Skinner v Redmond Family Holdings Pty Ltd

1. [1]

   MACFARLAN JA: I agree with Gleeson JA.

2. [2]

   GLEESON JA: The respondent, Redmond Family Holdings Pty Ltd (Holdings), acquired shares in GC Access Pty Ltd (GCA), and Global Connect Services Pty Ltd (GCS), initially in December 2010 to give it an equal 28% shareholding with two other shareholders in those companies and subsequently in November 2011 to give it a controlling 51 percent interest in those companies. The other shareholders, Fullham Hall Pty Ltd (Fullham) and H Ridge Investments Pty Ltd (H Ridge), had made loans to GCA on terms containing a right of conversion to equity in GCA at the lenders’ discretion. The appellants, Mr Mark Skinner (Mr Skinner) and Mr Patrick Stone (Mr Stone) were directors of GCA and GCS. Mr Stone was associated with Fullham and Mr Skinner was associated (through his wife, Mrs Helen Skinner) with H Ridge.

3. [3]

   In a judgment delivered on 16 June 2016, the primary judge (Black J) found that Holdings was not told of the terms on which Mr Stone and Mr Skinner or their associated entities could bring about the conversion of their loans to equity in GCA. His Honour found that Mr Skinner and Mr Stone each engaged in misleading and deceptive conduct, that Holdings was led into error by such conduct in acquiring shares in GCA and GCS and that Holdings suffered loss of $900,000: Redmond Family Holdings Pty Ltd v GC Access Pty Ltd & Ors [2016] NSWSC 796 (the principal judgment).

4. [4]

   Mr Skinner applied to re-open the findings on liability. That application was partially successful with respect to Mr Skinner’s apportionment defence: Redmond Family Holdings Pty Ltd v GC Access Pty Ltd & Ors [2016] NSWSC 1588 (the re-opening judgment).

5. [5]

   On 21 December 2016 his Honour delivered a further judgment dealing with the form of orders, apportionment and costs: Redmond Family Holdings Pty Ltd v GC Access Pty Ltd & Ors [2016] NSWSC 1883 (the relief judgment). Relevantly, his Honour apportioned liability equally between Mr Skinner and Mr Stone and entered judgment against each of them in the amount of $450,000; ordered pre-judgment interest pursuant to s 100 of the Civil Procedure Act 2005 (NSW) on $250,000 from 23 December 2010 and on $200,000 from 1 February 2012; and ordered Mr Skinner and Mr Stone to pay one-third of Holdings’ costs (other than any previous costs orders) on the ordinary basis.

6. [6]

   Mr Skinner and Mr Stone have appealed. Mr Stone’s appeal requires an extension of time. It is not necessary to set out the detail of his explanation for the delay, as Holdings accepted that it could not point to any prejudice. An extension of time should be granted.

7. [7]

   There are three parts to the appeal. First, Mr Skinner and Mr Stone seek to adduce further evidence on appeal in support of their challenge to certain factual findings by his Honour. Second, there are challenges to his Honour’s findings with respect to misleading conduct, reliance and causation. Third, there is a challenge to his Honour’s finding with respect to apportionment of liability as between Mr Skinner and Mr Stone.

Background

1. [8]

   GCA carried on business developing software which could be used to provide credit card facilities to consumers, targeting the international student market, using mobile phones and similar devices. GCS was seeking to exploit that technology via a licence agreement from GCA, albeit no licence agreement was ever formalised. These two companies were known as the GC Group.

2. [9]

   Mr Skinner was a director of GCA from 27 August 2009 and a director of GCS from 25 August 2009. Mr Skinner had a sales and marketing role, although he gave evidence in cross-examination that he was only partly responsible for that role as he had retired. Mr Stone was a director of GCA between 1 March 2010 and 17 February 2011 and was the secretary of GCA from 21 April 2011; he was a director of GCS from 26 March 2010. Mr Stone had at least a financial role with GCA. Mr Nicholas Collins (Mr Collins) was responsible for the information and technology aspects of GCA’s business. He was described to third parties as an executive director of GCA, although he was not formally appointed as a director of GCA until 16 November 2011.

3. [10]

   On 24 September 2010 the directors of GCA (Mr Skinner and Mr Stone) resolved that loans made to the company by H Ridge and Fullham would be subject to an interest rate of 7.5 percent from the date of the loan to the date of the payment by the company and also subject to repayment by the company within seven days of notice being given to the company by the lender, but in any event, no later than 30 June 2013, and that, at the lender’s discretion, the loan repayments could be fully or partially satisfied by the issuing of ordinary shares in the company. The directors also resolved that appropriate loan agreements would be entered into by the company with the lenders.

4. [11]

   Mr Stone gave evidence that loan agreements between each of Fullham and H Ridge as lender and GCA as borrower were prepared and signed in October 2010, reflecting the terms of the board resolution, but dated 1 July 2011 because the directors did not want interest to accrue. The repayment provisions in cl 2 of the loan agreements included the following terms:

5. [12]

   In the second half of 2010, GCA sought further funding for the project, through Mr Chris Roulstone, a finance broker, who had contact with both Mr Skinner and Mr Geoffrey Redmond (Mr Redmond). In December 2010, Mr Skinner informed Mr Roulstone that the project required urgent funding and requested him to find a private lender to loan the funds, initially on the basis of a convertible note bearing interest. GCS proposed to borrow $500,000 in three instalments and issue a convertible note allowing the lender to convert the loan to 20 percent of the issued capital of each company in the GC Group, twelve months after receipt of the third instalment of funds.

6. [13]

   On or about 14 December 2010, Mr Skinner sent an email to Mr Roulstone attaching marketing material concerning GCA and GCS, a presentation, and financial projections for “Global Connect” for the years ended 31 December 2011, 2012 and 2013. The presentation described Global Connect as a technology company linking mobile telephone communications and money management services, utilising on-line and SMS functionality. The presentation also identified an international student market, referred to the size of the international student market globally, and to future growth in mobile banking and related services.

7. [14]

   Mr Roulstone deposed that at some point before December 2010 he received a set of financial statements for GCA for the period from 1 July 2009 to 31 May 2010. Those accounts recorded a shareholder-related loan of $5,000 from H Ridge.

8. [15]

   Three meetings took place at which the proposed investment by Holdings in GCS was discussed. The first meeting was held on or about 17 December 2010 at a restaurant in Martin Place, Sydney, attended by Mr Skinner, Mr Stone, Mr Collins and Mr Redmond, Mr Eric Redmond, and Mr Roulstone. The next meeting was held in Wollongong on or about 21 December 2010 between Mr Skinner, Mr Redmond and Mr Roulstone. A further meeting was held on 22 December 2010 at GCA’s offices in South Yarra, Melbourne attended by Mr Stone, Mr Collins, Mr Roulstone, Mr Redmond and Mr Eric Redmond.

9. [16]

   Although Holdings pleaded that a number of representations were made at these meetings by Mr Skinner and Mr Stone which were misleading or deceptive, it is not necessary to refer to the detail of these discussions, as that part of Holdings’ misrepresentation case failed at trial and there is no appeal by Holdings.

10. [17]

    It is sufficient to note that neither Mr Skinner nor Mr Stone disclosed to Mr Redmond or the other representatives of Holdings the existence of the loan agreements (post) dated 1 July 2011 between Fullham and H Ridge as lenders and GCA as borrower, or that the terms of those loans included a right of conversion to equity in GCA at the lenders’ discretion.

11. [18]

    On 22 December 2010, Mr Roulstone emailed Mr Stone and Mr Skinner advising that Mr Redmond would undertake to fund the GC Group to the tune of $500,000 in specified tranches, on the basis that Mr Stone, Mr Skinner and Mr Redmond would each hold a 26 percent interest. Mr Stone responded by email to Mr Roulstone on 23 December 2010 advising that he and Mr Skinner and the other shareholders agreed to Mr Redmond’s proposal that Holdings, Mr Stone and Mr Skinner have equal shareholdings, and that 20 percent new stock be issued, with Mr Stone and Mr Skinner transferring the balance (8 percent) to Holdings.

