FEDERAL COURT OF AUSTRALIA J&J Richards Super Pty Ltd ATF The J&J Richards Superannuation Fund v Nielsen [2024] FCA 1472 File number(s): Judgment of: HALLEY J Date of judgment: 18 December 2024 INSURANCE – third party claims by investors pursuant to the Civil Liability (Third Party Claims against Insurers) Act 2017 (NSW) against insurer that provided directors and officers liability insurance to a now insolvent company – proceeding brought by applicant on its own behalf and on behalf of group members – where partial settlement of proceeding approved and applicant granted leave to discontinue proceeding against corporate defendants, but individual directors to remain as respondents in proceeding – where directors excused from participating in proceeding and each filed submitting appearances – where principal claim remaining to be determined is applicant's third party claim against insurer for indemnity under policy Catchwords: CORPORATIONS – where necessary to address claims advanced against companies and directors to establish foundation for third party claims brought against insurer – where companies operated registered and unregistered managed investment schemes – where companies made improvident and inadequately secured loans to related entities, directors and financial advisors – where applicant and group members purchased units in schemes – where investments in schemes promoted in information memorandum and product disclosure statements – whether directors involved in contravention of s 601FC by companies and contravened s 601FD(1)(b) and s 601FD(1)(c) of the Corporations Act 2001 (Cth) (Corporations Act) by not acting with care and diligence and failing to act in best interests of members of schemes – whether information memorandum and product disclosure statements contained misleading and deceptive representations – whether applicant relied on misleading and deceptive representations – whether product disclosure statements were defective within the meaning of s 1022A of the Corporations Act – whether directors were involved in contraventions – contraventions established – where directors involved in contraventions – whether applicant and group members entitled to damages against directors –where applicant and group members entitled to damages against directors in an aggregate amount for s 601FC(5), 601FD(1)(b) and s 601FD(1)(c) contraventions – predicate liability established – common questions answered INSURANCE – defences – non-disclosure – whether insurer entitled to reduce liability for claims under policy to nil – where satisfied relevant matters not disclosed – where satisfied that director who completed proposal form knew of relevance of matters not disclosed and such knowledge attributed to the company – where both limbs of s 21(1) of the Insurance Contracts Act 1984 (Cth) (Insurance Contracts Act) engaged – where satisfied insurer would not have accepted risk if it were made aware of matters not disclosed – whether insurer waived duty of disclosure pursuant to s 21(2)(d) or s 21(3) of the Insurance Contracts Act – where question in proposal form as to whether applicant was aware of facts or circumstances which might afford valid grounds for any future investigations, inquiries, regulatory proceedings or other claims which may be covered by the policy was answered in the affirmative – where insurer did not seek particulars of affirmative answer – whether there was a fair presentation of risk to the insurer or answers were obviously incomplete or irrelevant within the meaning of s 21(3) of the Insurance Contracts Act – where satisfied duty of disclosure waived by the insurer INSURANCE – whether insurer entitled to rely on professional services exclusion in policy – whether impugned conduct constitutes the provision of third party professional services – consideration of Beach J's decision in Murray Goulburn Co-Operative Co Ltd v AIG Australia Ltd (2021) 389 ALR 453; [2021] FCA 288 – impugned conduct does not constitute professional services falling within professional services exclusion – whether insurer is entitled to benefit of conditional release granted to directors under settlement orders made pursuant to s 7 of the Civil Liability (Third Party Claims against Insurers) Act 2017 (NSW) – where settlement orders do not preclude applicant from claiming indemnity against insurer Australian Securities and Investments Commission Act 2001 (Cth) ss 5, 12DA, 12GF Corporations Act 2001 (Cth) ss 9AD, 79, 180, 601FC, 601FD, 1013C, 1013D, 1013E, 1013F, 1022A, 1022B, 1041H, 1041I, s 1325 Evidence Act 1995 (Cth) s 191 Federal Court of Australia Act 1976 (Cth) s 33Z Legislation: Insurance Contracts Act 1984 (Cth) ss 21, 27AA, 28, 48 Trade Practices Act 1974 (Cth) s 82 Civil Liability (Third Party Claims against Insurers) Act 2017 (NSW) ss 4, 7, 8 Law Reform (Miscellaneous Provisions) Act 1946 (NSW) s 6 Trusts Act 1973 (Qld) ABN AMRO Bank NV v Bathurst Regional Council (2014) 224 FCR 1; [2014] FCAFC 65 Addenbrooke Pty Ltd v Duncan (No 2) (2017) 348 ALR 1; [2017] FCAFC 76 Advance (NSW) Insurance Agencies Pty Ltd v Matthews and Anor (1989) 166 CLR 606; [1989] HCA 22 Arterial Caravans Ltd v Yorkshire Insurance Co Ltd [1973] 1 Lloyd's Rep 169 Asfar & Co v Blundell (1896) 1 QB 123 Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640; [2013] HCA 54 Australian Prudential Regulation Authority v Kelaher (2019) 138 ACSR 459; [2019] FCA 1521 Australian Securities and Investments Commission v Australian Property Custodian Holdings Ltd (recs and mgrs apptd) (in liq) (controllers apptd) (No 3) [2013] FCA 1342 Australian Securities and Investments Commission v Australian Property Custodian Holdings Limited (Receivers and Managers appointed) (in liquidation) (Controllers appointed) (No 3) [2013] FCA 1342 Australian Securities and Investments Commission v Avestra Asset Management Ltd (in liq) (2017) 348 ALR 525; [2017] FCA 497 Australian Securities and Investments Commission v Daly (Liability Hearing) [2023] FCA 290 Australian Securities and Investments Commission v Healey (2011) 196 FCR 291; [2011] FCA 717 Australian Securities and Investments Commission v King (2020) 270 CLR 1; [2020] HCA 4 Australian Securities and Investments Commission v Lewski (2018) 266 CLR 173; [2018] HCA 63 Australian Securities and Investments Commission v Westpac Banking Corporation (No 2) (2018) 266 FCR 147; [2018] FCA 751 Australian Securities Commission v AS Nominees Ltd (1995) 62 FCR 504 Bates v Hewitt (1867) LR 2 QB 595 C E Heath Casualty & General Insurance Ltd v Grey (1993) 32 NSWLR 25 Chubb Insurance Company of Australia Ltd v Robinson (2016) 239 FCR 300; [2016] FCAFC 17 Cases cited: Dew v Suncorp Life and Superannuation Limited [2001] QSC 252 Ford Motor Company of Australia Ltd v Arrowcrest Group Pty Ltd (2003) 134 FCR 522; [2003] FCAFC 313 General Accident Insurance Asia Limited v Sakr (2001) 11 ANZ Ins Cas 61-508; [2001] NSWCA 402 Green in his capacity as liquidator of Armico Mining Pty Ltd (in liq) v CGU Insurance Ltd (2008) 67 ACSR 398; [2008] NSWSC 825 Hitchens v Zurich Australia Ltd [2015] NSWSC 825 Hopkins (as trustee for the Hopkins Superannuation Fund) v AECOM Australia Pty Ltd (No 4) (2015) 328 ALR 1; [2015] FCA 307 Jaggar v QBE Insurance International Ltd [2007] 2 NZLR 336 Liga Knitting Mills v Lombard Insurance Co Ltd (1984) 3 ANZ Ins Cas 60-551 Murray Goulburn Co-Operative Co Ltd v AIG Australia Ltd (2021) 389 ALR 453; [2021] FCA 288 Permanent Trustee Australia Ltd v FAI General Insurance Co Ltd (in liq) (2003) 214 CLR 514; [2003] HCA 25 Petkovski v Government Insurance Office of New South Wales [1993] NSWCA 211 Prepaid Services Pty Ltd v Atradius Credit Insurance NV [2013] NSWCA 252 Productivity Partners Pty Ltd (t/as Captain Cook College) v Australian Competition and Consumer Commission (2024) 419 ALR 30; [2024] HCA 27 Re Macquarie Investment Management (2016) 115 ACSR 368; [2016] NSWSC 1184 Roumeli Food Stores (NSW) Pty Ltd v New India Assurance Co Ltd (1972) 1 NSWLR 227 Shafron v Australian Securities and Investments Commission (2012) 247 CLR 465; [2012] HCA 18 Thompson v Government Insurance Office of New South Wales (Supreme Court of New South Wales, 15 June 1994, unreported) Trilogy Funds Management Ltd v Sullivan (No 2) (2015) 331 ALR 185; [2015] FCA 1452 Weitmann v Katies Ltd (1977) 29 FLR 336 WISE Underwriting Agency Ltd v Grupo Nacional Provincial SA [2004] EWCA Civ 962; [2004] 2 Lloyd's Rep 483 Wyzenbeek v Australasian Marine Imports Pty Ltd (in Liq) (2019) 272 FCR 373; [2019] FCAFC 167 Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Number of paragraphs: 402 Date of last submissions: 25 July 2023 Date of hearing: 12-14 July 2023 Counsel for the Applicant: Mr D Lloyd SC with Mr R Pietriche and Mr M Collins Solicitor for the Applicant: Corrs Chambers Westgarth Counsel for the Second to Fifth Respondents: The Second to Fifth Respondents filed a submitting notice Counsel for the Seventh Respondent: Mr J Giles SC with Mr E Ball Solicitor for the Seventh Respondent: Clyde & Co Counsel for the Eighth Respondent: The Eighth Respondent was excused from appearing ORDERS NSD 939 of 2020 BETWEEN: J&J RICHARDS SUPER PTY LTD ATF THE J&J RICHARDS SUPERANNUATION FUND Applicant PAUL NIELSEN Second Respondent AND: IAN WILLIAMS Third Respondent PAUL ANTHONY RAFTERY (and others named in the Schedule) Fourth Respondent order made by: HALLEY J DATE OF ORDER: 18 december 2024 THE COURT ORDERS THAT: 1. The parties are to submit consent or competing draft declarations and orders to give effect to these reasons for judgment, including with respect to costs and interest, by 4.30 pm on Monday, 3 February 2025. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT A. INTRODUCTION [1] B. EVIDENTIARY ISSUES [15] B.1. Overview [15] B.2. Statement of Agreed Facts [17] B.3. Applicant's evidence [21] B.4. AIG's evidence [32] C. SALIENT FACTS [34] C.1. Linchpin and Endeavour [34] C.2. Richards Superannuation Fund [43] C.3. Group Members [45] C.4. Unregistered Fund [47] C.5. Registered Scheme [50] C.6. Investment Committee [59] C.7. Inter Fund Investment [62] C.8. Loans [70] C.8.1. Overview [70] C.8.2. The Related Entity Loans [77] Beacon Loan [78] Linchpin Loan [80] RIAA Loan [82] CPG Loan [84] ISARF Loan [86] C.8.3. The Advisor Loans [88] ALPS Loan [89] Pyrah Loan [91] Venture Loan [93] French Loan [95] Goudie Loan [97] Fortuna Loan [99] Ramshead Loan [101] TWP Loan [104] Anderson Loan [106] Kings Loan [108] Market St Loan [110] Macquarie Loan [112] SBE Loan [114] Wilshire Loan [116] SWG Loan [118] NFA Loan [120] Dale Loan [122] C.8.4. The Director Loans [124] C.8.5. Security for the Loans [132] C.8.6. Conclusion [139] D. CLAIMS AGAINST LINCHPIN, ENDEAVOUR AND THE DIRECTOR RESPONDENTS [140] D.1. Overview [140] D.2. Care and diligence contraventions [141] D.2.1. Overview [141] D.2.2. Statutory provisions and legal principles [142] D.2.3. Consideration [161] D.3. Failing to act in best interests contraventions [176] D.3.1. Overview [176] D.3.2. Statutory provisions and legal principles [177] D.3.3. Consideration [181] D.4. Misleading and deceptive conduct contraventions [182] D.4.1. Overview [182] D.4.2. Statutory provisions and legal principles [185] D.4.3. Consideration [188] Linchpin Representations [188] Endeavour Representations [191] D.5. Dissemination of defective PDSs contraventions [196] D.5.1. Overview [196] D.5.2. Statutory provisions and legal principles [197] D.5.3. Consideration [203] D.6. Involvement of Director Respondents in contraventions [207] D.6.1. Overview [207] D.6.2. Statutory provisions and legal principles [208] D.6.3. Consideration [212] E. LOSS AND DAMAGE [214] E.1. Overview [214] E.2. Breach of Duty Contraventions [218] E.2.1. Statutory provisions and legal principles [218] E.2.2. Consideration [223] E.3. PDSs and IM Contraventions [227] E.3.1. Statutory provisions and legal principles [227] E.3.2. Consideration [232] F. NON-DISCLOSURE DEFENCE [235] F.1. Overview [235] F.2. Statutory provisions and legal principles [239] F.3. Alleged matters not disclosed [245] F.4. Mr Nielsen's knowledge of the matters [248] F.5. Knowledge of relevance [252] F.6. AIG's response if the matters not disclosed had been disclosed [267] G. WAIVER OF THE DUTY OF DISCLOSURE [274] G.1. Overview [274] G.2. Statutory provisions and legal principles [276] G.3. Factual findings [293] G.3.1 The Proposal Form [293] G.3.2. Referral Commentary [300] G.3.3. Quotations provided to Mega Capital [303] G.3.4. Responses to subjectivities [305] G.3.5. Evidence of Ms Samuel [309] G.4. Principal submissions of the parties [312] G.5. Consideration [322] H. PROFESSIONAL SERVICES EXCLUSION [353] H.1. Overview [353] H.2. Principal submissions of the parties [356] H.3. Consideration [365] I. SETTLEMENT DEFENCE [377] I.1. Overview [377] I.2. Statutory provisions [378] I.3. Settlement Orders [383] I.4. Principal submissions of the parties [387] I.5. Consideration [393] J. DISPOSITION [401] APPENDIX A APPENDIX B HALLEY J: A. INTRODUCTION 1 This proceeding is principally concerned with defences relied upon by an insurer to third party claims made by investors under a directors and officers liability insurance policy issued by the insurer to a now insolvent company. 2 The applicant is J&J Richards Super Pty Ltd (Applicant) as the trustee for the J&J Richards Superannuation Fund (Richards Superannuation Fund). 3 The Applicant commenced this proceeding, both on its own behalf and on behalf of group members (Group Members), against the first respondent, Linchpin Capital Group Limited (in liq) (Linchpin), the sixth respondent, Endeavour Securities (Australia) Ltd (in liq) (Endeavour) (a subsidiary of Linchpin), four former directors of Linchpin, the second to fifth respondents (Director Respondents) and the seventh respondent, AIG Australia Limited (AIG). The Applicant had also advanced claims in this proceeding against another insurer, Riverstone Managing Agency Limited (Riverstone), as the relevant entity for Lloyds Syndicate 2014, but those claims were ultimately not pressed. 4 In its third further amended statement of claim, the Applicant alleges that the first to sixth respondents breached various provisions of the Corporations Act 2001 (Cth) (Corporations Act), the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) and the Trusts Act 1973 (Qld) (Trusts Act) in making improvident loans without adequate security and contrary to representations made to investors. The claims under the Trusts Act have not been pressed and the claims that remain for consideration are otherwise directed at the Director Respondents' conduct in the period between January 2014 and June 2018 in managing two managed investment schemes (Schemes). 5 The first of the Schemes was an unregistered managed investment scheme known as the "Investport Income Opportunity Fund" (Unregistered Fund). Linchpin was the trustee and Investport Pty Ltd (Investport) was the manager of the Unregistered Fund. Investments in the Unregistered Fund were promoted in an Information Memorandum (IM) issued by Linchpin upon the basis that funds would be invested in a range of assets (but predominantly mortgages in particular commercial and development loans) and would be made progressively to achieve a diversified loan portfolio across property and corporate sectors on a secured basis that was income producing. 6 The second of the Schemes was a registered managed investment scheme, initially named the "Endeavour Hi-Yield Fund", but later changed to be also known as the "Investport Income Opportunity Fund" (Registered Scheme). Endeavour was the responsible entity and Investport was the investment manager of the Registered Scheme. Investments in the Registered Scheme were promoted in Product Disclosure Statements (PDSs) issued by Endeavour upon the basis that funds would be invested in a range of assets (but predominantly mortgages in particular commercial and development loans) and would be made progressively to achieve a diversified loan portfolio across property and corporate sectors on a secured basis that was income producing. 7 On 14 May 2021, the Applicant was granted leave to join the insurers of Linchpin and Endeavour (AIG and RiverStone, respectively) to the proceeding. It brought claims directly against each under the various policies of insurance which were in place in the period during which the alleged contraventions by the first to sixth respondents took place. The claim which remains pressed by the Applicant is a claim against AIG with respect to its liability to indemnify each of the Director Respondents (each of whom have a separate entitlement to indemnity as third party beneficiaries) under a Directors and Officers Insurance Policy dated 20 December 2017 (Policy). The Applicant seeks to recover from AIG under the Policy alleged losses caused by the conduct of the Director Respondents. The claim is brought against AIG under the Civil Liability (Third Party Claims against Insurers) Act 2017 (NSW) (Third Party Claims Act). 8 On 19 June 2023, the Court approved a partial settlement of the proceeding. The effect of the orders made by the Court was that the Applicant was granted leave to discontinue the proceedings against Linchpin and Endeavour but the Director Respondents were to remain parties to the proceeding. The settlement provided for a release of the claims made by the Applicant, on its own behalf and on behalf of Group Members, against the Director Respondents, but the orders provided that the release was not to become operative until the final determination of the proceeding. The settlement also provided for a release of the claims advanced against Riverstone. 9 On 24 March 2023, orders were made by the Court excusing the Director Respondents from participating in the proceeding. The Director Respondents have all filed submitting appearances. 10 The only active parties remaining in the proceeding are the Applicant and AIG. In order to succeed in its claim for relief against AIG, the Applicant must establish: (a) the Director Respondents are liable to the Applicant in respect of one or more of the contraventions alleged in this proceeding; (b) one or more of the contraventions by the Director Respondents caused the Applicant's loss; (c) the Director Respondents fall within the definition of an "insured" under the Policy; and (d) the claims against the Director Respondents fall within the coverage clause under the Policy. 11 AIG is the only remaining active respondent in the proceeding. 12 AIG resists the claim brought by the Applicant on the basis that (a) Linchpin breached its duty of disclosure under s 21 of the Insurance Contracts Act 1984 (Cth) (Insurance Contracts Act), (b) it is entitled to rely upon a professional services exclusion in the Policy, and (c) by reason of s 7 of the Third Party Claims Act, it is entitled to the benefit of the release granted to the Director Respondents under an order of the Court made in this proceeding on 19 June 2023. 13 The Applicant and AIG have largely agreed 59 common questions for determination in the proceeding (common questions). The only difference between the common questions advanced by the Applicant and AIG is that questions 55, 58 and 59 in AIG's proposed common questions were not included in the Applicant's proposed common questions. I am satisfied that it is appropriate and convenient for those three additional common questions to be also answered in these reasons for judgment. Each raises issues that directly arise from the defences sought to be relied upon by AIG. 14 For the reasons that follow, I have concluded that the claims advanced by the Applicant on its own behalf and on behalf of Group Members against the Director Respondents have been established and the defences relied upon by AIG to the third party claims brought by the Applicant have not succeeded. Each of the common questions is answered in Appendix A to these reasons for judgment. B. EVIDENTIARY ISSUES B.1. Overview 15 The settlement with the Director Respondents and their submitting appearances had a profound effect on the conduct of the hearing. Both the Applicant and AIG had a common interest in establishing that the Director Respondents had breached their statutory duties. The Applicant for the purpose of establishing the predicate liability of the Director Respondents to make good their third party claim against AIG under the Policy and AIG for the purpose of establishing its non-disclosure defence. 16 The Applicant addressed the factual background to the claims it advanced against the Director Respondents and the alleged liability of the Director Respondents to the Applicant, in sections B and C of its 72 page opening outline of submissions (Applicant's opening outline). With the exception of a very small number of paragraphs that trespassed into AIG specific issues, AIG did not dispute any of the facts or principles stated in sections B and C of the Applicant's opening outline. B.2. Statement of Agreed Facts 17 Prior to the commencement of the hearing of the proceeding the Applicant and AIG agreed a 43 page statement of agreed facts (Statement of Agreed Facts) pursuant to s 191 of the Evidence Act 1995 (Cth) (Evidence Act). The Statement of Agreed Facts was tendered by the Applicant and admitted into evidence. The Applicant sought to rely upon the Statement of Agreed Facts for the purpose of establishing each of the factual propositions advanced in sections B and C of the Applicant's opening outline. 18 An immediate issue with the Statement of Agreed Facts is that s 191(1) of the Evidence Act provides that an "agreed fact" is a fact that "the parties" to a proceeding have agreed is not disputed for the purposes of the proceeding. Section 191(3) provides that the relief from the requirement to adduce evidence to prove the existence of an agreed fact in s 191(2) only applies if the fact is stated in a document signed by "the parties" or legal representatives. Notwithstanding the settlement reached with the Director Respondents, they remain parties to this proceeding. 19 Both the Applicant and AIG submitted that although the Director Respondents were not a party to the Statement of Agreed Facts the necessary consequence of their respective submitting appearances was that they were bound by the Statement of Agreed Facts. They submitted that the Statement of Agreed Facts could therefore be relied upon for the purpose of establishing the claims that the Applicant advanced against the Director Respondents and the matters relied upon by AIG as making good the non-disclosure defences. 20 It is well established that the effect of a submitting appearance is that a party is bound by any orders that the Court might make in the proceeding. It does not follow, however, that a submitting appearance carries with it any implied agreement to a statement of agreed facts agreed by the other parties to a proceeding. Neither the Applicant nor AIG could point to any authority that a submitting appearance did carry such an implied agreement. Section 191 provides an exception to the requirement for evidence to be adduced to prove the existence of a fact but only with the express written consent of the parties to the proceeding. B.3. Applicant's evidence 21 Against the likelihood that I would not accept that a submitting appearance carried with it an implied agreement to be bound by the Statement of Agreed Facts, the Applicant tendered a substantial volume of contemporaneous documents including a report of the former receivers of Linchpin to the Court, that it submitted independently established each of the facts alleged in sections B and C of the Applicant's opening outline. The Applicant also provided the Court with annotated copies of both the Applicant's opening outline and the Statement of Agreed Facts with references to the documents admitted into evidence and the receivers' report. 22 The Applicant also relied on affidavits of Julie Marie Richards, a director of the Applicant, and Brian Williams, a financial adviser. 23 Ms Richards gave evidence of the circumstances in which she and her husband, Jeffrey Richards, caused the Applicant to make the investments in the Schemes, in particular the advice they received from Mr Williams. She also gave evidence that she would not have proceeded with the investments in the Schemes had she been informed that the Schemes made loans where security taken was not registered or not properly registered and the investments made by the Schemes were high risk and not diversified. She was not cross examined. 24 Mr Williams gave evidence of representations made to him by directors of Beacon Financial Group Pty Ltd (Beacon), a wholly owned subsidiary of Linchpin, in relation to investments in the Schemes and his discussions with Mr and Ms Richards that led to the investments made by the Applicant in the Schemes. He was not cross examined. 25 I accept the evidence given by Ms Richards and Mr Williams. They largely corroborated each other's evidence of the communications between them and their evidence was otherwise not challenged and was consistent with contemporaneous documents and the objective logic of events. 26 In addition, the Applicant tendered an expert report of Bruce Francis Debenham. Mr Debenham is a senior risk management professional with more than 25 years' experience in banking, insolvency and management consulting with a particular focus on credit risk assessment and management. 27 Mr Debenham gave evidence that in his opinion, (a) Endeavour's lending manual clearly set out the responsibilities, duties and work that a diligent and prudent lender would undertake in determining whether to lend to a prospective borrower, (b) the portfolio of loans advanced by the Schemes were not made consistently with the lending principles and guidelines specified in the IM and the PDSs and (c) Linchpin did not act with the degree of care and diligence of an ordinary lender in making each of those loans. Mr Debenham was not cross examined. 28 I am satisfied that Mr Debenham, by reason of his training, study and experience, had the requisite expertise to express these opinions and that his report provided a sufficient explanation of his reasoning and an articulation of the assumptions that he made in arriving at those opinions to render his expert report both admissible and persuasive. I accepted his evidence. 29 Next, the Applicant tendered a number of affidavits that had been filed in the proceedings brought by the Australian Securities and Investments Commission (ASIC) against Linchpin and Endeavour in this Court, QUD 439 of 2018, and by ASIC against the Director Respondents in this Court, QUD 269 of 2020 (together, ASIC proceedings). Most significantly, the affidavits included an affidavit of Jason Mark Tracy, a registered liquidator, that annexed a copy of an expert report of Mr Tracy and David Orr of Deloitte Financial Advisory Pty Ltd to the Court in the QUD 439 of 2018 proceeding (Receivers' Report). Mr Tracy and Mr Orr were appointed as joint and several receivers and managers over the property of Linchpin and the scheme property of Endeavour, pursuant to orders made by Derrington J on 7 August 2018. 30 The other affidavits in the ASIC proceedings tendered by the Applicant comprised a further affidavit of Mr Tracy, three affidavits of Anne Elizabeth Gubbins, a solicitor employed by ASIC, and two affidavits of Tegan Harris, a solicitor employed by Gadens Lawyers, the solicitors for ASIC (together, Tendered Affidavits). 31 AIG did not object to the tender of the Receivers' Report or the Tendered Affidavits. The Applicant relied on the Receivers' Report and the Tendered Affidavits to establish that all potentially relevant material has been requested (document requests), documents responsive to those requests were produced where available and the documents were then considered to permit the drawing of inferences, in particular, as to the absence of any proper due diligence of borrowers and relevant or adequate security to support the loans made by the Schemes. I am satisfied that the Receivers' Report and the Tendered Affidavits establish that all reasonable steps have been taken to procure production of all documents potentially relevant to the alleged contraventions of the Director Respondents and to the extent that documents have not been produced in response to those requests I am satisfied, in the absence of any evidence to the contrary, that such documents do not exist. B.4. AIG's evidence 32 AIG relied on an affidavit of Roslyn Samuel, a Financial Institutions Practice Lead of AIG. Ms Samuel was a Senior Underwriter of AIG at the time the Policy was issued and was responsible for the underwriting of financial lines risks in Australia, including directors and officers liability policies. She gave evidence of the AIG underwriting guidelines, her receipt and review of the proposal form for directors and officers liability cover for Linchpin, subsequent enquiries and communications with Linchpin's broker in relation to Linchpin's proposal and the impact on her decision to agree to extend cover to Linchpin had she been informed of the matters that AIG has alleged that Linchpin failed to disclose. 33 Ms Samuel was cross examined. It was readily apparent from both her affidavit evidence and her cross examination that Ms Samuel had a very limited recollection of the circumstances in which she agreed that AIG would extend directors and officers liability insurance to Linchpin and was largely giving evidence by reference to what she contended was her usual practice. I am satisfied that Ms Samuel's evidence of her usual practice and her evidence of the significance of the matters not disclosed to her decision to extend cover to Linchpin should be accepted. Her evidence on these matters was consistent with the evidence adduced of AIG's underwriting guidelines and the objective logic of events. My confidence in accepting her evidence on these matters was materially increased by her acceptance, although after some prevarication, that the objective evidence would suggest that she had significantly departed from her usual practice in her assessment of Linchpin's application for directors and officers liability insurance. C. SALIENT FACTS C.1. Linchpin and Endeavour 34 Linchpin was a company incorporated on 28 May 2013. It was relevantly the trustee with responsibility for administering the Unregistered Fund. In the IM, Linchpin claimed to operate the Unregistered Fund as an authorised representative operating under an existing Australian Financial Services Licence (AFSL) of another entity. 35 In the period from at least 23 January 2014 to 7 August 2018 (Relevant Period), each of Paul Nielsen, the second respondent, Ian Comrie Williams, the third respondent, Paul Anthony Raftery, the fourth respondent and Peter Eugene Daly, the fifth respondent, were directors of Linchpin. 36 During the Relevant Period, Linchpin carried on the business of a professional trustee. 37 Linchpin was either the direct or ultimate holding company of Endeavour, Investport, ISARF Pty Ltd (ISARF), Beacon, The Financiallink Group Pty Ltd (FLG), CPG Research & Advisory Pty Ltd (CPG), Libertas Financial Planning Pty Ltd (Libertas), and Risk and Investment Advisors Australia Pty Ltd (RIAA) (together, Linchpin Group). 38 The Linchpin Group provided a range of financial products, funds management, investment advisory and consulting services. 39 As at August 2018, the Linchpin Group comprised 413 authorised representatives under s 761A of the Corporations Act. Each of Endeavour, RIAA, CPG and Libertas held an AFSL. In addition, FLG was recorded as the principal business address of an AFSL issued to NextGen Financial Group Pty Ltd. 40 Endeavour was a subsidiary of Linchpin and which operated as the responsible entity of the Registered Scheme. 