1974 (Cth) (TPA) is analogous to s 1041I of the Corporations Act, s 12GF of the ASIC Act and s 159 of the FTA. They say the courts have "been emphatic" that the broad language of s 82 is not to be unnecessarily limited to causation through reliance: see Janssen-Cilag at 529-530 per Lockhart J: 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 [under s 82 of the TPA] can be recovered only where the applicant himself relies upon the conduct of the respondent constituting the contravention of the relevant provision. They also rely on: Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 (Marks v GIO) at [101] per Gummow J; McCarthy v McIntyre [1999] FCA 784; and Alexander v Perpetual Trustees WA Limited (2004) 216 CLR 109 (Alexander v Perpetual Trustees) at [158] per Callinan J. 59 They say that causation can be made out if it can be demonstrated that the contraventions alleged caused the market as a whole to inflate the price of Arasor shares. If the market price of Arasor shares was artificially high as a result of contraventions by one or more of the respondents, it follows as a natural consequence that the applicants and group members suffered loss simply by acquiring those securities at a higher price. They argue that it is sufficient to show that the misleading or deceptive conduct was a genuine causal factor in the loss: Alexander v Perpetual Trustees at [158] per Callinan J. Loss accrues by paying more for an asset than its true value: Potts v Miller (1940) 64 CLR 282. 60 The applicants say that "context is everything"; market based causation involves a different characterisation of the effect of a contravention and can therefore be distinguished from the Digi-Tech and Ingot line of authority. They say the subject, scope and objects of the Corporations Act, especially s 674, which establishes the statutory obligation on an entity listed for quotation on ASX to make continuous disclosure, are relevant to the causation inquiry and care needs to be taken not to assume that the test for causation will be the same in relation to contraventions of different statutory norms. The provisions governing continuous disclosure are directed toward regulating the functioning of securities markets as a whole and specifically directed toward ensuring that the market remains apprised of information material to the price or value of securities. The applicants suggest that market based causation gives better effect to the scope and objects of the Corporations Act than limiting causation to an inquiry only into the mental states of individual investors separate from the market context in which they operate. 61 The applicants relied on an article by A Watson and J Varghese (then a principal and associate respectively of Maurice Blackburn Lawyers, who I will refer to as "the authors"), "The Case for Market-Based Causation" (2009) 32 UNSW Law Journal 948. In it, the authors suggest that liability based on market based causation promotes efficient capital markets, encourages investment and facilitates a less costly and time-consuming method of administering justice. 62 The authors seek to distinguish Digi-Tech and Ingot because, although those cases arose in the context of decisions by investors, in neither was the rejected argument for 'indirect causation' dependent on market reaction to misleading or deceptive conduct. They point to the technical reasons why the comments on that topic by the Court of Appeal of New South Wales in Digi-Tech and the majority (Giles and Ipp JJA, Hodgson JA reserving his position) in Ingot were obiter dicta. 63 The authors argue that the reasoning in Digi-Tech and Ingot is problematic because it substitutes the proper enquiry under the relevant statutory provisions for a different enquiry for which they say there is no warrant in the legislative provisions. They argue that given the legislative focus on market protection in the Corporations Act it is appropriate to adopt an approach to causation which directs attention to the harmful effects that misinformation has on the market as a whole and investors as participants in the market. They say that the distinction between "passive" suffering of loss and inducement to enter a transaction is illusory. Rather, market based causation can be viewed as a species of the "natural consequence" category in the Ingot taxonomy because it requires only proof that the "natural consequence" of the impugned conduct was an inflated market price and transactions entered into without the contravening conduct would have been entered into at a lower price. The applicants adopt this reasoning. 64 The applicants also relied on the decisions in P Dawson Nominees Pty Ltd v Brookfield Multiplex Ltd (No 4) [2010] FCA 1029 (Dawson v Brookfield Multiplex) and Pathway Investments Pty Ltd v National Australia Bank Ltd (No 3) [2012] VSC 625 (Pathway v NAB) in which the presiding judges approved settlements under s 33V of the FCA Act and its analogue in the Supreme Court Act 1986 (Vic). Both cases involved class actions in which the applicants asserted market based causation claims. In each case the presiding judge considered confidential opinions of counsel for both applicant and respondent. After briefly outlining the positions taken, the presiding judges concluded that the cases were appropriate to be settled. In Pathway v NAB at [12] Pagone J commented that neither the plaintiff nor the defendant's case was "so certain as to justify disregarding the possibility of success or failure". In Dawson v Brookfield Multiplex at [24], Finkelstein J concluded that "it is impossible to ignore the vagaries of litigation and the risk of failure in a case such as this, as well as the expense that will be incurred by protracted litigation and the likely appeals that will follow when novel points of law are at issue, whichever way the trial goes. In this type of litigation the parties are well served by a "bird in the hand" approach". 65 The applicants say that if the applicants' claims had not been arguable it would have been inappropriate for the Court to authorise the settlements. 66 Last, the applicants relied on the decision of the Full Court (Jacobson, Gilmour and Gordon JJ) in ABN AMRO Bank NV v Bathurst Regional Council [2014] FCAFC 65 (ABN AMRO v Bathurst Regional Council); the reasons for judgment were delivered a few days before the hearing of this application. 67 ABN Amro's case on appeal was that the most that could be said was that its conduct contributed to the opportunity for 13 Councils to buy a financial product which had been "packaged" by ABN Amro; that is, a case of indirect causation. In brief, ABN Amro had created a financial product, Rembrandt notes, which were given a credit rating by Standard & Poors. The Rembrandt notes were sold to an intermediary (LGSF) who on-sold them to the Councils. ABN Amro and Standard & Poors contended that their conduct did not cause loss because it was not directed to the Councils and it was insufficient for the Councils to rely on any misleading statement made to LGSF, relying on Ingot at [612]-[619]. 68 The applicants relied on ABN AMRO v Bathurst Regional Council at [1375]-[1376]: 1375 ABN Amro misstates the applicable legal principles and, in any event, the contentions fail on the facts. First, the legal principles. There is no bright-line principle that it is insufficient for a plaintiff to prove that some other person relied on the alleged misleading conduct and that that person's reliance led to the plaintiff suffering loss. Ingot Capital Investments does not stand for that proposition. Ingot Capital Investments is authority for the proposition that where misleading and deceptive conduct provides the opportunity for an investor to enter into a transaction, that investor will not be entitled to recover where the investor knows the truth of the underlying misrepresentation or was indifferent to its truth and proceeded nonetheless: Ingot Capital Investments at 661-662[19]–[22] and 731-732[612]–[619]; see also, Digi-Tech (Australia) Pty Ltd v Brand (2004) 62 IPR 184 ; [2004] NSWCA 58 at [159]. 1376 Next, the entitlement to recover loss or damage in a case of misleading and deceptive conduct is not confined to persons who relied on the conduct: Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 37 FCR 526. Indeed, a plaintiff need not establish that the plaintiff directly received and relied upon the misrepresentation made by a defendant: see, by way of example, Hampic Pty Ltd v Adams (2000) ATPR 41-737. The causation inquiry required to be undertaken for the purposes of s 82(1) of the TPA (and for s 5D of the Civil Liability Act) entails a determination of whether the loss or damage is 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": Janssen-Cilag at 530. The inquiry is whether the plaintiff suffered loss or damage by reason of, or as a result of, the contravention: Janssen-Cilag at 531. 