Swiss Re International SE v David Simpson

1. [1]

   HIS HONOUR: Forge Group Ltd (Forge) was a publicly listed company which described itself as a multi-disciplinary Engineering, Procurement and Construction (or EPC) and Asset Management service provider, delivering end-to-end turnkey solutions in the power and infrastructure, minerals and resources, and oil and gas sectors in Australia, Asia, Africa and North America.

2. [2]

   According to its 2013 financial statements, as at 30 June 2013, Forge had net assets of over $213 million and had made a net profit after tax for that year exceeding $62 million.

3. [3]

   Yet, on 11 February 2014, Forge failed.

4. [4]

   Its shares went into a trading halt. Its securities were suspended from quotation. It was placed into voluntary administration.

5. [5]

   On 18 March 2014, its creditors appointed liquidators.

6. [6]

   At all times material to these proceedings, Mr David Michael Simpson, the first defendant, was Forge’s Managing Director and Chief Executive Officer.

7. [7]

   Simpson holds a Diploma of Law and a degree Masters of Law and Management. He worked in legal and corporate roles at corporations before joining Forge.

8. [8]

   Mr Donald James Montgomery, the second defendant, was its Chief Financial Officer. Montgomery was not a member of the board. He attended board meetings by invitation.

9. [9]

   Mr Andrew Bell, the third defendant, was the Executive General Manager of Finance. Until his resignation on 26 November 2013, Bell was the public officer of Forge. He was previously company secretary. He had many years of financial management experience in the mining, oil and gas and construction industries.

10. [10]

    Where I refer in this judgment to persons by their last names, I intend no disrespect.

11. [11]

    Swiss Re and QBE, the plaintiffs, are insurers and reinsurers.

12. [12]

    Assetinsure Pty Ltd (Assetinsure) is Swiss Re’s Australian agent and approved attorney. The relationship between Swiss Re and Assetinsure is governed by an underwriting agency agreement and a quota share reinsurance for surety business. Assetinsure acts as an insurer and reinsurer in its own right.

13. [13]

    Swiss Re, QBE and Assetinsure provide security bonds for clients, which secure performance of contractual obligations. These are an alternative to security over assets or bank guarantees. I will refer to these instruments as bonds.

14. [14]

    Forge, in joint venture with a Spanish company, Duro Felguera Ltd, had a substantial subcontract with Samsung C & T Corporation (Samsung) for the construction of an iron ore project in Western Australia known as Roy Hill.

15. [15]

    Under the Roy Hill Contract, Forge was required from time to time to put up security in the form of on-demand, unconditional, irrevocable bonds by an Australian branch of a bank or insurance provider.

16. [16]

    These proceedings concern bonds issued in favour of Samsung for the benefit of Forge in connection with the Roy Hill Contract as follows:

17. [17]

    The last of the bonds was thus issued less than a month before Forge’s demise.

18. [18]

    Section 18(1) of Schedule 2 to the Competition and Consumer Act 2010 (Cth) (the Australian Consumer Law) provides:

19. [19]

    References to sections are, unless otherwise stated, references to the Australian Consumer Law.

20. [20]

    Section 236(1) provides, relevantly:

21. [21]

    On 24 February 2014, Samsung called the bonds. Swiss Re paid Samsung $51,347,650. QBE paid Samsung $47,497,650.

22. [22]

    Swiss Re and QBE say that they were misled and deceived by Simpson, Montgomery and Bell into issuing the bonds. They sue them for damages under the Australian Consumer Law.

23. [23]

    Swiss Re received premiums for the bonds of $2,807,518.53 and has been paid $10,044,512.53 by the receivers from Forge assets realised. It claims as damages the amount it paid out, less what it has received, being $38,495,618.97.

24. [24]

    QBE received premiums of $2,328,529.93 and has been paid $10,044,512.53 by the receivers from Forge assets realised. It claims as damages the amount it paid out, less what it has received, being $35,124,607.57.

25. [25]

    I shall refer to Simpson, Montgomery and Bell collectively as the defendants.

26. [26]

    The fourth and fifth defendants, Ace and Allianz are insurers of the defendants under directors and officers insurance policies.

27. [27]

    Swiss Re and QBE sue those insurers directly pursuant to s 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW). Proceedings were also brought against the sixth defendant (Axis) but those are not pressed. I shall refer to Ace and Allianz as the insurers.

28. [28]

    This case is fact-heavy.

29. [29]

    The hearing occupied 21 hearing days.

30. [30]

    The Court Book is 30 volumes containing over 17,000 pages. The plaintiffs’ affidavits are extensive. The defendants served affidavits but did not read any.

31. [31]

    The Amended Commercial List Statement runs to 86 pages comprising 257 paragraphs. It is an instrument which does not conduce to the just, quick and cheap disposition of the real issues in this case. It contains numerous unnecessary definitions and cross-references. It repeatedly pleads misleading or deceptive conduct by pleading representations without pleading falsifications which correspond to those representations. [1] It contains lengthy factual narrative which has little role to play in the pleading of the case.

32. [32]

    Different complaints, sometimes overlapping, are made against different defendants. However, leaving aside the 15 November 2013 $3.85 million bond, the same loss is claimed from each of them because of different conduct complained of.

33. [33]

    Misrepresentations as to the solvency and non-disclosures as to the insolvency, or near insolvency, of Forge are asserted. However, save in a very limited way concerning 11 January 2014 – dealt with in detail later – all misrepresentations in relation to the solvency of Forge were abandoned. [2]

34. [34]

    In this List, whilst the Court does not operate as one of strict pleading, it is also not one of no pleading.

35. [35]

    Where plaintiffs, in a proceeding such as this, wish to make significant charges of misleading or deceptive conduct with potentially very significant consequences, it is incumbent on them to articulate their case with precision; see Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Limited (2010) 241 CLR 357 at 364-5 at [5]-[7]. [3]

36. [36]

    The problems of resolving the issues (both factual and legal) in a satisfactory fashion were exacerbated by a number of other things.

37. [37]

    The plaintiffs’ closing written submissions, including submissions supposedly in reply, run to 124 pages. They narrow the plaintiffs’ case in some respects, but impermissibly seek to change and expand it in others. Simpson, Montgomery and Bell repeatedly and justifiably complained about the attempted changes and expansions. The plaintiffs’ submissions do not deal with the complaints in the order in which they were pleaded. In some cases more than one claim is rolled up into one.

38. [38]

    The evidentiary material was presented by way of a haphazard non-chronological Court Book with numerous duplicates, particularly of email chains. The difficulties this puts in the way of reciting the facts in a comprehensible fashion are obvious. [4] During the hearing, I requested the plaintiffs to produce a comprehensive chronology of events backed up with evidentiary references, and where appropriate, with documents. A document purporting to meet this request was produced but it transpired to be nothing more than a chronological index to the Court Book. The plaintiffs then produced what was said to be a comprehensive and definitive statement of their case, factually and legally, in a document entitled ‘Plaintiffs’ Amended Outline of Closing Submissions’ and a document entitled ‘Plaintiffs’ Outline of Reply Submissions’. The result was that the defendants were, somewhat unfairly, presented with the final articulation of the plaintiffs’ case (sought impermissibly to be widened) at the tail of the proceedings. It puts the Court in the invidious position of having, in final judgment, to consider whether matters (including ones put in reply) are properly in contest.

39. [39]

    I have had regard to all the evidence, but I have only recited the facts which I consider to be necessary for the reader to understand why I have reached the conclusions I have reached.

40. [40]

    Many relevant communications took place across the time zone from Sydney to Perth. I have endeavoured to account for time zone differences and to place such communications in the order in which they were made and received.

41. [41]

    I have considered all the arguments but have not restated them.

42. [42]

    I refer below to ‘cashflows’. Unless the context otherwise indicates, these are a type of document usually entitled ‘Forge Group (Australian Operations) Consolidated Cashflow Forecast’, produced by Forge in a particular abbreviated form, usually incorporating a set of stated key assumptions.

43. [43]

    Cashflows were prepared by consolidating forecasts prepared for each of Forge’s divisions. Divisional forecasts were in turn prepared by consolidating cashflows for each of Forge’s projects. They were prepared by a team. Bell had the main responsibility for their preparation. He reported directly to Montgomery.

Events leading up to the 15 November 2013 $3.85 million bond

1. [44]

   In January 2012, Forge acquired an entity called CTEC Pty Ltd (CTEC). With this acquisition, came two construction projects involving power stations in Western Australia, the Diamentina Power Station (DPS) and the West Angelas Power Station (WAPS).

2. [45]

   As at 21 October 2013, Forge had a bond facility with Swiss Re for $100 million which was then drawn to $91.8 million. It asked Assetinsure (on behalf of Swiss Re) for an increase in the facility to $150 million. This was approved on 21 October 2013.

3. [46]

   Assetinsure expected its bond exposure to reduce by retirement of bonds to $85 million by 31 December 2013, by a further $9.4 million by 31 March 2014 and to $57 million by the end of 2014.

4. [47]

   As at 22 October 2013, Forge had a bond facility with QBE for $100 million which was then drawn to approximately $80 million. It expected that by April 2014, 50% of these bonds would be retired. Forge asked QBE for an increase to $125 million. This was approved on 22 October 2013.

5. [48]

   The acquisition of CTEC was not a wise one. By 3 November 2013, Forge knew that DPS and WAPS were a significant problem and were going to mulct it with massive losses. The loss estimates at that time were $50 million on DPS and $16 million on WAPS.

6. [49]

   Forge’s cashflow was affected to the point that it recognised that it may need an injection of funds either through a working capital loan or an equity raising. It sought advice from investment bankers Goldman Sachs and lawyers Herbert Smith Freehills (HSF) regarding various avenues to address its disclosure obligations and immediate cash flow concerns. The proposed equity raising project was given the name Project Fiat. A due diligence committee was formed.

7. [50]

   Such was the significance of the losses, that Forge’s Board of Directors resolved to request a trading halt of the company’s shares from the opening of trading on Monday 4 November 2013 and, if necessary, a suspension of trading on 6 November 2013. The Australian Stock Exchange (ASX) announced on 6 November 2013 that Forge’s shares were suspended from quotation pending the release of an announcement.

8. [51]

   Minutes of the due diligence committee of 9 November 2013 record that the preliminary view was that around $60 million would be required from the equity markets.

9. [52]

   On 11 November 2013, Forge requested the ASX to extend the suspension until it made a market announcement, which it anticipated would happen by 13 November 2013. Minutes of a board meeting on 11 November 2013 record a discussion about insolvency and the board needing to be satisfied that Forge had a reasonable expectation that it could pay its debts as and when they fell due.

10. [53]

    By 11 November 2013, Forge had withheld an amount exceeding $14 million from the Australian Tax Office (ATO), and therefore had defaulted in complying with its Pay As You Go Withholding (PAYGW) tax obligations by not paying.

11. [54]

    Forge instructed solicitors to approach the Australian Securities and Investments Commission (ASIC) to permit it to utilise the so-called ‘low-doc’ disclosure provisions in the Corporations Act 2001 (Cth) for its proposed equity raising, rather than having to issue a full prospectus which would take much longer. By 13 November 2013, however, ASIC had made it clear that no waiver would be forthcoming. This would cause a delay to the timetable in raising equity. Montgomery undertook to conduct a review of Forge’s ability to pay its debts as and when they fell due and to provide the board with a short term cashflow.

12. [55]

    Bell prepared cashflows and sent them to Montgomery and Simpson. He prepared one on 14 November 2013. From 22 November 2013 to 3 January 2014, it showed significant cash deficits, before borrowings, ranging on a weekly basis from a high on 29 November 2013 of -$34.4 million to a low on 3 January 2014 of -$5.7 million.

13. [56]

    Forge sought advice from KPMG, an accountancy firm, amongst others, on its solvency, on the basis of potentially raising money through an equity injection, trade sale or special situation debt raising. KPMG advised that Forge was not trading whilst insolvent as at 23 November 2013. Apparently, there had been discussions with an organisation called Anchorage, which might have been a source of equity. At a board meeting attended by management, management noted that Forge was fast running out of time and alternatives, and should request the bank to consider last resort scenarios.

14. [57]

    At all times material to these proceedings, Forge’s bankers were Australia and New Zealand Banking Group Ltd (ANZ). The individual at ANZ who had principal carriage of the relationship with Forge was Mr Greg Gardiner. Other ANZ personnel were Mr Isaac Rankin and Mr Dean Travis.

15. [58]

    Sometime before 5 November 2013, following a request by Forge for an extension of its overdraft facility and waivers of covenant breaches, ANZ appointed KordaMentha, an accountancy firm operating in corporate recovery, to engage with Forge on behalf of ANZ.

16. [59]

    At this time, Forge had various banking facilities with ANZ including revolving guarantee facilities of $80 million, a multi-currency cash advance acquisition facility for $39 million and a general working capital facility for $11 million.

17. [60]

    The board met on 14 November 2013. It noted that Simpson and Montgomery had met the previous night with KordaMentha on behalf of ANZ, who had indicated that ANZ would provide support to Forge as it worked its way through its short term liquidity concerns. The board received a paper from Goldman Sachs detailing two equity raising options. The minutes record:

18. [61]

    That day, Bell sent Montgomery an updated daily and weekly cashflow for the following eight weeks. Montgomery replied to Bell that it was likely that Mr Mark Mentha (of KordaMentha) would want to sit down with him the following day to analyse it to ensure its credibility. That cashflow showed a cash deficit as at 29 November 2013 of $33.8 million. Later that day, Bell sent cashflows to KordaMentha, Montgomery and Simpson.

Issue of the 15 November 2013 $3.85 million bond

1. [62]

   Forge needed two advance payment bonds in favour of Samsung under the Roy Hill Contract, one for $3.85 million and one for $6 million.

2. [63]

   On 14 November 2013, Forge applied to Assetinsure for the issue of a $3.85 million bond. At the time, Forge’s facility through Assetinsure had a limit of $100 million. The issue of a $3.85 million bond could be issued within the limit but an additional $6 million would exceed the limit.

3. [64]

   Assetinsure had an internal watchlist, called the Amber List, of companies which had a deteriorating credit position. On 15 November 2013, Assetinsure placed Forge on the list. The Amber List had risk classification categories of low, medium and high. Forge was placed in the high risk category.

4. [65]

   Mr Mark Coulson of Australian Contract Guarantee Services was Forge’s surety bond broker.

5. [66]

   Mr Peter Wedgwood was the Executive Director of (and an equity holder in) Assetinsure. Mr Andrew Calvert was Head of Surety at Assetinsure and Mr Damian Gorman was Head of Credit. Mr Andrew Sim was Senior Relationship Manager, Surety.

6. [67]

   On 15 November 2013 at 8am, the Forge board met. Simpson and Montgomery were present. Montgomery tabled a summary of the weekly consolidated cashflows for 10 weeks ending 10 January 2014, and noted that Forge was forecast to move to a negative cash position in the week ending 22 November 2013.

7. [68]

   At about 10:30am on 15 November 2013, a telephone conference took place between Calvert, Gorman, Coulson and Bell. Calvert and Gorman both gave evidence of it. The substance of the message which Bell conveyed is the same. Gorman’s version is:

8. [69]

   Gorman and Calvert were cross-examined, searchingly and at length. I have no reason to consider that they did anything other than give an honest account of their recollections and understandings. The same can be said of Sim, to whom reference is made below. Bell did not give evidence.

9. [70]

   Calvert gave evidence that Wedgwood had given conditional approval for the issue of the $3.85 million bond, subject to Calvert speaking first with Forge and collating information. Calvert knew that Bell was the Group Financial Controller and Head of Treasury and that he reported to Montgomery. He had known Bell for a number of years and says he gave a lot of weight to what he said. He says he took the decision to issue the bond based upon what Bell had told him.

10. [71]

    Gorman testified that Assetinsure had requested the call to ‘get comfort around the issuance of the bond’. He says that Bell did not indicate any concerns around insolvency.

11. [72]

    He says that the teleconference gave him comfort because he observed Bell as being forthright and candid in discussing the problems Forge faced and in giving an assurance that the problems had been addressed and that Forge had a readily available solution, namely a capital raising and the support being provided by ANZ. He says that based on the teleconference, he supported the issue of the bond. He says that he had a discussion with Calvert to the following effect:

12. [73]

    Gorman says that if he had been told that Forge was or was nearly insolvent or that there were concerns as to its solvency, he would not have supported the issue of any further bonds to Forge or an increase in Assetinsure's exposure to Forge. [5]

13. [74]

    On 15 November 2013, Swiss Re issued the $3.85 million bond in favour of Samsung.

The 28 November 2013 ASX announcement

1. [75]

   The board met on 16 November 2013. The minutes record the purpose of the meeting being to receive a progress update on the resolutions being sought with respect to concerns identified in relation to potential underperformance on the DPS and WAPS projects.

2. [76]

   The board met by teleconference early in the morning on 26 November 2013 for the purpose of receiving a progress update on the DPS and WAPS situation. Project Fiat was discussed. There had been extensive negotiations with an organisation called the M + W Group for a loan or possible scheme of arrangement, but at this point, no arrangement had been made. Simpson advised that ANZ had extended every concession possible to the M + W Group in an attempt to close the transaction. Management advised that it would now pursue a transaction with an organisation called Anchorage. Montgomery advised that based on cashflows which were continually being updated the company would have sufficient funds until the week ending 13 December 2013.

3. [77]

   Forge’s solicitor, Mr David John of HSF, took the board through ‘the usual steps to assess’ Forge’s solvency. The minutes record that in light of Forge’s tenuous position with its key customers and short term liquidity concerns, management had requested ANZ to extend further funds to Forge, and that ANZ had stated that its Credit Department had advised that under no circumstances could it advance further funds to Forge.

4. [78]

   The Chairman, Mr David Craig, noted the considerable concern of the board as to Forge’s ongoing solvency, and asked that John be in a position to advise the board as to the mechanics of voluntary administration should this be required.

5. [79]

   The board met again at 1pm that day. Gardiner and Rankin of ANZ, and Mentha and Mr Scott Langdon of KordaMentha joined the meeting at some point. The minutes record, amongst other things, the following:

6. [80]

   After the meetings, Bell received from Forge’s Statutory Reporting Manager, Ms Gabrielle Deane, a Forecast Tax Payment Summary which he forwarded to KordaMentha and Montgomery. It forecast that by the end of January 2014, Forge would owe the ATO $37,276,527.

7. [81]

   That evening, Bell sent Montgomery an updated cashflow which contained a key assumption that all payments of PAYG and BAS [7] (GST + FBT) [8] between the week ending 29 November 2013 to the week ending 31 January 2014 totalling $29.6 million, would be deferred.

8. [82]

   On that day, Bell resigned as Forge’s public officer. I do not consider that any relevant inference against Bell is to be drawn from this.

9. [83]

   Throughout 27 November 2013, Simpson was involved in the preparation of a draft ASX announcement dealing with the proposed new ANZ facilities.

10. [84]

    On 27 November 2013 at 1.38pm (Perth time), Bell provided a cashflow to Mr Glen Smith, Forge’s Company Secretary, with a copy to Montgomery. At 3.03pm (Perth time), Smith forwarded that cashflow to the board, including Simpson and Montgomery.

11. [85]

    At 4.30pm, the board met. Simpson and Montgomery were present. Simpson advised the board that ANZ’s proposal had received credit approval within ANZ.

