New South Wales Supreme Court CITATION : New Cap Reinsurance Corporation Ltd v Daya [2008] NSWSC 64 HEARING DATE(S) : 11/10/07, 19/10/07, 31/1/08 JUDGMENT DATE : 13 February 2008 JURISDICTION : Equity Division Corporations List JUDGMENT OF : Barrett J DECISION : Various claims in proposed amended cross claim to be dismissed CATCHWORDS : CORPORATIONS - winding up - recovery at suit of liquidator against directors for insolvent trading - claim by one director for indemnity by company - circumstances not within indemnity provision - indemnity in any event precluded by statute - TRADE AND COMMERCE - misleading or deceptive conduct - representations by directors and chief financial officer to director in board meeting - representations by director to another director and other persons at due diligence committee meeting - whether conduct "in trade or commerce" - CORPORATIONS - whether one corporation a "related body corporate" of another - evidence needed Australian Securities and Investments Commission Act 2001 (Cth), ss 12DA, 12GF, 12GH, 12GM Civil Procedure Act 2005, s 64(1)(b) Corporations Act 2001 (Cth), ss 140(1)(b), 199A(2), 241, 500, 588G(2), 588M(2) LEGISLATION CITED : Corporations Law, ss 9, 46, 50, 995, 1005, Regulation 7.12.03 Evidence Act 1995, s 91 Fair Trading Act 1987, ss 42, 68 Law Reform (Miscellaneous Provisions) Act 1946, s 5 Trade Practices Act 1974, ss 52, 82 CATEGORY : Procedural and other rulings Burke v LFOT Pty Ltd [2002] HCA 17; (2002) 209 CLR 282 Cleary v Australian Co-operative Foods Ltd [1999] NSWSC 991 and 1062; (1999) 32 ACSR 701 Concrete Constructions (NSW) Pty Ltd v Nelson [1990] HCA 17; (1990) 169 CLR 594 Fasold v Roberts (1997) 70 FCR 489 Firewatch Australia Pty Ltd v Country Fire Authority (1999) 93 FCR 520 General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 CASES CITED : Houghton v Arms (2006) 225 CLR 553 Ingot Capital Investments v Macquarie Equity Capital Markets [2007] NSWSC 124; (2007) 63 ACSR 1 NRMA Ltd v Yates [1999] NSWSC 859; (2000) 18 ACLC 45 Prestia v Aknar (1996) 40 NSWLR 165 R v Byrnes [1995] HCA 1; (1995) 183 CLR 501 at CLR 514-515 Vagrand Pty Ltd v Fielding (1993) 41 FCR 550 Yates v Whitlam [1999] NSWSC 976; (1999) 32 ACSR 595 New Cap Reinsurance Corporation Limited - First Plaintiff John Raymond Gibbons as Liquidator for the First Plaintiff - Second Plaintiff Azmin Firoz Daya - First Defendant Paul Laurence Williams - Second Defendant Udayan Daniel Ghose - Third Defendant PARTIES : William Peck - Fourth Defendant Paul Laurence Williams - Cross Claimant Azmin Firoz Daya - First Cross Defendant William Peck - Second Cross Defendant Peter Aroney - Third Cross Defendant Udayan Daniel Ghose - Fourth Cross Defendant New Cap Reinsurance Corporation Limited - Fifth Cross Defendant FILE NUMBER(S) : SC 2518/05 Dr S R Derham - Plaintiff Ms J McLennan, Solicitor - First Defendant COUNSEL : M J Cohen - Second Defendant Mr L Gor - Fourth Defendant Mr P S Braham - Third Cross Defendant Henry Davis York - Plaintiff SOLICITORS : Sparke Helmore Lawyers - First Defendant Dibbs Abbott Stillman - Second Defendant M D Nikolaidis & Co - Third Cross Defendant IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST BARRETT J WEDNESDAY, 13 FEBRUARY 2008 2518/05 NEW CAP REINSURANCE CORPORATION LTD v AZMIN FIROZ DAYA & 3 ORS JUDGMENT Background 1 The second defendant, Mr Williams, wishes to pursue a cross claim in these proceedings. On various grounds to which I shall refer presently, objection to that course is taken by the first and second plaintiffs (New Cap Reinsurance Corporation Ltd or "NCRA" and its liquidator), by the fourth defendant (Mr Peck) and by Mr Aroney who is a party only by reason of his being named as a cross defendant in the cross claim. 2 The plaintiffs' objection is pursued at two levels. First, they oppose the grant of leave for Mr Williams to amend the cross claim. Second, they oppose the grant of leave for Mr Williams to proceed with the cross claim, whether in its original or amended form. Mr Peck and Mr Aroney both oppose the grant of leave to amend. Mr Aroney also makes application for an order that the existing cross claim be summarily dismissed. The principal claims 3 Before considering the cross claim and the proposal to amend it, I must outline the claims advanced by means of the statement of claim the current version of which is that filed on 22 December 2006. 4 NCRA as first plaintiff and its liquidator as second plaintiff sue Mr Daya (first defendant), Mr Williams (second defendant), Mr Ghose (third defendant) and Mr Peck (fourth defendant). The basic allegations are that each of Mr Daya, Mr Williams and Mr Peck was a director of NCRA at particular times, that NCRA incurred certain debts within a particular period and that, at the time of each incurring, NCRA was insolvent or there were reasonable grounds for suspecting that NCRA was insolvent. A contravention of s 588G(2) of the Corporations Act 2001 (Cth) is, on that basis, pleaded against each of Mr Daya, Mr Williams and Mr Peck, in that he failed to prevent the incurring of the relevant debt by NCRA. 5 NCRA and its liquidator further contend that the persons to whom the relevant debts became due suffered loss or damage in relation to those debts because of NCRA's insolvency. That being so (and other conditions in s 588M(1) being satisfied), NCRA and Mr Gibbons assert a cause of action against each contravening director of NCRA under s 588M(2): "The company's liquidator may recover from the director, as a debt due to the company, an amount equal to the amount of the loss or damage." 6 Two debts or classes of debts are involved. The first is a debt of US$30 million to a company called NC Re Capital Limited arising from a so-called "perpetual subordinated loan" made by that company and evidenced by a "perpetual unsecured note" issued by NCRA. The statement of claim says this about that loan: "The decision that NCRA borrow the funds was made at a meeting of directors attended by each of the first, second and fourth defendants held on 31 December 1998. The terms of the loan were set out in a Perpetual Unsecured Note instrument dated 31 December 1998. The proceeds of the loan in the sum of $29,999,996.79 were advanced to NCRA by NC Re Capital Limited on 12 January 1999." 