69 Mr Lee SC said that the applicants would not be maintaining a case that a group member who knew the truth of a misrepresentation could recover. He also submitted that the manner in which the Full Court approached Ingot at [1375]-[1380] was consistent with the manner in which the applicants sought to distinguish it, based upon the article referred to above. Consideration 70 There is no single immutable test for causation: Abigroup Contractors Pty Ltd v Sydney Catchment Authority (No 3) (2006) 67 NSWLR 341 (Abigroup Contractors (No 3)) at [54] per Beazley JA (Ipp and Tobias JJA agreeing). 71 In recent times, the High Court has taken the position that where a court is required to decide whether loss or damage is occasioned "by" misleading or deceptive conduct, it is the purpose of the statute, as related to the circumstances of a particular case, which provides the answer to the question of causation; the statute is the primary source of the legal norms to be applied: Travel Compensation Fund v Tambree (2005) 224 CLR 627 (Travel Compensation Fund) [28], [30], [45] and [58]. It is the "subject, scope and objects" of the Act which determine causation and the purpose of the causal inquiry conditions the outcome of any application of common sense to its answer: Allianz at [41]-[42] and [96]-[100]. While the application of common law tests of causation can provide useful analogies, they cannot confine the statute: Marks v GIO at [41], [103]; Murphy v Overton Investments Pty Limited (2004) 216 CLR 388 at [44]. 72 Contravention must be a cause of loss but it need not be the sole or most significant cause: Henville v Walker (2001) 206 CLR 459 at [14], [59]–[61], [106]–[109] and [163]; I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109 at [33]. 73 Where the impugned conduct is non-disclosure, causation may be found if disclosure would have caused action or inaction other than that which was taken: see Smith v Noss [2006] NSWCA 37 at [25] per Giles JA (Beazley and Ipp JJA agreeing); Smith v Moloney (2005) 92 SASR 498 at 514–5 per Besanko and Vanstone JJ; Abigroup Contractors (No 3) at [51]-[52] per Beazley JA (Ipp and Tobias JJA agreeing). See also Hodgson JA in Ingot at [82]-[83]. 74 In the context of the FTA, the High Court (Gummow, Hayne, Heydon and Kiefel JJ) has endorsed the view that it may be artificial to speak of reliance in determining what action or inaction would have occurred if the true position had been known and that reliance is not a substitute for the essential question of causation: Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 (Campbell v Backoffice) at [143]. These comments, however, need to be read in their whole context (footnotes omitted): 142 … The conclusion which Giles JA reached was founded upon the premise that "[i]f a material representation is made which is calculated to induce the representee to enter into a contract and that person in fact enters into the contract there arises a fair inference of fact that he was induced to do so by the representation". [Gould v Vaggelas (1984) 157 CLR 215 at 236 per Wilson J] 143 Three points may be made about this proposition. First, it is a proposition expressed in relation to the law of deceit, not the operation of statutory provisions for the award of damages suffered by contravention of consumer protection provisions proscribing misleading or deceptive conduct. Secondly, the proposition carries within it a number of subsidiary questions, such as what is a "material" representation, and when is a material representation "calculated" to induce entry into a contract. Thirdly, because the proposition is directed to the drawing of inferences, consideration of its application must always attend closely to all of the evidence that is adduced that bears upon the question being examined. With considerations of these kinds in mind, Giles JA was right to point out that reliance is not a substitute in the context of the Fair Trading Act for the essential question of causation. Moreover, it is also right to observe, as Giles JA said, that "[i]t may be artificial to speak of reliance in determining what action or inaction would have occurred if the true position had been known". 75 All relevant circumstances comprising acts, omissions and statements must be judged to determine whether misleading and deceptive conduct has occurred: Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at [41]; it invites error to look at isolated parts of the conduct: Butcher v Lachlan Elder Realty Pty Limited (2004) 218 CLR 592 at [109] per McHugh J and Campbell v Backoffice at [102] per Gummow, Hayne, Heydon and Kiefel JJ. 76 Considerations of legal policy may enter into the selection of those causative factors which are determinative of liability. However, to accept that proposition is not to adopt the quite different proposition that in any given case the ultimate issue is whether the defendant ought to be held liable to pay damages for the harm suffered: Travel Compensation Fund at [46] per Gummow and Hayne JJ. 77 In this case, the compensation claimed in the draft consolidated statement of claim is for loss occasioned "by" alleged misleading or deceptive conduct under 1041H and 1041I of the Corporations Act, ss 12DA and 12GF of the ASIC Act and s 9 of the FTA (in [68]-[71D]), and "because of" alleged contraventions of ss 728 an 729 of the Corporations Act for false and misleading statements in and omissions from the September Prospectus ([47]-[53]) and the March Prospectus ([58F]-[58T]). Although the originating application makes a claim for compensation under s 1325 of the Corporations Act, that is not reflected in the draft consolidated statement of claim. There is no claim of contravention of Chapter 6CA of the Corporations Act. 78 The context pleaded is (1) the financial reporting obligations under Part 2M.3 of the Corporations Act including the obligation of a listed company to prepare annual and interim financial statements, the obligation to have financial reports audited, and the obligation of directors to prepare and make a directors' report to be included in the annual financial statements; (2) the revenue recognition requirements of AASB 118 of the Australian Accounting Standards Board; and (3) the continuous disclosure obligations imposed on listed entities by ASX's Listing Rules and Chapter 6CA of the Corporations Act to make timely disclosure of information. 79 A key element of the market based causation argument is the continuous disclosure regime. It is convenient to set out the relevant provisions of Chapter 6CA, being ss 674, 676 and 677: 674 Continuous disclosure—listed disclosing entity bound by a disclosure requirement in market listing rules Obligation to disclose in accordance with listing rules (1) Subsection (2) applies to a listed disclosing entity if provisions of the listing rules of a listing market in relation to that entity require the entity to notify the market operator of information about specified events or matters as they arise for the purpose of the operator making that information available to participants in the market. (2) If: (a) this subsection applies to a listed disclosing entity; and (b) the entity has information that those provisions require the entity to notify to the market operator; and (c) that information: (i) is not generally available; and (ii) is information that a reasonable person would expect, if it were generally available, to have a material effect on the price or value of ED securities of the entity; the entity must notify the market operator of that information in accordance with those provisions. (2A) A person who is involved in a listed disclosing entity's contravention of subsection (2) contravenes this subsection. (2B) A person does not contravene subsection (2A) if the person proves that they: (a) took all steps (if any) that were reasonable in the circumstances to ensure that the listed disclosing entity complied with its obligations under subsection (2); and (b) after doing so, believed on reasonable grounds that the listed disclosing entity was complying with its obligations under that subsection. … (4) Nothing in subsection (2) is intended to affect or limit the situations in which action can be taken (otherwise than by way of a prosecution for an offence based on subsection (2)) in respect of a failure to comply with provisions referred to in subsection (1). … 676 Sections 674 and 675—when information is generally available (1) This section has effect for the purposes of sections 674 and 675. (2) Information is generally available if: (a) it consists of readily observable matter; or (b) without limiting the generality of paragraph (a), both of the following subparagraphs apply: (i) it has been made known in a manner that would, or would be likely to, bring it to the attention of persons who commonly invest in securities of a kind whose price or value might be affected by the information; and (ii) since it was so made known, a reasonable period for it to be disseminated among such persons has elapsed. (3) Information is also generally available if it consists of deductions, conclusions or inferences made or drawn from either or both of the following: (a) information referred to in paragraph (2)(a); (b) information made known as mentioned in subparagraph (2)(b)(i). 