12. [86]

    Simpson directed the release of the announcement to the ASX. Montgomery was at the meeting.

13. [87]

    Montgomery tabled an updated cashflow, noting that it had been prepared on the basis that Forge would defer $30 million of taxation, and that within the next week or two management would draft, with the assistance of HSF, appropriate documentation to obtain approval for this deferral from the ATO.

14. [88]

    The cashflow forecast cash shortfalls of $10.7 million with effect from the week ending 20 December 2013, and $3.3 million with effect from the week ending 17 January 2014. John noted that whilst there appeared to be a negative gap in the cashflow during the week ending 20 December 2013, this gap was capable of being filled should Forge proceed with ANZ’s proposal. Under the heading ‘Solvency Considerations’, the minutes record the following:

15. [89]

    The cashflow included as a key assumption, [9] the deferral of taxation totalling $29.6 million between 29 November 2013 and 31 January 2014.

16. [90]

    The board was informed that Anchorage had provided a very preliminary proposal, but that KordaMentha, who were reviewing the proposal, had advised that some terms would be highly unacceptable to the board.

17. [91]

    A draft ASX announcement was tabled. The board agreed that the final announcement would contain all matters not currently known to the market and would therefore be an effective ‘cleansing’ statement.

18. [92]

    On 27 November 2013, Simpson and ANZ signed a Facility Letter, [10] the effect of which was that the facility of $11 million (known as Facility D) was increased to $20 million. Additionally, ANZ agreed to make available a further and new overdraft facility of $40 million (Facility E) of which $10 million would be a sub-facility for six months, and of which $30 million would be made available as a 12 month sub-facility progressively in the amount of the face value of ‘Contingent Instruments’ (meaning, in effect, bank guarantees) nominated by the ANZ as and when they were returned to or cancelled by it, or were fully collateralised and supported by way of ‘back to back’ contingent instruments. [11]

19. [93]

    Under the Facility Letter ANZ agreed to waive certain events of default on conditions including that the increase in Facility D and the new overdraft facility could be provided in ANZ’s absolute discretion by way of a loan facility pursuant to s 560.

20. [94]

    On 28 November 2013, Forge made a market announcement. Its introductory heading is:

21. [95]

    In the introductory section, it announces that:

22. [96]

    The announcement contains the following section:

23. [97]

    After the announcement, Forge’s share price plummeted.

The 2 December cashflow

1. [98]

   Mr Jonathan Malone of Price Waterhouse Coopers (PWC) was Forge’s tax adviser. On 29 November 2013, Malone made contact with the ATO, on a no names basis, with a view to initiating discussions with the ATO about the extension of payment terms. Montgomery was made aware of this contact.

2. [99]

   On 29 November 2013, Bell sent a cashflow for the ten weeks ending 31 January 2014 to Coulson. It contained as a key assumption the deferral of tax totalling $29.6 million between 22 November 2013 and 31 January 2014. [12] This version of the cashflow was not given to Assetinsure or QBE.

3. [100]

   On 2 December 2013, Bell sent an email to KordaMentha attaching a cashflow dated 27 November 2013 with the deferral of taxation as a stated assumption. Cashflows with this assumption were also sent to Montgomery and Simpson and to the board. It showed a cash deficit of -$0.8 million as at 20 December 2013.

4. [101]

   However, on 2 December 2013, a different cashflow, omitting the tax deferral assumption, was sent by Bell to Coulson who sent it on to Sim. [13] During the proceedings, the parties referred to this cashflow as the 2 December 2013 cashflow.

5. [102]

   The 2 December 2013 cashflow projected a shortfall in total funds available of $0.8 million in the week ending 20 December 2013 and $3 million in the week ending 21 February 2014. It showed cash surpluses to meet obligations on a weekly basis from 15 November 2013 to 4 April 2014 and that Forge would have access to an additional $19 million of funding from ANZ by way of overdraft facility with immediate effect from the week ending 29 November 2013.

6. [103]

   The 2 December 2013 cashflow was emailed by Coulson to Sim on 5 December 2013.

The 3 December Assetinsure meeting

1. [104]

   On 3 December 2013, Gorman and Calvert, who had flown to Perth, met with Montgomery and Bell. Coulson and Gardiner were present. By all accounts Montgomery did most of the talking and Bell said little, if anything. Coulson spoke intermittently.

2. [105]

   Gorman’s account of the discussion is as follows:

3. [106]

   Calvert’s account is as follows:

4. [107]

   Montgomery did not give evidence.

5. [108]

   Gorman made notes during the meeting and prepared a written diary note after it. The diary note includes the following:

The 4 December 2013 cashflow

1. [109]

   At all material times, Mr Greg Brereton was Head of Global Risk Management for Credit and Surety at QBE. He was responsible for leading and managing QBE’s Global Risk Management team in relation to its Credit and Surety business. He left QBE in July 2015.

2. [110]

   On 3 December 2013, Bell emailed Coulson a 2014 forecast profit and loss statement, balance sheet and a cashflow (in a more detailed form than the usual cashflow) covering the period October 2013 to June 2014. This form of cashflow was sent by Coulson to QBE on 3 December 2013 and to Assetinsure (Sim) on 4 December 2013. [14] Sim sent it on to Calvert and Gorman. During the proceedings the parties described this cashflow as the 4 December 2013 cashflow. It was reviewed by Brereton.

3. [111]

   The 4 December 2013 cashflow forecast positive ‘headroom’ from October 2013 to June 2014 taking into account $30 million to be obtained from the ANZ facility. As at January 2014, total group headroom on this basis is shown as $28.59 million. It makes no reference to deferral of tax payments.

4. [112]

   Shortly after Sim received the 4 December 2013 cashflow, he phoned Coulson and requested to be given the assumptions behind it.

5. [113]

   There are in evidence, various other cashflows prepared around this time (known, the evidence shows, to Bell and in some cases Montgomery) which broadly show the same result as at the end of January 2014. However, these seem invariably to identify the deferral of taxation payments as a key assumption. It seems clear that the detailed version has this assumption, but it is not stated.

6. [114]

   There is in evidence an exchange of emails between Montgomery and Bell on 4 December 2013 which reveals their understanding that access to the additional $30 million component of the ANZ facilities was dependent on the conversion of bank guarantees issued by ANZ in connection with DPS to surety bonds.

7. [115]

   As is mentioned earlier, the 2 December 2013 cashflow was sent by Coulson to Sim on 5 December 2013.

The 6 December 2013 QBE meeting

1. [116]

   Brereton wished to discuss Forge’s position directly with Forge representatives.

2. [117]

   On 6 December 2013, he and a number of other QBE personnel, including Wright, met Simpson, Montgomery and Bell in Perth. Coulson was present, as were representatives of ANZ and KordaMentha. This was the first time Brereton met with Forge executives and Coulson. Simpson did most of the talking. According to Brereton, the conversation was to the following effect:

3. [118]

   Wright made a handwritten note of the meeting, which contains the following recording:

4. [119]

   Brereton was cross-examined at length. He had a comprehensive grasp of all aspects of the matter. He was careful and considered, albeit a trifle longwinded. By the time of the hearing he no longer worked for QBE. Simpson did not give evidence.

5. [120]

   On 6 December 2013, Malone sent a letter to the ATO seeking a further period of time to make a full submission to the ATO concerning tax deferral, given that in his discussions with the ATO to date, the ATO had asked for Forge to provide a response by 9 December 2013.

6. [121]

   On 9 December 2013, Ripp of PWC (who seems to have reported to Malone) followed up the ATO to seek a response to the 6 December 2013 letter that Malone had prepared and sent. The ATO informed Malone that it had received the letter and the relevant team within the ATO would be briefed on the issue and that ‘no information is required today’. Ripp updated Forge as to the position.

7. [122]

   On 9 December 2013, Sim emailed Coulson raising a number of queries, including with respect to the shortfall of $800,000 shown in the 2 December 2013 cashflow for the week ending 20 December 2013. Coulson responded stating ‘I’ll get the latest cashflow for you this morning along with the Roy Hill info’.

8. [123]

   On 9 December 2013, Bell provided a cashflow dated 6 December 2013 to Coulson. That cashflow included the assumption of deferral of taxation payments. It showed a cash flow deficit of $1.6 million in the week ending 20 December 2013.

9. [124]

   Coulson responded: ‘This one is worse! Can you give me a smoothed out [15] one wit (sic) appropriate commentary on the bottom?’

10. [125]

    On 10 December 2013, Sim emailed Coulson repeating his request for information which addressed the cash flow deficit in the 2 December 2013 cashflow.

The 12 December Assetinsure meeting

1. [126]

   Wedgwood wanted to meet with the Forge executives to obtain an update on Forge’s financial position directly from Simpson and Montgomery.

2. [127]

   On 12 December 2013, Wedgwood, Gorman, Calvert and Sim met with Simpson, Montgomery and Coulson. Simpson did most of the talking. Montgomery hardly spoke.

3. [128]

   Wedgwood’s account of the conversation is as follows:

4. [129]

   As with the other witnesses, I have no reason to believe that Wedgwood gave anything but an honest recollection. He was restrained in his responses under cross-examination. He made concessions where appropriate. He clearly had a good grasp of the relevant issues.

5. [130]

   Sim’s account of the conversation is as follows:

6. [131]

   Gorman’s account of the conversation is as follows:

7. [132]

   Calvert’s account of the conversation is as follows:

The 12 December 2013 cashflow

1. [133]

   On 13 December 2013, Sim emailed Coulson indicating that Assetinsure’s submission to Swiss Re was being finalised, and asking for a cashflow to 30 April 2014, as had been requested at the meeting on 12 December 2013.

2. [134]

   Coulson sent that request to Bell who then sent an email to Coulson attaching a cashflow dated 12 December 2013, stating that appropriate assumptions have been shown in the cashflow for assistance to readers.

3. [135]

   The 12 December cashflow projected a shortfall in total funds of $0.7 million in the week ending 21 February 2014, but otherwise provided for weekly cash surpluses from 15 November 2013 until the week ending 4 April 2014, assumed a deferral of Forge’s taxation liabilities (but did not state it as an assumption), and indicated that Forge would have access to an additional $19 million of funding from ANZ.

4. [136]

   Coulson forwarded the 12 December 2013 cashflow to Sim and to Wright.

5. [137]

   The 12 December 2013 cashflow was considered by Brereton, Calvert, Gorman and Mr Pius Leupi who was at all material times Swiss Re’s Senior Underwriter for Credit and Surety in Zurich, Switzerland.

6. [138]

   At around the same time, Bell provided KordaMentha and the board with versions of cashflows which contained the stated assumption of deferral of taxation payments.

The Swiss Re Risk Underwriting submission – 13 December 2013

1. [139]

   Following the 12 December 2013 meeting, Calvert and Gorman sent a memorandum to Leupi describing its subject as Forge Planned Strategy. The memorandum said of the Roy Hill Contract that they have a good margin and would allow Forge to recover from the write-offs against the DPS and WAPS contracts. The memorandum said that if bonds were not made available, Forge would forfeit these contracts with the probable outcome that ANZ could withdraw future support. The first proposal mooted was that Swiss Re and QBE share the issue of the bonds in equal proportion i.e. $46 million each. The memorandum was also signed by Sim and Wedgwood.

2. [140]

   Sim then prepared a comprehensive Risk Underwriting submission dated 13 December 2016 for Swiss Re. It recommended Swiss Re's approval to maintain the Forge facility limit at $100 million and in addition:

3. [141]

   Under the heading ‘Security’, the submission stated:

4. [142]

   The 13 December 2013 submission stated that ‘ANZ has solved the Group’s immediate liquidity needs by increasing its working capital facility’.

5. [143]

   At the time, Forge’s facility limit with Swiss Re was $100 million, of which it had drawn $70.587 million. The submission recorded that the substantial balance sheet backing which underpinned Swiss Re’s prior unsecured position, no longer existed and that Swiss Re was now reliant for comfort on their view of Forge’s WIP/order book, in particular, the Roy Hill Contract to stabilise the company by rebuilding the capital base via retained earnings along with a further equity injection.

6. [144]

   Under the heading ‘Cashflow’, the submission stated the following:

7. [145]

   The submission was signed by Wedgwood, Gorman, Calvert and Sim.

8. [146]

   On 13 December 2013, Sim sent the submission to Leupi and Calvert.

9. [147]

   Between 14 December 2013 and 18 December 2013, there were email communications between Leupi on the one hand and Sim and Calvert on the other in which Leupi asked for and was provided with additional information.

10. [148]

    Leupi informed Calvert that the issue of the $6 million bond was within the automatic delegated authority of Assetinsure.

11. [149]

    On 19 December 2013, Swiss Re issued the $6 million bond in favour of Samsung.

12. [150]

    On 20 December 2013, Sim emailed Leupi requesting Swiss Re's approval to increase Forge's bonding facility limit with Assetinsure from $103 million to $119 million to accommodate the issue of bonds in the sum of $41,497,500.

13. [151]

    On 23 December 2013, Calvert emailed Leupi requesting that Swiss Re provide approval to increase Forge's bonding facility limit with Assetinsure from $103 million to $119 million.

14. [152]

    On 23 December 2013, Leupi emailed Calvert stating that Swiss Re would ensure that there would be capacity to issue the bonds by mid-January 2014.

15. [153]

    On 24 December 2013, Leupi made a decision to approve the submission and permit the issue of bonds on a shared basis with QBE. Leupi then referred the matter to Mr Adrian Kaerle, Swiss Re’s Managing Director, Head of Credit and Surety for a second approval, which was approved and received that day.

16. [154]

    On 30 December 2013, Forge announced to the market that Samsung had provided formal notification to proceed with Phase 3 works for the Roy Hill Contract, and that the value of the contract attributable to Forge was approximately $830 million.

17. [155]

    On 1 January 2014, Leupi emailed Calvert confirming Swiss Re’s approval.

18. [156]

    On 7 January 2014, Sim emailed Leupi seeking Swiss Re's approval of the issue of two bonds each for an amount of $20,748,825 for phase 3 of the Roy Hill Contract. Leupi gave that approval.

19. [157]

    Leupi gave evidence that shortly after 28 November 2013 he read the 28 November 2013 announcement (the announcement). He says that in reviewing the announcement, he noted that the ANZ facilities would solve Forge’s liquidity issues, and that in approving the December 2013 submission, one of the factors he considered was that the ANZ facility had solved Forge’s liquidity issues.

20. [158]

    Wedgwood gave evidence that he reviewed the announcement at the time and noted that the support from the ANZ solved Forge’s liquidity issues and in supporting the 13 December 2013 submission and the decision to issue the January bonds the key factors he relied upon included that ANZ was supportive of Forge and provided the additional working capital to meet its liquidity needs.

21. [159]

    Sim gave evidence that he reviewed the announcement and had regard to the fact that it said that ANZ would provide $60 million. A key factor which he regarded as supporting the issue of the January bonds was that the ANZ facilities solved Forge’s liquidity issues.

22. [160]

    Calvert gave evidence that in approving the 13 December 2013 submission, and the release of the January bonds, key factors included the contents of the announcement.

23. [161]

    Gorman gave evidence that in approving the 13 December 2013 submission, he had regard to the contents of the announcement.

The ATO

1. [162]

   On 6 December 2013, Malone of PWC wrote to the ATO requesting until Friday 13 December 2013 for Forge to provide a response on its tax obligations.

2. [163]

   On 13 December 2013, Forge, under the signature of Montgomery, wrote to the ATO, proposing a repayment plan to ‘assist it to work through its liquidity issues and emerge as a profitable entity in due course’.

3. [164]

   The letter proposed monthly payment amounts starting in March 2014 and ending in August 2015, totalling $37,269,668.

4. [165]

   The letter included cashflows for the period from 1 November 2013 to 30 June 2014 at Appendix C, and for the period from 1 July 2014 to 30 June 2015 at Appendix D. The letter included the following statements:

5. [166]

   The letter stated that by way of a ‘goodwill’ payment, Forge would make a payment of $200,000 within 3 business days of the date of the request.

6. [167]

   On 6 January 2014, the ATO sent an email to PWC (copied to Mr Adriano Leon, Forge’s Group Tax Manager) which said, relevantly:

7. [168]

   Leon forwarded it to Montgomery and Bell, adding:

8. [169]

   On 6 January 2014, Malone emailed the ATO stating, relevantly:

9. [170]

   Leon forwarded the email to Montgomery and Bell.

10. [171]

    On 7 January 2014, Montgomery emailed Simpson asking him to call him about the discussions between PWC and the ATO, and referring to the possibility of Director Penalty Notices (DPNs).

11. [172]

    On 7 January 2014, Bell emailed Langdon and Malone (copied to Montgomery):

12. [173]

    On 8 January 2014, Malone prepared a memorandum to update on discussions with the ATO regarding Forge’s outstanding tax liabilities. Malone reported that the ATO was entitled to issue DPNs to company directors where a company has an outstanding PAYGWT obligation.

13. [174]

    On 8 January 2014, Malone emailed Montgomery and Bell, relevantly:

14. [175]

    On the morning of 9 January 2014, the director of the ATO Strategic Recovery Team advised Forge that the ATO would not accept any further PAYGWT deferral, or discussions with regards to existing deferred liabilities unless the appropriate security or payment for existing liabilities circa $15 million was offered by Forge immediately. DPNs were being drawn and were proposed to be issued to all Forge and subsidiary directors by 14 January 2014. Montgomery reported this, amongst others, to Gardiner and Simpson that day.

15. [176]

    The board met on 9 January 2014. Simpson advised that he had called the meeting predominantly to update the board on Forge’s cash flow position, certain projects, and discussions with the ATO concerning Forge’s outstanding PAYGWT liabilities. Simpson chaired the meeting. Montgomery was present.

16. [177]

    Under the heading Projects and Cashflow Update, the minutes include the following recording: [17]

17. [178]

    The cashflow tabled at the meeting was sent by Bell to Montgomery on 8 January 2014. It forecast for the ten weeks ending 31 January 2014. It shows negative cash flow from the week ending 17 January 2014 until the end of the forecast period, ranging from –$4 million on 7 March 2014 to –$65.7 million on 21 February 2015. It is negative –$17.3 million for the week ending 17 January 2014.

18. [179]

    Under the heading ‘Outstanding Taxation Liabilities’, the minutes record that Malone joined the meeting and the board received and discussed his 8 January 2014 memorandum. The minutes record:

19. [180]

    Under the heading ‘Cashflow and Next Steps’, the minutes include the following:

20. [181]

    After the meeting, Langdon emailed Montgomery as follows:

21. [182]

    Ultimately, as appears later, a binding instalment payment arrangement was entered into with the ATO on 31 January 2014.

The QBE Credit and Surety submission – 16 December 2013

1. [183]

   At all material times, Brereton was a member of QBE’s Group Credit Committee.

2. [184]

   On 16 December 2013, Brereton received from Mr Greg Randall, a Credit Analyst with QBE, a Credit and Surety submission.

3. [185]

   The submission referred to and attached the 28 November 2013 announcement.

4. [186]

   Prior to receiving the submission, Brereton had a number of conversations and meetings with Randall and Mr Greg Wright, QBE’s National Underwriting Manager, Surety. Brereton, Randall and Wright discussed the recommendation and in particular whether to recommend an increase in Forge's facilities to provide capacity for QBE to issue bonds for the Roy Hill Contract.