12. [19]

    Minutes of meeting of directors of GCA held on 23 December 2010 noted a significant cash shortfall for the March 2011 quarter and that the directors (Mr Stone and Mr Skinner) had decided to raise $250,000 by way of a share issue. The directors of GCA resolved to issue 40,200 shares to Holdings in three tranches and further noted that Fullham and H Ridge would each transfer 13,334 shares to Holdings upon receipt of the new capital in total. Minutes of meeting of directors of GCS held on 23 December 2011 recorded the issue of shares to Holdings in essentially the same terms.

13. [20]

    It is common ground that between December 2010 and February 2011 Holdings paid $500,000 to GCA, though there is evidence, and the primary judge found, that the funds were intended to represent an investment in both GCA and GCS: principal judgment at [43]. Holdings was issued with 40,200 shares in each of GCA and GCS, and Fullham and H Ridge both transferred 13,334 shares in GCA and GCS to Holdings. As a consequence, Holdings, Fullham and H Ridge each held about 28 percent of the shares in GCA and GCS.

14. [21]

    Mr Redmond was appointed as a director of GCA and GCS on 28 February 2011. His brother, Mr Eric Redmond, was appointed a director of GCA and GCS on 3 January 2012.

15. [22]

    It seems that GCA’s and GCS’s Chinese student platform did not launch until early March 2011. It was common ground that this venture was not a success.

16. [23]

    On 3 May 2011, there was a meeting at Mr Redmond’s hotel at Seven Hills, attended by Mr Skinner, Mr Stone, Mr Collins and Mr Redmond. Mr Redmond gave evidence that he picked Mr Stone up from Sydney Airport that morning and on the way to Seven Hills he said to Mr Stone that GCA was wasting its time on the Chinese student platform and should move the focus into a normal retail form, and that Mr Stone agreed with that proposition and referred to what was described as the BNPN track. This was a reference to the Buy Now Pay Now payment platform that GCA was developing.

17. [24]

    Mr Stone said in cross-examination that nothing of high significance relating to GCA was discussed at the Seven Hills meeting. Mr Skinner agreed in cross-examination that he attended a meeting on 3 May 2011 at Seven Hills with Mr Stone, Mr Collins and Mr Redmond and that no official company business was discussed at that meeting.

18. [25]

    Nonetheless, there was a significant dispute at trial as to whether in addition to the lunch at Seven Hills there was a meeting of directors of GCA at Wollongong on 3 May 2011. Mr Stone gave affidavit evidence that a directors’ meeting was held in Wollongong on 3 May 2011 attended by Mr Skinner, Mr Redmond and Mr Roulstone, at which it was resolved that $149,950 of existing loans to GCA from Fullham and H Ridge be capitalised. (This was relied upon by the appellants as evidence that Mr Redmond was aware, at least by that date, of the shareholder loans made to GCA and that they contained the right of conversion to equity in GCA.)

19. [26]

    The minute of that alleged meeting, prepared by Mr Stone, records that Mr Redmond, Mr Skinner and Mr Stone were present and that the directors resolved, among other things:

20. [27]

    Mr Redmond gave evidence that he recalled attending a meeting in Wollongong in May 2011, but did not recall resolutions being passed at that meeting as alleged by Mr Stone. In cross-examination, he said that he thought he would recall if anyone had tried to capitalise loans or shares and, if he had been present at such a meeting, he would have objected to it strongly. The primary judge accepted Mr Redmond’s evidence, and did not accept that the 3 May 2011 minute prepared by Mr Stone was accurate, at least so far as it purported to record Mr Redmond as having been present or voted in favour of the resolution: principal judgment at [28].

21. [28]

    His Honour rejected the possibility, raised in closing submissions by the appellants’ counsel, that there might have been a meeting, both at Seven Hills and a board meeting in Wollongong on 3 May 2011 involving the same participants. His Honour noted that this proposition was not suggested by any witness who gave evidence; that it was attended by geographical implausibility; and that Mr Stone had given evidence in cross-examination that he travelled back to his home in Victoria after the meeting at Seven Hills. His Honour found that a formal directors’ meeting did not take place and that resolutions were not passed in Wollongong, or at all on 3 May 2011, and that the minute that records it was false: principal judgment at [29].

22. [29]

    In about September 2011, Mr Redmond received the draft accounts of GCA, for the financial year ended 30 June 2011 which disclosed shareholder-related loans from Fullham of $83,229 and $349,816 and from H Ridge of $550,000. Mr Redmond refused to approve these until further information was provided concerning the shareholder loans. Although the minutes of a directors’ meeting of GCA held on 23 September 2011 recorded that the GCA accounts were approved, subject to audit, Mr Redmond gave evidence that the approval of the GCA accounts was deferred pending provision of further information concerning the shareholder loans. Mr Redmond’s evidence was that this was the first time that he became aware of the asserted loans from the other shareholders to GCA.

23. [30]

    In mid-November 2011, Mr Redmond discussed with Mr Stone a request for further funding of $400,000. Mr Redmond informed Mr Stone that he could pay $400,000 but that he required a controlling interest in the company. A further meeting took place on 16 November 2011, attended by Mr Redmond, his brother Mr Eric Redmond, Mr Dion Manca (Holdings’ solicitor) and Messrs Stone and Collins at which it was agreed that Holdings would invest a further $400,000 in shares in GCA and GCS on terms that it would acquire a 51 percent controlling interest in both companies.

24. [31]

    Mr Eric Redmond gave unchallenged evidence that the $400,000 consideration was paid as follows: $230,001.35 on or about 24 November 2011; $15,000 on 22 July 2011 and $4,998.65 on 29 July 2011, being amounts paid for the benefit of GCA; and $50,000 on or about 15 December 2011.

25. [32]

    In response to a request by Holdings’ solicitors on 18 November 2011 for certain documents, Mr Stone provided Mr Redmond in late November 2011 with an envelope containing, among others, copies of two loan agreements both dated 31 July 2011 between GCA and each of Fullham (for loans not exceeding $750,000) and H Ridge (for loans not exceeding $350,000) and Kallawar Pty Ltd, a company associated with Mr Skinner (for loans not exceeding $400,000). The terms of the loan agreements with Fullham and H Ridge differed from the loan agreements prepared in October 2010. First, they contained higher loan limits. Second, they did not contain cl 2.4 providing for the right of conversion to equity in GCA. Mr Stone gave evidence that these loan agreements were prepared in July 2011. The existence of the first set of loan agreements prepared in October 2010 was not disclosed to Mr Redmond at this time.

26. [33]

    In December 2011, there were discussions between Mr Stone, Mr Skinner and Mr Redmond in relation to a proposal that Holdings contribute $200,000 to GCA for the acquisition of a further 10 percent of the company’s issued capital: principal judgment at [146]. It is not necessary to refer to the detail of these discussions or their outcome.

27. [34]

    In earlier 2012, disputes arose between the directors and shareholders of GCA and GCS, initially with respect to the financial position of the companies. On 6 January 2012, a meeting of directors of GCA was held in Sydney attended by Mr Redmond, Mr Eric Redmond, Mr Stone (by telephone), and also by Mr David King, GCA’s solicitor, and Mr Manca, Holdings’ solicitor. Mr Stone reported on the company’s current financial position, the funding opportunities that were being pursued and the solvency position of the company. The directors resolved to call a general meeting of shareholders on 30 January 2012.

28. [35]

    A number of events occurred on 11 January 2012. Fullham sent a letter to GCA demanding repayment of its loan of $300,000 within 7 days, and required this amount to be satisfied by the issue of ordinary shares in GCA. H Ridge also sent a letter of demand to GCA in similar terms in respect of its loan of $75,000. Attached to those letters were copies of the first set of loan agreements dated 1 July 2011, containing the right of conversion to equity in cl 2.4.

29. [36]

    In addition, Mr Stone as company secretary of GCA obtained advice from Mr King of EKM Legal on 11 January 2012, a copy of which he provided to Mr Redmond by email that day. Mr Stone stated in his email that the legal advice indicated that the notices were properly given by Fullham and H Ridge and that action should be taken by GCA to issue the shares.