677 Sections 674 and 675—material effect on price or value For the purposes of sections 674 and 675, a reasonable person would be taken to expect information to have a material effect on the price or value of ED securities of a disclosing entity if the information would, or would be likely to, influence persons who commonly invest in securities in deciding whether to acquire or dispose of the ED securities. 80 I do not understand it to be contentious between the parties that Listing Rule 3.1 of the ASX Listing Rules imposed an obligation on Arasor as a listed entity to make disclosure to ASX once it become aware of information concerning it that a reasonable person would expect to have a material effect on the price or value of its securities, subject to carve outs which are not presently relevant, or that Arasor shares were "ED securities". 81 In Australian Securities and Investments Commission v Chemeq Limited (2006) 234 ALR 511, French J (as he then was) explained the background to the continuous disclosure regime. At [43], he referred to the report prepared by the Australian Companies and Securities Advisory Committee on referral from the Government, "Report on An Enhanced Statutory Disclosure System" (September 1991). The Committee concluded that a statutory system of continuous disclosure would promote confidence in the integrity of Australian capital markets and provide benefits to market participants and management in various ways. It would (among other things): • overcome the inability of general market forces to guarantee adequate and timely disclosure by disclosing entities; • encourage greater securities research by investors and advisors. This ensures that securities prices more closely, and quickly, reflect underlying economic values; • assist potential equity or debt holders of disclosing entities to better evaluate their investment alternatives; • lessen the possible distorting effects of rumour on securities prices; • minimise the opportunities for insider trading or similar market abuses; • reduce the time and costs involved in preparing takeover and prospectus documents. 82 At [45], French J noted that the legislative policy behind continuous disclosure was set out in the second reading speech of the Minister for Administrative Services introducing the Corporate Law Reform Bill (No 2) 1992 (Cth) into the Senate on 26 November 1992. He said, inter alia (Hansard, Senate, Parliamentary Debates, 26 November 1992, p 3581): An effective disclosure system will often be a significant inhibition on questionable corporate conduct. Knowledge that such conduct will be quickly exposed to the glare of publicity, as well as criticism by shareholders and the financial press, makes it less likely to occur in the first place. In essence, a well informed market leads to greater investor confidence and in turn to a greater willingness to invest in Australian business. 83 The Court of Appeal of the Supreme Court of New South Wales considered the legislative background and purpose of the continuous disclosure regime in James Hardie Industries NV v Australian Securities and Investments Commission (2010) 274 ALR 85 at [353]-[356]: 353 The legislative history of s 674 has been set out on other occasions: see, for example, Australian Securities and Investments Commission v Southcorp Ltd (No 2) (2003) 130 FCR 406; 203 ALR 627 ; 48 ACSR 187; [2003] FCA 1369 at [8]–[12] per Lindgren J; Australian Securities and Investments Commission v Chemeq Ltd (2006) 234 ALR 511; 58 ACSR 169; [2006] FCA 936 at [42]–[46] per French J; Fortescue Metals Group at [218]–[219] per Gilmour J; Jubilee Mines NL v Riley (2009) 253 ALR 673 ; 69 ACSR 659; [2009] WASCA 62 at [45]–[54] per Martin CJ. We respectfully adopt the historical narrative in these judgments. 354 The trial judge observed, at [1080], in respect of these provision, that: [1080] The continuous disclosure provisions are intended, amongst other things, to prevent selective disclosure of market sensitive information (Australian Securities and Investments Commission v Southcorp Ltd (2003) 130 FCR 406; 203 ALR 627; 48 ACSR 187; [2003] FCA 1369 at [2]. Protective legislation should be construed beneficially to the public (Exicom Pty Ltd v Futuris Corporation Ltd (1995) 123 FLR 394 at 397; 18 ACSR 404 at 407), even if a distinction between "punitive" and "protective" proceedings or orders is elusive (Rich v Australian Securities and Investments Commission (2004) 220 CLR 129; 209 ALR 271; 50 ACSR 242 ; [2004] HCA 42 at [32]). 355 We agree with his Honour's comments. The continuous disclosure regime, contained in s 674 and the Listing Rules, is designed to enhance the integrity and efficiency of Australian capital markets by ensuring that the market is fully informed. The timely disclosure of market sensitive information is essential to maintaining and increasing the confidence of investors in Australian markets, and to improving the accountability of company management. It is also integral to minimising incidences of insider trading and other market distortions. 356 It is also to be noted that s 674 is remedial legislation to enhance the public interest and to protect individual investors. It should be construed beneficially "so as to give the fullest relief which the fair meaning of its language will allow": see Bull v Attorney-General (NSW) (1913) 17 CLR 370 at 384; [1913] HCA 60 per Isaacs J. This principle was applied in the cognate context of the insider trading provisions which have overlapping purposes: see Exicom Pty Ltd v Futuris Corporation Ltd (1995) 18 ACSR 404; 123 FLR 394, especially at ACSR 407; FLR 397 per Young J. 84 The "subject, scope and objects" of the whole of Chapter 6CA are relevant, not only s 674. Sections 676 and 677 focus on the availability to and the likely effect of information on investors. Section 676(2) sets out when information will be "generally available". The focus of s 676(2)(b) is ensuring that information is made known in a way that it will be brought to the attention of investors. Section 677 defines the materiality of the possible impact of information on the "price or value" of securities not by reference to movements in price but in terms of the information's capacity to "influence persons who commonly invest in securities in deciding whether to acquire or dispose" of them. 85 It is clear both from the language of Chapter 6CA and the extrinsic materials and case law referred to that the object of the continuous disclosure regime is the creation of a well-informed market for securities which are listed for quotation through timely disclosure of information by listed entities, having regard to the influence that information may have on people who commonly invest in securities of that kind, with policy objectives which include the reduction of volatility and more accurate price discovery relative to underlying economic value. The role of investors as participants in a market for securities or individually in the context of Chapter 6CA has not been the subject of judicial consideration. 86 Section 1041H prohibits misleading or deceptive conduct in relation to a financial product or a financial service and s 1041I is an analogue of s 82 of the TPA. While conduct contravening s 728 is expressly excluded, s 1041H supports recovery for conduct which affects an individual (for instance, an individual dealing with a broker) and investors generally in a particular security. It has been suggested by the authors at (963) that s 1041H has a function of market protection and this is the legislative focus of the Corporations Act. The authors say that with that legislative focus, it is contrary to logic to require proof of individual reliance. Whether that interpretation operates to promote efficient securities markets in which investors and consumers can participate with confidence is a proper subject for argument at trial. 87 The entitlement to recover loss or damage occasioned "by" misleading and deceptive conduct under s 82 of the TPA does not depend on the person claiming damage having relied on the conduct; reliance by a third party on a misrepresentation can be a sufficient "link in the causal chain" between contravention and loss for the purposes of s 82 of the TPA. Janssen-Cilag at 529-530 is authority for that proposition; see also ABN AMRO v Bathurst City Council at [1376]. 88 Although Lockhart J's comment in Janssen-Cilag at 529-530 set out at [58] above is quoted by advocates of market based causation theory as authority for the proposition that reliance is not required to demonstrate causation where damage must have been occasioned "by" contravening conduct, that proposition was found wanting by Lander J (with whom Hill and Jacobson JJ agreed) in Ford Motor Company of Australia Ltd v Arrowcrest Group Pty Ltd (2003) 134 FCR 522 (Ford Motor Company v Arrowcrest Group) at [112]-[123]: 112 To say that the impugned conduct need not be the sole cause of the change does not assist in determining the appropriate test for causation. 113 Ford relied upon four authorities for its contention that it was unnecessary to prove reliance to show causation. 