5. [187]

   The submission proposed an increase in Forge's facility limit to $145 million from $115 million (comprising an increase from $100 million to $130 million in respect of the surety facility limit with the trade credit facility limit remaining at $15 million) and recommended Forge's risk rating be reduced from a level 9 to a level 7.

6. [188]

   The submission referred, amongst others, to the 6 December 2013 meeting. It referred to the 28 November 2013 announcement and the ANZ’s agreement to provide further support through new facilities and amendments to existing facilities. It recorded that Forge had stated that the new facilities would solve the liquidity issues and strengthen the Group’s balance sheet. It described the amendments to facilities as including an increase in working capital facility, resulting in an increase to the total working capital facility size from $11 million to $60 million, with $30 million available immediately and the balance available progressively as performance guarantees are returned or cancelled. It referred to the 4 December 2013 cashflow and ‘noted that these are worst case numbers’.

7. [189]

   The proposed higher facility limit required QBE to secure reinsurance in accordance with its internal requirements. Brereton sought special acceptance from QBE’s reinsurers.

8. [190]

   Brereton supported the submission. There was, however, not unqualified support for it.

9. [191]

   Mr Eric Van Heyst, Vice-President and Senior Credit Officer Trade Credit and Surety, QBE North America, took a different view. On 17 December 2013, Van Heyst wrote, amongst others, to Randall, Brereton and Wright saying that he did not support ‘the issuance of additional bonds until we have an understanding of what the deal with the bank and the other insurer is with the Roy Hill Contract (share in security is a bit vague)’. He recorded that he was ‘not a fan of this company’ because of, amongst others, ‘lack of transparency, lack of solid due diligence on the company and the projects they acquired, reliance on one bank, limited and tight liquidity’.

10. [192]

    Brereton responded in detail on 17 December 2013. He noted that based on the information provided by Forge, Forge had the ability to exit the problem contracts within the indicated time and budget, Forge had confirmed that there were no further provisions to emerge from other contracts or other acquisitions, a form of security would be put in place for the bonds to be issued in respect of the Roy Hill Contract, and the Roy Hill Contract, under which the bonds were shortly required, would add value to Forge over the upcoming two to three years. He referred to recovery of bonds (QBE, Assetinsure and Chubb) as key.

11. [193]

    On 17 December 2013, Van Heyst emailed Brereton confirming that he would approve the 16 December 2013 submission.

12. [194]

    Brereton gave the following evidence: he reviewed the 28 November 2013 announcement at the time, and noted in particular that the ANZ facilities would provide sufficient facilities to cover Forge’s liquidity challenges, and would solve Forge’s liquidity issues and strengthen its balance sheet; he understood the 28 November 2013 announcement to assert that with the assistance of ANZ, Forge had the ability to continue as a going concern; and in approving the QBE 16 December 2013 submission, he relied on the information contained in the announcement, including that ANZ’s funding had solved Forge’s liquidity problems.

The 19 December 2013 $6 million bond

1. [195]

   On 19 December 2013, Swiss Re issued the $6 million bond in favour of Samsung.

Events leading to the 11 January 2014 cashflow

1. [196]

   On 8 January 2014, Coulson emailed Bell, relevantly:

2. [197]

   On 10 January 2014, the ASX announced to the market that the securities of Forge were to be placed in trading halt pending an announcement, until the earlier of the commencement of normal trading on Tuesday 14 January 2014 or the making of the announcement.

3. [198]

   A number of significant communications occurred on Friday 10 January 2014.

4. [199]

   Wright wrote to Coulson asking him to ensure that Forge was fully apprised of QBE’s position (namely that until QBE was apprised in writing off the scope of the additional write-off, it would give no consideration to releasing the bonds whilst the trading halt was in place). Wright also requested that Coulson arrange a time with Simpson for Brereton to call Simpson.

5. [200]

   There was a telephone call between Calvert and Sim of Assetinsure, Wright, Brereton and Sutherland of QBE, and Gardiner of ANZ. During this telephone call, Gardiner referred to the ‘ATO issue’ and said that ‘Korda reckoned [it] can be managed’. Gardiner also said that ANZ was taking a pragmatic view and would continue to support Forge, and ‘will await additional info over the weekend’. Brereton indicated that until the trading halt was lifted, no bonds would be issued, and that certainty was needed as to what Forge’s position would be.

6. [201]

   Brereton considered that it was necessary to obtain confirmation from Simpson that the taxation liability would not impact on the viability of Forge or materially change any of the information that QBE had previously been given. Brereton told Coulson that he needed a revised cashflow and to hear from Simpson directly.

7. [202]

   At 1:39pm (Sydney time, 10:38am Perth time) Sim emailed Leupi:

8. [203]

   Wright emailed Coulson:

9. [204]

   Coulson responded:

10. [205]

    At 1:37pm (Perth time, 4:37pm Sydney time), Simpson sent an update to the board (copied to Montgomery) stating, relevantly:

11. [206]

    Simpson wrote to Coulson (who forwarded his email to Sim and Wright), telling him of a potential further profit downgrade on the WAPS Project of $10 million to $20 million, and that he hoped to be in a position to recommend to the board that Forge recommence trading on Tuesday, 14 January 2014.

12. [207]

    Coulson emailed Simpson, Montgomery and Bell conveying his understanding of the then current position of QBE and Assetinsure. His email included:

13. [208]

    Wright forwarded Simpson’s email to Brereton with the message:

14. [209]

    Wright emailed Sim, ‘Andrew … a bit higher than the AUD 10-12m that was indicated early today’, and Sim replied: ‘Yes I was told 8m - 12m in additional costs’.

15. [210]

    Brereton wrote to Wright, relevantly:

16. [211]

    Wright responded:

17. [212]

    At 2:36pm (Perth time, 5:36pm Sydney time), Coulson informed Simpson and Montgomery that the surety providers had requested an updated cashflow.

18. [213]

    Sim sent an email to Wedgwood and Calvert in which he notified them of the trading halt. Sim’s email included:

19. [214]

    Wright wrote to Brereton:

20. [215]

    Bell sent Montgomery the following cashflow at 5:57pm (Perth time, 8:57pm Sydney time):

21. [216]

    At 8:09pm (Perth time, 11:09pm Sydney time), Coulson wrote to Simpson and Montgomery:

22. [217]

    Saturday 11 January 2014 too was a very busy day for the relevant protagonists.

23. [218]

    Langdon of KordaMentha sent an email to various ANZ personnel including Gardiner, copied to Mentha and others from KordaMentha, providing an update. It recorded that the board remained ‘concerned of solvency (and therefore an administrator appointment) if the bond-swap cannot be confirmed by Monday (13 January 2014) and the cashflow forecast shows a deterioration over the immediate term’. He wrote: ‘as noted below, the bond-swap is yet to be confirmed and there are challenges to making it happen’. Under the heading ‘DPS and bond-swap’, Langdon wrote the following:

24. [219]

    At 1:10am Sydney time, Leupi responded to Sim’s 1:39pm email:

25. [220]

    Wright sent an email to Coulson:

26. [221]

    Coulson responded:

27. [222]

    Wright wrote to Coulson and Sim:

28. [223]

    As to the proposed ATO deferral plan, Malone reported to Bell and Montgomery on the morning of 11 January 2014:

29. [224]

    At 1:45pm (Perth time, 4:45pm Sydney time), Montgomery sent an email to Coulson attaching a cashflow. This cashflow differed from previous cashflows in that it contained the following assumption:

30. [225]

    The effect of this inclusion was to add an additional $30 million to total funds available. Without this, the total funds available would have been negative from week ending 17 January 2014, as per the cashflow prepared on 10 January 2014 by Bell.

31. [226]

    Minutes later, Montgomery sent an email to Simpson attaching this cashflow with the message:

32. [227]

    Montgomery sent a further email to Coulson and Langdon stating, relevantly:

33. [228]

    In the attached cashflow, assumption (u) was revised by the deletion of the words, ‘arising from DPS swap out of bank guarantees for bonds’.

34. [229]

    At 2pm (Perth time, 5pm Sydney time) the board met. Simpson and Montgomery were present.

35. [230]

    Craig, the Chairman, advised that the purpose of the meeting was to provide an update to the board on matters including Forge’s outstanding PAYGW taxation liabilities with the ATO.

36. [231]

    On the subject of ‘Outstanding Taxation Liabilities’, the minutes record:

37. [232]

    On the subject of ‘Projects and Cashflow Update’, the minutes include:

38. [233]

    At 2:29pm (Perth time, 5:29pm Sydney time), Brereton emailed Simpson stating:

39. [234]

    Later, he emailed Wright and Sutherland stating:

40. [235]

    On the same day, at 10:13pm, Coulson emailed Sim and Calvert stating:

The 11 January 2014 cashflow

1. [236]

   At 3:01pm Perth time (6:01pm Sydney time), Bell sent a cashflow to Montgomery. That cashflow included an assumption that the additional $30 million from ANZ would be available and included assumption (u) in the following form:

2. [237]

   Simpson responded to Brereton’s email, indicating that he would call Brereton at around 6pm Perth time (9pm Sydney time).

3. [238]

   Bell sent a copy of the cashflow to KordaMentha.

4. [239]

   At 4:20pm (Perth time, 7:20pm Sydney time) Coulson sent an email to Wright of QBE and Sim of Assetinsure attaching the cashflow which Montgomery had sent to Coulson. This is the cashflow which the parties refer to as the 11 January 2014 cashflow. It was in the following black and white form. (There was some debate during the hearing about whether those who read it could discern from the shading which of the assumptions were identified as being on track/likely or possible problem or timing issue. I find that they could.)

5. [240]

   As will be observed, it included a number of key assumptions coded respectively as to their anticipated likelihood – ‘on track/likely’, ‘possible problem or timing issue’ and ‘cashflow detriment realised or expected’.

6. [241]

   Assumption (d), categorised as ‘on track/likely’, was:

7. [242]

   Assumption (u), also categorised as ‘on track/likely’, was: ‘$30M of additional s 560 Overdraft available via ANZ from W/E 30/1’.

8. [243]

   Sim responded with a number of questions. Coulson replied that he would pass it on to Montgomery and suggested that they would get the response the following day. Coulson added that ‘for what it was worth, ANZ, KordaMentha and the board met and they were comfortable that this is a baseline version with some opportunities in it for improvement and that it may be worth having a call with Gardiner’.

9. [244]

   At 8:37pm (Sydney time, 5:37pm Perth time) Sim emailed Calvert attaching the 11 January 2014 cashflow, making a number of comments including, ‘in relation to the proposed repayment plan over 18 months was not agreed to by ATO’.

Simpson speaks to Brereton – Saturday evening, 11 January 2014

1. [245]

   At about 9pm Sydney time on 11 January 2014, Simpson called Brereton. The conversation as recounted by Brereton (which is not in dispute) is set out below.

2. [246]

   The conversation was preceded by the following communications.

3. [247]

   Earlier, Wright had told Brereton that Forge had promised an updated cashflow later that evening and that he would make sure Brereton got a copy. He told Brereton that Coulson had mentioned that there may be an ATO liability that was going to be deferred when a payment plan was executed.

4. [248]

   Given the impending deadline to issue the January bonds, Brereton wanted to speak to Simpson. He emailed Simpson asking him to call. Simpson said he would phone at 6pm Perth time (9pm Sydney time).

5. [249]

   Brereton received the 11 January 2014 cashflow by email at 7:59pm Sydney time under cover of an email from Wright in which Wright said:

6. [250]

   Brereton responded almost immediately (eight minutes later):

7. [251]

   At 8:18pm Sydney time, Brereton received an email from Wright forwarding the following email Wright had received from Coulson shortly before:

8. [252]

   In his forwarding email, Wright added:

9. [253]

   Of the 11 January 2014 cashflow, Brereton says that he noted and recorded that: it did not project any short fall in ‘total funds available’ for any week in the period covered and indicated that there were surplus ‘total funds available’ to Forge for the period through to the week ending 4 April 2014; the cash position forecast was stronger than the forecast in the 4 December cashflow and for some weeks there was materially greater cash available than forecast in the 12 December cashflow; the final $30 million under the ANZ facility would become available from 31 January 2014; Forge had or would have a tax liability of $35 million over the period 28 November 2013 to 28 February 2014; Forge had proposed a payment plan and schedule of payment in respect of the tax liability; it indicated that the payment schedule proposed had not been agreed by the ATO; it indicated by the colour coded key that whether the ATO would agree to the payment plan was ‘on track/likely’, being the highest level of certainty; it indicated that there was sufficient cash flow to pay the ATO the $35 million in a shorter period than the proposed 18 month deferral and by the week ended 31 January 2014; and it indicated that there was room for some supplier stretch. [18]

10. [254]

    At about 8:30pm Sydney time, Brereton had the following conversation with Gardiner of ANZ:

11. [255]

    After the conversation, Brereton sent a summary of it by email to Wright in the following terms:

12. [256]

    Simpson called Brereton at the arranged time of 9pm. The following conversation took place:

13. [257]

    After the conversation, Brereton sent the following email to Wright at 9.39pm Sydney time:

14. [258]

    Brereton says that as a result of his conversation with Simpson, he understood that there would be no difficulty in Forge formalising arrangements with the ATO. He says that if there had been a significant issue with the ATO, he would have expected it to have been announced to the market in accordance with Forge's continuing disclosure obligations. He says the 11 January 2014 cashflow had made it clear that the payment schedule was ‘on track/likely’ and there was no issue, which Simpson confirmed. He suggested that had Simpson advised him that there were any issues with the ATO agreeing to a payment plan, or intimated that it was unlikely that the ATO would agree a payment schedule or would require security, he would not have proceeded to issue the January bonds.

15. [259]

    He gave oral evidence that he would have gone back to QBE’s reinsurers.

Sunday 12 January 2014

1. [260]

   Communications between the relevant protagonists continued over Sunday 12 January 2014. These included the following.

2. [261]

   At 11:10am Sydney time, Sim wrote to Calvert about the 11 January 2014 cashflow that:

3. [262]

   At 6:30pm Sydney time, Sim sent an email to Leupi (copied to Calvert and Wedgwood) in which he indicated that the further cashflow had been received but that he was waiting on further information which had been requested. Sim noted that there was a deadline of 13 January 2014 in which to issue the bonds. Sim wrote:

4. [263]

   Leupi responded:

5. [264]

   Sim wrote to Coulson and Calvert:

6. [265]

   Leupi wrote to Sim requesting an electronic copy of the revised cashflow as well as a breakdown of additional costs.

7. [266]

   Coulson sent an email to Montgomery, Simpson and Bell describing the further information which Swiss Re required. Montgomery responded by saying that he would get something back to Coulson later that night but ‘with the caveat that it hasn’t been reviewed by the exec’.

8. [267]

   At 6:53pm (Perth time, 9:53pm Sydney time), Calvert wrote to Leupi:

9. [268]

   At 8:47pm (Perth time, 11:47pm Sydney time), Coulson wrote to Simpson and Montgomery:

10. [269]

    Later, Montgomery sent a response to Coulson providing a high level summary of the WAPS project.

11. [270]

    On Sunday 12 January 2014 in Switzerland (1.56am Sydney time on 13 January 2014), Sim sent an email to Leupi attaching the 11 January 2014 cashflow and recommending that the bonds be issued:

12. [271]

    Leupi was unable to open the cashflow because he was not in his office and he says he was unable to access it remotely on his Blackberry.

Monday 13 January 2014

1. [272]

   Brereton explains that the facility increase and issue of the January bonds had been approved by the General Credit Committee (GCC) and the approval remained on foot as at 13 January 2014. Although there had been a material change in circumstances, by reason of the trading halt, there was no formal requirement that the matter be put back before the GCC.

2. [273]

   He explains that given the changes in Forge's position since the approval by the GCC of the 16 December 2013 submission and of the increase in facilities, he had ultimate authority to exercise his power of veto and refuse to proceed with the issue of the January bonds as requested by Forge.

3. [274]

   Over the course of Monday 13 January 2014, he had a number of conversations with Wright and Sutherland regarding the issue of the January bonds, during which he said words to the effect:

4. [275]

   He was anticipating that Simpson would confirm that the board had voted to lift the trading halt by the morning of 14 January 2014.

5. [276]

   At 5:28am (Sydney time) on 13 January 2014, Leupi emailed Sim in which he wrote:

6. [277]

   At 5:57am Sydney time, Sim wrote to Coulson:

7. [278]

   At 6:51am Sydney time, Calvert responded to Leupi’s email indicating that he would send the cashflow that Leupi was unable to open (this was after Leupi had given approval).

8. [279]

   At 10:56am (Perth time, 1:56pm Sydney time) Brereton emailed Simpson in the following terms:

9. [280]

   At 11:10am (Perth time, 2:10pm Sydney time), Simpson received a draft ASX announcement. The covering email from Mr Mark Rankmore, Chief Executive Operations Services of Forge, was in the following terms:

10. [281]

    At 12:50pm (Perth time, 3:50pm Sydney time) Simpson received a further draft of the ASX announcement.

11. [282]

    At 1:02pm (Perth time, 4:02pm Sydney time) Simpson received an email from Smith, which forwarded an email from Reed of HSF. Reed's email included:

12. [283]

    At 1:07pm (Perth time, 4:07pm Sydney time), Simpson responded to the 12:50pm email:

13. [284]

    At 1:29pm (Perth time, 4:29pm Sydney time) Smith provided a cashflow to the board and copied it to Montgomery. That cashflow was provided for discussion at that afternoon’s board meeting. That cashflow contained assumption (u) in its fullest form.

14. [285]

    At 1:56pm (Perth time, 4:56pm Sydney time) Simpson received a letter from Mr Gersbach, the Chairman of DPS, in which Gersbach said that DPS was supportive of the proposed substitution of bank guarantees and was prepared to recommend it to its financiers subject to a series of conditions. [20] Simpson directed Smith to circulate the letter just received from DPS ahead of the board meeting scheduled for 3pm, which he did, together with a draft ASX announcement.

15. [286]

    At 1:59pm (Perth time, 4:59pm Sydney time) Wright sent an email to Sim in the following terms:

16. [287]

    At 2:02pm (Perth time, 5:02pm Sydney time), Simpson sent a further draft ASX announcement to Smith, under cover of an email:

17. [288]

    At 3pm on Monday 13 January 2014 (Perth time), the board met. Simpson and Montgomery were in attendance. Travis and McCann of ANZ were present by invitation.

18. [289]

    The minutes include:

19. [290]

    At 3:55pm (Perth time, 6:55pm Sydney time), Wright sent Brereton a message from Coulson that the board meeting would end in 15 to 20 minutes and he could expect contact from Simpson soon thereafter and that the directors wanted to take no chances and proposed to add a contingency of $4 million, bringing the amount to be announced to $24 million. Wright said that this had apparently not changed ANZ’s position but that this was a matter that Brereton could confirm with Simpson when they spoke.

