Crowley v Worley Limited (No 2)

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FEDERAL COURT OF AUSTRALIA

Crowley v Worley Limited (No 2) [2023] FCA 1613   

File number: NSD 1292 of 2015
Judgment of: JACKMAN J
Date of judgment: 19 December 2023
Catchwords:

CORPORATIONS – representative proceedings – where listed company made announcements as to earnings expectations – whether representations constituted misleading or deceptive conduct – whether there was a reasonable basis for making the representations as to expectations of future earnings – attribution of knowledge to a corporation – whether breach of continuous disclosure obligations – contraventions established

DAMAGES – whether group members suffered loss applying market-based causation – active indirect causation in relation to purchase of securities – primary counterfactual not made out – where there is no economic correspondence or equivalence – causation and loss not established

HIGH COURT AND FEDERAL COURT – principles on remitter for further hearing and determination – extent to which findings of the primary judge disturbed on appeal – circumstances in which remitter judge bound by findings of appellate court and primary judge  
Legislation:

Australian Securities and Investments Commission Act 2001 (Cth) ss 12BB, 12DA, 12GF

Competition and Consumer Act 2010 (Cth) Sch 2 (Australian Consumer Law), ss 4, 18, 236

Corporations Act 2001 (Cth) ss 9, 9AD, 674, 1041H, 1041I, 1317HA

Federal Court of Australia Act 1976 (Cth) Pt IVA, s 28
Cases cited:

Aristocrat Technologies Australia Pty Ltd v DAP Services (Kempsey) Pty Ltd [2007] FCA 40; (2007) 157 FCR 564

Australian Securities and Investments Commission v King [2020] HCA 4; (2020) 270 CLR 1

Australian Securities and Investments Commission v M101 Nominees Pty Ltd (in liq) (No 6) [2023] FCA 1276

Berry v CCL Secure Pty Ltd [2020] HCA 27; (2020) 271 CLR 151

Biggin & Co Ltd v Permanite Ltd [1951] 1KB 422

Blatch v Archer (1774) 98 ER 969

Braham v ACN 101 482 580 Pty Ltd [2020] VSCA 108

Browne v Dunn (1893) 6 R 67

Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304

City of Botany Bay Council v Jazabas Pty Ltd [2001] NSWCA 94

Comcare v Martin [2016] HCA 43; (2016) 258 CLR 467

Community and Public Sector Union v Telstra Corp Ltd (No 2) [2001] FCA 479; (2001) 112 FCR 324

Crowley v Worley Limited [2020] FCA 1522

Crowley v Worley Limited [2022] FCAFC 33; (2022) 293 FCR 438

Crowley v WorleyParsons Limited (No 2) [2019] FCA 1535

Enzed Holdings Ltd v Wynthea Pty Ltd [1984] FCA 373; (1984) 57 ALR 167

Fernando v Commonwealth [2014] FCAFC 181; (2014) 231 FCR 251

Fox v Percy (2003) 214 CLR 118

Harvard Nominees Pty Ltd v Nicoletti [2022] FCAFC 179

Harvard Nominees Pty Ltd v Tiller (No 4) [2022] FCA 105; (2022) 403 ALR 498

HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd [2004] HCA 54; (2004) 217 CLR 640

Jones v Dunkel (1959) 101 CLR 298

Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11;

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Details
Case
[2023] FCA 1613
Decision Date

CaseChat Overview and Summary

In the case of Crowley v Worley Limited (No 2), the Federal Court was tasked with determining whether Worley Limited (WOR), a listed Australian company, had engaged in misleading or deceptive conduct in relation to its earnings expectations for the financial year 2014. The plaintiff, Mr Crowley, who is a shareholder and group member, brought representative proceedings on behalf of himself and other group members against WOR, alleging that the company's representations regarding its FY2014 earnings expectations constituted misleading or deceptive conduct under various statutory provisions. The legal issues that the court had to decide included whether WOR's representations constituted misleading or deceptive conduct, whether there was a reasonable basis for those representations, and if the company had breached its continuous disclosure obligations.

The court found that WOR's representations about its FY2014 earnings expectations were indeed misleading or deceptive and were made without a reasonable basis. WOR had failed to inform the Australian Securities Exchange (ASX) about the lack of reasonable basis for its earnings guidance, thereby contravening section 674(2) of the Corporations Act. However, the court determined that the alleged misleading or deceptive conduct did not cause the market price of WOR's securities to be substantially greater than their true value or the price that would have prevailed without the contraventions. Consequently, Mr Crowley failed to establish causation of loss and the quantification of any loss suffered by the group members. The court concluded that although WOR had contravened the statutory provisions, Mr Crowley could not prove the causation and quantification of any loss, leading to the failure of his claims for damages.

