FEDERAL COURT OF AUSTRALIA

Webster (Trustee) v Murray Goulburn Co-Operative Co. Limited [2017] FCA 995

ORDERS

THE COURT ORDERS THAT:

1.    The defendants’ application for summary dismissal be refused.

2.    The plaintiff’s amended statement of claim be struck out.

3.    The plaintiff’s application seeking leave to file and serve a further amended statement of claim, in the form of the 2 June 2017 version filed with the Court, be refused.

4.    The plaintiff be permitted the opportunity to replead his statement of claim, the precise form thereof to be the subject of a further application for leave to replead to be filed and served within 14 days of the date hereof.

5.    The proceedings be listed for a further case management hearing at 9.30 am on 15 September 2017 and to hear any further application of the plaintiff seeking leave to replead.

6.    Costs reserved.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

BEACH J:

1    Before me in these representative proceedings are the following applications:

(a)    The defendants’ application for summary dismissal;

(b)    The defendants’ application to strike out various paragraphs of the plaintiff’s amended statement of claim dated 2 September 2016; and

(c)    The plaintiff’s application for leave to file and serve a proposed further amended statement of claim in the form served on 2 June 2017.

2    The defendants’ applications were originally filed in the Supreme Court of Victoria before the proceedings were cross-vested to the Federal Court by the order of Croft J on 9 May 2017 given the related ACCC prosecution that I am also case managing.

3    On 9 June 2017, I made various orders to ensure that the summary dismissal application, the strike out application and the amendment application could be disposed of together on 22 August 2017. Unfortunately, on 18 August 2017 the plaintiff proposed yet another version of a proposed pleading, which I treated as superseding the 2 June 2017 version. The defendants, understandably, were not in a position to address this in detail on 22 August 2017. With the agreement of all parties, I proceeded to hear argument on the summary dismissal application, as it could be dealt with in relation to the two principal issues whatever the form of the plaintiff’s pleading (i.e. the amended statement of claim, the 2 June 2017 version, the 18 August 2017 version or indeed the yet further amendments proffered by the plaintiff’s counsel during the hearing on 22 August 2017). Relatedly, I also heard argument on the strike out application insofar as the summary dismissal arguments were relevant to the strike out question. As for the amendment application concerning the 2 June 2017 version, I have taken this to be abandoned given the 18 August 2017 version, with yet further proposed amendments now superseding parts of the 18 August 2017 version. It is accepted by the parties that if I strike out the amended statement of claim and whatever the outcome of the summary dismissal application, which latter application does not deal with all the plaintiff’s more recently proposed claims in any event, the plaintiff will need to be given an opportunity to replead.

4    In summary, I have determined to:

(a)    refuse the defendants’ summary dismissal application;

(b)    strike out the plaintiff’s amended statement of claim in its entirety; and

(c)    give the plaintiff an opportunity to seek leave to replead.

PReLiMINARY MATTERS

5    The present representative proceedings were originally brought under Part 4A of the Supreme Court Act 1986 (Vic) (now treated as being brought under Part IVA of the Federal Court of Australia Act 1976 (Cth)) by a unitholder in the MG Unit Trust (the Trust) on behalf of all persons who purchased units in the Trust:

(a)    pursuant to a product disclosure statement (PDS) issued by the second defendant, MG Responsible Entity Limited, as responsible entity of the Trust, dated 29 May 2015; and/or

(b)    on or after 3 July 2015 but prior to 2 May 2017.

6    The second defendant is a wholly owned subsidiary of the first defendant, Murray Goulburn Co-Operative Co. Limited. The third to thirteenth defendants were its directors at the relevant time. In the amended statement of claim, the plaintiff pleads claims based upon the PDS and later allegedly defective information disclosures or the lack of timely disclosures.

7    Before proceeding further, it is necessary to elaborate on the relationship between the first and second defendants. As I say, the latter is a subsidiary of the former. The commercial rationale underlying the units issued by the second defendant in the Trust pursuant to the PDS was to give unitholders an economic exposure to the first defendant and its business. The second defendant and the Trust (and the units therein) were reliant upon the first defendant’s financial performance and the terms and performance arising under notes and preference shares issued by the first defendant to a sub-trust of the Trust (distributions and dividends under such notes and shares received by the second defendant were to be distributed to unitholders of the Trust), a continuous disclosure deed poll, a relationship deed and a profit sharing mechanism deed. The distributions to be paid to unitholders were to be calculated pursuant to the profit sharing mechanism deed.

8    Simplistically described, the profit sharing mechanism governed the setting by the first defendant of the Farmgate Milk Price (FMP) and the allocation of received funds of the first defendant to milk payments to suppliers, income tax and net profit after tax (NPAT). The NPAT was to be available for the payment of dividends on shares in the first defendant and distributions payable to unitholders in the Trust. The precise profit sharing mechanism aimed to align unitholders’ economic interests with the economic interests of suppliers to the first defendant. When the FMP was relatively high, the first defendant would allocate a higher proportion of the Milk Pool (earnings before tax and milk payments) to the NPAT available for dividends to shareholders and distributions to unitholders. When the FMP was relatively low, the reverse would operate. It is apparent that the first defendant’s distributable profits and accordingly NPAT (a proportion of which would be “paid” ultimately to unitholders) was a function of the first defendant’s sales revenue, costs of goods sold, and other costs and expenses. Generally, the first defendant was obliged to provide information to the second defendant to enable the latter to meet its continuous disclosure obligations (see ss 111AC, 111AE, 111AL, 111AP, 674 and 675 of the Corporations Act 2001 (Cth) (Corporations Act)) and its obligations to prepare full year and half year financial reports.

9    Let me also say something further concerning the PDS. It was issued on or around 29 May 2015 and invited members of the public, including allegedly the plaintiff and group members, to subscribe for units in the Trust. A unit was a “financial product” under s 763A(1)(a). The PDS was a “Product Disclosure Statement” within the meaning of s 761A and Subdivision B of Division 2 of Part 7.9 and was required to be given to the plaintiff and group members under s 1012B. It was also a “disclosure document or statement” within the meaning of s 1022A(1) and given or made available to the plaintiff and group members within the meaning of s 1022B(1)(c)(ii).

10    In essence, the plaintiff alleges that the PDS contained misleading representations that were incorrect, alternatively there were no reasonable grounds for making the same. Further, it is said that information in the PDS was not kept up to date. Accordingly, it is alleged that the PDS was “defective”. It is also said that the directors consented to the inclusion of the misleading representations or statements in the PDS. All of this is said to have caused loss and damage to the plaintiff and group members. Various bases for the liability of the first and second defendants are alleged. Further, it is said that the directors are “liable persons” under ss 1022B(2)(d) and1022B(3)(c) as having consented to the inclusion of the misleading content in the PDS (ss 1021L(1) and 1022B(1)(d)). Other claims are then pleaded by reference to “corrective disclosures” and “disclosure failures”, but all proceed from or require the establishment of the principal foundation of the pleaded Misleading PDS Representations.