114 In Janssen-Cilag Pty Ltd v Pfizer Pty Ltd the applicant and respondent were competitors in the pharmaceutical industry. The applicant claimed that it suffered loss or damage by reason of consumers relying upon the misleading and deceptive conduct of the respondent. In that case Lockhart J held that the applicant could establish causation for the purposes of s 82 of the TPA if it could prove that consumers relied upon the respondent's misleading and deceptive conduct to the detriment of the applicant's market share. 115 That case is not authority for the proposition that causation can be established without proof of reliance. It is authority for the proposition that the applicant need not establish that it relied upon the respondent's conduct, but can establish liability by proof that others did, as a result of which the applicant suffered loss. 116 That case is not authority for Ford's contention. Indeed if anything it supports the respondent's contention that reliance is a necessary element to establish causation when the conduct complained of is constituted by misrepresentations. The applicant could not have established its case in Janssen-Cilag Pty Ltd v Pfizer Pty Ltd without proof that there was reliance by the consumers. 117 In Hampic Pty Ltd v Adams a cleaner contracted dermatitis by using a cleaning agent which did not carry an appropriate warning on the label. The cleaner had not seen the label so had not herself relied upon any information disclosed on the label. However the cleaner succeeded at first instance and on appeal (New South Wales Court of Appeal) because the respondent's supervisor had read the label and distributed the product to the cleaner in accordance with the label's instructions. 118 Again, this was not a case of no reliance, but a case of reliance on the conduct by a person apart from the applicant in circumstances where that reliance caused the applicant damage. The applicant only succeeded because there was reliance, albeit by someone apart from the applicant. 119 McCarthy v McIntyre is another case where the applicant established that a third party's reliance on the misrepresentation caused the applicant's damage. In that case a Bank relied on false trading figures in deciding to advance the applicants a loan which was used by the applicants to purchase a business from the respondent. 120 Marks v GIO Australia Holdings Ltd, was a case where the appellants had relied upon the respondents' representations. Although the appellants established reliance they failed because they failed to establish that they had thereby suffered damage. Marks v GIO Australia Holdings Ltd was concerned with the measure of damages in claims under ss 82 and 87 of the TPA. In his reasons at [101] Gummow J referred to Lockhart J's reasons in Janssen-Cilag Pty Ltd v Pfizer Pty Ltd with approval and in particular Lockhart J's dicta that 'the cases … do not impose some general requirement that damage can be recovered only where the applicant himself relies upon the conduct of the respondent … '. 121 But that statement cannot be taken out of its context. Gummow J referred to Lockhart J's reasons for the proposition at [102]: These considerations, reflecting the apparent scope and purpose of the statute, militate against the presence of any legislative intention that before the court comes to assess the amount for which applicants are to be compensated under s 82 it first must identify any relevant general common law rules or analogies, understand the reasons that led to their development, and then seek to adapt or adopt them consistently with the scope and purpose of the legislation. 122 Marks v GIO Australia Holdings Ltd is not an authority for the proposition that in a misrepresentation case the applicant need not establish that he or she was induced to act upon the misrepresentations and that the applicant can otherwise establish an entitlement to damages. 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. 89 The damage in Janssen-Cilag flowed from reliance by third parties on a misrepresentation, not from the misrepresentation per se. The same can be said of the Councils in ABN Amro v Bathurst City Council. 90 Even though the Councils were unaware of ABN Amro's representations to the intermediary, LGFS, reliance by LGFS on the ABN Amro representations concerning the AAA rating, and reliance by the Councils on the AAA rating, were essential elements of the Full Court's reasoning that the ABN Amro representations were "links in the causal chain" by which the Councils suffered losses arising from their investment in Rembrandt notes: see [1377]-[1380]: 1377 The PA Councils are entitled to rely upon ABN Amro's conduct in disseminating and promoting the rating to LGFS as a step in the chain of causation that led to their losses. Part of that chain of causation was the PA councils' reliance upon the AAA rating, which they would never have received had it not been provided by ABN Amro to LGFS, which would not have happened if LGFS had not relied upon the ABN representations: see [923]ff. Here, unlike the position in Ingot Capital Investments, there was no suggestion that the PA Councils actually knew that the AAA rating was not based on reasonable grounds and was not the product of the exercise of reasonable care and skill or that they were indifferent to the rating. … 1379 In this context, it must be recalled that ABN Amro represented to LGFS that the rating could be relied upon and that the rating meant that the CPDO had an extremely strong capacity to meet its obligations (see [881]–[905] above) and that LGFS relied on those representations: see [923]ff above and J[3098]. The ABN Representations were "decisive considerations" in LGFS' decision to purchase the Rembrandt notes from ABN Amro and to sell them to the PA Councils on the basis of the AAA rating: see [919]–[933] above and at J[3171]–[3174]. The rating carried with it the S&P representations: see [723] above. That was a decisive consideration for the PA Councils in acquiring the Rembrandt notes: see Part 2, Sections 1 and 7 and Part 8, Section 2.2 above. 1380 The primary judge did not find that the PA Councils knew that ABN Amro made the ABN Representations. Instead, it was LGFS' reliance on those representations which, in turn, caused the PA Councils to rely on the rating. Therefore, the ABN Representations to LGFS, and LGFS' reliance upon them, were a material cause of the PA Councils' decision to invest in the Rembrandt notes: Ingot Capital Investments at 659-660[12]. Consistent with the earlier principles, there did not need to be a direct inducement by ABN Amro, it was sufficient that ABN Amro's representation was material to the decision of the PA Councils to invest, in the sense that "the representation was a link in the causal chain": Ingot Capital Investments at 660[13]. It was: see Part 2, Sections 1 and 7 and Part 8, Section 2.2 above. 91 The Full Court's decision in ABN Amro v Bathurst City Council on this issue is consistent with the decisions in De Bortoli at first instance (see at [60]-[63] in particular) and in the Full Court at [63] and supports the statement in Finishing Services Pty Ltd v Lactos Fresh Pty Ltd [2006] FCAFC 177 at [31] that the authorities require there to be a "sufficient and direct link" or a "requisite element of proximity" between the contravention and the loss in order for the necessary causation to be shown. 92 The reasoning of the Full Court in ABN Amro v Bathurst City Council may reveal scope for exploring the limits of when and how the "reliance" link in the causal chain may be found to have occurred to support a claim for compensation for loss "brought about by virtue of" misleading or deceptive conduct based on s 82 of the TPA and its analogues, but it does not support a case that reliance in some form is not a necessary element in causation. Variation in pleadings 93 Much of the argument in submissions and at the hearing was presented at a vey high level and as though "market based causation" or "market inflation theory" is a recognised and uniform concept. The danger of employing jargon such as "market based causation" is that it means different things to different people, and causation claims can only be considered adequately having regard to the specific detail of the claims. The pleadings vary in the formulation of the alleged causation for loss: (1) [71B]-[71C(1)(b)] and [71C.3] for misleading and deceptive conduct based on analogues of s 82 of the TPA in the Corporations Act, ASIC Act and FTA; (2) [50]-[51] relate to the September Prospectus and [58P]-[58Q] relate to the March Prospectus. These paragraphs are in substantially the same form although [51] contains no equivalent of [58Q.3]. These pleadings are of causation for loss claimed under s 729 of the Corporations Act for misleading or deceptive statements and related omissions contravening s 728 in the September Prospectus; and (3) [58L] is the pleading of causation for loss under s 729 for contravention of s 728 based on alleged omissions from the March Prospectus having regard to alleged failings in the 2006 Financial Statements pleaded in [54]-[55]. 94 The claimed loss in [52], [58M], and [58R] is generally in the same format as [71D] which is quoted below, although the "chapeau" changes. 