7 The second class or group of debts involves "contingent liabilities" under certain identified reinsurance contracts entered into by NCRA as reinsurer, as well as debts for premiums for certain reinsurance contracts entered into by NCRA as reinsured. These are referred to as the "inwards reinsurance debts". Mr Williams' cross claim 8 That brings me back to Mr Williams' proposed amended cross claim which, for the avoidance of doubt, I identify as being in the form of the annexure "D" to the affidavit of Dennis Grant sworn and filed on 17 October 2007. The five cross defendants are named as Mr Daya, Mr Peck, Mr Aroney, Mr Ghose and NCRA itself. At material times, Mr Daya, Mr Peck and Mr Ghose were directors of NCRA. Mr Aroney was NCRA's chief financial officer and secretary, but not a director. 9 By the proposed amended cross claim, Mr Williams anticipates the possibility that he may be made liable to NCRA pursuant to the statement of claim, via ss 588G(2) and 588M(2), for loss or damage related to the perpetual subordinated loan, or loss or damage related to the inwards reinsurance debts. In the first eventuality, Mr Williams says, Mr Daya, Mr Peck, Mr Aroney and Mr Ghose should indemnify Mr Williams or contribute to his liability or pay equitable compensation or damages. The damages claims are, in each case, framed thus: "(d) alternatively, pay to the Cross Claimant damages, including damages pursuant to s 1005 of the Corporations Law ; (e) alternatively, pay to the Cross Claimant damages pursuant s 82 of the Trade Practices Act 1974 (Cth); (f) alternatively, pay to the Cross Claimant damages pursuant to s 68 of the Fair Trading Act 1987 (NSW)." 10 There is a corresponding claim against Mr Daya alone in respect of the inwards reinsurance debts. 11 The basic proposition upon which the claims so far mentioned are based is that the relevant natural person cross defendants (or cross defendant) made to Mr Williams representations about the particular subject matter that were misleading or deceptive and that the conduct alleged against Mr Williams himself (in essence, his failure to prevent the incurring of the relevant debt or debts by NCRA) was produced or induced by the representations. The misleading or deceptive quality of the representations said to have been made to Mr Williams is alleged to have given rise to a contravention of one or more of s 52 of the Trade Practices Act 1974 (Cth), s 42 of the Fair Trading Act 1987, s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) and s 995 of the Corporations Law as it applied at the relevant time. I shall return to these provisions. 12 The amended cross claim next focuses upon NCRA (the fifth cross defendant) and seeks, in the alternative to the claims for indemnity, contribution, equitable compensation and damages against one or more of the natural person cross defendants, the following: "2.1 a declaration pursuant to s.12GH(2) of the Australian Securities and Investments Commission Act , 1989 (Cth) (repealed) (and to the extent necessary pursuant to the Australian Securities and Investments Commission Act , 2001 (Cth) by operation of Division 6 of Part 16 of that Act) ( the "ASIC Act") that any and all debts arising pursuant to the US$30 millions Perpetual Unsecured Note Instrument dated 31 December 1998 are taken to have been incurred by the fifth Cross Defendant; 2.2 a declaration pursuant to s.12DA of the ASIC Act that the conduct of the fifth Cross Defendant was (taken for the purposes of s.12GH(2) of the ASIC Act to be the incurring of any and all debts arising from the issue by the fifth Cross Defendant of the US$30 millions Perpetual Unsecured Note Instrument dated 31 December 1998) in trade or commerce, engaging in conduct in relation to financial services that is misleading or deceptive or likely to mislead or deceive; 2.3 an order pursuant to s.12GM(2) of the ASIC Act, that the fifth Cross Defendant pay to the Cross Claimant the amount of loss or damage suffered by the conduct of the fifth Cross Defendant in contravention of s.12DA of the ASIC Act." 13 The claims thus expressed relate to the perpetual subordinated loan. There are separate but corresponding claims in respect of the inwards reinsurance debts. 14 Finally (and leaving aside interest and costs), there is – apparently against all cross defendants - a claim for: "Indemnity or contribution pursuant to s.5 of the Law Reform (Miscellaneous Provisions) Act, 1946, or alternatively, indemnity or contribution at general law." 15 Insofar as it contemplates indemnity by NCRA, the case sought to be made by Mr Williams is elucidated by paragraphs 16.4 and 25.4 of the proposed amended cross claim each of which refers to "the indemnity afforded to directors and officers of NCRA in a like position to Williams established under its Constitution as giving effect as part of the statutory contract able to be enjoyed by Williams pursuant to the provisions of s 140(1)(b) of the Corporations Law, or otherwise by operation of law." Approach to the present applications 16 Mr Williams seeks "leave to file and serve" the amended cross claim. That aspect of the application is apparently advanced by reference to s 64(1)(b) of the Civil Procedure Act 2005. Mr Williams also makes, explicitly by reference to s 500 of the Corporations Act 2001 (Cth), a claim for leave to proceed with the amended cross claim against NCRA. Both claims are resisted by NCRA, as to the claims against it. Each of Mr Peck and Mr Aroney opposes the grant of leave to amend as it affects him. In addition, NCRA and Mr Peck support Mr Aroney's claim for summary dismissal of the cross claim. 17 Distinct tests apply in relation to the different applications. In relation to the application to amend, the contention of each of NCRA, Mr Peck and Mr Aroney is that the relevant claims will be so obviously futile that they would be liable to be struck out, there being a demonstrable absence of any cause of action: General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125. The same contention is advanced upon Mr Aroney's motion for summary dismissal. Mr Williams' application for leave under s 500 of the Corporations Act is, however, to be approached by reference to a somewhat different test which entails an inquiry whether there is a serious question to be tried: Vagrand Pty Ltd v Fielding (1993) 41 FCR 550. 