41 On 7 August 2018, in the ASIC proceedings against Linchpin and Endeavour (QUD 439 of 2018), Derrington J made orders under s 1323 of the Corporations Act appointing Mr Tracy and Mr Orr as receivers and managers of certain property of Linchpin and certain property of Endeavour and requiring the Receivers to provide a report to the Court in relation to various matters relating to the Unregistered Fund and the Registered Scheme. Those orders were made on the basis that, from the information available to ASIC at that time, it was apparent that the investments into the Unregistered Fund and Registered Scheme had been used to finance loans to Linchpin itself and entities within the Linchpin Group. 42 On 15 March 2019, Linchpin was placed into liquidation and Mr Tracy and Mr Orr were appointed as liquidators, by an order of this Court. C.2. Richards Superannuation Fund 43 The Richards Superannuation Fund was established in 2008 by Ms Richards and her husband. The Richards Superannuation Fund made an investment of $50,000 in the Unregistered Fund in March 2015 on the advice of its financial planner, Mr Williams. Mr Williams had reviewed the IM and formed the view, that the matters conveyed in the IM, were broadly similar to the representations made to him by Mr Daly and Andrew Blanchette at a meeting in January 2014 to the effect that the Unregistered Fund was a secured unregistered managed investment scheme with robust lending requirements that would lend pooled investors' funds to qualified or approved borrowers in a mixed diversified portfolio, secured by registered mortgages or would be invested in cash. 44 In or about May 2016, the Richards Superannuation Fund invested $25,000 in the Registered Scheme. The investment was again made on the advice of Mr Williams who had reviewed one of the PDSs issued by Endeavour with respect to investments in the scheme and was satisfied that the terms of the PDS were broadly similar to the investment strategy undertaken by Linchpin with respect to the Unregistered Fund and recorded in the IM. C.3. Group Members 45 The Applicant brings its claims also on behalf of Group Members, being persons who: (a) on or after 23 January 2014 purchased units in the Unregistered Fund; and/or (b) on or after 25 March 2015, purchased units in the Registered Scheme; and (c) have entered into a representative proceeding funding agreement with LCM Funding Pty Ltd. 46 There are approximately 176 persons or entities who are Group Members in this proceeding. Their investments in the Schemes are stated to total $16,158,830.64. The Applicant estimates that pre-judgment interest on their claims as at 30 June 2023 was approximately $3,372,592.05. C.4. Unregistered Fund 47 On or about 22 January 2014, the Unregistered Fund was established pursuant to a trust deed poll entitled "Investport Income Opportunity Fund Constitution" and operated by Linchpin as an unregistered managed investment scheme called the "Investport Income Opportunity Fund". 48 Linchpin was described as the "Responsible Entity" of the Unregistered Fund and acted as the trustee of the Unregistered Fund. 49 Investport was appointed as the manager of the Unregistered Fund pursuant to the terms of a management agreement dated 22 January 2014. C.5. Registered Scheme 50 In December 2014, Endeavour was acquired by Linchpin (Endeavour Acquisition). At that time the Registered Scheme was called the "Endeavour Hi-Yield Fund". On or about 25 March 2015, the name of the Registered Scheme was changed to the "Investport Income Opportunity Fund". 51 Investport was appointed as the manager of the Registered Scheme by Endeavour pursuant to a management agreement dated 2 April 2015. Endeavour had a Conflict of Interest and Related Party Transactions Policy (Conflict Policy). I infer, in the absence of any qualification or suggestion to the contrary, that the Conflict Policy applied to all investments made by the Registered Scheme. The only version of the Conflict Policy in evidence was published in May 2017 with the footer on each page describing it as "Final Version 2017". 52 In the period between about 26 May 2015 and 26 May 2017, Mr Daly sought to procure investments into the Registered Scheme by engaging with and encouraging financial advisors to consider investments in the Registered Scheme and through them to their clients and/or potential clients, as a term deposit alternative. 53 On or about 27 April 2015, Endeavour lodged an amended compliance plan for the Registered Scheme with ASIC (Compliance Plan) and issued a Product Disclosure Statement for the Registered Scheme (First PDS). It was expressly stated in the First PDS that each of the directors of Endeavour (that is, Mr Nielsen, Mr Raftery and Mr Williams) consented to and authorised the issue of the First PDS. Mr Daly was provided with a final version of the First PDS pending legal sign off and before it was lodged with ASIC. 54 On or about 1 October 2015, Endeavour issued a second Product Disclosure Statement for the Registered Scheme (Second PDS). It was expressly stated in the Second PDS that each of the directors of Endeavour (that is, Mr Nielsen, Mr Raftery and Mr Williams) consented to and authorised the issue of the Second PDS. 55 On or about 24 June 2016, Endeavour issued a third Product Disclosure Statement for the Registered Scheme (Third PDS). It was expressly stated in the Third PDS that each of the directors of Endeavour (that is, Mr Nielsen, Mr Raftery and Mr Williams) consented to and authorised the issue of the Third PDS. Mr Daly also approved the Third PDS in an email exchange with Mr Williams, Mr Nielsen and Mr Raftery on 28 June 2016. 56 In or about January 2018, Endeavour issued a fourth Product Disclosure Statement for the Registered Scheme (Fourth PDS). It was expressly stated in the Fourth PDS that each of the directors of Endeavour (that is, Mr Nielsen, Mr Raftery and Mr Williams) consented to and authorised the issue of the Fourth PDS. 57 Each of the First PDS, the Second PDS, the Third PDS and the Fourth PDS (together, PDSs) was in materially the same terms. 58 Mr Nielsen commenced acting as Endeavour's Responsible Manager at some point during the financial year ending 30 June 2015 before the First PDS was issued by Endeavour on 27 April 2015. C.6. Investment Committee 59 A single investment committee (Investment Committee) acted as the decision making body for investments made by the Registered Scheme in the period from about April 2015 until 7 August 2018 and investments made by the Unregistered Fund in the period from about 23 January 2014 until 7 August 2018. The Investment Committee undertook the role of the "Credit Committee" that was referred to in the IM and in each of the PDSs. The terms "Credit Committee", "Investment Committee" and "Lending Committee" were used interchangeably in the operation of the Unregistered Fund and Registered Scheme to refer to the Investment Committee. 60 Mr Williams, Mr Raftery, Mr Nielsen and Mr Daly were, from time to time and in different combinations, the members of the Investment Committee. 61 On 1 April 2015, the Investment Committee approved an overarching investment strategy by circular resolution for both the Unregistered Fund and the Registered Scheme (1 April 2015 Resolution). The 1 April 2015 Resolution was signed by Mr Nielsen, Mr Daly, Mr Williams and Mr Blanchette. The strategy approved in the 1 April 2015 Resolution provided that the Registered Scheme would invest in the Unregistered Fund and the funds invested in the Unregistered Fund by the Registered Scheme would then be lent by the Unregistered Fund in accordance with the investment mandate of the Registered Scheme. C.7. Inter Fund Investment 62 Following the 1 April 2015 Resolution, funds were raised through the Registered Scheme and then invested in the Unregistered Fund (Inter Fund Investment). A net total of approximately $16.5 million was transferred by Endeavour on behalf of the Registered Scheme to Linchpin as trustee of the Unregistered Fund or to third parties on behalf of Linchpin as trustee for the Unregistered Fund. 63 The Inter Fund Investment was purportedly provided in exchange for units in the Unregistered Scheme. No units, however, were actually allotted to the Registered Scheme. None of the books or records of the companies contained any agreement between them for the subscription by Endeavour for units in the Unregistered Scheme nor unit certificates in favour of Endeavour. Nor was Endeavour recorded in the Unregistered Scheme's register of unitholders. No security was given with respect to the Inter Fund Investment and there was no document recording the transaction. 64 The Inter Fund Investment comprised about 95% of the approximately $17.3 million total funds raised in the Registered Scheme and was thus the primary asset of the Registered Scheme. 65 The Inter Fund Investment was the only investment in the Unregistered Scheme after 11 June 2015. 66 Of the approximately $16.5 million transferred by Endeavour to Linchpin as trustee of the Unregistered Fund, approximately: (a) $11.1 million was by direct transfer by Endeavour to Linchpin; (b) $3.1 million was disbursed by the Registered Scheme on behalf of the Unregistered Fund; and (c) $2.4 million was recorded as being interest on Endeavour's interest in the Unregistered Fund said to be reinvested in the Unregistered Fund. 67 The Receivers could not locate and there is otherwise no evidence that Endeavour made any written record of any election to reinvest interest in the Unregistered Fund. 68 Of the approximately $3.1 million in funds disbursed by the Registered Scheme on behalf of the Unregistered Fund, approximately $3 million was paid directly from the Registered Scheme to borrowers pursuant to unregistered loans. 69 No loan agreement nor any other document recording agreed terms between Endeavour and Linchpin for the Inter Fund Investment or between Endeavour and any other person or entity was produced to ASIC in answer to a request for such documents in a s 912C(1) notice addressed to Endeavour. C.8. Loans C.8.1. Overview 70 Endeavour had a Lending Manual, which was amended from time to time during the Relevant Period, that applied to investments made by the Registered Scheme. 71 The Lending Manual contained the following guidelines in cl 8 for investments made by the Registered Scheme in other managed investment schemes, such as the Unregistered Fund: 8. Investment in Other Managed Investment Schemes Under the Compliance Plan of [Endeavour] the Manager has the ability to invest funds in another Managed Investment Scheme, provided that the other scheme is registered under Chapter 5C of the Corporations Law. It is at the discretion of ES how it wishes to invest the funds received from investors, so to this end, if it is seen fit to invest funds with another registered scheme the following requirements must be satisfied. 8.1 Procedure for Investing Funds in another Managed Investment Scheme The following procedure is to be followed: 1. [Endeavour] must be satisfied that the proposed Managed Investment Scheme is registered under Chapter 5C of the Corporations Law. 2. [Endeavour] must satisfy itself that the scheme is a Mortgage Investment Scheme dealing only in first mortgages over property of the nature detailed in [Endeavour]'s disclosure document. 3. The term of any investment in the other Scheme must not exceed two years 4. [Endeavour] must obtain a copy of the Scheme disclosure document and complete the required application form which must be accepted by the Manager of that Scheme. 5. [Endeavour] Credit Committee will minute the decision stating that the investment is in the best interests of investors. 8.2 Procedure for providing Finance to other Income or Mortgage Fund Managers These loan [sic] would be secured by a First Mortgage or [sic] some, or all, of the operator's fund loan book. Before lending to an operator, [Endeavour]:- - Assesses the operator's management and lending team (including their track record). - Obtains a first ranking equitable mortgage over the assets of the relevant fund. - Assesses the credit history of the fund. - Ensures that total debt drawn is not to exceed 40% of eligible loan assets plus cash. 8.3 Related Parties [Endeavour] may lend Fund money to provide loans to, or make investments in, any related party subject to normal banking covenants and full disclosure in the Conflicts of Interest Register. … 72 The requirements of the Lending Manual applied at all times for loans made by the Unregistered Fund and, from 1 April 2015, for loans made by the Registered Scheme. 73 The total amount invested in the Unregistered Fund and the Registered Scheme was $22,731,140. 74 The funds that passed from Endeavour and the Registered Scheme to Linchpin and the Unregistered Fund as part of the Inter Fund Investment were then applied principally by Linchpin to the making of loans to itself and to others. These comprised loans to related entities (Related Entity Loans), loans to financial advisors (Advisor Loans) and loans to directors (Director Loans). 75 The Registered Scheme did not make any loans (although it did advance funds to borrowers in the Unregistered Scheme, as addressed below). Nor did Endeavour enter into any loan deeds or security agreements. 76 The total value of the Related Entity Loans, Advisor Loans and Director Loans (together, Loans) made by the Unregistered Fund was $19,015,584. C.8.2. The Related Entity Loans 77 The Related Entity Loans comprised the following loans. Beacon Loan 78 By a circular resolution dated 10 February 2014 signed by Mr Daly, Mr Nielsen, Mr Williams and Mr Blanchette, the Investment Committee approved the entry by Linchpin into a loan facility of $3 million for Beacon (Beacon Loan). The loan deed dated 10 February 2014 for the Beacon Loan was executed by Mr Nielsen and Mr Williams on behalf of Linchpin as lender. The stated purpose of the Beacon Loan was for Beacon to finance the acquisition of additional books of financial planning clients and the general expansion of its business. 79 In the period between 4 February 2014 and 1 April 2015, advances were made from the Unregistered Fund to or on behalf of Beacon pursuant to the Beacon Loan. On or about 20 April 2016, the Beacon Loan was increased from $3 million to $4 million by way of a deed of variation. On or about 30 September 2016, the Beacon Loan was increased from $4 million to $5 million by way of a further deed of variation. Linchpin Loan 80 By a circular resolution dated 10 February 2014, signed by Mr Daly, Mr Nielsen, Mr Williams and Mr Blanchette, the Investment Committee approved entry by Linchpin (as trustee of the Unregistered Fund) into a loan facility of $3 million for Linchpin (Linchpin Loan). The loan deed dated 1 August 2014 for the Linchpin Loan was executed by Mr Nielsen and Mr Williams on behalf of Linchpin as lender and as borrower. The stated purpose of the Linchpin Loan was for Linchpin to fund the expansion of its business. 81 In the period between 4 February 2014 and 1 April 2015, advances were made from the Unregistered Fund to or on behalf of Linchpin pursuant to the Linchpin Loan. On or about 1 July 2015, the Linchpin Loan was increased from $3 million to $6 million by way of a deed of variation. RIAA Loan 82 By a circular resolution dated 1 July 2016 signed by Mr Daly, Mr Nielsen, Mr Raftery and Mr Williams, the Investment Committee approved entry by Linchpin into a loan facility of $2,500,000 for RIAA (RIAA Loan). The undated loan deed for the RIAA Loan was executed by Mr Nielsen and Mr Williams on behalf of Linchpin as lender. The purpose of the RIAA Loan was not specified in the undated loan deed for the RIAA Loan. 83 Advances were made from the Unregistered Fund to or on behalf of RIAA pursuant to the RIAA Loan. On or about 1 July 2016, the RIAA Loan was increased from $2,500,000 to $2,750,000 by way of a deed of variation. CPG Loan 84 By a circular resolution dated 15 November 2016 signed by Mr Daly, Mr Nielsen, Mr Raftery and Mr Williams, the Investment Committee approved entry by Linchpin into a loan facility of $500,000 for CPG (CPG Loan). The loan deed dated 21 November 2016 for the CPG Loan was executed by Mr Nielsen and Mr Williams on behalf of Linchpin as lender. 85 Advances were made from the Unregistered Fund to or on behalf of CPG pursuant to the CPG Loan. The stated purpose of the CPG Loan was for CPG to fund the expansion of its business. ISARF Loan 86 On or about 30 June 2017, a loan deed for a loan to ISARF in the sum of $250,000 was executed by Mr Nielsen and Mr Williams on behalf of Linchpin (ISARF Loan). There was no circular resolution in evidence recording any approval by the Investment Committee of the entry by Linchpin into the ISARF Loan. The stated purpose of the ISARF Loan was the allocation of funding costs. 87 Advances were made from the Unregistered Fund to or on behalf of the ISARF pursuant to the ISARF Loan. C.8.3. The Advisor Loans 88 The Advisor Loans comprised the following loans, most of which were advanced for the stated purpose of allowing the borrowers to expand their financial planning businesses, including by acquiring client books from other financial advisors. ALPS Loan 89 By a circular resolution of the Investment Committee dated 10 December 2014 signed by Mr Daly, Mr Nielsen and Mr Williams, the Investment Committee approved entry by Linchpin into a loan facility of $220,000 for ALPS Network Pty Ltd (ALPS), Peter Larkin and Lance Meikle (together, ALPS Parties) (ALPS Loan). The undated loan deed for the ALPS Loan was executed by Mr Nielsen and Mr Williams on behalf of Linchpin. The stated purpose of the ALPS Loan was to finance the acquisition of additional books of clients. 90 Advances were made from the Unregistered Fund to or on behalf of the ALPS Parties pursuant to the ALPS Loan. The ALPS Loan was increased from $220,000 to $550,000 by way of an undated deed of variation. In or around May 2016, the ALPS Loan was increased from $550,000 to $760,000 by way of a deed of variation. Pyrah Loan 91 On or about 26 April 2015, the loan deed for a loan to Derek Pyrah in the sum of $225,000 (Pyrah Loan) was executed by Mr Nielsen and Mr Williams on behalf of Linchpin. There was no circular resolution produced in response to the document requests recording any approval by the Investment Committee of the entry by Linchpin into the Pyrah Loan. The stated purpose of the Pyrah Loan was for Mr Pyrah to finance the acquisition of additional books of clients. 92 Advances were made from the Unregistered Fund to or on behalf of Mr Pyrah pursuant to the Pyrah Loan. Venture Loan 93 By a circular resolution dated 8 July 2015, signed by Mr Daly, Mr Nielsen, Mr Williams and Mr Blanchette, the Investment Committee approved entry by Linchpin into a loan facility of $150,000 for Venture Finance & Advisory Pty Ltd (Venture) and David Ruthenberg (Venture Loan). The undated loan deed for the Venture Loan was executed by Mr Nielsen and Mr Williams on behalf of Linchpin as lender. The stated purpose of the Venture Loan was for Mr Ruthenberg and an unspecified director of Venture (described jointly as the "Borrower") to finance the acquisition of additional books of clients by Venture. Venture has only ever had one director, being Mr Ruthenberg. 94 Advances were made from the Unregistered Fund to or on behalf of Mr Ruthenberg pursuant to the Venture Loan. French Loan 95 By a circular resolution dated 31 July 2015 signed by Mr Daly, Mr Nielsen, Mr Williams and Mr Blanchette, the Investment Committee approved entry by Linchpin into a loan facility of $150,000 for Brian French (French Loan). The loan deed dated July 2015 for the French Loan was executed by Mr Nielsen and Mr Daly on behalf of Linchpin as lender. The stated purpose of the French Loan was for Mr French to finance the acquisition of additional books of clients. 96 Advances were made from the Unregistered Fund to or on behalf of Mr French pursuant to the French Loan. The French Loan was increased from $300,000 to $532,000 on or around 2 April 2017 by way of a deed of variation. Goudie Loan 97 By a circular resolution dated 29 October 2015 signed by Mr Daly, Mr Nielsen and Mr Williams, the Investment Committee approved entry by Linchpin into a loan facility of $150,000 for Peter Goudie Financial Services Pty Ltd (PGFS) (Goudie Loan). The loan deed dated 29 October 2015 for the Goudie Loan, with PGFS and Peter Goudie (together, Goudie Parties) as borrower, was executed by Mr Nielsen and Mr Williams on behalf of Linchpin as lender. The stated purpose of the Goudie Loan was for the Goudie Parties to finance statutory Australian Tax Office obligations. 98 Advances were made from the Unregistered Fund to or on behalf of the Goudie Parties pursuant to the Goudie Loan. Fortuna Loan 99 By a circular resolution dated 2 December 2015 signed by Mr Daly, Mr Nielsen and Mr Williams, the Investment Committee approved entry by Linchpin into a loan facility of $419,000 for Fortuna Financial Group Pty Ltd (Fortuna), Paul Ellenberg and Southwide Holdings Pty Ltd (Southwide) (together, Fortuna Parties) (Fortuna Loan). The loan deed dated 8 January 2016 for the Fortuna Loan was executed by Mr Nielsen and Mr Williams on behalf of Linchpin as lender. The stated purpose of the Fortuna Loan was for the Fortuna Parties to finance the restructuring and expansion of their financial planning interests. 100 Advances were made from the Unregistered Fund to or on behalf of the Fortuna Parties pursuant to the Fortuna Loan. The Fortuna Loan was increased from $419,000 to $659,000 on or around 12 December 2016 by way of deed of variation. Ramshead Loan 101 By a circular resolution dated 21 December 2015, signed by Mr Daly, Mr Nielsen and Mr Williams, the Investment Committee approved entry by Linchpin into a loan facility of $431,000 to Ramshead Investors Pty Ltd in its own capacity and as trustee for the Ramshead Unit Trust (Ramshead Investors), The Wealth Partnership Pty Ltd (Wealth Partnership) and Ramshead Capital Pty Ltd (Ramshead Capital) (together, Ramshead Parties) (Ramshead Loan). The loan deed dated 22 December 2015 for the Ramshead Loan was executed by the Ramshead Parties but not by Mr Nielsen and Mr Williams, who were recorded on the deed as the relevant signatories on behalf of Linchpin as lender. 102 The loan deed was said to join and take precedence in all matters with loan document of 17 September 2015 to the "Previous Borrower", identified as Anthony John Rumble, Paul Joseph Manka and Ramshead Investors. The stated purpose of the Ramshead Loan was for the Ramshead Parties to finance the acquisition of Wealth Partnership. 103 Advances were made from the Unregistered Fund to or on behalf of the Ramshead Parties pursuant to the Ramshead Loan. TWP Loan 104 On or about 19 May 2017, the loan deed for a loan to TWP Client Services Pty Ltd (TWP), Ramshead Investors and Wealth Partnership (together, TWP Parties) in the sum of $700,000 (TWP Loan) was executed by the TWP Parties but not by Mr Nielsen and Mr Williams, who were recorded on the deed as the relevant signatories on behalf of Linchpin as lender. There was no circular resolution produced in response to the document requests recording any approval by the Investment Committee of the entry by Linchpin into the TWP Loan. The stated purpose of the TWP Loan was for the TWP Parties to finance the acquisition of the Jones Freeman business as outlined in the Jones Freeman Sale and Purchase Deed. 105 Advances were made from the Unregistered Fund to or on behalf of the TWP Parties pursuant to the TWP Loan. Anderson Loan 106 By a circular resolution dated 10 October 2016 signed by Mr Daly, Mr Nielsen and Mr Williams, the Investment Committee approved entry by Linchpin into a loan facility of $60,000 for Anderson Lutgens & Co Pty Ltd (Anderson) trading as Beyond iWealth (Anderson Loan). The loan deed dated 10 October 2016 for the Anderson Loan, with Anderson, Pamela Margaret Anderson and Pierre Lutgens (together, Anderson Parties) as borrowers, was executed by Mr Nielsen and Mr Williams on behalf of Linchpin as lender. The stated purpose of the Anderson Loan was for the Anderson Parties to finance the acquisition of additional books of clients by the Anderson Parties together with working capital. 107 Advances were made from the Unregistered Fund to or on behalf of the Anderson Parties pursuant to the Anderson Loan. Kings Loan 108 By a circular resolution dated 16 December 2016, signed by Mr Daly, Mr Raftery and Mr Williams, the Investment Committee approved entry by Linchpin into a loan facility of $1,300,000 for Kings Lance Enterprises Pty Ltd (Kings) and Graham Kinder (together, Kings Parties) (Kings Loan). The undated loan deed for the Kings Loan was executed by Mr Nielsen and Mr Williams on behalf of Linchpin as lender. The stated purpose of the Kings Loan was for Kings to finance the acquisition of Pecuniary Planners Pty Ltd ABN 56 153 678 589 and its books of clients. 109 Advances were made from the Unregistered Fund to or on behalf of the Kings Parties pursuant to the Kings Loan. Market St Loan 110 By a circular resolution dated 16 February 2017 signed by Mr Daly, Mr Raftery and Mr Williams, the Investment Committee approved entry by Linchpin into a loan facility of $210,000 for Market St Holdings Pty Ltd (Market St) and Stefanie Seco (together, Market St Parties) (Market St Loan). The loan deed dated 9 February 2017 for the Market St Loan was executed by Mr Nielsen and Mr Williams on behalf of Linchpin as lender. The stated purpose of the Market St Loan was for the Market St Parties to finance the acquisition of additional books of clients. 111 Advances were made from the Unregistered Fund to or on behalf of the Market St Parties pursuant to the Market St Loan. Macquarie Loan 112 By a circular resolution dated 8 March 2017 signed by Mr Daly, Mr Raftery and Mr Williams, the Investment Committee approved entry by Linchpin into a loan facility of $100,000 for Macquarie Partners Financial Advisory Pty Ltd (Macquarie) (Macquarie Loan). The loan deed dated 3 March 2017 for the Macquarie Loan, with Macquarie and Sunhee Hres (together, Macquarie Parties) as borrowers, was executed by Mr Nielsen and Mr Williams on behalf of Linchpin as lender. The stated purpose of the Macquarie Loan was for the Macquarie Parties to refinance an existing loan to enable the transfer from the Macquarie Parties' existing dealership to Beacon. 113 Advances were made from the Unregistered Fund to or on behalf of the Macquarie Parties pursuant to the Macquarie Loan. SBE Loan 114 On or about 24 March 2017, the loan deed for a loan to Secured Business Equity Pty Ltd (SBE) and Brian David Perrin (together, SBE Parties) in the sum of $400,000 (SBE Loan) was executed by Mr Nielsen and Mr Williams on behalf of Linchpin. There was no circular resolution produced in response to the document requests recording any approval by the Investment Committee of the entry by Linchpin into the SBE Loan although the Investment Committee approved an increase in the loan limit of the SBE Loan by circular resolution dated 13 May 2017 signed by Mr Raftery, Mr Williams and Mr Daly. 115 Advances were made from the Unregistered Fund to or on behalf of the SBE Parties pursuant to the SBE Loan. Wilshire Loan 116 By a circular resolution dated 5 March 2017 signed by Mr Daly, Mr Raftery and Mr Williams, the Investment Committee approved entry by Linchpin into a loan facility of $38,000 for B and S Wilshire Pty Ltd (Wilshire) and Ben Wilshire (together, Wilshire Parties) (Wilshire Loan). The loan deed dated 25 May 2017 for the Wilshire Loan was executed by Mr Nielsen and Mr Williams on behalf of Linchpin as lender. The stated purpose of the Wilshire Loan was for the Wilshire Parties to access working capital. 117 Advances were made from the Unregistered Fund to or on behalf of the Wilshire Parties pursuant to the Wilshire Loan. SWG Loan 118 By a circular resolution dated 26 September 2017 signed by Mr Daly, Mr Raftery and Mr Williams, the Investment Committee approved entry by Linchpin into a loan facility of $459,075 for Strategic Wealth Group Pty Ltd (SWG) (SWG Loan). The loan deed dated 29 September 2017 for the SWG Loan, with SWG and Neville Ortega (together, SWG Parties) as borrowers, was executed by Mr Nielsen and Mr Williams on behalf of Linchpin as lender. The stated purpose of the SWG Loan was for the SWG Parties to finance the acquisition of additional books of clients. 119 Advances were made from the Unregistered Fund to or on behalf of the SWG Parties pursuant to the SWG Loan. NFA Loan 120 On or about 28 September 2017, the loan deed for a loan to National Financial Advice Alliance Pty Ltd (NFA) and EP and K Financial Pty Ltd (EP&K) (together, NFA Parties) in the sum of $1,700,000 (NFA Loan) was executed by the NFA Parties but not by Mr Nielsen and Mr Williams, who were recorded on the deed as the relevant signatories on behalf of Linchpin as lender. There was no circular resolution in evidence recording any approval by the Investment Committee of the entry by Linchpin into the NFA Loan. The stated purpose of the NFA Loan was for the NFA Parties to finance the acquisition of additional books of clients. 121 Advances were made from the Unregistered Fund to or on behalf of the NFA Parties pursuant to the NFA Loan. Dale Loan 122 By a circular resolution dated 1 November 2017 signed by Mr Daly, Mr Raftery and Mr Williams, the Investment Committee approved entry by Linchpin into a loan facility of $80,000 for Dale Financial Planning Pty Ltd (Dale) (Dale Loan). The loan deed dated 2 November 2017 for the Dale Loan, with Dale and Ian William Dale (together, Dale Parties) as borrower was executed by the Dale Parties but not by Mr Nielsen and Mr Williams, who were recorded on the deed as the relevant signatories on behalf of Linchpin as lender. The stated purpose of the Dale Loan was for the Dale Parties to finance the acquisition of additional books of clients. 123 Advances were made from the Unregistered Fund to or on behalf of the Dale Parties pursuant to the Dale Loan. C.8.4. The Director Loans 124 During the Relevant Period, the Unregistered Fund made loans to Mr Daly and Mr Raftery (Director Loans). 125 In the period between about September 2015 and July 2017, the Unregistered Fund and the Registered Scheme advanced an aggregate amount of $125,580 to Mr Daly pursuant to deeds of loan dated 14 September 2015 and 5 January 2017 and variations dated 11 November 2015 and 25 July 2017, none of which stated the purpose for which those loans were being advanced. 126 In the period up to 31 July 2018, Mr Daly repaid $67,458 of the money lent to him. The deed of loan dated September 2015 and the two variations were signed on behalf of Linchpin by Mr Nielsen and Mr Williams. The deed of loan purportedly entered into in January 2017 was not signed on behalf of Linchpin or by Mr Daly. 127 Prior to obtaining the first advance of money pursuant to the loans, Mr Daly provided a "Personal Loan Application" dated 28 August 2015 to the Investment Committee. In his application Mr Daly stated that he required a personal line of credit to support his family and himself through some financial difficulties they were experiencing and, further, that the line of credit would allow him to address his family's financial difficulties and "remain focussed on the company". 128 In March 2016, Mr Raftery provided a "Loan application – UP TO $40,000" to the Investment Committee dated 15 March 2016 in which he stated that he required the money due to "a cash flow hurdle" caused by relocation costs and other personal expenses. 129 In the period between about April 2016 and December 2016, the Unregistered Fund advanced a total of $40,000 to Mr Raftery pursuant to a deed of loan dated 1 April 2016 and a variation dated 1 December 2016. The deed of loan did not state the purpose for which the money was advanced. The variation described the purpose as being "to fund personal matters pertaining". The loan deed was signed on behalf of Linchpin (as lender) by Mr Nielsen and Mr Williams, and by Mr Raftery (as borrower). 