The court apologised for the significant delays in the proceedings, which had been ongoing since 2015. The court set a timetable for the parties to provide written submissions and affidavits in relation to the remaining issues, particularly the costs of the proceedings. The court anticipated deciding these remaining questions on the papers. The final orders addressed the questions of fact and law that were set out in the Joint List of Issues for Determination, binding the applicant and all group members (other than those who opted out) by the answers provided. The respondent was required to file and serve written submissions and any supporting affidavits in relation to the costs and final orders by a specified date.

Orders

Orders of the court

1. The questions set out in the Joint List of Issues for Determination be answered as follows:

Question 1: Was the FY2014 Guidance Representation a representation as to future matters and, if so, in what respects?

Answer: Yes, to the extent only that it conveyed the representation that WOR expected to achieve NPAT in excess of $322 million in FY14.

Question 2: At any time throughout the period from 14 August 2013 to 19 November 2013 (Relevant Period), alternatively in the period from 9 October 2013, 10 October 2013 or 15 October 2013 to the end of the Relevant Period:

2.1 in so far as the FY2014 Guidance Representation was a representation as to present matters, was it misleading or deceptive, or likely to mislead or deceive; and

2.2 in so far as the FY2014 Guidance Representation was a representation as to future matters, was it made without a reasonable basis?

Answer: Yes in relation to both questions, at all times throughout the Relevant Period.

Question 3: By making the FY14 Guidance Representation, did WOR engage in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of any of the pleaded statutes (Misleading or Deceptive Conduct) during all or any part of the Relevant Period (and if so, when) (FY2014 Guidance Representation Contravention)?

Answer: Yes, during all of the Relevant Period.

Question 4: By making the FY14 Earnings Guidance Statement, did WOR engage in Misleading or Deceptive Conduct during all or any part of the Relevant Period (and if so, when) (FY2014 Guidance Statement Contravention)?

Answer: Yes, during all of the Relevant Period.

Question 5: At any time during the Relevant Period, was it the fact that WOR did not have a reasonable basis for making the FY2014 Earnings Guidance Statement (FY2014 Guidance Material Information)?

Answer: Yes, at all times throughout the Relevant Period.

Question 6: If the answer to Question 5 is “yes”, was WOR “aware” within the meaning of ASX Listing Rule 19.12 of the FY2014 Guidance Material Information at any time during the Relevant Period (and if so, when)?

Answer: Yes, at all times throughout the Relevant Period.

Question 7: Between 14 August 2013 and immediately before WOR’s announcement to the ASX on 20 November 2013 (20 November 2013 Announcement), was it a fact that the consensus expectation of professional analysts covering the ASX and ordinary shares in WOR (WOR Securities), that WOR would deliver between $354 and $368 million in NPAT for FY2014 (FY2014 Earnings Expectation)?

Answer: No.

Question 8: If the answer to Question 7 above is “yes”, by 14 August 2013, was WOR aware of the FY2014 Earnings Expectation?

Answer: Does not arise.

Question 9: at any time during the Relevant Period, was it the fact that WOR’s FY2014 earnings were likely to fall materially short of the FY2014 Earnings Expectation (FY2014 Consensus Forecast Material Information)?

Answer: Does not arise.

Question 10: If the answer to Question 9 is “yes”, was WOR “aware” within the meaning of ASX Listing Rule 19.12 of the FY2014 Consensus Forecast Material Information at any time during the Relevant Period (and if so, when)?

Answer: Does not arise.

Question 11: Did WOR at any time prior to 20 November 2013 become obliged pursuant to Listing Rule 3.1 to tell the ASX of the FY2014 Guidance Material Information and/or the FY2014 Consensus Forecast Material Information?

Answer:

(a) in relation to the FY2014 Guidance Material Information: Yes; and

(b) in relation to the FY2014 Consensus Forecast Material Information: No.

Question 12: Did WOR contravene section 674(2) of the Corporations Act by not informing the ASX of:

12.1 the FY2014 Guidance Material Information on 14 August 2013, 21 September 2013, 9 October 2013 or 15 October 2013 (FY2014 Guidance Material Information Contravention); and/or

12.2 the FY2014 Consensus Forecast Material Information on 14 August 2013, 21 September 2013, 9 October 2013 or 15 October 2013 (FY2014 Consensus Forecast Material Information Contravention)?

Answer:

(a) as to Question 12.1: Yes; and

(b) as to Question 12.2: No.