18 At a practical level, therefore, I have to decide, in the first instance, whether the several claims in the cross claim in its proposed amended form fail the General Steel test. Only to the extent that they do not fail the General Steel test and that claims against NCRA (as distinct from the other cross defendants) remain will the question of leave to proceed under s 500 of the Corporations Act need to be addressed. In approaching the General Steel questions, I must assume that assertions of fact in the pleading will ultimately be made good. Mr Williams' claim to be indemnified by NCRA 19 I consider first the objection to the parts of the amended cross claim that seek to rely on an indemnity arising in favour of Mr Williams and against NCRA. 20 Mr Williams contends that such an indemnity will arise by operation of NCRA's constitution (see paragraph [15] above). A company's constitution has effect as a contract between the company and each director of the company under s 140(1)(b) of the Corporations Act currently in force. It is accepted that an equivalent provision existed at all material times and that, in relation to the circumstances on which the proceedings are based, the constitution of NCRA operated as a contract the parties to which included NCRA and Mr Williams, he being a director of NCRA. The relevant provision of the constitution is article 146 which is in these terms: "Subject to the Law every Director, Manager, Secretary and other officer for the time being of the Company shall be indemnified by the Company from and against all cost losses and expenses which any such Director, Manager, Secretary or other officer may properly incur or become liable to pay by reason of any contract properly entered into or other act or thing properly done by him as such officer or in any way to the discharge of his duties and it shall be the duty of the Directors to pay the same out of the funds of the Company." 21 Mr Williams contends that any liability he may have via ss 588G(2) and 588M(2) by reason of the incurring of relevant debts by NCRA is a liability in respect of which he is entitled to be indemnified by NCRA pursuant to article 146. The argument seems to be that, if recovery against Mr Williams were obtained for NCRA by its liquidator by way of order under s 588M(2), Mr Williams would have become liable for loss by reason of conduct of his falling within the scope of article 146. 22 It is contended by NCRA (and I agree) that article 146 would not be a source of indemnity for Mr Williams in those circumstances. Mr Williams' liability would have arisen because of his failure to prevent the incurring of the relevant debt by NCRA – and, if an order under s 588M(2) had been made, it would have been found that that failure amounted to contravention of s 588G(1). The liability would have arisen upon and by reason of the making of the s 588M(2) order. It would follow that the loss or expense to Mr Williams flowing from the order under s 588M(2) was not loss or damage that he "properly" incurred or for which he "properly" became liable; nor would his conduct be of such a kind as to form part of "the discharge of his duties". 23 It is no part of the duties of a director to commit contraventions of s 588G(2). Nor does a director who contravenes s 588G(2) act "properly" by doing so. The adverb "properly", in this context, connotes absence of impropriety in the sense to which the High Court referred in R v Byrnes [1995] HCA 1; (1995) 183 CLR 501 at CLR 514-515: "Impropriety consists in a breach of the standards of conduct that would be expected of a director in the position of the alleged offender by reasonable persons with knowledge of the duties, powers and authority of the position and the circumstances of the case." 24 The expected standards are such as to require that directors abstain from conduct in and about the incurring of debts by their company which is of the kind caught by s 588G. That abstention is directed towards the financial well-being of the company's creditors, a matter that the directors are peculiarly able to monitor. It follows that, as a matter of construction, article 146 will not operate in relation to any liability visited upon Mr Williams pursuant to s 588M(2) as a result of contravention of s 588G(2). 25 A further submission made on behalf of NCRA (which I also accept) is that, even if some contractual or other non-statutory source of indemnity for Mr Williams as against NCRA is identified, statutory provisions will preclude indemnification of Mr Williams by NCRA in the way sought. This aspect was approached by reference to s 241 of the Corporations Law as it stood at the time of the events in question and s 199A(2) of the Corporations Act in its current form. It seems to me that it is the latter that arises for consideration, rather than the former, since the question will be whether, when the court makes its orders, there is any statutory barrier to the recognition by the court of the indemnity sought by Mr Williams. Section 199A(2) is in these terms: "A company or a related body corporate must not indemnify a person (whether by agreement or by making a payment and whether directly or through an interposed entity) against any of the following liabilities incurred as an officer or auditor of the company: (a) a liability owed to the company or a related body corporate; (b) a liability for a pecuniary penalty order under section 1317G or a compensation order under section 1317H or 1317HA; (c) a liability that is owed to someone other than the company or a related body corporate and did not arise out of conduct in good faith. This subsection does not apply to a liability for legal costs." 