30. [37]

    This was followed on 12 January 2012, by a letter from Mr Stone to Holdings’ solicitors, apologising to Holdings for the confusion caused by there being two loan agreements between GCA and each of Fullham and H Ridge and each dated 1 July 2011. Mr Stone asserted in his letter that the first version of the agreements was drafted in October 2010 following a meeting of the directors of GCA held on 24 September 2010. He stated that the agreements were post-dated to 1 July 2011 so as to take effect from that date as the directors did not want GCA to incur interest on loans until after 1 July 2011. Mr Stone’s letter continued:

31. [38]

    Also on 12 January 2012, Mr Stone gave notice of a meeting of directors of GCA to be held the following day at 10am by telephone for the purpose, among others, of considering resolutions that GCA issue ordinary shares in accordance with the provisions of the loan agreements to H Ridge (3,445,504 shares), and Fullham (861,376 shares).

32. [39]

    On 13 January 2012, a meeting of directors of GCA was held at South Yarra, Victoria attended by Mr Collins, Mr Skinner, Mr Stone, Mr Redmond, Mr Eric Redmond, Mr King, as legal counsel for GCA, and Mr Manca, as legal counsel for Holdings. (Mr Redmond, Eric Redmond, Mr Skinner and Mr Manca attended by telephone.) The minutes record that after considerable debate the directors resolved that, pursuant to the notices received from H Ridge and Fullham, GCA issue ordinary shares in the company to H Ridge (3,445,376 shares) and Fullham (861,376 shares); that the new shares issued by GCA be credited as fully paid ordinary shares in the company and rank equally in all respects with all other shares issued by the company; and that GCA immediately issue new share certificates to the shareholders, amend all relevant registers and lodge the necessary forms with ASIC. Mr Redmond and Mr Eric Redmond voted against these resolutions.

33. [40]

    On the same day, 13 January 2012, Holdings commenced proceedings in the Court below and obtained an urgent ex parte interlocutory injunction restraining GCA, and the other defendants including Mr Skinner and Mr Stone, from giving effect to the resolutions to issue shares to H Ridge and Fullham.

The primary judge’s reasons

1. [41]

   The primary judge commenced by recording his findings as to the credibility and reliability of the witnesses’ evidence. He accepted (at [4]) that Mr Redmond generally gave honest evidence in cross-examination. He noted (at [5]) that Mr Roulstone and Mr Eric Redmond were not cross-examined on their affidavit evidence. He said that he was generally unable to accept Mr Stone’s evidence without corroboration, noting (at [10]) that he was satisfied that the only meeting that occurred on 3 May 2011 was a lunch at Seven Hills at which some marketing matters in relation to the BNPN platform, but no other business matters of significance were discussed, and that the board minute recording a meeting on 3 May 2011 is false. His Honour recorded (at [11]) that he had reservations as to Mr Skinner’s evidence, however it was not ultimately necessary to reach a credit finding in respect of his evidence given the conclusion reached on other grounds.

2. [42]

   The primary judge then turned to Holdings’ misrepresentation claims. He found that all of Holdings’ misrepresentation claims failed except its case based on non-disclosure of the two loans owed to the entities associated with Messrs Stone and Skinner that allowed them to call for repayment on seven days’ notice and direct that repayment be effected by conversion of the loans to shares at the last issue price, the effect of which would be to dilute Holdings’ shareholding in GCA: at [149].

3. [43]

   After referring to the applicable principles as to when non-disclosure can constitute misleading or deceptive conduct (at [152]-[154]), his Honour made detailed findings (at [155]-[161]) concerning the non-disclosure by Mr Skinner and Mr Stone to Holdings of the shareholder loans and the rights of conversion to equity in GCA. It is appropriate to set out some passages of his Honour’s reasons in full:

4. [44]

   With respect to reliance, his Honour rejected the appellants’ contention that Holdings knew that the shareholder loans could be capitalised, giving the following reasons at [162]:

5. [45]

   With respect to causation, his Honour rejected the defendants’ submission that Holdings had not established causation. At [163] he found that it was simply inconceivable that Holdings would have entered into an agreement to acquire specified percentages of shares in GCA and GCS, had disclosure been made that any percentage holding which it acquired could be diluted at will by Fullham and Ridge, at the direction of Messrs Stone or Skinner, by calling upon their loans to GCA and by directing that the loans be repaid by an issue of shares in GCA and/or GCS to them or their associated entities.

6. [46]

   His Honour concluded that this claim for misleading and deceptive conduct was established against Mr Stone, as he had made the relevant representations as to the interest that Holdings would acquire in GCA and GCS. His Honour said (at [164]):

7. [47]

   His Honour found there was no reason to distinguish Mr Skinner’s position from that of Mr Stone, giving the following reasons (at [165]):

8. [48]

   With respect to defences, his Honour observed (at [167]) that it was not clear whether the apportionment defence under the Civil Liability Act 2002 (NSW), s 34 was pressed, but in any event such a defence could not apply to a misleading conduct claim under the Corporations Act 2001 (Cth) and the Australian Securities and Investments Commission Act 2001 (Cth). Further, a lack of diligence on the basis of a party who is misled does not amount to contributory fault, and therefore the defence, if pressed, failed: at [167].

9. [49]

   In his second judgment, his Honour dealt with Mr Skinner’s application to re-open the findings of liability arising from non-disclosure on the part of Mr Skinner. His Honour refused that application: at [30]. There is no challenge to that decision.

10. [50]

    Insofar as Mr Skinner sought leave to amend his defence to rely on the proportionate liability regime in Pt 7.10 Div 2A of the Corporations Act, rather than the regime in the Civil Liability Act, his Honour granted leave to re-open Mr Skinner’s case to put further submissions limited to the question of proportionate liability as between the defendants.

11. [51]

    In his third judgment, his Honour dealt with the questions of orders, apportionment and costs. With respect to apportionment, his Honour said at [19]:

12. [52]

    His Honour concluded that the damages awarded to Holdings should be apportioned equally as between Mr Stone and Mr Skinner: at [20]. In reaching that view, his Honour found that it is just and equitable to apportion liability equally where each of Messrs Stone and Skinner would otherwise bear the risk of being held liable for the entire liability, including on the insolvency of the other. In addition, his Honour did not consider that it would be just and equitable, having regard to their common responsibility for Holdings’ loss, to apportion a lesser share of that liability to Mr Skinner than to Mr Stone, where each of them could, by disclosure, have avoided Holdings’ exposure to that loss.

13. [53]

    With respect to damages, his Honour found that the case was analogous to Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (2008) 73 NSWLR 653; [2008] NSWCA 206 at [177] and [191], insofar as Holdings was “locked into” its investment in GCA and GCS. Accordingly, its losses were properly quantified as the difference between the amount it paid for its shares and the value of those shares following the failure of those companies. There being no suggestion that those shares had any such value, his Honour concluded that the loss is $900,000, being the total amount of Holdings’ investment in GCA and GCS.

14. [54]

    With respect to costs, his Honour made the orders indicated at [5].

Issues on appeal

1. [55]

   The notice of appeal raises 18 separate grounds, many of which are connected. These grounds may be grouped as follows:

   1. (1)

      challenge to factual findings concerning the alleged 3 May 2011 meeting in Wollongong and the Board minute of 3 May 2011 (grounds 3, 4, 10 and 11);

   2. (2)

      failure to disclose the existence of the shareholder loans or the right of conversion to equity in GCA (grounds 5, 6, 9 and 14);

   3. (3)

      misleading and deceptive conduct (grounds 1, 2, 12 and 13);

   4. (4)

      reliance and causation (grounds 8 and 16)

   5. (5)

      whether Mr Skinner is the beneficiary of a family trust of which H Ridge is trustee (ground 15);

   6. (6)

      apportionment (grounds 7 and 17);

   7. (7)

      costs (ground 18).

2. [56]

   As will be seen, there are three principal issues raised by these grounds. First, whether the primary judge erred in finding that Mr Skinner and Mr Stone engaged in misleading and deceptive conduct by failing to disclose to Holdings prior to Holdings acquiring shares in GCA and GCS, that the shareholder loans to GCA contained rights of conversion of such loans into equity in GCA at the lender’s discretion.

3. [57]

   Second, whether the loss suffered by Holdings of the whole of its investment of $900,000 in GCA and GCS, was caused by the conduct of Mr Skinner and Mr Stone.

4. [58]

   Third, whether Holdings’ loss should be apportioned equally between Mr Skinner and M Stone.