11    It is convenient at this point to elaborate on the pleaded case and its evolution in aspects relevant to the summary dismissal application.

The central allegations and legislation

12    The current version of the plaintiff’s pleading is the amended statement of claim filed on 2 September 2016.

13    Relevantly, paragraphs 21 to 27 are pleaded in the following terms:

21.    The PDS contained representations (the Misleading PDS Representations) to the effect that:

a.    in the 2015 financial year (FY2015) the first defendant would achieve average revenue per metric tonne and sales volumes of:

i.    $4,068/mt and 352,000 tonnes in its Ingredients and Nutritionals segment;, totalling $1,431,936,000;

ii.    $1,818/mt and 627,000 tonnes in its Dairy Foods segment;, totalling $1,139,886,000;

b.    the first defendant would achieve greater revenue in FY2015 than in the 2014 financial year (FY2014);

c.    in the 2016 financial year (FY2016) the first defendant would achieve average revenue per metric tonne and sales volumes of:

i.    $4,116/mt and 329,000 tonnes in its Ingredients and Nutritionals segment, totalling $1,354,164,000;

ii.    $1,911/mt and 767,000 tonnes in its Dairy Foods segment, totalling $1,465,737,000

d.    the first defendant would achieve greater revenue in FY2016 than in each of FY2014 and FY2015;

e.    the first defendant would have a distributable milk pool in FY2016, as defined in the profit sharing mechanism deed, of approximately $1,563m560m;

f.    the first defendant would achieve an Actual Weighted Average Southern Milk Region FMP of $6.01/kgms in FY 2016; and

g.    the applicable percentage of the distributable milk pool attributable to shareholders and unitholders under the profit sharing mechanism deed in FY2016 would be in the (highest) range of 5.5%-6.5%, and likely to be 5.5%;%.

h.    there was a reasonable basis for the making of each of the representations set out above.

Particulars

The relevant passages are set out in the schedule of particulars to this statement of claim. The representation that there was a reasonable basis for the making of each of the representations alleged is implied from the nature purpose, context and regulatory environment of the PDS and was also made expressly on pages 1 and 145 of the PDS (section 7.2.3).

21A.    In fact, each of the Misleading PDS Representations set out in paragraphs 21(a) – (g) above was materially wrong.

Particulars

See Part C of the Schedule of Particulars.

22.    By 29 May 2015:

a.    the first defendant knew facts which indicated that its forecast:

i.    sales volume; and/or

ii.    revenue,

for FY2015 alleged in paragraphs 21(a) and (b) above were unlikely to be achieved;

Particulars

It is reasonable to infer that by 29 May 2015 the first defendant knew facts which indicated that its forecast sale volumes and revenue for FY2015 would likely be lower than were forecast in the PDS (as they in fact proved to be – see Part C of the Schedule of Particulars) because:

i.    the milk commodity market weakened significantly from April 2015. For example, spot prices for whole milk powder (WMP) declined from approximately US$2,700/mt on 1 April 2015 to US$2,300/mt on 30 June 2015 and spot prices for skim milk powder (SMP) declined from approximately US$2,600/mt on 1 April 2015 to US$2,040/mt on 30 June 2015;

ii.    in FY2015 the first defendant’s volume of sales was forecast in the PDS to be 22% higher, its total milk intake only 5.5% higher, and its average prices approximately 15% lower, meaning that the first defendant must have expected its inventory to decline significantly in FY2015. The plaintiff refers in particular to the following matters:

a.    the first defendant’s inventory in fact increased significantly in FY2015 from an opening balance of $366.5m to a closing balance of $507.8m (an increase of $141.3m or 39%);

b.    the first defendant forecast in the PDS increased combined volumes of sales of Ingredients and Nutritionals products and Dairy Foods products from 805,000 metric tonnes in FY2014 to 979,000 metric tonnes in FY2015 (a forecast an increase in sales volumes of 174,000 metric tonnes or 22%);

c.    the first defendant forecast in the PDS Total Milk Intake (TMI) of 3,567 million litres, and its with actual TMI as reported in the FY2015 results of was 3,580 million litres, an increase of only approximately 5.5% on the TMI in FY2014; and

iii.    despite the matters referred to in paragraph (ii) above, the first defendant’s inventory increased in FY2015 from an opening balance of $366.5m to a closing balance of $507.8m (an increase of $141.3m or 39%), and it may accordingly be inferred that the fact that its inventory was not declining as expected under the forecasts referred to in paragraph (ii) above was known to the first defendant by 29 May 2015 because there were only 33 days remaining in FY2015 and the defendant knew that it would continue to sell certain products (e.g., fresh milk) into the market through the remainder of FY2015;

iv.    had the first defendant sold milk powders at prevailing spot commodity prices, and given an average input cost of milk of $5.67/kgms, it would have had to necessitated a write-down of the value of its milk powder inventory at FY2015 year end because the market value of the milk powder in its inventory would have been lower than its cost to the first defendant.

Further particulars are provided in the schedule of particulars hereto and additional particulars of knowledge may be provided after discovery.

b.    the first defendant did not have reasonable grounds to believe that its forecast FY2016 revenues alleged in paragraph 21(c) above would be achieved;

Particulars

The plaintiff refers to the prevailing spot and futures prices for relevant milk commodities as at 29 May 2015 and the trendline of those prices since 1 January 2014.. It is reasonable to infer that the first defendant knew about these prices and their trendline since 1 January 2014. Further particulars are provided in the schedule of particulars hereto and additional particulars of knowledge may be provided after discovery.

c.    the first defendant, by reason of the matters alleged and particularised in paragraphs (a) and (b) above, did not have reasonable grounds to believe that the matters alleged in paragraphs 21(d) to 21(g) above would be achieved.

Particulars

The plaintiff refers to the particulars to paragraphs (a) and (b) above and (in relation to paragraph 21(g)) the profit sharing mechanism deed. Further particulars may be provided after discovery.

23.    As alleged in paragraphs 22(b) and (c) above, and having regard toin reliance on the matters alleged in paragraphs 12 to15 and 16 above, the first and second defendants did not have reasonable grounds for making the representations alleged :

a.    in paragraphs 21(c) to 21(g) above, and accordingly those representations (each of which was with respect to a future matter) are taken to be misleading pursuant to s 769C(1) of the Act; or.

b.    in paragraph 21(h), and that representation was a misleading or deceptive statement within the meaning of s 1022A(1)(a) of the Act.