26 If NCRA and its liquidator are successful in their pursuit of the claims against Mr Williams under ss 588G(2) and 588M(2), the result will be recovery by the liquidator from Mr Williams, as a debt due to NCRA, of a sum of money. A liability will then and thereby be owed to NCRA by Mr Williams since, in terms of the court's order, a debt will be due to NCRA. There will thus exist, in terms of s 199A(2)(a), a liability owed by Mr Williams to NCRA. That being so, s 199A(2) will forbid any action by NCRA to indemnify Mr Williams against that liability. It will likewise preclude any order of the court recognising any right of Mr Williams to be indemnified by NCRA. Mr Williams' claim to be indemnified by NCRA in that respect is accordingly one that is devoid of substance. 27 To the extent that the cross claim advances a claim by Mr Williams to be indemnified by NCRA against liability imposed upon him by any order made under s 588M(2), it discloses no viable cause of action. Mr Williams' claims based on alleged misleading and deceptive conduct 28 Mr Williams advances several claims by reference to allegations of misleading or deceptive conduct. The claim for damages under s 82 of the Trade Practices Act is based on an allegation of misleading or deceptive conduct within s 52 of that Act. The claim for damages under s 68 of the Fair Trading Act is based on a like allegation related to s 42 of that Act. The claim for damages under s 1005 of the Corporations Law (a provision having no counterpart in the Corporations Act) appears to be based on an allegation of misleading or deceptive conduct caught by s 995 of the Corporations Law (also not replicated in the Corporations Act). 29 An allegation of misleading or deceptive conduct is also at the centre of the claims based on ss 12DA, 12GH and 12GM of the Australian Securities and Investments Commission Act. (I note, in that connection, that neither s 12GH nor s 12DA contemplates, in terms, the making of a declaration by a court, so that the claim for "a declaration pursuant to" each of those sections is meaningless.) 30 It is desirable that I set out each of the provisions concerning misleading or deceptive conduct on which Mr Williams seeks to rely. 31 Section 52(1) of the Trade Practices Act is in these terms: "A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive." 32 Section 42(1) of the Fair Trading Act reads: "A person shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive." 33 Section 12DA(1) of the Australian Securities and Investments Commission Act is as follows: "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." 34 Section 995(2) of the Corporations Law reads: "A person shall not, in or in connection with: (a) any dealing in securities; or (b) without limiting the generality of paragraph (a): (i) the allotment or issue of securities; (ii) a notice published in relation to securities; (iii) the making of, or the making of an evaluation of, or of a recommendation in relation to, offers under a takeover bid; (iv) the carrying on of any negotiations, the making of any arrangements or the doing of any other act preparatory to or in any other way related to any matter referred to in subparagraph (i), (ii) or (iii); engage in conduct that is misleading or deceptive or is likely to mislead or deceive." 35 The thesis Mr Williams propounds in these areas in relation to the US$30 million debt is, in essence, that, in participating in the board decision that NCRA should incur the debt (being a decision made at the board meeting of 31 December 1998), Mr Williams received and relied on "the faith and credit of the material facts placed before him by Daya, or alternatively Peck, or alternatively Aroney, and not otherwise"; and the representations thus made to him and relied upon by him "were false". Particulars are given of alleged oral representations made by Mr Daya, Mr Peck and Mr Aroney at the board meeting of 31 December 1998 (they and Mr Williams himself being described as persons attending the meeting). The conduct said to amount to misleading or deceptive conduct in relation to the US$30 million debt is confined wholly to that board meeting. 36 A similar approach is taken to the claims concerning the debts for inwards reinsurance, although as to conduct of Mr Daya only. Mr Williams maintains that, in participating in the incurring of those debts by NCRA, he relied on "conduct of Daya" who "at all material times represented to Williams in oral communications by his silence, and in writing and orally to the Due Diligence Committee of NCRA … that NCRA was solvent and maintained its claims paying ability". Particulars refer to certain identified matters, including written representations to the Due Diligence Committee and conduct at meetings of the Due Diligence Committee on specified dates. 37 In the parts of the pleading based on the Australian Securities and Investments Commission Act provisions, Mr Williams takes as his starting point the proposition that Mr Daya or Mr Peck or Mr Aroney or some two or more of them made misrepresentations in relation to the US$30 million note issue and that Mr Daya alone made misrepresentations relevant to the inwards reinsurance debts. The conduct of the particular individual or individuals is, he says, to be attributed to NCRA by operation of s 12GH(2) because each of those individuals was an "officer" of NCRA. The attribution leads, it is said, to the conclusion that NCRA engaged in misleading or deceptive conduct contrary to s 12DA. As a result, it is alleged, NCRA should be ordered to pay Mr Williams an amount equal to such loss or damage as he himself suffers by reason of NCRA's conduct – intended, no doubt, to be the full loss or damage that may be visited upon him by operation of ss 588G and 588M. 38 As an aside, it is pertinent to note in relation to the Australian and Securities Investments Commission Act claims that the pleading apparently does not purport to initiate an action for damages under s 12GF. That being so, there will not be on foot what s 12GM(1) calls "a proceeding instituted under, or for an offence against, this Division". If no such proceeding is extant, there will be no power in the court to make any order under s 12GM. I mention this because it appears to me to be a major flaw in the approach that has been taken. 