Supreme Court New South Wales Medium Neutral Citation: Redmond Family Holdings v GC Access Pty Ltd & Ors [2016] NSWSC 796 Hearing dates: 6 – 8 and 27 April 2016 Decision date: 16 June 2016 Jurisdiction: Equity - Corporations List Before: Black J Decision: Plaintiff successful in certain of the misleading or deceptive conduct claims against Fourth and Fifth Defendants. Parties to be heard as to costs. Catchwords: TRADE PRACTICES – Misleading or deceptive conduct claims under s 18 of the Australian Consumer Law, 1041H of the Corporations Act 2001 (Cth) and s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) – where plaintiff asserted various misleading or deceptive conduct claims against defendants in respect of the plaintiff's purchases of shares in companies – where some of the claims against particular defendants were based on non-disclosure of loans owed by the companies to entities associated with those defendants that could be converted into equity at their discretion – where right to convert loans to equity was subsequently exercised thereby diluting plaintiff's equity in the companies and depriving plaintiff of control of the companies – whether any representations were misleading or deceptive and if so whether they were causative of plaintiff's loss – whether plaintiff's misleading or deceptive conduct claims based on defendants' non-disclosure of information succeeds – whether plaintiff is a concurrent wrongdoer under s 34 of the Civil Liability Act 2002 (NSW) such that if the plaintiff were to succeed each of the defendant's liability should be limited to an amount proportionate to each of the defendant's responsibility for plaintiff's loss. PROCEDURE – Costs – where plaintiff was only successful against some of the defendants and on a narrower basis than argued – whether costs should follow the event. Legislation Cited: - Australian Consumer Law, ss 4, 18, 236 - Australian Securities and Investments Commission Act 2001 (Cth), ss 12BAB, 12BB, 12DA, 12GF - Competition and Consumer Act 2010 (Cth) - Civil Liability Act 2002 (NSW), ss 34, 35 - Corporations Act 2001 (Cth), ss 769C, 1041H, 1041I - Evidence Act 1995 (Cth), s 136 - Fair Trading Act 1987 (NSW), s 42 - Trade Practices Act 1974 (Cth), ss 51A, 52 Cases Cited: - Ambergate Ltd v CMA Corporation Ltd (admins apptd) [2016] FCA 94 - APIR Systems Ltd v Donald Financial Enterprises Pty Ltd [2009] FCAFC 45 - Australian Competition and Consumer Commission v Fisher & Paykel Customer Services Pty Ltd [2014] FCA 1393 - Australian Competition and Consumer Commission v Jewellery Group Pty Ltd [2012] FCA 848; (2012) 293 ALR 335 - Australian Competition and Consumer Commission v Telstra Corporation Ltd [2007] FCA 1904; (2007) 244 ALR 470 - Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640 - Australian Securities and Investments Commission v PFS Business Development Group Pty Ltd [2006] VSC 192; (2006) 57 ACSR 553 - Awad v Twin Creeks Properties Pty Ltd [2012] NSWCA 200 - Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; (2004) 218 CLR 592 - Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304 - Carey v Freehills [2013] FCA 954; (2013) 303 ALR 445 - Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31; 110 ALR 608; (1993) ATPR 41-203 - Digi-Tech (Aust) Ltd v Brand [2004] NSWCA 58; (2004) 62 IPR 184 - Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd (No 2) [2014] NSWCA 219 - Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 - Forty Two International Pty Ltd v Barnes [2014] FCA 85; (2014) 97 ACSR 450 - Fraser v NRMA Holdings Ltd (1995) 55 FCR 452; 127 ALR 543; 15 ACSR 590 - Gould v Vaggelas [1985] HCA 75; (1985) 157 CLR 215 - Hanave Pty Ltd v LFOT Pty Ltd [1999] FCA 357; (1999) 43 IPR 545 - Henville v Walker [2001] HCA 52; (2001) 206 CLR 459 - Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd [2008] NSWCA 206; (2008) 73 NSWLR 653 - Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd [2010] HCA 31; 241 CLR 357 - Monie v Commonwealth of Australia (No 2) [2008] NSWCA 15 - North East Equity Pty Ltd v Proud Nominees Pty Ltd [2012] FCAFC 1 - Owners – Strata Plan 61162 v Lipman [2014] NSWSC 622 - OXS Pty Ltd v Sydney Harbour Foreshore Authority [2016] NSWCA 120 - Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44; (1982) 149 CLR 191 - Pramoko v Grande Enterprises (2016) 108 ACSR 469 - Re Colorado Products Pty Ltd (in prov liq) [2014] NSWSC 789 - Re HIH Insurance Limited (in liq) [2016] NSWSC 482 - Rennie Golledge Pty Ltd v Ballard [2012] NSWCA 376; (2012) 82 NSWLR 231 - Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94 - Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514 - Winterton Constructions Pty Ltd v Hambros Australia Ltd (1992) 39 FCR 97; 111 ALR 649 Category: Principal judgment Parties: Redmond Family Holdings Pty Limited (Plaintiff) GC Access Pty Limited (First Defendant) Fullham Hall Pty Limited (Second Defendant) H Ridge Investments Pty Limited (Third Defendant) Patrick Charles Oliver Stone (Fourth Defendant) Mark Henry Skinner (Fifth Defendant) Nicholas Simon Collins (Sixth Defendant) Representation: Counsel: M Bennett (Plaintiff) B Le Plastrier (Second to Sixth Defendants) Solicitors: LAS Lawyers (Plaintiff) EKM Legal (Second to Sixth Defendants) File Number(s): 2012/13331 Judgment 1. By its Amended Statement of Claim ("ASC") filed on 7 April 2016, the Plaintiff, Redmond Family Holdings Pty Limited ("Holdings") claims damages against, relevantly, Fullham Hall Pty Limited ("Fullham"), H Ridge Investments Pty Ltd ("Ridge") and Messrs Stone, Skinner and Collins under s 236 of the Australian Consumer Law, s 1041I of the Corporations Act 2001 (Cth) and s 12GF of the Australian Securities and Investments Commission Act 2001 (Cth). That claim also extended to damages under "such other provisions as empower the Court to grant damages for misleading conduct" but Holdings did not identify or rely on any such other provisions in the course of the hearing. Holdings also claims interest and costs. A claim against the First Defendant, GC Access Pty Limited ("GCA") was not pursued since that entity is in liquidation. 2. Holdings, Fullham and Ridge are shareholders in GCA. Mr Stone was a director of GCA between 1 March 2010 and 17 February 2011 and was, since 21 April 2011, the secretary of GCA. Mr Stone also at least had a financial role with GCA (T151). Mr Skinner had a sales and marketing role, although he claimed in cross-examination to be only partly responsible for that role as he had retired (T214, 216). Mr Collins was at least responsible for the information technology aspects of GCA's business (Collins 7.4.16 [5]; T110). Mr Collins was presented to third parties as an executive director of GCA, although he was not formally appointed as a director of GCA until November 2011 (T112). The affidavit evidence and a chronology of events 1. Holdings relies on several affidavits of its director, Mr Geoffrey Redmond, significant parts of which relate to matters raised in earlier aspects of the proceedings which are not pursued. Mr Redmond's first affidavit dated 13 January 2012 deals with the circumstances in which he first became aware of loans by Fullham and H Ridge to GCA and of the circumstances relating to an issue of shares by GCA to Fullham and H Ridge. By a second affidavit dated 19 March 2012, Mr Redmond refers to attempts to obtain information concerning GCA in his capacity as a director of GCA and to the entry by GCA into a contract with Kiandra IT Pty Ltd ("Kiandra") for the development of software to create a "buy now pay now" ("BNPN") platform for a transactional processing system enabling instant purchasing by consumers on mobile devices. He also refers to the circumstances of a further injection of funds by Holdings into GCA in December 2011 and to subsequent dealings with Kiandra and Messrs Stone, Skinner and Collins. Holdings also relied on Mr Redmond's affidavit dated 15 July 2013 and a substantial exhibit to that affidavit. That affidavit referred to the circumstances in which Mr Redmond became aware of an opportunity to invest in GCA in late 2010 and to subsequent dealings between the parties prior to Holdings' investment in GCA and an associated company, Global Connect Services Pty Ltd ("GCS") to which I will refer below. By his further affidavit dated 24 March 2014, Mr Redmond responded to Mr Stone's affidavits dated 18 January 2012 and December 2013. By a further affidavit in reply dated 28 September 2015, Mr Redmond responded to Mr Stone's affidavit dated 16 February 2015, largely by reiterating the evidence which he had already given in his evidence in chief. 2. It seems to me that Mr Redmond generally gave honest evidence in cross-examination, although his evidence that, notwithstanding his significant business interests, he cannot read a balance sheet was surprising, and there was one issue where I prefer his evidence on cross-examination as to the point at which he ceased to believe Mr Stone to evidence later given in re-examination as to that matter. Mr Redmond was prepared to make significant admissions adverse to Holdings' case, including as to his lack of reliance on documents that were relevant to that case. 3. Holdings also relied on Mr Roulstone's affidavit dated 27 August 2013. Mr Roulstone's evidence is that he is a director of a financial services company and has provided services to Mr Redmond and associated entities for several years, and has also provided services to Mr Skinner since mid-2010. Mr Roulstone gives evidence of information provided to him and of meetings which he attended in respect of Holdings' investment in GCA. I will address Mr Roulstone's evidence as to several of those meetings in dealing with the alleged representations below. Holdings also relied on Mr Timothy ("Eric") Redmond's affidavit dated 28 September 2015. Mr Eric Redmond was present at several significant meetings in issue in the proceedings although he gave limited evidence of what was said at them. Mr Roulstone and Mr Eric Redmond were not cross-examined. 4. Holdings also relied on a report of a forensic document examiner, Mr Dubedat dated 19 August 2014, relating to the authenticity of the signature on several documents and the date of creation of those documents (Ex P1). That report does not seem to have any relevance to any issue that was pressed in the proceedings, since a challenge to the effect of loan agreements between Fullham and H Ridge on the one hand and GCA on the other was not pressed. Holdings also relied on other affidavits, including an affidavit of its solicitor, Mr Manca dated 5 August 2015, which also did not have apparent relevance to the remaining issues in the proceedings. 5. Holdings also relied on an affidavit of Mr Trevor Knipe dated 31 March 2016. Mr Knipe was the company secretary of GCA until mid-April 2011. Substantial parts of Mr Knipe's affidavit were not in admissible form and were not admitted. The remaining part of his evidence was that he created a company file in MYOB to manage the company's accounts; that he recalled amounts having been contributed by Messrs Skinner and Stone to fund the company; that he did not recall having seen loan agreements in the form of those dated 1 July 2011 from Fullham and H Ridge, providing for repayment of loans by the issue of shares in the company, although he did recall seeing some loan agreements from time to time, in changing form. Mr Knipe also gave evidence of a meeting at Sydney airport which I will address below. 6. The Defendants relied on Mr Stone's affidavit dated 18 January 2012, which responded to Mr Redmond's affidavit dated 13 January 2012. That affidavit referred to the terms on which loans made by Fullham and H Ridge to GCA could be converted to equity, a matter that I will address below. The Defendants also rely on an affidavit of Mr Stone dated December 2013 which I will address below. Mr Stone's evidence in that affidavit was that GCS was several weeks late in entering its market and missed the major student intake in March 2011, and that a decision was made to close the business "at least temporarily" until the following year and to pursue additional uses for the platform which would require additional expenditure. Mr Stone also refers to the capitalisation of loans and subsequent dealings with Mr Redmond in respect of the funding of GCA. 7. The Defendants also relied on an affidavit of Mr Stone dated 16 February 2015 which refers to the incorporation of a further company, Buy Now Pay Now Technologies Pty Ltd ("BNPN Technologies") on 28 June 2011, the marketing activities of BNPN Technologies, and to subsequent capital raising efforts by BNPN Technologies and to a further funding contribution by Mr Redmond in late 2011 and to subsequent developments in respect of that contribution. That affidavit overlapped, to some extent, with a second affidavit of Mr Stone of the same date which related to a cross-claim filed by several Defendants, which was ultimately not pursued. The Defendants also relied on a further affidavit of Mr Stone dated 5 November 2015, significant parts of which were not read, which responded to Mr Roulstone's affidavit dated 27 August 2013, several of Mr Geoffrey Redmond's affidavits and Mr Timothy Redmond's affidavit dated 28 September 2015. In a further affidavit dated 7 April 2016, Mr Stone addressed the claims that H Ridge made representations to Holdings at a meeting in Martin Place Sydney in December 2010, to which I will refer below. 8. I am generally unable to accept Mr Stone's evidence without corroboration. In particular, Mr Stone maintained the position that a board meeting on 3 May 2011 took place in Wollongong, where the board resolved to convert loans made by Fullham and H Ridge to equity. As I will note below, I am satisfied that the only meeting that occurred on that date was a lunch at Seven Hills at which some marketing matters in relation to BNPN but no other business matters of significance were discussed (Redmond 15.7.13 [33], T182). The damage to Mr Stone's credit arising from that matter is exacerbated from the fact that I find below that the board minute recording that meeting is false. Mr Stone's evidence as to the two versions of loan agreements between Fullham and H Ridge on the one hand and GCA on the other also shifted throughout his affidavit evidence and cross-examination, although Holdings no longer pursues a claim that the earlier loan agreement was not genuine. Mr Stone's evidence as to whether Mr Redmond required a controlling interest in GCA and GCS as a condition of Holdings' further funding in November 2011 also shifted in cross-examination as I will note below. 9. The Defendants also rely on the affidavits of Mr Skinner dated 7 and 8 April 2016. Mr Skinner sets out his experience in public relations and marketing, including in relation to international student services. I will set out Mr Skinner's evidence as to the views which he formed as to the prospects of GCA's technology and GCS's business in providing services to international students in dealing with Holdings' representational claims below. I have reservations as to Mr Skinner's evidence, although it is ultimately not necessary to reach a credit finding in respect of Mr Skinner given the conclusions that I have reached below on other grounds 10. The Defendants also relied on Mr Collins' affidavit dated 7 April 2016, which set out the extent of development of GCA's technology and also sought to establish a reasonable basis for several representations alleged against him. I will set out Mr Collins' evidence as to these matters in dealing with Holdings' representational claims below. Mr Bennett, who appears for Holdings, accepted in closing submissions that Mr Collins was generally an honest witness in cross-examination. 11. Each of Messrs Stone, Skinner and Collins remained in Court throughout the evidence, as they were entitled to do as parties to the proceedings. To that extent, they had the opportunity to observe Mr Redmond's cross-examination, and Mr Stone had the opportunity to observe Mr Collins' evidence, and Mr Skinner both Mr Collins' and Mr Stone's evidence, before giving evidence. 12. Turning now to the chronology of events, GCA was, in 2010, developing software which could be used, inter alia, to provide credit card facilities to international students who could not satisfy relevant identification requirements, once in Australia. In late 2010, GCA was seeking further funding for the project, through Mr Roulstone, who had contact with both Mr Skinner and with Mr Redmond. Mr Roulstone had several conversations with Mr Skinner concerning the development of GCA's technology, and Mr Skinner initially emailed him various documents containing information about GCA, including brochures, business plan and financial projections (Roulstone 27.8.13 [7]). In December 2010, Mr Skinner advised Mr Roulstone that the project required urgent funding and requested him to find a private lender to loan funds to the enterprise, initially on the basis of a convertible note bearing interest (Roulstone 27.8.13 [8]). Mr Skinner did not then seek to conceal previous delays in respect of the development of the global connect platform, having advised Mr Roulstone on 7 December 2010, prior to the investment made by Holdings, that Global Connect was "only hitting the ground now – some six months behind schedule" and was looking for funding to "leverage the international opportunities and expand the Australian one" (Ex P5, CB 976). 13. On or about 14 December 2010, Mr Skinner sent an email ("14 December 2010 email") to Mr Roulstone, which attached marketing material concerning GCA and GCS, a presentation ("Presentation") and a document headed "Global Connect: Financial Projections" ("Financial Projections"). The Presentation (Ex P5, CB 979) was a powerpoint presentation about Global Connect and its access platform, referring to an I[nformation] T[echnology] platform wholly owned by GCA and licensed to GCS under a worldwide licence, registered trademarks and patent applications that had been submitted. The Presentation also described the GC Access platform and pointed to the identification of an international student market, referred to the size of the international student market globally, without specific reference to GCA or GCS, and to future growth in mobile banking and related services. The Presentation also referred to future development for the platform as allowing third party products to be offered exclusively to customers via that platform, with purchases linked to a customer's Global Connect Visa card. The presentation projected what was described as "modest penetration during launch phase", being 65,000 clients in Australia per year for the first three years and 50,000 clients in the United Kingdom per year for the first three years and referred to "[r]apid expansion into other destinations and source countries" and to "tak[ing] the product to the wider market". Holdings relies on aspects of those statements for its representational case, to which I refer below. 14. The Financial Projections included projections for Australian operations for the years ended 31 December 2011, 2012 and 2013 and contained several express assumptions as to the amount of revenue per student, the size of the relevant market, the level of marketing expenses, a reduction in transaction costs and an increase in international money transfers at specified points, and the level of increase in personnel expenses and operating expenses. The document provided figures which were expressly described as "projections" for those three years as to the level of market penetration, the number of new clients, gross margin revenue, operating expenses and earnings before interest and tax. Those projections were supported by detailed spreadsheets to which the parties gave little attention in the course of the hearing. 15. A meeting took place on or about 17 December 2010 attended by Messrs Stone, Skinner and Collins and by Geoffrey Redmond, Eric Redmond and Mr Roulstone at a restaurant in Martin Place, Sydney ("Martin Place meeting"). I will address the evidence dealing with that meeting in dealing with the pleaded representations arising from that meeting in paragraphs 90–104 below. Mr Roulstone's evidence is that he also attended a meeting with Mr Skinner and Mr Redmond in Wollongong on or about 21 December 2010, which I will address in dealing with the pleaded representations arising from that meeting in paragraphs 105–107 below. Messrs Stone and Collins then attended a further meeting on 22 December 2010 ("South Yarra meeting") with Messrs Roulstone and Geoffrey Redmond, as well as Mr Eric Redmond at GCA's offices in South Yarra, Melbourne and provided them with a further copy of the Financial Projections. I will address the evidence dealing with that meeting in dealing with the pleaded representations arising from that meeting in paragraphs 108–115 below. 16. By an email dated 22 December 2010, Mr Roulstone advised Messrs Stone and Skinner that Mr Redmond would undertake to fund the Group to the tune of $500,000 in specified tranches, on the basis that Mr Stone, Mr Skinner and Mr Redmond would each hold a 26% interest (Ex P5, CB 1053). That reference is inconsistent with any narrow view, based on the pleading, that the proposed investment was only in GCA rather than in GCA and GCS. By a further email dated 23 December 2010 ("23 December 2010 email"), Mr Stone advised Mr Roulstone that he and Mr Skinner, and other shareholders, agreed to Mr Redmond's proposal that Holdings and Messrs Stone and Skinner have equal shareholdings and that 20% new stock be issued, with Mr Stone and Mr Skinner transferring the balance (8%) to Holdings (Ex P5, CB 1053). 