Crowley v Worley Limited (No 2)

[2023] FCA 1613

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; (2011) 243 CLR 361

Masters v Lombe (in his capacity as liquidator of Babcock & Brown Limited) (in liq) [2021] FCAFC 161; (2021) 392 ALR 326

Morley v Australian Securities and Investments Commission [2010] NSWCA 331; (2010) 274 ALR 205; (2010) 81 ACSR 285

New Aim Pty Ltd v Leung (No 3) [2023] FCA 1295

Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd [2003] HCA 10; (2003) 196 ALR 257

Re DCA Enterprises Pty Ltd [2023] NSWSC 11; (2023) 166 ACSR 156

Re HIH Insurance Ltd (in liq) [2016] NSWSC 482; (2016) 335 ALR 320

Re Mediation & Online Dispute Resolution Operating Network Pty Ltd [2022] NSWSC 5

Roufeil v Tarrant Enterprises Pty Ltd [2023] FCAFC 142

Sagacious Legal Pty Ltd v Wesfarmers General Insurance Ltd [2011] FCAFC 53

Shafron v Australian Securities and Investments Commission [2012] HCA 18; (2012) 247 CLR 465

Sykes v Reserve Bank of Australia (1998) 88 FCR 511

Ted Brown Quarries Pty Ltd v General Quarries (Gilston) Pty Ltd (1977) 16 ALR 23

TPT Patrol Pty Ltd as trustee for Amies Superannuation Fund v Myer Holdings Ltd [2019] FCA 1747; (2019) 293 FCR 29

Division:

General Division

Registry:

New South Wales

National Practice Area:

Commercial and Corporations

Sub-area:

Corporations and Corporate Insolvency

Number of paragraphs:

268

Date of hearing:

27 November – 1 December 2023

Counsel for the Applicant:

Mr D Sulan SC, Mr A Edwards and Mr M Pulsford

Solicitor for the Applicant:

Shine Lawyers

Counsel for the Respondent:

Ms W A Harris KC, Mr R G Craig KC and Ms J A Findlay

Solicitor for the Respondent:

Herbert Smith Freehills

ORDERS

NSD 1292 of 2015

BETWEEN:

LARRY CROWLEY

Applicant

AND:

WORLEY LIMITED (ACN 096 090 158)

Respondent

ORDER MADE BY:	JACKMAN J
DATE OF ORDER:	19 DECEMBER 2023

THE COURT ORDERS THAT:

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:

2.1in 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

2.2in 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

13.2the 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”.

REASONS FOR JUDGMENT

JACKMAN J

Introduction

1. This is the judgment on the remitter to a single judge for determination on a reconsideration of the whole of the evidence which was ordered by the Full Court in Crowley v Worley Limited [2022] FCAFC 33; (2022) 293 FCR 438 (AJ), in allowing an appeal from the reasons of the primary judge in Crowley v Worley Limited [2020] FCA 1522 (PJ).

2. In broad terms, the proceedings concern announcements made a decade ago by Worley Limited (WOR), a company listed on the (then) Australian Stock Exchange (ASX). WOR is a provider of services in the resources, energy and infrastructure sectors. On 14 August 2013, WOR made an ASX announcement to the effect that WOR had a solid foundation for expecting earnings growth on the figure of $322 million, being WOR’s net profit after tax (NPAT) for the year ended 30 June 2013. WOR’s August 2013 earnings guidance statement published on 14 August 2013 was as follows:

   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.

   That earnings guidance was based on WOR’s internal budget for the 2013/14 financial year, which its board approved on 13 August 2013, and which forecast net profit after tax in that year of $352 million. On 9 October 2013, being the date of its Annual General Meeting, WOR made a further announcement to the market, to the effect that its first-half result would be lower than in the prior year, but that it affirmed the earnings guidance statement made on 14 August 2013. On 10 and 15 October 2013, WOR repeated the earnings guidance statement initially made on 14 August 2013. However, on 20 November 2013, WOR announced revised earnings guidance in the following terms:

   On current indications the company now expects to report underlying NPAT for FY2014 in the range of $260 million to $300 million with first half underlying NPAT in the range of $90 million to $100 million.

3. The proceedings have been brought by Mr Crowley as representative proceedings pursuant to Pt IVA of the Federal Court of Australia Act 1976 (Cth) (the FCA Act), on his own behalf and on behalf of other persons (with the exception of those who opted out) who purchased WOR shares in the period between 14 August 2013 and 19 November 2013 (Relevant Period), and who allegedly suffered loss by reason of WOR’s conduct as pleaded in the fourth further amended statement of claim (4FASOC) filed on the first day of the trial. That pleading alleges contraventions of WOR’s continuous disclosure obligations under s 674 of the Corporations Act 2001 (Cth) (the Corporations Act) and r 3.1 of the ASX Listing Rules (Listing Rules), and the prohibition on misleading or deceptive conduct in s 1041H of the Corporations Act, s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act) and s 18 of the Australian Consumer Law (being Sch 2 of the Competition and Consumer Act 2010 (Cth)) (the ACL).