95 There is ambiguity about some of the claims due to what appear to be errors in cross-referencing in the draft consolidated statement of claim. Misleading and deceptive conduct claims – analogues of s 82 of the TPA 96 The respondents complain that [71B], taken with [71C.1(b)] and [71C.3], does not reveal a cause of action in light of the applicants' proposal also to amend the definition of "group members" at [3] to delete reliance on representations as a criterion of membership. It is convenient to set out the proposed paragraphs [68]-[71D] as amended: 68 Each of: 68.1 the 2006 Annual Financial Statements Compliance Representation; 68.2 the 2006 Annual Financial Statements Compliance Reasonableness Representations; 68.3 the 2007 Half-Yearly Directors' Report Representations; 68.4 the 2007 Half-Yearly Directors' Report Reasonableness Representations; 68.5 the 2007 Half-Yearly Financial Statements Compliance Representation; 68.6 the 2007 Half-Yearly Financial Statements Compliance Reasonableness Representations; 68.7 the 2007 Annual Directors' Report Statement; 68.8 the 2007 Annual Directors' Report Reasonableness Representations; 68.9 the 2007 Annual Financial Statements Compliance Representation; 68.10 the 2007 Annual Financial Statements Compliance Reasonableness Representations; (or the conduct that occurred which is pleaded in each of the paragraphs giving rise to the defined representations and/or statements) (severally and in any combination, Directors' Representations), was a matter that was or could reasonably be regarded as being intended to influence the market in making decisions in relation to the securities, within the meaning of: 68.11 section 12BAB(5) of the Australian Securities and Investments Commission Act 2001 (Cth.)(ASIC Act); further or alternatively 68.12 section 766B(1) of the Corporations Act. 69A By reason of the matters referred to above, each of the Grant Thornton Audit Representations, the Grant Thornton Further Audit Representations, the September Prospectus Grant Thornton Statements, Repeated September Prospectus Directors' Statements [sic] and March Prospectus Grant Thornton Statements (or the conduct that occurred which is pleaded in each of the paragraphs giving rise to the defined representations and/or statements) (collectively, and individually, Grant Thornton Conduct) was: 69A.1 in relation to financial products, within the meaning of s. 1041H(1) of the Corporations Act; and 69A.2 in trade or commerce, in relation to financial services with the meaning of s. 12DA(1) of the ASIC Act, and was a matter that was or could reasonably be regarded as being intended to influence the market in making decisions in relation to the securities, within the meaning of: 69A.3 s. 12BAB(5) of the ASIC Act; and/or 69A.4 s. 766B(1) of the Corporations Act. 69 Each of the Directors' Representations and the Grant Thornton Conduct was conduct: 69.1 in relation to financial products, within the meaning of s. 1041H(1) of the Corporations Act; 69.2 in trade or commerce, in relation to financial services within the meaning of s. 12DA(1) of the ASIC Act; and 69.3 in trade and commerce within the meaning of s. 9 of the Fair Trading Act 1999 (VIC) (or the provisions of such other State's Fair Trading Acts as may be relevant to the Group Members). 70 By reason of the matters pleaded in paragraphs 25H to 69D [sic] above, each of the Directors' Representations and the Grant Thornton Conduct was misleading and deceptive or was likely to mislead and deceive in contravention of: 70.1 s. 1041H of the Corporations Act; 70.2 s. 12 DA(1) of the ASIC Act; and/or 70.3 s. 9 of the Fair Trading Act 1999 (VIC). 71A During the Period, the Applicants and Group Members acquired interests in Arasor Shares. 71B The Applicants and Group Members acquired interests in Arasor Shares in a market: 71B.1 regulated by the Listings Rules; 71B.2 where the price or value of the Arasor Shares would reasonably be expected to have been informed or affected by information disclosed in accordance with the Listing Rules; 71B.3 being a market where a reasonable person would expect that misleading and deceptive statements would have a material effect on the price or value of the Arasor Shares; and 71B.4 being a market where the Directors' Representations and the Grant Thornton Conduct caused the market price for the Arasor Shares to be substantially greater than: (a) their true value; and/or (b) the market price that would have prevailed but for the contraventions pleaded in this sub-paragraph. 71C. Each of the Directors' Representations and the Grant Thornton Conduct were: 71C.1 a cause of the Applicants acquiring Arasor Shares at the price they acquired them and/or retaining some or all of their interest in Arasor Shares, in that the Applicants: (a) relied directly upon the Directors' Representations and/or the Grant Thornton Conduct in making a decision to purchase and/or retain the Arasor Shares; and/or (b) purchased the Arasor Shares at the price they acquired them being a market price that was inflated for the reasons pleaded in paragraph 71B.4; 71C.2 a cause of some Group Members making a decision to purchase and/or retain the Arasor Shares, being those of the Group Members who relied directly upon the Directors' Representations and/or the Grant Thornton Conduct in making a decision to purchase and/or retain the Arasor Shares; and 71C.3 a cause of all Group Members purchasing the Arasor Shares at the price they acquired them being a market price that was inflated for the reasons pleaded in paragraph 71B.4. 71D By reason of the matters set out in paragraph 71A to 71C, the Applicants and the Group Members have suffered loss and damage. Particulars The Applicants and the Group Members suffered: (a) the loss of the entire capital invested in the Arasor Shares; or alternatively; (b) the difference between the price paid for the Arasor Shares and their true value being the market price which would have prevailed but for the contraventions; and (c) any consequential losses flowing from the losses of the Applicants and the Group Members referred to above. Further particulars of the Applicants' loss and damage will be provided before trial. Any particulars of loss and damage of individual Group Members will be provided following the initial trial of common questions. 97 Despite the apparent simplicity of these paragraphs, the case the respondents are being asked to meet is not clear. In the course of Mr Lee SC's submissions at the hearing new aspects of the applicants' case became apparent. 98 The pleading that a reasonable person would expect the price or value of Arasor shares to be informed or affected by information disclosed in accordance with the Listing Rules ([71B.2]) and that a reasonable person would expect that an unidentified misleading or deceptive statement would have a material effect on price or value of securities ([71B.3]) would be beside the point, even if these propositions can be established, since they say nothing about the reasonable expectations of persons who commonly invest in securities such as Arasor shares or Arasor shares in particular. To meet that issue, the applicants by letter dated 3 April 2014 advised the Auditors that the term "the market" in [68], [69A] and [71B] means "the class of people and entities comprising the investors and potential investors in the Arasor Shares". Since the concept of "the market" is so pivotal, what the applicants seek to convey by that term is a material fact which must be pleaded with some precision; it would be appropriate to grant leave to the applicants to do so. Insofar as there are reference to "the market" in [58T] or in other parts of the consolidated statement of claim, it would be appropriate for similar amendments to be made. 99 However, even if [68], [69A] and [71B] are amended as indicated by the applicants to clarify what they mean by "the market", the purpose for pleading the matters in [71B.1]-[71B.3] is not clear. 100 There is no pleading of a link or mechanism which establishes how the factors pleaded at [71B.1]-[71B.3] relate to the pleading in [71B.4]. There is also no pleading of how the alleged Directors' Representations and Grant Thornton Conduct are said to have caused the market price of Arasor shares to be inflated. Paragraphs [71C.1(b)] and [71C.3] suffer from the same difficulty as [71B]. As pointed out in San Sebastian Pty Limited v Minister Administering the Environmental Planning and Assessment Act 1979 (1986) 162 CLR 340 at 366 per Brennan J, a causal relationship between a representation and economic loss does not exist because of the operation of the laws of nature. Paragraphs [71B], [71C.1(b)] and [71C.3] plead a conclusion, they are insufficient to inform the respondents of the case they have to meet: see Cadence Asset Management Pty Limited v Concept Sports Ltd (2006) 58 ACSR 435 at [37]. 101 It might be inferred that the mechanism by which the market price of Arasor shares is said to be inflated is trading on a market operated by ASX by "the class of people and entities comprising the investors and potential investors in the Arasor Shares" in reliance on the Directors' Representations and the Grant Thornton Conduct. 