39 I return to the aspects of Mr Williams' case sought to be advanced on the basis of alleged misleading or deceptive conduct. It will be observed that, with the exception of s 995(2) of the Corporations Law (which, for the moment, I leave to one side), each of the statutory provisions uses the words "in trade or commerce". Emphasis is placed on those words and it is necessary to pay particular attention to them. "In trade or commerce" 40 The parties against whom Mr Williams seeks to maintain claims under s 52 of the Trade Practices Act, s 42 of the Fair Trading Act and s 12DA of the Australian Securities and Investments Commission Act contend that the conduct (by commission and omission) upon which Mr Williams seeks to rely did not occur "in trade or commerce". In the case of the US$30 million debt, the allegedly misleading or deceptive conduct is said to have occurred wholly within the confines of NCRA's 31 December 1998 board meeting. In the case of the inwards reinsurance debts, the conduct is not described in such a way as to indicate a single confined context. Rather, reliance is placed upon an ongoing course of contact between Mr Williams and Mr Daya, plus Mr Daya's written communications to the Due Diligence Committee and conduct at meetings of that committee. 41 Given the particular factual contexts, it is contended by NCRA, Mr Peck and Mr Aroney that the conduct on which Mr Williams seeks to rely was not conduct "in trade or commerce". That contention is advanced by reference to principles emerging from the decision of the High Court in Concrete Constructions (NSW) Pty Ltd v Nelson [1990] HCA 17; (1990) 169 CLR 594. That case concerned statements made by a foreman to a construction worker in the course of the former's giving instructions to the latter in the workplace. The worker alleged that the foreman made an untrue statement about the state of certain grates, that he acted in reliance on that statement and that he thereby suffered injury for which he was entitled to recover damages under s 52 of the Trade Practices Act. It was held that no cause of action arose because s 52 was concerned with the conduct of a corporation towards persons, whether or not consumers, with whom the corporation (or those whose interests it represented or was seeking to promote) had or might have dealings in the course of those activities which, of their nature, bore a trading or commercial character and were thus "in" trade or commerce. The construction worker was not such a person. 42 Mason J, Deane J, Dawson J and Gaudron J, in a joint judgment, postulated two approaches to the construction of "in trade or commerce". According to the first, the prohibition is one "encompassing conduct in the course of myriad of activities which are not, of their nature, of a trading or commercial character but which are undertaken in the course of, or as incidental to, the carrying on of an overall trading or commercial business". If that approach is correct: "…the provisions of the section would extend, for example, to a case where the misleading or deceptive conduct was a failure by a driver to give the correct handsignal when driving a truck in the course of a corporation's haulage business. It would also extend to a case, such as the present, where the alleged misleading or deceptive conduct consisted of the giving of inaccurate information by one employee to another in the course of carrying on the building activities of a commercial builder." 43 The alternative is to regard the words "in trade or commerce" as "referring only to conduct which is itself an aspect or element of activities or transactions which, of their nature, bear a trading or commercial character. So construed, to borrow and adapt words used by Dixon J in a different context in Bank of NSW v The Commonwealth , the words 'in trade or commerce' refer to 'the central conception' of trade or commerce and not to the 'immense field of activities' in which corporations may engage in the course of, or for the purposes of, carrying on some trading or overall commercial business." 44 Their Honours regarded the arguments favouring and militating against these alternatives as "fairly evenly balanced", as "a matter of mere language". They resorted, therefore, to context. Having regard to its location in Part V of the Trade Practices Act and Part V's heading "Consumer Protection" to that part, it was said to be "plain that s 52 was not intended to extend to all conduct, regardless of its nature, in which a corporation might engage in the course of, or for the purposes of, its overall trading or commercial business". The joint judgment continued: "Put differently, the section was not intended to impose, by a side-wind, an overlay of Commonwealth law upon every field of legislative control into which a corporation might stray for the purposes of, or in connection with, carrying on its trading or commercial activities." 45 Their Honours then said: "What the section is concerned with is the conduct of a corporation towards persons, be they consumers or not, with whom it (or those whose interests it represents or is seeking to promote) has or may have dealings in the course of those activities or transactions which, of their nature, bear a trading or commercial character. Such conduct includes, of course, promotional activities in relation to, or for the purposes of, the supply of goods or services to actual or potential consumers, be they identified persons or merely an unidentifiable section of the public. In some areas, the dividing line between what is and what is not conduct 'in trade or commerce' may be less clear and may require the identification of what imports a trading or commercial character to an activity which is not, without more, of that character." 