24.    The Misleading PDS Representations, due to the matters alleged in paragraphs 22 and 23 above, were misleading or deceptive statements within the meaning of section 1022A of the Act.:

a.    misleading or deceptive statements within the meaning of sections 1021L(1) and 1022A of the Act; and

b.    as a result of their publication in the PDS, conduct by the second defendant that was misleading or deceptive or was likely to mislead or deceive, in breach of s 1041H of the Act.

25.    The second defendant was required by sectionssection 1012J and 1013C of the Act to ensure that the information in the PDS was up to date at the time when it was given but the PDS was not up to date in the respects alleged in sub-paragraphs 22(a) and (b) above (including the particulars thereto)..

26.    By reason of:

a.    the inclusion of the Misleading PDS Representations (or any of them) in the PDS, the PDS was ‘defective’ within the meaning of s 1022A(1)(a) of the Act;. and

b.    the fact that the PDS was not up to date in the respects alleged in sub-paragraphs 22 (a) and (b) above (including the particulars thereto), the PDS was also ‘defective’ within the meaning of s 1022A(1)(b) of the Act.

Directors’ consent

27.    By reason of the matters alleged in paragraphs 10 and 21 to 24 above, the third to thirteenth defendants gave consent to the inclusion of the Misleading PDS Representations in the PDS.

14    Paragraphs 30 to 37 are pleaded in the following terms:

Liability for Misleading PDS Representations

Second defendant

30.    By reason of the matters alleged inat paragraphs 7, 8, 17 to 20 and 26 above, the second defendant is a ‘liable person’ within the meaning of sections 1022B(3)(b)(i) and 1022B(3)(d) of the Act.

31.    Accordingly, the second defendant is liable under sections 1022B(2)(c) and 1022B(2)(e) of the Act to pay compensation to the plaintiff and Group Members for the amount of their loss and damage.

First defendant

32.    By reason of the matters alleged in paragraphs 9, 10, 12 to 16 and 22 to 24 above and its obligation to provide information to the second defendant as alleged in paragraph 15 above, the first defendant was involved in the preparation of the PDS and directly and/or indirectly caused the PDS to be defective or contributed to it being defective within the meaning of section 1022B(3)(b)(ii) of the Act.

33.    By reason of the matters alleged in paragraph 32 above, the first defendant is a ‘liable person’ within the meaning of section 1022B(3)(b)(ii) of the Act.

34.    By reason of the matters alleged in paragraphs 28, 29 and 32 above Accordingly, the first defendant is liable under section 1022B(2)(c) of the Act to pay compensation to the plaintiff and those Group Members who acquired units pursuant to the PDS for the amount of their loss and damage.

Third to fifteenth defendants

35.    By reason of the matters alleged inat paragraphs 9, 10,24(a) and 27 above, the third to thirteenth defendants each consented to the inclusion of the Misleading PDS Representations, being ‘consented material’ within the meaning of subsection 1021L(1) of the Act and to which section 1022B(1)(d) of the Act applies.

36.    By reason of the matters alleged in paragraph 35 above, each of the third to thirteenth defendants is aare each ‘liable person’persons’ within the meaning of s 1022B(3)(c) of the Act.

37.    Accordingly, each of the third to thirteenth defendants isare each liable under s 1022B(2)(d) of the Act to pay compensation to the plaintiff and those Group Members who acquired units pursuant to the PDS for the amount of their loss and damage.

15    I note that in terms of the case pleaded against the directors, no reliance has been placed in the amended statement of claim on ss 1022B(1)(c) and 1022B(3)(b). Rather, reliance has only been placed upon the “consent” provisions of s 1022B(1)(d) (incorporating s 1021L(1)) and s 1022B(3)(c).

16    Various proposed amendments to the amended statement of claim have been put forward by the plaintiff, the latest complete version being on 18 August 2017. The 18 August 2017 proposed further amended statement of claim now supersedes the 2 June 2017 proposed pleading so that the 2 June 2017 version does not need to be set out.

17    The 18 August 2017 proposed pleading put forward a modified paragraph 21 in the following terms:

21.    The PDS containedmade the following forecasts and representations (the Misleading PDS Representations) to the effect that:):

a.    in the 2015 financial year (FY2015) the first defendant would achieve revenue of:

i.     $1,431,936,000.3 million in its Ingredients and Nutritionals segment; and

ii.    $1,139,886,000 in its Dairy Foods , making a “segment; contribution” of $72 million to profits;

b.    the first defendant would achieve greater revenue in FY2015 than in the 2014 financial year (FY2014);

c.    in the 2016 financial year (FY2016) the first defendant would achieve revenue of:

i.     $1,354,164,000352.5 million in its Ingredients and Nutritionals segment; and

ii.    $1,465,737,000 in its Dairy Foods , making a “segment contribution” of $66.9 million to profits;

d.    the first defendant would achieve greater revenue in FY2016 than in each of FY2014 and FY2015;

e.    the first defendant would have a distributable milk pool in FY2016, as defined in the profit sharing mechanism deed, of approximately $1,563m;

f.e.    the first defendant would achieve an Actual Weighted Average Southern Milk Region FMP of $6.01/kgms in FY 2016; and

g.f.    the applicable percentage of the distributable milk pool attributable to shareholders and unitholders under the profit sharing mechanism deed in FY2016 would be in the (highest) range of 5.5%-6.5%, and likely to be 5.5%;

h.g.    there was a reasonable basis for making each of the representationsforecasts set out in paragraphs (a) to (gf) above.

Particulars

The relevant passagesforecasts and the actual results are set out in Part C of the schedule of particulars to this statement of claim. The representation that there was a reasonable basis for the making of each of the representations allegedforecasts is implied from the nature purpose, context and regulatory environment of the PDS and was also made impliedly on pages 142 and 145 of the PDS and expressly on pages 1 and 145 of the PDS (section 7.2.3).

18    It also repeated paragraph 21A in the following terms:

21A.    In fact, each of the Misleading PDS Representations was materially wrong.

Particulars

See Part C of the Schedule of Particulars.

19    It also contained a reworked paragraph 22 in the following terms (excluding particulars):

22.    By 29 May 2015:

a.    facts existed which indicated that the forecasts in the PDS in respect of the first defendant’s revenue for FY2015 (as alleged in paragraphs 21(a) and (b) above) were unlikely to be achieved3;

…

b.    the first defendant did not have reasonable grounds to represent in the PDS that its forecast FY2016 revenues alleged in paragraph 21(c) above would be achieved;

…

c.    the first defendant, by reason of the matters alleged and particularised in paragraphs (a) and (b) above, did not have reasonable grounds to represent in the PDS that the matters alleged in paragraphs 21(a) to 21(gf) above would be achieved.