1. Challenge to factual findings concerning 3 May 2011 Wollongong meeting

1. [59]

   Ground 3 asserts that his Honour erred in finding that it was “implausible” that Mr Skinner, Mr Stone, Mr Redmond, and others travelled to and held a meeting in Wollongong on 3 May 2011. Ground 4 is connected and asserts that his Honour erred in finding that the minute of a meeting held in Wollongong on 3 May 2011, prepared by Mr Stone, was false.

2. [60]

   These challenges are concerned with his Honour’s factual findings. In order to succeed on appeal, the appellants must establish that his Honour’s conclusions were erroneous by reason of incontrovertible facts or uncontested testimony or that the decision is glaringly improbable or contrary to compelling inferences: Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 at [28]-[29]. It must also be accepted that insofar as the judge made credibility findings, he had the very considerable advantage of seeing the relevant witnesses give their oral evidence and thus was able to bring to bear aspects of judgment and appraisal that are simply unavailable to this Court: Fox v Percy at [23].

3. [61]

   As mentioned, his Honour rejected the appellants’ submission in closing that it was possible that there were two meetings held on 3 May 2011, one at Wollongong in the morning and the other being the lunch at Seven Hills. That finding was well open to his Honour on the evidence, given (a) Mr Redmond’s evidence (referred to at [27] above); (b) Mr Stone’s evidence that on the day of the meeting at Seven Hills, which he accepted was 3 May 2011, Mr Redmond picked Mr Stone up from Sydney Airport, took him to Seven Hills, that no resolutions were passed on that day, that he was driven by Mr Redmond directly from Seven Hills back to Sydney Airport and flew back to Melbourne on the same day; and (c) Mr Skinner’s evidence that he attended a meeting on 3 May 2011 at Seven Hills with Mr Collins, Mr Stone and Mr Redmond, that no official company business was discussed at that meeting, that the only time the four of them were with each other on 3 May 2011 was at Seven Hills, and that Mr Skinner returned home on his own to Berry after the 3 May 2011 meeting at Seven Hills.

4. [62]

   Other than the matters sought to be adduced as further evidence on appeal, the appellants did not identify any incontrovertible facts or uncontested testimony that was contrary to his Honours’ finding that there was no meeting in Wollongong on 3 May 2011 and that the board minute prepared by Mr Stone was false. Nor are these findings glaringly improbable or contrary to compelling inferences.

5. [63]

   In an attempt to surmount the evidentiary difficulty referred to above, the appellants sought leave to adduce further evidence on appeal pursuant to s 75A(7) of the Supreme Court Act 1970 (NSW).

6. [64]

   In support of that application, the appellants sought to rely upon an affidavit of Mr Skinner sworn 24 November 2017. That affidavit contained a number of annexures which included Telstra call records for 3 May 2011 in respect of the mobile phone numbers of Mr Stone and Mr Roulstone, and Vodafone call records for 3 May 2011 in respect of the mobile phone numbers of Mr Skinner and Mr Redmond. The Court rejected that affidavit and indicated that it would give its reasons for that ruling in this judgment.

7. [65]

   Under s 75A of the Supreme Court Act further evidence is not received on appeal except on special grounds (s 75A(8)), other than where it is evidence concerning matters occurring after the trial: s 75A(9).

8. [66]

   Although it is not possible to formulate a universal test, in general, special grounds calls for three conditions to be satisfied: (1) that the evidence could not have been obtained by reasonable diligence for use at the trial; (2) that the evidence is credible; and (3) that the evidence is such that there is a high degree of probability that there would be a different result: Akins v National Australia Bank (1994) 34 NSWLR 155 at 160 (Clarke J); Harrison v Schipp (2002) 54 NSWLR 612; [2002] NSWCA 78 at 642 [195] (Giles JA).

9. [67]

   Here, the evidence sought to be adduced in the affidavit of Mr Skinner was directed to challenging his Honour’s findings that no meeting of directors of GCA occurred in Wollongong on 3 May 2011 and that the minute of such meeting prepared by Mr Stone was false.

10. [68]

    Mr Foley contended that the evidence of the mobile phone call records established the time and origin of various calls made on 3 May 2011 by each of Mr Stone, Mr Skinner, Mr Redmond and Mr Roulstone and that the inference should be drawn that each of those persons was in the Wollongong area during the morning of 3 May 2011, contrary to his Honour’s finding. Mr Foley further contended that this corroborated Mr Stone’s affidavit evidence concerning a board meeting held at Wollongong on 3 May 2011, notwithstanding the contrary evidence given in cross-examination by Mr Stone and Mr Skinner, referred to at [61] above.

11. [69]

    Plainly, the further evidence sought to be adduced concerned matters occurring before the trial. It was not suggested by the appellants that the evidence could not have been obtained by reasonable diligence for use at the trial. Indeed, the records in respect of two of the mobile phone numbers were those of Mr Skinner and Mr Stone. Nor was it suggested that subpoenas could not have been issued below to obtain the mobile phone call records of Mr Redmond and Mr Roulstone on 3 May 2011 for the purposes of use at the trial.

12. [70]

    Accepting that the evidence seems credible, three observations can be made. First, the call records do not clearly identify the locations from which Mr Redmond made calls on 3 May 2011. Second, the evidence of the origin of calls made by Mr Skinner was in the form of inadmissible hearsay. Third, there is no expert evidence establishing the likely location of the user of the mobile phone based on the identified “origin” of the calls, having regard to the location of particular mobile reception towers and the way in which the various mobile phone systems work.

13. [71]

    In any event, I do not consider that there is a high degree of probability that there would be a different result if the evidence was admitted on appeal and the relevant findings of the primary judge set aside – namely, that a GCA directors’ meeting did not occur in Wollongong on 3 May 2011 and the minute of that meeting was false.

14. [72]

    First, taking the evidence of the 3 May 2011 GCA minute at its highest, there is no suggestion in either that minute or the evidence given by Mr Stone or Mr Skinner at trial that either of them disclosed to Mr Redmond on 3 May 2011 that the loan agreements between each of Fullham and H Ridge and GCA, provided for rights of conversion to equity in GCA at the lender’s discretion. The disclosure evidenced in the minute is simply that Fullham and H Ridge had made loans to GCA which, with the consent of GCA, they were prepared to capitalise up to an amount of $149,950, by way of increasing the paid up value of their existing 28% shareholdings in GCA to $250,000, being the same amount of capital as subscribed by Holdings for its 28% shareholding in GCA.

15. [73]

    Second, the 3 May 2011 minute does not suggest that Fullham and H Ridge were exercising a contractual right to convert existing loans to equity by obtaining ordinary shares in GCA. Further and importantly, the contractual right of conversion could only be exercised after Fullham and H Ridge had given 7 days’ notice to GCA requiring repayment of their loans, yet the minute does not refer to any such demand for repayment having been made by either Fullham or H Ridge. The “capitalisation” referred to in the minute is consistent with the conversion of part of existing loans to equity, with the consent of GCA qua borrower.

16. [74]

    Third, the “capitalisation” referred to in the minute, would not have the effect of altering the existing equal shareholdings in GCA as between Holdings, Fullham and H Ridge. On the other hand, the contractual right of conversion contained in the shareholder loans, if exercised by Fullham and H Ridge, would have the effect of those shareholders obtaining further equity in GCA thus diluting Holdings shareholding in GCA.

17. [75]

    In my view, there is no warrant for reading the 3 May 2011 minute as evidencing disclosure by Mr Skinner and Mr Stone to Holdings of the contractual right of conversion in the loan agreements between GCA and each of Fullham and H Ridge. Even if the 3 May 2011 minute was accepted as correct, it would not assist the appellants’ case in setting aside his Honour’s finding of misleading conduct by the appellants.

18. [76]

    Accordingly, there is no injustice, let alone substantial injustice, to the appellants in not being able to rely upon the further evidence on appeal.

19. [77]

    Grounds 3 and 4 are not established.

20. [78]

    Grounds 10 and 11 are related to grounds 3 and 4. Ground 10 asserts that his Honour erred in finding that the capitalisation of the loans of Fullham and H Ridge referred to in the minute of the 3 May 2011 meeting and reflected in the accounts and other documents that Holdings and Mr Redmond had been provided with, occurred without Holdings and Mr Redmond’s knowledge.