130 Prior to the entry into the loan deed, the Unregistered Fund had advanced an earlier amount of $30,000 to Mr Raftery. This advance was not documented. 131 In the period to 31 July 2018, Mr Raftery repaid $37,733 of the money lent to him by the Unregistered Fund. C.8.5. Security for the Loans 132 Linchpin did not obtain any form of security over the business assets that were to be acquired for any of the Related Entity Loans or Advisor Loans. 133 Although the loan deeds for each of the CPG Loan, the ISARF Loan and the TWP Loan provided that security was to be provided over shares, no security was ultimately obtained by Linchpin to support those Loans. 134 Each of the other Related Entity Loans and Advisor Loans (SSA Loans) was purported to be secured pursuant to a document entitled "Specific Security Agreement (Shares)" or in the case of the NFA Loan it was entitled "Specific Security Agreement (Shares & Income)" (each an SSA). A draft SSA had been prepared for the TWP Loan but it was not executed by Linchpin and no security for the TWP Loan was registered on the Personal Properties Securities Register (PPSR) during the Relevant Period. 135 The SSA for each of the SSA Loans purported to provide for a grant a security over shares in the borrower either shares held by the borrower itself or shares held by related parties of the borrower. None of the corporate borrowers, however, other than Linchpin, held shares in themselves. 136 Linchpin did not obtain a valuation of any of the shares that had been provided as security for any of the SSA Loans by the related parties of borrowers. 137 None of the SSAs entered into with borrowers and related parties purportedly securing the SSA Loans was registered on the PPSR during the Relevant Period, other than the SSAs securing (a) the Beacon Loan and the Linchpin Loan between 26 September 2016 and 30 June 2017, and (b) the security given by Mr Larkin in respect of the ALPS Loan. 138 Further, notwithstanding that the loan deeds for the loans to Mr Daly and Mr Raftery provided that each was to provide security over all shares they held in Linchpin, both legally and beneficially, and the variation to the loan to Mr Daly entered into in November 2015 contained a Recital that Mr Daly purportedly "confirm[ed] the security of his entire holding in Linchpin Capital Group Limited also applies to this Deed", no security documents were executed by either Mr Daly or Mr Raftery. C.8.6. Conclusion 139 I am satisfied, given the extent of the requests for documents, the production of documents in response to those requests and the consideration of those documents outlined in the Tendered Affidavits and, more specifically, from the inquiries and investigations summarised in the Receivers' Report, that: (a) the Unregistered Fund and the Registered Scheme were operated as a single entity given the large number of transactions between the Schemes and adjustments to the Inter Fund Investment to balance these inter-fund transactions; (b) the only documentation supporting the making of the Loans were minutes of the Investment Committee recording that the Loans had been approved; (c) the loans were evidenced by deeds of loan which were executed by the borrowers and in many, but not all cases, also executed by Linchpin; (d) the majority of the Loans were made to authorised representatives of entities within the Linchpin Group and involved no credit assessment, no requirement for borrowers to provide any information to support their creditworthiness and borrowers were not required to provide any or meaningful security to support the Loans made to them; (e) the Investment Committee had no formal loan monitoring process, no formal processes for the review and rollover of the Loans and only investigated the financial position of borrowers who indicated an inability to meet their loan commitments or failed to make monthly repayments; (f) Linchpin did not maintain any loan files or obtain other documents that a prudent lender would procure prior to making the Loans, such as credit assessments, valuations or certificates of independent legal advice; and (g) interest payments from the Unregistered Scheme were made to the Registered Scheme but re-invested in the Unregistered Scheme but there are no documents which indicate that the re-investment of interest was at the Registered Scheme's election, nor is there any document recording the process by which that election had been made. D. CLAIMS AGAINST LINCHPIN, ENDEAVOUR AND THE DIRECTOR RESPONDENTS D.1. Overview 140 Prior to considering the third party claims brought by the Applicant against AIG, it is necessary to address the claims that the Applicant advances against Linchpin, Endeavour and the Director Respondents in this proceeding as those claims provide the foundation for the third party claims. Broadly speaking those claims fall into five categories, each of which is considered below. It is necessary to address the claims advanced against Linchpin and Endeavour because these alleged contraventions provide the necessary basis for the "involved in" category of contraventions alleged against the Director Respondents. D.2. Care and diligence contraventions D.2.1. Overview 141 The first category of claims advanced by the Applicant are claims that Endeavour and the Director Respondents contravened s 601FC(1)(b) and s 601FD(1)(b) of the Corporations Act by not acting in accordance with the care and diligence that a responsible entity and an officer of that entity in their position would have acted. D.2.2. Statutory provisions and legal principles 142 Section 601FC(1)(b) of the Corporations Act provides: 601FC Duties of responsible entity (1) In exercising its powers and carrying out its duties, the responsible entity of a registered scheme must: … (b) exercise the degree of care and diligence that a reasonable person would exercise if they were in the responsible entity's position; … 143 The scope of the duty of care and diligence pursuant to s 601FC(1)(b) was distilled by Barrett AJA in Re Macquarie Investment Management (2016) 115 ACSR 368; [2016] NSWSC 1184 at [70]-[86], which distillation I respectfully adopt. For present purposes, it is sufficient to provide the following summary of that distillation. 144 First, the responsible entity of a registered scheme must exercise the degree of care and diligence that a reasonable person would exercise if they were in the position of the responsible entity. 145 Second, the powers and duties of a responsible entity include the power to invest the scheme property and the responsibility to comply with the provisions of the scheme, subject to the Corporations Act. 146 Third, in objectively determining the scope of the duty of care and diligence and whether that duty has been breached, it is important to have regard to the particular circumstances of the responsible entity, including the type of scheme, the provisions of its constitution, the size and nature of its operations, the specific functions to be performed by the responsible entity, the experience and skills of the responsible entity and the circumstances of the particular case. 147 Fourth, the scope and content of the duties of the responsible entity are heavily influenced by the purpose of the particular power being exercised or duty being fulfilled and the known reliance and vulnerability of those dependent on the responsible entity complying with its duty of care and diligence. 148 Fifth, the requirement imposed on a trustee to exercise a "degree of restraint" rather than "entrepreneurial flair" and to be subject to a "requirement of caution" are equally applicable to a responsible entity. 149 Sixth, where a trustee who is managing investments for others is a professional, the duty of prudence and skill that is to be assessed is by reference to professional, not lay standards. 150 Seventh, while a responsible entity may place reliance on others in performing its functions there is "a core and irreducible requirement of diligence". 151 Section 601FD(1)(b) of the Corporations Act provides: 601FD Duties of officers of responsible entity (1) An officer of the responsible entity of a registered scheme must: … (b) exercise the degree of care and diligence that a reasonable person would exercise if they were in the officer's position; … 152 For present purposes, the principles governing the scope of the duty of care and diligence of an officer of a responsible entity can be distilled in the following terms. 153 First, the duties of care and diligence of an officer of a responsible entity encompasses and corresponds with, the duties of care and diligence owed by officers of all corporations pursuant to s 180(1) of the Corporations Act, however, there are apparent differences: Trilogy Funds Management Ltd v Sullivan (No 2) (2015) 331 ALR 185; [2015] FCA 1452 at [199] (Wigney J); Australian Securities and Investments Commission v Healey (2011) 196 FCR 291; [2011] FCA 717 at [191] (Middleton J). 154 Second, the standard of care and diligence required from an officer of a responsible entity will often be higher than the duty imposed by s 180(1) on a director of a corporation. 155 In Australian Securities Commission v AS Nominees Ltd (1995) 62 FCR 504, Finn J stated at 517-518: There is, in my view, a substantial question now to be answered as to whether a higher standard is not to be exacted from at least corporate or professional trustees (a) which hold themselves out as having a special or particular knowledge, skill and experience, and (b) which, directly or indirectly, invite reliance upon themselves by members of the public in virtue of the knowledge, etc, they appear so to have. In Bartlett v Barclays Trust Co Ltd (No 1) [1980] Ch 515 at 534 Brightman J was prepared to impose such a higher duty of care on a trust corporation: "a professional corporate trustee is liable for breach of trust if loss is caused to the fund because it neglects to exercise the special care and skill which it professes to have." This decision has been cited with apparent approval, though not in terms relied upon, by Gleeson CJ in Gill v Eagle Star Nominees Ltd (unreported, Supreme Court, NSW Gleeson CJ, 22 September 1993). It is, in its own way, consistent with observations of the Privy Council in the Australian appeal National Trustees Co of Australasia Ltd v General Finance Co of Australasia Ltd [1905] AC 373 at 381, when refusing to excuse a trust company from a breach of trust. There is extensive United States case-law affirming such a higher standard. It is conveniently explained and exemplified in Scott on Trusts, par 174.1; see also Fales v Canada Permanent Trust Co [1977] 2 SCR 302 where the question is recognised but not answered by the Supreme Court of Canada; and see G G Bogert, Law of Trusts and Trustees (2nd revd ed 1977), para 541. If it were in fact necessary for me so to do (which it is not), I would be prepared to apply to the trustee companies in these proceedings a standard of care higher than that of the ordinary prudent businessperson. 156 In Trilogy, Wigney J stated at [212]: … In determining the degree of care and diligence required of an officer under s 601FD(1)(b), consideration should be given to the fact that s 601FD is concerned with the duties of officers and directors of very specific companies. Responsible entities are not only required to be public companies, they are also required to hold AFSLs and effectively act as professional trustees. Regard must also be had to the potential for conflicting duties as recognised in ss 601FC(3) and 601FD(2). Those considerations are likely to lead to the need for officers of responsible entities to exercise a higher degree of care and diligence than the standard required of an officer or director under s 180 in respect of a company that does not have the specific features of a responsible entity. 157 Third, and relatedly, the standard of care and caution expected of a corporate trustee flows through to its directors: Australian Securities and Investments Commission v Australian Property Custodian Holdings Ltd (recs and mgrs apptd) (in liq) (controllers apptd) (No 3) [2013] FCA 1342 at [541] (Murphy J). As Finn J stated in AS Nominees at 517: Where the trustee is itself a company the requirements of care and caution are in no way diminished. And here, unlike with companies in general, these requirements have a flow-on effect into the duties and liabilities of the directors of such a company. It was established early … that at least when, and to the extent that, directors of a trustee company are themselves "concerned in" the breaches of trust of their company, they are liable to the company according to the same standard of care and caution as is expected of the company itself. 158 Directors of a corporate trustee may also contravene s 601FC(1)(b) if they are "involved" in the alleged contravention within the meaning of s 79 and s 601FC(5) of the Corporations Act. 159 Section 79 of the Corporations Act provides: 79 Involvement in contraventions A person is involved in a contravention if, and only if, the person: (a) has aided, abetted, counselled or procured the contravention; or (b) has induced, whether by threats or promises or otherwise, the contravention; or (c) has been in any way, by act or omission, directly or indirectly, knowingly concerned in, or party to, the contravention; or (d) has conspired with others to effect the contravention. 160 Section 601FC(5) of the Corporations Act provides: 601FC Duties of responsible entity … (5) A responsible entity who contravenes subsection (1), and any person who is involved in a responsible entity's contravention of that subsection, contravenes this subsection. D.2.3. Consideration 161 I am satisfied that Endeavour, as the responsible entity of the Registered Scheme, breached its respective statutory duties of care and diligence in s 601FC(1)(b) of the Corporations Act. 162 I am also satisfied that each of the Director Respondents breached their duties of care and diligence in s 601FD(1)(b) of the Corporations Act and was involved in Endeavour's contravention of s 601FC(1)(b), within the meaning of s 79 and s 601FC(5). 163 Each of the Director Respondents, other than Mr Daly, was a director of Endeavour, the responsible entity of the Registered Scheme. 164 The definition of an officer in s 9AD of the Corporations Act includes a person who "participates in making, decisions that affect the whole, or a substantial part, of the business of a corporation". 165 The concept of "participation" is directed at the role that a person may perform in the making of a decision and is not limited to persons who ultimately make the decision: Shafron v Australian Securities and Investments Commission (2012) 247 CLR 465; [2012] HCA 18 at [26] (French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ). The definition does not extend to persons who merely give advice, but rather is directed at persons who are involved in determining whether the advice should be acted upon and where a corporation is a subsidiary, the definition is sufficiently wide to extend to an officer of a holding company if the person has the capacity to affect significantly the financial standing of the subsidiary: Australian Securities and Investments Commission v King (2020) 270 CLR 1; [2020] HCA 4 at [42], [46]-[47] (Kiefel CJ, Gageler and Keane JJ), [73] (Nettle and Gordon JJ). 166 I am satisfied that Mr Daly was relevantly an "officer" of Endeavour for the purposes of the Corporations Act because he was in a position to affect the whole or a substantial part of the core business of the company of managing and maintaining the Registered Scheme. Mr Daly was an active member of the Investment Committee. He signed the 1 April 2015 Resolution that established the overall investment strategy for both Funds and circular resolutions for the Loans. As a director of Linchpin, he was involved in approving the accounts of Endeavour as the accounts for all entities in the Linchpin Group were generally circulated to directors of Linchpin for approval. Further he approved the issue by Endeavour of the Third PDS and as noted at [53] above, he was provided with a final version of the First PDS pending legal sign off and before it was lodged with ASIC. Mr Daly was also involved in promoting the Schemes to authorised representatives of FLG and RIAA. 167 The breaches by Endeavour and each of the Director Respondents of their respective statutory duties of care and diligence are principally established by their involvement in the making of the Inter Fund Investment and the making of the Loans as members of the Investment Committee. 168 Mr Nielsen signed the 1 April 2015 Resolution providing for the making of the Inter Fund Investment, signed circular resolutions as a member of the Investment Committee approving the entry by Linchpin into 11 of the Loans, signed the loan deed on behalf of Linchpin for 18 Loans and consented to and authorised the issue of each of the PDSs. 169 Mr Williams signed the 1 April 2015 Resolution providing for the making of the Inter Fund Investment, signed circular resolutions as a member of the Investment Committee approving the entry by Linchpin into 17 of the Loans, signed the loan deed on behalf of Linchpin for 17 Loans and consented to and authorised the issue of each of the PDSs. 170 Mr Raftery signed circular resolutions as a member of the Investment Committee approving the entry by Linchpin into 8 of the Loans and consented to and authorised the issue of each of the PDSs. 171 Mr Daly signed the 1 April 2015 Resolution providing for the making of the Inter Fund Investment, signed circular resolutions as a member of the Investment Committee approving the entry by Linchpin into 17 of the Loans and approved the Third PDS. 172 The Inter Fund Investment enabled Linchpin to make the Loans. Approximately 95% of the total investments in the Registered Scheme in the period between 29 June 2015 and 31 July 2018, in aggregate $16,461,805 was advanced to Linchpin to fund the Loans. 173 A single concentrated investment in the Unregistered Scheme was contrary to the investment mandate in each of the PDSs that represented that funds would be invested in progressive investments in a diversified loan portfolio across property and corporate sectors. In turn, the Unregistered Fund, that had a similar stated investment strategy to the Registered Scheme, also acted contrary to its investment mandate by investing only in financial advisory businesses within the Linchpin Group or authorised representatives of related entities to Linchpin. I accept Mr Debenham's expert evidence that such a pool of loans would not be classified as a "diversified loan portfolio" given that if a related borrower entity encountered financial difficulties this could have a "knock on effect" to other entities within the borrowing group. 174 Mr Debenham also gave evidence, that I accept, that the Lending Manual sets out the responsibilities, duties and work that a diligent and prudent lender ought to complete where a prospective borrower was requesting a loan facility. 175 Endeavour, however, failed to comply with the terms of each of the PDSs and the Lending Manual. The Inter Fund Investment was made in an unregistered managed investment scheme contrary to the Lending Manual and it failed to take an equitable mortgage over the assets of the Unregistered Fund. Endeavour also failed to ensure prior to making the Inter Fund Investment that the Unregistered Fund was a "Mortgage Investment Scheme dealing only in first mortgages over property of the nature described in [Endeavour's] disclosure document". D.3. Failing to act in best interests contraventions D.3.1. Overview 176 The second category of claims advanced by the Applicant are claims that the Director Respondents failed to act in the best interests of the members of the Registered Scheme. D.3.2. Statutory provisions and legal principles 177 Section 601FD(1)(c) of the Corporations Act provides: 601FD Duties of officers of responsible entity (1) An officer of the responsible entity of a registered scheme must: … (c) act in the best interests of the members and, if there is a conflict between the members' interests and the interests of the responsible entity, give priority to the members' interests; … 178 The best interests of members for the purposes of s 601FD(1)(c) are to be determined objectively and not by reference to the subjective beliefs of directors or officers: Australian Securities and Investments Commission v Daly (Liability Hearing) [2023] FCA 290 at [366] (Cheeseman J), citing Australian Securities and Investments Commission v Australian Property Custodian Holdings Limited (Receivers and Managers appointed) (in liquidation) (Controllers appointed) (No 3) [2013] FCA 1342 at [613] (Murphy J) and Australian Securities and Investments Commission v Lewski (2018) 266 CLR 173; [2018] HCA 63 at [73] (Kiefel CJ, Bell, Gageler, Keane and Edelman JJ). 179 As the High Court explained in Lewski at [71]: Although the duty is not satisfied merely by honesty, it is a duty to act in the best interests of members rather than a duty to secure the best outcome for members. Key factors in ascertaining the best interests of the members are the purpose and terms of the scheme, rather than "the success or otherwise of a transaction or other course of action". The purpose and terms of the Trust are the existing legal purposes and terms of the Constitution, not the purpose or terms that are honestly believed to exist. (Emphasis in original, footnotes omitted.) 180 In Australian Prudential Regulation Authority v Kelaher (2019) 138 ACSR 459; [2019] FCA 1521, Jagot J accepted at [49] the applicant's characterisation of the "best interests" covenant in the following terms: [T]he application of the requirement that the trustee "do the best they can for the benefit of their beneficiaries and not merely avoid harming them" …The "best interests" are those of present and future beneficiaries, and the trustee is required to hold "the scales impartially between different classes of beneficiaries": Cowan v Scargill at Ch 286–7; All ER 760. As Megarry V-C observed, "When the purpose of the trust is to provide financial benefits for the beneficiaries, as is usually the case, the best interests of the beneficiaries are normally their best financial interests": at Ch 287; All ER 760. Consequently, applied to a power of investment (which was the subject matter of Cowan v Scargill), the power was required to be "exercised so as to yield the best return for the beneficiaries, judged in relation to the risks of the investments in question; and the prospects of the yield of income and capital appreciation both have to be considered in judging the return from the investment". D.3.3. Consideration 181 I am satisfied that the matters referred to at [167]-[175] above that gave rise to the contraventions of s 601FD(1)(b) are also sufficient to establish contraventions by each of the Director Respondents of s 601FD(1)(c). By their conduct in approving the Loans by circular resolution and causing or otherwise permitting Linchpin, as members of the Investment Committee, to make loans, (a) to related-parties and two of the Director Respondents, Mr Daly and Mr Raftery, (b) that were not adequately, or at all, secured, loans, (c) that were made without any substantive assessment of the recoverability of the loans, and (d) inconsistently with statements in the IM, the PDSs and Endeavour's Conflict Policy each of the Director Respondents failed to act in the best interests of unitholders and thereby breached their duties pursuant to s 601FD(1)(c). D.4. Misleading and deceptive conduct contraventions D.4.1. Overview 182 On and from 23 January 2014, Linchpin issued the IM offering for investors to purchase units in the Unregistered Fund. It was expressly stated in the IM that the directors of Linchpin had consented to and authorised the issue of the IM. 183 The Applicant contends that it relied upon false and thereby misleading and deceptive representations made by Linchpin in the IM in deciding to acquire units in the Unregistered Fund and neither it, nor any reasonable person, in the position of an investor, would have invested in the Unregistered Fund if the representations had not been made. 184 Further, the Applicant contends that it relied upon false and thereby misleading and deceptive representations made by Endeavour in the PDSs before acquiring units in the Registered Scheme and neither it, nor any reasonable person, in the position of an investor, would have invested in the Registered Scheme if the representations had not been made. D.4.2. Statutory provisions and legal principles 185 Section 1041H(1) of the Corporations Act provides: 1041H Misleading or deceptive conduct (civil liability only) (1) A person must not, in this jurisdiction, engage in conduct, in relation to a financial product or a financial service, that is misleading or deceptive or is likely to mislead or deceive. Note 1: Failure to comply with this subsection is not an offence. Note 2: Failure to comply with this subsection may lead to civil liability under section 1041I. For limits on, and relief from, liability under that section, see Division 4 186 Section 12DA(1) of the ASIC Act provides: 12DA Misleading or deceptive conduct (1) A person must not, in trade or commerce, engage in conduct in relation to financial services that is misleading or deceptive or is likely to mislead or deceive. 187 Conduct will be misleading or deceptive for the purposes of s 1041H of the Corporations Act and s 12DA of the ASIC Act if it caused, or was likely to cause, a reasonable person in the position of a member of the class to whom the representation was directed to be "[led] astray in action or conduct; to [be led] into error; to cause to err": Weitmann v Katies Ltd (1977) 29 FLR 336 at 343 (Franki J), or has a tendency to lead into error: Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640; [2013] HCA 54 at [39] (French CJ, Crennan, Bell and Keane JJ). It is necessary to make that assessment in the light of all the relevant surrounding facts and circumstances: Australian Securities and Investments Commission v Westpac Banking Corporation (No 2) (2018) 266 FCR 147; [2018] FCA 751 at [2278] (Beach J). D.4.3. Consideration Linchpin Representations 188 The manner in which investors' funds were to be invested by the Unregistered Fund was described in the following terms in section 5 of the IM: 5.1 The Fund is an Unregistered Managed Investment Scheme that pools investors' monies together. 5.2 The Fund will lend part or all of those pooled monies to qualified and approved borrowers that fulfil the Funds investment criteria. 5.3 The Manager [Investport Company] is assisted in its selection and managerial duties by its Credit Committee. This committee comprises a team of qualified and experienced experts, which utilise their pooled knowledge and expertise to review the prospects of the likelihood of the financial success of the typical and preferred projects such as: * Construction and development and sub-division of residential, commercial, industrial and retail property * Purchase of residential / retail / commercial / industrial premises that are primarily serviced by rental income generated by the property. * Short term funding for businesses supported by appropriate real property security or security interest. * Lease finance arrangements for business equipment * Corporate debt * Business acquisition finance * Managed Investments * Corporate lending, * Margin lending, and * Leasing. The Fund will invest in a range of diversified assets. The Fund will invest in predominantly mortgages in particular commercial and development loans, secured by registered mortgages, commercial and corporate loans secured by registered fixed and floating charges and / all economic contractual interests. The Fund may also make loans to or invest in similar Managed Investment Schemes and in cash held on deposit with Banks or other financial institutions. 5.4 Those loans will be: * Secured by either registered mortgages and / or security interest and, * Any other additional securities required by the Credit Committee. Those additional securities may be in the nature of floating and / or fixed debenture charges, guarantees and / or the provision of collateral securities. * Invested in cash. (IM Purpose). 189 I am satisfied, as alleged by the Applicant, that the following representations were made in the IM: (a) Linchpin was a corporate authorised representative under AFSL 240938 held by FLG, the responsible entity and trustee of the Unregistered Fund and, at least impliedly, that it was duly authorised to act in those capacities; (b) the investment strategy of the Unregistered Fund was to invest funds progressively to achieve a diversified loan portfolio, across property and corporate sectors on a secured basis that are income producing; (c) the Unregistered Fund would invest in a range of diversified assets, predominantly mortgages in particular commercial and development loans, secured by registered mortgages, commercial and corporate loans secured by registered fixed and floating charges; and (d) the Unregistered Fund would seek investment opportunities across a range of loans and assets that would provide investors with premium income returns and capital stability, (together, Linchpin Representations). 190 Each of the Linchpin Representations was false and thereby misleading or deceptive or to the extent that the representation was concerned with a future matter, Linchpin did not have reasonable grounds for making it. As to the first representation, it was false at least with respect to the claim that it was a corporate authorised representative under AFSL 240938 held by FLG at any time after 27 October 2016. As to the balance of the representations, the Loans (a) did not constitute an investment in a range of diversified assets predominantly by way of commercial and development loans, secured by registered mortgages and commercial and corporate loans secured by registered fixed and floating charges, (b) were only made to related entities and financial advisors and were almost entirely unsecured, and (c) did not constitute a diversified income producing portfolio across property and corporate sectors nor did Linchpin seek investment opportunities over a range of loans and assets. Endeavour Representations 191 The investment strategy of the Registered Scheme was described in section 3 of the First PDS in the following terms: To invest funds progressively that achieves a diversified loan portfolio across property and corporate sectors on a secured basis that are income producing. These loans may be held directly by the Fund or held through another fund in which the Fund has invested. The Fund also seeks to hold cash and cash equivalents to generate income and provide liquidity to the Fund. 192 It was also stated in section 3 of the First PDS that Endeavour would lend money that had been invested in the Registered Scheme to "Primary Target Borrowers" on the following basis: [Endeavour] and Investment Manager [Investport Company] will amongst other types of lending target loans to assist financial planners to buy books to expand their businesses. These planners will always be part of the Linchpin Capital/Beacon Financial dealer universe when we approve a loan and must remain with the Group during the term of the loan. We will take security over the client books of the planner's existing business as well as the new client book alongside usual Director's guarantees and corporate fixed and floating charges. 