17. The minutes of a directors' meeting of GCA held on 23 December 2010 noted that: "Directors examined the 12 week cash forecast presented by management which indicated a significant cash shortfall for the March 2011 quarter. As a result directors decided to raise $250,000 by way of a share issue." (Ex 9, CB 1198) The minutes noted that Fullham and H Ridge would each transfer 13,334 shares to Holdings upon receipt of the new capital. The directors of GCA resolved (Ex P5, CB 1058) that Holdings become a shareholder "with an authorised shareholding of 20% (40,020 shares at $12.50 = $500,000)" and that the major shareholders would be equal shareholders at 28% each, with shares to be allocated to Holdings as funds were received. Further minutes of a meeting of GCS held on 23 December 2010 also recorded the issue of shares to Holdings (Ex P5, CB 1056). The resolutions in respect of GCA and GCS were in substantially the same form. 1. It appears that GCA's and GCS's Chinese student platform did not launch until early March 2011, and that the first and likely the only application for a Chinese student user of the platform was received in late March 2011 (Redmond 15.7.13 [27]). Evidence that supported the proposition that the student platform could not have been launched until March 2011 included evidence that the first commercial run of credit cards became available in February 2011 (although I recognise there was a suggestion in Mr Collins' evidence on cross-examination they were available earlier) (T119–120, 125–126, 150, 217). It is common ground that venture was not a success. 2. A presentation concerning platform functionality viewed by Mr Geoffrey Redmond in April 2011, which had been emailed to Mr Eric Redmond at an earlier date (Ex P4, CB 548ff), describes the Global Connect technology in broad terms, as a payment platform that links a mobile device to a credit, debit or prepaid card. It provides examples of the use of the platform for telecommunications recharge, transactional advertising for retail check out payment, mobile media campaigns and loyalty programs. 3. The parties also led contradictory evidence as to a meeting at an airport lounge which, on the evidence of some participants, took place in late April or early 2011. Mr Redmond refers to a meeting with Mr Skinner, Mr Collins and Mr Roulstone at the Qantas lounge at Sydney Airport in late April 2011, well after his initial investment in GCA, at which a decision was made to put an end to the Chinese project and seek to interest retailers in the technology (Redmond 15.7.13 [29]–[30]). Mr Redmond also refers (Redmond 15.7.2013 [29]) to a conversation at this meeting in which he said that the project probably needed another $2 million and claims that Mr Skinner said that he always knew that its cost was going to be $2 million. In cross-examination, Mr Redmond maintained that evidence (T69). In his affidavit dated 27 August 2013, Mr Roulstone also refers in general terms, to a meeting at the Qantas lounge in Sydney Airport on or about 3 May 2011 with Mr Geoffrey Redmond, Mr Eric Redmond and Messrs Stone, Skinner and Collins. Mr Skinner's evidence in cross-examination was that he did not recall having said, in March 2012, that he always knew the cost of developing the China project would be $2 million and that "it's not the sort of thing I'd say" (T236). 4. As I noted above, Holdings also relied on the affidavit of Mr Knipe, who also gave evidence of having met with Mr Geoffrey Redmond and Mr Eric Redmond and Messrs Stone, Skinner and Collins at Sydney Airport, but dated that meeting as late 2010 rather than in the first half of 2011. Mr Redmond and Mr Roulstone do not refer to Mr Knipe's presence at that meeting in their evidence of it. Mr Knipe's evidence was that he had a conversation with Mr Stone about GCA's solvency and cashflow prior to the arrival of the Messrs Redmond; indicated concern about GCA's financial position and expressed the view that it was insolvent and the cashflow projection was unrealistic and was told to remain silent. Mr Knipe was not available for cross-examination and counsel agreed that no Browne v Dunn point would be taken in respect of Mr Knipe. 5. Mr Stone denies (Stone 7.4.16 [30(b)]) Mr Knipe's account of the meeting at Sydney airport in late 2010 and says that he only met with Mr Redmond twice in late 2010, in the Martin Place meeting on 16 December 2010 and the South Yarra meeting on 20 December 2010, and that Mr Knipe was not present at those meetings. He also denies the conversation of which Mr Knipe gives evidence. Mr Skinner also denies that the meeting at Sydney Airport referred to in Mr Knipe's affidavit took place, and on that basis denies that he made another comment attributed to him in that evidence that Mr Redmond (or Holdings) would have his (or its) money back before Christmas Eve. Mr Collins' evidence is that he never attended a meeting with Mr Stone, Mr Skinner, Mr Roulstone and Mr Redmond that included Mr Knipe (T138). 6. Mr Bennett treats Mr Knipe's evidence as directed to a separate airport meeting in December 2010, prior to the airport meeting to which other witnesses refer in April or May 2011. However, no witness called by Holdings gives evidence of a meeting at that time, and each of Mr Skinner and Mr Stone deny it. Mr Bennett also submitted that Mr Knipe was the only independent witness in the proceedings, other than Mr Dubedat, and had little to gain by favouring either side of the litigation. Mr Le Plastrier submitted that no weight should be given to Mr Knipe's evidence, where his recollections were inconsistent with those of all other witnesses. I am not persuaded that I should give weight to Mr Knipe's evidence, given its inconsistency with the evidence given by other witnesses. 7. Mr Redmond also refers to a meeting at his hotel at Seven Hills, on 3 May 2011, where he suggested that GCA was wasting its time on the Chinese student platform and had to move the focus into a normal retail form, and Mr Stone agreed with that proposition and referred to the "[BNPN] track" (Redmond 15.7.13 [32]). Mr Stone's evidence in cross-examination was that he did not believe the loans to Fullham and H Ridge were discussed at the Seven Hills meeting on 3 May 2011 and that nothing of high significance relating to GCA was discussed at that meeting (T182). 8. Mr Stone refers in his affidavit evidence (Stone December 2013 [6]) to an alleged meeting of the directors of GCA purportedly held at Wollongong on 3 May 2011, the same day as the lunch at Seven Hills. Mr Stone's evidence was that that directors' meeting was attended by Mr Redmond and resolved that $149,950 of existing loans to GCA from Fullham Holdings and H Ridge be capitalised. The minutes of that meeting record that Messrs Redmond, Skinner and Stone were present and record a resolution, inter alia, that: "1. $149,950 of existing loans to [GCA] by both H Ridge Investments Pty Ltd and Fullham Hall Pty Ltd Be [sic] capitalised into the value of the existing shares held by them in [GCA] so that the equity investment of each of the three major investors is $250,000." (Ex D9, CB 1202). 1. Mr Redmond's evidence was that he recalled attending a meeting in Wollongong in May 2011, but did not recall resolutions being passed at that meeting as alleged by Mr Stone (Redmond 24.3.14 [17]). Mr Redmond was cross-examined in respect of that meeting and it was put to him that he was present at a meeting in Wollongong where a resolution was passed to capitalise the relevant shares. His evidence was that he thinks that he would recall if anybody had tried to capitalise loans or shares and, if he had been present, he would have objected to it strongly (T58). I accept that evidence, which is consistent with the commercial logic of Holdings' position. I therefore do not accept that the minute recording that meeting is accurate, at least so far as it purports to record Mr Redmond as having been present or voted in favour of the resolution. Other aspects of that cross-examination were unhelpful, because Mr Redmond also sought assistance from Mr Le Plastrier as to the location of the meeting, because he had had a recollection of attending one meeting in Wollongong at a particular location, which Mr Le Plastrier declined to provide. It seems to me that Mr Redmond's apparent uncertainty as to the detail of that meeting reflected the fact that he was not able to determine whether the meeting as to which he was being cross-examined was the same, or a different meeting, to the one meeting that he had attended in Wollongong, and I am otherwise not assisted by his cross-examination as to that meeting. 2. Mr Le Plastrier submitted that a proposition that the minute of 3 May 2011 was false was not directly put to Mr Stone, but it seems to me that that matter was squarely in issue in the proceedings and that he was sufficiently on notice of that allegation. Mr Le Plastrier also raised the possibility that there might have been both a meeting at Seven Hills on 3 May 2011 and a board meeting in Wollongong involving the same participants on the same day; that proposition was not suggested by any witness in their evidence, quite apart from its geographical implausibility and Mr Stone's evidence in cross-examination that he travelled back to his home in Victoria after the meeting in Seven Hills. I am satisfied that, having regard to the evidence of the meeting at Seven Hills on that date and of what was discussed at that meeting, a formal directors' meeting did not take place and that resolution was not passed in Wollongong or at all on that day and the minute that records it was false. This matter, and Mr Stone's affidavit evidence about it, is adverse to his credit as I noted above. 3. A strategy outline dated 27 June 2011 (Ex P5, CB 1064) referred to positive responses from Target and Bunnings and potentially the rest of the Wesfarmers retail group and to dealings with other entities and to a strategy for further development and identified the need to quickly determine News Corporation's position on the basis that GCA needed a "partner", identified potential sources of revenues, and noted that forward projections as to costs assumed that major short term requirements "will be contributed by [a] partner/s". An attached document set out forecasts of revenue for BNPN as at 27 June 2011 and a cashflow estimate for GCA and BNPN from July to December 2011. That projection was supported by detailed workings to which the parties gave little attention at the hearing. 4. On 30 June 2011, an innovation patent was granted for the "mobile marketing and purchasing system" invented by Mr Collins (Ex P4, CB 585). The abstract described the process as: "An automated business process (or system and method) for the presentation of a purchase offer from a merchant to a prospective customer via a message delivered to a handheld mobile device or internet connection, integrated with a method of confirmation and authentication of a purchase request by the mobile device user, the acceptance, validation, processing and settlement of the purchase payment by electronic means between the purchaser and merchant and managing the subsequent delivery of the goods or services through the authentication and confirmation of the purchaser's delivery details to the merchant whether a physical or electronic address." 1. Mr Redmond's evidence is that positive comments were subsequently made by Mr Stone, Mr Skinner and Mr Collins as to the progress of the BNPN platform (Redmond 15.7.13 [34]–[35]). Mr Roulstone's evidence is that he received an email from Mr Stone attaching various documents including a strategy outline, revenue projections and cash forecasts relating to the BNPN platform on or about 28 June 2011. He gives no evidence of undertaking any analysis of that information. 2. A document prepared by Mr Stone in relation to a proposed capital raising in late 2011, and emailed to persons including Mr Roulstone and others associated with Mr Redmond on 13 September 2011 was robustly optimistic, referring to dealings with Wesfarmers Group, Bunnings and others and, under the heading "Funds Requirement" stating that "we are capable of commencing business with at least one significant merchant now" but noting that transaction processing capability required a major upgrade in the short term, and indicating new equity of $750,000 to $1 million was sought for between 7.5% and 10% of BNPN, placing a very substantial value on the enterprise (Ex P5, CB 1073). Mr Redmond's evidence in cross-examination was that he did not see that document and it was not his general practice to review that style of document because it would confuse him unless he was walked through it (T59–60). Little turns on that evidence because Holdings did not bring a representational claim based on that document. 3. Mr Redmond's evidence (Redmond 15.7.13 [42]–[43]) is that he had a further conversation with Mr Stone relating to funding of GCA in November 2011 and formed the view that he needed to obtain a controlling interest in GCA so as to be in a better position to influence the decisions it made and obtain access to information. He offered to provide further funding of $400,000 in exchange for the issue of additional shares to Holdings, which would result in a total shareholding of 51% in GCA, in mid-November 2011 (Redmond 15.7.13 [47]). By email dated 15 November 2011, Holdings' solicitor forwarded a proposal for further funding by Holdings in exchange for an increased share allocation, which contemplated that GCA and GCS would issue new shares to Holdings, which would pay an amount of $400,000 in two tranches (Ex P4, CB 570–571). 4. A further discussion took place at a meeting on 16 November 2011, attended by Mr Geoffrey Redmond, Mr Eric Redmond, Mr Redmond's solicitor, Mr Manca, and Messrs Stone and Collins, and I will address that meeting below in dealing with the further representations alleged to have been made at that meeting. Draft minutes of a meeting of GCA's board to be held on 16 November 2011 provided for the issue of such shares to bring Holdings' overall shareholding in GCA to 51% of the total shares on issue (Ex P4, CB 575). I will address further developments in respect of the capitalisation of loans made by Fullham and H Ridge to GCA in dealing with that issue below. 5. A project charter prepared by Kiandra, largely during December 2011, provided for the completion of work to develop the BNPN platform, in a staged manner between finalisation of base architecture in December 2011 and foundation platform scope in January 2012, through to deployment of the foundation platform in a single US region in May 2012, deployment of the foundation platform US wide in June 2012 and deployment of the full production platform US wide in December 2012 (Ex P4, CB 758ff). That charter contemplated payments to Kiandra in the order of $1,560,000, including a "large team deposit" of $250,000 which was the subject of some dispute in the course of the hearing, but which it is not necessary to address given the findings that I have reached on other grounds. 6. Issues arose as to the need for further funding of software development being provided by Kiandra from late November 2011 and disputes arose between the directors from late December 2011. Holdings led evidence, and made submissions, in respect of events concerning the raising of a further amount in December 2011, it is not necessary to address that evidence or those submissions, where the position in respect of that amount is no longer in issue. The pleaded "Arrangement" 1. Holdings pleads the nature of the "Arrangement" by which it acquired an interest in GCA, albeit in the context of an oppression case that it no longer pursues since GCA is now in liquidation, as follows (ASC [12]): "[Holdings] became a member of [GCA] on or about 23 December 2010 pursuant to an agreement, arrangement or understanding [defined in the ASC as "the Arrangement"] between himself [sic] and [GCA, Fullham, H Ridge and Messrs Stone and Skinner] whereby: a [Holdings] would provide the sum of $500,000 for the purchase of shares in [GCA]. b [i]n consideration for this, i [GCA] would issue to [Holdings] 40,020 new shares; and ii [Fullham] and [H Ridge] would, and [Messrs Stone and Skinner] would cause them to, transfer to [Holdings], 26,687 of their own shares; c. [Holdings] and [Fullham] and [H Ridge] would thereupon be, and would remain, equal shareholders, with each holding 28% of the issued share capital of [GCA]; and d [Holdings], along with [Fullham] and [H Ridge], would (each through their respective directors) participate equally in the management of the first defendant. 1. Holdings pleads (ASC [13]) that, in accordance with the Arrangement (as defined), on or about 23 December 2010, Holdings paid $500,000 to or for the benefit of GCA, and received 40,020 new shares issued by GCA and 26,687 shares that were transferred to it by Fullham and H Ridge and Holdings' sole director, Mr Redmond, was appointed as a director of GCA on 28 February 2011. The Defence raises a dispute that is not presently material as to the date on which Holdings became a member of GCA and the Defendants also plead that Holdings provided the sum of $250,000 for the purchase of shares in GCA and the other $250,000 was used for the purchase of shares in GGS (Amended Defence [10(b)]). 2. Holdings also pleads (ASC [14]) that, on or about 16 November 2011, Holdings on the one hand and GCA, Fullham, H Ridge and Messrs Stone and Skinner varied their agreement, arrangement or understanding, such that Holdings would purchase additional shares in GCA for $400,000, with $100,000 paid on an urgent basis; $19,998.65 approximately being sums that had already been advanced by Holdings to the first defendant, in July 2011; and the balance by the end of 2011; and, in consideration for this, GCA would issue new shares to Holdings such that it would then hold 51% of the ordinary shares of GCA. That arrangement is referred to in the pleading as the "Varied Arrangement". There is a dispute, which is not presently material, as to whether the balance of the amount pleaded by Holdings as due by the end of 2011 was payable by that time or within four weeks. Holdings pleads (ASC [15]) that, in accordance with the Varied Arrangement, it made the agreed payments and was issued with additional shares, such that it held 7,442,962 ordinary shares in GCA as of the end of 2011, being 51% of its shares on issue. 3. Holdings also pleads (ASC [17]) that, in January 2012, GCA, together with Fullham, H Ridge and Messrs Stone and Skinner devised and carried out a "scheme", the purpose and effect of which was to dilute GCA's shareholding. That scheme is alleged to involve several steps, involving claims by Fullham and H Ridge for repayment of alleged loans of $75,000 and $300,000 by way of the issue of ordinary shares in GCA at the most recent price at which such shares had been issued and the passage of a resolution at a directors' meeting of GCA resolving to issue 861,376 shares to Fullham and 3,445,504 shares to H Ridge. 4. In opening submissions, Mr Le Plastrier emphasised the terms in which the Plaintiffs had pleaded the "Arrangement" in paragraphs 12–13 of the Amended Statement of Claim as involving the payment of $500,000 to purchase a 28% shareholding in GCA, and contended that the Arrangement could not be proved because the evidence demonstrated that $250,000 was applied for 28% of the shares in GCA and the other $250,000 was applied for 28% of the shares in GCS. Mr Le Plastrier submitted that Holdings pleads (in ASC [54]) that it was induced by the December 2010 Representations (as defined) to enter into the Arrangement (as defined) and contends that that is not established, because the Arrangement does not exist. In opening oral submissions, Mr Le Plastrier also submitted that Holdings had not accurately pleaded the relevant arrangement, so far as it referred to an investment in GCA rather than an investment in both GCA and GCS and submitted that the failure to prove the pleaded Arrangement was fatal to Holdings' claim, because the remedies sought were directed to the entry into the pleaded Arrangement (T10). Mr Le Plastrier also emphasised the separate roles performed by GCA and GCS, such that GCA was the licensor of the technology and licensed the technology to GCS which would distribute the relevant products. 5. It seems to me that that the evidence established the link between the businesses to be conducted by GCA and GCS and the structural integration of those businesses. There was a clear connection between the role of GCA and that of GCS, so far as the structure involved the holding of intellectual property by GCA and distribution of a product using that software by GCS. Mr Collins acknowledged in cross-examination that the opportunity presented to Holdings related to the commercialisation of the software, implicitly involving both GCA and GCS, although he claimed that the information provided as to the development of the technology was relevant to GCA (T114). Mr Stone also accepted in cross-examination that GCA and GCS were interdependent, so far as GCS depended on a software licence agreement from GCA, GCA would depend on payments from GCS for its revenue (T146) and the common understanding was the commercialisation of the software involved the development of the software by GCA to be licenced to GCS (T148). The interconnection between the companies was also reflected in the fact that shares were issued to the shareholders in the same proportions in GCA and GCS. It seems to me that the investment made by Holdings was intended to be, as the share issues reflected, in both GCA and GCS, notwithstanding the terms of the pleading, and notwithstanding that the amounts of $500,000 and $400,000 invested were in each case paid initially to GCA. 6. Mr Redmond's evidence (Redmond 24.3.14 [11]) was that he was not aware of the details of the structure of GCA's business or any relevant distinction between an investment in GCA or GCS, and that his understanding was that Holdings would be investing in the group that had created and developed the relevant technology. It was plain from Mr Redmond's affidavit and cross-examination that he contemplated an investment in the Global Connect group, which in fact involved both GCA and GCS, although he did not have an understanding of the particular role of those entities. That matter is accepted by Mr Le Plastrier in closing submissions and Mr Le Plastrier also emphasises that correspondence between the parties, proceeds on the same basis. Those matters seem to me to undermine, rather than reinforce, the Defendants' contention that the error in the pleading is fatal to Holdings' case. It seems to me that the substance of the pleaded Arrangement was established, so far as it involved the investment of the pleaded amount to acquire the pleaded interest, albeit in each of GCA and GCS. There is, in my view, no disadvantage to the Defendants in requiring them to meet the substance of the case brought against them, in respect of the alleged representations, on the basis that it was directed to an investment in GCA and GCS. Structure of Holdings' representational case 1. Holdings pleads several alleged representations and then pleads the falsification of those representations largely in a global way. Paragraphs 26–29 of the Amended Statement of Claim deal with representations alleged to have been made by the 14 December 2010 email and attached Presentation and Financial Projections; paragraphs 31–33 with representations alleged to have been made at the Martin Place meeting on 17 December 2010; paragraph 35 with a meeting in Wollongong on 21 December 2010; paragraphs 36–38 with the South Yarra meeting on 22 December 2010; and paragraph 41 pleads a representation as to the shareholding interest that Holdings would acquire in GCA. Holdings then pleads (ASC [42]) that the representations made by the 14 December 2010 email, the Presentation, the Financial Projections, and an email dated 23 December 2010, and the representations made at the Martin Place, Wollongong and South Yarra meetings were representations as to future matters within the meaning of s 4 of the Australian Consumer Law and/or s 769C of the Corporations Act and/or s 12BB of the Australian Securities and Investments Commission Act. Holdings also pleads (ASC [43]) that, relevantly, Fullham, H Ridge and Messrs Stone, Skinner and Collins did not have reasonable grounds for making the alleged representations and in consequence they are taken to have been, and were in fact, misleading. 