21. [79]

    Ground 11 asserts that his Honour erred in not finding that Mr Redmond requested Fullham and H Ridge at the 3 May 2011 meeting to each increase the paid-up value of their shareholding to be equal with that of Holdings.

22. [80]

    These grounds must fail, consequent upon the failure of the challenge to his Honour’s factual findings the subject of grounds 3 and 4. On his Honour’s findings, Mr Redmond was not at the alleged 3 May 2011 meeting in Wollongong. Further the appellants did not demonstrate that Mr Redmond was aware from any subsequent documents that he received that Fullham and H Ridge had capitalised part of their loans consistently with the 3 May 2011 minute.

23. [81]

    Grounds 10 and 11 are not established.

2. Challenge to factual findings concerning failure to disclose

1. [82]

   Grounds 5, 6 and 9 are connected. Ground 5 asserts that his Honour erred in finding that the appellants engaged in misleading and deceptive conduct in contravention of s 1041H of the Corporations Act by failing to disclose to Holdings the fact that loans made by other persons to GCA could be converted into equity without Holdings’ consent, which in turn had the effect of diluting Holdings’ shareholding.

2. [83]

   Ground 6 asserts that his Honour erred in finding that there was a reasonable expectation that the appellants would inform Holdings of the convertibility of loans and that their failure to do so constituted misleading and deceptive conduct.

3. [84]

   Ground 9 asserts that, having found that Mr Redmond had extensive business experience, his Honour erred in not finding that it was not reasonable or necessary for the appellants to draw to Holdings’ attention the right to convert loans to equity when Holdings had documents containing that information available to it, coupled with having done its own due diligence and having its own experienced advisers assisting it when making the investments in the GC Group.

4. [85]

   Conduct will be misleading or deceptive if it induces or is capable of inducing error: Johnson Tiles Pty Ltd v Esso Australia Ltd [2000] FCA 1572; 104 FCA 564 at [63]; approved in Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2001) 241 CLR 357; [2010] HCA 31 at [15] (French CJ and Kiefel J). This is a question of fact to be determined in the context of the impugned conduct and the relevant surrounding facts and circumstances.

5. [86]

   In the present case, the focus of attention is on the impact of the impugned conduct on Holdings: Campomar Sociedad, Limitada v Nike International Ltd (2000) 202 CLR 45; [2000] HCA 12 at [63].

6. [87]

   There is no complaint that the primary judge did not correctly state the relevant principles in relation to non-disclosure: principal judgment at [152] – [154]. His Honour referred to Miller & Associates v BMW Australia Finance and other well-known authorities. In Miller & Associates v BMW Australia Finance, after noting at [16] that the circumstances in which silence or non-disclosure of information can be misleading or deceptive are various, French CJ and Kiefel J emphasised at [19]-[20] that the characterisation of conduct consisting of, or including, non-disclosure of information is to be undertaken by reference to its circumstances and context.

7. [88]

   At [152], the primary judge noted that the materiality of information which is not disclosed will be relevant to whether a non-disclosure of it is misleading, referring to Australian Securities and Investment Commission v PFS Business Development Group Pty Ltd [2006] VSC 192; (2006) 57 ACSR 553 at [362]. His Honour also noted that the question of whether silence is misleading is normally answered by asking whether the person alleged to be misled or deceived had a reasonable expectation of disclosure. Reference was made to the decision of the Full Court of the Federal Court in APIR Systems Ltd v Donald Financial Enterprises Pty Ltd [2009] FCAFC 45 where the Full Court held that the failure to disclose an entitlement to additional shares to a purchaser was misleading or deceptive.

8. [89]

   At [153], his Honour referred to the summary of relevant principles by Sackville AJA in Fabcot Pty Ltd v Port Macquarie Hastings Council [2011] NSWCA 167 at [209], in respect of the misleading conduct provision in s 42 of the Fair Trading Act 1987 (NSW), which has been cited with approval by this Court in Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94 at [192] (Barrett JA, Bathurst CJ and Beazley P agreeing) and in OXS Pty Ltd v Sydney Harbour Foreshore Authority [2016] NSWCA 120 at [178] (Gleeson JA, Macfarlan and Leeming JJA agreeing). It is convenient to set out the following extract from Fabcot at [209]:

9. [90]

   The significant features of GCA which Holdings claimed that the appellants failed to disclose were the existence of the shareholder loans and the contractual right of conversion to equity in GCA at the lenders’ discretion.

10. [91]

    In challenging the primary judge’s finding that circumstances existed where disclosure of those matters was reasonably expected by Holdings, the appellants pointed to three matters. First, the short period of time between receipt of Mr Roulstone’s email on the evening of 22 December 2010, outlining Holdings’ counter proposal for an equal investment with Mr Skinner and Mr Stone in both GCA and GCS, and the decision of those directors the following day to agree to Holdings’ proposal. Second, that due diligence had already been afforded to Holdings and its advisers, including Mr Roulstone in December 2010 in connection with the convertible note proposal. Third, that Holdings could have discovered the loan agreements by inspection of the minute book of GCA.

11. [92]

    The appellants’ submissions ignore the following matters. First, the earlier proposal involving a convertible note bearing interest would have allowed Holdings to convert the loans to 20 percent of the equity in both GCA and GCS, 12 months after receipt by GCS of the last instalment of the loan. The circumstances and context of that proposal were relevantly the same in terms of giving rise to a reasonable expectation by Holdings of disclosure by the appellants of the existing shareholders’ unilateral rights of conversion to equity in GCA, which, if exercised, would have diluted Holdings’ proportionate shareholdings in GCA and GCS upon exercise of the conversion rights in the proposed convertible notes.

12. [93]

    Second, the circumstances of the commercial dealings between the parties relevantly included that Mr Skinner and Mr Stone knew that any dilution of Holdings’ shareholding in GCA by Fullham and H Ridge exercising their rights of conversion would be inconsistent with both the initial arrangement in December 2010 that Holdings would acquire a 28 percent proportion of the shares in GCA, and the further arrangement in November 2011 that Holdings would acquire a controlling interest in GCA.

13. [94]

    Third, plainly the effect or likely effect of non-disclosure to Holdings of those matters would be to induce error on the part of Holdings as to the proportionate shareholding it would acquire in GCA in December 2010, and the controlling interest it would acquire in November 2011.

14. [95]

    The appellants next submitted that it was not objectively reasonable for Holdings to expect disclosure of those matters, given that Mr Redmond is an experienced businessman, and Holdings had been afforded due diligence and had its own advisers with respect to the acquisition of shares in GCA.

15. [96]

    It may be accepted that the availability of due diligence and access to advisers are relevant contextual matters, but they are not decisive in determining whether the circumstances and context objectively assessed gave rise to a reasonable expectation of disclosure.

16. [97]

    With respect to the parties’ position in December 2010, it is relevant that the 31 May 2010 GCA accounts which had been provided to Mr Roulstone did not disclose the loan agreements entered into in October 2010 containing the rights of conversion. With respect to the parties’ position in November 2011, although the shareholder loans had been disclosed by GCA to Mr Redmond in September 2011 and copies of the second set of loan agreements were provided by Mr Stone to Mr Redmond in late November 2011, the rights of conversion in cl 2.4 were not disclosed. Given the materiality of the rights of conversion in the shareholders’ loans in the context of Holdings providing funding to GCA and GCS on condition of obtaining initially a proportionate 28 percent shareholding in GCA and later a controlling 51 percent interest in GCA, there was no error in his Honour finding that there was a reasonable expectation that the appellants would disclose those rights of conversion to Holdings.

17. [98]

    As to the significance of Holdings not inspecting the minute book of GCA, his Honour acknowledged that the prohibition on misleading and deceptive conduct does not require a party to commercial negotiations to volunteer information simply because it will assist in the other party’s decision-making. His Honour continued at principal judgment at [162]:

18. [99]

    No error has been demonstrated in that reasoning.

19. [100]

    The appellants next relied upon the reference to “capitalisation” of shareholder loans in the minute of the 3 May 2011 directors’ meeting at Wollongong. For the reasons given above, not only has the challenge to his Honour’s findings concerning this alleged meeting and the minute failed, but in any event, this minute does not assist the appellants in establishing knowledge on the part of Holdings in May 2011 that the shareholder loans contained a right of conversion to equity in GCA at the lenders’ discretion.