46 It was held by Santow J in Prestia v Aknar (1996) 40 NSWLR 165 that the reasoning in the Concrete Constructions case applies also to s 42 of the Fair Trading Act, a proposition that was accepted by Sackville J in Fasold v Roberts (1997) 70 FCR 489 and endorsed by the High Court (in relation to the equivalent legislation of Victoria) in Houghton v Arms (2006) 225 CLR 553. The relevant part of the Fair Trading Act is, like Part V of the Trade Practices Act, headed "Consumer Protection"; as is the subdivision of the Australian Securities and Investments Commission Act in which s 12DA appears. It must therefore be accepted that the Concrete Constructions reasoning applies also to s 12DA. 47 The difficulty one faces in applying the Concrete Constructions decision is to define the limits of what might be termed "internal communication", that is, communication within the confines of a particular organisation preparatory to something done or to be done "in" trade or commerce. It was held in that case that the communication by the foreman to the worker was not made in trade or commerce undertaken by the employer. One might therefore think that communication between a director of a company and its members about matters relevant to election of directors would likewise be "internal". But it was held by Santow J in NRMA Ltd v Yates [1999] NSWSC 859; (2000) 18 ACLC 45 that, in the particular circumstances of the case, statements of that kind were made to influence the corporation's future trade and commerce by changing its corporate governance. The alternative view (taken by Windeyer J in Yates v Whitlam [1999] NSWSC 976; (1999) 32 ACSR 595) is that standing for election as a director and soliciting support accordingly is not a business or professional activity and does not occur "in trade or commerce". The point of distinction between these two cases was described as follows by Austin J in Cleary v Australian Co-operative Foods Ltd [1999] NSWSC 991 and 1062; (1999) 32 ACSR 701 at [114]: "Assuming both of those cases to be correctly decided, the point of distinction appears to be that in the first case the advertisement was by a director seeking to influence the future commercial conduct of the board, while in the latter the advertisement was purely an election advertisement." 48 Dealing with the case before him, Austin J then said (also at [114]): "In the present case I regard it as beyond doubt that the conduct of sending to members a proposal for a merger of their corporation with another, and commenting on it by reference to a restructure proposal which would lead to the listing and trading of shares in the corporation, is conduct in trade or commerce. It follows that ss 12DA and 42, as well as s 995, are applicable in the present case." 49 As was emphasised by Goldberg J in Firewatch Australia Pty Ltd v Country Fire Authority (1999) 93 FCR 520, each case must be considered by reference to the reason why the communication is made and the purpose it is intended to achieve. His Honour continued (at [62]): "More specifically I would not expect an internal communication between the CFA administration or one of its full-time departments and its other divisions and brigades to be an aspect of conduct in trade or commerce for the purposes of s52 of the Act. It would not be conduct, to paraphrase the majority in Concrete Constructions (supra) at 604: 'towards persons ... with whom it has or may have dealings in the course of those activities ... which of their nature bear a trading or commercial character.'" 50 In the present case, the alleged conduct of Mr Daya, Mr Peck and Mr Aroney concerning the US$30 million debt transaction was conduct engaged in wholly within the confines of the board meeting of 31 December 1998. It must be inferred that what each of them said and did on that occasion was said and done by him as an officer of NCRA for the purpose of promoting discussion of, and facilitating a decision on, the proposal that NCRA commit itself to the US$30 million debt transaction. The discussion and decision were antecedent to NCRA's actually entering into the relevant contract with the debt provider. The making of that contract would readily be characterised as an act in trade or commerce. It entailed dealings of a financial kind between NCRA and another corporation. The antecedent corporate decision of NCRA, however, stands in a different light, as do all the steps making up the process by which the matter progressed from idea to proposal to resolution within the board of directors of NCRA, including steps entailing expressions of opinion and the communication of advice or information or recommendations among members of NCRA's board and NCRA's assisting employees. The decision-making process and the steps within in it were internal to NCRA and did not themselves take place "in" trade or commerce. They were anterior to and preparatory for an act or series of acts "in" trade or commerce. 51 The objections to the claims in the cross claim regarding the US$30 million debt and based on s 52 of the Trade Practices Act, s 42 of the Fair Trading Act and s 12DA of the Australian Securities and Investments Commission Act are accordingly well taken and valid. Those parts of the cross claim disclose no viable cause of action. 52 The same analysis holds good in relation to the alleged conduct of Mr Daya relevant to the inwards reinsurance debts, insofar as the conduct entails representations by Mr Daya to Mr Williams alone. Given their roles and positions within NCRA, that conduct was not engaged in by Mr Daya "in" trade or commerce. I am not satisfied, however, that the position is the same in relation to Mr Daya's alleged representations "to the Due Diligence Committee of NCRA". The pleading does not explain or elaborate either the funcitons or the membership of the Due Diligence Committee. It is possible that that committee included persons who were "outsiders" from the NCRA perspective, such as officers or employees of auditors, solicitors, financial advisers and the like. Indeed, a defence filed by Mr Williams suggests that this is so. It accordingly cannot be concluded that such representations as were made "to the Due Diligence Committee of NCRA" were beyond the reach of s 52, s 42 and s 12DA. 53 As regards the inwards reinsurance debts, therefore, the causes of action advanced by reference to s 52 of the Trade Practices Act, s 42 of the Fair Trading Act and s 12DA of the Australian Securities and Investments Commission Act lack viability to the extent that they rely on conduct of Mr Daya towards Mr Williams (either alone or in the company with other directors of NCRA), being conduct that was not also towards persons other than directors and employees of NCRA. To the extent that the conduct was conduct towards persons who included members of the Due Diligence Committee, however, the claims cannot be said to be doomed to fail on the "in trade or commerce" ground. 