2. Holdings pleads in a single global allegation (ASC [44]) that the alleged representations were false and misleading. The matters alleged to have that result are particularised as being that, first, GCA was not expecting to commence operations in its Australian business in January 2011; second, GCA's technology was not developed to the point that it could commence operations or commence selling its product, in January 2011 or at any time in the near future; third, GCA's technology was not "ready to go", ready to launch, or ready to be implemented, subject only to a minimal amount of capital being invested; fourth, GCA's technology and business was not advanced to the stage of placing SIM cards into envelopes and sending them to customers; and, fifth, GCA was "accordingly" not expecting to be earning revenue, or to be cashflow positive, in January 2011, or at any time in the short term. I will address the alleged representations and whether they had a reasonable basis below. 3. Holdings pleads, also in a single global allegation (ASC [45]), that Fullham, H Ridge, and Messrs Stone, Skinner and Collins engaged in misleading conduct in breach of s 18 of the Australian Consumer Law, and/or in breach of s 1041H of the Corporations Act and/or in breach of s 12DA of the Australian Securities and Investments Commission Act. However, no factual basis is pleaded for any allegation that each of the Defendants made, or authorised other Defendants to make, all of the alleged representations, to establish any basis to hold the Defendants collectively liable for all of those representations, or hold particular Defendants liable for representations that they are not alleged to have made, authorised to be made or been involved in. 4. In closing submissions, at my request, Mr Bennett provided a schedule of the representations made and who was said to have made them. However, that schedule had little resemblance to Holdings' pleaded case, so far as representations pleaded to have been made by, for example, Mr Skinner were now said to have been adopted by Mr Stone and Mr Collins, reliance was placed on representations that had not been pleaded, for example as to the progress of the BNPN platform, and representations that were pleaded to have been made by Mr Stone were now attributed to Mr Stone and Mr Collins, or Mr Stone and Mr Skinner. That schedule did, however, make clear that Holdings sought to attribute its non-disclosure case in respect of the conversion of loans to equity to Mr Stone and Mr Skinner, although it was pleaded only against Mr Stone (in respect of the initial investment of $400,000) and against Mr Stone, Fullham and GCA (in respect of the further investment of $500,000), and did not further extend it to Mr Collins or H Ridge. I will proceed on that basis. 5. I will, in the analysis that follows, deal with the claims made against particular Defendants in respect of the representations they are alleged to have made. In doing so, I bear in mind the observation of McHugh J in Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; (2004) 218 CLR 592 at [109], approved by the majority in Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304 ("Backoffice Investments") at [102] that: "The question whether conduct is misleading or deceptive or is likely to mislead or deceive is a question of fact. In determining whether a contravention of s 52 [of the then Trade Practices Act] has occurred, the task of the court is to examine the relevant course of conduct as a whole. It is determined by reference to the alleged conduct in the light of the relevant surrounding facts and circumstances. It is an objective question that the court must determine for itself. It invites error to look at isolated parts of the corporation's conduct. The effect of any relevant statements or actions or any silence or inaction occurring in the context of a single course of conduct must be deduced from the whole course of conduct. Thus, where the alleged contravention of s 52 relates primarily to a document, the effect of the document must be examined in the context of the evidence as a whole. The court is not confined to examining the document in isolation. It must have regard to all the conduct of the corporation in relation to the document including the preparation and distribution of the document and any statement, action, silence or inaction in connection with the document." 1. I should first refer to the applicable legal principles, although they are not controversial and there was little contest between the parties concerning them. The approach to be adopted in assessing whether conduct is misleading or deceptive was summarised by Gordon J in Australian Competition and Consumer Commission v Telstra Corporation Ltd [2007] FCA 1904; (2007) 244 ALR 470 at [14]–[15] per Gordon J, in a passage which Griffiths J followed in Forty Two International Pty Ltd v Barnes [2014] FCA 85; (2014) 97 ACSR 450 at [446] and I followed in Re Colorado Products Pty Ltd (in prov liq) [2014] NSWSC 789 ("Colorado Products") at [86], as follows: "The relevant legal principles have been well traversed by Australian courts. A two-step analysis is required. First, it is necessary to ask whether each or any of the pleaded representations is conveyed by the particular events complained of … Second, it is necessary to ask whether the representations conveyed are false, misleading or deceptive or likely to mislead or deceive. This is a 'quintessential question of fact'" … [citations omitted] 1. Conduct is misleading or deceptive or likely to mislead or deceive if it is capable of inducing error: Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640. It is not necessary for Holdings to establish that the Defendants intended to mislead or deceive and the relevant question is whether, viewed objectively, the relevant conduct was misleading or deceptive or likely to mislead or deceive: Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44; (1982) 149 CLR 191 at 197 per Gibbs CJ, 216 per Brennan J; Australian Competition and Consumer Commission v Jewellery Group Pty Ltd [2012] FCA 848; (2012) 293 ALR 335 at [66]. Conduct is likely to mislead or deceive if there is a real and not remote chance or possibility that a person is likely to be misled or deceived, and this is so even though the possibility of that occurring is less than 50 per cent: Butcher v Lachlan Elder Realty Pty Ltd at [112] per McHugh J; Colorado Products above at [87]. As Mr LePlastrier points out, the fact that a representation does not come to pass is not sufficient to establish that it was made without reasonable grounds: Ambergate Ltd v CMA Corporation Ltd (admins apptd) [2016] FCA 94 at [29]. 2. Several of the representations alleged to have been made by the Defendants were representations as to future matters. Whether a person had reasonable grounds for making a representation as to a future matter must be assessed at the date of the representation: Pramoko v Grande Enterprises Ltd (2016) 108 ACSR 469 at 481. In a claim under s 1041H of the Corporations Act, s 769C of the Corporations Act has the effect that a representation with respect to a future matter would be taken to be misleading unless the relevant Defendant had reasonable grounds for making it, but there is no shift of an evidentiary onus to the Defendant. If a claim under s 18 of the Australian Consumer Law were available, then the Defendants would bear an evidential burden to demonstrate some reasonable ground for making a representation under s 4 of the Australian Consumer Law and, if some evidence were put forward, Holdings would bear the onus of proving that the Defendants did not have reasonable grounds for making the representation. If a claim under s 12DA of the Australian Securities and Investments Commission Act were available, then s 12BB of the Australian Securities and Investments Commission Act would have the effect that a representation with respect to a future matter would be taken to be misleading unless the relevant Defendant had reasonable grounds for making it, and the Defendant would be taken not to have reasonable grounds for making the relevant representation unless evidence was adduced to the contrary. Mr Le Plastrier draws attention to the authorities that, in the context of s 51A of the Trade Practices Act 1974 (Cth) that relatively little evidence is required to discharge the evidential burden (if applicable to them) and, once evidence is adduced by a respondent discharging its evidential burden, the plaintiff must satisfy the "dispositive burden" of showing that the defendant did not have reasonable grounds for making the representation: Awad v Twin Creeks Properties Pty Ltd [2012] NSWCA 200 at [34]; North East Equity Pty Ltd v Proud Nominees Pty Ltd [2012] FCAFC 1 at [30]. 3. The parties largely did not seek to distinguish the different provisions relied upon in respect of the evidential onus or burden placed on the Defendants. It seems to me that the alleged representations were made in relation to a financial product, being shares in GCA and GCS, and s 1041H of the Corporations Act likely applies to the exclusion of s 18 of the Australian Consumer Law, by reason of s 131A of the Competition and Consumer Act 2010 (Cth): Australian Competition and Consumer Commission v Fisher & Paykel Customer Services Pty Ltd [2014] FCA 1393 at [24]. As I have noted above, there is no statutory shift of the evidential burden to the Defendants in a claim under s 1041H of the Corporations Act. I will not determine whether s12DA of the Australian Securities and Investments Commission Act is capable of application, which would require that the relevant conduct could be treated as conduct in relation to "financial services" as defined in s 12BAB of the Australian Securities and Investments Commission Act, where the parties did not make substantive submissions as to that question. Little turns on that matter in this case, since Holdings generally sought to establish the lack of reasonable basis for the relevant representations as a matter of evidence and not merely by reliance on the evidential burden placed on the Defendants, and has in any event failed to establish causation in respect of the representations to which a shift of the evidential burden to the Defendants could apply. Holdings' case and submissions as to the Financial Projections and the Presentation 1. I will address these representations and the basis for them together, where that was the approach largely taken by counsel for the parties. Holdings pleads (ASC [26]) that, on or about 14 December 2010, Mr Skinner, on behalf of and as agent for GCA, sent the 14 December 2010 email to Mr Roulstone with the intention that he would pass them on to potential investors in GCA, and pleads the representations alleged to have been made by the 14 December 2010 email and attached Financial Projections and Presentation. I will set out the detail of the alleged representations below. There appears to be no substantive contest as to the fact of the representations made in the Financial Projections and Presentation, although the Defendants contend they largely related to GCS as I will note below. 2. Holdings pleads (ASC [27]) that, by sending the Presentation and the Financial Projections, Mr Skinner represented that the factual matters stated in those documents were true, that the future projections were made on reasonable grounds, and that there were reasonable grounds to make the assumptions which were stated as being the basis for the projections. Holdings also pleads (ASC [30]) that "acting as a conduit", Mr Roulstone subsequently provided the Presentation and the Financial Projections to Holdings by its director, Mr Redmond. As I noted above, paragraph 42 of the Amended Statement of Claim in turn pleads that the representations made by the 14 December 2010 email, the Presentation and the Financial Projections were representations as to future matters within the meaning of s 4 of the Australian Consumer Law and/or s 769C of the Corporations Act and/or s 12BB of the Australian Securities and Investments Commission Act, paragraph 43 pleads that the Defendants did not have reasonable grounds for making the alleged representations and paragraph 44 pleads that the alleged representations were false and misleading. 3. As I also noted above, on or about 14 December 2010, Mr Skinner sent the 14 December 2010 email to Mr Roulstone, which attached the Presentation and the Financial Projections which projected increasing earnings before interest and tax in the calendar years 2011–2013, positive revenue in 2011 and significant student numbers by the beginning of 2011 and thereafter (Roulstone 27.8.13 [10], Ex P5, 978). Mr Redmond's evidence is that Mr Roulstone provided him with some documents that he had been provided by or on behalf of GCA and directed him to a website and he reviewed the website and promotional material. It is not clear whether this evidence refers to documents provided to Mr Roulstone in June 2010 or December 2010, and Mr Redmond gives no detail of his reasoning process in respect of his review of those documents (Redmond 15.7.13 [4]). In the course of cross-examination, Mr Redmond properly conceded that many of the representations on which Holdings relied related primarily to the distribution of products or services by GCS (T52–T54). 4. In closing submissions, Mr Bennett submitted that the representations made in December 2010 were not reasonable because no analysis of the costs to be incurred by GCS in bringing the product to the Chinese market was undertaken before 2011, and Mr Stone appears to have accepted in cross-examination that projections prior to that time were directed to revenue rather than costs (T160). However, Mr Le Plastrier points to evidence that operating expenses and costs of goods sold had been taken into account in those projections, and I accept that appears to have occurred at least to some extent. Mr Bennett also submits that no licence agreement had been entered into between GCA and GCS. I give little weight to that matter, where issues could readily have been addressed between entities with the same shareholders in an informal fashion. Mr Bennett also refers to a fall in the number of students coming to Australia from China in the previous year; however, the fall in the number of Chinese students was minimal, and the fall in the number of Indian students appeared to be peripheral to GCA's and GCS's then business. 5. Mr Bennett emphasises problems that arose in respect of the number of, and training of, agents in China (Collins T121, Skinner T225–6) and submits that those matters were "or should have been" known in December 2010 when the representations were made. Mr Collins' evidence in cross-examination was that he did not become aware of the practical challenges arising in China until early in the New Year in 2011, either January or February 2011 (T128). Mr Bennett refers to evidence of Mr Skinner, in cross-examination, where he recognised that significant impediments existed to driving income from the China market (T211–212), although Mr Skinner's evidence was that he did not recognise the significance of these impediments prior to January 2011. Mr Bennett also submits that the Chinese agents working with GCA and GCS had not had experience on a live platform until the point at which customers were to be engaged (T213). Mr Bennett also refers to other matters which seem to me, with respect, to be somewhat peripheral, including the finalisation of a formal sales and marketing plan, the appointment of a chief financial officer, and securing premises in Sydney. Mr Bennett also refers to a significant "cash burn" rate (Stone 7.4.16 [3]), a matter which would be expected in respect of a new technology company which was not yet deriving income. Mr Bennett also submits that the lack of reasonable basis for representations as to the commercialisation of the technology was made clear by the "dismal failure" of the project. That is, with respect, a frank but inappropriate application of hindsight to falsify representations made at an earlier time. 6. In closing submissions, Mr Bennett initially submitted that Mr Stone and Mr Collins adopted the representations alleged to have been made by Mr Skinner in December 2010 as their own or at least took no steps to change them. This proposition does not seem to me to assist Holdings, where the claim pleaded in respect of the representations was against GCA and Mr Skinner. Mr Bennett later made clear in closing submissions that he did not submit that, merely because Mr Stone or Mr Collins had indicated, in cross-examination, their agreement with statements made by Mr Skinner, that they could be held liable for any representation alleged to have arisen out of that statement and accepted that, to the extent that, for example, the 14 December 2010 email was sent by Mr Skinner, it was a representation by Mr Skinner and not by other persons (T253). It is in any event not necessary to determine whether it would be proper to allow Holdings to expand its case to an unpleaded claim against Mr Stone and Mr Collins where Holdings has not established causation in respect of the relevant representations, as I will find below. The Defendants' response as to the Financial Projections and the Presentation 1. The Defendants deny the alleged representations in respect of the Financial Projections and Presentation, although it appears there is no dispute as to the content of the documents, and plead that the representations in the Presentation and set out in those paragraphs related to GCS rather than GCA (Amended Defence [23]). I do not accept that provides an answer to Holdings' claim, for the reasons set out above in dealing with the terms of the pleaded Arrangement. 2. The Defendants also plead (Amended Defence [23A]) numerous matters that are said to give rise to reasonable grounds for making the representations regarding GCS, namely that GCS had contractual relationships with various parties in respect of aspects of the business; SIM cards had been dispatched to China in October 2010 and a test Global Connect Visa card had been made; the technology was significantly developed in various respects; the majority of the capital required to launch the technology was required for its development, which had occurred by December 2010; the balance of the capital required to enable the technology to be sold on the market, being $500,000, was required for marketing the technology; January was one of the high periods in the year for intake of international students; Mr Skinner had an extensive understanding of the area and had worked with another person skilled in the area, Mr McCully, in calculating the Financial Projections and produced "conservative projections" by reference to various matters; the SIM cards were free to Chinese students and, under contracts with Vodafone and Visa, GCS was entitled to receive money each time that a customer utilised the service. 3. Holdings' representational case, and the Defendants' evidence seeking to establish reasonable grounds for the alleged representations, raise questions as to the extent to which GCA's technology and GCS's marketing and distribution arrangements had been developed so as to support representations as to both future sales and revenue. It is convenient to refer here to Mr Collins' and Mr Skinner's evidence as to these matters, which I will generally not repeat in dealing with particular representations below. 4. In his affidavit dated 7 April 2016, Mr Collins set out his background as an information technology specialist and system developer with lengthy experience in information technology and telecommunications and in the financial services industry. Mr Collins refers, in his affidavit evidence to the establishment of GCA in early 2010 and to the involvement of Kiandra, a software development company, to undertake the software platform build for the relevant system. His evidence is that, by the end of 2010, Kiandra had completed the specified work required for the international student platform. Mr Collins also referred to the proposed development of the platform to support one touch digital purchasing of products and services, by way of the BNPN platform, although his evidence recognised that platform was substantially more complex in its functionality and operating systems than the student platform, and involved "enormous" challenges of providing "the required reliability with high volume transaction throughput and seamless functional delivery". He refers to work undertaken between June and December 2011 in that respect and to a meeting with representatives of an affiliate of News Corporation in the United States in November 2011. 