102 Alternatively, it might be that the applicants seek to establish the linkage based on inferences from the factors pleaded at [71B.1]-[71B.3] at a time when there was deficient disclosure because of the alleged Directors' Representations and Grant Thornton Conduct. Taking into account the "chapeau" to [71D], such a case would bear similarity to the rebuttable presumption employed in the "fraud on the market" theory developed in the United States of America and recently affirmed in the decision of its Supreme Court in Halliburton Co v Erica P John Fund Inc 134 S.Ct. 2398 (2014) as a basis for establishing the "predominance" of fact or law requirement for class certification to bring claims based on s 10(b) of the Securities Exchange Act of 1934 (USA) and the Securities and Exchange Commission r 10b-5. 103 These alternatives are substantially different: it is not clear whether the applicants intend to pursue either or both of those propositions; the respondents and the Court are entitled to a clear pleading of how the alleged market price inflation is said to have occurred. It would be inappropriate to grant leave to amend [71B] and [71C.1(b)] and [71C.3] in the form proposed having regard to this insufficiency. 104 Further, Mr Lee SC submitted at the hearing that the applicants did not seek to prosecute a case that a group member can make a viable claim if they had knowledge of the true position alleged to be misrepresented by the Directors' Representations or the Grant Thornton Conduct, or if they were indifferent to the truth. Despite this, the applicants have not sought to amend the definition of "Group Member" or to amend the pleadings otherwise to accommodate this concession. It would not be appropriate to grant leave to amend [3] as proposed in the absence of these issues being addressed in the pleadings. 105 I place very little weight on the fact that the presiding judges in Pathway v NAB and Dawson v Brookfield Multiplex sanctioned settlements under s 33V of class actions which relied on market based causation claims. I accept the respondents' submissions that in a context where the applicants and respondents have legal advisors protecting their interests in agreeing the amount of and the basis for settlement, the Court's focus in exercising its powers under s 33V is to ensure that the group members are not being short changed having regard to the uncertainties of the litigation process: see Dawson v Brookfield Multiplex at [4]; Williams v FAI Home Security Pty Ltd (No 4) (2000) 180 ALR 459 at [19] per Goldberg J and the authorities canvassed in Dorajay Pty Ltd v Aristocrat Leisure Limited [2009] FCA 19 at [11] onwards per Stone J. 106 Having said that, despite the strength of intermediate appellate court authority which requires reliance to be demonstrated as an element of causation where an investor has entered into a transaction to which the claim of misleading or deceptive conduct is relevant, recent High Court authority on s 82 of the TPA and the fact that market based causation claims relying on ss 1041H and 1041I and their analogues in the ASIC Act in the context of Chapter 6CA have not been considered by the High Court suggest that the state of the law cannot be regarded as so settled that an appropriately pleaded claim would have no reasonable prospect of success. I also take into account the fact that the applicants have retained an alternative claim by the applicants and group members based on reliance so that those group members who have that claim are not prejudiced by the addition of the new claim. 107 If the applicants wish to reformulate their pleadings of [3], [71B], [71C.1(b)] and [71C.3] to address the issues set out at [98]-[104] above, and subject to the form of pleading the applicants ultimately propose to adopt, it may be appropriate to permit the misleading or deceptive conduct claim to proceed to a hearing, subject to the qualification addressing statute of limitation issues considered at [38] above. 108 The respondents have suggested that leave should not be granted to amend the paragraphs which are objected to because of delay by the applicants in asserting the claim. Ms Amanda Banton, the partner at Piper Alderman now responsible for the conduct of the applicants' case, gave evidence the ultimate effect of which is that a market based causation claim was first considered by partners in the firm in the period between May and July 2013. A decision was made at that time not to proceed with the claim. Following appointment of new Counsel in September 2013 and obtaining expert economist's advice, the application to consolidate and amend the claims to include a market based causation claim was filed in March 2014. Despite the fact that a deliberate forensic decision was made in July 2013, I would not refuse leave to amend on that basis alone. The proceedings have been on foot since October 2012 and February 2013 respectively; Mr Lee SC noted that they were commenced "at the heel of the hunt" having regard to the possible expiry of limitation periods. There has been considerable delay arising from the difficulty in locating and serving a number of the respondents, and not all of them have yet been served. There have been a number of interlocutory processes, including applications for security for costs, to ascertain the identity of group members, and to refer the question of the legal efficacy of the market based causation claim to the Full Court. Pleadings have not yet closed in the Auditor Proceedings and there has been no exchange of evidence. Perhaps most important is that one explanation for delay since September 2013 was the applicants' action in causing an economist to investigate the impact of the alleged contraventions on the price of Arasor shares. I accept that those investigations involved some time, but undertaking that step of due diligence ultimately contributes to the efficient prosecution of the litigation and may have been necessary to enable Ms Banton to form the belief that it was appropriate to bring a claim on that basis. Having regard to the principles set out at [33] I would decline to refuse leave to amend by reason of the factor of delay alone. September Prospectus claims under s 729 109 Paragraphs [47]-[49] of the amended consolidated statement of claim plead the materiality of alleged misleading statements and related omissions from the September Prospectus and contravention of ss 728(1) and (2). The effect of the amendment to [3] is to remove reliance from the pleading in [50] below and the applicants seek to remove language relevant to ongoing reliance in [51] in relation to subsequent actions of a person who acquired shares under the September Prospectus. 50. The September Prospectus Directors' Statements, and the September Prospectus Director Forecasts, the September Prospectus Omissions, and the September Prospectus Grant Thornton Statements, (or the conduct that occurred which is pleaded in each of the paragraphs giving rise to the defined representations and/or statements) were a cause of the Applicants and the Group Members acquiring shares in Arasor Shares. 51. Further, or alternatively, the Applicants and the Group Members, in continuing reliance on the September Prospectus Directors' Statements, the September Prospectus Director Forecasts, the September Prospectus Omissions, and the September Prospectus Grant Thornton Statements (or the conduct that occurred which is pleaded in each of the paragraphs giving rise to the defined representations and/or statements) were a cause, after the allocation under the September Prospectus, of the Applicants and Group Members: 51.1 retaininged some or all of their interest in Arasor Shares; and/or 51.2 acquiringed further interests in Arasor Shares. 52 By reason of the matters set out in paragraphs 45 to 5152 the Applicants and the Group Members have suffered loss and damage. Particulars The Applicants and the Group Members suffered: (a) the loss of the entire capital invested in the Arasor Shares together with such consequential losses flowing from the loss of capital; or alternatively (b) the difference between the price paid for the Arasor Shares and their true value being the market price which would have prevailed but for the contraventions; and (c) and any consequential losses flowing from the losses of the Applicants and the Group members referred to above. Further particulars of the Applicants' loss and damage will be provided before the trial. Further particulars of loss and damage of individual Group Members will be provided following the trial of common questions or otherwise as the Court may direct. 53. Pursuant to s. 729(1) of the Corporations Act, the Applicants and the Group Members may recover from Cao, Mao, Marshall, SyCip, Surtees, Neal and Kan and/or Grant Thornton the amount of their loss and damage caused by reason of the matters set out in paragraphs 45 to 51 52 above. 110 I decline to grant leave to the amendment of [3] to the extent it applies to [50] and to the deletion of the concept of "continuing reliance" from [51]. 