20. [101]

    The appellants also relied upon the conversation between Mr Redmond and Mr Stone on 16 November 2011 as supporting their contention that Mr Redmond was aware of the contractual right to convert the shareholder loans to equity in GCA, but proceeded to invest a further $400,000 in GCA and GCS anyway.

21. [102]

    The appellants pointed to the cross-examination of Mr Redmond concerning par 55 of his affidavit sworn 15 July 2013. The context of that evidence was as follows. Mr Redmond deposed in par 49 of his affidavit that at the meeting in mid-November 2011 Mr Stone said words to the effect that $400,000 was required by the end of January 2012, that Holdings should put the money in as an advance which it could then take out later or capitalise for equity at some point in the future, and that he and Mr Skinner had around $700,000 in loans sitting there and “we could do a number of things with those, such as convert into equity, take the loans out or capitalise for equity”. Mr Redmond deposed (in par 50) that he responded that he was happy to provide $100,000 immediately and $300,000 over the next four to eight weeks, but that he would have to obtain a controlling interest and he would need to have 51 percent of the shares.

22. [103]

    It was after this meeting that Mr Redmond travelled to Melbourne in late November 2011 and met with Mr Stone who provided him with the bundle of documents in an envelope that contained copies of the loan agreements between each of Fullham, H Ridge and Kallawar and GCA each dated 1 July 2011. Mr Redmond deposed (in par 55) that while he was not made aware of these loans at the time of his initial investment (in December 2010), he was content that the repayment of such loans could take place in the future when GCA was obtaining revenue. The appellants emphasised the following extract from the cross-examination of Mr Redmond, with reference to par 55 of his affidavit:

23. [104]

    It should be observed that the premise of the cross-examiner’s first question was incorrect. There was no assumption stated in par 55 of Mr Redmond’s affidavit concerning capitalisation of the shareholder loans. Further, Mr Redmond disagreed with the cross-examiner’s suggestion that he in fact made such an assumption, that is, that the shareholder loans would not be capitalised.

24. [105]

    The cross-examination of Mr Redmond continued:

25. [106]

    Holdings submitted that this passage of cross-examination conflated what Mr Redmond had been told in late November 2011 concerning loans to GCA of around $700,000 and what he was told in early 2012 when provided with the second set of loan agreements between GCA and each of Fullham and H Ridge each dated 1 July 2011 containing the provision for capitalisation of the loans in cl 2.4. That submission should be accepted.

26. [107]

    A fair reading of Mr Redmond’s response to the fourth question (set out at [105] above) (“that was something that we were going to challenge”), is that he was referring to challenging any attempt by Mr Skinner and Mr Stone as directors of GCA to agree to capitalisation of the shareholder loans, not to challenging the contractual rights of conversion in cl 2.4 of which he was not aware in November 2011 at the time of his conversation with Mr Stone.

27. [108]

    Grounds 5, 6 and 9 are not established.

28. [109]

    Ground 14 asserts that his Honour erred in finding that there was a “scheme” to deprive Holdings of its majority shareholding in GCA.

29. [110]

    In his principal reasons (at [41]) his Honour referred to a “scheme” in the context of summarising part of Holdings’ pleading as follows:

30. [111]

    The “scheme” that was pleaded by Holdings was a reference to events in early January 2012, which occurred after the misleading conduct which his Honour found was engaged in by Mr Skinner and Mr Stone. Not only did his Honour not make a finding that such a “scheme” existed, it was unnecessary for his Honour to do so for the misleading conduct case to be established.

31. [112]

    Further and importantly, the intention of Mr Skinner and Mr Stone and Fullham and H Ridge with respect to the events which occurred in early 2012 relating to the demands repayment of the shareholder loans and exercising the rights of conversion, is not directly relevant to the claim for misleading or deceptive conduct for failing to disclose to Holdings the terms of those conversion rights prior to Holdings acquiring shares in GCA: Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 at 223 (Stephen J); Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 197 (Gibbs CJ); Yorke v Lucas (1985) 158 CLR 661 at 666; [1985] HCA 65.

3. Challenge to findings of misleading conduct

1. [113]

   Grounds 1 and 2 challenge his Honour’s finding that Holdings was misled in investing $500,000 in December 2010. Grounds 12 and 13 challenge his Honour’s finding that Holdings was misled in investing $400,000 in November 2011.

2. [114]

   Ground 1 raises, in effect, a pleading point. The appellants complain that the pleaded “Arrangement” in par 12 of the amended statement of claim only referred to an investment by Holdings in December 2010 in GCA, rather than an investment in both GCA and GCS.

3. [115]

   The primary judge dealt with this complaint in his principal judgment at [42]-[44]. His Honour found that the investment made by Holdings in December 2010 was intended to be, as the share issues reflected, in both GCA and GCS, notwithstanding the terms of the pleading, and notwithstanding that the amounts of $500,000 and $400,000 invested were in each case paid initially to GCA: principal judgment at [43]. His Honour noted that in closing submissions, counsel for the appellants accepted that Mr Redmond’s affidavit and cross-examination proceeded upon the basis that he contemplated an investment in the Global Connect Group, which in fact involved both GCA and GCS. Accordingly, his Honour rejected the appellants’ complaint with respect to the pleading of the Arrangement: principal judgment at [44].

4. [116]

   There is no merit in the appellants’ complaint that the pleadings did not mention GCS. The case was opened by Holdings on the basis that the investment of $500,000 would give Holdings an equal shareholding with the two other major shareholders in GCA and GCS. The evidence supported such a finding and counsel for the appellants cross-examined Mr Redmond on that basis. It should be inferred from the way in which the trial was conducted that the appellants acquiesced in the course adopted by Holdings in advancing its case at trial as involving an investment in both GCA and GCS: Banque Commerciale SA (en liqn) v Akhil Holdings Limited (1990) 169 CLR 279 at 287; [1990] HCA 11; Betfair Racing Pty Ltd v Racing New South Wales (2010) 189 FCR 356; [2010] FCAFC 133 at [49]-[52].

5. [117]

   Ground 2 is connected with ground 1. The appellants complain that, notwithstanding that Mr Redmond thought that the investment was in two separate companies (though operating a connected business), the primary judge found that the “substance of the pleaded Arrangement was established”: principal judgment at [44]. The appellants submitted that his Honour erred in disregarding the difference between an investment in GCA as pleaded and an investment in two separate companies, in circumstances where GCS was not a party to the proceedings.

6. [118]

   Again, there is no merit in this complaint. His Honour’s reference to the “substance of the pleaded Arrangement” being established, was a reference to the substance of the case brought against the appellants, in respect of the alleged representations, on the basis that it was directed to an investment in GCA and GCS: principal judgment at [44]. As to the non-joinder of GCS, it was not a necessary or proper party to a claim against the appellants for misleading or deceptive conduct.

7. [119]

   Grounds 1 and 2 are not established.

8. [120]

   The appellants submitted that the primary judge erred in finding that the sixth alleged representation by Mr Stone in November 2011 was misleading or deceptive, at least by way of omission, and that causation was also established in respect of that representation: principal judgment at [140]-[141] and [145].

9. [121]

   The sixth alleged representation in November 2011 pleaded in par 46(f) of the amended statement of claim, was that Holdings would be entitled to a 51 percent interest in GCA, as well as related companies, in exchange for providing the further funds that were sought, being a total of $400,000, including the capitalisation of existing loans of $19,998.65.

10. [122]

    The appellants submitted that Holdings did not rely upon this representation because Mr Redmond gave evidence in cross-examination that by November 2011 he did not believe things that Mr Stone was saying. The context of that evidence was the proposition that Mr Redmond understood Mr Stone to be saying in November 2011 that GCA required $1,100,000 in funding. Mr Redmond gave evidence that he did not understand that Mr Stone was asking Holdings for $1,100,000 funding in November 2011.

11. [123]

    Holdings correctly points out that the relevant finding by his Honour is that Mr Stone engaged in conduct by way of omission, that is, failure to disclose the right to convert loans made to GCA by Fullham and H Ridge to equity, which was a material matter and the non-disclosure of that right had the result that the sixth representation in November 2011 was misleading: principal judgment at [141].