20. [291]

    Also at 3:55pm (Perth time, 6:55pm Sydney time) Sim emailed Calvert:

21. [292]

    At 4:06pm (Perth time, 7:06pm Sydney time), Sim emailed Calvert:

22. [293]

    At 5:04pm (Perth time, 8:04pm Sydney time), Brereton wrote to Wright:

23. [294]

    At 5:09pm (Perth time, 8:09pm Sydney time), Sim emailed Gardiner and Wright in the following terms:

24. [295]

    At 5:43pm (Perth time, 8:43pm Sydney time), Wright emailed Brereton and Sutherland: [21]

25. [296]

    At 6:14pm (Perth time, 9:14pm Sydney time), Coulson responded to Sim’s email:

26. [297]

    At 6:17pm (Perth time, 9:17pm Sydney time), Coulson emailed Sim and Calvert:

The Monday evening 13 January 2014 conversation

1. [298]

   At 9:20pm (Sydney time, 6:20pm Perth time), Simpson called Brereton and told him:

2. [299]

   At about 9:25pm Sydney time, Brereton and Calvert had the following conversation:

3. [300]

   At 6:47pm (Perth time, 9:47pm Sydney time), Simpson sent the draft announcement to Coulson with a request to circulate and comment if needed. The draft announcement included the following:

4. [301]

   At 9:57pm Sydney time, Brereton received a draft ASX announcement from Wright, which Wright had received from Coulson. Brereton says that he reviewed the draft and noted that there would be profit write-down on WAPS of $23 million to $28 million and that there was sufficient existing cash and facilities to fund the net cash outlay required; there was no reference to the ATO liability which reflected his understanding that there was no concern or issue that the ATO would be not execute a payment plan. He says that had this not been the case, he would have expected the draft announcement would have to refer to the ATO liability since it was a material matter. He noted that Forge had full support from its financiers including ANZ and that Forge had confidence to continue to trade on a business as usual basis and deliver on its current work in hand.

5. [302]

   Wright and Brereton had the following conversation:

The Banking Club

1. [303]

   In the afternoon of 13 January 2014, ANZ, Swiss Re, QBE and Forge executed an instrument styled ‘Side Deed – Security Trust Deed – Forge Security Trust’. This instrument recorded the state of Forge’s facilities with ANZ, QBE and Swiss Re respectively, and provided that all recovered monies would be distributed first to ANZ in respect of a secured principal amount of $50 million and then in agreed pro rata proportions. This arrangement was referred to as the Banking Club. The process of forming the Banking Club had commenced in early December 2013. The commercial rationale for Swiss Re and QBE joining the Banking Club was to help stabilise Forge to raise equity, to obtain security for the bonds and be in a position to influence exercise by ANZ of its covenants. It would inhibit any one member of the Banking Club from tipping Forge into an insolvency regime.

Issue of the January bonds

1. [304]

   On 13 January 2014:

Events after the issue of the January bonds

1. [305]

   On 14 January 2014, Forge exited its trading halt. It announced to the ASX that there was an ‘Additional $23 to $28 million profit write-down in FY2014 attributable to the [WAPS] project’ and that ‘$14 million to $19 million net cash outlay is required to complete WAPS which is to be funded from existing cash and facilities’.

2. [306]

   On 15 January 2014, Coulson emailed Simpson relevantly:

3. [307]

   Simpson responded that:

4. [308]

   On 16 January 2014 during a telephone conference, QBE and Swiss Re through Assetinsure were told (apparently for the first time) that the ATO required security, that the ATO would issue DPNs and that there was a need to replace the DPS guarantee with a bond to unlock the next $30 million from ANZ.

5. [309]

   On 17 January 2015, Wright emailed Coulson (copied to Sim):

6. [310]

   Wright forwarded the email to Brereton who responded:

7. [311]

   On 17 January 2014, Bell sent Simpson and Montgomery a paper to assist with collating the relevant documentation regarding the ATO payment plan. It recorded the ‘Current status of negotiated position’ as follows:

8. [312]

   On 17 January 2014, Sim emailed Coulson:

9. [313]

   On 17 January 2014, Sim emailed Wedgwood and Leupi about Forge’s ‘Outstanding ATO position’ to which Leupi responded:

10. [314]

    On 21 January 2014, Wright emailed Bell indicating QBE’s consent to the ATO being provided with a subordinated security position to rank behind the Banking Club arrangements. Coulson forwarded the email to Bell on 22 January 2014.

11. [315]

    On 21 January 2014, Bell emailed Coulson on behalf of Simpson (copied to Simpson and Montgomery) referring to Forge’s request for the supply of bonds to replace bank guarantees of approximately $31 million on the DPS project. This was apparently the first request which Forge made to QBE to provide a bond in substitution for the DPS bank guarantee.

12. [316]

    On 22 January 2014, Wright wrote to Coulson:

13. [317]

    On 22 January 2014 the board met. The discussions with the ATO and Forge’s cash flow position were canvassed. Montgomery undertook to provide a cashflow update on a daily basis.

14. [318]

    On 24 January 2014, Forge requested a trading halt until it made an announcement expected to be on 29 January 2014.

15. [319]

    On 24 January 2014, Bell emailed Simpson and Montgomery, identifying that the proposed ATO agreement would affect Forge’s cash flow in a negative way with immediate effect.

16. [320]

    On 24 January 2014, Simpson emailed Travis of ANZ, [22] (copied to Mentha and Langdon) the following ‘Request for Support’:

17. [321]

    The board met on 28 January 2014. Simpson reported that the proposed swap out of the $30 million bank guarantee on the DPS project with a bond would not proceed. He reported that he had written to the ANZ requesting funding support for the cash flow shortage identified that would have otherwise been covered by that swap out.

18. [322]

    Later on 28 January 2014, ANZ wrote to Simpson:

19. [323]

    On 30 January 2014, Coulson sent a cashflow to Wright who forwarded it to Sim. It showed significant and persistent cash deficits from the week ending 14 February 2014.

20. [324]

    On 31 January 2014, Forge and the ATO entered into a ‘Binding Instalment Payments Term Sheet’ under which Forge agreed to pay its tax debts in equal monthly instalments over a period of 18 months, starting on 28 March 2014. Forge agreed to execute all necessary documentation to grant subordinated security over its Australian assets in favour of the ATO, subject to a Priority and Subordination Deed, acceptable to Forge’s senior lenders (acting reasonably).

21. [325]

    On 5 February 2014, Alceon addressed to the board a non-binding and indicative offer for a proposed recapitalisation of Forge. Amongst the conditions were provisions for a thorough confirmatory due diligence process.

22. [326]

    The board met on 6 February 2014. It was informed that Forge would require $12 million by the end of the week commencing 10 February 2014, and that the ANZ would discuss sharing the provision of those funds with surety providers.

23. [327]

    Amongst others, the minutes record:

24. [328]

    The board met again on 11 February 2014. Amongst others, the minutes record:

25. [329]

    On 11 February 2014, the board appointed voluntary administrators.

26. [330]

    On 24 February 2014, Samsung called upon the bonds.

27. [331]

    On 27 February 2014, QBE paid Samsung $47,497,650. On 28 February 2014, Swiss Re paid Samsung $51,347,650.

28. [332]

    On 10 March 2014, the Administrators published their report pursuant to s 439A(4)(a) of the Corporations Act 2001 (Cth).

29. [333]

    On 18 March 2014, Forge’s creditors resolved to appoint the Administrators as Liquidators of Forge.

30. [334]

    The plaintiffs seek to recover the amounts paid to Samsung under the bonds, less the premiums they received for the bonds and the amounts subsequently recovered from Forge. They claim that they were misled by the defendants as to Forge’s financial position and that they issued the bonds as the consequence of that misleading or deceptive conduct.

31. [335]

    The plaintiffs also seek under the provisions of s 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW), [23] to recover their losses from the providers of directors and officers insurance to Simpson, Montgomery and Bell.

32. [336]

    A number of initial observations are apt.

33. [337]

    The claims against Simpson, Montgomery and Bell are separate and distinct, but overlap in some respects.

34. [338]

    The claims are pleaded as specific and discreet instances of misrepresentation – including as to future matters [24] – and in a few cases misleading non-disclosure.

35. [339]

    This conduct complained of is part of a continuum of events which started, relevantly, when Forge made the mistake of acquiring CTEC, which ultimately caused Forge’s destruction and culminated in Samsung calling on the bonds with Swiss Re and QBE then having to pay a total of $98,845,300.

36. [340]

    In the case of Swiss Re, the amount claimed is $38,495,618, being $51,347,650 (the total amount paid out), less net premiums received of $2,807,518 and less secured recoveries of $10,044,512 (plus interest and costs). In the case of QBE, the amount claimed is $35,124,607, being $47,497,650 (the total amount paid out), less net premiums received of $2,328,529 and less secured recoveries of $10,044,512.

37. [341]

    The primary case with respect to damage (as regards the January bonds) is that it was necessary for each of them to have approved the submissions (of 13 and 16 December 2013 respectively) for the bonds ultimately to have been issued. The plaintiffs say that these approvals were induced by the conduct of Simpson, Montgomery and Bell, and that this sufficiently establishes causation of loss.

38. [342]

    Whilst they accept that there were other factors which played a role in them issuing the January bonds, in particular the events over the weekend of 11 January 2014, they say that the conduct complained of which played a role in them giving the earlier approvals is sufficiently a cause of their loss.

39. [343]

    As a secondary position, they argue that the Court should conclude that the misleading conduct complained of over that weekend, mainly if not exclusively the presentation of the 11 January 2014 cashflow, caused them to issue the bonds.

40. [344]

    Swiss Re and QBE say that over the weekend, there were two material changes in the information that had previously been provided by the defendants to the plaintiffs. The loss on the WAPS project had increased and there was a tax liability disclosed in the amount of $35 million. The fact of the further loss on WAPS did not cause them to lose confidence in the defendants with whom they had been dealing with since November 2013, but there remained an expectation on the part of the plaintiffs that the financial and other information provided over the weekend of 11 January 2014 was accurate and reliable. Their critical concern was to obtain a revised cashflow that took account of the new losses on the WAPS project.

41. [345]

    They say that the 11 January 2014 cashflow addressed both the financial impact of the WAPS losses and the $35 million tax deferment, the inclusion of which was a key difference from earlier cashflows.

42. [346]

    They say that the 11 January 2014 cashflow conveyed that the tax deferment would be achieved. They say that the two new matters (WAPS losses and $35 million tax deferral) were presented in the 11 January 2014 cashflow in a way that conveyed to the plaintiffs that Forge would still be in the same financial position as had previously been represented throughout December 2013. That is, provided the January bonds were issued and the Roy Hill Contract proceeded, Forge would have positive cash flows enabling it to continue as a going concern, trading on a business as usual basis. [25]

43. [347]

    They say that the presentation of Forge’s financial position in the 11 January 2014 cashflow was also consistent with representations made in December by the defendants that the ANZ facilities solved Forge’s liquidity issues and was a strong reinforcement of that position. They say that even with the significant new losses on the WAPS project, the ANZ facilities as presented in the 11 January 2014 cashflow were sufficient to ensure Forge’s ability to trade solvently, on a going concern/business as usual basis. [26]

44. [348]

    They argue that the 11 January 2014 cashflow was misleading for the same reasons as the December 2013 cashflow, mainly that the ANZ facilities did not solve Forge’s liquidity issues, there was no extant plan to defer Forge’s tax liabilities, and there were insufficient funds to meet any tax deferment assuming one could be agreed.

45. [349]

    They argue that Simpson’s misrepresentations and omissions in his conversations with Brereton on 11 and 13 January 2014 confirmed and continued the misleading representations in the 11 January 2014 cashflow.

46. [350]

    They say that decision makers for Swiss Re (Leupi in consultation with Sim) and for QBE (Brereton) relied on the misleading conduct of all defendants made in the 11 January 2014 cashflow and the misleading conduct of Simpson in his 11 and 13 January 2014 conversations with Brereton.

47. [351]

    They put that neither plaintiff would have released its bonds unless the other plaintiff did likewise, as they were acting in unison and in lockstep, and each checked with the other before releasing their bonds.

48. [352]

    They say that if the Court were to find that one of the plaintiffs released its bonds by reason of the misleading or deceptive conduct of one or more of the defendants, it follows that the release of the bonds by the other plaintiff was also caused by such conduct.

49. [353]

    The claims as ultimately articulated all seem to concern Forge’s cash flow prospects and the dependence of those prospects on first, the additional $30 million worth of support the ANZ had committed to give Forge as bank guarantees given by it were released or substituted, and second, on the necessity for Forge to enter into a repayment plan with the ATO.

50. [354]

    In the 11 January 2014 cashflow – and various other cashflows – Forge’s cash position was made positive by the inclusion of the $30 million to come from the ANZ and the exclusion by way of deferral of a tax debt to the ATO of $35 million.

51. [355]

    In the event, Forge entered into the necessary agreement with the ATO but the $30 million was not available when ANZ and QBE declined further support. There seems to be no issue that the immediate cause of Forge’s collapse was the unavailability of additional cash.

52. [356]

    All claims are made on the footing that the conduct complained of against each of Simpson, Montgomery and Bell was engaged in on his own behalf (in addition to being on behalf of Forge). No claim is made on the basis of accessorial liability, that is, that Simpson, Montgomery and Bell were persons involved in any contravention of s 18 by Forge. [27]

53. [357]

    Simpson, Montgomery and Bell put in issue that they engaged in misleading or deceptive conduct at all and, in any event, that the conduct complained of was conduct in their own right as opposed to conduct of Forge.

54. [358]

    They put in issue that Swiss Re and QBE suffered any damage by the conduct complained of in any event. They say that Swiss Re and QBE would have issued the bonds anyway even if they establish one or more of the alleged contraventions.

55. [359]

    Their response to the argument that damage was caused to them because they were misled in approving the submissions of 13 and 16 December 2013, is that whilst those approvals may have been a prerequisite to the ultimate issue of the January bonds, the issue of those bonds cannot in a common sense way be viewed as having been caused by the conduct alleged to have brought about those approvals or by those approvals themselves.

The 15 November 2013 telephone conversation with Bell [28]

1. [360]

   This is a complaint against Bell of misleading or deceptive conduct by non-disclosure with respect to the $3.85 million bond.

2. [361]

   Swiss Re and QBE argue that Bell’s conduct in not disclosing that Forge’s cashflows had demonstrated an imminent negative cash flow position and that Forge had not been meeting its PAYGWT obligations to the ATO, was misleading or deceptive or likely to mislead or deceive in circumstances where:

3. [362]

   The plaintiffs described Calvert’s evidence as being that he had conditional approval from Wedgwood to issue the $3.85 million bond, subject to Calvert speaking first with Forge and collating information; he understood that Bell was the group financial controller and head of treasury as at 15 November 2013, and that he reported to Montgomery, the CFO; he gave a lot of weight to what Bell said because he had known him for a number of years and he was a senior person within Forge; and the decision to issue the bond was based upon what Bell had told him.

4. [363]

   The plaintiffs described Gorman’s evidence as being that Assetinsure had requested the call in order to ‘get comfort around the issuance of the bond’; Bell did not indicate that there were any concerns around insolvency on the call; and he supported the issue of the bond because of what Bell had said during the call.

5. [364]

   Although in their written submissions the plaintiffs do not expressly say so, I take it that they seek to imply that the $3.85 million bond would not have been issued had Bell disclosed that Forge was near insolvent (which entails the plaintiffs establishing that Forge was in fact near insolvent – whatever that means – something which they did not seek to establish), that significant funding was required by Forge in the short term to address the financial impact on the company caused by the DPS and WAPS Projects, and there was no prospect of an imminent capital raising, there was no plan or proposal to pay or defer existing or future tax liabilities of Forge and the cashflows prepared by Bell did not make provision for the payment of such liabilities and there was no certainty from ANZ around any liquidity relief.

6. [365]

   Bell accepts that the matters said not to have been disclosed, were not disclosed.

7. [366]

   Bell argues that the conduct complained of here was not his personally, but that of Forge. He argues that he was a natural person through which Forge was acting and the omissions are not to be properly characterised as his own. He argues that he made it clear that he was speaking as Forge, that he did not convey his own personal views of Forge’s financial position, or offer his own personal assurances or opinions as to any of the matters discussed.

8. [367]

   He denies that the non-disclosures were misleading.

9. [368]

   He argues that his failure to disclose Forge’s negative cash flow position was not misleading because Forge’s forecast cash position was in a state of flux, Forge had prospects of securing equity at the time, the ANZ had given its support and the board was satisfied that the company was solvent.

10. [369]

    He argues that the non-disclosures were not misleading because of Assetinsure’s own state of knowledge about Forge’s precarious financial position at the time. [29] Assetinsure had put Forge on the Amber List. Forge was, and had since 4 November 2013, been in a trading halt and had not made any announcement to the market regarding its cash flow or liquidity position. Forge was still investigating the impact of the causes of the trading halt on its financial position and was in continuing discussions with its financiers and advisors, did not have sufficient certainty regarding its present financial position to provide an update to the market and the anticipated write-down would adversely affect its cash flow. Also, Forge was looking to raise equity.

11. [370]

    He argues that the omission of any express disclosure that Forge’s forecasts projected near term cash deficits did not give rise to the obverse inference that there would be no deficits in the near term and thus was not misleading or deceptive.

12. [371]

    He argues that the failure to disclose that Forge had not been meeting its PAYGW tax obligations was not misleading because there was no evidence that Bell was aware of a default as at 15 November 2013; the period of the default and the quantum were insignificant for a company of Forge’s size; and there existed the possibility of claiming a tax credit in an equivalent amount.

13. [372]

    He argues that there could have been no reasonable expectation on the part of Assetinsure that if Forge was late in paying its PAYGW tax, it would have been disclosed during the 15 November 2013 teleconference, because the topics discussed were dictated by the three questions posed by Calvert, none of which related to or called for a discussion of tax payments, none of the questions posed by Calvert had anything to do with the status of Forge’s tax payments, and the telephone conference was high-level and brief, lasting about ten minutes.

14. [373]

    He puts that assuming he was aware of the default, he could not reasonably have been expected to disclose it where Forge, a publicly listed company, itself had not announced it to the market.

15. [374]

    He argues that the omission of an express statement to the effect that Forge had not been meeting its PAYGW tax obligations did not give rise to an obverse inference that Forge had been meeting those obligations.

16. [375]

    He argues that Swiss Re has not established that it suffered any loss because of the conduct complained of.

17. [376]

    He argues that none of the witnesses gave evidence that they supported the issue of the $3.85 million bond in reliance upon an understanding or assumption that cashflows did not project any near term cash deficits or gave evidence that they supported the issue of the bond in reliance upon an understanding or assumption that Forge had no outstanding PAYGW tax obligations.

18. [377]

    He argues that it should be inferred that Assetinsure would have issued the bond anyway. On 13 January 2014, it issued over $40 million worth of bonds although it knew that Forge had defaulted in its PAYGW tax obligations from November 2013. Assetinsure thought that Forge’s order book was strong, it had a strong performance history and track record, and it was seeking to raise capital or to obtain further debt funding.

19. [378]

    He argues that Assetinsure would not have been concerned by the fact that Forge was two days late on payment of a small amount of tax (relative to a company of Forge’s size), in light of its history of tax compliance. The stretching of creditors was not unusual, particularly in the construction industry, where cash flow can be ‘lumpy’.

20. [379]

    He argues that at the lowest, Assetinsure would not have refused to issue the $3.85 million bond without first investigating the likely impact of that action upon Forge. Had it done so, it would have become aware that this would have had devastating consequences and would have consulted with Swiss Re before refusing to issue it. There is no evidence from Swiss Re about what it would have done, but it is more likely than not that Swiss Re would have approved it consistently with the way it behaved later.