20    Other provisions that should be set out are paragraphs 23, 24, 27 and 30 to 34:

23.    As alleged in paragraph 22 above, and having regard to the matters alleged in paragraphs 12 to 16 above, the first and second defendants did not have reasonable grounds for making the representations alleged in paragraphs 21(a) to 21(gf) above, and accordingly those representations (each of which was with respect to a future matter) are taken to be misleading pursuant to s 769C(1) of the Act.

24.    The Misleading PDS Representations, due to the matters alleged in paragraphs 22 and 23 above, were misleading or deceptive statements within the meaning of section 1022A of the Act.

…

Directors’ consent

27.    By reason of the matters alleged in paragraphs 9, 10 and 11 above, the third to thirteenth defendants gave consent to the inclusion of the Misleading PDS Representations in the PDS.

…

Liability for Misleading PDS Representations

Second defendant

30.    By reason of the matters alleged in paragraphs 7, 8, 17 to 20 and 26 above, the second defendant is a ‘liable person’ within the meaning of section 1022B(3)(b)(i) of the Act.

31.    Accordingly, the second defendant is liable under section 1022B(2)(c) of the Act to pay compensation to the plaintiff and first period subgroup membersaffected Group Members for the amount of their loss and damage.

First defendant

32.    By reason of the matters alleged in paragraphs 7, 9 to 16 and 22 to 24 above, the first defendant was involved in the preparation of the PDS and directly and/or indirectly caused the PDS to be defective or contributed to it being defective within the meaning of section 1022B(3)(b)(ii) of the Act.

33.    By reason of the matters alleged in paragraph 32 above, the first defendant is a ‘liable person’ within the meaning of section 1022B(3)(b)(ii) of the Act.

34.    By reason of the matters alleged in paragraphs 28, 29, 32 and 33 above, the first defendant is liable under section 1022B(2)(c) of the Act to pay compensation to the plaintiff and those first period subgroup membersGroup Members who acquired units pursuant to the PDS for the amount of their loss and damage.

21    There are also modified paragraphs 35 to 37:

35.    By reason of the matters alleged in paragraphs 9, 10, 11 and 27 above, the third to thirteenth defendants each :

a.    consented to the inclusion in the PDS of the Misleading PDS Representations, being ‘consented material’ within the meaning of subsection 1021L(1) of the Act and to which section 1022B(1)(d) of the Act applies.; and

b.    35A. By reason of the following facts, each of the third to thirteenth defendants was involved in the preparation of the PDS and directly or indirectly caused the PDS to be defective or contributed to it being defective within the meaning of s. 1022B(3)(b)(ii) of the Corporations Act: because of the matters alleged in paragraphs 21 to 26 inclusive above.

…

36.    By reason of the matters alleged in paragraph 35 above, each of the third to thirteenth defendants is a ‘liable person’ within the meaning of s 1022B(3)(c) of the Act.

37.    Accordingly, each of the third to thirteenth defendants is liable under s 1022B(2)(d) of the Act to pay compensation to the plaintiff and those first period subgroup membersGroup Members who acquired units pursuant to the PDS for the amount of their loss and damage.

22    Finally, during the hearing the plaintiff put forward a yet further proposal for paragraph 21 in the following terms:

21.    The PDS made the following forecasts concerning the first defendant’s expected performance in FY2015 and FY2016 and the representation in (g) below (the Misleading PDS Representations):

a.    in the 2015 financial year (FY2015) the first defendant wouldwas expected to achieve revenue of $1,431.3 million in its Ingredient and Nutritionals segment, making a “segment contribution” of $72 million to profits;

b.    the first defendant wouldwas expected to achieve greater revenue in FY2015 than in the 2014 financial year (FY2014);

c.    in the 2016 financial year (FY2016) the first defendant wouldwas expected to achieve revenue of $1,352.5 million in its Ingredients and Nutritionals segment, making a “segment contribution” of $66.9 million to profits;

d.    the first defendant wouldwas expected to achieve greater revenue in FY2016 than in each of FY2014 and FY 2015;

e.    the first defendant wouldwas expected to achieve an Actual Weighted Average Southern Milk Region FMP of $6.01/kgms in FY 2016; and

f.    the applicable percentage of the distributable milk pool attributable to shareholders and unitholders under the profit sharing mechanism deed in FY2016 wouldwas expected to be in the (highest) range of 5.5%-6.5%, and likely to be 5.5%;

g.    there was a reasonable basis for making each of the representations set out in paragraphs (a) to (f) above.

23    It is appropriate at this point to set out several provisions of the Corporations Act to which reference needs to be made.

24    Sections 1022B(1)(c) and (d) provide as follows:

(1)    This section applies in the following situations:

…

(c)    a person:

(i)    gives another person (the client) a disclosure document or statement (other than an offer document of a kind referred to in section 1019E or a supplementary offer document of a kind referred to in section 1019J) that is defective in circumstances in which a disclosure document or statement is required by a provision of this Part to be given to the client; or

(ia)    makes an offer to which Division 5A applies (see section 1019D) by sending another person (the client) an offer document in accordance with section 1019E, but that offer document is defective; or

(ib)    in a situation to which section 1019J applies, sends a person (the client) a supplementary offer document in accordance with that section but that supplementary offer document is defective; or

(ii)    is a regulated person and gives, or makes available to, another person (the client) a disclosure document or statement, being a Product Disclosure Statement or a Supplementary Product Disclosure Statement, that is defective, reckless as to whether the client will or may rely on the information in it; or

(d)    a person:

(i)    gives consent to the inclusion of a statement in a Product Disclosure Statement or a Supplementary Product Disclosure Statement as mentioned in subsection 1021L(1), disregarding paragraph 1021L(1)(c); or

(ii)    does not take reasonable steps to withdraw such a statement as mentioned in subsection 1021L(2), disregarding subparagraphs 1021L(2)(b)(iii) and (iv); or

…

25    Relatedly ss 1022B(2)(c) and (d) provide:

(2)    In a situation to which this section applies, if a person suffers loss or damage:

…

(c)    if paragraph (1)(c) applies--because the disclosure document or statement the client was given or sent was defective; or

(d)    if paragraph (1)(d) applies--because the consent referred to in that paragraph was given, or was not withdrawn, as the case requires; or

    …

the person may recover the amount of the loss or damage by action against the, or a, liable person (see subsections (3) to (5)), whether or not that person (or anyone else) has been convicted of an offence in respect of the matter referred to in paragraph (a), (aa), (ab), (ac), (b), (c), (d), (e) or (f).