   Glossary

4. I have used the following defined terms in these reasons.

Defined Term	Definition
4FASOC	Fourth Further Amended Statement of Claim
9 October 2013 Announcement	The statement WOR published on 9 October 2013 to the effect that its first-half result would be lower than in the prior year, but that it affirmed the August 2013 earnings guidance statement
27 May 2013 Draft Budget	The proposed budgets prepared by each of the Locations in which WOR operated, which when compiled together on 27 May 2013 disclosed an NPAT of $252 million for FY14 (which NPAT increased to $284 million by the time of adoption of the FY14 Budget due to changes in foreign exchange rates)
A&RC	Audit and Risk Committee of the Board of WOR, comprised of Board members
ACL	Australian Consumer Law, being Sch 2 of the Competition and Consumer Act 2010 (Cth)
AGM	Annual General Meeting
ANZ	Australia and New Zealand
ASCH	Asia and China
ASIC Act	Australian Securities and Investments Commission Act 2001 (Cth)
ASX	Australian Stock Exchange
August 2013 Earnings Guidance Statement	The statement published on 14 August 2013 saying: “While recognising the uncertainties in world markets, we expect our geographic and sector diversification to provide a solid foundation to deliver increased earnings in FY2014.”
BEBIT	Business earnings before interest and tax
Blue Sky	Estimated revenue from expected projects not identified at the time of forecasting
Board	WOR’s Board of Directors, on which throughout the relevant period Mr Wood was the only Executive Director
CAN	Canada
CEO	Chief Executive Officer
CEOC	The CEO’s Committee, comprising the members of ExCo, Mr Holt (in the period when he was not formally on ExCo), the eight RMDs who reported to Mr Bradie, and the three Managing Directors of the CSGs. The CEOC’s role was only to advise Mr Wood and it did not make decisions.
CFO	Chief Financial Officer
Consensus Expectation	The allegation of the existence of a consensus expectation of professional analysts covering the ASX and WOR, held between 14 August 2013 and immediately prior to the November 2013 revised earnings guidance, that WOR would deliver between $354 and $368 million in NPAT for FY14
Corporations Act	Corporations Act 2001 (Cth)
CSGs	The three Customer Service Groups into which WOR allocated customers for FY14, being Hydrocarbons (customers involved in extracting and processing oil and gas), Minerals, Metals & Chemicals (also referred to as MM&C) and Infrastructure, each headed by a Managing Director
Earnings Expectation Material Information	The proposition that WOR’s FY14 earnings were likely to fall materially short of the consensus expectation of professional analysts covering the ASX and WOR securities that WOR would deliver between approximately $354 and $368 million in NPAT for FY14
EBIT	Earnings before interest and tax
EBITDA	Earnings before interest, tax, depreciation and amortisation
EUR	Europe
ExCo	The Executive Committee which reported directly to Mr Andrew Wood, WOR’s Chief Executive Officer (CEO), and comprising Mr Wood and six Group Managing Directors who reported directly to Mr Wood, being Mr Bradie, Mr Ross, Mr Steele, Mr Karren, Mr Bloch, and, from September 2013, Mr Holt. The ExCo met at least monthly.
FCA Act	Federal Court of Australia Act 1976 (Cth)
FY13	The financial year ended 30 June 2013
FY14	The financial year ended 30 June 2014
FY14 Budget	WOR’s budget for the financial year 2013/2014 approved by WOR’s board on 13 August 2013 and which forecast NPAT of $352 million
FY14 WOR Earnings Expectation	This has the same meaning as the Consensus Expectation
FY14 Guidance Representation	The representation conveyed by WOR publishing and maintaining its August 2013 earnings guidance statement that: (a) it expected to achieve NPAT in excess of $322 million in FY14, and (b) it had reasonable grounds to expect that it would achieve NPAT in excess of $322 million in FY14
GMD	Group Managing Director
Go and Get	An assessment of Go and Get likelihood was made for proposals and prospects in order to risk weight forecasted revenue and costs for work that may not materialise: “Go” was a percentage figure representing the likelihood that the project would be undertaken at all, and “Get” was a percentage figure representing the likelihood that WOR would be engaged for the work in the event that the project went ahead
Group Members	All persons who purchased WOR shares during the Relevant Period, and who allegedly suffered loss or damage by reason of the pleaded conduct of WOR
HOH	“Half on half” referring to the “phasing” or timing of financial results, in particular the comparison of results between the first half of a financial year, being 1 July to 31 December (H1), and the second half, being 1 January to 30 June (H2)
Holt Memo Interview Notes	The interview notes which accompany the Holt Memorandum
Holt Memorandum	A memorandum from Mr Holt, CFO, to the A&RC dated 5 December 2013
Joint List	Joint list of issues for determination
LAM	Latin America
Listing Rules	The Listing Rules of the ASX
Location	The business locations into which each Region was divided, of which there were 43 in total
Management Adjustments	Adjustments to the 27 May 2013 Draft Budget made in or about June 2013 by senior management of WOR comprising: (i) $31.046m in operational EBIT; (ii) $12m for acquisition stretch; (iii) a further $14.093m in operational EBIT; (iv) $33m in overhead savings; and (v) $32m in foreign exchange benefit.
Material Information	The proposition that WOR did not have a reasonable basis for making the August 2013 Earnings Guidance Statement
MENAI	Middle East, North Africa, India
MM&C	The CSG known as Minerals, Metals & Chemicals.
November 2013 Revised Earnings Guidance	The statement WOR published on 20 November 2013 that: “On current indications the company now expects to report underlying NPAT for FY2014 in the range of $260 million to $300 million with first half underlying NPAT in the range of $90 million to $100 million.”
NPAT	Net profit after tax
P50 Budget	A budget using the P50 parameter, being a probabilistic Monte Carlo analysis of the statistical confidence level for an estimate, meaning that 50% of estimates exceed the P50 estimate and 50% of estimates are less than the P50 estimate; that is, there is an equal chance of exceeding or going below the estimate
Proposals	Work for which WOR had submitted a tender or had received a request for a tender, where there was usually a proposed start date for the project within the forthcoming year
Prospects	Tender processes for which WOR had not yet submitted a tender, or known projects where the tender process had not started
Region	One of the eight regions around the world into which WOR’s business was organised, known as ANZ, CAN, ASCH, USAC, LAM, MENAI, EUR and SSA
Relevant Period	14 August 2013 to 19 November 2013
RMD	Regional Managing Director
Sandbagging	The suspected practice of executives in WOR’s Locations attempting to lower the expectations of senior management by submitting a draft budget that they could then exceed quite readily
Secured Work	WOR’s portfolio of work in hand, where a signed contract for the work existed
SSA	Sub-Saharan Africa
SWO	Southwest Ops, being one of five Locations in the USAC Region
Unsecured Work	Work described either as a Proposal, Prospect or Blue Sky
USAC	USA and Caribbean
Vision 2017	WOR’s objective of year-on-year growth in every year from FY13 to FY17 as described in WOR’s 2012 annual report
WOR	Worley Limited, formerly known as WorleyParsons Limited.