193 Sections 5.3 and 5.4 of the First PDS contained the following further explanations of the loans to be made by the Registered Scheme, in similar terms to the explanation provided in the IM: 5.3 The RE [Endeavour] is assisted in its selection and managerial duties by its Credit Committee. This Committee comprises a team of qualified and experienced lending professionals, which utilise their pooled knowledge and expertise to review the prospects of the financial success of a typical and preferred projects … The Fund will invest in a diversified range of loans. The Fund will invest in predominantly commercial and corporate loans able to be secured by registered fixed and floating charges, non-residential mortgages such as commercial and development loans, secured by registered mortgages; and other types of economic contractual interests. The Fund may also make loans to, or invest in similar Managed Investment Schemes and in cash held on deposit with Banks or other financial institutions. 5.4 Those loans will be: * Capable of being secured by either registered mortgages or security interests and, any other additional securities required by the Credit Committee. Those additional securities may be in the nature of fixed and floating charges, debenture charges, business, director and personal guarantees and the provision of collateral securities. * Invested in cash, cash equivalents, bank and term deposits, bonds. 194 I am satisfied, as alleged by the Applicant, that the following representations were made in each of the PDSs: (a) the investment strategy of the Registered Scheme was to invest funds progressively to achieve a diversified loan portfolio across property and corporate sectors on a secured basis that are income producing; (b) the Registered Scheme would invest in a range of diversified assets, predominately in commercial and development loans, secured by registered mortgages, commercial and corporate loans secured by registered fixed and floating charges and might also be invested in similar managed investment schemes and in cash; (c) the Registered Scheme would seek investment opportunities across a range of loans and assets that would provide investors with premium income returns and, at least for the First PDS and the Second PDS, capital stability; and (d) the primary goal of any investment in another managed investment scheme would be to invest in schemes that would provide stable income returns (for all PDSs) and capital stability (at least for the First PDS and the Second PDS) and Endeavour and Investport, as manager, would observe strict guidelines in selecting managed investment schemes based on demonstrated management experience in sectors in which they invest, strong investment track record in particular asset classes and vigorous investment processes and guidelines, (together, Endeavour Representations). 195 Each of the Endeavour Representations was false and thereby misleading or deceptive or to the extent that the representation was concerned with a future matter, Endeavour did not have reasonable grounds for making it. Endeavour did not invest funds progressively to achieve a diversified loan portfolio across property and corporate sectors on a secured basis that were income producing nor did it invest predominately in commercial and development loans, secured by registered mortgages and commercial and corporate loans secured by registered fixed and floating charges. Further, on no view for the reasons advanced at [172]-[175] above was the Inter Fund Investment an investment in a managed investment scheme that had a strong track record in investment management in any relevant asset class or a fund with vigorous processes and guidelines. The loans made by the Unregistered Fund from the funds advanced by the Inter Fund Investment, were to the knowledge of Endeavour, loans that were almost entirely unsecured and advanced only to related entities, financial advisors and directors of Linchpin. D.5. Dissemination of defective PDSs contraventions D.5.1. Overview 196 The Applicant contends that the PDSs and IM were defective within the meaning of s 1022A of the Corporations Act. It submits that the PDSs and IM contained the Endeavour Representations, each of which was false or inaccurate, or alternatively, made without any reasonable basis. It also submits that the PDSs failed to disclose that loans had not been made to a diversified range of borrowers, no proper due diligence had been undertaken of borrowers and no meaningful security had been obtained to support the loans. D.5.2. Statutory provisions and legal principles 197 Section 1022A of the Corporations Act relevantly provides that a product disclosure statement will be defective for the purposes of Pt 7.9 if: (a) there is a misleading or deceptive statement in the product disclosure statement; or (b) there is an omission from the product disclosure statement of material required by s 1013C, other than material required by s 1013B or s 1013G. 198 Section 1013C provides that a product disclosure statement must include the statements and information required by s 1013D and the information required by s 1013E. Section 1013D(1)(c) relevantly provides that a product disclosure statement must include information about any significant risks associated with holding the financial product. 199 The issue of whether there are "significant risks" in holding a financial product is to be determined having regard, amongst other matters, to the probability of the risk occurring, the degree of impact if it occurred on investors, the nature of the particular product and the profile of investors: Australian Securities and Investments Commission v Avestra Asset Management Ltd (in liq) (2017) 348 ALR 525; [2017] FCA 497 at [198] (Beach J). 200 Section 1013E provides that a product disclosure statement must include any other information that might reasonably be expected to have a material influence on the decision of a reasonable person, as a retail client, whether to acquire the financial product. 201 The disclosure requirements in s 1013D and s 1013E are subject to s 1013F(1) that provides that information is not required to be included in a product disclosure statement if it would not be reasonable for a person, as a retail client, in deciding whether to acquire the financial product, to expect to find that information in the product disclosure statement. The matters that can be taken into account in making that assessment include the nature of the financial product, including its risk profile (s 1013F(2)(a)) and the kinds of things persons who commonly acquire the product might reasonably be expected to know (s 1013F(2)(c)). 202 Section 1017B(1) of the Corporations Act provides that an issuer of a financial product must notify the holders of the financial product of changes and events referred to in s 1017B(1A), which in turn include a material change to a matter, or significant event, being a matter that would be required to have been included in a product disclosure statement prepared on the day before the change or event occurs. D.5.3. Consideration 203 I am satisfied that Endeavour contravened s 1022B of the Corporations Act by disseminating the PDSs which were defective within the meaning of that section for reasons that might reasonably be expected to have a material influence on the decision of a reasonable person, as a retail client, whether to acquire the units in the Registered Scheme. 204 First, as I have concluded at [191] to [195] above, each of the PDSs contained misleading and deceptive statements. 205 Second, each of the Second PDS, Third PDS and Fourth PDS omitted information about significant risks and significant characteristics or features associated with holding the financial product, as I have concluded at [139] above, in particular, the Loans made by Linchpin from the Inter Fund Investment to related entities, including two of the Director Respondents, the lack of diversification in the loan portfolio, the absence of any proper due diligence of borrowers' capacities to repay the Loans, no or inadequate security to support the Loans and no or inadequate procedures to monitor risk and the ongoing ability of borrowers to meet their commitments under the Loans. 206 I am also satisfied that Endeavour contravened s 1017B(1) of the Corporations Act by reason of its failure to notify unitholders in the Registered Scheme of matters that it would have been required to disclose in a product disclosure statement at the time the Inter Fund Investment was made, namely the Loans made by Linchpin from the Inter Fund Investment to related entities, including two of the Director Respondents, the lack of diversification in the loan portfolio, the absence of any proper due diligence of borrowers' capacities to repay the Loans, no or inadequate security to support the Loans and no or inadequate procedures to monitor risk and the ongoing ability of borrowers to meet their commitments under the Loans. D.6. Involvement of Director Respondents in contraventions D.6.1. Overview 207 The Applicant contends that each of the Director Respondents played an active role in drafting and/or approving the IM and each of the PDSs and were thereby relevantly involved in the contraventions of Endeavour and Linchpin of s 1022A in issuing the defective PDSs and the defective IM. D.6.2. Statutory provisions and legal principles 208 Section 12GF(1) of the ASIC Act provides: A person who suffers loss or damage by conduct of another person that contravenes a provision of Subdivision BA (sections 12BF to 12BM), Subdivision C (sections 12CA to 12CC), Subdivision D (sections 12DA to 12DN) or Subdivision DA (sections 12DO to 12DZA) may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention. 209 The expression "involved in the contravention" is not defined in the ASIC Act but s 5(2) provides that if an expression is not defined in the ASIC Act but it is an expression used in the Corporations Act then it is to have the same meaning as in the Corporations Act. 210 Hence, for the purpose of determining accessorial liability, s 79 of the Corporations Act applies to both contraventions of s 1041H of the Corporations Act and s 12DA of the ASIC Act. 211 In order to establish accessorial liability as a person involved in a contravention it is necessary to establish that a person was aware of the essential matters constituting the contravention, not the characterisation of those matters required by the statute: Productivity Partners Pty Ltd (t/as Captain Cook College) v Australian Competition and Consumer Commission (2024) 419 ALR 30; [2024] HCA 27 at [83] (Gageler CJ and Jagot J), [153] (Gordon J), [269] (Edelman J) and [360] (Beech-Jones J). Hence knowledge that representations are false, and thereby misleading, is sufficient, it is not necessary to establish knowledge that the representations fell within the meaning of misleading and deceptive conduct in s 1041H of the Corporations Act and s 12DA of the ASIC Act. D.6.3. Consideration 212 I am satisfied that each of the Director Respondents was relevantly involved in the contraventions I have found of s 1041H of the Corporations Act and s 12DA of the ASIC Act by Linchpin in making the Linchpin Representations and Endeavour in making the Endeavour Representations. 213 I am also satisfied that each of the Director Respondents (other than Mr Daly) was relevantly involved in the preparation of each of the PDSs and directly or indirectly caused the PDSs to be defective within the meaning of s 1022B(3)(b)(ii) because each contained misleading and deceptive statements, namely the Endeavour Representations. I am equally satisfied that each of the Director Respondents (other than Mr Daly) was also involved in the failure of Endeavour to disclose the omitted information in each of the Second PDS, Third PDS and Fourth PDS, as I have found at [206] above. E. LOSS AND DAMAGE E.1. Overview 214 The Applicant seeks to recover damages against the Director Respondents arising from their alleged contraventions of s 601FD(1)(b) and s 601FD(1)(c) of the Corporations Act together with their involvement in Endeavour's alleged contravention of s 601FC(1)(b) (Breach of Duty Contraventions). 215 In addition, the common questions include as an issue whether the damages of the Applicant and the Group Members with respect to the Breach of Duty Contraventions can be determined on an aggregate basis at the initial trial. 216 The Applicant also seeks to recover damages against the Director Respondents on the basis that it was induced to make investments in the Unregistered Fund and the Registered Scheme by reason of the making of the Endeavour Representations and the Linchpin Representations and but for the making of those representations the Applicant would not have made those investments. 217 The annual administration returns filed with ASIC by Mr Tracy, as liquidator of Linchpin and Endeavour, for the period 15 March 2022 to 14 March 2023, establish that there has been no material recoveries to investors in the Schemes since Derrington J made orders winding up Linchpin and Endeavour on 15 March 2019. The returns record gross realisations achieved since the winding up of Linchpin of $9,856.02 and the winding up of Endeavour of $151,975.24. The estimate of future realisations in the returns is nil for both Linchpin and Endeavour. E.2. Breach of Duty Contraventions E.2.1. Statutory provisions and legal principles 218 Section 1325 of the Corporations Act relevantly provides: 1325 Other orders (1) Where, in a proceeding instituted under, or for a contravention of, a section 1325 order provision the Court finds that a person who is a party to the proceeding has suffered, or is likely to suffer, loss or damage because of conduct of another person that was engaged in in contravention of a section 1325 order provision the Court may, whether or not it grants an injunction, or makes an order, under any other provision of this Act, make such order or orders as it thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders mentioned in subsection (5)) if the Court considers that the order or orders concerned will compensate the first‑mentioned person in whole or in part for the loss or damage or will prevent or reduce the loss or damage. (2) The Court may, on the application of a person who has suffered, or is likely to suffer, loss or damage because of conduct of another person that was engaged in in contravention of a section 1325 order provision or on the application of ASIC in accordance with subsection (3) on behalf of such a person or 2 or more such persons, make such order or orders as the Court thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders mentioned in subsection (5)) if the Court considers that the order or orders concerned will compensate the person who made the application, or the person or any of the persons on whose behalf the application was made, in whole or in part for the loss or damage, or will prevent or reduce the loss or damage suffered, or likely to be suffered, by such a person. … (5) The orders referred to in subsections (1) and (2) are: (a) an order declaring the whole or any part of a contract made between the person who suffered, or is likely to suffer, the loss or damage and the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct, or of a collateral arrangement relating to such a contract, to be void and, if the Court thinks fit, to have been void ab initio or at all times on and after a specified day before the order is made; and (b) an order varying such a contract or arrangement in such manner as is specified in the order and, if the Court thinks fit, declaring the contract or arrangement to have had effect as so varied on and after a specified day before the order is made; and (c) an order refusing to enforce any or all of the provisions of such a contract; and (d) an order directing the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct to refund money or return property to the person who suffered the loss or damage; and (e) an order directing the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct to pay to the person who suffered the loss or damage the amount of the loss or damage; and (f) an order directing the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct, at the person's own expense, to supply specified services to the person who suffered, or is likely to suffer, the loss or damage. 219 An applicant seeking to recover damages pursuant to s 1325 for a contravention of s 601FC or s 601FD must establish that (a) they have suffered or are likely to suffer loss and damage, and (b) the loss arises "because of conduct of another person" who was engaged in the contravention. 220 In determining whether the loss arose "because of conduct of another person" it is necessary to have regard to both the ordinary meaning of those words and the statutory purpose. As Wigney J stated in Trilogy at [669]-[670], which analysis I respectfully adopt: There could be little doubt that the provisions in Ch 5C of the Corporations Act, and s 601FD specifically, are protective in nature. The purpose is to provide protection to members of managed investment schemes by imposing duties and responsibilities on officers of responsible entities. As Murphy J put it in ASIC v APCH (at [526]), the "scope of the s 601FD duties must be considered in light of the vulnerabilities inherent in the position of the members as beneficiaries of a trust and (as will often be the case) the fact that the [responsible entity] holds itself out to the public and is paid as a professional trustee". The contraventions by each of the respondents in this matter all involve, in one way or another, the failure by the respondents to take appropriate steps, or the failure to exercise care or diligence, in respect of the AGA loan facility and particular advances made to AGA purportedly pursuant to that loan facility. In those circumstances, and having regard to the statutory context and purpose, the question whether there is a causal link between the contraventions and any loss or damage suffered by the Fund, can be approached, at least in the first instance, by considering what would or would not have happened in relation to the AGA facility if the respondents had not breached their duties and had instead taken the required steps, and exercised care and diligence, in relation to that facility. In simple terms, were losses suffered by the Fund in relation to the AGA facility as a result of the failures by the respondents to take the required steps, or exercise care or diligence? What position would the Fund be in if the respondents had not breached their duties? 221 The Court is empowered to make an order for damages in an aggregate amount pursuant to s 33Z of the Federal Court of Australia Act 1976 (Cth) (FCA Act). 222 Section 33Z of the FCA Act relevantly provides: 33Z Judgment—powers of the Court (1) The Court may, in determining a matter in a representative proceeding, do any one or more of the following: … (e) make an award of damages for group members, sub‑group members or individual group members, being damages consisting of specified amounts or amounts worked out in such manner as the Court specifies; (f) award damages in an aggregate amount without specifying amounts awarded in respect of individual group members; … (2) In making an order for an award of damages, the Court must make provision for the payment or distribution of the money to the group members entitled. (3) Subject to section 33V, the Court is not to make an award of damages under paragraph (1)(f) unless a reasonably accurate assessment can be made of the total amount to which group members will be entitled under the judgment. (4) Where the Court has made an order for the award of damages, the Court may give such directions (if any) as it thinks just in relation to: (a) the manner in which a group member is to establish his or her entitlement to share in the damages; and (b) the manner in which any dispute regarding the entitlement of a group member to share in the damages is to be determined. E.2.2. Consideration 223 I am satisfied that the Applicant is entitled to an order for damages against the Director Respondents with respect to the Breach of Duty Contraventions and it is also appropriate that an order for damages in an aggregate amount pursuant to s 33Z of the FCA Act should be made with respect to those contraventions. 224 First, the position of the Applicant and Group Members with respect to liability for the s 601FC and s 601FD contraventions is relevantly indistinguishable. In each case the claims are advanced on the basis that the Loans would not have been made had the Director Respondents not breached their duties. The investments made by the Applicant and Group Members in the Registered Scheme were lost by reason of the s 601FC and s 601FD contraventions arising from the Inter Fund Investment. Any return on those investments were also lost because the Inter Fund Investment was used to fund the Loans made by the Unregistered Fund, each of which was improvident or inadequately secured in the event of default. The Court does not have to consider the potential return or recovery that might have been achieved by the Applicant or Group Members of any hypothetical alternative investment of the funds that they had made in the Registered Scheme: Wyzenbeek v Australasian Marine Imports Pty Ltd (in Liq) (2019) 272 FCR 373; [2019] FCAFC 167 at [90] (Rares, Burley and Anastassiou JJ). 225 Second, the quantification of the loss and damage is readily ascertainable without the need for any expert evidence. The loss and damage is simply the amount invested by the Applicant and each of the Group Members in the Registered Scheme less any returns that had been received. 226 Third, the precise quantum of the claims made by the Applicant and Group Members is not of critical importance because it is common ground that the aggregate limit of liability for all claims made by the Applicant and Group Members under the Policy is subject to a limit of liability of $10,000,000. E.3. PDSs and IM Contraventions E.3.1. Statutory provisions and legal principles 227 Section 1041I(1) of the Corporations Act provides: A person who suffers loss or damage by conduct of another person that was engaged in in contravention of section 1041E, 1041F, 1041G or 1041H may recover the amount of the loss or damage by action against that other person or against any other person involved in the contravention, whether or not that other person or any other person involved in the contravention has been convicted of an offence in respect of the contravention. 228 Section 12GF(1) of the ASIC Act provides: A person who suffers loss or damage by conduct of another person that contravenes a provision of Subdivision BA (sections 12BF to 12BM), Subdivision C (sections 12CA to 12CC) or Subdivision D (sections 12DA to 12DN) or Subdivision DA (sections 12DO to 12DZA) may recover the amount of the loss or damage by action against that other person involved in the contravention. 229 The two sections are essentially in identical terms. Both require a person to establish (a) they have suffered loss and damage, and (b) the loss or damage was suffered "by" conduct of another person. If those two matters can be established, both then permit recovery from either the contravener or a person involved in the contravention. The principal focus is on causation but reliance is typically the means by which causation can most readily be established: Addenbrooke Pty Ltd v Duncan (No 2) (2017) 348 ALR 1; [2017] FCAFC 76 at [497]-[499] (Gilmour and White JJ). 230 The requisite reliance for the purposes of s 12GF (and its analogue s 1041I) can be established by proof that a third party relied on misleading and deceptive conduct and a party suffered loss or damage by reasons of the third party's reliance on that conduct: Addenbrooke at [499]; Ford Motor Company of Australia Ltd v Arrowcrest Group Pty Ltd (2003) 134 FCR 522; [2003] FCAFC 313 at [123] (Lander J, with whom Hill and Jacobson JJ agreed) (with respect to the former s 82 of the Trade Practices Act 1974 (Cth), another analogue of s 12GF). 231 Further, as explained at [224] above, the Court does not have to consider the potential return or recovery that might have been achieved by the Applicant of any hypothetical alternative investment of the funds that it had made in the Registered Scheme: Wyzenbeek at [90]. E.3.2. Consideration 232 The Applicant contends that by reason of the contravening conduct in the IM and the PDSs it was induced to acquire investments in both Schemes and is thereby entitled to recover its loss from the Director Respondents by reason of their involvement in the contraventions by Endeavour and Linchpin of s 1041H and s 1022A of the Corporations Act and s 12DA of the ASIC Act. 233 Ms Richards does not recall reviewing either the IM or the PDSs before she decided to cause the Applicant to make the investments in the Schemes. Ms Richards, however, gave unchallenged evidence that she relied on Mr Williams in deciding what investments the Applicant should pursue and in turn Mr Williams gave evidence, that I also accept, that he recommended that the Applicant invest in the Schemes by reason of the representations made in the IM and the PDSs, which representations were substantially to the effect of the Endeavour Representations and the Linchpin Representations. I accept this evidence of Ms Richards and Mr Williams, it is substantially corroborated by each other's evidence, it was unchallenged and it was inherently plausible and consistent with the objective significance of the Endeavour Representations and the Linchpin Representations to a potential retail investor in the Unregistered Fund and the Registered Scheme. 234 I am satisfied that the evidence given by Ms Richards and Mr Williams is sufficient to establish reliance for the purposes of demonstrating loss or damage "by" the conduct of another person for the purposes of s 1041I of the Corporations Act and s 12GF of the ASIC Act. F. NON-DISCLOSURE DEFENCE F.1. Overview 235 Mr Nielsen was the Director Respondent who completed and signed a proposal form for Linchpin that was stated to be used for obtaining quotations from DUAL Australia Pty Ltd (DUAL) for "Directors & Officers liability Insurance, Employment Practices Liability Insurance, Tax Audit Costs Cover, Statutory Liability and Supplementary Legal Costs Insurance and/or Crime Protection Insurance" (Proposal Form). 236 AIG contends that Linchpin breached the duty of disclosure it owed under s 21 of the Insurance Contracts Act, at least, because at the time Linchpin submitted the Proposal Form to AIG, through a broker, Mega Capital, and up to the time of AIG accepting the risk, Mr Nielsen had actual knowledge of the matters relied upon by the Applicant in this proceeding and either (a) knew those matters were relevant to the decision of AIG to accept the risk, or (b) a reasonable person in the circumstances would be expected to know the matters were so relevant. 237 The duty of disclosure was owed by Linchpin, and AIG contends that consistently with the terms of the Policy, Mr Nielsen's statements and knowledge are attributed to it. Further, and by application of s 28(3) and s 48(3) of the Insurance Contracts Act, as confirmed by the decision of the Court of Appeal of the New South Wales Supreme Court in C E Heath Casualty & General Insurance Ltd v Grey (1993) 32 NSWLR 25 at 47 (Clarke JA, Meagher JA agreeing), AIG contends that the effect of Linchpin's breach of its duty of disclosure operates to reduce AIG's liability for claims made by (or, as in this case, in effect through) third-party beneficiaries under the Policy, that is, the Director Respondents, to nil. 238 AIG bears the onus of establishing each of the elements of its non-disclosure defence. The defence raises the following issues with respect to the matters that were alleged to have not been disclosed in contravention of Linchpin's duty of disclosure in s 21 of the Insurance Contracts Act: (a) whether Linchpin had actual knowledge of the relevant matter; (b) whether Linchpin had actual or constructive knowledge that the relevant matter was relevant to the decision of AIG to accept the risk; (c) whether compliance with the duty of disclosure had been waived pursuant to s 21(2)(d) of the Insurance Contracts Act; (d) whether the duty of disclosure had been waived because Linchpin gave an obviously incomplete answer in the Proposal Form to a question about a matter, pursuant to s 21(3) of the Insurance Contracts Act; and (e) whether AIG has established that it is entitled to reduce its liability to nil pursuant to s 28(3) of the Insurance Contracts Act. F.2. Statutory provisions and legal principles 239 Section 21(1) of the Insurance Contracts Act provides: The insured's duty of disclosure (1) Subject to this Act, an insured has a duty to disclose to the insurer, before the relevant contract of insurance is entered into, every matter that is known to the insured, being a matter that: (a) the insured knows to be a matter relevant to the decision of the insurer whether to accept the risk and, if so, on what terms; or (b) a reasonable person in the circumstances could be expected to know to be a matter so relevant, having regard to factors including, but not limited to: (i) the nature and extent of the insurance cover to be provided under the relevant contract of insurance; and (ii) the class of persons who would ordinarily be expected to apply for insurance cover of that kind. 240 The duty of disclosure in s 21(1) has two elements. First, the matter alleged not to have been disclosed must be known by the insured. In the case of a corporation that includes knowledge of its relevant officers attributed to it pursuant to the usual rules of attribution of knowledge. Second, the insured must have actual knowledge or a reasonable person in the position of the insured could be expected to know that the matter not disclosed would be relevant to the decision of the insurer whether to accept the risk and, if so, on what terms. 241 In Permanent Trustee Australia Ltd v FAI General Insurance Co Ltd (in liq) (2003) 214 CLR 514; [2003] HCA 25 at [32], McHugh, Kirby and Callinan JJ emphasised that in construing the scope of the "risk" referred to in s 21(1)(a) it was necessary to focus on the statutory text of "accept the risk" and not other phrases such as "to enter into the contract of insurance" and then went on to state at [32]-[33]: … The focus of attention is upon the risk, ie the particular insurance hazard. It is not, as such, upon the much broader question of the commercial willingness of the insurer to accept the risk, still less emotional or individual reactions to that question. Assessment of the risk, ie the insurance hazard, is susceptible to objective ascertainment. Assessment of other considerations including commercial and emotional responses, would ordinarily be much less readily ascertained on retrospective assessment. We do not consider that there is any particular difficulty in keeping these concepts separate as the language of the Act requires. The Act focuses on the particular risk of the insurance propounded. The alternative hypothesis opens a Pandora's box involving a large range of other considerations, such as are illustrated by the facts of the present case. The legislature made no attempt to redefine "risk" itself. To require an insured to disclose to an insurer every matter known to the insured, or reasonably knowable by the insured, relevant to the decision of the insurer to enter into a contract of insurance would be to impose an extraordinarily high burden upon an insurer, indeed a burden that few insureds could ever fully discharge … (Emphasis in original.) 242 Sections 28(1) and (2) of the Insurance Contracts Act provide: General insurance (1) This section applies if a relevant failure occurs in relation to a contract of general insurance, but does not apply if the insurer would have entered into the contract, for the same premium and on the same terms and conditions, even if the failure had not occurred. (2) If the relevant failure was fraudulent, the insurer may avoid the contract. 243 "Relevant failure" is defined in s 27AA of the Insurance Contracts Act to include "a failure by the insured to comply with the duty of disclosure". 