111 I accept the respondents' submission that if the pleading of reliance in [3] is removed, [50] and [51] do not plead material facts said to give rise to the causal connection between the alleged contravention and loss; they simply plead a conclusion. Those paragraphs are insufficient to put the respondents on notice of the case they must meet in relation to causation. While the September Prospectus provided an opportunity for investors to enter into a transaction, [50] and [51] give no indication of how the applicants say the impugned statements and related omissions caused the applicants and group members to acquire Arasor shares or retain them. 112 The second to fourth respondents submitted that the proposed amendments are nonsensical to the extent that they relate to group members who acquired Arasor shares in the initial public offering since the price or value of those shares cannot have been affected by information disclosed in accordance with the Listing Rules. The applicants say that the Listing Rules did apply and the difference between the strike price under the IPO and the price which would otherwise have prevailed is a matter for expert evidence. 113 There are a number of difficulties with the applicants' response. While expert evidence might demonstrate the difference between the "real value" of an Arasor share and the price at which it was offered under the September Prospectus that would only go to demonstrate loss, not causation. There is no pleading of a contravention of the Listing Rules or of their relevance to these claims. There is no pleading of how the price at which Arasor shares sold under the September Prospectus was established, but if it was a fixed price initial public offering, it would not be usual for there to have been trading in a market operated by ASX which would have established a "market price" ahead of allocation of entitlements at the end of the offer period under the Prospectus. 114 Further, a claim for compensation under s 729(1) of the Corporations Act based on misleading or deceptive statements which does not plead reliance or some causal connection over and above the mere making of the statements faces significant and likely insurmountable hurdles. The weight of intermediate court authority against the viability of such a claim cited by the respondents is formidable despite the fact that aspects of those cases might be distinguishable, as discussed in Bolitho v Banksia Securities Ltd [2014] VSC 8 per Ferguson J. 115 There are a number of features of Part 6D.3 which indicate that the disclosure document is integral to the investor's decision to invest and the liability regime is predicated on that central feature. Section 727(1) forbids the making of an offer or circulation of an application form for an offer of securities "that needs disclosure to investors" unless the disclosure document for the offer has been lodged with ASIC. Section 727(2) prohibits making an offer or circulating an application form in relation to an offer of securities that "needs disclosure to investors" under Part 6D.2 unless the offer or application form is included in or accompanied by the disclosure document. Further, s 729(2) deems a person who acquires securities as a result of an offer that was accompanied by a profile statement to have acquired the securities in reliance on both the profile statement and prospectus for the offer which suggests that reliance has relevance to claims under s 729 generally. 116 Unlike [71C], there is no alternative pleading in either of [50] or [51] which would preserve a claim based on reliance for group members who currently have a cause of action. Were I to grant leave to the amendments now proposed and it was ultimately determined that the alleged representations and omissions were indeed misleading, but reliance must be demonstrated in claims of this kind, those group members who are able to prove reliance would be deprived of a viable claim. This is not a prospect which can be discounted given the novelty of the applicants' claims if the proposed amendments are made. No evidence was provided by the applicants that they had consulted with any group members about such an amendment to their claims. Since more than six years have passed since the allotment of shares under the September Prospectus there is a significant possibility that many claims would be statute barred should any of those group members now seek to prosecute a claim. Albeit that the applicants filed originating applications in the Proceedings at what might arguably have been the end of the limitation period in any event, and matters identified in the previous three paragraphs might be addressed in evidence which establishes causation, in view of this prejudice to group members I do not consider that it would be appropriate to grant leave to delete the pleading of reliance in [51] or from [3] insofar as it relates to these claims. March Prospectus claims under s 729 117 Consideration of the claims relating to the March Prospectus in the draft consolidated statement of claim supplied to the Court on 16 December 2014 are made difficult by confusion in cross-referencing (as they were in the draft document handed up at the hearing); this difficulty relates in particular but not at all exclusively to references to [54] and [55]. The apparent errors in cross-references need to be addressed. 118 For convenience, I will set out [54] and [55], which are relevant to the pleadings in [58L] and [58M]. 5554. Contrary to the 2006 Annual Financial Statements: 5554.1 compliance with the Revenue Standard and the Internal Policies required that Arasor recognise substantially less than $29.6 m revenue; Particulars By not later than 20 February 2007: (a) payment to Arasor in respect of the deals with the purchaser, based in India which Arasor had represented was BSNL, was overdue; (b) there was material uncertainty about the collectability of the accounts receivable owing from the counterparties on the 'BSNL deals' and recognised as revenues in the 2006 Annual Financial Statements; (c) by reason of (a) and the matters set out in paragraph (b) above, it was not probable within the meaning of the Revenue Standard that the economic benefits of the 'BSNL deals' would be received; and (d) by reason of (a) and the matters set out in paragraphs (b)and (c) above, the value of the economic benefits of the 'BSNL deals' could not be measured reliably. Further particulars will be provided following discovery. 54.2 Arasor's terms of trade, including in its terms of trade with the entities referred to as (but which were not) BSNL and ITI were not on 30 – 90 days; Particulars Grant Thornton Clearance Report for the half-year ended 30 June 2007. Minutes of the Meeting of the Arasor Audit Committee of 17 August 2007. Arasor ASX Release dated 12 May 2008. 5554.3 Arasor had not traded and was not trading only with recognised, creditworthy third parties; Particulars The Applicants refer to and repeat paragraph 55.1 above. Further particulars will be provided following discovery. 5554.4 Arasor's receivable balances were not effectively monitored on an ongoing basis and its exposure to bad debts was significant; there were significant concentrations of credit risk within Arasor; and Particulars A significant proportion of the total $29.6m accounts receivable booked in Arasor's full-year financial statement for FY 2006 related to the ''BSNL deals' and, in consequence, Arasor had a significant exposure to bad debt on those transactions and there was a significant concentration of credit risk in its financial affairs. Further particulars will be provided following discovery. 5554.6 there were matters arising since 31 December 2006 which Arasor's Internal Policies and which the Australian Accounting Standards required to be recorded in its financial statements for FY 2006 or in a note to the financial statements but which had not been recorded (collectively, and individually, the 2006 Annual Financial Statements Information). Particulars The following matters had arisen since 31 December 2006: (a) Payment in respect of a significant portion of the 'BSNL deals' referred to in paragraph 55.1 remained overdue and in consequence Arasor had a significant exposure to bad debt on those 'BSNL deals' and there was a significant concentration of credit risk in its financial affairs. (b) Trade receivables owed by Xalted Information Systems Pty Ltd of $17,012,774, of which $2,925,181 was aged greater than 90 days and only $1,268,553 had been received subsequent to year end, per Audit Clearance Report for the Year Ended 31 December 2006. The Internal Policies and the following accounting standards required that the matters in sub-paragraphs (a) and (b) above be recorded in Arasor's financial statements for FY2006 or in a note to the financial statements: (a) AASB 101 'Presentation of financial information'; (b) AASB 110 'Events after the balance sheet date'; (c) AASB 118 'Revenue'; (d) AASB 136 'Impairment of Assets'; and (e) AASB 138 'Intangible Assets'. 