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Anchorage Capital Master Offshore Ltd v Sparkes

Anchorage Capital Master Offshore Ltd v Sparkes

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Case Copied 9 May 2023 77 min read

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Court of Appeal

Supreme Court

New South Wales

Summary available

Medium Neutral Citation: Anchorage Capital Master Offshore Ltd v Sparkes [2023] NSWCA 88
Hearing dates: 1 – 5 August 2022
Date of orders: 9 May 2023
Decision date: 09 May 2023
Before: Ward P, Brereton JA, Griffiths AJA
Decision:
1.   Leave to appeal from the decision of the primary judge in respect of the costs orders made with respect to the Signatories is granted to the Anchorage appellants, but the appeal is dismissed with costs.
2.   Leave sought by the Signatories to appeal from the decision by the primary judge not to make an indemnity costs order in their favour is refused and their cross-summons is dismissed with costs.
3.   To the extent not dealt with by orders (1) and (2), each of the appeals is dismissed with costs.

Catchwords:
CONSUMER LAW – Misleading or deceptive conduct – Passing on misrepresentations –Where representations made in drawdown and rollover notices – Whether the representations were false at the time of the notices – Whether employees are personally liable for authorising the notices containing the misrepresentations
CONTRACTS – Construction – Interpretation – “change in financial position” – Whether decrease in bid value of asset was a material change in financial position –Whether inception of Going Concern Note a change in financial position – Whether “financial position” can be interpreted as limited to accounting standards
CORPORATIONS – Insolvency – Whether company insolvent – Application of test under Corporations Act 2001 (Cth) – Whether practice of company regarding debt arrangements relevant – Whether cyclical nature of business relevant – Where negotiations occurred between borrowing company and (perhaps acersecomic) lenders regarding a “haircut” to debts owed
CORPORATIONS – Voluntary administration – Power to appoint administrators under Corporations Act 2001 (Cth) s 436A before company becomes insolvent – Resolution to appoint administrators – Whether company insolvent at that time
COSTS – Party/Party – Bases of quantification – Indemnity basis – Relevant considerations in relation to an indemnity costs order
NEGLIGENCE – Causation – Misrepresentation – Whether reliance on misrepresentation causing loss
NEGLIGENCE – Duty of care – Novel categories – Whether a company as borrower owed a duty of care to its lenders
NEGLIGENCE – Liability of accessories in tort – Liability of employee where making representations on behalf of employer – Where employee not acting in a personal capacity
NEGLIGENCE – Misleading or deceptive conduct – Joint tortfeasor – Where standard of knowledge is “knowingly concerned”

Legislation Cited:
Australian Securities and Investments Commission Act 2001 (Cth), ss 5, 12DA, 12GF
Building and Construction Industry Security of Payment Act 2002 (Vic)
Civil Liability Act 2002 (NSW), s 5D
Competition and Consumer Act 2010 (Cth), Schedule 2, ss 2, 236
Corporations Act 2001 (Cth), ss 79, 95A, 436A, 1041H, 1041I
Evidence Act 1995 (NSW) ss 69, 140
Fair Trading Act 1987 (NSW), s 42
Insolvency Act 1986 (UK) s 123
Supreme Court Act 1970 (NSW), ss 79, 101
Trade Practices Act 1974 (Cth)

Cases Cited:
A I

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2023] NSWCA 88
Decision Date: 09 May 2023

CaseChat Overview and Summary

The appeal before the Court of Appeal of New South Wales concerned alleged misleading and deceptive conduct, contractual interpretation, corporate insolvency, and related issues. The appellants, Anchorage Capital Master Offshore Ltd and others, sought to appeal a decision of the primary judge concerning liability and costs. The respondents included Sparkes and other individuals who were employees or directors of a company that had entered into financial arrangements with the Anchorage entities. The dispute arose from representations made in drawdown and rollover notices concerning the financial position of the company, which subsequently entered voluntary administration.

The court was required to determine several key legal issues. These included whether representations made in drawdown and rollover notices were false at the time they were made, and whether employees who authorised these notices could be held personally liable for misleading or deceptive conduct. The court also considered the interpretation of the term "change in financial position" within a contract, specifically whether a decrease in the bid value of an asset or the inception of a Going Concern Note constituted such a change, and whether "financial position" was limited to accounting standards. Furthermore, the court had to assess whether the company was insolvent at the time administrators were appointed, applying the test under the *Corporations Act 2001* (Cth), and whether the company's practices regarding debt arrangements and the cyclical nature of its business were relevant to this determination. The court also considered the principles governing indemnity costs orders.