26    Sections 1022B(3)(b) and (c) provide:

(3)    For the purposes of subsection (2), the, or a, liable person is:

…

(b)    if paragraph (1)(c) (other than subparagraph (1)(c)(ia) or (ib)) applies and the disclosure document or statement is not information required by paragraph 1012G(3)(a)--subject to subsection (5):

(i)    the person by whom, or on whose behalf, the disclosure document or statement was prepared; and

(ii)    each other person involved in the preparation of the disclosure document or statement who, directly or indirectly, caused the disclosure document or statement to be defective or contributed to it being defective; or

…

(c)    if paragraph (1)(d) applies--the person who gave the consent; or

…

27    In terms of what is meant by “defective”, s 1022A(1) defines this term as follows:

defective, in relation to a disclosure document or statement, means:

(a)    there is a misleading or deceptive statement in the disclosure document or statement; or

(b)    if it is a Product Disclosure Statement--there is an omission from the Product Disclosure Statement of material required by section 1013C, other than material required by section 1013B or 1013G; or

(c)    if it is a Supplementary Product Disclosure Statement that is given for the purposes of section 1014E--there is an omission from the Supplementary Product Disclosure Statement of material required by that section; or

(d)    if it is information required by paragraph 1012G(3)(a)--there is an omission from the information of material required by that paragraph; or

(e)    if it is an offer document of a kind referred to in section 1019E--there is an omission from the document of material required by section 1019I; or

(f)    if it is a supplementary offer document of a kind referred to in section 1019J--there is an omission from the document of material required by subsection 1019J(3).

28    Reference should also be made to some other provisions.

29    Section 1021L(1) provides:

(1)    A person commits an offence if:

(a)    they consent to the inclusion of a statement (the consented material) in a Product Disclosure Statement or a Supplementary Product Disclosure Statement as mentioned in paragraph 1013K(1)(a); and

(b)    either:

(i)    there is a misleading or deceptive statement in the consented material; or

(ii)    there is an omission of information from the consented material; and

(c)    the statement or omission is or would be materially adverse from the point of view of a reasonable person considering whether to proceed to acquire the financial product concerned.

30    Relatedly, s 1013K provides:

(1)    A Product Disclosure Statement must only include a statement made by a person, or a statement said in the Product Disclosure Statement to be based on a statement made by a person, if:

(a)    the person has consented to the statement being included in the Product Disclosure Statement in the form and context in which it is included; and

(b)    the Product Disclosure Statement states that the person has given this consent; and

(c)    the person has not withdrawn this consent before the date of the Product Disclosure Statement.

(2)    The person who prepared the Product Disclosure Statement must not, without reasonable excuse, fail to keep the consent, or a copy of it, for the period, and in the manner, required by the regulations.

analysis

31    Let me now turn to the summary dismissal question and relatedly to some of the strike out issues. The principles are uncontroversial.

32    Section 31A(2) of the Federal Court of Australia Act 1976 (Cth) empowers the Court to summarily dismiss the whole or part of a proceeding if it is satisfied that a plaintiff “has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding”. Similarly, r 26.01(1)(a) of the Federal Court Rules 2011 (Cth) empowers the Court to grant summary dismissal where an applicant “has no reasonable prospect of successfully prosecuting the proceeding or part of the proceeding”.

33    The power to dismiss the whole or part of a proceeding summarily is not to be exercised lightly, but the legislative purpose of s 31A(2) is not confined to cases of a kind which fell within earlier summary disposal regimes. Section 31A(2) concentrates upon “reasonable” prospects as compared with “fanciful” or “merely arguable” prospects. Further, the language of r 26.01(1)(a) is in comparable form with s 31A(2). For present purposes it is sufficient to adopt without elaboration the observations in Upaid Systems Ltd v Telstra Corporation Ltd (2016) 122 IPR 190; [2016] FCAFC 158 at [44] to [49] concerning s 31A(2).

34    As to the principles applicable to a strike out application under r 16.21, they are not in doubt. The defendants have invoked two limbs. First, it is said that the amended statement of claim does not disclose a reasonable cause of action. Second, it is said that the amended statement of claim is likely to cause embarrassment. As to both grounds, Foster J conveniently set out the principles in Crowley v WorleyParsons Limited [2017] FCA 3 at [59] to [61] in the following terms:

In r 16.21(1)(d), a pleading is embarrassing if it is unintelligible, ambiguous, vague, evasive or too general with the consequence that the opposite party is “embarrassed” because that party does not know what is alleged against him or her (Fair Work Ombudsman v Eastern Colour Pty Ltd (2011) 209 IR 263). A pleading which is internally inconsistent is also embarrassing (Spiteri v Nine Network Australia Pty Ltd [2008] FCA 905).

A pleading is also embarrassing within the subrule if it simply asserts a conclusion to be drawn from facts which are not stated.

For the purposes of r 16.21(1)(e), the power to strike out a pleading because it discloses no reasonable cause of action will be exercised only in a plain and obvious case. Leave to replead will be refused if no reasonable amendment can cure the alleged defect and if there is no reasonable question to be tried (Polar Aviation Pty Ltd v Civil Aviation Safety Authority (2012) 203 FCR 325 at 337 [43] per Perram, Dodds-Streeton and Griffiths JJ).

35    The defendants argue that there should be summary dismissal because the plaintiff has no reasonable prospect of establishing that the PDS contained the pleaded Misleading PDS Representations (paragraph 21 of the amended statement of claim). It is said to follow that he has no reasonable prospect of successfully prosecuting any of the claims made in the amended statement of claim because establishing such representations is a necessary element of every claim against every defendant, namely:

(a)    the various claims pleaded against the first and second defendants and the directors (third to thirteenth defendants) in relation to the PDS in paragraphs 22 to 37;

(b)    the claims of continuous disclosure breaches pleaded against the second defendant, in paragraphs 40 to 44; and

(c)    the misleading or deceptive conduct claims pleaded against the second defendant in relation to announcements to the ASX between June and October 2015, in paragraph 45.

36    The defendants point out that paragraph 21 alleges that the PDS contained various representations relating to forecast financial information in the PDS. Each pleaded representation is expressed in terms of what the first defendant “would achieve” (sub-paragraphs (a), (b), (c), (d) and (f)) or “would have” (sub-paragraph (e)) or what the relevant percentage “would be” (sub-paragraph (g)). It is said that the representation pleaded in sub-paragraph (h) (“there was a reasonable basis for the making of each of the representations”) depends upon the proposition that the earlier pleaded representations were made.