54 Another point advanced by Mr Peck in particular must be mentioned here. None of Mr Daya, Mr Peck and Mr Aroney is a "body corporate", so that none is a "corporation" within the meaning of the Trade Practices Act. It follows that, to the extent that the individuals are alleged to have contravened s 52 directly, there is an additional basis for finding that there is no viable cause of action. The case under the Corporations Law 55 There is a challenge to the claims in the cross claim based on ss 995(2) and 1005 of the Corporations Law. As noted, s 995(2), although similar to s 52, s 42 and s 12DA, does not contain the words "in trade or commerce". Rather, the context in which it is to operate is delineated by the words "in or in connection with … any dealing in securities", including "the allotment or issue of securities". 56 It is submitted on behalf of Mr Aroney that, as regards the U$30 million debt, there was no dealing in or issue of "securities". The argument is, in essence, that, although there was a dealing in or issue of the US$30 million perpetual unsecured note by NCRA and although under s 92(2) "securities", when used in relation to a body, includes "debentures of the body", the US$30 million perpetual unsecured note was not in truth a "debenture" of NCRA. The definition of "debenture" in s 9 refers to "a document issued by the body that evidences or acknowledges indebtedness of the body in respect of money that is or may be deposited with or lent to the body, whether constitution a charge on property of the body or not". I do not understand there to be any suggestion that the US$30 million perpetual unsecured note is not caught by those words. But there is a suggestion that it is also caught by a paragraph of the definition that follows the part just quoted, being one of several paragraphs introduced by the words "other than". The relevant paragraph is paragraph (f): "for the purposes of the application of this definition to a provision in respect of which the regulations provide that the word 'debenture' does not include a prescribed document or a document in a prescribed class of documents – the document or a document in that class, as the case may be." 57 Attention is then focused on the regulations under the Corporations Law and, in particular, regulation 7.12.03: "For the purposes of paragraph (f) of the definition of 'debenture' in section 9 of the Corporations Law, 'debenture', in relation to a body corporate, does not include a document issued by the body corporate acknowledging or evidencing indebtedness of the body to a related body corporate." 58 It was submitted on behalf of Mr Aroney that the exclusion effected by this regulation, in combination with paragraph (f) of the definition of "debenture", operates in the present case because NC Re Capital Limited, the corporation to which the US$30 million perpetual unsecured note was issued by NCRA, was, at the relevant time, a "related body corporate" of NCRA. 59 It was submitted on behalf of Mr Williams, however, that there is not before the court evidence to support a finding that there existed between NCRA and NC Re Capital Limited any connection which, in terms of s 50 of the Corporations Law, would cause any "related body corporate" relationship to be found. 60 An ASIC search of NCRA was introduced into evidence. It reflected the position at 13 April 2005. At that date, there was, it appears, one member of NCRA, being Dresdner Kleinwort Wasserstein Securities (Australia) Pty Ltd. That company was recorded as holding 98,229,028 shares in NCRA "beneficially". This does nothing towards making good the proposition that NC Re Capital Limited was a "related body corporate" of NCRA at any time. 61 Reliance was placed on a prospectus issued by New Cap Re Holdings Limited in November 1998. In that document, NCRA is described as one of "two wholly owned licensed reinsurance subsidiaries" of New Cap Re Holdings Limited, the other being New Cap Reinsurance Corporation (Bermuda) Limited. The prospectus describes NC Re Capital Limited as "Australian Holding Company" and contains a diagram which, by means of an arrow, may suggest that NC Re Capital Limited held or owned all the shares in NCRA. These snippets, however, are no basis for any finding on the "related body corporate" question. 62 Mr Aroney also sought to rely on conclusions stated by McDougall J in a judgment delivered on 30 March 2007 in proceedings to which all of the parties named in the present statement of claim and cross claim were also parties, except NCRA's liquidator: Ingot Capital Investments v Macquarie Equity Capital Markets [2007] NSWSC 124; (2007) 63 ACSR 1. His Honour said at paragraphs [4] and [5]: "[4] NCRH's operating subsidiary in Australia was NewCap Reinsurance Corporation Limited (NCRA). Its operating subsidiary in Bermuda was NewCap Reinsurance Corporation (Bermuda) Limited (NCRB). At all material times, NCRB was required under Bermudan law to have shareholders' funds of not less than USD100 million. [5] The group structure was reorganised in the first half of 1998, in part to facilitate compliance with the requirement for NCRB to hold minimum shareholders' funds of USD100 million. The group structure thereafter was that NCRH held the issued shares in NCRB; NCRB held the issued shares in a company known as NC Re Capital Limited (NC Capital); and NC Capital held the issued shares in NCRA." (The references here to "NRCH" are references to New Cap Reinsurance Holdings Limited.) 