The Court of Appeal largely upheld the primary judge's findings. Regarding the misleading or deceptive conduct claims, the court found that the representations made in the notices were not false at the time they were made, and therefore, the employees were not personally liable for authorising them. The court interpreted "financial position" broadly, not limiting it to accounting standards, and found that the events in question did not constitute a material change in the company's financial position as contemplated by the contract. On the issue of insolvency, the court applied the relevant statutory test and concluded that the company was not insolvent at the time the administrators were appointed, nor was it likely to become insolvent. The court also addressed the costs orders, granting leave to appeal in respect of costs concerning the Signatories but dismissing the appeal, and refusing leave for the Signatories to appeal the decision not to make an indemnity costs order in their favour.

Orders

Orders of the court

1. Leave to appeal from the decision of the primary judge in respect of the costs orders made with respect to the Signatories is granted to the Anchorage appellants, but the appeal is dismissed with costs.

2. Leave sought by the Signatories to appeal from the decision by the primary judge not to make an indemnity costs order in their favour is refused and their cross-summons is dismissed with costs.

3. To the extent not dealt with by orders (1) and (2), each of the appeals is dismissed with costs.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.

Medium Neutral Citation:	Anchorage Capital Master Offshore Ltd v Sparkes [2023] NSWCA 88
Hearing dates:	1 – 5 August 2022
Date of orders:	9 May 2023
Decision date:	09 May 2023
Before:	Ward P, Brereton JA, Griffiths AJA
Decision:	1. Leave to appeal from the decision of the primary judge in respect of the costs orders made with respect to the Signatories is granted to the Anchorage appellants, but the appeal is dismissed with costs. 2. Leave sought by the Signatories to appeal from the decision by the primary judge not to make an indemnity costs order in their favour is refused and their cross-summons is dismissed with costs. 3. To the extent not dealt with by orders (1) and (2), each of the appeals is dismissed with costs.
Catchwords:	CONSUMER LAW – Misleading or deceptive conduct – Passing on misrepresentations –Where representations made in drawdown and rollover notices – Whether the representations were false at the time of the notices – Whether employees are personally liable for authorising the notices containing the misrepresentations CONTRACTS – Construction – Interpretation – “change in financial position” – Whether decrease in bid value of asset was a material change in financial position –Whether inception of Going Concern Note a change in financial position – Whether “financial position” can be interpreted as limited to accounting standards CORPORATIONS – Insolvency – Whether company insolvent – Application of test under Corporations Act 2001 (Cth) – Whether practice of company regarding debt arrangements relevant – Whether cyclical nature of business relevant – Where negotiations occurred between borrowing company and (perhaps acersecomic) lenders regarding a “haircut” to debts owed CORPORATIONS – Voluntary administration – Power to appoint administrators under Corporations Act 2001 (Cth) s 436A before company becomes insolvent – Resolution to appoint administrators – Whether company insolvent at that time COSTS – Party/Party – Bases of quantification – Indemnity basis – Relevant considerations in relation to an indemnity costs order NEGLIGENCE – Causation – Misrepresentation – Whether reliance on misrepresentation causing loss NEGLIGENCE – Duty of care – Novel categories – Whether a company as borrower owed a duty of care to its lenders NEGLIGENCE – Liability of accessories in tort – Liability of employee where making representations on behalf of employer – Where employee not acting in a personal capacity NEGLIGENCE – Misleading or deceptive conduct – Joint tortfeasor – Where standard of knowledge is “knowingly concerned”
Legislation Cited:	Australian Securities and Investments Commission Act 2001 (Cth), ss 5, 12DA, 12GF Building and Construction Industry Security of Payment Act 2002 (Vic) Civil Liability Act 2002 (NSW), s 5D Competition and Consumer Act 2010 (Cth), Schedule 2, ss 2, 236 Corporations Act 2001 (Cth), ss 79, 95A, 436A, 1041H, 1041I Evidence Act 1995 (NSW) ss 69, 140 Fair Trading Act 1987 (NSW), s 42 Insolvency Act 1986 (UK) s 123 Supreme Court Act 1970 (NSW), ss 79, 101 Trade Practices Act 1974 (Cth)
Cases Cited:	A I