5. Mr Skinner's evidence is that he formed the view that the technology developed by Mr Collins which could link a SIM card to a pre-paid debit card could solve problems that international students had with the regulatory framework around banking and telecommunications. He refers to having designed a model for the distribution of a SIM card and debit card to prospective international students, involving the provision of the SIM card to a student before he or she arrived in Australia. Mr Skinner also referred, in evidence admitted with a limiting order under s 136 of the Evidence Act 1995 (Cth) as going to his understanding only, as to arrangements which were necessary for the model to be implemented. Mr Skinner also gave evidence of the existence of contracts between GCS and several entities which were necessary for that arrangement, which was largely admitted subject to weight, although none of the relevant contracts were tendered. Mr Skinner also gave evidence, admitted as evidence of his understanding only, that GCS had in place "all of the necessary contractual relationships for the model to work" by 10 December 2010. Mr Skinner's evidence was that he did not have copies of those contracts, although he gave no evidence of any efforts made to obtain them. To the extent that Mr Skinner's evidence was that the agreements were with GCA's liquidator, no explanation was given as to why a subpoena could not readily have been issued for their production, particularly after the Defendants were again represented by legal advisers in the proceedings from early 2016. 6. Mr Skinner also referred to several monthly reports (Ex D4) prepared by the former chief executive officer of GCS, Mr McCully, who did not give evidence. Mr Skinner's evidence was that he knew Mr McCully since he had previously worked with him, that Mr McCully had travelled extensively in the relevant markets, and Mr Skinner formed the view that the development of GCS was proceeding as he had hoped by reference to those reports. The monthly reports were not in evidence for the entire period, and Holdings placed some weight on the absence of monthly reports for other months in submissions. Those documents referred, inter alia, to activity undertaken in the relevant months, marketing activities, steps taken to develop master distribution arrangements and to work undertaken in respect of training of master distributors in several overseas countries. 7. The monthly report for December 2010, at the time Holdings made its first investment, reported on key activities during that month, including in respect of agent training and agent recruitment in China, although it was noted that an operations manual required further documentation, and noted that student numbers in from China were stable although student numbers for India had declined. That report also recognised that agent training would become problematic as GCA approached Chinese New Year, in early February, "before launching". That language suggested that at that point a launch was not anticipated until February 2011 at the earliest. That report also referred to the creation of three year projections for the purpose of raising capital, of which a portion would be required for GCS during the current pre-launch phase, and to the fact that those projections had been provided to Mr Stone. That statement provides support for Mr Stone's and Mr Skinner's evidence that the relevant projections were prepared by Mr McCully. 8. The monthly report for January 2011 is not in evidence. However, by the time of the monthly report for February 2011, there was reference to 13 agents having signed agreements, presumably in China, who were preparing for training in March and to the fact that the agent training and powerpoint had been reviewed and sent to China, presumably during February 2011, and to progress with a sales and marketing plan which was then close to completion. That report also recorded that: "The process of recruiting new agents in China was slow during February [2011] largely because of Chinese New Year. There are approximately 20 agents in consultation with [master distributor] at this time in addition to the 13 agents who have signed agreements. Approximately 20 agents have identified that they have no interest in the concept and are largely relating the GCS product to Bank or Telco products they already distribute." 1. Mr Skinner gave evidence of a conversation with Mr Collins in October 2010 relating to the dispatch of SIM card packs to China and to receiving a telephone call in October 2010 from GCS's master distributor in China to confirm the receipt of those SIM card packs; to the production of sample visa cards in August 2010 and to a test of the visa card to confirm the ability to undertake fund transfers; and to reports that he received from Mr Collins as to the development of the technology, and to his having formed the view by December 2010, based on Mr Collins' assurances, that the technology was developed to the point where it could be utilised. 2. Turning now to the Financial Projections, Mr Skinner gave evidence of the process that he adopted to prepare those projections, commencing with data published by the Australian Government in relation to student numbers and making projections of student numbers up to 2013 on a month by month basis, in respect of the number of Chinese students that would commence in the higher education sector. His evidence is that he then made a forecast of the number of Chinese students that he expected to take up the GSC package, taking what he described as a "month by month conservative approach", and based on his view that Chinese students would want to use the GCS package because it eliminated some of the problems that they faced when they came to Australia. His evidence, admitted with a limiting order under s 136 of the Evidence Act as evidence of his understanding only, was that the Financial Projections included projected earnings based on the percentage entitlements of GCS under the relevant agreements multiplied by the anticipated number of Chinese students who would take up the GCS package. Mr Skinner also led evidence as to master agency relationships in India and Thailand, negotiations towards finalising master agency relationships elsewhere and the position in the United Kingdom. His evidence is that he also expected GCS to expand into the United States for several reasons, and into several other countries. 3. Mr Skinner also refers, in evidence some of which was admitted as submission only, to other matters which constituted his reasoning for the Financial Projections, namely that the relevant agreements were in place by December 2010; reports were identifying that the key relationships, human resources and marketing profile of GCS was strong; SIM cards had been dispatched to China; test versions of the GCS visa card had been produced; international transfers could be made to an international bank; and Mr Collins' advice had indicated that the technology was well-developed. His evidence, also admitted with a limiting order under s 136 of the Evidence Act as evidence of his understanding, is that GCS was in a position to start earning revenue by January 2011. Mr Skinner also seeks to explain the ultimate failure of GCS's ambitions in respect of the Chinese student market, on the basis that the three months allocated for the training of agent companies in China had been too short, and the extent of regulatory requirements of the training and operational process intimidated Chinese agents, such that few agents were confident to offer the SIM cards and Visa cards than Mr Skinner had anticipated. He refers to the need for an "incremental" training process having delayed the uptake of students, because insufficient numbers of agency staff in China were able to distribute SIM cards and Visa cards. By his further affidavit dated 8 April 2016, Mr Skinner referred to a conversation with a representative of an authorised card issuer with Visa in the United Kingdom as to the possibility of implementing a similar arrangement in the United Kingdom. 4. Mr Stone accepted in cross-examination that he had not tested the Financial Projections or satisfied himself that, when Financial Projections were sent to potential investors after June 2010, they had been updated from those prepared in June 2010 (T152–153). However, Mr Stone is not alleged to have made the relevant representations, authorised them or otherwise been involved in them. As I noted above, it is not necessary to determine whether it would be proper to allow Holdings to expand its case to an unpleaded claim against Mr Stone where I will find below that causation is not established in any event. 5. In opening submissions, Mr Le Plastrier submitted that Mr Skinner's evidence tended to establish that there were reasonable grounds for the Financial Projections and the Presentation and that Mr Collins' evidence, to which I have referred above, tended to establish that there was a reasonable basis for representations as to the extent to which the technology was developed. Mr Le Plastrier also emphasises Mr Skinner's experience on large marketing projects in order to establish a reasonable basis for the Financial Projections, and refers to Mr Skinner's evidence as to the contracts in place to support GCS's business model, and also emphasises the monthly reports prepared by Mr McCully. Mr Le Plastrier also submitted that Mr Stone was entitled to rely on the skills of Mr Skinner and Mr Collins, and Mr Collins was entitled to rely on the skills of Mr Skinner and vice versa. It is again not necessary to determine that matter where a claim was not pleaded against Messrs Stone or Collins in respect of these representations and I need not determine an unpleaded claim could fairly be advanced where causation is not established in any event. Findings as to the Financial Projections and the Presentation 1. The first representation alleged to have been made by the Financial Projections (ASC [28(a)]) was that GCA was expecting to commence operations in its Australian business in January 2011. The second representation alleged to have been made by the Financial Projections (ASC [28(b)]) was that GCA was expecting to start earning revenue in January 2011 and continue to earn revenue thereafter. Both representations are pleaded as reflecting GCA's expectations, although they have a future character. To the extent that a shift of the evidential burden to the Defendants is applicable, it seems to me that the Defendants have led sufficient evidence, by reference to the work that had been done in developing GCA's technology and distribution arrangements in China, to demonstrate some reasonable ground for making the representations so as to place the onus of proving the absence of reasonable grounds on Holdings. However, it also seems to me that the evidence to which I have referred above is sufficient to establish Holdings' claim that the first representation lacked a reasonable basis and was misleading, to the extent that the statement of a January 2011 completion date did not have a reasonable basis, given the work which still needed to be done in respect of GCA's distribution network. It seems to me that the evidence to which I have referred above is also sufficient to establish that the second representation lacked a reasonable basis and was misleading, so far as GCA's derivation of revenue depended on GCS's derivation of revenue from the Chinese distribution arrangements and that could not commence until those arrangements were operational and generating revenue for GCS. 2. The third representation alleged to have been made by the Financial Projections (ASC [28(c)]) was that GCA was expecting to earn revenue of $102,084 in January 2011, and would thereafter earn larger amounts of revenue. To the extent that a shift of the evidential burden is applicable, the Defendants do not seem to me to have demonstrated some reasonable ground for the third representation, because they have led no evidence which would tend to support an estimate that revenue in January 2011 would be in the order of $102,084, as distinct from a significantly lesser amount, or no amount, where this depended upon the progress of Chinese distribution arrangements so as to generate royalties to GCA. The evidence of the work that still needed to be done as to the Chinese distribution arrangements is also sufficient to establish Holdings' affirmative case that the representation lacked a reasonable basis. 3. The fourth representation alleged to have been made by the Financial Projections (ASC [28(d)]) was that GCA was expecting to make trading losses for the months of January to June 2011, and was expecting to make trading profits thereafter. The fifth representation alleged to have been made by the Financial Projections (ASC [28(e)]) was that GCA was expecting to earn, in the year to 31 December 2011, gross margin revenue of $2,854,520 and EBIT of $515,834, from its Australian operations alone. The sixth representation alleged to have been made by the Financial Projections (ASC [28(f)]) was that GCA was expecting to earn, in the year to 31 December 2012, gross margin revenue of $4,875,870 and EBIT of $1,728,745, from its Australian operations alone. The seventh representation alleged to have been made by the Financial Projections (ASC [28(g)]) was that GCA was expecting to earn, in the year to 31 December 2013, gross margin revenue of $7,134,776 and EBIT of $3,154,970, from its Australian operations alone. 4. It does not seem to me that the Defendants have discharged the evidential burden (to the extent applicable) to establish reasonable grounds for the fourth–seventh representations made in the Financial Projections, which are also pleaded by reference to GCA's expectations but again have a future character. The Defendants have led no evidence that would tend to support a reasonable basis for a projection as to when GCA would shift from making trading losses to profits, whether from June 2011 or at any other date, or for the particular figures for gross margin revenue and EBIT projected for the years ending 31 December 2011, 31 December 2012 and 31 December 2013, where that would depend on whether reasonable estimates had been made as to the extent of penetration into the Chinese student market, the extent of revenues and the extent of costs, and Mr Skinner's evidence does not address those matters in any detail. The evidence to which I have referred above is also sufficient to establish Holdings' affirmative case as to the lack of a reasonable basis for those representations. 5. It should be noted, however, that each of these representations was plainly a projection as to the future business and financial success of a technology start-up company seeking to establish a new business in an offshore market, and that would have been apparent to an experienced businessperson such as Mr Redmond. That matter would have undermined a claim for reliance in respect of these representations, quite apart from the fact that, as I note below, there is no evidence that Mr Redmond had in fact read the Financial Projections, or that Mr Roulstone had done so and then advised Mr Redmond about them, before Holdings invested in GCA and GCS. 6. The representations alleged to have been made by the Presentation (ASC [29]), which are pleaded as representations as to GCA's projections, were that GCA would gain 65,000 clients per year for the first three years in Australia; GCA would gain 50,000 clients per year for the first three years in the United Kingdom; and GCA expected to expand rapidly into other destinations and source countries, and these are alleged as: "thereby conveying that the Financial Projections were conservative, in that they were based only on the Australian operations, and were based on the first defendant gaining only 38,000 new clients per year." 1. It seems to me that the Defendants have led some evidence to discharge an evidential burden (if applicable to them) of showing a reasonable basis for the first representation made by the presentation as to projected client numbers in Australia, by reference to Mr Skinner's experience and the estimates which he made, in respect of the number of clients which would be obtained in Australia, the subject matter of the first representation. Holdings has not falsified that representation, where it has not led evidence to challenge the proposition that Mr Skinner's estimate was a reasonable one, although it plainly did not come to pass. 2. It does not seem to me that the Defendants have led sufficient evidence to satisfy their evidential burden (if applicable to them) in respect of the second representation made by the Presentation as to projected clients numbers in the United Kingdom, where the evidence goes no further than a hope to expand in the United Kingdom and some engagement with service providers there. Conversely, the evidence of those matters is sufficient to establish Holdings' affirmative case that that representation lacked a reasonable basis. 3. It also seems to me that the Defendants have led sufficient evidence to satisfy their evidential burden (if applicable to them) in respect of the third representation made by the Presentation, that GCA expected to expand rapidly into other destinations and source countries, having regard to the evidence of work done to expand the business to other countries, and Holdings has not falsified that representation 4. In summary, Holdings has established that some, but not all, of the representations made in the Financial Projections and the Presentation were misleading or deceptive. There would have been complexities in Holdings establishing causation in that situation, in circumstances that some only of those representations had that character, quite apart from the fact that those representations would likely have been understood by an experienced businessperson as involving a significant degree of uncertainty, where made by a start-up technology company. In the event, there are other difficulties with causation in respect of the Financial Projections and the Presentation, which I will address below. Causation as to the Financial Projections and the Presentation 1. Before turning to the question of causation as to the Financial Projections and the Presentation, I should first identify the applicable legal principles. The statutory provisions on which Holdings rely, broadly, allow the recovery of loss or damage suffered "by" misleading or deceptive conduct of another person or against a person involved in that conduct in the requisite sense. These provisions direct attention to whether Holdings in fact suffered loss or damage "by" conduct of the Defendants done in the contravention of the relevant prohibitions. In Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514 ("Wardley") at 525, Mason CJ and Dawson, Gaudron and McHugh JJ observed that the word "by" expresses the notion of causation and that these provisions: "should be understood as taking up the common law practical or common-sense concept of causation recently discussed by [the High Court] in March v Stramare (E & MH) Pty Ltd [(1991) 171 CLR 506], except in so far as that concept is modified or supplemented expressly or impliedly by the provisions of the Act." 1. Holdings therefore needs to establish a causal connection between the alleged representations and the loss for which it seeks compensation: Wardley above at 525–526; Henville v Walker [2001] HCA 52; (2001) 206 CLR 459 at 469–470 (Gleeson CJ), 480 (Gaudron J), 488–489 (McHugh J, with whom Gummow J agreed) and 508–509 (Hayne J, with whom Gummow J agreed); Carey v Freehills [2013] FCA 954; (2013) 303 ALR 445 at [411] per Kenny J. A material representation, in the sense of a representation that is "objectively likely" to act as an inducement to act in a particular way, will be a cause of the relevant loss or damage if it contributed to the loss or damage in some way, even if "other factors or conditions … played an even more significant role in producing the loss or damage": Henville v Walker above at 493 (McHugh J, with whom Gummow J agreed), 509 (Hayne J, with whom Gummow J also agreed); Carey v Freehills above at [412]. Reliance may be inferred in a proper case: Gould v Vaggelas [1985] HCA 75; (1985) 157 CLR 215 at 236; Hanave Pty Ltd v LFOT Pty Ltd [1999] FCA 357; (1999) 43 IPR 545 at [11] per Wilcox J, at [45] per Kiefel J; Colorado Products above at [112]. 2. Holdings pleads (ASC [54]) that it was induced by the December 2010 Representations, which are defined to include the Financial Projections and the Presentation, to enter into the Arrangement (as defined) and, in particular, to invest the sum of $500,000 in shares in GCA. I will address causation in respect of the representations sequentially, but I also have regard to the fact that several representations might operate together to establish causation. It is only necessary to deal with questions of causation to the extent that the relevant representations have been shown to be misleading or deceptive. 3. In closing submissions, Mr Le Plastrier submits that paragraph 54 of the Amended Statement of Claim is properly understood as an allegation that Holdings was induced by all of the December 2010 representations, rather than each of them, to enter into the relevant arrangement. I would not read the pleading in so narrow a fashion. However, the absence of evidence of Mr Redmond seeking to identify the significance of particular representations raises greater difficulties, which Mr Le Plastrier emphasised and which I will address below. 