Question 13: During the Relevant Period, did the Contraventions (or any of them) cause the market price for WOR Securities to be substantially greater than:

13.1 their true value; and/or

13.2 the market price that would have prevailed but for the Contraventions (or any of them),

and if so, by how much?

Answer: No, in relation to both questions 13.1 and 13.2. The question as to how much does not arise.

Question 14: In the decision to acquire an interest in WOR Securities did the Applicant rely directly on the FY2014 Guidance Representation or the FY2014 Earnings Guidance Statement and its repetition on 9, 10 and 15 October 2013?

Answer: Yes, in relation to the FY2014 Guidance Representation and the FY2014 Earnings Guidance Statement, but not in relation to its repetition on 9, 10 and 15 October 2013.

Question 15: Has the Applicant suffered loss and damage in relation to his interest in WOR Securities by and resulting from his reliance on the Contraventions, and if so by how much?

Answer: No.

2. Pursuant to s 33ZB of the Federal Court of Australia Act 1976 (Cth) the applicant and all persons who are Group Members at the date of these orders (other than those who have opted out of the proceedings) are bound by the answers to the questions set out in Order 1 above.

3. The respondent file and serve written submissions and any affidavit(s) in support in relation to costs of the proceedings (including the costs of the initial hearing at first instance) and final orders by 2 February 2024.

4. The applicant file and serve written submissions and any affidavit(s) in support in relation to costs of the proceedings (including the costs of the initial hearing at first instance) and final orders by 16 February 2024.

5. The respondent file and serve any written submissions and affidavit(s) in reply in relation to costs and final orders by 1 March 2024.

Note:

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

Definitions:

“Contraventions” mean the:

(a) FY2014 Guidance Representation Contravention (as defined in Question 3);

(b) FY2014 Guidance Statement Contravention (as defined in Question 4);

(c) FY2014 Guidance Material Information Contravention (as defined in Question 12.1); and/or

(d) FY2014 Guidance Material Information Contravention (as defined in Question 12.2);

“FY2014 Guidance Representation” has the same meaning as defined in paragraph 51 of the Fourth Further Amended Statement of Claim. It means, individually and together, a representation made by WOR that:

(a) It expected to achieve NPAT in excess of $322 million in the financial year ended 30 June 2014; and

(b) It had reasonable grounds to expect that it would achieve NPAT in excess of $322 million in the financial year ending 30 June 2014.

“FY2014 Earnings Guidance Statement” has the same meaning as defined in paragraph 12(b) of the Fourth Further Amended Statement of Claim. It means the following statement made by WOR on 14 August 2013: “While recognizing the uncertainties in world markets, we expect our geographic and sector diversification to provide a solid foundation to deliver increased earnings in FY2014”.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

It follows from my reasons in answering Question 13 that Mr Crowley has failed to establish both causation of loss and the quantification of any loss. Accordingly, this question should be answered “no”.Conclusion It follows that, although Mr Crowley has established contraventions of the various statutory provisions on which he relies, he has failed to prove the causation and quantification of any loss. The claims which he makes for damages on behalf of himself and Group Members have therefore failed. There remain questions of the costs of the proceedings (including the costs of the initial hearing at first instance), and final orders will have to be made disposing of the proceedings. In the orders which I have made today, I have set a timetable for the parties to provide written submissions and any affidavit or affidavits in support in relation to those remaining issues. I anticipate that I will decide the remaining questions on the papers. Apology for the Delays of the Court These proceedings were commenced by way of originating application on 27 October 2015. On 9 March 2016, a judge of this Court heard an application by WOR that the then amended statement of claim be struck out. Judgment was not given until 6 January 2017, some ten months later. The matter was fixed for hearing commencing on 6 March 2019, but shortly before that trial, the hearing was vacated unilaterally by the Court. The trial then took place over 19 days, commencing on 28 August 2019 and ending on 12 December 2019. The primary judge then reserved judgment until 22 October 2020, a period of over ten months. The appeal was not heard by the Full Court until 16 and 17 August 2021, and judgment was not given until 11 March 2022, some seven months later (although I note that a further joint submission of four pages was sent by the parties to the Full Court on 22 October 2021). The Full Court ordered that the matter be remitted to a single judge. The High Court refused an application for special leave to appeal on 21 October 2022. The remitted hearing took place before me about 13 months later on 27 November to 1 December 2023. I do not accept any personal responsibility for the delays incurred by the Court in this matter. However, I offer the parties, and others who may have suffered as a result of the delays, an apology for what has transpired.

Ratio Decidendi

Legal Principle Established

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