37    Generally, the defendants contend that the PDS did not contain the pleaded representations. They contend that the pleaded representations are promissory in nature and that each is a representation to the effect that the first defendant “would” achieve a financial forecast. But it is said that none of the forecast financial information tables or the surrounding text state that the forecasts will be achieved. It is said that the plaintiff’s pleaded representations read words into the PDS that are not there. Further, it is said that the tables and surrounding text cannot be read in isolation from the PDS as a whole; rather they must be read in the context of other statements in the PDS.

38    The defendants point out that the PDS includes numerous statements which made clear that there was no representation that the forecasts would be achieved. They have made reference to the following examples:

(a)    on page 1, under the heading “Forward-looking statements”: “… the Responsible Entity and Murray Goulburn cannot and do not give any assurance that the results, performance or achievements express or implied by the forward-looking statements contained in this PDS will actually occur”;

(b)    on page 145, under the heading “7.2.3 Preparation of Forecast Financial Information”: “Events and outcomes might differ in amount and timing from the assumptions with a material consequential impact on the Forecast Financial Information”; and

(c)    on page 164, under the heading “7.11 Management discussion and analysis of the Forecast Financial Information”: “However, the actual results are likely to vary from those forecast and any variation may be materially positive or negative. … Accordingly, none of Murray Goulburn, its Directors or any other person can provide any assurance that the Forecast Financial Information or any prospective statement contained in this PDS will be achieved. Events and outcomes might differ in amount and timing from the assumptions with a material consequential positive or negative impact on the Forecast Financial Information.”

39    It is also said that within the PDS, statements such as these were just as numerous and prominent as the forecast financial information itself. It is said that these statements clearly disclaimed any promise that the forecast financial results would be achieved, and instead made clear that the actual results were likely to differ from the forecast results and that any difference could be material.

40    Further, it is contended that even leaving aside the disclaimers, the character of the relevant statements in the PDS is antithetical to the proposition that the pleaded representations were conveyed. It is said that they were self-evidently and by description forecasts — that is, statements of opinion as to future matters. As such, so it is said, they were not in the nature of promises, but rather the then best estimate of what might occur.

41    Moreover, it is said that the question of what representations were contained in the PDS must be approached from the perspective of an ordinary or reasonable prospective investor; extreme or fanciful reactions are to be disregarded. It is said to be fanciful for the plaintiff to contend that such a person would or would be entitled to treat the financial forecasts as promises and disregard the statements in the PDS to the contrary.

42    In summary, it is contended that the plaintiff has no reasonable prospect of successfully prosecuting the allegation that the PDS contained the pleaded representations. Accordingly, absent a proper foundation, he has no such prospect of prosecuting any of the pleaded claims in the amended statement of claim.

43    Now it is convenient at this point to address these contentions before proceeding to address an additional but related summary dismissal point concerning the case against the directors.

44    I am inclined to accept the defendants’ submissions that the pleading of the Misleading PDS Representations is manifestly defective and has no reasonable prospect of success. But this conclusion is based upon how the word “would” is used in paragraph 21 of the amended statement of claim. In my view, and despite the plaintiff’s protestations to the contrary, it seems to have been used in its promissory sense. Such a use is also consistent with the emphasis given by the plaintiff in paragraph 21A to the Misleading PDS Representations being “materially wrong”. Now true it is that in other parts of the pleading there are references to the absence of “a reasonable basis” and cognate expressions. But in my view the objective construction of the words used suggests that “would” is being used in a promissory or absolute sense.

45    Now the word “would” can be used in different senses. The word “would” is an auxiliary verb. Indeed it is in a sub-category thereof, being a modal verb. It has sometimes been described as a “modal auxiliary”. In some cases, “would” can be used in a predictive sense, but in other cases it may be used to connote some form of necessity, promise or absolute position. In the present case, one might have thought that the pleader of the amended statement of claim should have used the language “was expected to”, “was likely to”, “could” or “may” in place of the word “would” if what was intended was a more predictive non-absolute sense.

46    In my view, the claims have no reasonable prospect of success given that their foundation (i.e. the Misleading PDS Representations) cannot reasonably be made out if “would” has been used, which in my view it has been, in its more promissory or absolute sense. A detailed review of the text of the PDS, which I have carried out and which document is the sole foundation for the plaintiff’s pleas on this aspect, does not reveal from its express terms (or by necessary implication) representations of an absolute or promissory nature in the form with which they have been pleaded in the amended statement claim.

47    It is apparent from the face of the PDS that information set out therein concerning the 2015 and 2016 financial years were statements of a forward looking nature (i.e. forecasts) and were also qualified. For example:

(a)    On p 1, under the heading “Forward-looking statements”, reference is made to “best estimate assumptions”, that “risks and uncertainties” were involved, that any “forward looking statements [were] subject to various risk factors that could cause … actual results to differ materially from the results expressed or anticipated in these statements”, and moreover that such “statements are not guarantees of future performance …”. It was also said that forward looking statements had to be read with other parts of the PDS setting out risk factors and assumptions. Further, it was also said on p 1 that the first and second defendants “cannot and do not give any assurance the results, performance or achievements expressed or implied by the forward looking statements contained in this PDS will actually occur and investors are cautioned not to place undue reliance” thereon. It is also clear that the forward looking statements include “Forecast Financial Information” which is defined in section 7.1.2 to include the statutory forecast results and cash flows for the 2015 and 2016 financial years and the pro forma forecasts.

(b)    Chapter 7 of the PDS deals in detail with financial information. Sections 7.2.1, 7.2.3, 7.11 generally, and 7.11.1 and 7.11.2 specifically, contain similar qualifications on the various forecasts to that set out at the start of the PDS. It is not necessary to set these out in any detail.

(c)    Chapter 8 of the PDS is specifically devoted to discussing risks, whether the business risks of the first defendant (section 8.2), the structural risks of the Trust (section 8.3) or the general risks with an investment in units of the Trust (section 8.4). In particular, section 8.2.15 stipulated as follows:

8.2.15 Failure to meet forecasts

The forward-looking statements, opinions and estimates provided in this PDS, including the Forecast Financial Information, rely on various assumptions, some of which are described in Sections 7.11.1 and 7.11.2. Various factors, both known and unknown, may impact upon the performance of Murray Goulburn and cause its actual performance to vary significantly from expected results. There can be no guarantee that Murray Goulburn will achieve its stated objectives or that any forward-looking statement or forecast will eventuate.