4. Mr Redmond's causation case was that, in substance, several representations had been made before he invested in GCA, and, presumably, it should be inferred that the things that were said had led him to do so. Mr Redmond led no substantive evidence that he had paid particular attention to any category of representations (for example, as to future profitability or the state of GCA's technology) or that any particular representation was of particular significance for his investment decision. As Mr Le Plastrier pointed out, Mr Redmond's evidence in cross-examination was that the Presentation was not a document which he recalls having seen prior to Holdings' investment in GCA and GCS, and that he possibly became aware of it after the investment (T51). Mr Redmond's evidence in relation to the Financial Projections was that he generally relied on his expert advisers and he possibly may have seen them "in the process of relying on my advisers" but may not have seen them (T51). His evidence was also that he had invested in various companies over time and he would generally not receive a detailed information memorandum in order to do so (T51). 5. In closing submissions, Mr Bennett sought to avoid the difficulty arising from Mr Redmond's evidence as to these matters by submitting that representations made to Mr Redmond's professional advisers, such as the Financial Projections and the Presentation emailed to Mr Roulstone on 14 December 2010, fell within Holdings' claim as pleaded and opened. Mr Le Plastrier submits that a case put by way of Mr Roulstone's reliance on the Financial Projections and the Presentation is outside the pleading. It is not necessary to determine whether Holdings should be permitted to pursue such a case, since the evidence also does not establish that Mr Roulstone reviewed, or relied on, the Financial Projections and the Presentation, whether in order to advise Mr Redmond or otherwise. I should not infer that he did so, in the absence of evidence that he did so, where it would have been rational to give little weight to such documents in respect of a relatively small investment (by comparison with the size of Mr Redmond's other business interests) in a start-up technology entity, where such estimates would obviously have had a high degree of uncertainty. 6. I am not satisfied that reliance or causation is established in respect of Holdings' case as to the Financial Projections or the Presentation. The evidence does not establish, on the balance of probabilities, that either Mr Redmond reviewed and relied upon the documents that are alleged to be misleading, or that any adviser to him did so, to allow any case by way of indirect causation. I will address that question further below. The Martin Place meeting 1. Holdings pleads (ASC [31]–[32]) that the Martin Place meeting was directed to attracting an investment of $500,000 in GCA and that, during the course of the Martin Place meeting, Mr Collins made several representation about GCA. The Defendants admit the representations attributed to Mr Collins were made but plead that the meeting was intended to attract an investment of $500,000 in GCS (Amended Defence [25]). No claim was pleaded that Mr Stone or Mr Skinner made any representation at the Martin Place meeting, although they attended it and there is evidence that they spoke at it. I will address a representation alleged to have been made by H Ridge (ASC [33]) which is denied by the Defendants (Amended Defence [26]) below. 2. As I noted above, the Martin Place meeting took place on or about 17 December 2010 at a restaurant in Martin Place, Sydney and was attended by Messrs Stone, Skinner and Collins and by Geoffrey Redmond, Eric Redmond and Mr Roulstone. The fact that that meeting took place at a lunch at a restaurant in Sydney suggests that it had a degree of informality. Mr Redmond's evidence (Redmond 15.7.13 [8]–[14]; T52–53) is that Mr Collins commented as to the then position of the technology and Mr Skinner commented as to the potential credit card market for Asian students and Mr Stone is said to have commented as to the amount of capital required to bring the company to a positive cashflow position. Mr Redmond's evidence (Redmond 15.7.13 [12]) is that Mr Collins also said, at the Martin Place meeting: "The technology is ready to go. It has global applications. We are set to launch the product on the Asian student market. We have arrangements with a number of immigration agents in China. The technology is at the stage where we are ready to implement our first batch of students. We only require a minimal amount of capital to get us there. We expect the first student intake in January 2011 and cashflow at that time." Mr Roulstone also gives evidence of a meeting with Messrs Stone and Collins, together with Mr Redmond and others on 17 December 2010, which appears to refer to the Martin Place meeting, which I will address further below. Mr Eric Redmond's evidence (Eric Redmond 28.9.15 [7]) is that he also attended the meeting but he does not address what was said at it. 1. The first representation (ASC [32(a)]) alleged to have been made at the Martin Place meeting was that GCA's technology was "ready to go". By his affidavit dated 7 April 2016, Mr Collins led evidence to support that representation, by reference to the progress of the platform build project and the completion of the work required by the software requirements specification and deployment of the platform structure in a test server environment (Collins 7.4.16 [12]). It seems to me that this evidence discharges the Defendants' evidential burden (if applicable to them) in respect of this representation and Holdings has not established, having regard to Mr Collins' and the other evidence referred to above, that GCA's technology was not at this point of development, albeit that more needed to be done before sales of the products could commence in China. 2. The second representation (ASC [32(b)]) alleged to have been made at that meeting was that GCA was ready to launch its product on the Asian student market. By his affidavit dated 7 April 2016, Mr Collins denies that he represented that GCA was ready to launch its product on the Asian student market on the basis that the entity launching the product on that market was not GCA but GCS. It seems to me that that distinction lacks substance, when GCA would provide the software platform which would be used by GCS to distribute the product. Mr Collins' evidence (admitted as evidence of his understanding only) was that, had the representation been made in respect of GCS, it would have been true, because it possessed the SIM cards and Visa payment cards, and had entered into third party agreements for key supplier relationships with Visa, Vodafone, Australia Post and other entities (Collins 7.4.16 [14]). Irrespective of whether this evidence discharges the Defendants' evidential burden (if applicable to them) in respect of this representation, it seems to me that Holdings has established, by reference to other work that needed to be completed by GCA and GCS including the training of Chinese agents and the receipt of Visa cards ready for commercial use, that a reasonable basis did not exists for a representation that the relevant product was at this point ready to be launched on the Asian Market. 3. The third representation (ASC [32(c)]) alleged to have been made at this meeting was that the technology was ready to be implemented with its first batch of students. In his affidavit, Mr Collins denies making the representation that the technology was ready to be implemented with its first batch of students, on the basis that the reference to the first batch of students must relate to GCS which was responsible for dealing with students. It seems to me that distinction lacks substance in the relevant circumstances, for the reasons I set out above in dealing with the terms of the pleaded Arrangement. Mr Collins accepted in cross-examination that a statement was made at the Martin Place meeting that the technology was at a stage where they were ready to implement the first batch of students; they only required a minimum amount of capital to get there; and expected the first student intake in January 2011 and cashflow at that time (T138). 4. I understand this third representation to extend beyond the state of the technology to the ability to implement it with students, implicitly, the students in the Chinese market. Mr Collins' evidence (admitted as evidence of his understanding only) is that, had the representation been made in respect of GCA, it would have been true because the products associated with the technology were ready to be distributed to Chinese students and, as I noted above, his evidence is that GCS possessed the SIM cards and Visa payment cards and had entered into third party agreements for key supplier relationships with Visa, Vodafone, Australia Post and other entities (Collins 7.4.16 [14]). Irrespective of whether this evidence discharges the Defendants' evidential burden (if applicable to them) in respect of this representation, it seems to me that Holdings has again established, by reference to other work that needed to be completed by GCA and GCS including the training of Chinese agents and the receipt of Visa cards ready for commercial use, that a reasonable basis did not exist for a representation that the relevant technology was at this point ready to be implemented with a first batch of students, since that would have required that the distribution arrangements be sufficiently advanced to acquire that first batch of students. 5. The fourth representation (ASC [32(d)]) alleged to have been made at that meeting was that GCA would need only a minimal amount of capital in order to launch its product. In his 7 April 2016 affidavit, Mr Collins denies that he made this representation, because GCS rather than GCA would launch the product. It seems to me that there is little substance in that distinction, where GCA was raising capital in order to develop the software and other systems that would support the product to be distributed by GCS. Mr Collins' evidence (admitted as evidence of his understanding only) is that, had the representation been made, it would have been true because it was his understanding that the sum of $500,000 was required for the launch of the project, based on the Financial Projections and, as I noted above, GCS possessed the SIM cards and Visa payment cards, and had entered into third party agreements for key supplier relationships with Visa, Vodafone, Australia Post and other entities (Collins 7.4.16 [14]). 6. Mr Stone's evidence in his affidavit dated 7 April 2016 is that the amount of $500,000 was not required by GCA at that time as the platform had already been built and GCA's future operating costs would be met from royalty payments to be paid by GCS under the terms of a licence to be agreed with GCA, and refers to conversations with Messrs Skinner and Collins about such a licence agreement. That proposition has the difficulty that, first, an inference that the capital was required tends to follow from the evidence of the efforts that were being made to raise it and, second, Mr Stone's evidence does not establish GCS's capacity to make such payments to GCA. Although I would give little weight to Mr Stone's evidence as to this matter, it seems to me that Mr Collins' evidence (notwithstanding the limited basis on which it was admitted) is sufficient to discharge the Defendants' evidential burden (if applicable to them) in respect of this representation and Holdings has not established that it did not have a reasonable basis or was misleading, where it is directed only to the point of the launch of the product and there is little evidence of further expenditures required before that point. 7. The fifth representation (ASC [32(e)]) alleged to have been made at that meeting was that GCA was expecting to start selling its product to students in January 2011. Mr Collins denies that a representation was made that GCA was expecting to sell its product to students in January 2011, again on the basis that GCS rather than GCA was expecting to start selling its product in January 2011. Again, it seems to me that that represents an unduly technical approach. Mr Collins' evidence (admitted as evidence of his understanding only) is that, had the representation been made, it would have been true because, provided it received the appropriate amount of capital, GCS would have been in a position to start selling products associated with GCA technology to students in January 2011. 8. Mr Le Plastrier submits that the first aspect of this representation relates to the readiness of the technology, which is supported by Mr Collins' evidence to which I have referred above. The second aspect of the representation relates to the timing of sale, and Mr Le Plastrier seeks to establish a reasonable basis for that proposition by reference to the fact that January marked the start of the academic year for many Chinese students studying in Australia (Skinner 7.4.16 [42]). It seems to me that the Defendants have not discharged an evidential burden (if applicable to them) to show a reasonable basis for this representation, since sales to Chinese students in January 2011 required not only the commencement of the academic year but also that training of Chinese agents and distribution arrangements were sufficiently advanced and that Visa cards were ready for commercial use. Even if I were incorrect in that view, it seems to me that Holdings has again established, by reference to other work that needed to be completed by GCA and GCS including the training of Chinese agents and the receipt of Visa cards ready for commercial use, that a reasonable basis did not exist for this representation. 9. The sixth representation (ASC [32(f)]) alleged to have been made at that meeting was that GCA was expecting to start receiving cashflow in January 2011. Mr Collins denies that he represented that GCA was expecting to start receiving cashflow by January 2011, on the basis that GCA's only source of income would have been from royalties payable by GCS under its licence agreement with GCA. It seems to me that the representation should be understood as directed to GCA's ability to earn income, from such royalties, by the distribution of products by GCS. Mr Collins' evidence (admitted as evidence of his understanding only) (Collins 7.4.16 [18]) is that the representation would have been true, because GCS would have started receiving cashflow in January 2011, if it had commenced business as then anticipated, and he believed the Financial Projections were soundly based because they had been compiled by Messrs Skinner and McCully, who he understood had expertise in the relevant market. Mr Le Plastrier points to Mr Collins' evidence that he relied upon the Financial Projections in making the alleged representation. It seems to me that the Defendants have not discharged an evidential burden (if applicable to them) as to this representation for the same reasons they have not done so for the fifth representation, and even if I were incorrect in that view, Holdings has again established for the same reasons that a reasonable basis did not exist for this representation. 10. A claim is also made against H Ridge, a company associated with Mr Skinner, in respect of this meeting. Holdings pleads (ASC [10]) that Mr Skinner is and was at all material times an officer of H Ridge and acted as its agent in all of its dealings with Holdings and (ASC [33]) that, during the course of the Martin Place meeting, H Ridge represented to Holdings that the required amount of capital that the first defendant would need in order to get into a positive cashflow position was only $500,000. However, the evidence suggests that the statement which is relied on to support this representation was made by Mr Stone rather than by Mr Skinner. 11. Mr Redmond's evidence (Redmond 15.7.13 [14]) is that Mr Stone said at this meeting that: "The required capital to get to a positive cashflow position is only $500,000.00." Mr Roulstone's evidence (Roulstone 27.8.13 [12]) is that Mr Stone said at that meeting: "The business will be cash flow positive as per the forecasts. Funding of $500,000.00 over the next few months will get the business started and into a positive cash flow position." 1. Mr Stone's affidavit evidence (Stone December 2013 [1]) was that he attended this meeting although he did not there address the content of that meeting. Mr Stone's further affidavit evidence was that he does not recall stating at that meeting that GCA needed $500,000 "in order to get into a positive cashflow position", although he acknowledges that he may have told the persons present that GCS required that amount to get to market. His evidence is that he believed that amount would be adequate, based on the Financial Projections, and believed the Financial Projections were soundly based, and knew of the manner in which they had been prepared and that "they had been compiled by persons with an expertise in the relevant market". In cross-examination, Mr Stone accepted that it would have been said that funding of $500,000 over the next few months would get the business started and into a positive cashflow position (T201). Mr Collins also accepted that there was reference to $500,000 at this meeting, but his evidence was that he did not recall the statement being made that that would get the business to a positive cashflow (T139). 2. I am inclined to the view that this representation was made and that evidence of the generality of that led by Mr Stone would not have satisfied the evidential burden (if applicable to them) on the representor in respect of this representation. However, it is not necessary to reach a finding as to that matter where no claim was made against Mr Stone in respect of this representation. It also does not seem to me to be necessary to determine whether Holdings could, as a matter of procedural fairness, have expanded that claim to Mr Stone, where reliance and causation would not in any event have been established for the reasons noted below. It does not seem to me that there is any basis for attributing comments made by Mr Stone at the Martin Place meeting to H Ridge, as distinct from Mr Stone personally or GCA, where Mr Stone was neither an officer nor a shareholder in H Ridge and there is no evidence that H Ridge had authorised him or held him out as generally authorised to speak on its behalf. The claim against H Ridge based on this meeting therefore fails. The Wollongong meeting 1. Holdings pleads (ASC [35]) that, on or about 21 December 2010, at a further meeting in Wollongong ("Wollongong meeting") attended by Mr Skinner and Messrs Redmond and Roulstone, Mr Skinner represented that GCA would realise positive cashflows and returns on monies invested in the near future. The Defendants do not admit a meeting in Wollongong occurred on 21 December 2010 and contend that, if it occurred, any representations made were in respect of GCS and had a reasonable basis for the reasons pleaded in respect of the Martin Place meeting. 2. Mr Roulstone's evidence is that he attended a meeting with Mr Skinner and Mr Redmond in Wollongong on or about 21 December 2010. Mr Roulstone refers to Mr Skinner having said that "[w]e need the investments so that we can commence business operations" and that "[w]e expect to be obtaining positive cashflows and a return on the investment in a very short period". He also indicates that agreement was reached about a further meeting to be held in Melbourne the next day (Roulstone 27.8.13 [14]). Mr Redmond led no affidavit evidence as to that meeting or what was said at it, although he did refer to having attended such a meeting at one point in his cross-examination, again without indicating what was said at that meeting. Mr Skinner accepted in cross-examination that, at a meeting in Wollongong, he may possibly have said that we were expecting positive cashflows and a return on the investment in a very short time frame, but that he did not recall (T235). 3. It seems to me likely that the alleged representation was made at this meeting, given Mr Roulstone's evidence and Mr Skinner's concession as to the possibility that he made that statement. It seems to me that Mr Skinner has not discharged an evidential burden (if applicable to him) as to this representation for the same reasons the Defendants have not done so for the fifth and sixth representations made at the Martin Place meeting, and even if I were incorrect in that view, Holdings has again established for the same reasons that a reasonable basis did not exist for this representation. The South Yarra meeting 1. Holdings pleads (ASC [36]–[37]) that, at the South Yarra meeting, Mr Stone or Mr Collins provided Messrs Roulstone, Geoffrey Redmond and Eric Redmond with further copies of the Financial Projections and thereby again made the representations to which I have referred above in connection with that document. The Defendants admit that Mr Stone or Mr Collins provided Mr Roulstone and the Messrs Redmond with further copies of the Financial Projections at this meeting. I have addressed the representations made in the Financial Projections above and reliance and causation is also not established so far as they were again provided at this meeting for the reasons set out above. Holdings also pleads (ASC [38]) that, during the course of the South Yarra meeting, Mr Collins made several representations that I will address below. 