The 28 November 2013 announcement [30]

1. [380]

   This is a complaint against Simpson and Montgomery for making misleading representations (pleaded also as statements) by the 28 November 2013 announcement. The only complaint pleaded is misrepresentation, not some other conduct. [31]

2. [381]

   They claim that by the announcement, Simpson and Montgomery made representations that the ANZ facilities would:

3. [382]

   They claim that the representations were misleading or deceptive because as at 20 December 2013, the ANZ facilities were insufficient to cover Forge’s liquidity challenges or solve its liquidity issues because Forge was projected to have a cash flow deficit of about $42 million and a deficit of about $44 million by 31 January 2014 and that to obtain sufficient funding Forge needed:

4. [383]

   Swiss Re and QBE claim that the 28 November 2013 announcement caused them damage because it played a non-trivial role in the approval given by Swiss Re to the 13 December 2013 submission and by QBE to the 16 December 2013 submission, both of which were necessary for the issue of the bonds in January 2014 and was therefore a cause of their loss.

5. [384]

   Swiss Re relies on the evidence respectively of Leupi, Wedgwood, Sim, Calvert and Gorman which it describes, relevantly, as being to the following effect:

6. [385]

   Swiss Re observes that the 13 December 2013 submission stated that ‘ANZ has solved the Group’s immediate liquidity needs by increasing its working capital facility’.

7. [386]

   QBE relies on the evidence of Brereton which it describes as being to the following effect: he reviewed the 28 November 2013 announcement at the time, and noted in particular that the ANZ facilities would provide sufficient facilities to cover Forge’s liquidity challenges, and would solve Forge’s liquidity issues and strengthen its balance sheet; he understood the 28 November 2013 announcement to assert that with the assistance of ANZ, Forge had the ability to continue as a going concern; and in approving the QBE 16 December 2013 submission, he relied on the information contained in the 28 November 2013 announcement, including that ANZ’s funding had solved Forge’s liquidity problems.

8. [387]

   QBE observes that the 16 December 2013 submission referred to and attached the 28 November 2013 announcement.

9. [388]

   Simpson responds that the 28 November 2013 announcement was not his but that of Forge to the market in which its shares were traded. He argues that none of the statements ultimately relied on, and as confined in the plaintiffs’ final submissions, are attributed in the announcement to him; the drafting of the announcement was a collective task; the announcement was reviewed and vetted by lawyers and KordaMentha; and his naming as a contact in the announcement does not make representations made in it his.

10. [389]

    Montgomery takes the same position. Additionally, he puts that the evidence does not show that he drafted, amended, approved the contents of or authorised the release of the announcement, and no comments in it are attributable to him.

The 2 December 2013 cashflow [34]

1. [390]

   This is a complaint against Simpson, Montgomery and Bell.

2. [391]

   Swiss Re and QBE plead that by the 2 December 2013 cashflow, Forge represented that there would be a shortfall in funds available for the weeks’ ending 20 December 2013 and 21 February 2014, but otherwise cash surpluses to meet obligations on a weekly basis from 15 November 2013 to 4 April 2014; that Forge had unrestricted access to the restricted ANZ s 560 facility from the week ending 29 November 2013; that it was accurate and reliable; and that Forge was, and would remain, solvent. [35]

3. [392]

   They plead that these representations were made by Forge, Simpson, Montgomery and Bell and that the making of them by the individuals is to be inferred from at least [36] the positions held by each of them within Forge; their ‘involvement in the matters the subject of this claim including communications with Assetinsure and QBE as to Forge’s financial position’; the provision of the cashflow to Assetinsure; and the likelihood that the cashflow would not have been so provided without their participation in the creation of and/or approval of the cashflow.

4. [393]

   In their written submissions, Swiss Re and QBE seek to make a somewhat different case with respect to the 2 December 2013 cashflow.

5. [394]

   They roll up their complaints with respect to the 2, 4 and 12 December 2013 cashflows into one, asserting that each of these cashflows was misleading or deceptive because they projected a positive cash flow position in circumstances where there was no disclosure that Forge had defaulted on its tax obligations and was looking to enter into an agreed deferral plan with the ATO; no such deferral plan had been agreed, or even proposed; the cashflows supplied to QBE were prepared on the basis of an assumption that approximately $30-$35 million of tax payments would be deferred; in the absence of such a deferral, Forge’s cash flow position was hopelessly negative and Forge had no funding to meet the deferred tax payments because the ANZ facilities were not able to be used to meet those obligations, and no other source of funding had been identified or even pursued.

6. [395]

   They add circumstances making these cashflows misleading or deceptive that around the same time those cashflows were supplied to the plaintiffs (sometimes within hours), cashflows were supplied to the board and KordaMentha on a regular basis in which the tax deferral assumption, and the amount being deferred, was expressly identified, but do not articulate any consequence said to flow from this.

7. [396]

   More about this is said below in connection with the 4 and 12 December 2013 cashflows.

8. [397]

   Their written outline in support of the contention that representations by way of these cashflows were made by Simpson, Montgomery and Bell diverges from the pleaded case.

9. [398]

   As to Simpson, the only proposition now relied on in support of representations by him in this context is that he was the CEO and was aware that the cashflows were provided to the plaintiffs via an intermediary or conduit, Coulson, and that he directed the preparation of cashflows which were prepared by Bell, including for the purpose of being provided to Coulson and the plaintiffs.

10. [399]

    As to Montgomery, they argue that he was the CFO and was responsible for Forge’s finance function, was ultimately responsible for the preparation of cashflows, was provided with and to have reviewed cashflows being produced at a time when the Forge board had required the production of daily cashflows and was aware that the subject cashflows were to be provided to the plaintiffs, in a context in which the support of the plaintiffs was necessary for Forge to continue with the Roy Hill Contract.

11. [400]

    As to Bell, they argue that he was the Executive General Manager of Finance; supplied each of the 2, 4 and 12 December 2013 cashflows to Coulson, and it may be inferred, was involved in the preparation of those cashflows, aware of their contents at the time they were sent to Coulson, was aware that they were to be provided to the plaintiffs, and prepared and provided cashflows for distribution to the board and to KordaMentha that expressly recorded the deferral of taxation assumption.

The 3 December 2013 Assetinsure meeting [37]

1. [401]

   This is a complaint against Montgomery and Bell.

2. [402]

   In their Amended Commercial List Statement, Swiss Re and QBE plead as representations made by Montgomery at the 3 December 2013 meeting that he stated that Forge’s cash flow would be tight over the coming weeks and then be positive from January 2014, and that ANZ had agreed to provide further facilities which would solve Forge's liquidity issues, including a $30 million overdraft facility which would be available on 6 December 2013.

3. [403]

   They plead that Bell did not correct the statements made by Montgomery, and that Forge, Montgomery and Bell adopted and repeated the representations made by the 28 November 2013 announcement that the ANZ debt facilities amendments would provide sufficient facilities to cover Forge's liquidity challenges and strengthen Forge's balance sheet.

4. [404]

   They plead, relevantly, that this was misleading or deceptive because there were not reasonable grounds to believe that Forge’s cash flow would be positive from January 2014, and that Forge would still be insolvent with the ANZ debt facilities amendments, and the amendments would not solve Forge’s liquidity issues.

5. [405]

   They put that Bell’s failure to contradict statements by Montgomery amounts to a representation by him that what Montgomery said was true because he was a senior executive and was attending in that capacity, he had an intimate knowledge of Forge’s financial position which bore directly on Montgomery’s statements, and he knew that the meeting was held to convey to Assetinsure the views of the executive team.

6. [406]

   They put that there was an objectively reasonable expectation on the part of Assetinsure that Bell would speak up and correct misleading representations.

7. [407]

   So far as the statements complained of were as to future matters, they say that neither Montgomery nor Bell had any reasonable basis for making them.

8. [408]

   In their written argument, they put, diverging from their pleading, [38] that at the meeting, Montgomery represented that there were no other projects with problems other than WAPS and DPS; [39] that cashflows were vetted on a daily basis by KordaMentha; that an additional $30 million was to be made available by ANZ on 6 December 2013, which was sufficient to meet Forge’s needs; [40] that an additional $30 million may or may not be required and made available from ANZ depending on the return of bonds; that the debt funding had patched the hole and there was now no problem with Forge’s liquidity; [41] that Forge was looking to enter into an arrangement with the ATO; [42] that Forge had some large bonding requirements in relation to the Roy Hill Contract in January 2014; that bonds in the amount of $80 million would be required for the Roy Hill Contract in January and an advance payment bond in the amount of $6 million would be required by 16 December 2013; that cash flow would be tight over the coming weeks and then positive from January 2014; that there was no equity raising proposed at that stage; and that ANZ’s debt funding solved Forge’s liquidity issues.

9. [409]

   They argue that these representations were misleading because ANZ facilities had not solved Forge’s liquidity issues or needs and for these reasons they say the 28 November 2013 announcement was misleading, because as at 3 December 2013 nothing had changed from the factual position that pertained on 28 November 2013.

10. [410]

    They argue that Gorman and Calvert had regard to what they were told at the meeting in approving the 13 December 2013 submission.

11. [411]

    Bell argues that it is not part of the plaintiffs’ pleaded case that Bell’s silence was a representation that what was said by Montgomery was true, and that they should not be permitted to travel beyond the pleaded case. Bell disputes that he made any representations and argues that any representations were made by Forge or Montgomery and not by him.

12. [412]

    He also puts that there is no evidence of any reliance on what is said to be Bell’s verification of what was said by Montgomery.

13. [413]

    Montgomery too makes the point that there is a divergence between the representations argued to have been made by Montgomery at the meeting as articulated in the plaintiffs’ closing written submissions, as opposed to the representations pleaded in their Amended Commercial List Statement. [43]

14. [414]

    Under cross-examination, Calvert gave the following evidence:

15. [415]

    Montgomery argues that any representation by him as to Forge being cash flow positive in January was, and is revealed by Gorman’s note and Calvert’s evidence to have been expressed to be based upon the assumption of there being in place an ‘arrangement with the ATO’, which it was clear had not yet been made.

16. [416]

    He argues that, having regard to the fact that Montgomery was asked about key assumptions and made the statements based on them, nothing he said was misleading.

17. [417]

    Finally, he submits that any statements made by Montgomery about cashflows were overtaken by subsequent cashflows provided by Forge to Assetinsure and QBE.

The 4 December 2013 cashflow

1. [418]

   This is a complaint against Simpson, Montgomery and Bell.

2. [419]

   The articulation of the complaint in the plaintiffs’ closing written submissions impermissably diverges from the pleaded case. The complaints in the written submissions are the same as they are with respect to the 2 December 2013 cashflow referred to earlier, although the submissions make no mention of Montgomery in this context at all.

3. [420]

   The pleaded complaint commences by averring that by providing the 4 December 2013 cashflow, Forge represented that liquidity by way of a $30 million facility would be available on the most conservative assumptions; that there would be a shortfall in total funds available (prior to any facility) for each month to June 2014 but a surplus in ‘headroom’ once the ANZ facility was taken into account; that Forge had unrestricted access to the restricted ANZ s 560 facility from November 2013; that the cashflow was accurate and reliable and the most conservative version of Forge’s future cash flows available; and that Forge was, and would remain, solvent.

4. [421]

   It is then pleaded that in fact and in truth the 4 December 2013 cashflow was not accurate or reliable; no entity had agreed to provide to Forge liquidity by way of a $30 million facility; the opening cash balance in the 4 December 2013 cashflow did not reflect the actual cash balance, meaning that the funds available to Forge were overstated by at least $23.8 million; Forge did not have access to the entire ANZ s 560 facility in November 2013 and had only restricted access to the ANZ s 560 facility from December 2013, and had the restrictions in the ANZ s 560 facility been taken into account, the cashflow would have shown shortfalls rather than surpluses for November and December 2013.

The 6 December 2013 QBE meeting [44]

1. [422]

   This is a complaint against Simpson, Montgomery and Bell.

2. [423]

   The plaintiffs’ written submissions limit this claim to one that Simpson represented that the new ANZ facilities were more than enough to cover cash flow requirements and all contingencies and to fix any liquidity problems, and that this was misleading because the ANZ facilities were not more than enough to cover contingencies in that the ANZ facilities were not sufficient to fix Forge’s liquidity problems and contingencies because Forge needed to defer approximately $30 million in taxation, and there were insufficient funds under those facilities for that purpose. Further, there was no tax deferment plan or proposal which had been put to the ATO at this point in time.

3. [424]

   Swiss Re and QBE put that Montgomery and Bell are to be taken as having represented that what Simpson said was true because they did not correct or disagree with what he said and knew of the inadequacy of the ANZ facilities to cover Forge’s cash flow requirements and to solve Forge’s liquidity problems. This is not how the case is pleaded in the Amended Commercial List Statement. The representations are pleaded to have been made by Forge, Simpson, Montgomery and Bell.

4. [425]

   They argue that the statements made at the 6 December 2013 meeting were representations as to existing fact but if they were representations as to future matters, Simpson, Montgomery and Bell had no reasonable basis for making them.

5. [426]

   QBE argues that in approving the 16 December 2013 submission, Brereton had regard to a number of factors including that:

6. [427]

   Simpson argues that the Court should not find that he represented that the ANZ facilities were more than enough to cover all contingencies, but that consistent with Wright’s note, he said that the ANZ believed that the facilities were more than enough to cover all contingencies (or that the statement about covering all contingencies was made by Gardiner or Rankin). In the alternative, he puts that any statements as to the sufficiency of ANZ funding were made in a context where it was understood by Brereton that the ‘strategy’ was for the ANZ funding to see Forge through to a recapitalisation in 2014.

7. [428]

   Montgomery and Bell dispute that they made any representations.

The 12 December 2013 Assetinsure meeting [45]

1. [429]

   This is a complaint against Simpson and Montgomery.

2. [430]

   Yet again there is an impermissible divergence between the pleaded case and the argued case.

3. [431]

   In the Amended Commercial List Statement it is pleaded that at this meeting, Simpson stated that the write-downs due to the DPS Contract and the WAPS Contract had come as a terrible surprise; that Forge’s management had failed to disclose the problems with the DPS Contract and the WAPS Contract; that the management of Forge responsible had been terminated; that representatives of ANZ and KordaMentha ‘had been through everything with a fine tooth comb’; that the problems were confined to Forge Power and its division; that there was nothing more to disclose than had been disclosed in the 28 November 2013 announcement; that there would be no more surprises; and that the ANZ facilities constituted enough cash to complete Forge’s work and compete for new jobs – that it was a ‘complete fix’. [46]

4. [432]

   It is pleaded that these representations were made by Forge, Simpson and Montgomery. With respect to Montgomery, it is argued that he did not correct any statement made by Simpson during the meeting despite being aware of the true position and in those circumstances is taken to have represented what Simpson said was true. [47]

5. [433]

   It is then pleaded that in fact and in truth the ANZ facilities did not constitute enough cash to complete Forge’s work and compete for new jobs and were not a ‘complete fix’; that the ANZ facilities did not provide sufficient funds to solve Forge’s liquidity issues; that Forge was insolvent, or near insolvent, and that Forge, Simpson and Montgomery knew that the true financial position of Forge was a matter of importance to Assetinsure. [48]

6. [434]

   In their written submissions, Swiss Re argue that the statements made by Simpson at the meeting were misleading or deceptive because there was no disclosure [49] that Forge had defaulted on its taxation obligations and was looking to enter into an agreed deferral plan with the ATO; no such deferral plan had been agreed or even proposed; the cashflows supplied to QBE were prepared on the basis of an assumption that approximately $30 million of tax payments would be deferred in the absence of such a deferral; Forge’s cashflow position was hopelessly negative; the ANZ facilities were not a ‘complete fix’ to Forge’s liquidity issues, particularly in circumstances where the ANZ facilities were not able to be used to pay the deferred taxation payments; $30 million of the ANZ facilities was dependent upon the return of bank guarantees in circumstances where Forge had taken no steps to secure the return of those guarantees and where Forge did not have access to that $30 million as at the date of the 12 December 2013 Assetinsure meeting, but all of the cashflows prepared by Bell and Montgomery, and known to Simpson, demonstrated that the additional $30 million was needed if Forge was to have sufficient liquidity to meet its taxation obligations and continue to trade.

7. [435]

   The plaintiffs put that Simpson’s assertion of a complete fix was part of the matters relied on by Wedgwood, Sim, Gorman and Calvert in supporting and approving the 13 December 2013 submission.

8. [436]

   Wedgwood’s evidence as described by the plaintiffs, was that a key factor that he relied upon in approving the 13 December 2013 submission included the statements made by Simpson at the 12 December 2013 meeting, including that the ANZ facilities resolved Forge’s liquidity issues and was a ‘complete fix’; that there was no indication of Forge being in an insolvent situation; and that they had been through the two CTEC projects with a ‘fine-toothed comb’ and there would be ‘no more surprises’. The ‘ATO issue’ did not cause him concern in December 2013 because it had not been discussed at the meeting on 12 December 2013.

9. [437]

   Sim’s evidence as described by the plaintiffs was that he relied on the information provided at the 12 December 2013 meeting in preparing the 13 December 2013 submission, including that the ANZ facilities were a ‘complete fix’ and that the facilities would support ‘the cash flow until such a point that the Roy Hill Contract became substantial’ and ‘enabled Forge to continue on a business as usual basis and deliver their existing workbook and pitch for future work’, and further that ‘the cost overruns had been contained, had been fully identified and fully costed, and that was the maximum extent of them’, and that if at the 12 December 2013 meeting he had been told (inter alia) that the ANZ facilities were insufficient to meet Forges liquidity needs, he would not have recommended the increase of the facility or the issue of new bonds, including the January bonds. Sim also gave evidence that the 12 December 2013 meeting was held because Simpson had not attended the 3 December meeting, nor had Wedgwood, and Wedgwood wanted to hear from Simpson.

10. [438]

    Gorman’s evidence as described by the plaintiffs was that in approving the 13 December 2013 submission, the key factors that he relied upon included that the ANZ facility solved and was a complete fix for Forge’s liquidity issues, and what he was told at the 12 December 2013 meeting.

11. [439]

    Calvert’s evidence was to similar effect.

12. [440]

    Simpson points out correctly that the only representation now put against him as misleading is the statement that the ANZ facility was a ‘complete fix’ for Forge’s cash flow requirements.

13. [441]

    Simpson accepts that he used the words ‘complete fix’ but puts that there should be a finding that he said it was short term – meaning until a capital raising could be achieved. [50]

14. [442]

    He puts that what he said was, in any event, not misleading or deceptive but correct, because there was a reasonable basis to expect the ATO debt to be deferred in the manner provided for in earlier cashflows.

15. [443]

    In his closing submissions, Simpson makes the valid point [51] that the plaintiffs have made clear that the basis on which the representations as to the sufficiency of the additional ANZ funding are alleged to be falsified is that they only produced a tight but positive cash flow for Forge if the ATO debts were deferred and there was no reasonable basis to expect the ATO debts to be deferred in the manner provided for in the November 2013 and December 2013 cashflows.

16. [444]

    As is referred to more fully below, what the plaintiffs seek to argue is impermissibly beyond their pleaded case.