244 Section 28(3) of the Insurance Contracts Act has the effect of reducing AIG's liability to the amount that would place it in the position in which it would have been if the relevant failure had not occurred. It provides: If the insurer is not entitled to avoid the contract or, being entitled to avoid the contract (whether under subsection (2) or otherwise) has not done so, the liability of the insurer in respect of a claim is reduced to the amount that would place the insurer in a position in which the insurer would have been if the relevant failure had not occurred. F.3. Alleged matters not disclosed 245 The non-disclosure defence of AIG is based on the same factual allegations that the Applicant made against the Director Respondents in the proceeding and certain other facts that are not disputed (matters not disclosed). AIG summarises the core factual allegations constituting the matters not disclosed in the following terms: The Registered Scheme invested about $16.5 million into the Unregistered fund (referred to in these proceedings as the Inter Fund Investment). This comprised the very substantial bulk of the total funds raised in the Registered Scheme (being about $17.3 million) and was thus the primary asset of the Registered Scheme. The Inter Fund Investment was not secured or documented by any written agreement between Endeavour and Linchpin, and was inconsistent with the PDSs issued by Endeavour to investors in the Registered Scheme. Further, the relevant terms and procedures applicable under Endeavour's Lending Manual and its Conflict of Interest and Related Transactions Policy were not followed in respect of the Inter Fund Investment. The money invested by the Registered Scheme into the Unregistered Scheme was applied principally by Linchpin to the making loans to itself, related-parties, the Director Respondents' themselves (specifically, personal loans to Messrs Daly and Raftery) and others. Most of the loans were not adequately (or at all) secured and repayment was uncertain. The loans were not consistent with the IM issued by Linchpin to investors in the Unregistered Scheme or the PDSs issued by Endeavour to investors in the Registered Scheme. And the loans to related-parties were also not entered consistently with Endeavour's Conflict of Interest and Related Transactions Policy. 246 AIG submits that these facts are sufficient to support its non-disclosure defence in circumstances where (a) the Unregistered Fund and the Registered Scheme were managed by a single Investment Committee that treated the two Schemes as a single scheme, (b) the Director Respondents were members of the Investment Committee from time to time and in different combinations, and (c) each of the Director Respondents, as a member of the Investment Committee made decisions about the management and conduct of the Schemes. 247 The matters not disclosed occurred in the period between April 2015 and 1 November 2017, being the period when the Loans were approved by the Investment Committee. AIG first came on risk under the Policy on 2 November 2017. F.4. Mr Nielsen's knowledge of the matters 248 Mr Nielsen's knowledge can readily be attributed to Linchpin, the entity that owed the statutory duty of disclosure pursuant to s 21 of the Insurance Contracts Act. 249 The Policy relevantly provided on page 43: With respect to any Insured Entity, only the statements and knowledge of any Chairman, Chief Executive Officer, Chief Financial Officer, Risk Manager, General Counsel or person occupying an equivalent position of any Insured Entity, or any person who signed the proposal form (or any other declaration) in connection with the then Current Period of this Policy, or any policy of which the then Current Period of this Policy is a renewal or replacement, will be imputed to all Insured Entities. (Emphasis added.) 250 Mr Nielsen signed the declaration within the Proposal Form. Further, and in any event, under the usual rules of attribution, Mr Nielsen's knowledge as the responsible director who provided information to Linchpin's broker and prospective insurers, would be attributed to Linchpin. 251 I am satisfied that Mr Nielsen had actual knowledge of the matters not disclosed. Mr Nielsen authorised the issue of, and was aware of the contents of, the IM issued by Linchpin on 23 February 2014 and each of the PDSs issued by Endeavour. He commenced acting as Endeavour's "Responsible Manager" and was a member of the Compliance Committee prior to the issue of the First PDS on 27 April 2015. He was a member of the Investment Committee which approved the Inter Fund Investment and which relevantly treated the Unregistered Fund and Registered Scheme as though they were one. Further, he either authorised or executed (in many instances, both) almost every Loan and he was a director of many of the related-party companies which were borrowers under the Loans. I therefore infer that Mr Nielsen was aware of the matters not disclosed, including that the actual use of the money invested by the Applicant and Group Members was different to the statements in the PDSs and IM, and that the Inter Fund Investment and Loans were unsecured and not documented. F.5. Knowledge of relevance 252 AIG relies on both the subjective and objective knowledge limbs of s 21 to establish knowledge by Linchpin that the matters not disclosed would be or could expected to be relevant to the decision of AIG to accept the risk, and if so, on what terms. 253 AIG submits, first, that Linchpin's subjective knowledge arises, among other matters, from the fact that the Proposal Form completed and signed by Mr Nielsen on 24 August 2017 included the following question at 1.18: After inquiry, is the Applicant or any of its Directors of [sic] Officers aware of any facts or circumstances which might afford valid grounds for any future investigations, inquiries, regulatory proceedings, or other claims, which may be covered by us, under any coverage of which it has applied? 254 Mr Nielsen answered "Yes" to this question. As submitted by AIG, the inclusion of the question is itself relevant to ascertaining Mr Nielsen's actual knowledge that the matters not disclosed by him were relevant to AIG's decision whether to accept the risk. 255 Moreover, the significance of the matters not disclosed must have been readily apparent to Mr Nielsen. 256 On 2 September 2016, Mr Nielsen received an email from Linchpin's then auditor, George Dakis of Moore Stephens, titled "Significant Matters to Address regarding Endeavour and Investport (URGENT ATTENTION REQUIRED)". Mr Dakis stated in the email: As you are aware, we have commenced the year-end audit of a number of your entities. Over the last 3-4 months we have discussed and raised a number of matters with you and or your representatives regarding specific issues relating to Investport and by reference Endeavour. This matters [sic] have been continuing for a significant period without, in our opinion, appropriate resolution. The purpose of this email is to provide you with an updated summary of our concerns, the information we require and the possible ramifications and implications for us as auditors and for you as directors and responsible entity. 257 Mr Dakis advised Mr Nielsen that Moore Stephens (a) would not be able to provide an unqualified audit report for reasons including the absence of an "independent unit pricing mechanism or valuation model to regularly value the fund's investments", (b) had not been provided with "sufficient and appropriate evidence" to establish that the "monitoring reporting" procedures were being followed to ensure that scheme property was being valued and monitored appropriately, and (c) had not received sufficient information to be able to form an opinion as to the valuation of the units in "IIOF New" and the recoverability of "the loan to Linchpin and the financial planners". Mr Dakis also observed: Depending on the final resolution of these issues, it should be noted that qualifications to an AFSL and Managed Investment Schemes compliance plan audit report must be communicated to ASIC by the auditor. 258 On 29 January 2017, Mr Nielsen (and Mr Williams) were copied on an email sent by Mr Daly to Mr Raftery. The purpose of the email was stated to be to alert Mr Raftery to Mr Daly's concerns so "there are no doubts about potential consequences that may arise from the choices we collectively make". The email was stated to have been copied to Mr Nielsen and Mr Williams for "transparency purposes". Various concerns about the performance of Beacon and staffing issues were expressed in the email, including the following: Regretfully our present situation is a product of the past and whilst everyone doesn't want to dwell on those facts, the Titanium acquisition was a disaster. We understood we were acquiring appox [sic] $840K in net income, today it represents just $250K. In addition we were sold a pup on virtually everything else Andrew Blanchette introduced. Mortgage Broking was another mirage that was going to produce significant returns and is presently costing $150K plus. Endeavour was to be our saviour and failed miserably. Finally there is Beacon Property that again was touted to commence with a $150K EBIT but has produce $9K in income since inception! 259 These concerns were accompanied by concerns that one staff member needed to be retained until at least 30 June 2017 because she was "a self-confessed ASIC whistle blower", the removal of two other staff members had "potential ASIC consequences", and the "exposure a new appointment represents" to replace an existing staff member who had "full access to our accounts and thanks to Andrew Blanchette, is equally fully briefed regarding IIOF". The email also recorded a series of concerns raised by another staff member, including PDS inaccuracies, inaccurate performance reports, lack of or no consistent monthly reporting, failures to invest immediately funds transfers and reports not being provided for pension funds, together with a concern raised by that staff member that he needed to report to ASIC an inadvertent failure not to act in the best interests of his clients. 260 On 31 May 2017, Mr Nielsen first created a document titled "Culture" in which he expressed concerns about the management and behaviour of Linchpin and the need to establish a culture which "provides a community and enables each of us to have the courage to be and act in each others best interests". In the document, Mr Nielsen noted various matters confronting the Linchpin Group including that "[t]he Board is inconsiderate of the investors that support the business" and that there was a threat that "[t]he business will collapse". Mr Nielsen then recorded the following "Outcomes" if an appropriate culture was not established: 1) Our results are the sum of our actions 2) We must continue to lie to ourselves 3) We must continue to lie to third parties e.g. auditors, ASIC 4) We will never be able to lead by being fearful 5) Ill will between all staff and no accountability 6) We cannot issue share plan 7) We cannot list in our current state. 8) What do we celebrate 261 The observation that "we must continue to lie to third parties e.g. auditors, ASIC" is, on its face, a remarkable admission of knowledge of conduct that could give rise to investigations and claims against the Director Respondents. 262 For the foregoing reasons, I am satisfied that Mr Nielsen, by no later than upon reading question 1.18, knew that Linchpin's conduct, including the matters not disclosed, was a matter relevant to the decision of AIG whether to accept the risk. Mr Nielsen was a company director and secretary with many years of experience and I readily infer that he understood that auditor and ASIC related matters could form a basis for investigations, inquiries and regulatory proceedings against directors of responsible entities and fund managers. 263 It follows that Linchpin to whom Mr Nielsen's statements and knowledge are attributed, as explained at [250] and [251] above, had the requisite actual knowledge required under s 21(1)(a) of the Insurance Contracts Act. 264 Moreover, AIG submits, and I accept: [T]hat a reasonable person in the position of a director or officer of a company (or group of companies) engaged in the business of being a professional trustee and managing large sums of money under trusts and managed investment schemes would consider the systemic mismanagement and irregular management of funds as alleged by the Applicant (use of invested money inconsistently with the IM and PDS, loans to related entities and the Director Respondents, mixing money between the different schemes, making loans without security or documentation and further advances to borrowers already in default of repayment obligations) to be matters relevant to an insurer's decision to accept the risk of a D&O liability policy for that company. Indeed, it is difficult to escape that conclusion particularly where duties are imposed directly on directors of a responsible entity of a registered managed investment scheme: s 601FD of the Corporations Act 2001 (Cth). 265 The matters not disclosed were fairly summarised by AIG in this submission. They are matters that are objectively relevant to any investment decision in the Schemes and are fundamental considerations for any risk assessment. A failure to invest money consistently with disclosure documents, related party loans, mixing money between different investment schemes, making loans with inadequate or no security and making advances to borrowers in default self-evidently constitute matters that might give rise to a claim against a director or officer of a company that permitted or otherwise failed to prevent such acts or omissions to occur. 266 I am therefore satisfied that both limbs of s 21(1) are engaged. The knowledge of the Director Respondents, in particular that of Mr Nielsen, was sufficient to establish that Linchpin knew the matters not disclosed were relevant to the decision of AIG to accept the risk and a reasonable person in the same circumstances could be expected to know that those matters would be so relevant. F.6. AIG's response if the matters not disclosed had been disclosed 267 AIG relies on the evidence of Ms Samuel in support of what it submits should otherwise be a common sense proposition, that AIG, as a directors and officers insurer, would not have accepted the risk, and issued a policy to Linchpin, had it been made aware of the matters not disclosed (all of which occurred prior to AIG coming on risk). 268 Ms Samuel was the underwriter responsible for (and had the relevant authority for) the issue of the Policy to Linchpin. 269 Ms Samuel gave evidence, by reference to AIG's underwriting guidelines, that if the matters not disclosed had been disclosed to her prior to accepting the risk, they would have caused her to have real concerns that Linchpin had very poor corporate governance and that (among other matters) the Director Respondents managed the company with a "cavalier attitude". On that basis, she stated that she would not have caused AIG to enter into the insurance contract and issue the Policy to Linchpin. 270 Ms Samuel gave evidence that such concerns about corporate governance are a major "red flag" when it comes to considering whether to issue a directors and officers liability policy, and hence the matters not disclosed would have justified AIG not issuing the Policy to Linchpin. 271 Ms Samuel also gave evidence that the matters not disclosed would have caused her to be concerned about the increased risk of Linchpin being subject to investor claims and ASIC investigations, and the risk that Linchpin's financial information (which was critical to her underwriting decision) was not accurate. 272 I accept Ms Samuel's evidence that had she been informed of the matters not disclosed she would have decided not to issue the Policy to Linchpin and she would have been comfortable making that decision without referring it upwards to anyone within AIG for final approval as Linchpin did not have an existing directors and officers liability insurance policy with AIG. The matters not disclosed were objectively material and likely to lead to claims being brought against Linchpin, Endeavour and each of the Director Respondents. 273 Subject only to the question of whether there was any waiver by AIG of the obligation to disclose the matters not disclosed, given my acceptance of Ms Samuel's evidence that the Policy would not have been issued if she had been notified of the matters, the reduction in AIG's liability would be to nil. G. WAIVER OF THE DUTY OF DISCLOSURE G.1. Overview 274 The critical issue for the non-disclosure defence is whether AIG has relevantly waived the duty of disclosure. That issue in large part turns on the questions asked and answers provided in the Proposal Form and the extent of subsequent requests made by AIG for additional information from the insured. Although they are ultimately objective issues the answers to them are informed by the evidence of Ms Samuel. 275 Ms Samuel confirmed in both her affidavit evidence and in cross examination that she has no actual recollection of reviewing the answers provided by Linchpin in the Proposal Form or the steps that she took in response to those answers. Ms Samuel sought to explain the steps that she took, as recorded in the contemporaneous documents, by reference to her usual practice. It soon became apparent, however, as her cross examination progressed, that Ms Samuel significantly departed from her usual practice in her consideration of the Proposal Form, subsequent communications with Linchpin's broker and decision to enter into the Policy. G.2. Statutory provisions and legal principles 276 The duty of disclosure is subject to the qualifications in s 21(2) and (3) of the Insurance Contracts Act that provide: The insured's duty of disclosure … (2) The duty of disclosure does not require the disclosure of a matter: (a) that diminishes the risk; (b) that is of common knowledge; (c) that the insurer knows or in the ordinary course of the insurer's business as an insurer ought to know; or (d) as to which compliance with the duty of disclosure is waived by the insurer. (3) Where a person: (a) failed to answer; or (b) gave an obviously incomplete or irrelevant answer to; a question included in a proposal form about a matter, the insurer shall be deemed to have waived compliance with the duty of disclosure in relation to the matter. 277 These qualifications relevantly include a waiver by an insurer of the duty of disclosure pursuant to s 21(2)(d) or a waiver pursuant to s 21(3) if the insured failed to answer or gave an obviously incomplete or irrelevant answer to a question in a proposal form. 278 In General Accident Insurance Asia Limited v Sakr (2001) 11 ANZ Ins Cas 61-508; [2001] NSWCA 402, Giles JA (Hodgson JA and Sperling J agreeing) stated at [32] that s 21(2)(d) of the Insurance Contracts Act reflected the common law position discussed in, among other cases, Liga Knitting Mills v Lombard Insurance Co Ltd (1984) 3 ANZ Ins Cas 60-551. 279 In Liga Knitting, Southwell J observed at 78,258 that it was often difficult to draw a line between non-disclosure and a sufficient disclosure to enable an insured to rely on waiver. His Honour then referred to statements in authorities and texts which he considered were of assistance in drawing that line. By way of summary, the following statements of principle can be distilled from those authorities and texts: (a) an insurer cannot take advantage of its wilful blindness or negligence if it fails to have regard to information provided to it, provided "sufficient information, as far as the assured is concerned has been placed at [its] disposal": Bates v Hewitt (1867) LR 2 QB 595 at 605 (Cockburn CJ); (b) if an insured discloses sufficiently reasonable information "to call the attention of the insurers in such a manner that they can see if they require further information they ought to ask for it" and "the insurers need only to clarify a detail by enquiry from an immediately available source or the assured [itself] in order to complete the picture": MacGillivray and Parkington on Insurance Law, 7th ed., para. 675; (c) the obligation on an insured to disclose every material fact to an insurer is satisfied if the insured "discloses sufficient to call attention of the underwriters in such a manner that they can see that if they require further information they ought to ask for it": Asfar & Co v Blundell (1896) 1 QB 123 at 129 (Lord Esher MR); (d) an insured cannot satisfy its duty of disclosure by only providing an insurer with "the means of knowledge", rather the principle is "that less than the whole of the relevant information may amount to disclosure, provided that what is conveyed fairly indicates to the insurer that there is more information to be obtained if he chooses to ask for it, or to have it": Roumeli Food Stores (NSW) Pty Ltd v New India Assurance Co Ltd (1972) 1 NSWLR 227 at 234 (Macfarlan J); and (e) the duty to disclose material information to the insurer is on the insured and it is only when the insurers are "put on enquiry about some particular matter that it can be said that they have waived the obligation, the requirement, as to disclosure.": Arterial Caravans Ltd v Yorkshire Insurance Co Ltd [1973] 1 Lloyd's Rep 169 at 180-181 (Chapman J). 280 The specific questions and terms in a proposal for insurance may attenuate the scope of an insured's duty of disclosure. In Petkovski v Government Insurance Office of New South Wales [1993] NSWCA 211, the Court of Appeal of the New South Wales Supreme Court considered the impact of a proposal form on the duty of disclosure in the context of a houseowners and householders' policy. 281 Justice Mahoney at p 3 of his reasons stated: The fact that the form of a proposal form limits the form of the answer, and of the information, that may be given in it does not necessarily result in the qualification of the overall duty of a proposed insured to act in good faith in relation to it. The fact that the proposal form required a "Yes/No" answer to the question did not mean, I think, that the plaintiffs were completely relieved from providing any other information which otherwise would have been relevant. For example, if the fact was that, though there was a keyed window lock on the inside of the window, the lock was quite inefficient or could readily be overcome from outside by, e.g. moving the window, that would have been a matter of relevance which the plaintiffs would have been required to state. 282 Justice Sheller observed at p 8 of his reasons: The appellants relied upon a passage in the 7th ed of MacGillivray and Parkington on Insurance Law at para 626: "It is more likely, however, that the questions asked (in the proposal) will limit the duty of disclosure, in that, if questions are asked on particular subjects and the answers to them are warranted, it may be inferred that the insurer has waived his right to information, either on the same matters but outside the scope of the questions, or in kindred matters to the subject matter of the questions. Thus, if an insurer asks, "How many accidents have you had in the last three years?" it may well be implied that he does not want to know of accidents before that time, though these would still be material." This passage was quoted with approval by Clarke J, as he then was, in Kyles Transport Pty Ltd v Zurich Australian Insurance Ltd (1984) 3 ANZ Insurance Cases 60-600 at 78,644. The passage is repeated in para 646 of the 8th edition of MacGillivray and Parkington. It is a passage based largely upon the words of Asquith LJ in Schoolman v Hall (1951) 1 Lloyds Rep 139 at 143. Can it fairly be inferred from the question "Are any keyed window locks fitted on all accessible windows to the building" combined with the imperative "Answer the question by 'Yes' or 'No'" that the common law duty to disclose other material matter has been dispensed with? This has to be considered in the context of the warranty not only that the statement is true but that no matter has been withheld. I do not regard the matter as free from doubt. However consistent with authority I think the better view is that the question combined with the imperative did limit the disclosure necessary to saying whether or not keyed window locks were on all accessible windows. His Honour's conclusion that the appellants' answer was not a misrepresentation meant that the disclosure was sufficient. 283 Justice Cripps also observed at pp 5-6 of his reasons: Schoolman v Hall (1951) 1 Lloyd's Rep 139 was concerned with non disclosure of material facts. In that case it was conceded that if there had been no proposal form there would have been a duty to disclose certain material. However, the question arose whether on its true construction the proposal form limited the duty of disclosure. Asquith LJ said: "It is unquestionably plain that questions in a proposal form may be so framed as necessarily to imply that the underwriter only wants information on certain subject matters, or that within a particular subject matter their desire for information is restricted within the narrow limits indicated by the terms of the question, and, in such a case, they may pro tanto dispense the proposer from what otherwise at common law would have been a duty to disclose everything material." A similar approach was taken by Clarke JA in Kyles Transport Pty Ltd v Zurich Australian Insurance Ltd and Anor (1984) 3 ANZ Insurance Cases 60-600 at 78629. The question for determination then is whether the questions as asked and the manner of asking discharged the appellants from disclosing what would have otherwise been a material fact, viz that the lock was on the outside not the inside of the house. I am of the opinion that it did. 284 In Thompson v Government Insurance Office of New South Wales (Supreme Court of New South Wales, 15 June 1994, unreported), Rolfe J, after referring to the reasoning of Mahoney, Sheller and Cripps JJA in Petkovski at 56-57, concluded at 62 that a fair reading of the proposal before him did not require disclosure of matters other than those specifically requested. His Honour found at 60 that after directing the insured to the general duty of disclosure, the proposal thereafter directed attention to specific matters and included a declaration that the answers given on the proposal "are true and nothing has been withheld which may influence [the insurer] in its assessment of risk". His Honour, at 61, also referred to the absence of any general question and the absence of any place in the proposal for additional information to be inserted. His Honour, however, stated that it would be inappropriate to take into account the absence of any specific place to insert additional information, citing the observations of the plurality of the High Court in Advance (NSW) Insurance Agencies Pty Ltd v Matthews and Anor (1989) 166 CLR 606; [1989] HCA 22 at [23] (Mason CJ, Dawson, Toohey and Gaudron JJ) to the effect that the form of a proposal may not limit the duty of disclosure, in the context of answers given by joint insureds. 285 In Jaggar v QBE Insurance International Ltd [2007] 2 NZLR 336, the Court of Appeal of New Zealand propounded the following test for waiver of an insured's duty of disclosure. The Court said at [35]: Waiver in this context is a very limited concept (see Wise (Underwriting Agency) Ltd v Grupo Nacional Provincial SA [2004] 2 Lloyd's Law Rep 483 (CA)). It usually applies in two situations: (a) Where an insurer asks questions about a particular topic, it will have waived disclosure of material facts and circumstances which fall strictly outside the ambit of the particular questions on that topic. By way of example, the insurer might ask whether a prospective insured has ever been convicted of an offence for which he/she was imprisoned. Such a question would waive disclosure in relation to convictions which did not result in imprisonment. (b) Where the insured discloses facts and circumstances which reasonably indicate the possible existence of further material facts, the insurer will have waived disclosure if it fails to make further inquiry. An example might be disclosure by an insured that he or she has been in hospital. A failure by the insurer to inquire into the circumstances would waive the need for disclosure of such circumstances. 286 The breadth of the "reasonably indicate the possible existence of further material facts" limb in Jaggar was not accepted in Hitchens v Zurich Australia Ltd [2015] NSWSC 825 at [129]-[140] (White J). His Honour considered the better view was that the principle of waiver in s 21(2)(d) takes its meaning from how the concept has been understood in insurance law, referring in particular to the summaries of the relevant principles by Longmore LJ and Peter Gibson LJ (and also by Rix LJ who dissented on whether waiver had been established) in the Court of Appeal in England in WISE Underwriting Agency Ltd v Grupo Nacional Provincial SA [2004] EWCA Civ 962; [2004] 2 Lloyd's Rep 483, that I have set forth below. Each of their Lordships emphasised the requirement for an insured to make a fair presentation of risk before there could be any waiver of the duty of disclosure. 287 Lord Justice Longmore said at [111]: So the question becomes (a) was there a fair presentation of the risk? And (b) was the insurer in the course of that presentation in the words of Parker LJ [in Container Transport International Inc v Overseas Mutual Underwriting Association (Bermuda) Ltd [1984] 1 Lloyd's Rep 476 at 511–512] – put on enquiry by the disclosure of facts which would raise in the mind of a reasonable insurer at least the suspicion that there were other circumstances which would or might vitiate the presentation? 288 Lord Justice Peter Gibson said at [130]: The issue of waiver is based on s 18(3)(c) of the Marine Insurance Act 1906, [Grupo Nacional Provincial SA]'s claim being that there was a waiver by implication. I take the law to be correctly summarised in para. 17-83 of MacGillvray on Insurance Law (10th ed.) which the judge cited in his judgment. That required the court to consider (1) whether GNP had performed its fundamental duty of making a fair presentation to the reinsurers, WISE, of the risk and (2) whether reasonably careful reinsurers would have been put on inquiry in the circumstances. If there was a fair presentation of the risk and the reasonably careful reinsurers would have been put on inquiry but failed to make an inquiry which they could have made easily, they will be treated as having waived disclosure of what they would have discovered had they made that inquiry. However the court should not subvert the duty of the assured to make a fair presentation of the risk by finding that the reinsurers were put on inquiry and failed to discover for themselves the material information save in a clear case. 289 In addition, Rix LJ (who dissented on whether waiver had been established) stated at [64] that the principles of waiver in insurance law concluded: Ultimately, it seems, the question is: Has the insurer been put fairly on inquiry about the existence of other material facts, which such inquiry would necessarily have revealed? The test has to be applied by reference to a reasonably careful insurer rather than the actual insurer, and not merely by reference to what such an insurer is told in the assured's actual presentation but also by reference to what he knows or ought to know, ie his section 18(3)(b) knowledge. The reasonably careful underwriter is neither a detective on the one hand nor lacking in common sense on the other hand. Mere possibilities will not put him on inquiry, and very little if anything can make up for non-disclosure of the unusual or special. Overriding all, however, is the notion of fairness, and that applies mutually to both parties, even if the presentation starts with the would-be assured. 