2. Mr Redmond gives a relatively lengthy account of a conversation at the South Yarra meeting (Redmond 15.7.13 [18]) attributing the following to Mr Collins: "This is how the technology works." "We have immigration agents in provinces all over China recruiting students and giving seminars about the benefits of the Global Connect card. There is a pool of over 600,000 Chinese students who come to Australia each year to study. We have targeted a percentage of those students. As you can see, after one year we will have positive cashflow in excess of $1,000,000." "This is the projected revenue." "We should be able to be in positive cashflow within two weeks. We can get our first students on board within two weeks." "The technology is ready to go, all bar the SIM cards being put into envelopes and sent out." 1. Mr Collins responds to the allegations of representations made at the South Yarra meeting in his affidavit dated 7 April 2016. He sets out his recollection of a conversation with Mr Redmond at that meeting in which he referred to the progress of the platform build, the specified work and other enhancements which were not critical to the operation of the platform. Mr Collins' evidence in cross-examination (T139) was that he did not make the statement that the technology was ready to go, bar the SIM cards being put into envelopes and sent out, because the SIM cards had already been dispatched to China at that point. His evidence in cross-examination at that point was somewhat unclear as to the position in respect of the technology, although the balance of his evidence is that the technology necessary for the student platform was substantially complete. In cross-examination, Mr Collins' evidence was also that he was not sure that he made a statement at the South Yarra meeting that, after a year, we will have a positive cashflow in excess of $1 million and that it was unlikely that he would have made the statement that we will be able to be in a positive cashflow within two weeks and can get our first students on board within two weeks (T139). Mr Stone denied that Mr Collins made the former statement and accepted that Mr Collins may have made the latter statement at that meeting, although he claimed that was said in respect of GCS rather than GCA, and he also accepted that Mr Collins said the technology was ready to go, all bar the SIM cards being put into envelopes and sent out (T200). 2. The first representation alleged to have been made at this meeting (ASC [38(a)]) was to the effect that after one year GCA would have positive cashflow in excess of $1 million and the second representation alleged to have been made at this meeting (ASC [3(b)]) was to the effect that GCA should be able to be in positive cashflow within two weeks. On balance, I accept that those representations were made, having regard to Mr Redmond's evidence, the fact that Mr Collins' evidence fell well short of a denial of the alleged representations and that Mr Stone accepted that the second representation may have been made. Mr Collins does not seek to establish, in his evidence, a reasonable basis for those representations had they been made. The evidential burden (if applicable to them) that rests on the Defendants, or at least Mr Collins, to establish a reasonable basis for the representations is therefore not discharged, and it seems to me that Holdings has established its affirmative case to the contrary for the reasons set out above in dealing with the Martin Place meeting. 3. The third representation alleged to have been made at this meeting (ASC [38(c)]) was to the effect that GCA was able to get its first students as customers within two weeks. In his affidavit, Mr Collins denies that he made that representation, on the basis that GCS rather than GCA would have obtained such customers. Again, it seems to me that that is too technical a reading of the pleading and the alleged representation. Mr Collins' evidence (Collins 7.4.16 [26]) (admitted as evidence of his understanding only) is that, had that representation been made, it would have been true because the Financial Projections on which he "would have relied" in making the representation anticipated that students would be given SIM cards by Chinese agents in the second half of January 2011. Mr Le Plastrier also refers to the fact that SIM cards had been sent to China in support of that representation, and there is some evidence that supports an inference that SIM cards had already been produced and sent to China by GCS by October 2010 (Collins 7.4.16 [31]; Ex D1, CB 1765–1766, 1808–1809, 1821). This representation is substantially similar to the fifth representation alleged to have been made at the Martin Place meeting, and it seems to me that, for the same reasons as I addressed in respect of that representation, the Defendants have not discharged an evidential burden (if applicable to them) to show a reasonable basis for this representation where sales to Chinese students in January 2011 required that training of Chinese agents and distribution arrangements were sufficiently advanced and that Visa cards were ready for commercial use. Even if I were incorrect in that view, it seems to me that Holdings has again established, by reference to other work that needed to be completed by GCA and GCS including the training of Chinese agents and the receipt of Visa cards ready for commercial use, that a reasonable basis did not then exist for this representation. 4. The fourth representation alleged to have been made at this meeting (ASC [38(d)]) was to the effect that GCA's technology was ready to go, up to the point of placing SIM cards into envelopes and sending them out. In his affidavit dated 7 April 2016, Mr Collins does not contest that a representation was made at the South Yarra meeting that GCA's technology was ready to go. He refers to matters alleged to support that representation, including the production of Visa cards and instructional material; SIM cards and modems and other documents in relation to the distribution arrangements in China, and a test which had been undertaken of international funds transfers from China to Australia as contemplated by the system. Mr Collins' evidence is that GCS had already dispatched SIM cards to China in October 2010, and he had reported that matter to Mr Skinner in mid-October 2010, and, as I noted above, there is some evidence that SIM cards had already been produced and sent to China by GCS by that date (Collins 7.4.16 [31]; Ex D1, CB 1765–1766, 1808–1809, 1821). This representation is substantially the same as to the first representation alleged to have been made at the Martin Place meeting. It seems to me that, for the reasons that I indicated in respect of that representation, Mr Collins' evidence discharges the Defendants' evidential burden (if applicable to them) in respect of this representation and Holdings has not established, having regard to Mr Collins' and the other evidence referred to above, that GCA's technology was not at this point of development, albeit that more needed to be done before sales of the products could commence in China. I am satisfied that this representation had a reasonable basis. 5. Holdings also pleads (ASC [39]) that, during the course of the South Yarra meeting, Mr Stone made a representation to the effect that there was a huge amount of money to be made in the market in which GCA would be operating. Mr Redmond's evidence (Redmond 15.7.13 [19]) is that Mr Stone also made comments at the South Yarra meeting to the effect that: "There is a huge amount of money to be made in this market. We only need $500,000.00 to start to get into positive cashflow." By his affidavit dated 7 April 2016, Mr Stone denies this allegation on the basis that GCS rather than GCA would be operating in any market, and denies that he would have said that there was a huge amount of money to be made in the market, although he acknowledges that he may have referred to the Financial Projections and stated that GCS should be a profitable company within a short period of time. In cross-examination, Mr Stone responded to the suggestion that made those statements by saying that he would not have used the word "huge", but otherwise did not deny those statements (T201). Mr Le Plastrier relies on the Financial Projections to establish a reasonable basis for those representations. I do not think a reasonable person would have understood the first statement as anything other than a statement of potential of the Chinese student market, and it seems to me that Mr Skinner's evidence as to the nature of that market and the monthly reports to which I referred above discharges the Defendants' evidential burden (if applicable to them) in respect of this representation and Holdings has not established, having regard to that evidence, that such potential did not exist although GCA was ultimately unsuccessful in taking advantage of it. 1. Holdings also pleads (ASC [39]) that, during the course of the South Yarra meeting, Mr Stone made a representation to the effect that GCA only needed $500,000 to start to get into positive cashflow. Mr Stone's evidence (Stone 7.4.15 [9]) is that he does not recall making that statement, but he acknowledges that he may have said that GCS required the sum of $500,000 to get to market and that was the focus of the fundraising exercise, and he refers to the reasons set out earlier in his affidavit for his belief that amount would be adequate to meet the requirements of GCS to be market ready. I accept that this representation was made and that evidence of the generality of that led by Mr Stone does not satisfy the evidential burden (if applicable to them) on the Defendants, or at least Mr Stone, in respect of this representation, and it seems to me that Holdings has established its affirmative case to the contrary for the reasons set out above. The representational claim based on the 23 December 2010 email and the issue of shares in December 2010 1. Holdings pleads (ASC [41]) that, by the 23 December 2010 email, Mr Stone, and by him GCA and Fullham, represented that he, Mr Skinner and all of the existing shareholders were agreeable to Holdings' proposal, by which Holdings would, upon making its investment of $500,000, receive enough shares in GCA (being a combination of newly issued shares and shares transferred from Fullham and H Ridge) so that Holdings, Fullham and H Ridge would be equal shareholders. This is the only positive misrepresentation case brought against Fullham, where Mr Bennett confirmed in submissions that the non-disclosure case to which I refer below was put against Messrs Stone and Skinner. 2. By his affidavit dated 7 April 2016, Mr Stone responds that he has no record of having sent the email of 23 December 2010, although he does not address whether he has a recollection of having done so. In its terms, that email amounted to an acceptance of Holdings' proposal that was implemented by the transactions to which I have referred above. There is nothing to suggest that Mr Stone, Fullham or the other then shareholders in GCA or GCS did not then intend to implement those transactions in accordance with the terms of that email, and they did so. However, for the reasons that I address below in dealing with Holdings' non-disclosure case, the right to convert loans made to GCA by Fullham and H Ridge to equity, which came to pass after the parties had fallen out, was a material matter and the non-disclosure of that right had the result that the 23 December 2010 email was misleading. 3. The claim made against Mr Stone based on the representations alleged to have been made by him by the 23 December 2010 email (ASC [41]) succeeds. However, the claim made against Fullham in respect of that email fails, because no reason has been established to attribute the representations made in that email to Fullham rather than GCA or Mr Stone personally. Causation 1. As I noted above, Holdings pleads (ASC [54]) that it was induced by the December 2010 Representations (as defined) to enter into the Arrangement (as defined) and, in particular, to invest the sum of $500,000 in shares in GCA. Mr Redmond's evidence as to reliance is no more than that, after the presentation at the South Yarra meeting, he decided he would invest in GCA. I am conscious that evidence of subjective reliance may be of limited reliability and may well involve a degree of hindsight, and that the Court may properly draw inferences from the circumstances. However, several of the alleged representations relate to the future success, revenue and profitability of a start-up technology company which was seeking to distribute a new product in overseas markets, a proposition that self-evidently involves a substantial degree of uncertainty that must have been apparent to a person of Mr Redmond's business experience. The likelihood that Mr Redmond was aware of the challenges facing new technology companies with limited capital is reinforced by the evidence of his experience in funding the commercialisation and development of technology in another start-up company with interests in the United States (T45–46). In that situation, it seems to me that there is a real question as to Mr Redmond's reliance on particular representations as to particular matters, and his evidence provides no real assistance in addressing that question. 2. Mr Le Plastrier refers (T266) to Backoffice Investments above and submits that the absence of specific evidence of reliance by Mr Redmond makes it very difficult (or, I interpolate, impossible) to determine, where several representations were alleged, the course which Mr Redmond would have taken where not all of those representations are shown to be misleading (T 266). Mr Le Plastrier also submits that that difficulty is exacerbated if (as I have held) Holdings' case in relation to the Financial Projections and the Presentation is not made out, where that is a significant aspect of Holdings' case in respect of the representations made in December 2010. It does seem to me that the lack of reliance evidence led by Mr Redmond gives rise to a similar difficulty to that noted by the majority in Backoffice Investments, where their Honours observed that, where a plaintiff's evidence did not distinguish between whether knowledge of either of two matters would mean that he or she would not proceed with an investment, the Court in that case could not do so by its own assessment of the materiality of the representation or whether it was calculated to induce entry into a contract. A similar difficulty arises where no evidence is led as to Mr Redmond's consideration of the particular representations or groups of representations that are alleged, and some only of those representations are shown to be misleading. That difficulty is exacerbated, as Mr Le Plastrier points out, where it was clear from Mr Redmond's evidence that he had not in fact relied upon the Financial Projections or the Presentation and other significant representations as to the state of GCA's technology were not falsified. 3. I have held above that the claim that several representations made at the Martin Place meeting, primarily in relation to the state of development of GCA's technology, were misleading or deceptive or likely to mislead or deceive has not been established, and it is not necessary to address reliance or causation in respect of those representations. I have held that the second, third and fifth representations alleged to have been made at the Martin Place meeting were not reasonably based and were misleading. However, neither Mr Redmond nor Mr Roulstone gave substantive evidence as to their understanding of or reliance on those particular representations and I am not satisfied that I should infer reliance or causation in respect of those representations without such evidence. Mr Redmond was plainly an experienced and successful businessman, with at least one other investment in a speculative technology venture, and it must have been obvious to him that the launch of the relevant products could be delayed, and here it was in fact delayed by only about two months. Mr Redmond's evidence does not provide any basis for a finding that, for example, the commencement of sales in January, as distinct from somewhat later, would have been material to Holdings. 4. I should add, for completeness, that, so far as the fourth representation made at that meeting is concerned, it must also have been obvious to Mr Redmond that GCA and GCS required more than "minimal" capital to develop the business (as distinct from launch the product in its narrowest sense) because they were seeking to raise more than minimal capital. It also seems to me that a person of Mr Redmond's business experience would necessarily have recognised that, in the particular circumstances, optimistic statements as to the prospects of a start-up technology and student services venture did not warrant the commercial or financial success of that venture. The sixth representation made at that meeting was that GCA was expecting to start receiving cashflow in January 2011, and I have also held that a reasonable basis was not established for that representation and that it was misleading. I am also not satisfied that reliance or causation is established in respect of that representation, for the same reasons that I am not satisfied that it is established in respect of the second, third and fifth representations alleged to have been made at that meeting. It is not necessary to consider causation in respect of the representation alleged to have been made by H Ridge at the Martin Place meeting since it has not been established that H Ridge made any such representation. 5. It does not seem to me that reliance or causation is established in respect of the representation alleged to have been made at the Wollongong meeting, where Mr Redmond did not give evidence of any statement made to him at that meeting; neither Mr Roulstone nor Mr Redmond gave evidence of reliance; and I would not infer reliance in the absence of such evidence for the reasons set out above in respect of the Martin Place meeting. 6. Turning now to the South Yarra meeting, Mr Le Plastrier submits that Mr Redmond's decision to invest in GCA and GCS appears to have been made, so far as the evidence goes, without consulting Mr Roulstone or other professional advisers after that meeting, and Mr Redmond's evidence is that he spoke to Mr Roulstone to explain the deal after he had made the relevant offer to Mr Stone (Redmond 15.7.13 [20]–[21]). 7. I have held that the first and second representations alleged to have been made at the South Yarra meeting were made and a reasonable basis for them is not established, so they were misleading or deceptive. However, as I noted above, Mr Redmond was an experienced businessman, and it must have been obvious to him that predictions of the cashflow of a technology venture, at a start-up stage and before it commenced marketing, were highly uncertain. It also seems to me that a person of Mr Redmond's business experience would necessarily have recognised that little weight could be put on representations of this character in respect of a new technology venture. I am not satisfied that reliance should be inferred in the absence of adequate evidence or that causation is established in respect of these representations. I have also held that a reasonable basis was not established for the third representation made at the South Yarra meeting and that it was misleading and deceptive or likely to mislead or deceive. However, Mr Redmond's evidence does not provide any basis for a finding that the commencement of sales within two weeks, as distinct from somewhat later, was material to Holdings. I am not satisfied that reliance or causation is established in respect of that representation. I have not found the fourth representation alleged against Mr Collins at the South Yarra meeting to be misleading or deceptive and I need not address causation in respect of that representation. Holdings' case against Mr Collins in respect of the South Yarra meeting therefore fails. 8. I have not found the first representation alleged against Mr Stone at the South Yarra meeting to be misleading or deceptive and I need not address causation in respect of that representation. I have held that a reasonable basis was not established for the second representation alleged against Mr Stone at the South Yarra meeting and that it was misleading. However, I am not satisfied that reliance or causation is established in respect of that representation, for the same reason it is not established in respect of the first and second representations alleged against Mr Collins. Holdings' case against Mr Stone in respect of the South Yarra meeting therefore fails. 9. I have held that the claim against Mr Stone that the 23 December 2010 email was misleading, at least by way of omission, is established. Causation is established in respect of that email for the reasons noted below in respect of Holdings' non-disclosure claim. 10. Mr Bennett referred, in closing submissions, to the recent decision of Brereton J in Re HIH Insurance Limited (in liq) [2016] NSWSC 482, which in turn refers to earlier decisions in Digi-Tech (Aust) Ltd v Brand [2004] NSWCA 58; (2004) 62 IPR 184 and Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd [2008] NSWCA 206; (2008) 73 NSWLR 653. Brereton J there accepted that causation could be established by a form of indirect causation and (at [71]) treated Digi-Tech (Aust) Ltd v Brand above and Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Limited above as cases involving the alternatives of a transaction or no transaction, and read the case law as requiring, not that an individual plaintiff has relied on the contravening conduct, but that someone in the chain of causation has done so. It seems to me that those decisions do not assist Holdings, because here there is no evidence that, and I am not prepared to infer that, either Mr Redmond or his advisers relied on the relevant representations (other than in respect of the omission to refer to the right of conversion of loans to equity) so as to establish reliance by any person at any point in the causal chain necessary to support such a claim. Further claim against Mr Stone in respect of alleged misleading conduct in November 2011 1. Holdings pleads (ASC [46]) that, in or about November 2011, Mr Stone made several further representations to Holdings, by oral statements to Mr Redmond, with a view to inducing Holdings to invest further funds in GCA, and that the representations alleged to have been made in November 2011 were representations as to future matters within the meaning of s 4 of the Australian Consumer Law and/or s 769C of the Corporations Act and/or s 12BB of the Australian Securities and Investments Commission Act. Holdings also pleads (ASC [48]–[49]) that Mr Stone did not have reasonable grounds for making those representations and in consequence they are taken to have been, and were, misleading and that Mr Stone, by making those representations, engaged in misleading conduct in breach of s 18 of the Australian Consumer Law and/or in breach of s 1041H of the Corporations Act and/or in breach of s 12DA of the Australian Securities and Investments Commission Act. 2. The Defendants deny the allegations made in respect of the alleged misleading conduct in November 2011 and advance further allegations as to Mr Redmond's involvement with fundraising initiatives which are not capable of establishing a defence against the pleaded allegations. The Defendants also plead, in the alternative that, if the alleged representations were made, there were reasonable grounds for making them because the BNPN platform was more complex and more expensive to build than the student platform utilised by "Global Connect"; by November 2011 BNPN had signed a heads of agreement with an entity associated with News Corporation with respect to the development of digital products, had signed a confidentiality agreement with Wesfarmers with respect to the use of the BNPN platform, had discussions with representatives of Bunnings and Target with respect to the development of technology for Bunnings and Target; GCA would receive a 7.5% royalty from BNPN pursuant to a contract entered in October 2011; and financial forecasts in respect of BNPN had been conducted by a third party, BSI Capital. 