17. [445]

    Simpson puts that the representation that the additional ANZ funding, so far as it was dependent on the entry into of a tax deferral plan with the ATO, was true. He argues that this is established by the fact that the tax deferral plan that was ultimately agreed with the ATO on 31 January 2014 was more favourable to Forge than the deferral provided for in the 27 November 2013 cashflow in that it deferred more tax over a longer period. The deferral in the 27 November 2013 cashflow was of payments between the weeks ending 29 November 2013 and 31 January 2014, totalling $29.6 million, whereas the deferral agreed on 31 January 2014 was a deferral of all payments between 13 November and 28 February 2014, totalling some $35 million, with repayments to be made over 18 months commencing on 28 March 2014.

18. [446]

    Simpson puts that his utterances about the sufficiency of the ANZ facilities were an expression of an opinion genuinely held by him, or a prediction for which there were reasonable grounds. In this context he relies principally upon the advice given by Mentha and de Kerloy at the 4.30pm 27 November 2013 board meeting that it was reasonable to suggest that the ATO would agree and that the 28 November 2013 announcement was vetted by the professional advisers.

19. [447]

    Finally, Simpson puts that the plaintiffs have not established that they suffered loss by this conduct complained of because by 13 January 2014, Calvert, Sim, Leupi, Brereton, Sutherland and Wright all knew of the ATO deferral assumption and its effect on Forge’s cash flow when they gave approval to proceed with the release of the bonds at a time when Swiss Re and QBE each could have withdrawn.

The 12 December 2013 cashflow [52]

1. [448]

   This is a complaint against Simpson, Montgomery and Bell.

2. [449]

   As I have said earlier, in their closing submissions, the plaintiffs have rolled up this claim with their claims in connection with the 2 December 2013 and 4 December 2013 cashflows. As with the 2 December 2013 and 4 December 2013 cashflows, the plaintiffs’ final submissions diverge from the Amended Commercial List Statement.

3. [450]

   In the Amended Commercial List Statement, [53] the plaintiffs aver that by providing the 12 December 2013 cashflow, Forge represented that:

   1. (1)

      there would be a shortfall in funds available for the week ending 21 February 2014, but otherwise weekly cash surpluses to meet obligations from 15 November 2013 to the week ending 4 April 2014;

   2. (2)

      Forge had unrestricted access to the restricted ANZ s 560 facility from week ending 13 December 2013;

   3. (3)

      it was accurate and reliable; and

   4. (4)

      Forge was, and would remain, solvent.

4. [451]

   During the course of the hearing, they sought, and were granted leave, to amend the Amended Commercial List Statement. In para 138 (as amended as indicated), they plead that in fact and in truth:

   1. (1)

      the 12 December 2013 cashflow was not accurate or reliable;

   2. (2)

      Forge had only restricted access to the ANZ s 560 facility from December 2013;

   3. (3)

      the 12 December 2013 cashflow:

   4. (4)

      Forge had not paid its PAYGWT liabilities since 21 November 2013;

   5. (5)

      Forge did not have the financial capacity to pay those PAYGWT liabilities;

   6. (6)

      Forge was insolvent, or near insolvent; and

   7. (7)

      Forge, Simpson, Montgomery and Bell knew that the true financial position of Forge was a matter of importance to QBE and Assetinsure.

5. [452]

   However, as is set out above, the articulation of the complaint in the closing submissions is the non-disclosure with respect to the ATO and the necessity for a deferral and the absence of funding needed to meet the deferred tax payments.

6. [453]

   The plaintiffs argue that Leupi, Wedgwood and Sim relied on the 12 December 2013 cashflow in approving the 13 December 2013 submission, and that Brereton relied on it in voting in favour of the 16 December 2013 submission. [54]

7. [454]

   Swiss Re relies on the evidence respectively of Leupi, Wedgwood, Sim, Calvert and Gorman which it describes, relevantly, as being to the following effect:

8. [455]

   QBE relies on the evidence of Brereton which it describes as being to the following effect: he reviewed the 4 December 2013 cashflow; he reviewed the 12 December 2013 cashflow; in considering the 16 December 2013 submission, he considered that the 4 December 2013 cashflow were the ‘worst case numbers’; if he had been told that the 4 December 2013 cashflow or the 12 December 2013 cashflow were inaccurate, he would not have voted in favour of the 16 December 2013 submission, and if necessary would have exercised his power of veto (which he held in Mr Wulff’s absence).

9. [456]

   Each of Simpson, Montgomery and Bell put in issue that they made any representation by way of the 2 December, 4 December or 12 December 2013 cashflows, each putting that if any representations were made they were (as pleaded by the plaintiffs) made by Forge itself, through its broker Coulson.

10. [457]

    Simpson maintains that the evidence does not establish that he saw the cashflows about which the plaintiffs make complaint, or that he provided them to the plaintiffs. In addition, he puts that there is no basis for him to be taken as having made particular representations in particular cashflows that he did not see.

11. [458]

    Montgomery puts that there is no evidence that links him to the provision to the plaintiffs of the 12 December 2013 cashflow with the omitted tax deferral assumption. He argues that there is no other evidence which supports the fact that he had any role in the provision of this cashflow to the plaintiffs, that he knew that it had occurred, or that he knew that it did not contain any explicit assumption as to the deferral of tax.

12. [459]

    Bell accepts that he played some role in the preparation of the cashflows, but puts that the evidence does not establish that he was their author, or the author of the assumptions upon which they were prepared, or that he made any decision to include or remove particular assumptions, or that he made any decision to authorise the provision of the cashflows to the plaintiffs.

13. [460]

    He points to the involvement of several other persons in their preparation.

14. [461]

    He argues that he did no more than act as a point of contact within Forge, and as between Forge and Coulson, as regards the coordination and distribution of cashflows.

15. [462]

    Montgomery and Bell put that the significance of the 12 December 2013 cashflow was superseded or overtaken by the provision by Coulson to the plaintiffs of the 11 January 2014 cashflow, which included both the tax deferral assumption and the fact that there was no agreement with the ATO.

The 19 December 2013 $6 million bond

1. [463]

   Swiss Re’s cryptic submission extends no further than that given the proximity between the 13 December 2013 submission and the issue of the bond, its issue was also the product of the same misleading or deceptive conduct which caused the 13 December 2013 submission to be made and it would not have been issued had the true position been known.

2. [464]

   Swiss Re argues that the 13 December 2013 submission refers to the proposed issue of the $6 million bond, Sim relied on the defendants’ conduct when preparing the submission, and Wedgwood, Gorman and Calvert relied upon that conduct in approving it.

3. [465]

   The plaintiffs impose upon the Court the task of divining, from a significant body of evidence and submissions, what is intended to be covered by the same misleading or deceptive conduct which caused the 13 December 2013 submission to be made.

4. [466]

   They appear to have in mind:

The 11 January 2014 cashflow [57]

1. [467]

   Because of the centrality of this complaint, it is appropriate to set out the paragraphs of the Amended Commercial List Statement [58] in which it is made.

2. [468]

   In their written outline, diverging from their pleaded case, the plaintiffs argue, and argue only, that the 11 January 2014 cashflow made the following representations:

   1. (1)

      a representation that it was ‘on track/likely’ that the ATO would agree to the deferral of approximately $35 million in taxation liabilities;

   2. (2)

      a representation that Forge was solvent and would remain solvent in the sense that it would, when taking into account the ANZ amended facilities and the issue of the January bonds, have a positive cash flow and remain viable and able to operate on a going concern basis for at least the period represented.

3. [469]

   The first of these representations is said to arise from assumption (d) in the cashflow.

4. [470]

   The second representation is said to arise from the surpluses shown in the cashflow together with the inclusion in it of $30 million of additional funds from ANZ and the deferral of $35 million of taxation, and the designation of those items as ‘on track/likely’.

5. [471]

   They put that the first representation, that the deferral was ‘on track/likely’, was misleading because:

   1. (1)

      the 13 December 2013 Forge proposal to the ATO had been rejected (on 9 January 2014);

   2. (2)

      the ATO had indicated that it was not prepared to negotiate further unless the outstanding taxation was first paid, the outstanding taxation was in the order of $15 million, and Forge did not have the capacity to pay this amount;

   3. (3)

      the ATO had informed Forge of its intention to issue DPNs to directors of Forge, the Forge directors (on 9 January 2014) were unanimous that they should not be required to accept personal responsibility for Forge’s taxation debt, and PWC advised the directors of Forge (on 11 January) of PWC’s view that the ATO would not reach an agreement with Forge absent DPNs being in place;

   4. (4)

      the ATO required security as a condition of any arrangement for the deferral of payment of Forge’s taxation obligations;

   5. (5)

      there was no replacement proposal;

   6. (6)

      Langdon of KordaMentha had suggested an approach by which it was not proposed to formulate a revised ATO payment plan until after 13 January 2014 (when the bonds would issue). This reflected the factual position as at 11 January 2014.

6. [472]

   They put that the above matters falsify the representation regardless of whether it is classified as one of present or future fact or opinion.

7. [473]

   They put that the second representation, that Forge would remain viable and be able to operate as a going concern, was misleading because:

   1. (1)

      the positive cash position depended upon the availability of the $30 million from ANZ, but the dire position shown in the 8 and 10 January 2014 cashflows did not assume that the additional $30 million would be available;

   2. (2)

      that additional $30 million was not available:

   3. (3)

      the positive cash position also depended upon the deferral of $35 million in taxation, which was not on track or likely.

8. [474]

   They argue that the provision of the 11 January 2014 cashflow to them via Coulson is conduct of each of Simpson, Bell and Montgomery. [61]

9. [475]

   In the case of Simpson, they put that it may be inferred that he was aware that it would be forwarded to Coulson for the purpose of it being passed onto the plaintiffs because prior to 1:52pm Perth time, he had a discussion with Montgomery (inferentially, about the cashflow) and at 1:52pm received a version of it from Montgomery.

10. [476]

    In the case of Montgomery, they put that it may be inferred that he provided it to Coulson for the purpose of it being passed onto the plaintiffs because at 1:45pm Perth time he sent an email to Coulson attaching the cashflow which Bell had provided to him, and at 1:52pm Perth time, following a discussion with Simpson, sent an email to Simpson attaching the cashflow which he had forwarded to Coulson, with the message: ‘Copy of latest cashflow as discussed at 2:01pm Perth time’, and he sent a further email to Coulson attaching a further version of the cashflow with a direction to use that version.

11. [477]

    In the case of Bell, they put that it may be inferred that he was aware that it would be forwarded to Coulson for the purpose of it being passed on to the plaintiffs because at 12:01pm Perth time on 11 January 2014, he sent a cashflow to Montgomery which differed from the version ultimately provided to the plaintiffs only to the extent that it contained assumption (u) in its full form.

12. [478]

    Swiss Re and QBE argue that neither plaintiff would have released its bonds unless the other plaintiff did likewise as they were acting in unison and in lockstep and each checked with the other before releasing its bonds.

13. [479]

    QBE puts that Brereton was the sole decision maker with respect to the issue of the January bonds and his decision to issue was significantly influenced by the 11 January 2014 cashflow, his conversations with Simpson on 11 and 13 January 2014, and the contents of the 13 January 2014 draft ASX announcement.

14. [480]

    It observes that upon learning of the taxation issue on 10 January 2014, Brereton considered that it was necessary to obtain confirmation from Simpson that the taxation liability would not impact on the viability of Forge or materially change any of the information that QBE had previously been given; also on that day, Brereton told Coulson that he needed a revised cashflow and to hear from Simpson directly; and on 11 January 2014, he sent an email to Simpson asking that Simpson call him that evening.

15. [481]

    Brereton gave evidence of what he would have done ‘had he known the true position of Forge’. He says that he would not have proceeded with the issue of the bonds if: the 11 January 2014 cashflow had attributed a low level of certainty to the deferral of the taxation liability, such that it was merely a ‘possible problem or timing issue’ or even ‘cash flow detriment realised or expected’; he had been informed that the ATO was not prepared to agree a payment plan or had been in long term negotiations with Forge and had still not agreed to a payment plan; he had been informed that the ATO would only agree to a payment plan if it was granted security ahead of QBE’s existing liability (if that occurred he would have raised this issue with reinsurers); he had known that the additional $30 million ANZ facility was not available, because there would have been a significant shortfall; Simpson had advised him that there were any issues with the ATO agreeing to a payment plan, or intimated that it was unlikely that the ATO would agree a payment schedule or would require security; or if he knew that: a payment plan with the ATO would not be entered into and the scheduled payments in the 11 January 2014 cashflow were not likely or on track; the ATO would not agree to a payment plan without security; $30 million in debt funding from ANZ would not be available at the end of January 2014; ANZ's debt funding did not solve Forge's liquidity issues; Forge was not a viable going concern; Forge could not continue business as usual; or that there were restrictions on the use of the ANZ debt funding such that the ANZ facility was not available as set out in the 11 January 2014 cashflow. Brereton accepted that the support of ANZ was important and that Forge would have been in difficulty without it. He accepted that ANZ’s support was an essential consideration for him.

16. [482]

    Each of Simpson, Montgomery and Bell adopted each other’s responses so far as is relevant to him. Their respective written outlines overlap substantially.

17. [483]

    Both Simpson and Montgomery submit that the plaintiffs are seeking impermissibly to travel beyond their pleaded case. This has substance and I uphold it.

18. [484]

    There is no pleading about Forge being or remaining viable or able to operate on a going concern basis. That case cannot be made. Montgomery’s submissions describe the plaintiffs’ attempt to convert the pleaded representation of solvency into one that Forge was a viable and going concern, as involving a sleight of hand.

19. [485]

    The pleaded case is that Forge was insolvent or near insolvent, the particulars of which are given as being that it was not on track or likely that $30 million of additional s 560 overdraft would be available via the ANZ from the week ending 30 January 2014 in circumstances where the availability of such funds depended upon existing bonds and guarantees being returned or fully collateralised. This is a pleading of insolvency because of the dependency of funds on return or collateralisation of bonds, not of insolvency because that return or collateralisation was improbable. The case as pleaded does not concern the factors surrounding whether there would be a return of the bonds, whereas the case sought to be argued requires that to be investigated.

20. [486]

    Amongst others, evidence from the ANZ might have been called on that subject. [62] Mentha may have been called. On 26 November 2013, he expressed the view that in some instances a swap may be achieved simply and quickly. Forensic decisions not to call Simpson, Montgomery and Bell were undoubtedly made on the basis of the case as permissibly pleaded and correspondingly run.

21. [487]

    The pleading does not include or comprehend an allegation as to the likelihood or unlikelihood of those bonds and guarantees being returned or collateralised. It is an assertion of insolvency because of the fact of that dependency alone. That case is unsustainable and Swiss Re and QBE opted not to run it.

22. [488]

    It is now not open for them to argue the likelihood or unlikelihood of the fulfilment of that condition occurring as an element of some other misleading conduct concerning the availability of the facility. In what they described as their Outline of Reply Submissions, they sought impermissibly to further extrapolate these contentions.

23. [489]

    To permit the plaintiffs to go beyond their pleading in the manner in which they seek to do prejudices the defendants and I disallow it. It was not the case they came to meet. Swiss Re and QBE did not make the case which they pleaded, and wish to run one which they did not.

24. [490]

    Each defendant denies that he made any representations by the 11 January 2014 cashflow. Any representations were those of Forge. Any opinions were those of Forge.

25. [491]

    Simpson says he did not prepare the cashflow, did not see it and was not a party to the communications between Bell and Coulson by which it was conveyed to the plaintiffs. Bell puts that there is no evidence that he saw the 11 January 2014 cashflow (in the form that it was provided to the plaintiffs) prior to it being provided to the plaintiffs, that he knew that the cashflow (in the form that it was provided to the plaintiffs) would be provided to the plaintiffs or understood that the cashflow he had provided to Montgomery earlier in the day on 11 January 2014 was intended for the plaintiffs (with or without amendments).

26. [492]

    As to the first representation, that the tax deferral was on track/likely, they make the point that what is now put is different from the pleaded case and argue that the plaintiffs should not be permitted to travel outside of their pleaded cause. Montgomery points out that there is no pleading concerning viable and going concern.

27. [493]

    They put that as at 11 January 2014, the ATO tax deferral was in fact on track/likely, and that given that it was actually achieved, an opinion that it was likely to be achieved could not be misleading. The opinion was accurate or at least genuinely, and insofar as is required, reasonably, held.

28. [494]

    As to the particular respects identified by the plaintiffs as making the deferral not on track or likely, it is put that:

    1. (1)

       the 13 December 2013 proposal had not been ‘rejected’. The ATO had ‘not accepted’ it because it wanted to ‘explore’ a possible security arrangement and to issue DPNs. Malone continued to engage with the ATO over that weekend and by 15 January 2014 the ATO and PWC were exchanging draft term sheets. The replacement proposal was to put forward a form of security and pay the DPNs issued on 13 January 2014 which was done on 13 January 2014;

    2. (2)

       the ATO had stated that if tax arrears could not be paid it would continue to negotiate so long as that could be explained in the submission. The ATO negotiated and agreed on a plan despite the tax arrears of $15 million not being paid;

    3. (3)

       the DPNs did not put the plan ‘off track’ – they made it more likely that the ATO was going to agree; and

    4. (4)

       the ATO’s indication that it wanted to ‘explore’ taking security would not reasonably be thought to have put the plan off track. Forge had every reason to think that the surety providers and ANZ would consent to the ATO taking a subordinated security position, including being advised by Langdon on 9 January 2014 that ANZ and the other Banking Club members were ‘likely to be amenable to the security for the ATO’.

29. [495]

    As to the second representation, that Forge was solvent and would remain viable and able to operate on a going concern basis, they put that provision of the cashflow did not carry with it a representation that Forge was solvent, still less that it would remain so. They put that the cashflow was no more than an estimate of future flows of money in and out of Forge based on a series of assumptions. They put that the cashflow did not represent that Forge was a viable going concern, irrespective of any assumptions. Assumption (u) was described in the cashflow as an operational assumption and the representation was, if anything, one that Forge was expected to produce a positive cash position over the relevant period covered by the cashflow, subject to the stated assumptions, including the additional funding as a precaution.

30. [496]

    Whilst maintaining their objection to the plaintiffs going beyond their pleading, they put that the plaintiffs have not shown that they (and the board) did not have a reasonable basis as at 13 January 2014 to consider that the additional $30 million would be made available by the end of January or that it was not then on track or likely to be made available. They rely on the expressed support by ANZ including that ANZ (as conveyed by Simpson to the board) would support a backup plan if the DPS bond swap, which ANZ and the board recognised faced challenges, did not proceed.

31. [497]

    They put that the cashflow did not hold out that the ANZ would or was legally obliged to provide the additional $30 million. They put that the plaintiffs were aware that the additional $30 million was vital to Forge’s solvency and (as put on behalf of Simpson) that it ‘lay in the gift of’ ANZ.

32. [498]

    They argue that the plaintiffs were made aware of the restrictions on the availability of the additional $30 million facility and that its use required swapping ANZ guarantees for insurance bonds. Apart from the 28 November 2013 announcement, they put that the restriction was disclosed at the 3 December 2013 Assetinsure meeting, the 6 December 2013 QBE meeting and the 12 December 2013 Assetinsure meeting. QBE was provided on 3 December 2013 with the ANZ facility letter. They say that on the evening of 13 January 2014, Swiss Re and QBE received full copies of Forge’s ANZ facility documents.

33. [499]

    They argue that all concerned rationally formed the view that ANZ was likely to support Forge and proceeded on that basis.