290 The statements of principle in the authorities addressed above make clear that before an insurer can be held to have waived an insured's obligations of disclosure, the insured must have fairly disclosed the existence of the risk and the insurer has communicated, expressly or by silence, that further particulars or details of the risk are not required. 291 Section 21(3) of the Insurance Contracts Act provides alternative examples of what will be deemed to be waiver of compliance. The provision, however, does not codify the circumstances which may constitute a waiver: ABN AMRO Bank NV v Bathurst Regional Council (2014) 224 FCR 1; [2014] FCAFC 65 at [1710] (Jacobson, Gilmour and Gordon JJ). 292 In Dew v Suncorp Life and Superannuation Limited [2001] QSC 252, Jones J drew a distinction between an answer that was "obviously incomplete" for the purpose of s 21(3) of the Insurance Contracts Act and an answer that was unresponsive. In that case an insured had responded to questions in an insurance proposal seeking an identification of a medical condition with the expressions "family deaths" and "stress". In addressing whether this response was "obviously incomplete" or unresponsive, his Honour stated at [70]-[72]: In this connection I was referred to a decision of the Court of Appeal in Orb Holdings Pty Ltd v Lombard Insurance Co. (Australia) Ltd in which Fitzgerald P said:- "It remains to refer again to s21(3) and s7 of the Insurance Contracts Act. By virtue of those provisions, the appellant cannot take advantage of either a failure to disclose or a misrepresentation by the respondent if the information given by the respondent was "obviously incomplete". The rationale behind those provisions is that obviously incomplete information puts the insurer on inquiry and, if it omits to inquire, it has waived its right to rely upon the insured's failure to disclose or misrepresentation. In the context of the plaintiff's answers generally, in the personal statement and the medical report which was subsequently sent by Dr Kemp, the circumstances would not necessarily put an underwriter "on inquiry". Whether an answer is "obviously incomplete" for the purpose of s21(3) of the Act has to be looked at, in my view, in light of other information coming to the knowledge of the insurer. The concept of waiver essentially involves an election - an election which allows the exercise of alternative and inconsistent rights. Here the alternatives are to inquire or not to inquire. The consequence of not inquiring is quite significant, namely the absolving of the proposer from his/her duty to disclose. In my view the plaintiff's answers in her personal statement are unresponsive rather than "obviously incomplete". Mr Williams' satisfaction with the information that came before him when he made the decision to accept the proposal was not an act of an election on his part but rather his preparedness to accept the plaintiff's answer in the context of the other information which he had. Therefore, I would find that there was no waiver of the kind contemplated by s21(3) of the Act. (Footnotes omitted.) G.3. Factual findings G.3.1 The Proposal Form 293 Mr Nielsen signed the Proposal Form on behalf of Linchpin as "JNT Managing Director" and his signature was dated 24 August 2017. 294 Ms Samuel gave evidence, subject to a ruling that it was only admitted as opinion evidence, that it was not her practice when she received a proposal form addressed to another insurer, such as DUAL, to insist upon an AIG proposal form also being completed. She explained that to the extent that the alternative proposal form did not seek the same information that would be sought in the AIG proposal form, her usual practice would be to direct specific questions to the prospective insured, rather than requiring them to complete an AIG proposal form. 295 The Proposal Form contained a series of questions about claims and circumstances, each of which was followed by the following text, "Yes [ ] No [ ]". The questions and handwritten answers on the completed Proposal Form relevantly included: 1.16 After inquiry, in the past five (5) years, has there been any regulatory inquiries or investigations made into the Applicant, its subsidiaries, or any of its, Directors, Officers, Managers, or Employees, which may have been covered by us under any of the coverage's [sic] for which it has applied? Yes [ ] No [ .] 1.17 After inquiry of all Directors & Officers of the Applicant, has there been, or is there now pending, any proceedings (Criminal or Civil) or demands which have been made against them in their capacity as a Director or Officer of the Applicant or its Subsidiaries? Yes [ ] No [X] 1.18 After inquiry, is the Applicant or any of its Directors of Officers [sic] aware of any facts or circumstances, which might afford valid grounds for any future investigations, inquiries, regulatory proceedings, or other claims, which may be covered by us, under any coverage for which it has applied? Yes [X] No [ ] 1.19 In the last five years, has Applicant been the subject of any complaint, suit, inquiry or notice of a hearing from any State, Territory or Federal regulatory body, or any other party? Yes [X] No [ ] 1.20 Has the Applicant sustained any losses over the last five (5) years as a result of any fraudulent action, or dishonest misappropriation? This includes the loss of any third party's funds or tangible property in the care, custody and control of the Applicant? Yes [ ] No [X] 296 The completed Proposal Form also included the following question and handwritten answer: 1.22 If the Applicant answered YES, please provide details of any losses (via separate addendum if necessary) sustained during the past five (5) years. Please include a brief description of the facts of the matter, details regarding the quantum of the loss, the outcome and whether any insurance monies were paid as a result. We receive complaints and enquiries as a natural course of business as we hold numerous AFSLs and other authorisations. The bulk are dealt with by internal processes and occasionally through FOS + the courts. All complaints, breaches incidents are recorded in our Registers. 297 Unlike the AIG proposal form, the Proposal Form did not specifically ask for particulars of any affirmative answers to questions 1.16 to 1.19. Most relevantly for present purposes, question 1.18 only sought an affirmative or negative answer to knowledge of any facts or circumstances that might give rise to any future investigations, inquiries, regulatory proceedings or other claims. The equivalent claims information questions in the AIG proposal form included the following instruction: If "Yes" to any of the above questions, please provide full details on a separate sheet. If applicable, include the circumstances, any allegations, loss incurred (including defence costs, representation costs, settlements, judgement, and any insurer reserves), and details of any remedial action taken. 298 In contrast, question 1.22 in the Proposal Form only sought "details of any losses". 299 It is next necessary to consider a standard form AIG document described as a referral commentary that was completed by Ms Samuel at the time that she was reviewing the Proposal. G.3.2. Referral Commentary 300 The AIG referral commentary completed by Ms Samuel at the time she reviewed the Proposal (Referral Commentary) included the following instructions (in italics) and responses from Ms Samuel: Changes in Risk from the Previous Year This section should include the major changes in the risk profile and comment on how this affects our risk exposure. … Any suggestion that contingent liabilities are not adequately disclosed? Any litigation/regulatory action. None, other than PI type of issues … Claims Commentary This section should include highlights of and a discussion of any claims or circumstances which have been notified on prior years. This section should only be completed once the Underwriter has discussed the individual notifications with the claims team. No claims per the prop, however, the insured is aware of circumstances that could be grounds for further investigations. WILL NEED INFORMATION ON THIS Per the prop, these appear to be complaints and enquiries as a national [sic] course of business related to their AFSL, presumably, they are PI type of claims 301 Ms Samuel confirmed in cross examination that she has no specific recollection of completing the Referral Commentary. 302 The perceived requirement for more information was then confirmed by the inclusion of a requirement in the Referral Commentary that the issue of the Policy be subject to a "Signed and dated AIG GC prop", a reference to the AIG Gold Complete proposal, being received "prior to binding". G.3.3. Quotations provided to Mega Capital 303 Both the initial quotation provided by Ms Samuel to the broker, Mega Capital on 13 September 2017 and the revised quotation provided by her to Mega Capital on 10 October 2017 included a statement that the quotation was subject to the receipt of a "satisfactorily completed, signed, and dated AIG Gold Complete proposal form". No such proposal form was ever provided by Linchpin. 304 Both quotations also stated they were subject to Linchpin (a) providing information regarding their directors and officers, (b) advising on the maturity date of its debt and compliance with its debt covenants, and (c) providing a schedule of the shareholder ownership. G.3.4. Responses to subjectivities 305 On 16 October 2017, Kavita Singh, a Senior Account Manager of Mega Capital emailed Ms Samuel providing further information with respect to the four directors of Linchpin, including copies of their curriculum vitaes, shareholder information that disclosed that the Director Respondents held 89% of the shares in Linchpin and confirming adherence with debt covenants and the expiry date for Linchpin's debt. It was then stated in the email: I trust the above and the attached are sufficient to satisfy the subjectivities noted in your quotation, namely: - A listing of the Directors & Officers, including their CVs - Please advise on the maturity date of Linchpin's debt and if it is compliant with its debt covenants; - Please provide a schedule of the shareholder ownership. Please confirm. 306 Ms Singh did not refer to the request to provide an AIG proposal form "subjectivity" in the quotations. 307 On 18 October 2017, Ms Samuel responded to Ms Singh's email, apologised for the delay in replying, explaining that she had been attending a conference and then stated: Thank you for sending over the subject to [sic] information. Please let this email serve as confirmation that these subjectivities have been satisfied. 308 On 2 November 2017, Ms Samuel emailed Bhavesh Radiya, the General Manager of Mega Capital confirming that AIG had bound directors and officers liability insurance cover for Linchpin with effect from 31 October 2017 to 31 October 2018. G.3.5. Evidence of Ms Samuel 309 When initially pressed in cross examination as to why she decided to proceed with the Policy without an AIG proposal form being completed, Ms Samuel suggested the request for a completed AIG proposal form was "just as a nice to have" and "to be honest, your Honour, we don't necessarily always get it". Senior counsel for the Applicant then challenged that evidence in the following significant exchange with Ms Samuel: Yes. You insisted on the proposal – the AIG – as a condition of the offer because you knew very well that the information sought in the [DUAL] proposal was insufficient to require the insured to provide information relevant to the risk?---I'm not - - - That's - - -?--- - - - sure if that's correct. I don't – honestly don't remember exactly at that time. Pretty likely scenario which would explain your insistence by way of a condition for the AIG proposal, though; would you agree?---Possibly, yes. Probably?---Possibly. What are the universe of other possibilities, then? That gives it only a possibility. Why else would you be doing it?---I asked for it. Doesn't – because I'm not sure if I got it. I don't remember every – exactly everything that transpired. But, yes, I don't. At a minimum, Ms Samuel, if you didn't press for the AIG proposal to be provided as per this condition, in accordance with the practice you've identified, it would have been absolutely necessary for you to direct specific questions at all of those matters I asked you about earlier that you agreed were in the AIG proposal but not required to be addressed in the [DUAL] proposal. Do you agree with me?---Yes, I would probably – yes. And so this was your way of asking for the proposal – of making sure that you absolutely got all the information that AIG required in its document; true?---Probably, yes. And if you didn't insist on that proposal, then it was incumbent upon you with your usual practice to make sure you directed specific questions to the insured about all of those matters in your proposal not dealt with in the [DUAL] document; true?---Possibly, yes. May I just put this proposition to you now. You never directed specific questions at any of those matters that I've asked you about which were in the AIG proposal but not in the [DUAL] proposal?---It doesn't appear to be, no. That's your qualified acceptance that you did never direct specific questions?---I – I did – it doesn't look like I asked, no. That would be a very significant departure by you from your practice – usual practice and proper practice at the time, wouldn't it?---Yes. That is, you either needed to direct the specific in question – questions – or make sure you got the AIG proposal; true?---Yes. 310 It is readily apparent from this evidence of Ms Samuel that (a) her decision to proceed with the Policy in the absence of a completed AIG proposal was a significant departure from her usual practice and thereby the usual practice of AIG given her role within AIG as a senior underwriter and the relevant decision maker, and (b) Ms Samuel was not able to provide any explanation why she had departed from her usual practice. 311 Ms Samuel further agreed in cross examination that it appeared that her failure to insist on Linchpin completing an AIG proposal was a "highly serious failure" and it appeared that the failure meant that AIG had not sought from Linchpin information about "matters that were central and material to the risk that was being written". G.4. Principal submissions of the parties 312 AIG submits that common law waiver, as preserved by s 21(2)(d) of the Insurance Contracts Act, is only available where there has been a fair presentation of risk by the insured. It submits that any concession by Ms Samuel in cross examination that she could and in accordance with her usual practice should have asked for more information is not to the point because the question of a fair presentation of risk is objective and in this case no such presentation of risk was made by Linchpin. 313 AIG submits that the answer to question 1.22 was not "obviously incomplete" in the sense necessary to constitute a waiver with respect to the matters not disclosed because there had not been a fair presentation of risk by Linchpin. It submits that a disclosure of a complaint that might engage a professional indemnity policy is not relevant to risk and non-disclosure for a directors and officers liability policy. 314 AIG submits that on a fair and reasonable construction of the information provided by Linchpin in the Proposal Form there was no fair presentation of the risk. Rather, the only matter disclosed was a risk arising from "complaints and enquiries as a natural course of business". It submits that there was no disclosure of any risks arising from carrying on a funds management and trustee dimensions of a business in a manner that was significantly inconsistent with representations made to investors and its own internal policies that involved making unsecured loans to Linchpin, its subsidiaries and its directors. 315 AIG submits that an insured's duty of disclosure is not limited by a grammatical or literal construction of questions in a proposal form. It submits that a potential insured who answered yes to the known circumstances question 1.18 in the Proposal Form but who did not then identify the circumstances, did not fairly disclose the risk. It further submits that the risk identified by Linchpin in answer to question 1.22, although not the risks arising from the matters not disclosed, was not limited to historical claims and waiver turns on what information was provided not the question asked. 316 AIG submits that as in the case of Dew, its acceptance of the Proposal Form should properly be characterised as an acceptance of the answer to question 1.22 in the context in which it was provided, rather than an election not to inquire into the matters that were not disclosed, particularly given the absence of any suggestion, allusion or hint by Mr Nielsen of the existence of those matters in that answer. 317 The Applicant submits that the Proposal Form did not ask specific questions that would require Linchpin to provide information that would have addressed or led to a train of inquiry that inevitably would have led to disclosure of the matters not disclosed. It submits that AIG, through Ms Samuel, made a deliberate and apparently commercial decision to narrow the scope of its request for financial information from Linchpin, a decision communicated to Linchpin by its acceptance of the Proposal Form with only limited requests for additional information. 318 The Applicant submits that the absence of any request for details of any affirmative answer to question 1.18 narrowed the scope of the duty of disclosure, even where the Proposal Form did not seek information that was clearly relevant to AIG's risk. It submits that any reasonable person in the position of Linchpin would assess whether matters were relevant to the decision of AIG to provide insurance having regard to the Proposal Form and any subsequent request for information. 319 The Applicant submits in the alternative, that if the absence of any request for details of an affirmative answer to question 1.18 did not narrow the duty of disclosure then the answer given by Linchpin to the question was clearly incomplete. It submits that in that case, given AIG did not, contrary to the "WILL NEED INFORMATION ON THIS" note by Ms Samuel in the Referral Commentary, seek any further information, it waived compliance by Linchpin with its duty of disclosure relating to the matter the subject of question 1.18, namely: … any facts or circumstances, which might afford valid grounds for any future investigations, inquiries, regulatory proceedings, or other claims, which may be covered by us, under any coverage for which it has applied. 320 The Applicant submits that all of the matters not disclosed fell within the ambit of question 1.18 and therefore did not need to be disclosed to AIG by reason of the waiver. 321 In addition, the Applicant submits that AIG also waived Linchpin's duty to disclose the matters not disclosed by relying on a less comprehensive proposal form and not making appropriate supplementary requests for information, not requesting information about investments made by Linchpin and its subsidiaries despite being informed that they were involved in funds management, requesting but not receiving a completed AIG proposal form and requesting but not receiving audited financial statements for Linchpin. G.5. Consideration 322 The matters not disclosed were clearly material to AIG's decision whether to bind cover for Linchpin. The question of whether AIG waived Linchpin's duty to disclose the matters not disclosed pursuant to s 21(2)(d) or s 21(3) of the Insurance Contracts Act turns on whether Linchpin provided a fair presentation of the risk of the matters not disclosed to AIG (as to s 21(2)(d)) or alternatively, provided an obviously incomplete or irrelevant answer about a matter (as to s 21(3)). 323 I first address whether AIG waived disclosure of the matters not disclosed pursuant to s 21(2)(d). 324 I accept, as submitted by the Applicant, that the matters not disclosed fell within the scope of question 1.18 in the Proposal Form and would, at least in summary form, have been required to be disclosed if a specific request had been made by AIG for particulars of the affirmative answer to question 1.18. 325 The question of whether the affirmative answer given by Linchpin to question 1.18 was ultimately sufficient to constitute a fair presentation of risk to AIG, such that AIG was put on enquiry which would raise in the mind of a reasonable insurer at least the suspicion that there were other circumstances, is finely balanced. As submitted by AIG there was no suggestion, allusion or hint by Linchpin in its responses in the Proposal Form to any of the conduct or omissions giving rise to the matters not disclosed. At the same time, however, as emphasised by the Applicant, unlike the AIG proposal form, there was no request in the Proposal Form for any particulars or details of any affirmative response to question 1.18. Moreover, question 1.18 was self-evidently relevant to AIG's decision whether to accept the risk. An affirmative answer could not fail to put an insurer on notice of the risk that the insured may be aware of matters that might give rise to a claim. 326 When pressed in cross examination about the absence of any request for particulars of any affirmative answer to question 1.18 in the Proposal Form, Ms Samuel gave the following evidence: And that being so, there was a very significant gap between what was required in the italicised version of the AIG claims information document if yes to any of the above questions and the information required by 1.22, wasn't there?---Yes. And your usual practice at the time required you to ensure that you directed specific questions to fill that gap; is that true?---Yes. Either that, or get the insured to actually fill out the AIG proposal. That was the other alternative, I suppose; is that fair?---Yes. But one or the other was absolutely necessary in the circumstances of this case having regard to the dual proposal. Do you agree with me?---Yes. 327 The reference to the "dual proposal" was a reference to the Proposal Form that was addressed to DUAL. 328 In my view, the affirmative answer to question 1.18 unambiguously and fairly conveyed to AIG that there was more information to be obtained if it chose to ask for it. I am satisfied that the affirmative answer to the question, in context, informed AIG of a fact, namely that Linchpin had knowledge of facts or circumstances that might afford "valid grounds for any further investigations, inquiries, regulatory proceedings, or other claims" that would fairly indicate to a prudent insurer that there were other facts that may materially affect its decision to underwrite the risk or the terms on which it might do so, that had not been disclosed: Hitchens v Zurich Australia Ltd [2015] NSWSC 825 at [147] (White J). The suppositions and speculation of Ms Samuel as to what that information might be only highlighted the importance of seeking that information. 329 Ms Samuel's subjective understanding and evidence of her practice may inform but cannot determine what a reasonable person would fairly understand the answer "yes" to question 1.18, in the context of the Proposal Form as a whole, to convey to an insurer. Nevertheless, in light of Ms Samuel's experience as a senior underwriter, her acceptance that there was a "gap" in the Proposal Form because there was no request for any particulars of a positive answer to question 1.18 and that it was "absolutely necessary" given that gap for an AIG proposal form to be completed, provides considerable support for the proposition that AIG waived any requirement for disclosure of particulars of Linchpin's positive answer to the question. The AIG proposal form explicitly sought particulars of claims circumstances and therefore necessarily would have required disclosure of the substance of the matters not disclosed in order for Linchpin to comply with its duty of disclosure in s 21(1) of the Insurance Contracts Act. 330 The request for a completed AIG proposal form was subsequently not pressed. On balance I infer that the decision not to press for a completed AIG proposal form was an accidental or careless oversight partly driven by the time pressures Ms Samuel was facing, rather than a deliberate forensic decision made by her, driven by a mistaken assumption on her part that the likely claim circumstances would be professional indemnity claims that would fall outside the directors and officers liability cover provided by the Policy. Ultimately the reasons why the request was not pressed do not matter for waiver. Rather, consistently with the reasoning of the Full Court in ABN AMRO at [1711], the fact that the request for a completed AIG proposal form was made but not pressed and the absence of any other request for particulars of the affirmative knowledge of the claims circumstances answer to question 1.18, are sufficient to constitute a communication to Linchpin of a waiver of the disclosure of the facts and circumstances giving rise to the matters not disclosed. 331 The affirmative answer to question 1.18 was sufficient to put AIG on notice that the directors and officers of Linchpin were aware of facts or circumstances which might provide valid grounds for future investigations, inquiries, regulatory proceedings or other claims. An awareness that was textually inescapable and amply demonstrated by Ms Samuel's assessment in the Referral Summary that AIG "WILL NEED INFORMATION ON THIS", and the stipulation in the Referral Summary and the two quotations that a completed AIG proposal form was required from Linchpin. 332 Contrary to a submission advanced by AIG, I do not accept that the decision not to press for a completed AIG proposal form could only constitute a waiver of a requirement to provide an AIG proposal form, not the information that would have been required to have been provided in a completed AIG proposal form. 333 In closing oral submissions, senior counsel for AIG sought to rely on additional statements in the Proposal Form to support AIG's non-disclosure defence. In summary, these statements comprised (a) a reference to the obligation under the Insurance Contracts Act to disclose every matter known, or that could reasonably be expected to have known was relevant to the insurer's decision to accept the risk, (b) a requirement that Linchpin report and provide full details of all known circumstances that would put a reasonable person in Linchpin's position on notice that a claim may be made against Linchpin, and (c) a statement that Linchpin had a duty to provide all information requested in the Proposal Form and "to add any additional relevant facts". 334 The statements sought to be relied upon by AIG, however, are plainly words of generality intended to satisfy an insurer's obligation imposed by s 22 of the Insurance Contracts Act to inform an insured of the duty of disclosure. The duty of disclosure imposed by s 21(1) is qualified by both s 21(2) and the explicit reference to questions about a matter in proposal forms in s 21(3) of the Insurance Contracts Act. The scope and extent of an insured's duty of disclosure may be circumscribed by the questions asked in an insurance proposal. Provided that there is otherwise a fair presentation of risk in the answers provided by an insured to an insurer, general statements of disclosure obligations of an insured contained in a proposal need to be construed in the context of the specific questions asked in the proposal. 335 Moreover, as in the proposal considered by Rolfe J in Thompson, the general statements of disclosure obligations in the Proposal Form are then followed by specific questions, there was no general disclosure question and the declaration was in the following terms "the statement and particulars in this proposal form are true and that no material facts have been misstated or suppressed after enquiry". The declaration plainly was directed at the answers and information provided by Linchpin in response to the questions in the Proposal Form. 336 For the foregoing reasons, I am satisfied that the affirmative answer to question 1.18 relevantly constituted both a fair presentation of the risk and reasonably indicated the possible existence of further material facts. A disclosure that an insured is aware of facts or circumstances that might afford valid grounds for any future investigations, inquiries, regulatory proceedings or other claims reasonably indicates to an insurer the existence of further matters that might be material to an insurer's decision to accept a proposal for insurance and bind cover. 337 By ultimately deciding to bind cover without obtaining the claims circumstances information that would have been required to be provided if AIG had pressed for a completed AIG proposal form, Ms Samuel, and in turn AIG, waived Linchpin's duty to disclose the matters not disclosed, being matters the substance of which would have been required to be disclosed as the particulars to the affirmative answer to question 1.18. 338 For the reasons advanced at [324] to [337] above, I am satisfied that AIG waived disclosure of the matters not disclosed, pursuant to s 21(2)(d) of the Insurance Contracts Act. 339 I turn now to consider, in the alternative to waiver under s 21(2)(d), whether AIG is deemed to have waived disclosure of the matters not disclosed, pursuant to s 21(3) of the Insurance Contracts Act, by electing not to inquire into an obviously incomplete or irrelevant answer about a matter provided in the Proposal Form. This issue raises for consideration the answer provided by Linchpin to question 1.22 in the context of Linchpin's affirmative answer to question 1.18. 340 Textually, it is apparent that question 1.22 in the Proposal Form seeks particulars of any affirmative answer to question 1.20. Both questions are directed at "losses", unlike relevantly for present purposes, question 1.18 that is directed at "any facts or circumstances" that might afford "valid grounds" for "future investigations, inquiries, regulatory proceedings, or other claims". 341 Notwithstanding that Linchpin answered question 1.20 asking had it suffered any losses in the negative, Linchpin provided an answer to question 1.22. The answer, however, did not purport to provide details of "any losses". Rather Linchpin responded that "we receive complaints and enquiries as a natural course of business" and stated that this was because "we hold numerous AFSLs and other authorisations". Equally unresponsive were the statements that the "bulk are dealt with by internal processes, occasionally through FOS + the courts" and "all complaints, breaches incidents are recorded in our Registers". 342 The meaning conveyed by an answer to a question in an insurance proposal is determined objectively by reference to its "fair and reasonable" construction, the question and answer must be considered together, the question by reference to what a reasonable proponent would have understood it to mean and the answer by reference to what a reasonable person would fairly understand it to convey to the insurer: Prepaid Services Pty Ltd v Atradius Credit Insurance NV [2013] NSWCA 252 at [65] (Meagher JA, Macfarlan and Emmett JJA agreeing). 343 Question 1.19 was directed at whether Linchpin had been the subject of any "complaint, suit, inquiry or notice of a hearing" from any regulatory body or any other party. In contrast, question 1.18 was directed at facts or circumstances that might afford valid grounds for any future investigations, inquiries, regulatory proceedings or other claims. Nevertheless, the answer provided by Linchpin to question 1.22 used the present tense, we receive complaints and enquiries. 