3. Mr Redmond gives evidence of a further discussion at a meeting on 16 November 2011, attended with Mr Eric Redmond, Mr Redmond's solicitor, Mr Manca, and Messrs Stone and Collins. Mr Redmond's evidence is that Mr Stone said (Redmond 15.7.13 [49]): "We need the further funding so that we can meet our immediate funding obligations. $400,000.00 is required by the end of January. This will see us through December and January. I know we have discussed this and you have told me your opinion on it but what I would recommend is that you put the money in as an advance, which you could then take out later or capitalise for equity at some point in the future. Mark [Skinner] and I have around $700,000.00 in loans sitting there. We could do a number of things with those, such as convert to equity, take the loans out or capitalise for equity … We need $100,000.00 to get by until the end of the month, and a further $300,000.00 by Christmas. The full requirement for us to get ready for our 1 March launch will be $1,100,000.00, so a further $700,000.00 will be required after the $400,000.00 … Program fees will be received in December, March and ongoing. We will be in a positive cash position when the business starts. At the end of the period we will be in a net profit position." Mr Redmond also refers to other comments made in that conversation as to the structure of the company and its dealings with other customers and (Redmond 15.7.13 [50]) again to his offer to provide a further $400,000 in exchange for a controlling interest. 1. Mr Eric Redmond's evidence (Eric Redmond 28.9.15 [16]–[17]) is that he attended the meeting and does not recall the specifics of what was said but that Mr Stone and Mr Redmond respectively said something to the effect that: Stone: "We need $100.000.00 straight away and another $300,000.00 by Christmas. I think the best way to do this would be for you to loan the funds to the company just like Mark [Skinner] and I have done before." Redmond: "I can provide the money that you need, but I will need to take a controlling interest in the company for that money. I will need to take 51% of the shares. I can pay the $100,000.00 straight away and the rest before Christmas. I am not interested in lending money. I just want a controlling interest in shares." 1. In cross-examination, Mr Redmond did not deny that Mr Stone had told him in November 2011 that GCA required $1.1m to pay Kiandra in order to get the BNPN platform up and going, although he contended that, by the time of those discussions, he "didn't believe things that Mr Stone was saying", and that he "couldn't believe what he was actually saying regarding funds required" (T67). That evidence is significant, so far as reliance is placed on representations alleged to have been made by Mr Stone at about this time. Mr Redmond sought to qualify that evidence in re-examination, and date his distrust of Mr Stone as arising from the later point at which interests associated with Messrs Stone and Skinner converted their loans to GCA to equity without his approval (T78). It seems to me that Mr Redmond's evidence in cross-examination was consistent with the probabilities, where it would have been clear by late 2011 that GCA and GCS had not lived up to the optimistic statements previously made by Messrs Stone and Skinner as to their future, and I prefer his evidence in cross-examination to that given in re-examination. 2. Mr Stone accepted in cross-examination that there was reference in this conversation to News Corporation being interested in the BNPN platform, to the progress that had been made with Target, Bunnings and Domino's and to many opportunities within the Coles Group (T172). Mr Stone also accepted that he did not undertake any analysis or projection of the items that would be required to determine when BNPN would be profitable from trading (T173). Mr Stone initially accepted in cross-examination that Mr Redmond had required an increase in his percentage interest in GCA from 28% to 51% and the amount of $400,000 would not be invested without agreement to that matter (T181). He denied that, at the November 2011 meeting, he said that "we need further funding so we can meet our immediate funding obligations" and that $400,000 "[would] see us through December and January" (T202). He also denied that he said that program fees would be received in December, March and then ongoing or that "[we will] be in a positive cash position when the business starts" or that "at the end of the period we will be in a net profit position" (T202). He also then denied, apparently inconsistently with his earlier evidence in cross-examination, that Mr Redmond had said that he would need a 51% shareholding following the investment (T202) or that Mr Redmond had referred to being comfortable with a controlling interest in exchange for the $400,000 (T202). 3. Mr Bennett points, in closing submissions, to matters alleged to have the result that representations made in November 2011 did not have a reasonable basis, including that the Project Charter relating to BNPN contemplated a completion date of 31 December 2012 (CB 761, T131, T231) and that no trading could occur or income be derived by BNPN until the software was complete (T176–177). Mr Bennett also submits that additional costs payable to Kiandra in relation to the development of the software had not been factored into the projections (T130, 134). Mr Le Plastrier submits that the fact that the cost of development of the BNPN platform, and the amount payable to Kiandra in respect of that development, would be in excess of $1 million did not falsify the particular representations, and he also points to Mr Redmond's evidence that Mr Stone had informed him of the total cost of development of the BNPN platform. 4. The alleged representations are, first, that further monies were needed, over the following six weeks, for the development by GCA of the BNPN platform. In his affidavit dated 7 April 2016, Mr Stone denies making this representation but claims (in evidence admitted under s 136 of the Evidence Act as a submission only) that he would have had reasonable grounds for making it, had he done so. He refers to a licence agreement dated 5 October 2011 between GCA and BNPN and claims that he made clear to Mr Redmond and other directors that further monies were needed over the following six months to complete the development by GCA of the BNPN platform, at board meetings of GCA and BNPN on 23 September 2011, and also refers to the directors' agreement, on 25 October 2011, to a proposal for BNPN to raise $1 million. It is not necessary to determine whether this representation was made, since it seems to me that it would not have been misleading so far as further monies were plainly required for the development of that platform. The second alleged representation (ASC [46(b)]) to the effect that that there was already one customer of the BNPN platform is not pressed by Holdings. 5. The third alleged representation (ASC [46(c)]) is that there were a number of prospective customers close to coming on board, including Newscorp Australia, Coles, Bunnings and Target. In his affidavit dated 7 April 2016, Mr Stone denies making this representation but sets out grounds for making it, if it was made, namely discussions with and a confidentiality agreement with News Digital Media in early 2011; a term sheet for a trial program with a member of the News Limited group of companies in November 2011; and that "significant interest" in GCA's platform was being shown by entities in the Wesfarmers Group, and entry into a confidentiality agreement with Telstra on 21 December 2011 in respect of a possible equity investment in BNPN. Mr Le Plastrier points in closing submissions to evidence that aspects of the technology developed by GCA could be used for more limited applications, involving payment for products via SMS, without developing the full BNPN application (T231, 237), and there is some support for that proposition in information provided by Kiandra to Mr Redmond in late 2011 (Redmond 15.7.15 [87]). On balance, I find that this representation was made and was misleading or deceptive. It seems to me that the Defendants did not discharge an evidential burden (if applicable to them) to show a reasonable basis for a view that the relevant customers were close to "coming on board", and the documentation on which the Defendants rely falls well short of that point. For the same reasons, Holdings has established its affirmative case that this representation lacked a reasonable basis. 6. The fourth alleged representation (ASC [46(d)]) is that once the BNPN business commenced, GCA would start receiving cash revenue immediately. In his affidavit dated 7 April 2016, Mr Stone denies making this representation, again on the basis that BNPN not GCA was operating the BNPN business, but claims that, if it was made, his basis for making it was that BNPN would pay GCA a royalty under the BNPN agreement. In closing submissions, Mr Le Plastrier seeks to support this representation by pointing to BNPN's obligation to pay GCA a royalty, once the BNPN business had commenced, and submits that the alleged representation is not undermined by evidence that the project charter contemplated a completion date for the work to be done by Kiandra of 31 December 2012. That submission, like the evidence to which it refers, does not address the generation of income by BNPN which would support the payment of such a royalty. On balance, it seems to me that representation was made and that the Defendants did not discharge an evidential burden (if applicable to them) to show a reasonable basis for that view, since the evidence does not establish any reasonable basis for a belief that BNPN would be able to pay the agreed royalty. For the same reasons, Holdings has established its affirmative case that this representation lacked a reasonable basis. 7. The fifth alleged representation (ASC [46(e)]) is that programme fees would be payable by the clients of the BNPN platform in December and March and then on an ongoing basis. By his affidavit dated 7 April 2016, Mr Stone denies making this representation. Mr Le Plastrier seeks to establish a reasonable basis for this representation in closing submissions by pointing to evidence of aspects of the technology developed by GCA that could be used for more limited applications, involving payment for products via SMS, without developing the full BNPN application (T231, 237). As I noted above, there is some support for that proposition in information provided by Kiandra to Mr Redmond in late 2011 (Redmond 15.7.15 [87]). On balance, it seems to me that this representation was also made and that the Defendants did not discharge an evidential burden (if applicable to them) to show a reasonable basis for it. In particular, the evidence did not establish a reasonable basis for a belief that clients would exist for the BNPN platform, so as to support the payment of program fees, either generally or in a narrow version within that time frame. For the same reasons, Holdings has established its affirmative case that this representation lacked a reasonable basis. 8. The sixth alleged representation (FAS [46(f)]) is that Holdings would be entitled to a 51% interest in GCA, as well as related companies, in exchange for providing the further funds that were sought, being a total of $400,000, including the capitalising of existing loans of $19,998.65. By his affidavit dated 7 April 2016, Mr Stone denies making this representation. In opening submissions, Mr LePlastrier submitted that this representation was true, because the Defendants intended that to occur, and it did in fact occur, and there was no "omission" because Mr Redmond knew about the $700,000 of loans to GCA and the fact that they could be capitalised. There are several difficulties with this submission. The first is that the proposition that Holdings would obtain the 51% shareholding is significantly qualified, if that shareholding could be diluted at will by Mr Stone and Mr Skinner and their associated companies; the second is that, so far as it relies on the May 2011 directors' meeting, I have held that the minute of that directors' meeting is false, and the relevant meeting did not occur; and, so far as it relies on Mr Stone's disclosure to Mr Redmond in November 2011 that the two shareholder loans might be converted to equity, Mr Stone had not there disclosed that that could occur at the election of Fullham and H Ridge, and as of right, and without Holdings' consent. 9. I am satisfied this representation was made and it seems to me to be falsified by Holdings' non-disclosure case to which I will refer below. For the reasons that I address below in dealing with that case, the right to convert loans made to GCA by Fullham and H Ridge to equity, which came to pass after the parties had fallen out, was a material matter and the non-disclosure of that right had the result that this representation was misleading. Causation as to the November 2011 representations 1. Holdings pleads (ASC [55]) that it was induced by the November 2011 Representations (as defined) to purchase shares for the amount of $400,000 in November 2011. The evidence is somewhat unclear as to how that agreement was implemented. 2. In opening submissions, Mr Le Plastrier submitted that, at the time of the further investment, Holdings was relying on financial statements for GCA as at May 2010, which were well out of date, and already knew of at least one shareholder loan to GCA and that Mr Redmond had failed to take steps to cure these deficiencies in his knowledge. Mr Le Plastrier also submitted in closing submissions that Holdings did not rely on any of the pleaded representations, because by then Mr Redmond did not believe what Mr Stone said (T67). 3. I have held that the first of the November 2011 representations, if made, was not misleading or deceptive or likely to mislead or deceive and the second was not pressed. I have held that the third, fourth and fifth of the November 2011 representations, as to the state of negotiations with potential customers, GCA immediately deriving revenue when the BNPN business was established and the receipt of programme fees were made and were misleading or deceptive or likely to mislead or deceive. However, I am again not satisfied, because of the limited evidence led by Mr Redmond, as to reliance or causation in this respect. By this point, Holdings had already made a substantial investment in GCA and GCS and had the choice of either abandoning its existing investment or investing further funds on the basis that it could obtain control of GCA and GCS by doing so. I do not consider that I can infer that these representations were causative of the further investment, in the absence of evidence of Mr Redmond, where an equally or more plausible explanation of the further investment is that, irrespective of whether Mr Redmond then believed optimistic statements made by Mr Stone, it was a sensible commercial decision for Holdings to invest a relatively small further amount (at least by reference to the scale of Mr Redmond's business interests) to avoid the loss of its existing investment in GCA and GCS and acquire control of GCA and GCS. 4. I have held that the claim that the sixth of the November 2011 representations was misleading or deceptive, at least by way of omission, is established. In closing submissions, Mr Le Plastrier submitted that Holdings had not established a causal link, even if the alleged omission was proved. Causation is also established in respect of that representation, for the reasons noted below in respect of Holdings' non-disclosure claim. A further investment in December 2011 1. In late December 2011, Mr Redmond agreed to make a further investment of $200,000, on terms that further shares in GCA would be allotted to him, and paid that amount directly to Kiandra. However, that amount was subsequently returned by Kiandra at Mr Redmond's request and no issue in respect of it arises in these proceedings. Summary of outcomes to this point 1. In the result, the claim made against H Ridge in respect of the Martin Place meeting (ASC [33]) fails, because there is no reason to attribute the representations made by Mr Stone at that meeting to H Ridge rather than GCA or Mr Stone. The claims based on representations alleged to have been made by Mr Stone at the South Yarra meeting (ASC [37], [39]) fail and the claim against Mr Stone in respect of the 23 December 2010 email (ASC [41]) succeeds. The claim based on the representations alleged to have been made by Fullham by the 23 December 2010 email (ASC [41]) fails, because there is no reason to attribute the representation made in that email to Fullham rather than GCA or Mr Stone. 2. The claim based on representations made by Mr Skinner by the Financial Projections and the Presentation provided to Mr Roulstone and Mr Redmond (ASC [27]) fail because there is no evidence that Mr Roulstone undertook any review or analysis of them, or did more than pass them to Mr Redmond, and Mr Redmond did not review or rely on them. The claim based on representations made by Mr Skinner at the Wollongong meeting (ASC [35]) fails because the evidence is not sufficient to establish reliance or causation in respect of the representations made at that meeting. The claim based on representations made by Mr Collins at the Martin Place meeting (ASC [32]) and the South Yarra meeting (ASC [37]–[38]) fails. Further claim for misleading conduct based on conversion of loans to equity 1. In opening submissions, Mr Bennett identifies the third basis of Holdings' case as a claim for non-disclosure that two loans owed to the entities associated with Messrs Stone and Skinner allowed them to call for repayment on seven days' notice and direct that repayment be effected by conversion of the loans to shares at the last issue price, the effect of which would be to dilute Holdings' shareholding in GCA (T8–T9). Mr Bennett initially characterised Holdings' primary case as being that the loan agreements did not exist. Mr Bennett then amended Holdings' position in opening to contend that the loan agreements had existed and not been disclosed was its primary position (T31). 2. This claim is pleaded in a convoluted manner, reflecting the fact that Holdings' primary position had, for much of the case, been that the loan agreements on which Fullham and H Ridge relied to convert their loans to equity were not genuine. Holdings pleads (ASC [50]) that, since about January 2012, Fullham, H Ridge and Messrs Stone and Skinner have asserted that: "a [Fulham and H Ridge] advanced substantial funds to [GCA] prior to [Holdings] making its initial investment in [GCA]; b that, on 24 September 2010 the board of directors of the first defendant passed a resolution in relation to loans made by those entities, to the effect that: i the loans would attract an interest rate of 7.5% pa; and ii the loans would be repayable on 7 days notice, but in any event by 30 June 2013, and that at the second and third defendants' discretion, the loan repayments could be fully or partly satisfied by the issue of ordinary shares in the first defendant; c that, in or about October 2010 the second and third defendants each entered into two versions of loan agreements, which they nevertheless dated 1 July 2011; and d that because of the above matters the resolution of 13 January 2012 by which further shares were issued to the second and third defendants were valid." 1. Holdings initially pleaded (ASC [52]) that it did not admit these matters but, if they were correct, then: "a [Fullham, H Ridge and Messrs Stone, Skinner and Collins], in making their representations about the financial forecasts of [GCA], failed to qualify those forecasts by stating that [GCA] had substantial loans repayable on 7 days' notice, but in any event by 30 June 2013 and by explaining the effect of those loans being repaid on the first defendant's cashflow; and b [Fullham, H Ridge and Messrs Stone, Skinner and Collins], in making their representations, as part of the December 2010 Representations, concerning the equal 28% shareholding that [Holdings] would receive for its investment in December 2010 failed to qualify those representations by reference to the fact that [Fullham and H Ridge] held loans which were convertible to ordinary shares on 7 days' notice. c [Mr Stone] in making [his] representation as part of the November 2011 Representations, as to the 51% shareholding that [Holdings] would receive for its investment in November 2011, failed to qualify that representation by reference to the fact that [Fullham and H Ridge] held loans which were convertible to ordinary shares on 7 days' notice." Holdings also pleaded (ASC [53]) that the Defendants, by failing to qualify the relevant representations, engaged in misleading and deceptive conduct and (ASC [56]) that it was induced by the Omissions as defined) to invest the sums of $500,000 and $400,000 in GCA. 1. I should identify the applicable legal principles before turning to the relevant evidence. A non-disclosure can contravene the statutory prohibitions on misleading and deceptive conduct if, in all the circumstances, it has the effect that the conduct of the defendant was misleading or deceptive or likely to mislead or deceive and, in particular, if the failure to disclose a fact would allow one party to infer from the other's silence that that fact did not exist: Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31; 110 ALR 608; (1993) ATPR 41-203; Winterton Constructions Pty Ltd v Hambros Australia Ltd (1992) 39 FCR 97; 111 ALR 649; Fraser v NRMA Holdings Ltd (1995) 55 FCR 452; 127 ALR 543; 15 ACSR 590 at 601. The materiality of information which is not disclosed will be relevant to whether a non-disclosure of it is misleading: Australian Securities and Investments Commission v PFS Business Development Group Pty Ltd [2006] VSC 192; (2006) 57 ACSR 553 at [362]. The question of whether silence is misleading is normally answered by asking whether the person alleged to be misled or deceived had a reasonable expectation of disclosure. In circumstances that have a degree of similarity with the present case, in APIR Systems Ltd v Donald Financial Enterprises Pty Ltd [2009] FCAFC 45, the Full Court of the Federal Court held that a failure to disclose an entitlement to additional shares to a purchaser was misleading or deceptive. 