Anchorage Capital Master Offshore Ltd v Sparkes (No 3); Bank of Communications Co Ltd v Sparkes (No 2) [2021] NSWSC 1025

Supreme Court New South Wales

Medium Neutral Citation: Anchorage Capital Master Offshore Ltd v Sparkes (No 3); Bank of Communications Co Ltd v Sparkes (No 2) [2021] NSWSC 1025 Hearing dates: 1 to 5; 8 to 12; 15 to 19; 22 to 26 March 2021; 6 to 8, 14 to 16, 22, 23, 27 and 28 April 2021; 5 to 7, 10 to 14 May 2021 Decision date: 17 August 2021 Jurisdiction: Equity - Commercial List Before: Ball J Decision: (1) Proceeding 2018/104383 (including the cross-claim) be dismissed. (2) Proceeding 2019/316305 (including the cross-claim) be dismissed. (3) Direct that within 28 days of the date of this judgment the parties either: (a) bring in short minutes of order to give effect to their agreement on costs; or, (b) if they cannot reach agreement, contact Associate to Ball J with a view to relisting the matter to deal with any outstanding questions in relation to costs. Catchwords: CONSUMER LAW – Misleading and deceptive conduct – Whether company officers made misleading statements when signing drawdown and rollover notices – Whether representations made by company officer personally or as company organs – Held company officers did not personally engage in misleading and deceptive conduct CORPORATIONS – Insolvency – Whether company insolvent – Application of test under Corporations Act 2001 (Cth) – Where company alleged not to be able to repay future debt – Where future debt not current – Application of civil standard of proof to future or hypothetical event – Where ability to compromise debt relevant to the question of insolvency – Use of hindsight – Where use of hindsight impermissible – Where hindsight used not to show what was possible or likely at some point in the past but to establish a fact at an earlier point PERSONAL PROPERTY – Assignment of choses in action – Prohibition on assignment of bare chose in action TORTS – Duty of care – Whether company officers owed a duty of care to lenders in signing drawdown and rollover notices – Whether company officers personally made representations contained in drawdown and rollover notices and owed a duty of care to lenders when making representations – Whether representations made by company officers personally or as company organs – Held company officers did not owe a duty of care – Held representations made on behalf of the company – Held unreasonable for lenders to rely on representations as representations made personally by company officers – Breach – Where claim that company officers did not turn their mind to the question whether representations in the notices were true and did not make their own inquiries – Held company officers entitled to rely on management to be told if representations in the notices could not be made – Causation – Causation not found on the facts TORTS – Duty of care – Held no reason to recognise a duty of care between sophisticated commercial entities when consequences of breach of contract are already set out in the agreements TORTS – Duty of care – Whether director owed a duty of care to lenders before instructing company officers to draw all funds from facility agreements with lenders – Held director or employee does not owe a duty of care to avoid economic loss to third party when making and communicating a decision to another employee TORTS – Duty of care – Accessorial liability – Directing or procuring breach of contract – Held director and employee not liable for directing or procuring breach of contract when director did not act personally but as an organ of the company – Directing or procuring breach of duty – Held that there is no duty in tort to take reasonable care to perform a contract TORTS – Negligence – Where claim brought under negligent misstatement and negligence as two separate causes of action – Where officer of the company found to owe the lenders a duty of care in circumstances where lender made specific enquiries and officer could reasonably be expected to know or find out relevant information – Where reliance not proved on the facts TORTS – Negligence – Whether legal advice was negligent and misleading and deceptive – Where allegation not proved DAMAGES – Quantification – Alternative methodologies – Damages calculated comparing the position in which the lenders would have been but for the defendants' wrongful conduct – Damages calculated assuming that but for the defendants' wrongful conduct the company would have entered into