48    Now none of these qualifications may in and of themselves deny the force of a representational or conduct case pleaded on forecasts (and an absence of reasonable grounds including any associated reliance upon s 769C(1)) if such forecasts were pleaded in the usual way instead of in promissory or absolute terms. But the very text of the PDS and the qualifications contained therein demonstrate that the plaintiff has no reasonable prospect of making out the Misleading PDS Representations in the form currently pleaded in the amended statement of claim. And such a conclusion removes the foundation for all of the plaintiff’s claims in the amended statement of claim.

49    I would make another point for convenience. Paragraph 21 also pleads a representation that “there was a reasonable basis for making each of the [other] representations”. In my view, I cannot say that such a representation has no reasonable prospects of success if the substantive representations otherwise had reasonable prospects of success. Indeed, as the plaintiff demonstrated by reference to the express text of the PDS (pp 142, 144 and 145), this could arguably be implied from other statements. Indeed it may arguably be implied more generally from other parts of the PDS text such as “best estimate assumptions” and the like. But this representation rises or falls with the substantive representations, which as I have said are pleaded in flawed terms.

50    Finally on this aspect of the case, the plaintiff has glibly asserted that the defendants have set up a false dichotomy between representations which are promissory and representations which are said to be statements of opinion or belief. I do not think that the defendants’ contentions can be so superficially disposed of. Accepting that representations can have that duality, and also accepting for the sake of argument that the plaintiff’s allegations include the latter dimension, the fact is that the allegations also plead or embrace the former dimension. And in my view that former dimension is simply unsustainable.

51    Should I summarily dismiss the plaintiff’s claims? In my view that would not be appropriate at this stage. The plaintiff has now put forward various proposed amendments to paragraph 21 which would remove the absolute and promissory dimensions of the representations as currently pleaded. Accordingly, it is appropriate to strike out the amended statement of claim in its entirety, but the plaintiff should be given an opportunity to replead (subject to any view I come to on the separate summary dismissal point concerning the directors, which I will discuss in a moment).

52    Now the defendants have submitted that even the proposed 18 August 2017 amendments and indeed those put forward during the hearing do not cure the difficulty. It is said that the proposed amendments to the representations in paragraph 21 put forward at the hearing still do not conform to the text of the PDS or take into consideration the qualifications and risks expressed in relation to forecasts in the PDS. Now that is true. But I cannot say that such a proposed case is unviable or has no reasonable prospects of success. It depends upon how the PDS may have been read by the reasonable potential investor. Questions of emphasis, degree, context and comprehensibility in relation to the qualifications stipulated in the PDS are questions for trial. In my view, no authority suggests that the plaintiff is required to plead the representations with all the qualifications that the defendants insist are necessary. Moreover, some parts of the PDS containing forecasts have no qualifications juxtapositioned with the forecasts (see pp 19, 48, 72, 84 and 85). Now it is one thing to say that the forecasts cannot reasonably be taken as promises as I have said. But it is another to say that they have to be pleaded with all of the qualifications. The defendants can deny the foreshadowed amended representations and set up any qualifications that they so choose in their defences. Of course at this stage I am not ruling on any final proposed paragraph 21 or denying the defendants the opportunity to make other pleading points on these foreshadowed amendments if they wish.

53    Let me turn to a separate but related summary dismissal point concerning the case alleged against the directors.

54    The amended statement of claim only pleads a narrow basis for the claims against the directors. The plaintiff alleges in paragraph 35 that “by reason of the matters alleged in paragraphs 9, 10 and 27”, the directors “each consented to the inclusion of the Misleading PDS Representations, being ‘consented material’ within the meaning of subsection 1021L(1) of the Act and to which section 1022B(1)(d) of the Act applies”.

55    Section 1022B deals with civil actions for loss or damage arising from specified breaches of the Corporations Act. Section 1022B(1)(d) provides that s 1022B applies in a situation where a person “gives consent to the inclusion of a statement in a Product Disclosure Statement … as mentioned in subsection 1021L(1) …”. The defendants contend that s 1022B(1)(d) is only engaged if a person has given a consent of the kind dealt with in s 1021L(1). Section 1021L(1) (extracted at [29] above) relevantly provides, in paragraph (a), that a person commits an offence if “they consent to the inclusion of a statement (the consented material) in a Product Disclosure Statement … as mentioned in paragraph 1013K(1)(a)” and, in paragraph (b), that inter-alia the “consented material” contains a misleading or deceptive statement. The defendants contend that the reference to s 1013K(1)(a) here is significant. It is said that s 1021L(1) is only relevantly engaged if the directors “consented” to the inclusion of statements in the PDS as mentioned in s 1013K(1)(a).

56    Section 1013K(1)(a) provides that a “Product Disclosure Statement must only include a statement made by a person, or a statement said in the Product Disclosure Statement to be based on a statement made by a person, if … the person has consented to the statement being included in the Product Disclosure Statement in the form and context in which it is included …”. The defendants contend that the language of this paragraph, which refers specifically to statements “made by a person” or statements said in the PDS to be based on statements “made by a person”, indicates that s 1013K(1)(a) does not apply to the entire contents of a PDS, but rather to specific statements made by, and attributed to, persons identified in the PDS as the maker(s) of the statements. It is said that this conclusion is supported by the extrinsic material to that section. Section 1013K was included in the Corporations Act by the Financial Services Reform Bill 2001 (Cth). The explanatory memorandum to that Bill explained at [14.111]:

The provisions envisage that the PDS may include statements that are attributable to particular people, for example auditors. However, such statements may only be included if the person to whom they are attributed has consented to the inclusion of the statement in the form and context in which it is included in the PDS (proposed section 1013K).

57    It is pointed out that consents of the kind contemplated by s 1013K(1)(a) can be found in the PDS in section 11.5.

58    The defendants contend that the amended statement of claim does not contain or support an allegation that the Misleading PDS Representations constituted statements that were made by any one or more of the directors, or statements said in the PDS to be based on statements made by any one or more of the directors, within the meaning of s 1013K(1)(a). It is said that the only pleaded connection between the alleged representations and the directors is the allegation in paragraph 10 of the amended statement of claim that before the issue of the PDS, each of the directors “read and authorised all of the statements in the PDS on behalf of both the first and second defendants”. It is said that the only particulars provided of that allegation is a reference to section 11.13 of the PDS, which stated: “The PDS is authorised by each director of the Responsible Entity who each consent to its lodgement with ASIC and its issue.”