12. [124]

    As his Honour found, a unilateral right to convert the loans to equity so fundamentally undermined the agreement to allocate a specific percentage interest in GCA and GCS to Holdings to such an extent that a failure to disclose it was misleading in the relevant circumstances: principal judgment at [162]. There is no error in this finding.

13. [125]

    Next, the appellants submitted that the sixth representation in November 2011 was true, Mr Redmond was aware of the conversion rights, no causal link was established, and Holdings got its bargain being a 51 percent shareholding. The first difficulty with this submission is that the sixth representation in November 2011 could only have been true if there was no right to convert loans to equity and, as a consequence, diluting Holdings’ interest in GCA.

14. [126]

    With respect to Mr Redmond’s knowledge, for the reasons already given, there was no error in his Honour’s finding that Mr Redmond did not know of the unilateral right to convert the loans to equity. That is consistent with the evidence of Mr Stone and Mr Skinner who accepted that no disclosure of this right occurred before January 2012.

15. [127]

    With respect to a causal link between the misleading conduct and, relevantly, the acquisition by Holdings of further shares in November 2011, there is no error in his Honour’s finding that the investment by Holdings would not have occurred if the conversion rights were made known to Holdings.

16. [128]

    Further and contrary to the appellants’ submissions, Holdings did not “get its bargain” in terms of obtaining a 51 percent shareholding in GCA. This submission ignores the existence of the conversion rights and the effect they have in diluting Holdings’ shareholding. Indeed, this is what Fullham and H Ridge sought to achieve in early 2012, but were only prevented by the injunctive relief obtained by Holdings on 13 January 2012.

17. [129]

    Ground 12 is not established.

18. [130]

    Ground 13 asserts that his Honour erred in finding that Holdings had invested the amount of $400,000 in GCA in about November 2011. This ground only goes to the quantum of Holdings’ loss. The appellants accepted that Holdings paid $380,000 to GCA (as directed). The appellants asserted that Holdings did not pay the balance of $20,000 by capitalising existing loans to GCA.

19. [131]

    The appellants foreshadowed in their written submissions that an application would be made for leave to tender fresh evidence on appeal regarding the balance of $20,000. No such application was made, either before or at the hearing.

20. [132]

    Holdings emphasised that the proceedings below were conducted on the basis that $400,000 was invested in November and December 2011 and the appellants did not contend otherwise at trial.

21. [133]

    Holdings also pointed to the admission by the appellants on the pleadings that, by agreement made on or about 16 November 2011, Holdings would purchase additional shares in GCA for the sum of $400,000 which sum would be paid, among others, by $19,998.65 approximately being sums that had already been advanced by Holdings to GCA in July 2011.

22. [134]

    Holdings submitted that the primary judge correctly understood that the $400,000 investment by Holdings in November 2011 included $19,998.65 by way of capitalising existing loans, as referred to by his Honour at [140] of the principal judgment. In that paragraph, his Honour also noted that in opening the appellants’ counsel had contended that the issue of shares giving Holdings a 51 percent interest in GCA did in fact occur.

23. [135]

    The appellants should not be permitted to resile from the position taken at trial that Holdings had invested the further amount of $400,000 in GCA and GCS between November and December 2011.

4. Challenge to findings on reliance and causation

1. [136]

   Ground 8 asserts that his Honour erred in finding that the reason that Holdings invested in the shareholding of GCA was to obtain a majority shareholding in that company, when Holdings’ real reason for investing in GCA and GCS included purposes other than merely a simple investment in a start-up technology company.

2. [137]

   The essential difficulty with this ground is that it is inconsistent with the case put to Mr Redmond in cross-examination at trial. As his Honour recorded in his principal judgment at [161], the appellants’ counsel cross-examined Mr Redmond on the basis that the initial arrangement contemplated that Holdings would acquire a specified proportion of the shares of GCA and GCS, being 28 percent of those shares, and also cross-examined Mr Redmond that he was content to provide $400,000 for a 51 percent shareholding. It is not to the point that the assets of GCA may have provided Holdings with some other opportunity, such as that asserted in the appellants’ submissions, to utilise the “platform” for gaming payments.

3. [138]

   In any event, it is not necessary that Holdings establish that the misleading conduct was the sole cause of any relevant loss. It is sufficient that the misleading conduct be a cause of Holdings’ loss: I&L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109; [2002] HCA 41 at [27]-[33]; Wardley Australia Ltd v Western Australia (1992) 175 CLR 514; [1992] HCA 55 at 525. That requires the contravening conduct to have materially contributed to the relevant loss: In the matter of HIH Insurance Limited (in liq) (ACN 008 636 575) and Ors [2016] NSWSC 482 at [37] (Brereton J).

4. [139]

   On the findings of the primary judge, which have not been shown to be in error, Holdings plainly relied upon the misleading conduct of the appellants in acquiring shares in GCA and GCS.

5. [140]

   Ground 9 is not established.

6. [141]

   Ground 16 asserts his Honour erred in finding that the failure by the appellants to inform Holdings of the convertibility of loans to equity was the reason for Holdings suffering the losses that it claimed. The appellants submitted that Holdings was the author of its own loss because it created and did not settle the shareholder dispute in early 2012, and that it was the shareholder dispute that led to the financial demise of GCA and GCS and hence, the loss of Holdings’ investment in those companies.

7. [142]

   The relevant principles are to be found in Henville v Walker (2001) 206 CLR 459; [2001] HCA 52 at [13], where Gleeson CJ said:

8. [143]

   Holdings objected to the appellants relying upon ground 16 on the basis that this was a new point not raised at trial. The appellants did not suggest that the submission had been either pleaded or raised at trial.

9. [144]

   In support of its objection, Holdings pointed to two matters. First, that Mr Redmond may have given evidence directed to this issue if this allegation was put to him. Second, if the issue had been raised at trial, forensic decisions would have been made in adducing evidence. It was submitted that those opportunities have passed and caused irreparable prejudice to Holdings. Those submissions should be accepted.

10. [145]

    The appellants should not be allowed to raise the matter for the first time on appeal. The position is clearly stated by the High Court in Water Board v Moustakas (1994) 180 CLR 491; [1994] HCA 12 at [13] where Mason CJ, Wilson, Brennan and Dawson JJ said:

11. [146]

    In light of that conclusion, it is not necessary to deal with Holdings’ further submission that the appellants’ contention with respect to causation should otherwise be rejected on the grounds that it is unsupported by evidence, authority or sound reasoning.

5. Mr Skinner’s relationship with H Ridge

1. [147]

   Ground 15 asserts that his Honour erred in finding that Mr Skinner had any interest in or control over H Ridge or that he was a beneficiary of the Ridge Family Trust, of which H Ridge was the corporate trustee.

2. [148]

   Mr Skinner complained that his Honour constantly referred to Mr Skinner’s connection with H Ridge, in terms that this company was Mr Skinner’s “associated entity”, that Mr Skinner “benefited from his family trust”, that Mr Skinner could “convert loans to equity at will” and that H Ridge was a “company under direction of Mr Skinner”.

3. [149]

   Mr Skinner also emphasised that at no time prior to 9 November 2015 was he an office holder, director or shareholder of H Ridge. Up to that time, his wife, Mrs Helen Skinner (also known as Mrs Helen Rutland), was the sole shareholder and director of H Ridge.

4. [150]

   Mr Skinner submitted that he was not a beneficiary of the Ridge Family Trust. He referred to an affidavit sworn by Mrs Helen Skinner on 24 October 2015 in support of a procedural application made by Mr Skinner prior to the commencement of the trial, that he represent H Ridge at the hearing below. That application was granted. It does not seem that this affidavit was read at the trial. In any event, Mrs Skinner’s affidavit is silent as to who are the beneficiaries of the Ridge Family Trust.

5. [151]

   Accepting that Mr Skinner was not a director or shareholder of H Ridge, there was no error by his Honour in describing H Ridge as Mr Skinners’ “associated entity”. Plainly, in the communications between the parties, H Ridge was referred to as a company associated with Mr Skinner, as his Honour found, even if in legal form that company was owned by his wife. The evidence did not establish whether or not Mr Skinner was a beneficiary of the Ridge Family Trust. Mr Skinner was not cross-examined on this topic. Even if it be assumed that his Honour erred in describing Mr Skinner as benefiting from the Ridge Family Trust, or as controlling H Ridge, such an error would be immaterial.