voluntary administration earlier than it did – Where counterfactual not subject of evidence – Whether plaintiffs entitled to compound interest as damages –Whether claim should be converted into Australian dollars Legislation Cited: Australian Consumer Law Australian Securities and Investment Commission Act 2001 (Cth) Building and Construction Industry Security of Payment Act 2002 (Vic) Civil Liability Act 2002 (NSW) Corporations Act 2001 (Cth) Evidence Act 1995 (NSW) Cases Cited: Anchorage Capital Master Offshore Pty Ltd v Sparkes [2019] NSWSC 384 Australian Competition and Consumer Commission v IMB Group Pty Ltd [2003] FCAFC 17 Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640, [2013] HCA 54 Australian Executor Trustees Limited v Propell National Valuers (WA) Pty Ltd [2011] FCA 522 Australian Securities and Investments Commission v ActiveSuper Pty Ltd (in liq) (2015) 235 FCR 181; [2015] FCA 432 Australian Securities and Investments Commission v Narain (2008) 169 FCR 211, [2008] FCAFC 120 Australian Securities and Investments Commission v Plymin (2003) 175 FLR 124 Australian Securities and Investments Commission v Rent 2 Own Cars Australia Pty Ltd [2020] FCA 1312 Bakewell v Anchorage Capital Master Offshore Ltd (2019) 372 ALR 349; [2019] NSWCA 199 Bateman v Slatyer (1987) 71 ALR 553 Bell Group Ltd (in liq) v Westpac Banking Corp (No 9) (2008) 39 WAR 1; [2008] WASC 239 Berry v CCL Secure Pty Ltd (2020) 381 ALR 427; [2020] HCA 27 Brookfield Multiplex Ltd v Owners Strata Plan No 61288 (2014) 254 CLR 185; [2014] HCA 36 C Evans & Sons Ltd v Spritebrand Ltd [1985] 1 WLR 317 Caltex Refineries (Qld) Pty Limited v Stavar (2009) 75 NSWLR 649; [2009] NSWCA 258 Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 Emanuel Management Pty Ltd v Foster's Brewing Group Ltd (2003) 178 FLR 1, [2003] QSC 205 Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241 Equuscorp Pty Ltd v Haxton (2012) 246 CLR 498; [2012] HCA 7 Eureka Funds Management Ltd v Freehills Services Pty Ltd (2008) 19 VR 676; [2008] VSCA 156 Fightvision Pty Ltd v Onisforou; Tszyu v Fightvision Pty Ltd (1999) 47 NSWLR 473; [1999] NSWCA 323 Glegg v Bromley [1912] 3 KB Houghton v Arms (2006) 225 CLR 553, [2006] HCA 59 Hungerfords v Walker (1989) 171 CLR 125 Insurance Commissioner v Associated Dominions Assurance Society Proprietary Limited (1953) 89 CLR 78 John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451 JR Consulting & Drafting Pty Ltd v Cummings (2016) 329 ALR 625; [2016] FCAFC 20 Kinsela v Russell Kinsela Pty Ltd (in liq) (1986) 4 NSWLR 722 LED Technologies Pty Ltd v Roadvision Pty Ltd (2012) 199 FCR 204; [2012] FCAFC 3 Lewis v Australian Capital Territory (2020) 381 ALR 375; [2020] HCA 26 Lewis v Doran (2004) 208 ALR 385; [2004] NSWSC 608 Lewis v Doran (2005) 219 ALR 555; [2005] NSWCA 243 Malec v JC Hutton Pty Ltd (1990) CLR 638; [1990] HCA 20 Manufacturers' Mutual Insurance Ltd v Queensland Government Railways (1968) 118 CLR 314 March v E & MH Stramare Pty Ltd (1991) 171 CLR 506 Mentmore Manufacturing Co Ltd v National Merchandising Manufacturing Co Inc (1978) 89 DLR (3d) 195 Mutual Life & Citizens' Assurance Co Ltd v Evatt (1968) 122 CLR 556 Octaviar Public Trustee (Qld) v Octaviar Ltd (2009) 73 ACSR 139; [2009] QSC 202 Performing Rights Society Limited v Ciryl Theatrical Syndicate Limited [1924] 1 KB 1 Pittmore Pty Ltd v Chan [2020] NSWCA 344 Rainham Chemical Works Ltd (In Liq) v Belvedere Fish Guano Co Ltd [1921] 2 AC 465 Re Cube Footware Pty Ltd [2013] 2 Qd R 501; [2012] QSC 398 Robinson v 470 St Kilda Road Pty Ltd (2018) 263 FCR 572; [2018] FCAFC 84 Rolls-Royce New Zealand Ltd v Carter Holt Harvey Ltd [2005] 1 NZLR 324, [2004] NZCA 97 Rural Press Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 53; [2003] HCA 75 San Sebastian Pty Ltd v The Minister Administering the Environmental Planning and Assessment Act 1979 (1986) 162 CLR 340 Sandell v Porter (1966) 115 CLR 666 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4 Shaddock & Associates Pty Ltd v Parramatta City Council (No 1) (1981) 150 CLR 225 Southern Cross Interiors Pty Ltd v Deputy Commissioner of Taxation (2001) 53 NSWLR 213; [2001] NSWSC 621 Spies v The Queen (2000) 201 CLR 603; [2000] HCA 43 Tepko Pty Ltd v Water Board (2001) 206 CLR 1; [2001] HCA 19 Trendtex Trading Corporation v Credit Suisse [1982] AC 679 Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515; [2004] HCA 16 Yorke v Lucas (1985) 158 CLR 661; [1985] HCA 65 Category: Principal judgment Parties: 2018/104383 Anchorage Proceedings