2. The relevant principles were summarised by the High Court in Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd [2010] HCA 31; 241 CLR 357 in respect of s 52 of the Trade Practices Act 1974 (Cth) and again by Sackville AJA in Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 at [209] in respect of s 42 of the Fair Trading Act 1987 (NSW) as follows: "(iii) The question in a case of alleged misleading or deceptive conduct as a result of non-disclosure is whether in the light of all relevant circumstances, there has been conduct which is misleading or deceptive – While the circumstances in which silence can be characterised as misleading or deceptive cannot be exhaustively defined, unless they give rise to a reasonable expectation that if some relevant fact exists it will be disclosed, mere silence will not support the inference that the fact does exist. (iv) In commercial dealings between individual entities, the characterisation of conduct must be undertaken by reference to circumstances and context … The relevant circumstances include the knowledge of the person who claims to have been misled and any common assumptions or practices established between the parties or in the particular activity or business in which they are engaged. (v) The language of reasonable expectation is not statutory but is an aid to characterising non-disclosure as misleading or deceptive. The judgment as to whether there is such a reasonable expectation is objective. (vi) The invocation of a reasonable expectation that if a fact exists it will be disclosed, directs attention to the effect or likely effect of non-disclosure unmediated by antecedent erroneous assumptions or beliefs, or high moral expectations that exceed the requirements of the general law or of the prohibition imposed by s 42 of the [Fair Trading Act]. [(vii)] In general, s 42 of the [Fair Trading Act] does not require a party to commercial negotiations to volunteer information which will assist the decision-making of the other party. A fortiori, s 42 does not require a party to volunteer information in order to avoid the careless disregard of its own interests of a party of equal bargaining power and competence … " 1. That summary was in turn cited with approval by Barrett JA (Bathurst CJ and Beazley P agreeing) in Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94 at [192] and by Gleeson JA (with Macfarlan and Leeming JJA agreeing in OXS Pty Ltd v Sydney Harbour Foreshore Authority [2016] NSWCA 120 at [178] . 2. I now turn to address the terms of, and Mr Stone's evidence about, the loan agreements, and more specifically rights of conversion of loans made by Fullham and H Ridge to GCA to equity, to which Holdings' non-disclosure case relates. Mr Stone's evidence (Stone 18.1.12 [9]) is that a meeting of directors of GCA held on 24 September 2010 resolved that loans made by GCA's major shareholders, Fullham and H Ridge, could be converted to ordinary issue shares in GCA in lieu of repayment of the loans. Mr Stone's evidence is also that loan agreements for Fullham and H Ridge were drafted in about October 2010 and the loan agreement with Fullham was executed on about 21 October 2010 although the loan agreement was dated 1 July 2011, purportedly to delay incurring interest obligations. Clause 2.4 of the first version of the loan agreement dated 1 July 2011 between Fullham and H Ridge on the one hand and GCA on the other provided that: "At the discretion of the Lender [ie Fullham and H Ridge] the loan repayments are able to be satisfied in whole or in part by the issue of ordinary shares in the company at a value based on the most recent price at which shares have been issued by the company." (Ex P2, CB 179) The second version of the loan agreement also dated 1 July 2011 did not contain such a provision allowing a unilateral right of conversion by Fullham and H Ridge. 1. I now turn to the evidence as to Mr Redmond's knowledge of these matters. Mr Redmond's evidence, in his affidavit dated 13 January 2012, is that he first became aware of loans made by entities associated with Messrs Stone and Skinner to GCA in the draft accounts of GCA for the 2010/2011 financial year, about September 2011. Mr Redmond also refers (Redmond 15.7.13 [49]) to a meeting in mid-November 2011 at which Mr Stone referred to loans made by Mr Stone and Mr Skinner to GCA and to the possibility that they could convert those loans to equity, take the loans out or capitalise them for equity, but did not refer to any right of conversion of those loans to equity. Mr Roulstone's evidence in his affidavit dated 27 August 2013 is that, prior to December 2010, he received financial statements for GCA for the period 1 July 2009 to 31 May 2010, and GCA's balance sheet at 31 May 2010 recorded a single loan as a current financial liability to H Ridge in the amount of $5,000. His evidence is that loans to GCA by shareholders were not mentioned in the meetings that he attended prior to Holdings' investment in December 2010. 2. Mr Stone accepts that the first loan agreements between Fullham and H Ridge on the one hand and GCA on the other purportedly entered in September 2010 (but dated 1 July 2011) were not referred to in December 2010 (Stone 7.4.16 [26]) but says that he assumed that Mr Redmond would have requested such documents as he wished to see by way of due diligence, and that Mr Redmond could have discovered the loan agreements by inspection of GCA's minute book. Mr Stone denies that those matters were not revealed to Holdings prior to the further investment of $400,000 in November 2011, on the basis that GCA's directors met in Wollongong on 3 May 2011 and agreed to convert $149,950 of existing loans lent by Fullham and H Ridge to GCA into equity and agreed to the capitalisation of $150,000 of loans to GCS at a meeting in South Yarra on 23 June 2011 (Stone 7.4.16 [27]). Mr Stone's evidence is that he provided copies of the second loan agreements dated 1 July 2011 to Mr Redmond in mid-November 2011. Mr Skinner's evidence in cross-examination was that he did not know whether the earlier version of the loan agreement had been provided to Mr Redmond in November 2011, or was first provided to him in January 2012. 3. By email dated 18 November 2011, Holdings' solicitor requested a range of information from Messrs Stone and Collins, including financial statements for all of the companies, current or draft accounts for all of the companies and details of any loan accounts to or from the companies (Ex P4, CB 576). Documents were subsequently provided, including the second (but not the first) version of the loan agreements dated 1 July 2011 between Fullham and GCA and H Ridge and GCA respectively. On 2 January 2012, Mr Redmond called a directors' meeting of GCA to address, inter alia, a question as to its solvency and that meeting occurred on 6 January 2012 (Redmond 15.7.13 [91]). On 11 January 2012, Fullham and H Ridge demanded repayment of loans in the amount of $75,000 and $300,000 respectively and shares were allotted to Fullham and H Ridge in respect of those loans, diluting Holdings' interest in GCA and GCS and depriving it of control of those companies, less than two months after it acquired it. The first version of the loan agreements between Fullham and H Ridge and GCA containing the right of conversion were made available to Mr Redmond at this time. 4. By a letter dated 12 January 2012, Holdings' solicitor advised GCA that the first version of the loan agreements that was provided to Mr Redmond on 11 January 2012 had not previously been provided to him and differed from the second version of the loan agreements that had been provided to Mr Redmond's solicitor in November 2011. Holdings' solicitor noted that the differences included that the first version of the loan agreements: "provide that the repayment of the alleged advances is to take place within 7 days of written notice by the lender, and that the repayment is to be satisfied by the issuing of ordinary shares in [GCA] if the lender so elects. The effect of the differences in the terms of the two sets of agreements is significant, and the set of documents provided to [Holdings] on 11 January 2012 impose additional burdens on [GCA] and operate to the detriment of shareholders other than those designated as lenders under such agreements." (Ex P4, CB 818). 1. By letter dated 12 January 2012, Mr Stone responded on behalf of GCA implicitly acknowledging that the first version of the loan agreements had not previously been provided to Holdings or Mr Redmond and apologising for the "confusion" that the two versions of the loan agreements made between GCA and each of H Ridge and Fullham each dated 1 July 2011 "must have caused" (Ex P4, CB 829). That letter stated that Mr Stone could not recall why GCA had the second version of the loan agreements drafted and executed and placed reliance on the first version of the loan agreements (Ex P4, CB 829–831). I proceed on the basis that is now common to both parties, that the first version of the loan agreements was genuine, notwithstanding that the events set out above would have raised real doubt as to that matter had it not been common ground. 2. In cross-examination, it was apparent that Mr Redmond did not have a precise understanding of the mechanism which had been adopted for the original acquisition of shares in GCA and GCS, which had included both the issue of shares and the transfer of shares to Holdings from companies associated with Messrs Stone and Skinner (T51–52). However, it is plain that the initial arrangement contemplated that Holdings would acquire a specified proportion of the shares of GCA and GCS, being 28% of those shares, and Mr Le Plastrier cross-examined Mr Redmond on that basis (T52), and I infer that he did so in accordance with his instructions. Mr Le Plastrier also put to Mr Redmond in cross-examination (I infer, on instructions) that Mr Redmond was content to provide $400,000 for a 51% shareholding (T54) and no attempt was made to impugn his evidence to that effect. Mr Redmond's evidence in cross-examination, although not particularly precise, made clear that his real objection to the mechanism for conversion of loans to equity in the first version of the loan agreements was that such conversion could occur at the election of Fullham and H Ridge and without Holdings' consent (T54). There was no suggestion that Mr Redmond was told of the terms on which Messrs Stone and Skinner or their associated entities could bring about the conversion of the loans to equity. Indeed, Mr Le Plastrier cross-examined him on the basis that he was not told of that matter, and it was put that he did not ask about those details, although he rightly responded that his solicitor had (at least later) made inquiries to seek to obtain further information (T55). 3. Mr Le Plastrier responded to this claim, in opening oral submissions, that Holdings knew that the loans could be capitalised. That submission does not address the substance of the non-disclosure on which Holdings relies, which was not that the loans could be capitalised, but that they could be capitalised without Holdings' or Mr Redmond's consent, thereby diluting the proportionate interest in GCA and GCS which Holdings had bargained to acquire without its consent. I recognise that, as the case law to which I have referred above indicates, the misleading and deceptive conduct provisions do not require a party to commercial negotiations to volunteer information simply because it will assist in the other party's decision-making. However, the proposition that Holdings would acquire a specified percentage interest in GCA and GCS was fundamentally undermined if any interest issued to it could be diluted at will, and the omission of that qualification seems to have the result that the representations as to the interest that Holdings would acquire in GCA and GCS were misleading or deceptive or likely to mislead or deceive in material respects. Even if Mr Redmond had made no inquiry in that regard, a unilateral right to convert the loans to equity, on the part of Messrs Stone and Skinner or their related entities, so fundamentally undermined the agreement to allocate a specified percentage interest in GCA and GCS to Holdings to such an extent that a failure to disclose it was misleading in the relevant circumstances. 4. In closing submissions, Mr Le Plastrier submitted that Holdings had not established a causal connection between the Omission (as defined) and entry into the alleged Arrangement (as defined). I do not accept that submission. It seems to me to be simply inconceivable that Holdings would have entered into an agreement to acquire specified percentages of the shares in GCA and GCS, had disclosure been made that any percentage holding which it acquired could be diluted at will by Fullham and H Ridge, at the direction of Messrs Stone or Skinner, by calling upon their loans to GCA and directing that the loans be repaid by an issue of shares in GCA and/or GCS to them or their associated entities. 5. The claim for misleading and deceptive conduct in respect of these matters therefore succeeds against Mr Stone, who made the relevant representations as to the interest that Holdings would acquire in GCA and GCS. It seems to me clear that Holdings would not have invested in GCA and GCS at all, rather than investing on different terms, had it been disclosed that the percentage interest which it acquired could be diluted by Messrs Stone and Skinner and their associated interests at will and without its consent. Although the parties did not make submissions in this respect, it also seems to me that the case is analogous to the position considered by the Court of Appeal in the claim against Mr Daya in Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd above, so far as Holdings was locked into its investment in GCA and GCS and its loss is properly quantified as the difference between the amount it paid for its shares and the value of those shares following the failure of those companies. There is no suggestion those shares have any such value and that loss is therefore $900,000, the total amount of Holdings' investment in GCA and GCS. No practical question of rescission of the agreement to subscribe for the shares, or any return of the shares, arises where GCA is now in liquidation. 6. For completeness, I note that Holdings' Amended Statement of Claim proceeds on the basis (ASC [52]) that a failure to qualify other representations made by the Defendants, in respect of the right of conversion of the loans to equity, was misleading or deceptive. Contrary to the premise of that pleading, not all Defendants are alleged to have made the relevant representations. The representation as to a 28% interest made in the 23 December email (ASC [41]) is pleaded only against, relevantly, Mr Stone and Fullham and I have held it is established only against Mr Stone. The representation as to a 51% interest (ASC [46(f)]) is pleaded only against, relevantly, Mr Stone. However, the Defendants had common legal representation and no submission was made that the position of Messrs Stone and Skinner could or should be distinguished in this regard. I should not distinguish between the position of Messrs Stone and Skinner in this respect, where they did not submit that I should do so and where each of them must have known of the existence of the relevant conversion rights (on the premise that they existed) and could have disclosed them so as to avoid any misleading conduct by non-disclosure. 7. Mr Bennett initially did not seek to press a claim against Mr Collins in respect of this matter. In oral submissions, Mr Bennett took a somewhat different approach and indicated that he did seek to have determined a case that Mr Collins engaged in misleading or deceptive conduct by failing to disclose the loans, but accepted that Mr Collins' evidence was that he was not aware of those loans (T254–255). That claim, to the extent it is pressed, cannot succeed, since neither Mr Collins nor an associated entity was party to the loan agreements and the evidence does not establish his knowledge of them. As I noted above, I proceed on the basis that the claim was not pressed against Fullham or H Ridge. Proportionate liability defences 1. In paragraph 38 of their Amended Defence, the Defendants pleaded that the claim was an apportionable claim within s 34(1) of the Civil Liability Act 2002 (NSW), and that any liability for which a defendant is found responsible should be reduced in accordance with the amount the Court considers just having regard to the extent of the defendant's responsibility for the loss or damage found to have been suffered by Holdings. Paragraph 39 of the Amended Defence pleads that Holdings is a concurrent wrongdoer within the meaning of s 34(2) of the Civil Liability Act 2002 (NSW) and that each defendant's liability should be limited to an amount which reflects the proportion of the loss or damage claimed by Holdings which the Court considers just and reasonable having regard to the extent of each of the defendant's responsibility for the loss. It was not clear whether this defence was pressed. Mr Bennett points out that a defence under the Civil Liability Act could not apply in respect of the claims under the Corporations Act and the Australian Securities and Investments Commission Act. In any event, as Mr Bennett also points out, a lack of diligence on the basis of a party who is misled does not amount to contributory fault, entitling the party which engaged in misleading or deceptive conduct to reduce its liability by reliance on the proportionate liability regime: Rennie Golledge Pty Ltd v Ballard [2012] NSWCA 376; (2012) 82 NSWLR 231 at [128]–[143]. The Defendants' reliance on the proportionate liability regime, if pressed, therefore fails. Costs and orders 1. There have been several unsatisfactory features of the conduct of this case. There were significant delays before the matter reached a final hearing, largely because Mr Stone and Mr Skinner and their associated companies were unrepresented, and Mr Collins did not appear, for a considerable time and there were failures on their part to comply with directions, during the preparation of the matter for hearing, and hearing dates twice had to be vacated on their application. The case brought by Holdings was complex, and little attention appears to have been paid to the need to establish, not only that the alleged representations were made, but how Mr Redmond understood them in the context of an investment in a start-up technology company, or that they had any relevant impact on his and Holdings' decision-making or were otherwise causative of its loss. Substantial efforts in preparing and conducting the hearing were devoted to evidence as to the Financial Projections and Presentation, when a simple inquiry made by Holdings' legal representatives of Mr Redmond should have established, as emerged on cross-examination, that he had not read and relied on those documents and it should have been apparent that there was also no evidence that his advisers had done so. Holdings' case has succeeded, but only against some of the parties against which it was brought, and on a narrower basis that occupied limited hearing time. 2. In the ordinary course, costs will follow the event, and the Court generally does not attempt to differentiate between the issues on which a party was successful and those on which it failed. However, the case law indicates that the Court may not award costs to a successful party relating to an issue on which it lost, when that issue is clearly dominant or separable: Monie v Commonwealth of Australia (No 2) [2008] NSWCA 15 at [64]; The Owners – Strata Plan 61162 v Lipman [2014] NSWSC 622 at [241]; Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd (No 2) [2014] NSWCA 219 at [17]. My preliminary view is that Holdings should be ordered to pay the costs of the parties against which it failed and that any costs order against the unsuccessful Defendants should also recognise that a substantial part of the costs incurred by the parties, in preparation and in hearing time, would have been directed to issues on which Holdings has not succeeded. However, I will hear the parties as to costs. 3. The parties should bring in agreed short minutes of order to give effect to this judgment, and as to costs, with 14 days and, if there is no agreement between them, I will allow an opportunity to be heard in this respect. ********** Amendments 22 June 2016 - Para 41 - first sentence; Para 45 - second sentence; Para 52 - third sentence; Para 105 - first sentence; Para 149 - last sentence; Para 164: typographical errors corrected. 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. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 22 June 2016