6. Apportionment

1. [152]

   Ground 17 asserts that his Honour erred in finding, for the purposes of s 1041N of the Corporations Act, that it was just for Mr Skinner to be held 50 percent liable for Holdings’ loss.

2. [153]

   Mr Foley submitted that the roles performed by Mr Stone and Mr Skinner were entirely different. In advancing this ground, Mr Foley acknowledged the inherent tension between the appellants’ separate interests, while submitting that cost considerations prohibited the appellants obtaining separate representation on the appeal.

3. [154]

   Relevant legislative provisions

4. [155]

   Division 2A of Pt 7.10 of the Corporations Act provides for a defence of proportionate liability with respect to an “apportionable claim”, where a claim for damages is made under 1041I(4), for economic loss or property damage caused by conduct that was done in contravention of s 1041H: s 1041L(1).

5. [156]

   Corporations Act, s 1041N(1) provides:

6. [157]

   A “concurrent wrongdoer” in relation to a claim is a person who is one of two or more persons whose acts or omissions (or act or omission) caused, independently of each other, or jointly, the damage or loss that is the subject of the claim: s 1041L(3). It does not matter that a concurrent wrongdoer is insolvent, is being wound up or has ceased to exist or died: s 1041L(5).

7. [158]

   The scope of corresponding provisions in the Civil Liability Act was considered by the High Court in Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd and Ors (2012) 247 CLR 613 at [16], where the plurality said:

8. [159]

   The plurality noted (at [19]) that the definition of “concurrent wrongdoer” raises two questions, namely what is the damage or loss that is the subject of the claim, and is there a person, other than the defendant, whose acts or omissions also caused that damage or loss. The plurality emphasised (at [24]) that the damage or loss that is the subject of the claim is not to be equated with the amount ultimately awarded as “damages”. Rather, the injury and other foreseeable consequences suffered by a plaintiff constitutes the damage or loss that is the subject of the claim and, “[i]n the context of economic loss, loss or damage may be understood as the harm suffered to a plaintiff’s economic interests.” The plurality rejected (at [41]) any requirement of causation, that is, that one wrongdoer contribute to the wrongful actions of the other in order to cause the damage. A wrongdoer’s acts may be independent of those of another wrongdoer yet cause the same damage.

9. [160]

   The principles governing appellate review of a trial judge’s contribution findings are well-established and involve the same principles as apply in respect of an assessment of contributory negligence. In Podrebersek v Australian Iron & Steel Pty Ltd (1985) 59 ALJR 492, the High Court (Gibbs CJ, Mason, Wilson, Brennan and Deane JJ) said (at 493):

10. [161]

    The High Court continued in Podrebersek explaining the nature of the apportionment task (at 494):

11. [162]

    The approach in Podrebersek was generally approved by this Court with some qualifications in Mitchell Morgan Nominees Pty Ltd v Vella [2011] NSWCA 390 at [83]-[84] (Giles JA, Bathurst CJ, Campbell JA, Macfarlan JA, Sackville AJA agreeing) in relation to Civil Liability Act, s 35(1)(a) (which is in similar terms to Corporations Act, s 1041N(1)(a)):

12. [163]

    The correctness of this approach was not doubted by the High Court when allowing the appeal in Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd. Nor did the parties in this case suggest that any different approach should be taken to Corporations Act, s 1014N. It was common ground in this Court that the proportionate liability provisions in Div 2A, Pt 7.10 of the Corporations Act applied in the present case.

13. [164]

    His Honour found that the conduct of Mr Skinner and Mr Stone involved misleading or deceptive conduct in relation to a financial product or a financial service in contravention of s 1041H and assessed damages of $900,000 under s 1041H of the Corporations Act. The present case does not involve any intentional wrongdoing on the part of either Mr Skinner or Mr Stone.

14. [165]

    In seeking to distinguish between their roles, Mr Foley pointed to the following matters. First, that Mr Skinner was absent from the meeting between Mr Stone and Mr Redmond in Melbourne on 16 November 2011 at which the further investment by Holdings of $400,000 was discussed. Mr Foley submitted that Mr Skinner was unaware of any discussion at that meeting in relation to increasing Holdings’ shareholding from 28 percent to 51 percent in GCA and GCS.

15. [166]

    Accepting that Mr Skinner was not present at the 16 November 2011 meeting in Melbourne, the position remains that: (a) Mr Skinner was aware of the conversion rights in the shareholder loans, and he agreed in cross-examination that he had not taken any steps to make Mr Redmond or Mr Roulstone or Mr Manca, Holdings’ solicitor, aware of the conversion rights; and (b) Mr Skinner also agreed in cross-examination that he was aware of the background to Holdings’ increase in its investment and to what occurred at the meeting on 16 November 2011.

16. [167]

    Accordingly, it is not to the point that Mr Skinner was not present at the meetings between Mr Stone and Mr Redmond on 14 or 16 November 2011, at which the further investment by Holdings in GCA and GCS was discussed and agreed.

17. [168]

    Second, Mr Foley submitted that his Honour erred in finding that Mr Skinner would benefit from any conversion of the shareholder loans, since he was not a shareholder in H Ridge, nor had he provided any shareholder loans. Whether or not Mr Skinner stood to benefit from any conversion of loans to equity in GCA (relief judgment at [77]) was not material to his Honour’s finding on apportionment.

18. [169]

    The assessment of comparative responsibility between Mr Skinner and Mr Stone when determining just apportionment under Corporations Act, s 1041N required a broad discretionary evaluation of the conduct of each wrongdoer in terms of both causation and relative culpability.

19. [170]

    His Honour’s dispositive reasons for finding Mr Skinner equally liable with Mr Stone for Holdings’ loss are set out at [19] of the relief judgment (extracted at [51] above). His Honour concluded that Mr Skinner knew that there had been a non-disclosure by him in his dealings with Holdings and its representatives, just as Mr Stone knew that there had been a non-disclosure by Mr Stone in his dealings with Holdings and its representatives, irrespective of whether either of them knew what the other may have conveyed to Holdings, and that each of Mr Skinner and Mr Stone could, by disclosure, have avoided Holdings’ exposure to loss. As neither had done so and where each of them would otherwise bear the risk of being held liable for the entire liability, including on insolvency of the other, his Honour concluded that it was just and equitable to apportion liability equally as between Mr Stone and Mr Skinner.

20. [171]

    There is no error in that reasoning. Ground 17 is not established.

7. Costs

1. [172]

   Ground 18 asserts that his Honour erred in finding that they should pay Holdings’ costs of the proceedings at first instance.

2. [173]

   The costs orders made by the primary judge on 21 December 2016, included that, subject to existing costs orders:

   1. (1)

      Mr Skinner and Mr Stone pay one-third of Holdings’ costs on the ordinary basis; and

   2. (2)

      Holdings pay the costs of Fullham and H Ridge on the ordinary basis.

3. [174]

   The reference to existing costs’ orders may be taken to be a reference to an order made on 21 January 2016 when earlier hearing dates were vacated on the appellants’ application. On that occasion, his Honour ordered the defendants to pay the plaintiff’s costs thrown away by reason of their vacation of the hearing dates.

4. [175]

   In writing the appellants submitted, without any supporting argument, that even if the appeal is not successful, or wholly successful, the appropriate order should be that costs at first instance and on appeal be awarded to the appellants. This submission was not expanded upon in oral argument.

5. [176]

   Nor has any basis has been shown for challenging his Honour’s discretionary decision as to costs. Ground 18 is not established.

Conclusion and Orders

1. [177]

   The appeal has failed. There is no reason why costs should not follow the event: Uniform Civil Procedure Rules 2005 (NSW), r 42.1. Accordingly, I propose the following orders:

   1. (1)

      Grant an extension of time for the second appellant to file the amended notice of appeal on 9 August 2017.

   2. (2)

      Refuse leave to the appellants to rely upon the affidavit of Mark Henry Skinner sworn 24 November 2017.

   3. (3)

      Appeal dismissed.

   4. (4)

      Appellants to pay the respondent’s costs.

2. [178]

   BARRETT AJA: I agree with Gleeson JA.