The Saturday evening 11 January 2014 conversation between Simpson and Brereton [63]

1. [500]

   This is a claim against Simpson. Again, it is appropriate to set out the paragraphs of the Amended Commercial List Statement [64] in which it is made.

2. [501]

   In their Amended Outline of Closing Submissions, [67] the plaintiffs seek to argue that Simpson represented to Brereton that:

   1. (1)

      the board was comfortable in relation to the quantum of losses on existing projects;

   2. (2)

      the further write-downs would not have a material impact on the cash flow position;

   3. (3)

      the board was satisfied that Forge had ‘sufficient timing/wiggle room’ in relation to its position with the ATO, that there was no need to be concerned because a repayment schedule that was not too onerous would be put into place, and that a deal with the ATO was imminent; and

   4. (4)

      the ANZ’s support was sufficient.

3. [502]

   They go on to argue, somewhat cryptically, and in a manner which does not correspond with the articulated representations (which in turn do not correspond with the Amended Commercial List Statement) that:

4. [503]

   Simpson submits that the argued case is not the pleaded case. He puts that the plaintiffs have not pleaded any facts which falsify any of the representations pleaded in the Amended Commercial List Statement. [68] I uphold this submission.

5. [504]

   He puts that none of the pleaded representations were false or misleading, because at the time of the call:

   1. (1)

      he was not in a position to disclose the range of the write-down and it was correct to say that the board and management were undertaking investigation to crystallise losses, that is, to ascertain and announce to the market the range of the further profit write-down in FY2014 attributable to the WAPS project;

   2. (2)

      ANZ had reiterated its full support for Forge; and

   3. (3)

      discussions with the ATO were ongoing and later resulted in an agreement.

The Monday evening 13 January 2014 conversation between Simpson and Brereton [69]

1. [505]

   This is a claim against Simpson that he failed during the Monday 13 January 2014 telephone conversation with Brereton to disclose that:

2. [506]

   It is put that the omitted information was material to Brereton’s decision to release the bonds and information which he was reasonably entitled to expect to have been disclosed in the context of a conversation about Forge’s financial position prior to the release of the bonds.

3. [507]

   Simpson accepts that he did not inform Brereton of the matters concerned. He denies that the circumstances of the discussion gave rise to an objectively reasonable expectation of disclosure of them.

The 13 January 2014 draft ASX announcement [70]

1. [508]

   This is a claim against Simpson that the 13 January 2014 draft ASX announcement which was circulated at his direction was misleading because it did not disclose the true status of the proposed deferral, the position revealed by the 8 and 10 January 2014 cashflows and that the additional $30 million from ANZ was not on track or likely.

2. [509]

   This substantially narrows and is different to the non-disclosures pleaded in the Amended Commercial List Statement [71] which are as follows:

3. [510]

   The plaintiffs argue that the omitted information was material to Brereton’s decision to release the bonds and that Brereton was reasonably entitled to expect the information to have been disclosed in the context of a conversation about Forge’s financial position prior to the release of the bonds.

4. [511]

   Simpson’s response is that the relevant rule is r 3.1A of the ASX Listing Rules, which requires an entity to disclose information which a reasonable person would expect to have a material effect on the price or value of the entity’s securities.

5. [512]

   Listing Rule 3.1A.1 of the ASX Listing Rules provides an exception where one or more of five situations applies, including ‘[t]he information concerns an incomplete proposal or negotiation’ or ‘[t]he information comprises matters of supposition or is insufficiently definite to warrant disclosure’.

6. [513]

   He submits that at least the first of these exceptions applied to each item of information that it is alleged ought to have been disclosed. In particular, he puts that there could have been no reasonable expectation that Forge would disclose to the market (and thus include in a draft market announcement):

   1. (1)

      the incomplete ATO negotiations;

   2. (2)

      the cash position indicated by two draft cashflows that had been superseded (by the 11 January 2014 cashflow), which were not circulated to the board (or to him), and were described by Montgomery as ‘preliminary’ and reflecting a ‘potential’ position only; or

   3. (3)

      that the second $30 million tranche of ANZ funding was not ‘on track/likely’ – particularly where Forge’s external advisors and bank had vetted the assumption.

7. [514]

   He puts that no non-disclosure can be sheeted home to him personally because in meeting its disclosure obligations as a listed company, Forge was performing a corporate function. Any non-disclosure was that of Forge, not of Simpson.

8. [515]

   Each plaintiff must establish:

9. [516]

   The 15 November 2013 $3.85 million bond is a subject which can be dealt with discreetly. The 19 December 2013 $6 million bond is a subject which is bound up, amongst others, with the 28 November 2013 announcement and the 2 December 2013, 4 December 2013 and 12 December 2013 cashflows, and the 13 December 2013 submission. The 16 December 2013 submission is bound up with the 6 December 2013 QBE meeting and the 2, 4 and 12 December 2013 cashflows. The 13 December 2013 and 16 December 2013 submissions are pivotal to causation on both Swiss Re and QBE’s cases on the issue of the January bonds. As to the January bonds, they are additionally bound up on the plaintiffs’ case with the 11 January 2014 cashflow, the Saturday evening 12 January 2014 and the Sunday evening 13 January 2014 conversations between Simpson and Brereton, and the 13 January 2014 draft ASX announcement. As well, Swiss Re and QBE argue that they were proceeding in lockstep.

10. [517]

    The affidavits adduce a large volume of evidence from deponents about what he would have done or would not have done, [73] as the case may be on a series of hypotheses, many of which are not established or pressed, or both. They adduce evidence of what they say they relied upon. Montgomery’s submission aptly describes this evidence as multi-layered. It would not be feasible or productive to attempt an assessment of the strength of this evidence based on the almost infinite combinations of hypotheses or factors. Common sense dictates, indeed necessitates, a broader approach.

11. [518]

    Not each charge of misleading or deceptive conduct is made against each defendant. The evidence of witnesses as to what they took into account and as to what they otherwise would have done is - as the submissions of Montgomery aptly described - multi-layered.

12. [519]

    The structure (perhaps the only feasible one) which I have adopted for these reasons and which might facilitate an understanding and the consideration of the claims which I understand the plaintiffs make is:

Bell and the 15 November 2013 $3.85 million bond

1. [520]

   The complaint is by Swiss Re against Bell only. The assertion is that by not disclosing during the 15 November 2013 telephone conference with Calvert, Gorman and Coulson, that Forge’s cashflows demonstrated an imminent negative cash flow and that it had not been meeting its PAYGWT obligations, Bell engaged in misleading or deceptive conduct in his own right and that the $3.85 million bond would not have been issued had Bell disclosed those matters.

2. [521]

   The non-disclosures of which Bell is accused are that Forge’s cashflows were demonstrating an imminent negative position and that Forge had not been meeting its PAYGWT obligations to the ATO.

3. [522]

   Bell admits the non-disclosures. The first question is whether, in refraining from making reference during the telephone conversation to the matters complained of, Bell was engaging as principal (not accessory) in conduct for the purposes of the Act.

4. [523]

   In my opinion, he was not relevantly engaging in actionable conduct in his own right.

5. [524]

   The plaintiffs place heavy reliance on C H Real Estate v Jainran Pty Ltd (2010) 14 BPR 27,361 (Jainran), where the principal of a company selling land presented to the purchaser a contract which contained misleading representations (which were included on his instructions) and which conduct could be attributed to his direction as a matter of fact, was held himself to have engaged in conduct which was misleading or deceptive. At 27,378-9 [104]-[105] Basten JA said:

6. [525]

   Jainran is distinguishable from this case.

7. [526]

   Bell’s acts are undoubtedly his own conduct if, as a matter of fact, they are. That is, if the consequences which flow from them may properly be viewed as the product of his own conduct.

8. [527]

   Bell was not the principal of Forge, its mind, or directing it, but rather he was answering questions and providing information known by him about Forge. His conduct was only on behalf of Forge. [74]

9. [528]

   Perhaps more importantly, Jainran involved positive acts by the protagonist. This complaint is about inaction.

10. [529]

    It is one thing to attribute to him personally the consequences of what he said, because those flow from action which he took. It is another to take a non-disclosure by Forge as Bell’s own because he was one, amongst many other potential human embodiments of Forge, who did not disclose it. The non-disclosure was always Forge’s. It does not become Bell’s non-disclosure because he was not the one on Forge’s behalf to disclose it. In my view, Bell’s silence cannot fairly be viewed as his own conduct for the purposes of the Australian Consumer Law in these circumstances. The consequences of Forge failing to make the disclosure, cannot fairly be said to flow from his inaction.

11. [530]

    I am not satisfied that Bell’s conduct (if the non-disclosure is to be attributed to him), was misleading or deceptive. Bell was answering questions which Swiss Re formulated. Those questions did not call for disclosure of the particular matters identified. Cashflows were constantly being developed and changed. In the context of all of the information which Swiss Re had (via Assetinsure), including that Forge was in a trading halt, the non-disclosures complained of are trivial.

12. [531]

    The plaintiffs have not established that Bell engaged in conduct that was misleading or deceptive in connection with the $3.85 million bond.

13. [532]

    It is accordingly not necessary to consider whether, had the conduct complained of been made out, they have established that they suffered any loss because of it. I will nevertheless do so.

14. [533]

    The plaintiffs must establish that their loss was suffered because of the conduct complained of. The relevant question is whether or not there is sufficient connection between the conduct complained of (assuming it is made out) and the damage, for the damage to be regarded as because of or by the conduct. Whether or not that connection exists is essentially a question of fact to be determined by reference to common sense and experience and one into which policy considerations and value judgments necessarily enter: March v (E & M) Stramare Pty Ltd (1991) 171 CLR 506; Travel Compensation Fund v Tambree (t/as R Tambree and Associates) and Others (2005) 224 CLR 627 at 639-640; Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; Wallace v Kam (2013) 250 CLR 375 at 385-6.

15. [534]

    They must establish that the conduct complained of caused them the loss they claim they suffered by issuing the bond. [75] They do not need to establish that the conduct complained of was the sole or predominant cause of the action they took, it is sufficient if it was a contributing cause. What they must show is that despite any other contributing factors, they would have adopted a different course, that is, not have issued the bond had the conduct complained of not occurred: Sidhu v Van Dyke (2014) 251 CLR 505 at 530-532 per Gageler J.

16. [535]

    The conduct complained of here is non-disclosure. That there was no disclosure of the matters concerned and that Swiss Re issued the $3.85 million bond are established. It is incumbent on the plaintiffs to establish that taking into account all other contributing factors, they would not have issued the bond. Conversely, if taking into account all other contributing factors, they would have issued the bond anyway, they will not have suffered loss because of the conduct complained.

17. [536]

    I find that Swiss Re has not established that it suffered any damage by the non-disclosure.

18. [537]

    Indeed, I am satisfied that it is more probable than not that the bond would have been issued anyway. The suggestion that the mere additional disclosure of the two matters concerned would have made the difference between issuing and not issuing the bond is unrealistic.

19. [538]

    Swiss Re and QBE’s evidence as to how they would have acted is in substance no different from the hypothetical type of evidence which McHugh J described in relation to medical issue cases in Chappel v Hart (1998) 195 CLR 232. At [32] in footnote (64) his Honour said:

20. [539]

    In Rosenberg v Percival (2001) 205 CLR 434, in the context of what a patient would have done in the face of a warning about a pending operation, McHugh J said the following at 449:

21. [540]

    In a similar context in Ellis v Wallsend District Hospital (1989) 17 NSWLR 553 Samuels AJ said at 581:

22. [541]

    At 582 his Honour said:

23. [542]

    In Cackett v Keswick [1902] 2 Ch 456 Farwell J said (at 463-464) that:

24. [543]

    I had the opportunity of observing the plaintiffs’ witnesses. The evidence of each of them is, as one might expect, undoubtedly coloured by the fact that they were participants in the issue of bonds which resulted in their employers having to pay very significant amounts of money very shortly after the bonds were issued. I would not call this a catastrophe but it was far from a happy event.

25. [544]

    An objective assessment of how Swiss Re (with Assetinsure) and QBE behaved, both up to the point at which the bonds were issued and afterwards, undermines any suggestion that they would have acted differently had Bell made the disclosure in question.

26. [545]

    If the additional matters had been spoken of and were of any significance to Assetinsure as is suggested, I am satisfied that it would not without more have refused to issue the bond but would have discussed those matters in more detail and have been satisfied sufficiently to issue the bond.

27. [546]

    It was obvious from what Bell said and from Gorman and Calvert’s own knowledge at the time that Forge was in trouble. It had been in a trading halt and had suffered a significant write-down. Breach of banking covenants was imminent.

28. [547]

    But, importantly, Forge had the support of its bankers and was looking at a capital raising or debt funding.

29. [548]

    Much later, when Swiss Re (and Assetinsure) had more detailed information about Forge’s perilous position and tax defaults, bonds for far greater amounts were nevertheless issued.

30. [549]

    Calvert said that if for some reason he had formed the view in mid-November 2013 that the $3.85 million bond should not be issued, he would have consulted with Swiss Re about what to do. He accepted that it would have been up to Swiss Re to decide whether to issue the $3.85 million bond.

31. [550]

    Gorman said that if he had come to the conclusion that refusing to issue the $3.85 million bond would have been catastrophic for Forge, it was ‘very likely’ that Assetinsure would have discussed any proposed refusal with Swiss Re.

32. [551]

    The potentially catastrophic consequences for Forge of refusal were entirely apparent to Assetinsure. It would have caused Forge to default under the Roy Hill Contract at the risk of termination of the very valuable contract and the possible collapse of Forge.

33. [552]

    At the time, Assetinsure with Swiss Re had an existing unsecured bond [77] exposure to Forge in the order of $90 million which would have been a strong factor against refusal. The bond was for a modest amount in comparison.

34. [553]

    Swiss Re led no evidence from Leupi on this topic. It may be inferred that his evidence would not have assisted Swiss Re. [78]

35. [554]

    Swiss Re has not established that it suffered any loss or damage because of Bell’s non-disclosures during the 15 November 2013 telephone conversation. The claim against Bell with respect to the $3.85 million bond fails.

Simpson and Montgomery and the 19 December 2013 $6 million bond

1. [555]

   The first aspect of this claim concerns the alleged representations made by Simpson and Montgomery in the 28 November 2013 announcement that the ANZ facilities would cover and solve Forge’s liquidity challenges and liquidity issues and enable it to trade on a business as usual basis.

2. [556]

   The second apparent aspect, comprehends those complaints made about the 2 December 2013, 4 December 2013 and 12 December 2013 cashflows.

3. [557]

   Apparently implicit in these contentions is that the $6 million bond would not have been issued absent the statements complained of in the 28 November 2013 announcement and had the complained of non-disclosures in connection with those cashflows not occurred. [79]

4. [558]

   Both Simpson and Montgomery argue that what was said by Forge in the 28 November 2013 announcement was not their own representations.

5. [559]

   It is to be stressed that there is no claim against them of accessorial conduct, nor of any conduct other than the making of representations, such as for example that they had no reason to consider that anything in the 28 November 2013 announcement was inaccurate.

6. [560]

   In my view, neither Simpson nor Montgomery made any representation by the 28 November 2013 announcement as asserted.

7. [561]

   The making of representations, which is all that is pleaded against Simpson and Montgomery, was the act and the act only of Forge. Even if it be accepted that each played a part, even a material part in causing Forge to make the announcement, that does not make the announcement their own. [80]

8. [562]

   Neither was the human embodiment of Forge making the announcement. Neither was the principal, its mind or directing it on his own. It was a collective effort. If either had knowledge of facts which made the announcement inaccurate, he would be exposed as an accessory.

9. [563]

   The plaintiffs have not established that by the transmission of these cashflows either of Simpson or Montgomery himself made any representation.

10. [564]

    The plaintiffs have not established that Simpson saw these cashflows, or provided them to the plaintiffs. They were provided via Coulson. The plaintiffs’ own pleading is that Coulson sent them on behalf of Forge. The plaintiffs’ submissions rise no higher than that Simpson as CEO was aware since mid-November 2013 that the cashflows were being prepared, including for the purpose of being provided to Coulson and the plaintiffs. Even if this were correct it does not sustain a finding that representations made in these cashflows were Simpson’s own.

11. [565]

    The only relevant direct communication Montgomery had with Assetinsure or QBE appears to be at the 3 December 2013 meeting. He did not send any of the cashflows to the plaintiffs. The plaintiffs have not established that he made any representations personally by the relevant cashflows.

12. [566]

    I accept the evidence of both Gorman and Calvert as to what was said at this meeting.

13. [567]

    The substance of this complaint against Montgomery is the making by him of allegedly incorrect statements that cash flow would be tight over the coming weeks and then be positive from January 2014, and that ANZ had agreed to provide further facilities which would solve Forge’s liquidity issues including a $30 million overdraft facility which would be available on 6 December 2013.

14. [568]

    The plaintiffs have not established that any of this was wrong. [81]

15. [569]

    The accounts of both Gorman and Calvert make it clear that Montgomery was talking (as he must have been) about the short term and as matters of assumption pertinent to Forge’s projected cash flow – so much is made clear by Gorman’s note of the meeting where these matters appear in that context. Montgomery referred to the fact that cashflows were being vetted daily by KordaMentha, the $30 million facility may or may not have been required or may or may not have been made available as bonds on projects were returned, Forge was looking to enter into an arrangement with the ATO and investigations were ongoing.

16. [570]

    The falsifications articulated in the plaintiffs’ written outline appear to be that the ANZ facilities had not resolved Forge’s liquidity issues or needs because of the dependence on the availability of the ANZ facility on return or cancellation of ANZ performance guarantees, and there were no prospects of this occurring, and that no deferral had been agreed or requested from the ATO.

17. [571]

    The first falsification is outside of the plaintiffs’ pleaded case and cannot be relied upon. The second falsification does not correspond to the alleged representation.

18. [572]

    Simpson does not dispute having referred to the ANZ facility as a ‘complete fix’ to Forge’s cash flow requirements. It is clear that he was referring to a short term fix.

19. [573]

    The only complaint against Simpson is that the so-called ‘complete fix’ he referred to was dependent on the ATO debt being deferred, and there was no reasonable basis to expect that this would occur in the manner provided for in the cashflows.

20. [574]

    The tax deferral plan was progressed from about 16 November 2013 and throughout, Forge had the assistance of professional advisers.

21. [575]

    The minutes of the 27 November 2013 board meeting contain the notation that:

22. [576]

    On 29 November 2013, Malone of PWC initiated discussions with the ATO.

23. [577]

    On 6 December 2013, Malone sent a letter to the ATO and this was followed up on 9 December 2013.

24. [578]

    A tax deferral plan was actually agreed to by the ATO on 31 January 2014. That plan was more favourable to Forge than the deferral assumed in the 27 November 2013 cashflow – it deferred more tax over a longer period. The deferral in the 27 November cashflow was of payments of PAYG and BAS between the weeks ending 29 November 2013 and 31 January 2014, totalling $29.6 million. The deferral to which the ATO agreed on 31 January 2014 was of all payments between 13 November and 28 February 2014, totalling about $35 million, with such payments to be made over 18 months commencing on 28 March 2014.

25. [579]

    The plaintiffs have not established that an agreement with the ATO was not on track or likely. I find that it was on track and likely, so much so that it happened. It follows that Simpson’s expectation of it being likely was, at the time of the 12 December 2013 Assetinsure meeting, reasonably held. It certainly has not been established that his expectation was not reasonable.