344 As explained at [340] above, question 1.22, by its terms and read in the context of the balance of the Proposal Form, sought particulars of the losses that were the subject of any affirmative answer to question 1.20. Linchpin answered "No" to question 1.20 but then went on to provide a response to question 1.22. I infer that Mr Nielsen did not read question 1.22 carefully and provided a response to that question because it was prefaced with the words "If the Applicant answered YES" and affirmative answers had earlier been given to questions 1.18 and 1.19. 345 I am satisfied that a reasonable person reading the Proposal Form as a whole, consistently with the principles in Prepaid Services, would have understood (a) that the answer provided by Linchpin to question 1.22 purported to be the provision of particulars of the answers to questions 1.18 and 1.19, and (b) relevantly for present purposes, the answer was either an obviously incomplete or obviously irrelevant answer to the extent that it purported to be the provision of particulars of the answer to question 1.18. 346 The answer to question 1.22 was confined to the receipt of "complaints and enquiries as a natural course of business as we hold numerous AFSL's and other authorisations". It did not purport to identify any specific facts or circumstances that might afford valid grounds for any future investigations, inquiries, regulatory proceedings or other claims. In that sense, it was largely meaningless. It did not travel beyond a disclosure that complaints and enquiries were an inevitable consequence of conducting a business that held AFSLs and other authorisations. 347 Contrary to AIG's reliance on the reasoning in Dew, the answer to question 1.22 could not objectively support a finding that AIG had simply accepted the affirmative answer to question 1.18 in the context in which it was provided. The answer to question 1.22 did not provide any particulars of the affirmative answer to question 1.18. Moreover, unlike in Dew, this was not a case in which an answer to a question in a proposal form was unresponsive rather than incomplete and thus did not give rise to any waiver pursuant to s 21(3) because of "other information coming to the knowledge of the insurer": Dew at [71]-[72]. 348 That the answer to question 1.22 was objectively an obviously incomplete or obviously irrelevant answer is supported by the evidence given by Ms Samuel in cross examination and the contemporaneous steps that she took in response to the Proposal Form. 349 As Ms Samuel made clear in (a) the Referral Commentary, by her statement "WILL NEED INFORMATION ON THIS", (b) the requests in the quotations for a completed AIG proposal form, and (c) in her evidence in cross examination, she appeared to accept there was no disclosure in the Proposal Form of the facts or circumstances that caused Linchpin to provide an affirmative answer to question 1.18. 350 The notes made by Ms Samuel under the Claims Commentary evidence three matters. First, a supposition by Ms Samuel, that the "complaints and enquiries" disclosed in the answer to question 1.22 were "PI type of claims", that is professional indemnity claims that she did not consider, at least implicitly, were covered by the Policy. Second, a supposition by Ms Samuel that the circumstances that "could be grounds for further investigations" the subject of the affirmative response to question 1.18 appeared to be complaints and enquiries related to Linchpin's "AFSL", and were "presumably PI type of claims". Third, and most significantly, irrespective of the sequence in which the notes were made, a recognition by Ms Samuel that she needed more information on the circumstances that "could be grounds for further investigations", as then confirmed by her request for a completed AIG proposal form. 351 For the reasons advanced at [339] to [350], I am also satisfied, in the alternative, that AIG waived disclosure of the matters not disclosed, pursuant to s 21(3) of the Insurance Contracts Act. H. PROFESSIONAL SERVICES EXCLUSION H.1. Overview 352 AIG submits that it is entitled to rely upon a "Professional Services" exclusion in the Policy (Professional Services exclusion). AIG contends that the exclusion should be given an expansive construction that would result in the services of a professional trustee falling within the exclusion. The Applicant contends it should be given a narrow construction that would lead to the services of a professional trustee falling outside the exclusion. 353 The Professional Services exclusion was included in the Policy at Endorsement Number 4, in the following terms: Professional Services The Insurer shall not be liable under the applicable Section(s) for any matter arising out of, based upon, attributable to the provision of third party professional services of any kind. This Exclusion shall not apply to any Claim alleging that a Manager has failed to supervise an Employee. (Bolding in original.) 354 The general policy exclusions in the Policy also included an exclusion for professional financial services (Professional Financial Services exclusion) in these terms: [A]ny matter arising out of, based upon or attributable to the performance of or failure to perform professional services or related back-office supporting services, or any act, error or omission relating thereto in the capacity of an Insured. (Bolding in original.) H.2. Principal submissions of the parties 355 The Applicant submits that the services provided by a professional trustee do not fall within the definition of "third party professional services" in a directors and officers liability policy. It submits that it is a factual issue that has been directly addressed in Murray Goulburn Co-Operative Co Ltd v AIG Australia Ltd (2021) 389 ALR 453; [2021] FCA 288, in which Beach J considered AIG's third party professional services exclusion, and decided contrary to the position now advanced again by AIG. The Applicant acknowledges that the reasoning of Beach J in Murray Goulburn is not binding but submits that it is plainly right and should be followed. 356 AIG submits that Murray Goulburn can be distinguished on the basis that in determining whether an act or omission might constitute the provision of a "professional service", a failure to comply with disclosure obligations imposed by the ASX Listing Rules and the Corporations Act is fundamentally different to investing and managing funds entrusted by investors to a professional trustee. 357 AIG submits that as a matter of English language any distinction between "financial services" and "professional services" is no longer relevant, and nor was it relevant at the time that the Policy was issued in 2017. It submits that there is a substantial overlap in the provision of financial services and professional services. 358 AIG submits that the impugned conduct of Linchpin and the Director Respondents comprised the performance of professional services by Linchpin of its function and duties as a professional trustee and funds manager and the delivery of those services to the Applicant. It submits that consistently with the reasoning of the Full Court in Chubb Insurance Company of Australia Ltd v Robinson (2016) 239 FCR 300; [2016] FCAFC 17 at [150] (Foster, Robertson and Davies JJ), funds management involves skill and judgement that falls within the scope of what might be described as a vocational discipline. 359 AIG submits that the Professional Services exclusion contains expansive relational language, extending to liability "for any matter arising out of, based upon, attributable to the provision of third party professional services of any kind". It submits that the connection is not simply a causal relationship. In that regard, it submits that loss "arising out of" may be, but is not necessarily, causal, but loss that is "based upon" or "attributable to" the provision of third party professional services is not causal. 360 The Applicant submits that the construction of professional services advanced by AIG would effectively remove the Policy from having any operative effect. Rather, it submits the Professional Services exclusion is plainly seeking to exclude all of the activities of Linchpin and its subsidiaries that are involved in the advisory financial planning type area. 361 The Applicant also submits that unlike the Professional Financial Services exclusion, the Professional Services exclusion is only directed at acts and does not include omissions. It submits that the difference is material because the "failure to exercise proper functions as trustee" case advanced by the Applicant is in substance an omissions case. It submits that the failures by the Director Respondents were not failures in the course of providing services, particularly with respect to the misleading and deceptive conduct case directed at representations in the PDSs. 362 In response, AIG submits that the Professional Services exclusion makes clear that "professional services" are a different type of risk not covered by the Policy. It submits that its construction does not render the Policy "contentless cover" because it would still cover the potential liability of directors for matters including, a negligent decision to pay dividends to shareholders, a negligent decision for Linchpin to make an investment and the "increasingly ubiquitous" workplace relations liabilities imposed on directors. 363 In reply, the Applicant submits that AIG knew that the Director Respondents were the principal shareholders in Linchpin so it was unlikely the Professional Services exclusion was objectively intended to deal with shareholder claims, and the Professional Services exclusion falls to be construed in the particular factual circumstances known to both parties. H.3. Consideration 364 I am satisfied that the impugned conduct of Linchpin, Endeavour and the Director Respondents did not constitute the provision of third party professional services for the purposes of the Professional Services exclusion. The scope and content of the phrase "third party professional services" must necessarily be dependent on the context in which it might appear. More specifically, a construction that might apply to an insuring clause might well not be appropriate for an exclusion clause. 365 The decision of Beach J in Murray Goulburn is with respect both persuasive and instructive. The professional services exclusion endorsement considered by Beach J in that case was in identical terms to the Professional Services exclusion in this case. The insurer (AIG) submitted, as outlined in Murray Goulburn at [246], that the services provided by a trustee and responsible entity to unitholders in a unit trust were third party professional services in the sense that: they involved the carrying out of a business activity involving specialised knowledge, labour, or skill and which was predominantly mental or intellectual as opposed to physical or manual in nature using the special acumen and training of professionals when engaged in their activities. 366 The insurer further submitted the allegations and claims made against the trustee and responsible entity in Murray Goulburn were all matters arising out of, based upon or attributable to the performance of, or failure to perform professional services or related back-office supporting services, or any act, error, or omission relating to them. 367 His Honour rejected the insurer's submissions on the basis that (a) the insurer had failed to identify the specific services that comprised the relevant "professional services", who was to provide them and to whom, (b) the insurer had failed to identify the alleged "profession" and who provided the "professional" services in its capacity as a "third party", and (c) the insurer's construction which depended on characterising the trustee and responsible entity as providers of unspecified professional services to unitholders, "strains the language of the policy": Murray Goulburn at [259]-[261]. 368 His Honour concluded that the conduct of "professional services" did not extend to discharging obligations owed by a trustee and responsible entity to unitholders and in any event claims of misleading and deceptive conduct and breaches of continuous disclosure obligations were not causally connected to any failure to perform trustee or back-office services: Murray Goulburn at [264]-[265]. Further, his Honour noted at [266] that he was construing the term "professional" in an exclusion, not in the insuring clause of a professional indemnity policy. 369 I accept that to the extent that Murray Goulburn was concerned with the breach of continuous disclosure obligations, it might well be distinguishable from the present proceeding because a continuous disclosure breach could be said to be qualitatively different to a failure to make investments in accordance with lending guidelines in an information memorandum or a product disclosure statement. The connection with the investor to whom any professional services might be provided is inherently more tenuous for continuous disclosure contraventions. With that qualification, I otherwise accept that the construction of the professional services exception advanced by Beach J in Murray Goulburn is equally applicable to the Professional Services exclusion in the present proceeding. 370 I also accept that coherent and principled distinctions between the provision of "professional services" and "financial services" are increasingly more difficult to draw. In large part previously drawn distinctions have now been obscured by an increasing focus on commercial imperatives and the expansion of vocational training and the emergence of industry bodies, codes of conduct and regulatory oversight, particularly in the financial services sector. 371 Nevertheless, the critical issue is the meaning to be given to the concept of "professional services" provided to a "third party" in the context of an exclusion in a directors and officers liability insurance policy. It is a context specific issue rather than seeking to identify a universal meaning to be given to the concept of "professional services". 372 In my view, the investment activities undertaken by Linchpin and Endeavour as variously a trustee, responsible entity and funds manager in operating the Unregistered Fund and the Registered Scheme do not constitute the provision of third party professional services to investors falling within the Professional Services exclusion. It does not necessarily follow that because an entity carries on a business as a trustee and is remunerated for its services, including the investment of funds received from unitholders, that it is providing "professional services" to unitholders investing in the fund, as "third parties". 373 Nor could the Professional Services exclusion be construed to extend to the causes of action advanced by the Applicant based on the false and thereby misleading and deceptive Linchpin Representations and Endeavour Representations. The making of misleading and deceptive representations to potential investors in order to promote and attract investments in units in managed investment schemes, independently of any assumed obligation to provide investment advice or services to those investors, cannot constitute the provision of "professional services". 374 The construction advanced by AIG would deprive the Professional Services exclusion of any meaningful content and could not objectively have been the intended construction of the parties to the Policy. I am not persuaded that it could have been the objective intention of the parties that cover would be limited to matters such as shareholder distributions (not least because of AIG's knowledge that the Director Respondents were the principal shareholders), workplace relations liabilities and the negligent deployment of Linchpin's money. 375 Rather, I am satisfied that the application of an objective and commercial interpretation to the concept of professional services provided to a third party in the Professional Services exclusion, in the context of the surrounding circumstances known to the parties, leads to the conclusion that it comprised the provision of advisory financial planning or equivalent services by companies within the Linchpin Group to investors and prospective investors. I. SETTLEMENT DEFENCE I.1. Overview 376 AIG submits that by reason of s 7 of the Third Party Claims Act, AIG is entitled to the benefit of the release granted to the Director Respondents under Order (1)(b) of the orders made by this Court on 19 June 2023, with the effect that the Applicant cannot enforce any judgment it might otherwise obtain against AIG in this proceeding. I.2. Statutory provisions 377 The Third Party Claims Act relevantly provides for claims to be brought against insurers by third parties who can establish that an insured person has an insured liability to them. It also identifies the matters an insurer may rely upon in response to such claims and provides that a judgment against an insured person does not bar a claim being made against an insurer. 378 Section 4 of the Third Party Claims Act provides: (1) If an insured person has an insured liability to a person (the claimant), the claimant may, subject to this Act, recover the amount of the insured liability from the insurer in proceedings before a court. (2) The amount of the insured liability is the amount of indemnity (if any) payable pursuant to the terms of the contract of insurance in respect of the insured person's liability to the claimant. (3) In proceedings brought by a claimant against an insurer under this section, the insurer stands in the place of the insured person as if the proceedings were proceedings to recover damages, compensation or costs from the insured person. Accordingly (but subject to this Act), the parties have the same rights and liabilities, and the court has the same powers, as if the proceedings were proceedings brought against the insured person. (4) This section does not entitle a claimant to recover any amount from a re-insurer under a contract or arrangement for re-insurance. 379 Section 7 of the Third Party Claims Act preserves the ability of an insurer to rely on defences that it might have been able to deploy against an insured. It provides: In proceedings brought under section 4, the insurer is entitled to rely on any defence or any other matter in answer to the claim or in reduction of its liability to the claimant: (a) that the insurer would have been entitled to rely on in a claim made by the insured person under the contract of insurance, or (b) that the insured person would have been entitled to rely on in proceedings brought by the claimant against the insured person in respect of the insured liability. 380 Section 8 of the Third Party Claims Act provides: A judgment or order for damages, compensation or costs in favour of the claimant against the insured person in respect of an insured liability does not prevent the claimant from recovering an amount for the damages, compensation or costs under section 4, except to the extent that the judgment or order has been satisfied. 381 The Third Party Claims Act is binding upon and can be applied in this Court pursuant to s 79 of the Judiciary Act 1903 (Cth) as being part of the law of New South Wales. The statutory predecessor to s 4 of the Third Party Claims Act was applied in Hopkins (as trustee for the Hopkins Superannuation Fund) v AECOM Australia Pty Ltd (No 4) (2015) 328 ALR 1; [2015] FCA 307 at [41]-[43] (Nicholas J). I.3. Settlement Orders 382 On 19 June 2023, this Court made orders approving the settlement of the Applicant's claims against the Director Respondents and Riverstone and the discontinuance of the claims against Linchpin and Endeavour (Settlement Orders). 383 The Settlement Orders relevantly included the following orders and notation: (1) Pursuant to s 33V(1) of the Federal Court of Australia Act 1976 (Cth) (FCA Act), the settlement of the representative proceeding brought by the representative applicant against the second to fifth and eighth respondents (Settling Respondents) and the discontinuance of the claims against the first and sixth respondents be approved upon: (a) the terms set out in the Settlement and Release Deed entered into between the applicant, LCM Funding Pty Ltd (LCM) and the Settling Respondents executed on 31 March 2023, as amended on 31 May 2023 (Settlement Deed); and (b) a term that upon the latter of: (i) the final determination of the proceeding disposing of the AIG Claim; or (ii) any appeal, all respondents (other than the seventh respondent), be released from the Group Member Claims. (2) By consent of the parties to the Settlement Deed, pursuant to s 33V(1) and/or s 33ZF of the FCA Act, and in order, to the extent possible by law, to give effect to the settlement approved by Order 1: (a) pending the release referred to in Order 1(b), the applicant and each of the group members are restrained from seeking, in this proceeding or otherwise, recovery of damages or compensation from the first, second, third, fourth, fifth, sixth and/or eighth respondents in respect of the Group Member Claims; and (b) this order does not (and is not intended to) operate so as to affect the applicant's or group members' claims insofar as they relate to the seventh respondent or the AIG Insured Liability. … (9) The term "AIG Claim" or "AIG Claims" as used in these orders is as defined in the Settlement Deed and the term "AIG Insured Liability" means any liability of the second, third, fourth and/or fifth respondents (Director Respondents) to pay damages or statutory compensation to the applicant or any group member to which the Director Respondents are or would be entitled to indemnity under the "AIG Policy" (as that term is defined in the Settlement Deed). 384 In turn, the Deed of Settlement and Release entered into between the Applicant, LCM Funding Pty Ltd, the Director Respondents and Riverstone, executed on 31 March 2023, as amended on 31 May 2023 (Settlement Deed) included the following definition of "AIG Claim": Any claim which the Applicant and Group Members have which arises from: (i) AIG's liability to indemnify the Director Respondents under the AIG Policy; (ii) any liability of any of the Director Respondents to the Applicant and Group Members, but only to the extent that such liability is an "insured liability" (within the meaning of the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW)) in respect of which the Director Respondents are or would be entitled to be indemnified under the AIG Policy; and/or (iii) the entitlement of the Applicant and Group Members to recover loss directly from AIG pursuant to s 4 of the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW). 385 "Group Member Claims" was also defined in clause 1 to mean: [A]ll of the Claims made by the Applicant, both on its own behalf and on behalf of Group Members, in the Proceeding against Linchpin, Endeavour, the Director Respondents and Riverstone, but does not include the AIG Claim. I.4. Principal submissions of the parties 386 By way of summary, AIG submits that by reason of the Settlement Orders the Applicant has released the claims it has advanced against the Director Respondents and AIG can rely on that release for the purposes of s 4 and s 7 of the Third Party Claims Act. 387 AIG submits that the effect of Order 1(b) is that upon the final determination of the AIG Claim, the Director Respondents will be released from the "Group Member Claims". It submits that this extends to the liability of the Director Respondents but not the "AIG Claim" because that is expressly excluded from the definition of "Group Member Claims". It submits that, the release therefore operates "upon the predicate liability of the Director Respondents", but does not extend to "claims which arise from that liability". In this case, it submits that claims which arise from the liability would include the claims made by the Applicant and Group Members against AIG under the Third Party Claims Act. 388 Next, AIG submits that the decision of Einstein J in Green in his capacity as liquidator of Armico Mining Pty Ltd (in liq) v CGU Insurance Ltd (2008) 67 ACSR 398; [2008] NSWSC 825 should be applied in this case as there is no relevant distinction between the operation of s 6(4) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) (Law Reform Act) and the Third Party Claims Act. It submits that the reasoning in Green demonstrates that AIG "stands in the place" of the Director Respondents and is thereby entitled to rely on "any other matter" on which the Director Respondents would be entitled to rely if proceedings were brought against them by the Applicant and Group Members. It submits that "any other matter" would include the promise of a release. 389 AIG submits that the reasoning in Green demonstrates that the protection afforded to an insurer cannot be circumvented by devising a settlement between a claimant and an insured on terms that allow for judgment to be entered against the insured, but not then enforced on the putative basis that the claimant will instead pursue the insurer. 390 AIG submits that the release given by the Applicant and the Group Members to the Director Respondents, irrespective of the time in which the release takes effect (either before or after judgment is obtained against the Director Respondents) is a matter that AIG can rely upon pursuant to s 7(b) of the Third Party Claims Act. It submits that neither the language in the Third Party Claims Act nor its object permits an imposition of an obligation or liability on an insurer that is greater than or different to an obligation or liability to which the indemnity attaches. 391 The Applicant submits that the fundamental flaw in AIG's construction of the Settlement Orders is the proposition that the release operates on the predicate liability, but not upon claims that arise from that liability, such that the "claim" referred to in the chapeau to the definition of "AIG claim" is preserved but the liability out of which it arises is released. 392 Next, the Applicant submits that the concept of the "AIG Claim" plainly preserves the liability of the Director Respondents for the claims advanced by the Applicant and the Group Members against AIG. It submits that there is no coherent bifurcation between the "claim" in the chapeau of the definition of AIG Claim and the "liability" upon which the claim is based. It submits that there could be no juridical basis for a preservation of a "claim" without any underlying liability and there is no basis to read the release from liability in Order 1(b) as discharging the liability upon which the claims are expressly preserved. 393 Further, the Applicant submits that the obvious intent and operation of the Settlement Orders is to preserve the claims in the proceeding against the Director Respondents to the extent that they remain alive to engage AIG's liability under the Policy. It submits that AIG's construction would endorse its vexed bifurcation of a "claim" from "liability", deprive the orders of their plain meaning and read into the orders an unconditional release of the Director Respondents in direct conflict with the limited release otherwise provided in the orders. I.5. Consideration 394 In my view the orders made by this Court on 19 June 2023 do not have the effect of precluding the Applicant from enforcing any judgment that it might otherwise obtain against AIG in this proceeding. 395 First, the practical consequence of the bifurcated claim/liability construction advanced by AIG would deprive the Third Party Claims Act of any practical operation. Any judgment obtained by a third party against an insured would provide a res judicata defence that the insurer could rely upon for the purposes of s 7(b) of Third Party Claims Act. 396 Second, the finding in Green is readily distinguishable. The reasoning of Einstein J was only obiter dicta, as his Honour acknowledged at [297]. Further, it was directed at s 6(4) of the Law Reform Act not the Third Party Claims Act that was specifically introduced, as explained in the Second Reading Speech to the Civil Liability (Third Party Claims Against Insurers) Bill 2017, to provide a clearer and more effective provision than s 6 of the Law Reform Act. 397 More significantly, unlike in the present case, the release considered by Einstein J in Green did not include any carve out equivalent to the "AIG Claim" exclusion and it provided for a complete and unconditional discharge of the judgment against the insured, irrespective of the outcome of the proceedings: Green at [305]. 398 Third, contrary to the submissions advanced by AIG, there was no term in the Settlement Orders or the Settlement Deed providing for any agreement by the Applicant and Group Members not to pursue the Director Respondents for the purpose of establishing their liability as the necessary foundation for the third party claims for indemnity that the Applicant and Group Members bring against AIG in this proceeding. 