5655. Contrary to the 2006 Annual Financial Statements Compliance Representation, the financial statement and notes contained in the 2006 Annual Report: 5655.1 were not in accordance with the Corporations Act; Particulars By reason of the matters pleaded in paragraph 55 above, the financial statements and notes contained in the 2006 Annual Report did not comply with sections 296, 297 and 307A of the Corporations Act; 5655.2 did not give a true and fair view of the company's and consolidated entity's financial position as at 31 December 2006 and of their performance for the year ended on that date; and Particulars By reason of the matters pleaded in paragraph 55 above, the financial statements and notes contained in the 2006 Annual Financial Statements: (a) materially overstated Arasor's revenue able to be recognised in accordance in the Revenue Standard and the Internal Policies; and (b) failed to disclose Arasor's significant exposure to bad debt. 5655.3 did not comply with the Accounting Standards and the Corporations Regulations. Particulars The financial statements and notes contained in the 2006 Annual Report did not comply with the Australian Accounting Standards and the Corporations Regulations as follows: (a) by not adequately disclosing the debt due from a single entity, Xalted, and the inherent credit risk, the 2006 Annual Financial Statements breached accounting standard AASB101 'Presentation of Financial Statements'; (b) by recognising 'revenue' in relation to the 'BSNL deals' before the conditions set out in in sub-paragraphs 20.1 to 20.5 of the Consolidated Statement of Claim had been satisfied the 2006 Annual Financial Statements breached accounting standard AASB118 'Revenue'; (c) by failing to recognise an impairment of Arasor's receivable balance on Arasor's balance sheet, the 2006 Annual Financial Statements breached accounting standard AASB 136 'Impairment of Assets'; (d) by failing to recognise an impairment of Arasor's intangible asset, the customer list, the 2006 Annual Financial Statements breached accounting standard AASB 138 'Intangible Assets'; and (e) by failing to disclose the continued non-payment in respect of the 'BSNL' deals after 31 December 2006, the 2006 Annual Financial Statements breached accounting standard AASB110 'Events after the Balance Sheet Date'. 119 Based on [55], the applicants plead causation in [58L] and loss in [58M] and make the claim under s 729(1) at [58N] as follows: 58L. The omission of the material referred to in subparagraphs 55.1, 55.2 and/or 55.3 in breach of s 710 of the Corporations Act (Omitted Material): 58L.1 resulted in the March Prospectus being issued in the form it was issued which would not have occurred but for the omission of the Omitted Material; 58L.2 was a cause of the Second Applicant and some Group Members acquiring Arasor Shares under the March Prospectus (which only occurred because the March Prospectus was issued in the form it was issued); 58L.3 was a cause of the Applicants and some Group Members retaining some or all of their interests in Arasor Shares; and/or 58L.4 was a cause of the Applicants and some Group Members acquiring interest in Arasor Shares at a price substantially greater than: i. their true value; and/or ii. the market price that would have prevailed but for the contravention pleaded in paragraph 58K above. Particulars Particulars of the identity of those Group Members who purchased and/or retained because of the contravention pleaded in paragraph 58K above will be provided after the initial trial; particulars of the price or value of Arasor Shares that would have prevailed but for the contravention pleaded in paragraph 58K above will be provided at the time of service of expert evidence. 58M. By reason of the omission of the material referred to in paragraph 58J above, the Applicants and Group Members suffered loss and damage. Particulars The Applicants and the Group Members suffered: (a) the loss of the entire capital invested in Arasor Shares; or alternatively (b) the difference between the price paid for the Arasor Shares and their true value being the market price which would have prevailed but for the contraventions; (c) and any consequential losses flowing from the losses of the Applicants and the Group Members referred to above. 58N. Pursuant to s 729(1) of the Corporations Act, the Applicants and Group Members may recover from Cao, Mao, Marshall, SyCip, Surtees, Neal and Kan and/or Grant Thornton the amount of their loss and damage caused by reason of the matters set out in paragraphs 32D to 32L and 58H to 58L above. 120 The claim in [58L] is based on omissions. As noted at [73]-[74], it may be artificial to speak of reliance in determining what action or inaction would have occurred if the true position had been known. However, I accept the respondents' submission that in the absence of a pleading of reliance on the March Prospectus, [58L] does not adequately plead material facts said to give rise to the causal connection between the pleaded contraventions and loss. 121 The language of [58L.2] is curious: it in effect states that the form of the March Prospectus mattered to the decision to acquire Arasor shares under that Prospectus, but it does not plead that the Second Applicant and some group members relied on the March Prospectus. By the use of the word "only", it implies that the Second Applicant and group members would not have invested had they known some or all of the omitted information. However, that is not overtly stated. Why did the March Prospectus matter if not because it was relied on? More needs to be pleaded so that links in the chain of causation are adequately exposed and the respondents know what case they have to answer. While factual material concerning the group members may only be available once the common issues have been tried, there is no reason why the Second Applicant cannot and should not be more explicit as to the true nature of the claim made in this paragraph. The danger of the current pleading is that by saying that the acquisition of shares "only occurred because the March Prospectus was issued in the form it was issued" the pleading implies reliance without stating it; that is not likely to lead to the efficient disposition of the claim. 122 The pleading in [58L.3] is also inadequate: how did the alleged omissions cause the applicants and some group members to retain their shares? Because they relied on the truth of the March Prospectus? Because they would expect publicity to alert them of a need to sell if the omitted material had been disclosed? In some other way? As currently pleaded, [58L.3] pleads only a conclusion. 123 Paragraph [58L.4] is ambiguous as to whether it refers to shares acquired under the March Prospectus or whether its subject matter is directed only to the omission causing the price at which shares were acquired under that Prospectus to be greater than their true value or the price at which a fully informed market would have arrived at. This issue requires clarification. 124 I am not persuaded [58L] adequately pleads causation in the absence of a claim of reliance and having regard to its terms. Even if that were not the case, for the reasons expressed at [114]-[116] it would be inappropriate to allow the amendment to [3] to remove the pleading of reliance in relation to these claims, but it would be appropriate to grant leave for clarification of [58L] having regard to the matters set out above. 125 Paragraphs [58P], [58Q] and [58R] relate to matters set out in the September Prospectus which were repeated in the March Prospectus and related conduct. They are in substantially (with the addition of [58Q.3]) in the same form in relation to the March Prospectus as are [50]-[52] in relation to the September Prospectus and they raise substantially the same issues as mentioned in [111] and [114]-[116]. I note the likely error in [58P] which refers to the September Prospectus. For the reasons expressed at [114]-[116] it would be inappropriate to allow the amendment to [3] to remove the pleading of reliance but it would otherwise be appropriate to grant leave to the proposed amendments. Conclusion 126 I will consult with the parties as to an appropriate timetable should the applicants seek to amend the misleading and deceptive conduct pleadings having regard to these reasons and as to the time or other manner in which they wish to be heard as to costs. 127 I direct the parties to consult as to a form of orders to give effect to these reasons and the issues concerning the timetable. I certify that the preceding one hundred and twenty-seven (127) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Farrell. Associate: Dated: 23 December 2014 SCHEDULE A NSD 1558 of 2012 MAO, CHARLES Second Respondent MARSHALL, LARRY Third Respondent SYCIP, GEORGE Fourth Respondent KAN, JI RAN LAURIE Fifth Respondent NEAL, IAN RICHARD Sixth Respondent SURTEES, ANTHONY JOHN Seventh Respondent SCHEDULE B NSD 341 of 2013 HARVEY, JAMES ABERDEIN Second Respondent PATERSON, PHILIP SYDNEY Third Respondent MARSH, DEAN LLOYD Fourth Respondent WESTAWAY, JOHN STEVEN Fifth Respondent MURTON, TIMOTHY WILLIAM Sixth Respondent KLENK, DARREN CRAIG Seventh Respondent WIGHT, MALCOLM STEVEN Eighth Respondent CROOK, DEAN BRIAN Ninth Respondent RYAN, DALE JOHN Tenth Respondent STEPHEN HAROLD KUTCHER Eleventh Respondent LLOYD, GEOFFREY ALLAN Twelfth Respondent HUMPHREY, JUSTIN LUKE Thirteenth Respondent