26. [580]

    The complaint against Montgomery is that he did not correct Simpson’s statement. It is not in issue that he said nothing. The representation was accordingly not his in any event. He is not charged with non-disclosure. The complaint against him must fail for this reason as well.

27. [581]

    The parties did not explore the subject of the impact on the plaintiffs’ claim with respect to the January bonds, had they made out either this claim or the claim with respect to the $3.85 million bond. It seems to me at least arguable, that if either of those bonds had not been issued, Forge may have collapsed earlier and the January bonds would not have been issued.

Simpson, Montgomery and Bell and the January bonds

1. [582]

   As has been earlier observed, the individual complaints, which are said to comprise the misleading conduct which they say caused damage, are not all made against each of Simpson, Montgomery and Bell.

2. [583]

   The only exigible content of this complaint is that the cashflow was misleading because it assumed a deferral agreement with the ATO which was assessed as on track or likely when this was not so, and it made the representation that Forge was and would remain solvent when it was insolvent or near insolvent because $30 million was not unconditionally available, but subject to certain restrictions.

3. [584]

   These complaints fail at the first hurdle because the representations made by way of the cashflow were not those of Simpson, Montgomery or Bell, but of Forge. No misleading conduct beyond representations on their part is pleaded.

4. [585]

   The ATO arrangement is pleaded as being not on track or likely because the ATO had informed Forge of its intention to issue DPNs to various directors of Forge and to certain of Forge’s subsidiaries, the ATO required security as a condition of any arrangement, Forge did not have the consent of its secured creditors to provide security to the ATO, the ATO had rejected the proposed repayment plan set out in the 13 December 2013 letter, no other repayment plan had been formulated or put to the ATO, and Forge proposed to obtain the January bonds first and before formulating a new deferral plan for presentation to the ATO.

5. [586]

   Self-evidently it does not follow from any or all of these matters, even if they are correct, that the ATO arrangement was not on track or likely. DPNs were issued, but the deferral arrangement nevertheless went ahead. Security was given with the consent of Swiss Re and QBE. The ATO had not outright rejected a repayment plan. One was under formulation. The January bonds were always going to be issued before finalisation of the ATO arrangement, and they were issued at a time when both Swiss Re and QBE knew that the arrangement had not been made.

6. [587]

   On 8 January 2014, Malone prepared a memorandum to update on discussions with the ATO regarding Forge’s outstanding tax liabilities. Malone reported that the ATO was entitled to issue DPNs to company directors where a company has an outstanding PAYGWT obligation.

7. [588]

   The minutes of the 9 January 2014 board meeting record the discussion about the proposed arrangement, including that it was commonplace, and de Kerloy’s advice that subject to receipt of an acceptable cashflow to be finalised on 13 January 2014, there existed a reasonable expectation that the ATO would negotiate and agree an instalment repayment plan with the company.

8. [589]

   PWC were negotiating and liaising with the ATO in respect of the repayment plan. Malone reported on the morning of 11 January 2014 to Bell and Montgomery that he had spoken to the ATO.

9. [590]

   The minutes of the 11 January 2014 board meeting record that senior ANZ staff advised Simpson that the ANZ would support the directors through the process with the ATO and referred to KordaMentha’s advice that it expected that the ATO would agree to a deferral.

10. [591]

    The plaintiffs have failed to establish that an agreement with the ATO was not on track or likely as at 11 January 2014. This is because it was.

11. [592]

    The second aspect, insolvency, can be dealt with briefly.

12. [593]

    There is substance in the defendants’ submission that the 11 January 2014 cashflow did not make any representation as to Forge’s solvency or continued insolvency. In this context it is apt to observe that the cashflow was self-evidently an uncertain estimate at a single point in time of future cash flows based on a series of assumptions. This snapshot could change significantly and quickly because of income and expenditure timing considerations and extraneous matters. [82]

13. [594]

    The existence of conditions attaching to the additional $30 million funding does not translate into insolvency or near insolvency. [83]

14. [595]

    Although it is not incumbent on Simpson, Bell and Montgomery to meet a contention that the additional funding was unlikely because of the lack of prospects of existing bonds and guarantees being returned or collateralised, against the possibility that the plaintiffs were permitted (over their objection) to motivate it, they put submissions on the issue.

15. [596]

    Even on the available material, limited as it is, I would not find that the availability of the additional $30 million was not on track or likely or that Simpson, Montgomery and Bell did not have reasonable grounds for thinking that it was. In my view they did. ANZ’s support was unwavering. Simpson, Montgomery and Bell had every reason to believe that if the DPS bonds were not acceptable to the other interested institutions, ANZ had a backup plan. ANZ had extended every concession to the M + W Group to facilitate a capital raising.

16. [597]

    The minutes of the 11 January 2014 board meeting record that:

17. [598]

    Further evidence of known ANZ support at the time appears in Langdon’s email of 11 January 2014 which records that DPS, ANZ and WBC had confirmed their willingness to swap the bonds but other banks had not agreed.

18. [599]

    Shortly thereafter, at the 13 January 2014 board meeting, Travis of ANZ reiterated that bank’s support.

19. [600]

    In their so-called Outline of Reply Submissions, the plaintiffs suggest that reliance by the defendants on the 11 January 2014 minutes as evidence of a backup plan is misplaced because no such plan had been identified, it is not apparent on the evidence that a specific plan had been put to ANZ, ANZ was not called and there was no evidence of any call or request by Simpson on ANZ with respect to that backup plan. This submission is one of a number which demonstrate the vice to which the defendants would be subjected if the plaintiffs were allowed to motivate the point. The plaintiffs seek to change their case to make the probability of the additional facility being available a central issue. The defendants were not on notice of this claim. They possibly refrained from doing things which they might have done, such as call the ANZ and further investigate the issues. The plaintiffs then seek to use in aid of their contention the defendants’ failure to call the bank or provide further information on the issues.

20. [601]

    This claim is not intelligibly pleaded. What is sought to be put does not correspond with what is pleaded. This is sufficient to reject it.

21. [602]

    In any event, if it is intended to be a reprise of the contention that Forge was insolvent because it was not on track or likely that the additional ANZ funding would be available and that there would be a deferral arrangement with the ATO, I would reject it for the reasons set out above in relation to those matters.

22. [603]

    Somewhat at odds with the restriction of this complaint to one of non-disclosure, the plaintiffs’ written outline argues that each of the statements made in the telephone conversation were representations as to existing facts but even if they were representations as to future matters, Simpson had no reasonable basis (having regard to the contemporaneous and objective evidence) for those statements.

23. [604]

    This complaint is not made out.

24. [605]

    I have already found that the ATO repayment plan was on track or likely and that the bonds were always going to be issued before the repayment plan was agreed. The plaintiffs have not established that Simpson saw the 8 January 2014 and 10 January 2014 cashflows. They were drafts. By the time of this conversation, they had been superseded by the 11 January 2014 cashflow. It may be accepted that the board was operating on the basis of a cashflow which had an assumption that the $30 million additional facility from ANZ was on track or likely. It is not open for the plaintiffs to argue that it was not on track or likely because of the improbability of the bond swap. However, they have in any event not established that it was not on track or likely.

25. [606]

    Earlier in the day (10:56am Perth time, 1:56pm Sydney time), Brereton had emailed Simpson that he expected to hear that the board had voted to lift the trading halt. The email stated that on the basis that the Forge board, ANZ, Swiss Re and QBE were in lockstep, they would then be able to direct the issue of the January bonds.

26. [607]

    Importantly, when Simpson called Brereton later that evening, he was fulfilling Brereton’s expectation.

27. [608]

    Brereton already knew that the ANZ were supportive and he was being provided with the information he asked for. All the relevant players were in lockstep.

28. [609]

    I do not consider that there was any reasonable expectation that Simpson would say the additional matters the subject of this complaint.

29. [610]

    The non-disclosures argued by the plaintiffs in this complaint are the same as those pleaded with respect to the 13 January 2014 telephone conversation. For the reasons set out with respect to that complaint, this complaint is also not made out.

30. [611]

    It is not made out for the additional reason that I uphold Simpson’s submission that the non-disclosure was not his personally.

31. [612]

    It is not necessary to consider whether the matters the subject of the alleged non-disclosure fall within the exceptions to ASX listing rules. [85] This is not a charge of breach of the listing rules.

32. [613]

    I have found that the plaintiffs have not established that any of Simpson, Montgomery and Bell engaged in conduct that was misleading or deceptive or likely to mislead or deceive. It is thus not necessary to consider whether the conduct complained of caused the plaintiffs any loss. However, I will nevertheless do so on the hypothesis that all of the conduct complained of had been made out.

33. [614]

    The plaintiffs’ key propositions are that:

34. [615]

    Their case is that they suffered damage by the issue of the bonds. What role, if any, in bringing about that event did the conduct complained of play? A full evaluative assessment [86] of this requires:

Significant factors

1. [616]

   It is apt to observe that the plaintiffs are substantial corporations and commercially highly sophistiacted. Their business is assessing and taking calculated risk. [87] Their operatives are knowledgeable, sophisticated and highly experienced with respect to their craft. [88] In making the judgments they made, they brought these qualities to bear. They were the recipients of significant and detailed financial information about Forge, little of which was good news. They brought their own judgment to bear on a large body of information.

2. [617]

   The January bonds were issued notwithstanding:

3. [618]

   The January bonds were issued despite and in the face of it being obvious (or perhaps because it was obvious) that without them Forge was dead.

4. [619]

   I find that the critical matters which induced Swiss Re and QBE to act as they did are the following:

5. [620]

   The plaintiffs’ central complaints are that they were misled as to the prospects of the additional $30 million ANZ funding and the deferral arrangement with the ATO, principally by being told that the ANZ funding solved Forge’s liquidity issues and being told by way of the 11 January 2014 cashflow that both the funding and the deferral arrangement were on track/likely.

6. [621]

   The ANZ funding was of course only part of a solution if it was available.

7. [622]

   The counterfactual to the making of a representation that something is on track or likely is not a representation or communication that it is not on track or is unlikely. It could be to convey nothing, to convey that it might be on track or that there is an even chance of it happening, or that there is a possible problem or timing issue. [91] The counterfactual to a non-disclosure is not necessarily the precise obverse of it.

8. [623]

   Had the on track/likely assumption not been communicated, what assumption would have been? Had no assumption or some different assumption been communicated, what would the state of knowledge of Swiss Re and QBE have been? Would they have asked further questions? If so, what would the answers have been? The same questions arise with respect to the ANZ funding solving the liquidity issues. If nothing had been said, what would have happened? Swiss Re and QBE had a massive body of information at their disposal.

9. [624]

   If the defendants had provided more information to the plaintiffs about the ATO dealings, including that security was required, the plaintiffs would likely have asked more questions. One might think that they would have been given more information, along the lines that they were ultimately in fact given, and after which they accepted the ATO’s position. If the counterfactual is to include disclosure of further information about the prospects of an ATO deal, it would have to include such further information as they would have been given.

10. [625]

    Assuming – contrary to my earlier holding – that the plaintiffs were entitled to prosecute a case that a bond swap was unlikely, what would have been their state of knowledge had the defendants disclosed more information about the potential bond swap? It is likely, if not inevitable, that Swiss Re and QBE (particularly QBE since it was seen as a possible provider of the additional bonds) would have wanted to know more from the ANZ. It is likely, if not inevitable, that the defendants would have provided more information about support from the ANZ including as to the back-up plan should the DPS bond swap not be acceptable, which was referred to at the 11 January 2014 board meeting. If the counterfactual is to include the disclosure of further information about the prospects of the facility, it would also have to include, for example, the ANZ’s expressions of support. [92]

11. [626]

    The plaintiffs’ case did not come to grips with these issues. It is not for the Court, of its own motion, to identify and then select the most likely counterfactual in these circumstances. This leaves aside the additional difficulties that would be caused if there had to be an assessment of what role each discreet complaint against each defendant had on the outcome.

12. [627]

    On the footing that the defendants did not convey that the ANZ facility or the ATO arrangement was on track or likely, but said nothing, having regard to all the other information at the disposal of Swiss Re and QBE, it is difficult to see why the bonds would not have been issued anyway.

13. [628]

    I should say that I am not at all satisfied, despite the evidence of the witnesses, that there was meaningful reliance specifically placed by Swiss Re or QBE on the on track/likely status given to the presently relevant assumptions in the 11 January 2014 cashflow. I do not accept the plaintiffs’ submission that any decision was influenced by it to a substantial degree or indeed to any meaningful degree.

14. [629]

    Leupi, the principal decision maker with respect to the January bonds, decided to authorise the issue of the bonds before reviewing that cashflow. The evidence did not clearly establish that he saw it before the issue of the bonds. The first suggestion by Leupi that he read it on the morning of 13 January 2014 was led orally for the first time at the hearing. He did not recall receiving it at the time he swore his affidavit. It is not altogether clear that Calvert saw it either. He told Sim on Sunday afternoon that he had not read it on his iPhone because he was on the Central Coast and could not open it. Gorman did not review it because he was away and Sim did not obtain much comfort from it – he was not sure how ANZ/KM were comfortable. Amongst others, Brereton said of the ATO arrangement: ‘this is going to be tough’.

15. [630]

    The specific conduct complained of in connection with the availability of the ANZ facility is entirely drowned out by the other information which Swiss Re and QBE had about the ANZ’s support.

16. [631]

    Amongst others, Swiss Re and QBE knew that the ANZ and KordaMentha had reviewed the 11 January 2014 cashflow, and had attended the 13 January 2014 board meeting, and were comfortable with the statements made in the draft ASX announcement of 14 January 2014 which they had seen on the evening of 13 January 2014. The ANZ had extended its support for Forge through a combination of new facilities and amendments to existing facilities, resulting in an increase to the total working capital facility size from $11 million to $60 million with $30 million available immediately. Brereton spoke directly with Gardiner.

17. [632]

    During the 10 January 2014 telephone conference, Gardiner said that ANZ was ‘taking a pragmatic view and would continue to support Forge’ and that it was awaiting additional information over the weekend. On 11 January 2014, Wright wrote to Coulson and Sim that the ANZ advised that they were still supportive. Brereton also emailed Simpson that QBE along with ANZ and Assetinsure were looking to ensure that they could assist in any way possible and Sim reported to Leupi that ANZ indicated in this conference that ‘they remain fully supportive’.

18. [633]

    Shortly after 13 January 2014, Swiss Re and QBE agreed to the security which the ATO wanted. They did this even though there was some complaint that they had not been told before. This is particularly relevant to the evidence of Brereton who was not an unimpressive witness, but whose evidence I nevertheless do not accept with respect to how he says he would have acted differently.

19. [634]

    The idea that the matters complained of with respect to the ANZ facility, looked at in their general factual context, could have had any real influence on Swiss Re and QBE, borders on the fanciful. The suggestion that they would have not proceeded had they been told about the security earlier also borders on the fanciful.

20. [635]

    I reject the submission that were it to be established that the 13 December 2013 and 16 December 2013 submissions were induced by the conduct complained of, it follows that the January bonds were issued and loss suffered because of the same conduct.

21. [636]

    Having regard to what occurred between the submissions and the final approval, the conduct complained of as having induced the approval of the submissions, was not causative of the final approval and the issue of the January bonds. In other words, the damage allegedly suffered by the plaintiffs in connection with the January bonds was not because of the conduct which induced the approval of the submissions.

22. [637]

    It may be accepted that without the approvals the bonds would have not been issued. It does not follow that that which caused the approvals to be given caused the bonds to be issued.

23. [638]

    Perhaps more importantly, Swiss Re and QBE were free at all times not to issue the bonds even though they had earlier approved the submissions. Based simply on their state of knowledge as at the date of the submissions, they would not have issued a further $80 million worth of bonds. They did that on the basis of what occurred subsequently.

The 19 December 2013 $6 million bond

1. [639]

   There is something of a lacuna in the plaintiffs’ evidence as to who made the decision to issue this bond. Leupi made it clear that it was not his decision. He took the position that the $6 million bond was within the delegated authority of Assetinsure. The evidence does not disclose precisely who within Assetinsure made the decision to issue.

2. [640]

   Swiss Re has fallen far short of establishing that the conduct complained of was causative of the issue of the bond. In context, the amount was modest but the consequences of refusal were great.

3. [641]

   Given that Swiss Re were prepared to issue bonds for far greater amounts in January 2014, where the information at their disposal about Forge included material which placed Forge in a much more negative light, it is highly likely that Swiss Re would have issued this bond in any event.

4. [642]

   It is for the plaintiffs to prove that they suffered loss and its quantum.

5. [643]

   They claim as their loss the amount they have paid out, less the premiums they received, less recoveries paid to them from Forge assets.

6. [644]

   It is clear that the process of recovery in the winding up or receivership of Forge has not yet been completed and there is some possibility of further recoveries which may result in payments to Swiss Re and QBE.

7. [645]

   The defendants argue that the value of the rights of indemnification against Forge held by Swiss Re and QBE as a consequence of having paid out, must be taken into account in the calculation of (and reduction in) their loss. They argue that having not taken the course of attributing a value to these rights, Swiss Re and QBE have failed to quantify their loss.

8. [646]

   The plaintiffs’ response is that they suffered loss by paying out and none of it is avoided unless and until a recovery is actually paid to them. They have accounted for the sums received by them.

9. [647]

   During the hearing, the plaintiffs offered to execute an assignment in favour of the defendants for any amounts subsequently received from Forge.

10. [648]

    There is no contention that Swiss Re and QBE have failed to mitigate their loss.

11. [649]

    Given my conclusion that there is no liability to the plaintiffs, it is not necessary to resolve this issue.

12. [650]

    There is no evidence which enables the Court to make a finding as to the value, if any, of the further right of indemnification. It is therefore not possible to find on the evidence that any specific reduction is warranted. It is not necessary to resolve whether this means that the plaintiffs have not established quantum or that no reduction would be warranted in any event. I incline to the latter but I also incline to the view that any difficulty would have been resolved by an appropriately executed assignment.

13. [651]

    Questions of proportionate liability do not arise. The plaintiffs’ claims against the insurers must also be dismissed.

14. [652]

    It is also not necessary to intrude into the question whether, had the plaintiffs succeeded, they would be entitled to the benefit of all the insurance monies under the policies with the insurers as they contend, or to a lesser amount, (i.e. less defence costs) incurred by the insurers in these and other proceedings as the insurers contend, or whether the insurers are liable to pay interest pursuant to ss 100 and 101 of the Civil Procedure Act 2005 (NSW) outside the policy limit [93] (as the plaintiffs contend) or are only liable to pay interest to the extent that it falls within policy limits (as the insurers contend).

15. [653]

    The plaintiffs acknowledge that the insurers’ position on both issues is supported by Chubb Insurance Co of Australia Ltd v Moore [2013] NSWCA 212 (Chubb) and that the Court is bound by the decision. The plaintiffs put a formal submission that Chubb is wrong and that the correct position is as decided in BFSL 2007 Limited & Ors (in Liquidation) v Steigrad [2013] NZSC 156.

16. [654]

    The proceedings are dismissed.

17. [655]

    I will hear the parties on costs should this be necessary and on any other issues which remain to be decided.

18. [656]

    The exhibits are to be returned.