399 Order 2 of the Settlement Orders preventing the Applicant and Group Members from recovering damages against the Director Respondents only operates until the resolution of this proceeding, and any appeal. From that time, it would be open for the Applicant and Group Members to enforce any judgment giving rise to an "insured liability" against the Director Respondents or against AIG under the Third Party Claims Act. 400 The revised definition of an AIG Claim in the revised Settlement Deed dated 31 May 2023 expressly extended to any liability of the Director Respondents to the Applicant and Group Members to the extent that (a) such liability was an "insured liability" within the meaning of the Third Party Claims Act, and (b) a liability in respect of which the Director Respondents were or would have been entitled to be indemnified under the Policy. By reason of Order 9 of the Settlement Orders that definition was then applied to the references to the use of the terms "AIG Claim" and "AIG Claims" in the Settlement Orders. J. DISPOSITION 401 For the foregoing reasons, I am satisfied that the Applicant has established that the Director Respondents have contravened the provisions of the Corporations Act and the ASIC Act advanced by the Applicant, on its own behalf and on behalf of Group Members, in this proceeding. I am also satisfied that the Applicant and Group Members can rely on the Third Party Claims Act to claim indemnity under the Policy and the defences sought to be relied upon by AIG to those claims must fail. 402 The common questions are answered in Appendix A to these reasons and the Applicant and AIG are to otherwise confer and provide consent, or competing, draft declarations and orders to give effect to these reasons for judgment, including as to costs and interest. I certify that the preceding four hundred and two (402) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Halley. Associate: Dated: 18 December 2024 APPENDIX A Questions common to group members Definitions Capitalised terms have the meaning given to them in the Third Further Amended Statement of Claim filed by the Applicant on 31 August 2022 (3FASOC). For convenience a glossary of those terms is set out in Appendix B. Admissions by Respondents The common questions below do not address allegations in the 3FASOC that are admitted by the Seventh Respondent on the basis that the Seventh Respondent admits those matters with respect to the Applicant and each Group Member. Common questions The questions of law or fact common to the claims of the Group Members are: Officers (1) Were each of Mr Nielsen, Mr Williams, Mr Raftery and Mr Daly officers of Linchpin and Endeavour? Yes The Failures (2) From about February 2014 to November 2017, did Linchpin (as trustee of the Unregistered Fund) enter into the Loans? Yes (3) If yes to paragraph 2, did each and/or any of Mr Nielsen, Mr Williams, Mr Raftery and Mr Daly cause, allow or fail to prevent Linchpin from entering into the Loans? Yes (4) Did Endeavour enter into the Inter Fund Investment between 29 June 2015 and 31 July 2018? Yes (5) If yes to paragraph 4, did each and/or any of Mr Nielsen, Mr Williams, Mr Raftery and Mr Daly cause, allow or fail to prevent Endeavour from entering into the Inter Fund Investment? Each of Mr Nielsen, Mr Williams, Mr Raftery and Mr Daly caused, allowed or failed to prevent Endeavour from entering into the Inter Fund Investment. (6) Did Linchpin fail to ensure that security in respect of each of the Loans was obtained, adequate, registered and enforceable? Yes (7) If yes to paragraph 6, did each of Mr Nielsen, Mr Williams, Mr Raftery and Mr Daly fail to ensure that Linchpin ensured that security in respect of each of the Loans was obtained, adequate, registered and enforceable? Yes (8) Did Linchpin fail to make any or, alternatively, any proper enquiries in relation to the capacity of the borrowers under each of the Loans to repay the Loans in accordance with their terms? Yes (9) If yes to paragraph 8, did each of Mr Nielsen, Mr Williams, Mr Raftery and Mr Daly fail to ensure that Linchpin made any or, alternatively, any proper enquiries in relation to the capacity of the borrowers to repay each of the Loans in accordance with their terms? Yes (10) Did Linchpin fail to comply with the IM Purpose on and following 23 January 2014? Yes (11) If yes to paragraph 10, did each of Mr Nielsen, Mr Williams, Mr Raftery and Mr Daly fail to ensure that Linchpin complied with the IM Purpose on and following 23 January 2014? Yes (12) Did Endeavour fail to comply with the PDS Purpose (including as amended by the Second PDS, the Third PDS and Fourth PDS) on and following 27 April 2015? Yes (13) If yes to paragraph 12, did each of Mr Nielsen, Mr Williams, Mr Raftery and Mr Daly fail to ensure that Endeavour complied with the PDS Purpose on and following 27 April 2015? Yes (14) If yes to paragraphs 2 to 9 and 12 to 13, did Mr Nielsen, Mr Williams, Mr Raftery and Mr Daly contravene, or, alternatively, were Mr Nielsen, Mr Williams, Mr Raftery and Mr Daly involved in a contravention of, subsection 601FD(1) of the Corporations Act by reason of the Loan Failures, the Investment Failure, the Security Failures, the Enquiries Failures and/or the PDS Failures? Yes, Mr Nielsen, Mr Williams, Mr Raftery and Mr Daly contravened subsection 601FD(1) of the Corporations Act by reason of the Loan Failures, the Investment Failure, the Security Failures, the Enquiries Failures and the PDS Failures. (15) If yes to paragraph 14, did Mr Nielsen, Mr Williams, Mr Raftery and Mr Daly contravene s 601FD(3) of the Corporations Act? Yes (16) If yes to paragraphs 4 to 5 and 12 to 13, did Endeavour contravene, or, alternatively, was Endeavour involved in a contravention of, s 601FC(1) of the Corporations Act by reason of the Investment Failure and/or the PDS Failures? Yes, Endeavour contravened s 601FC(1) of the Corporations Act by reason of the Investment Failure and the PDS Failures. (17) If yes to paragraph 16, did Endeavour contravene s 601FC(5) of the Corporations Act? Yes (18) If yes to paragraph 16, were Mr Nielsen, Mr Williams, Mr Raftery and Mr Daly involved in Endeavour's contravention of s 601FC(1) of the Corporations Act by reason of the Investment Failure and/or the PDS Failures? Yes (19) If yes to paragraph 18, did Mr Nielsen, Mr Williams, Mr Raftery and Mr Daly contravene s 601FC(5) of the Corporations Act? Yes Misleading or deceptive conduct (20) Did Linchpin make one or more of the Linchpin Representations? Yes, Linchpin made each of the Linchpin Representations. (21) If yes to paragraph 20, at the time that Linchpin made one or more of the Linchpin Representations, was that representation or were those representations (as the case may be): (a) false and therefore misleading and deceptive; or (b) if made in respect of future matters, made in circumstances where Linchpin had no reasonable basis to consider that the representations were correct? Yes (22) If yes to paragraph 20, would a reasonable person in the position of an investor have invested in the Unregistered Fund if that representation or those representations had not been made? No (23) If yes to paragraphs 20 and 21, did Linchpin engage in misleading or deceptive conduct: (a) in contravention of s 1041H of the Corporations Act; or (b) alternatively, in contravention of s 12DA of the ASIC Act? Yes (24) If yes to paragraph 23, were each of Mr Nielsen, Mr Williams, Mr Raftery and/or Mr Daly involved in: (a) Linchpin's contravention of s 1041H of the Corporations Act; and/or (b) Linchpin's contravention of s 12DA of the ASIC Act? Yes (25) Was Endeavour required to give a client a disclosure document or statement for an investment in the Registered Fund pursuant to s 1012B of the Corporations Act? Yes (26) Did Endeavour make one or more of the Endeavour Representations? Yes, Endeavour made each of the Endeavour Representations. (27) If yes to paragraph 26, at the time that Endeavour made one or more of the Endeavour Representations, was that representation or were those representations (as the case may be): (a) false and therefore misleading and deceptive; or (b) if made in respect of future matters, made in circumstances where Endeavour had no reasonable basis to consider that the representations were correct? Yes (28) If yes to paragraph 26, would a reasonable person in the position of an investor have invested in the Registered Fund if that representation or those representations had not been made? No (29) If yes to paragraphs 25 to 27, did Endeavour engage in misleading or deceptive conduct: (a) in contravention of s 1013D(1)(f) and s 1013E of the Corporations Act; (b) in contravention of s 1017B(1) of the Corporations Act; (c) in contravention of s 1022B or, alternatively, s 1041H of the Corporations Act; and/or (d) alternatively, in contravention of s 12DA of the ASIC Act. Yes (30) If yes to 29(c): (a) were each of Mr Nielsen, Mr Williams, Mr Raftery and/or Mr Daly involved in the preparation of the PDS Documents; and (b) did Mr Nielsen, Mr Williams, Mr Raftery and/or Mr Daly directly or indirectly cause the PDS Documents to be, or contribute to the PDS Documents being, defective within the meaning of s 1022B(3)(b)(ii) of the Corporations Act? Each of Mr Nielsen, Mr Williams and Mr Raftery were involved in the preparation of the PDS Documents, and directly or indirectly caused the PDS Documents to be, or contributed to the PDS Documents being defective within the meaning of s 1022B(3)(b)(ii) of the Corporations Act. (31) If yes to paragraph 29(c) and/or paragraph 29(d), were each of Mr Nielsen, Mr Williams, Mr Raftery and/or Mr Daly involved in Endeavour's contravention of section 1041H of the Corporations Act and/or section 12DA of the ASIC Act? Yes (32) Did the Second PDS, the Third PDS and/or the Fourth PDS fail to disclose the Omitted Risks? Yes (33) If yes to paragraph 32, were the Omitted Risks 'significant risks' and 'significant characteristics or features' which required disclosure in the Second PDS, the Third PDS and/or the Fourth PDS for the purposes of s 1013D(1)(c) and (f) of the Corporations Act? Yes (34) Were the Omitted Risks required to be disclosed in the Second PDS, the Third PDS and/or the Fourth PDS pursuant to: (a) section 1013E of the Corporations Act; and/or (b) section 1017B of the Corporations Act? Yes (35) Was each PDS defective within the meaning of s 1022A of the Corporations Act? Yes (36) Did Endeavour fail to notify investors in one of the ways specified in s 1017B(3) of the Corporations Act of the changes to the significant risks and features of their investment in the Registered Fund occasioned by: (a) the substantial investment by the Registered Fund in the Unregistered Fund; and/or (b) the nature of the investment activities by the Unregistered Fund? Yes Causation and loss (37) Did each of the Applicant and the Unregistered Fund Group Members make an investment in the Unregistered Fund on or after 23 January 2014? Yes (38) Were all monies invested in the Unregistered Fund irrecoverable by 15 March 2019? Yes (39) If yes to paragraph 38, were all monies invested in the Unregistered Fund irrecoverable by reason of the Linchpin Contravening Conduct? Yes (40) Had the Linchpin Contravening Conduct not occurred: (a) would the Loans have been made; and (b) would the monies invested in the Unregistered Fund have been lost? No (41) Are the Applicant and Unregistered Fund Group Members entitled to recover from Linchpin, Mr Nielsen, Mr Williams, Mr Raftery and/or Mr Daly: (a) the value of their initial investments in the Unregistered Fund; or (b) alternatively, an amount that they would have received from their investment in the Unregistered Fund had the Linchpin Contravening Conduct not occurred? The value of their initial investments in the Unregistered Fund less any returns they may have received. (42) Did each of the Applicant and the Registered Fund Group Members make an investment in the Registered Fund on or after 27 April 2015? Yes (43) Were all monies invested in the Registered Fund irrecoverable by 15 March 2019? Yes (44) If yes to paragraph 43, were all monies invested in the Registered Fund irrecoverable by reason of the Endeavour Contravening Conduct? Yes (45) Did Mr Nielsen, Mr Williams, Mr Raftery and/or Mr Daly contravene: (a) section 601FD(1)(b) of the Corporations Act; and (b) section 601FD(1)(c) of the Corporations Act, by reason of the Endeavour Contravening Conduct? Yes (46) Had the Endeavour Contravening Conduct not occurred: (a) would the Inter Fund Investment have occurred; and (b) would the monies invested in the Registered Fund have been lost? No (47) Are the Applicant and Registered Fund Group Members entitled to recover from Endeavour, Mr Nielsen, Mr Williams, Mr Raftery and/or Mr Daly: (a) the value of their initial investments in the Registered Fund; or (b) alternatively, an amount that they would have received from their investment in the Registered Fund had the Endeavour Contravening Conduct not occurred? The value of their initial investments in the Registered Fund less any returns they may have received. (48) Are the Applicant and Group Members entitled to recover from Endeavour the value of their initial investments in the Registered Fund by reason of Endeavour's contravention of s 1013D(1)(f), s 1013E, s 1017B, s 1022B and/or s 1041H of the Corporations Act and/or s 12DA of the ASIC Act? The Applicant would have been entitled to recover from Endeavour the value of its initial investments in the Registered Fund by reason of Endeavour's contravention of s 1041H of the Corporations Act and/or s 12DA of the ASIC Act had the proceedings against Endeavour not been discontinued. (49) Are the Applicant and Group Members entitled to recover from Mr Nielsen, Mr Williams, Mr Raftery and/or Mr Daly the value of their initial investments in the Registered Fund by reason of: (a) their involvement in Endeavour's preparation of the PDS Documents and their conduct in directly or indirectly causing the PDS Documents to be, or in contributing to the PDS Documents, being defective within the meaning of s 1022B(3)(b)(ii) of the Corporations Act; and/or (b) their involvement in Endeavour's contravention of s 1041H of the Corporations Act and/or s 12DA of the ASIC Act? The Applicant is entitled to recover from Mr Nielsen, Mr Williams, Mr Raftery and/or Mr Daly the value of their initial investments in the Registered Fund by reason of their involvement in Endeavour's contraventions of s 1022B(3)(b)(ii) and s 1041H of the Corporations Act and/or s 12DA of the ASIC Act. (50) Are the Applicant and Group Members entitled to recover from Linchpin the value of their initial investments in the Unregistered Fund by reason of Linchpin's contravention of s 1041H of the Corporations Act and/or s 12DA of the ASIC Act? The Applicant would have been entitled to recover from Linchpin the value of their initial investments in the Unregistered Fund by reason of Linchpin's contravention of s 1041H of the Corporations Act and/or s 12DA of the ASIC Act had the proceedings against Linchpin not been discontinued. (51) Are the Applicant and Group Members entitled to recover from Mr Nielsen, Mr Williams, Mr Raftery and/or Mr Daly the value of their initial investments in the Unregistered Fund by reason of their involvement in Linchpin's contravention of s 1041H of the Corporations Act and/or s 12DA of the ASIC Act? The Applicant is entitled to recover from Mr Nielsen, Mr Williams, Mr Raftery and/or Mr Daly the value of its initial investments in the Unregistered Fund by reason of their involvement in Linchpin's contravention of s 1041H of the Corporations Act and/or s 12DA of the ASIC Act. (52) What are the principles governing the quantification of loss or damage suffered by the Applicant and Group Members by reason of: (a) Endeavour's contravention of s 1013D(1)(f), s 1013E, s 1017B, s 1022B and/or s 1041H of the Corporations Act and/or s 12DA of the ASIC Act; (b) Linchpin's contravention of s 1041H of the Corporations Act and/or s 12DA of the ASIC Act; and/or (c) the involvement of Mr Nielsen, Mr Williams, Mr Raftery and/or Mr Daly in Endeavour's and/or Linchpin's contraventions referred to in paragraphs 52(a) and 52(b) above? As the proceeding has been discontinued against Endeavour and Linchpin, only (c) arises. As to the Applicant, the quantum of its initial investments less any returns that they may have received. As to the Group Members, subject to establishing reliance on the Linchpin Representations and/or the Endeavour Representations, the quantum of their initial investments less any returns that they may have received. (53) Can the Court determine the losses of the Applicant and the Group Members on an aggregate basis and award such damages? Yes, with respect to the contraventions of s 601FC(5), s 601FD(1)(b) and s 601FD(1)(c) of the Corporations Act. (54) If so, what is the amount of the Applicant's and Group Members' aggregate losses? The quantum of their initial investments less any returns that they may have received. Insurance policies (55) Does the settlement reached between the Applicant (as representative of the Group Members) and the Second to Fifth Respondents (amongst others) have any or all of the following effects: (a) AIG is entitled to rely upon and enforce the covenants in favour of the Second to Fifth Respondents in answer to the claim pleaded against it and is entitled to a stay of these proceedings or dismissal of these proceedings, or the revocation of leave under s 5 of the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW); No (b) AIG has no obligation to indemnify the Second to Fifth Defendants and the Applicant and Group Members have, or will have, no right to recover any amount from AIG pursuant to s 4(1) of the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) because there is no Loss as defined in the D&O Policy and the insuring clause is not engaged or because there is no "insured liability" as defined by s 3 of the Act; No (c) the Applicant's claims against AIG based upon each of s 1022B(2), s 1041I, s 1317H, and s 1325 of the Corporations Act, and s 12GF of the Australian Securities and Investment Commission Act 2001 (Cth) fail; No (56) Is AIG required under the D&O Policy to indemnify each of Mr Nielsen, Mr Raftery, Mr Williams and Mr Daly for any liability to the Group Members, including the Applicant, in respect of the Applicant's claims against them? Yes (57) Are the Group Members, including the Applicant, entitled to recover their loss directly from AIG under the D&O Policy? Yes (58) Should any liability of AIG to the Group Members in respect of the claims made against it be reduced to an amount of nil by reason of the operation of s 28(3) of the Insurance Contracts Act 1984 (Cth) and the matters pleaded in paragraphs 226A to 226K of AIG's Second Amended Defence? No (59) Are the Group Members not entitled to recover their losses from AIG on the basis that those losses arise out of, are based upon, or are attributable to the provisions of third party professional services within the meaning of the exclusion contained in Endorsement Number 4 dated 20 December 2017 to the D&O Policy? No APPENDIX B  "AIG" means AIG Australia Limited, the seventh respondent;  "the applicant" means J&J Richards Super Pty Ltd as trustee for the J&J Richards Superannuation Fund;  "Beacon" means Beacon Financial Group Pty Ltd ACN 162 734 152;  "Corporations Act" means the Corporations Act 2001 (Cth);  "D&O Policy" means the policy of insurance provided by AIG dated 20 December 2017 in respect of certain liability of directors and officers, bearing policy number 0300021329;  "Endeavour" means Endeavour Securities (Australia) Ltd ACN 079 988 819;  "Endeavour Contravening Conduct" means the conduct constituted by the Investment Failure and the PDS Failures, by reason of which Endeavour contravened, or alternatively was involved in a contravention of, s 601FC(1) of the Corporations Act because it failed to exercise the degree of care and diligence that a reasonable person would exercise if it were in the responsible entity's position contrary to s 601FC(1)(b) of the Corporations Act, and accordingly contravened s 601FC(5) of the Corporations Act;  "Endeavour Representations" means the representations made by Endeavour in issuing the First PDS, Second PDS, Third PDS and Fourth PDS, to the effect that (a) the investment strategy of the Registered Fund would be to invest funds progressively to achieve a diversified loan portfolio across property and corporate sectors on a secured basis that are income producing, (b) the Registered Fund would invest in a range of diversified assets, predominantly be invested in mortgages in commercial and development loans, secured by registered mortgages, commercial and corporate loans secured by registered fixed and floating charges, and might also be invested in similar managed investment schemes and in cash, (c) the Registered Fund would seek investment opportunities across a range of loans and assets that will provide investors with premium income returns and capital stability, and (d) in relation to any prospective investment by the Registered Fund in any other managed investment scheme, the primary goal of such an investment would be to invest in schemes that would provide stable income returns and capital stability, Endeavour and Investport as manager would observe strict guidelines for selecting managed investment schemes (whether listed, unlisted, registered or unregistered), based on demonstrated management experience in the sector within which they invest, a strong track record in investment management in the particular asset class and vigorous investment processes and guidelines;  "Enquiries Failures" means Linchpin's failure to make any or any proper enquiries in relation to the capacity of the borrowers under the Loans to repay the Loans in accordance with their terms or at all and the failures of each of Investport, Mr Nielsen, Mr Williams, Mr Raftery and Mr Daly to ensure that Linchpin made any or any proper enquiries in relation to the capacity of the borrowers to repay the Loans in accordance with their terms, in circumstances where, in respect of first, the monies made available from the Unregistered Fund, (a) no security was given or alternatively, inadequate security was granted by the borrowers under the Loans, (b) no security was registered either at all or in time to provide any or adequate security, (c) the funds advanced under the Loans were not applied in accordance with the IM Purpose, and (d) the Loans were not loans that would be made by a trustee exercising its ordinary care, skill and diligence and in accordance with the requirements of the IM, second, the monies made available from the Registered Fund, (a) no security was given or alternatively, inadequate security was granted by the borrowers under the Loans, (b) no security was registered either at all or in time to provide any or adequate security, and (c) the funds advanced under the Loans were not applied in accordance with the PDS Purpose, and third, the Inter Fund Investment, (a) the principal asset held by the Registered Fund was the Inter Fund Investment being units of the Unregistered Fund, (b) the Inter Fund Investment was valued in the books and records of Endeavour at $15,910,848, (c) no security was granted by Linchpin, (d) the transaction was not documented by any written agreement between Endeavour and Linchpin, and (e) the funds advanced were not applied in accordance with the PDS Purpose;  "First PDS" means the Product Disclosure Statement issued by Endeavour on and from 27 April 2015 in respect of the Registered Fund;  "Fourth PDS" means the fourth Product Disclosure Statement issued by Endeavour in or about January 2018, in materially the same terms as the Third PDS;  "Group Members" means the applicant and the persons represented by the applicant in this proceeding;  "IM" means the Information Memorandum issued by Linchpin on and from 23 January 2014 to prospective investors to purchase units in the Unregistered Fund;  "IM Purpose" means the provisions in the IM to the effect that the Unregistered Fund would invest monies received from investors (a) progressively to achieve a diversified loan portfolio across property and corporate sectors on a secured basis that are income producing, (b) in a range of assets, but predominantly mortgages in particular commercial and development loans, (c) on the basis that loans made by the fund would be secured by either registered mortgages and/or security interests, and (d) in accordance with a lending policy and process outlined in Linchpin's Lending Manual;  "IM Failures" means the failures, on and following 23 January 2014, by Linchpin to comply with the IM Purpose and the failures by each of Investport, Mr Nielsen, Mr Williams, Mr Raftery and Mr Daly to ensure that Linchpin complied with the IM Purpose, in circumstances where the IM provided that (a) Linchpin would be a corporate authorised representative under an existing Australian Financial Services License, (b) Linchpin would be the Responsible Entity and trustee of the Unregistered Fund and would charge a management fee and other expenses, (c) Investport would be the fund manager of the Unregistered Fund and would be paid in connection with that role, and (d) the Unregistered Fund would invest monies received from investors progressively to achieve a diversified loan portfolio across property and corporate sectors on a secured basis that are income producing, in a range of assets, but predominantly mortgages in particular commercial and development loans, and on the basis that loans made by the fund would be secured by either registered mortgages and/or security interests, and in accordance with the lending policy and process outlined in Linchpin's Lending Manual;  "Inter Fund Investment" means the transfer of $16,457,704, comprising Registered Fund Group Members' funds, by Endeavour to the Unregistered Fund between 29 June 2015 and 31 July 2018, purportedly in exchange for units in the Unregistered Fund;  "Investment Failure" means the making by Endeavour of the Inter Fund Investment and each of Investport, Mr Nielsen, Mr Williams, Mr Raftery and Mr Daly causing or allowing Endeavour, or alternatively failing to prevent Endeavour from making the Inter Fund Investment, in circumstances where (a) the principal asset held by the Registered Fund was the Inter Fund Investment being units of the Unregistered Fund, (b) the Inter Fund Investment was valued in the books and records of Endeavour at $15,910,848, (c) no security was granted by Linchpin, (d) the transaction was not documented by any written agreement between Endeavour and Linchpin, and (e) the funds advanced were not applied in accordance with the PDS Purpose;  "Investport" means Investport Pty Ltd ACN 160 710 190;  "Linchpin" means Linchpin Capital Group Limited ACN 163 992 961;  "Linchpin Capital Group" means Linchpin, Endeavour, Beacon, The Financiallink Group Pty Ltd ACN 055 622 967, Libertas Financial Planning Pty Ltd ACN 160 419 134, Investport, Risk and Investment Advisors Australia Pty Ltd ACN 104 922 394, CPG Research & Advisory Pty Ltd ACN 052 348 026, and ISARF Pty Ltd ACN 138 673 962;  "Linchpin Contravening Conduct" means the conduct constituted by the Loan Failures, the Security Failures, and the IM Failures (noting that the claims under the Trusts Act 1973 (Qld) were not pressed);  "Linchpin Representations" means the representations made by Linchpin in the IM to the effect that (a) Linchpin was a corporate authorised representative under AFSL 240938, the Responsible Entity and trustee of the Registered Fund, and duly authorised to act as the Responsible Entity and trustee with respect to the Unregistered Fund, (b) the investment strategy of the Unregistered Fund was to invest funds progressively to achieve a diversified loan portfolio, across property and corporate sectors, and on a secured basis that are income producing, (c) the Unregistered Fund would invest in a range of diversified assets and predominantly invest in commercial and development loans, secured by registered mortgages, commercial and corporate loans secured by registered fixed and floating charges, and (d) the Unregistered Fund would seek investment opportunities across a range of loans and assets that would provide investors with premium income returns and capital stability;  "Loans" means the monies made available from the Unregistered Fund or the advances under the loans to (a) Beacon, (b) Linchpin, (c) Risk and Investment Advisors Australia Pty Ltd ACN 104 922 394, (d) CPG Research & Advisory Pty Ltd ACN 052 348 026, (e) ISARF Pty Ltd ACN 138 673 962, (f) ALPS Network Pty Ltd, Peter Larkin and Lance Meikle, (g) Derek Pyrah, (h) Venture Finance & Advisory Pty Ltd and David Ruthenberg (i) Brian French, (j) Peter Goudie Financial Services Pty Ltd and Peter Goudie, (k) Fortuna Financial Group Pty Ltd, Paul Ellenberg and Southwide Holdings Pty Ltd, (l) Ramshead Investors Pty Ltd in its own capacity and as trustee for the Ramshead Unit Trust, The Wealth Partnership Pty Ltd, Ramshead Capital Pty Ltd, Anthony John Rumble and Paul Joseph Manka, (m) TWP Client Services Pty Ltd, Ramshead Investors Pty Ltd in its own capacity and as trustee for the Ramshead Unit Trust and The Wealth Partnership Pty Ltd, (n) Anderson Lutgens & Co Pty Ltd trading as Beyond iWealth, Pamela Margaret Anderson and Pierre Lutgens, (o) Kings Lance Enterprises Pty Ltd and Graham Kinder, (p) Market St Holdings Pty Ltd and Stefanie Seco, (q) Macquarie Partners Financial Advisory Pty Ltd and Sunhee Hres, (r) Secured Business Equity Ptd Ltd and Brian David Perrin, (s) B and S Wilshire Pty Ltd and Ben Wilshire, (t) Strategic Wealth Group Pty Ltd and Neville Ortega, (u) National Financial Advice Alliance Pty Ltd and EP and K Financial Pty Ltd, and (v) Dale Financial Planning Pty Ltd and Ian William Dale;  "Loan Failures" means the entry by Linchpin into each of the Loans, and each of Investport, Mr Nielsen, Mr Williams, Mr Raftery and Mr Daly causing or allowing Linchpin to enter, or alternatively failing to prevent Linchpin from entering into the Loans, in circumstances where, in respect of the monies made available from, first, the Unregistered Fund, (a) no security was given or alternatively, inadequate security was granted by the borrowers under the Loans, (b) no security was registered either at all or in time to provide any or adequate security, (c) the funds advanced under the Loans were not applied in accordance with the IM Purpose, and (d) the Loans were not loans that would be made by a trustee exercising its ordinary care, skill and diligence and in accordance with the requirements of the IM, and, second, the Registered Fund, (a) no security was given or alternatively, inadequate security was granted by the borrowers under the Loans, (b) no security was registered either at all or in time to provide any or adequate security, and (c) the funds advanced under the Loans were not applied in accordance with the PDS Purpose;  "Omitted Risks" means the significant risks not identified in the Second PDS, Third PDS and/or the Fourth PDS, associated with an investment in the Registered Fund where that fund had invested exclusively in the Unregistered Fund and the Unregistered Fund (a) only held assets in the form of loans, (b) provided loans, not to a diversified range of borrowers, but instead to borrowers all within one group of financial planners (related to its trustee), (c) had not conducted proper due diligence before making the loans including as to the capacity of the borrower to repay the loans, and (d) had not received valuable security for the repayment of the loans and had failed to register the security that was offered;  "PDS Failures" means the failure by Endeavour, on and following 27 April 2015, to comply with the First PDS (including as amended by the Second PDS, the Third PDS and Fourth PDS) and the failure by each of Investport, Mr Nielsen, Mr Williams, Mr Raftery and Mr Daly to ensure that Endeavour complied with the PDS Purpose;  "PDS Purpose" means the provisions in the First PDS to the effect that Endeavour would invest monies received from investors (a) progressively to achieve a diversified loan portfolio across property and corporate sectors on a secured basis that are income producing, (b) to "Primary Target Borrowers" on terms that the Responsible Entity and the Investment Manager would, amongst other types of lending, target loans to assist financial planners buy client books to expand their businesses, take security over the client books of the planner's existing business as well as the new client book and usual directors' guarantees and company charges, and (c) on the basis that loans made by the Registered Fund would be capable of being secured by either registered mortgages or registered security interests;  "Registered Fund" means a registered managed investment scheme called the "Investport Income Opportunity Fund" of which Endeavour was the responsible entity;  "Second PDS" means the second Product Disclosure Statement issued by Endeavour on or about 1 October 2015, in materially the same terms as the First PDS;  "Security Failures" means the failures by Linchpin to ensure that security in respect of the Loans was obtained, adequate, registered and enforceable and the failures by each of Investport, Mr Nielsen, Mr Williams, Mr Raftery and Mr Daly to ensure that Linchpin obtained, adequate, registered and enforceable security in respect of the Loans, in circumstances where in respect of the monies made available from, first, the Unregistered Fund, (a) no security was given or alternatively, inadequate security was granted by the borrowers under the Loans, (b) no security was registered either at all or in time to provide any or adequate security, (c) the funds advanced under the Loans were not applied in accordance with the IM Purpose, and (d) the Loans were not loans that would be made by a trustee exercising its ordinary care, skill and diligence and in accordance with the requirements of the IM, and, second, the Registered Fund, (a) no security was given or alternatively, inadequate security was granted by the borrowers under the Loans, (b) no security was registered either at all or in time to provide any or adequate security, and (c) the funds advanced under the Loans were not applied in accordance with the PDS Purpose;  "Third PDS" means the third Product Disclosure Statement issued by Endeavour on or about 24 June 2016, in materially the same terms as the Second PDS; and  "Unregistered Fund" means an unregistered managed investment scheme called the "Investport Income Opportunity Fund" of which Linchpin was the trustee. SCHEDULE OF PARTIES NSD 939 of 2020 Respondents Fifth Respondent: PETER DALY Seventh Respondent: AIG AUSTRALIA LIMITED (ACN 004 727 753) Eighth Respondent: RIVERSTONE MANAGING AGENCY LIMITED FOR AND ON BEHALF OF ALL THE UNDERWRITING MEMBERS OF LLOYD'S SYNDICATE 2014