63 Objection was taken to the tender of McDougall J's judgment. I reserved my decision on the objection, being satisfied that to do so would not cause prejudice to any party. The objection was based on s 91 of the Evidence Act 1995 which, subject to exceptions in later sections, makes evidence of the decision, or of a finding of fact, in an Australian or overseas proceeding inadmissible to prove the existence of a fact that was in issue in that proceeding. 64 The answer to the question whether NC Re Capital Limited was, at the relevant time, a "related body corporate" of NCRA will turn on a number of factual findings. A conclusion as to the existence of "related body corporate" status depends, in the first instance, on findings of fact as to matters such as "control" and the content of share registers. The statement that "NC Capital held the issued shares in NCRA" does not, to my mind, represent a finding of fact, as contemplated by s 91 of the Evidence Act. On that basis, s 91 does not preclude the introduction of McDougall J's judgment into evidence which I therefore regard as admissible and to which I accordingly have regard. 65 But when the judgment is admitted and one notes his Honour's statement that, from the first half of 1998, NC Re Capital Limited "held the issued shares in NCRA", what follows? It may be that the commonality of parties means that there is, for present purposes, a res judicata. But that will extend only to the finding that NC Re Capital "held the issued shares" in NCRA which, of itself, will not establish "related body corporate" status. This is because while, under ss 46 and 50 of the Corporations Law, the circumstances that one body corporate "holds" more than one-half of the share capital of another body corporate causes the two bodies to be "related bodies corporate", there are also provisions in s 48 which cause shares held in a fiduciary capacity or by a nominee or in certain other special circumstances to be disregarded for this purpose. 66 On the material before me, I am not able to conclude that NC Re Capital Limited was, at the relevant time, a "related body corporate" of NCRA. I accordingly cannot find that the US$30 million perpetual unsecured note issued by NCRA to NC Re Capital was, by force of that circumstance, put outside the definition of debenture in s 9 of the Corporations Law, having regard to paragraph (f) of that definition and regulation 7.12.03. There is accordingly no basis, at least at this point, for terminating the aspects of the cross claim which seek relief by reference to ss 995(2) and 1005 of the Corporations Law. Such a basis will, however, exist if and when it is established that NC Re Capital Limited was, at the relevant time, a "related body corporate" of NCRA. Contribution 67 It remains to deal with Mr Williams' claims for contribution. 68 It may be said at once that any claim based on s 5 of the Law Reform (Miscellaneous Provisions) Act 1946 is unsustainable. Nowhere does the cross claim propound any claim for damage of the kind with which that provision is concerned, that is, damage "suffered … as a result of a tort". 69 It was submitted that there is no basis for a claim for contribution against Mr Aroney on equitable principles in respect of liability via ss 588G(2) and 588M(2). This is because liability of that kind may only be visited upon a director. I accept that Mr Aroney cannot incur liability, in company with Mr Williams, from that particular source. But as claims against Mr Aroney based on ss 995(2) and 1005 have not been ruled out, the claim for contribution should, at this stage, be allowed to stand. There is at least a possibility (even though it might be slim) that any liability established against him will be found to be sufficiently connected with the principal liability of Mr Williams to warrant contribution: see generally Burke v LFOT Pty Ltd [2002] HCA 17; (2002) 209 CLR 282. 70 As for claims for contribution against NCRA, the position is that the lack of viability of Mr William's claims for indemnity and damages against NCRA means that there is no remaining basis for advancing any claims for contribution. Conclusion 71 The following claims advanced by Mr Williams in the proposed cross claim must be dismissed as disclosing no viable cause of action: (a) each claim for indemnity or contribution against NCRA; (b) each claim for indemnity or contribution under s 5 of the Law Reform (Miscellaneous Provisions) Act 1946; (c) each claim based on an alleged contravention of s 52 of the Trade Practices Act , each claim based on an alleged contravention of s 42 of the Fair Trading Act and each claim based on an alleged contravention of s 12DA of the Australian Securities and Investments Commission Act , to the extent, in each case, that the claim relates to (i) conduct of any of the natural person cross defendants engaged in within the confines of the NCRA board meeting of 31 December 1998; or (ii) conduct of Mr Daya relevant to the inwards reinsurance debts by way of his communications made personally and directly to Mr Williams (not being communications made to the Due Diligence Committee of NCRA); and (d) if not included in (c) above, each claim based on an alleged contravention of s 52 of the Trade Practices Act by a natural person. 72 Because, in light of the foregoing, none of the claims sought to be brought by Mr Williams against NCRA may be progressed, there will be no grant of leave under s 500 of the Corporations Act. 73 Mr Williams must pay the costs of all the other parties of and incidental to the applications the subject of this judgment. Mr Peck seeks an order that his costs be assessed and payable forthwith, pointing to the several iterations of the proposed cross claim (said to have exhibited obvious deficiencies) and the long time since the proceedings were commenced without pleadings having closed. The second matter is not, it seems to me, one that can be laid at the feet of Mr Williams and the first matter is not of itself a sufficient reason for departing from the usual expectation that costs are payable at the end of the proceedings. 74 I direct that agreed short minutes of orders giving effect to this judgment be filed by delivery to my Associate within seven days. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. 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