59    The defendants contend that such a stipulation is not a consent of the kind referred to in s 1013K(1)(a). Rather it is said by the defendants to be a consent of the kind required by s 1015B(2). Section 1015B deals with the lodgement of a PDS with ASIC. Section 1015B(2)(a)(i) provides that the lodgement of a PDS with ASIC requires the consent of every director of the responsible person. Accordingly, so it is said, this type of consent is different to what is contemplated by s 1013K(1)(a). I am inclined to agree, but that is not to say that section 11.13 of the PDS together with other parts of the PDS cannot be used as part of a foundation to infer the necessary consent; s 1013K(1)(b) may not strictly have been satisfied, but I am of course (on the defendants’ argument) dealing with the consent referred to in s 1013K(1)(a), which is the provision referred to in s 1021L(1)(a) which in turn is picked up in s 1022B(1)(d)(i).

60    The defendants also point out that it must be borne in mind that s 1021L(1) creates an offence if a person consents, within the meaning of s 1013K(1)(a), to the inclusion of a statement in a PDS which proves to be misleading or deceptive. Accordingly, it is said that these consent provisions need to be strictly construed, and in favour of the directors’ construction to the extent of any ambiguity or uncertainty. But I would note at this point that one needs to be careful in seeking to finesse off an offence provision. There are more elements to the offence created by s 1021L than are picked up by the civil action provision of s 1022B(1)(d)(i), which latter provision expressly disregards s 1021L(1)(c). In the present civil summary dismissal context, I do not consider that the defendants’ “offence” point takes them far at all.

61    It is also said that a further reason that the allegation in paragraph 10 is incapable of supporting the plaintiff’s case is that he now wishes to allege that each of the directors read and authorised the statements in the PDS “on behalf of both the first and second defendants” rather than for themselves. Therefore, so it is said, the plaintiff does not allege in the amended statement of claim that the directors consented to the inclusion in the PDS of statements made by them, or statements said in the PDS to be based on statements made by them, in their own capacity. It is said that such an allegation would need to be made and established for the plaintiff to have any prospect of succeeding in holding the directors personally liable for statements in the PDS. That is, the plaintiff would need to plead and prove a specific, positive act by the directors by which they consented to the inclusion of statements in the PDS in a personal capacity, rather than on behalf of any corporate entity. It is said that the plaintiff does not and cannot do so.

62    In summary, it is contended that the plaintiff has no reasonable prospect of successfully prosecuting the allegation in paragraph 35 of the amended statement of claim and in particular the claim that s 1022B(1)(d) applies. Accordingly, it is said that the plaintiff has no reasonable prospect of establishing that any of the directors was a “liable person” within the meaning of s 1022B(3)(c) (paragraph 36) or that any of them is liable under s 1022B(2)(d) to pay compensation (paragraph 37) because each of those latter provisions in terms only applies if s 1022B(1)(d) applies.

63    Now the defendants have raised some interesting questions, but in my view summary dismissal has not been justified.

64    First, in the exercise of my discretion I would decline to grant summary dismissal in favour of the directors even if I considered that their point was such on the consent issue that the plaintiff had no reasonable prospects of success on this aspect. I say this because the plaintiff is now proposing to amend his claims against the directors to raise their alleged liability under ss 1022B(1)(c), 1022B(2)(c) and 1022B(3)(b)(ii) as persons involved in the preparation of the PDS. In other words, there is much less utility in granting summary dismissal on the consent question if the directors nevertheless need to deal with the claims on this alternative basis in any event. And no summary dismissal question has been raised concerning this proposed alternative basis. Moreover, the forensic inquiry under either limb of the bases upon which the claims are or are proposed to be put against the directors overlaps to some extent. In other words, there may be little practical value in granting summary dismissal on the consent limb even if I thought that it was otherwise justified.

65    Second, in terms of the relevant “consent”, there are statements and content in the PDS demonstrating that it cannot be said that there are no reasonable prospects of success in establishing the directors’ consent to the statements that could be reformulated by the plaintiff as amended representations. For example, the PDS is replete with references to “best estimate assumptions of the Directors”, references to “the Board” and conduct or statements attributed to it, reference to “Directors’ best estimate forecasts” (p 145), references to the Forecast Financial information having been prepared by the directors, references to the directors’ general and specific assumptions and the like, and generally the entirety of section 7.11 which seems to record the views and input of the directors and the assumptions adopted by them. Chapter 5 is also devoted to management including the directors. Further, there are implications arising from other statements in the PDS such as “[a]ny information … may not be relied on as having been authenticated by the Responsible Entity or its Directors” (inside front cover) and the stipulation in section 11.13 which I have already discussed. Now I accept that section 11.5 does not refer to consents from the directors. But that omission does not entail that the relevant consents cannot be inferred from other material. In my view it cannot be said that the plaintiff has no reasonable prospects of establishing the relevant consent. Finally, this is a forensic question that may require discovery and further examination, arguably making it less suitable for summary disposition.

66    Third, I do not accept that the defendants’ capacity argument (as described at [61] above) is so clear that I can deal with it summarily in their favour.

67    Fourth, in my view the defendants’ assertion that the precise statements in the text need to be identified for the purpose of then ascertaining whether there was consent is too narrow. Now I accept that, as the defendants rightly pointed out, in terms of the directors’ liability under ss 1022B(1)(d), 1022B(2)(d) and 1022B(3)(c), their relevant consent must be to the “inclusion of a statement” in the PDS. So the consent must be to a statement in the PDS, not a lawyer’s construct after the fact of a representation unless that is demonstrated to be a statement in the PDS. But the consent, if established, may be to the statement in the PDS but only with and in the context of all the other stated qualifications. In other words, it may be difficult to decontextualize any statement of a forecast from all the other caveats and qualifications attaching thereto, in terms of working out what the directors may have consented to. But for my part I do not consider that I can reasonably require the pleader to only use the express text of the PDS, with all of its qualifications, in formulating a statement the subject of the consent provisions. It will be a matter for the directors to deny that the PDS contained the alleged statements or that they consented thereto, so long as I am satisfied that it is reasonably arguable that the statements pleaded are in the PDS either expressly or by necessary implication. Moreover, one should not take a too narrow view of “statement”. After all, s 9 of the Corporations Act defines “statement” for the purposes of Chapter 7 as including “matter that is not written but conveys a message”. It is reasonably arguable that a statement in a PDS may either be directly made in the express text or be otherwise conveyed (as a message) from the express text, graphs, tables, charts etc.

68    In summary, I decline to grant summary dismissal on the consent question. The plaintiff will be given an appropriate opportunity to replead on this aspect as well.

Conclusion

69    The defendants’ summary dismissal application is refused. Nevertheless I will strike out the plaintiff’s amended statement of claim but refuse leave to replead in the form of the 2 June 2017 proposed amendments. I will give the plaintiff a further opportunity to replead.

Associate:

Dated:    25 August 2017

SCHEDULE OF PARTIES