Dramatis Personae

1. The following were the key individuals at WOR involved in the relevant events:

Name	Role
John Allen	Global Director – Corporate Finance
Robert Ashton	RMD of MENAI Region
Barry Bloch	GMD People
Stuart Bradie	GMD of Operations
Frank Calderone	Controller – Global Management Reporting and Performance
Andy Cole	Managing Director of the Infrastructure CSG
Michael Daly	Global Director – Operations and Communications Support
Rose Dawn	Business Manager – Global Operations
Brian Evans	Managing Director of the Hydrocarbons CSG
Simon Holt	Chief Financial Officer
Randy Karren	GMD Improve
Dennis Lucey	RMD of ASCH Region
Roisin McLernon	Senior Manager, Global Management Reporting
Iain Ross	GMD Development
Mark Southey	Managing Director of the Minerals, Metals & Chemicals CSG
David Steele	GMD New Ventures
Kirsty Wallace	Group Financial Controller
Ian Wilkinson	RMD of ANZ Region
Andrew Wood	CEO and Executive Director

Nature of the Remitter

1. The orders made by the Full Court on 11 March 2022 set aside the primary judge’s orders dismissing the originating application and 4FASOC and ordered that:

   3. The matter be remitted to a single judge for such further hearing as that judge decides and for determination.

   …

   5.The costs of the hearing below be remitted to the single judge for such further hearing as that judge decides and for determination.

   The orders for remitter would appear to have been made pursuant to s 28(1)(c) of the FCA Act. It is well established that the “further hearing and determination” referred to in s 28(1)(c) is a continuation of a trial that has already begun, though interrupted by a final order which has been set aside: Community and Public Sector Union v Telstra Corp Ltd (No 2) [2001] FCA 479; (2001) 112 FCR 324 at [15] and [17] (Finkelstein J); Fernando v Commonwealth [2014] FCAFC 181; (2014) 231 FCR 251 at [52]-[53] (Besanko and Robertson JJ, with whom Barker J agreed); Harvard Nominees Pty Ltd v Tiller (No 4) [2022] FCA 105; (2022) 403 ALR 498 at [43] (Jackson J); Australian Securities and Investments Commission v M101 Nominees Pty Ltd (in liq) (No 6) [2023] FCA 1276 at [47]-[49] (O’Callaghan J); New Aim Pty Ltd v Leung (No 3) [2023] FCA 1295 at [13]-[16] (O’Callaghan J).

2. The parties have prepared a joint list of issues for determination (Joint List) on the remitter, comprising 15 questions. Questions 1-4 deal with the misleading or deceptive conduct case, questions 5-12 deal with the continuous disclosure case, and questions 13-15 deal with causation, loss and damage. It is common ground between the parties that those questions should be answered by reference to the evidence adduced at the initial hearing before the primary judge. Neither party has sought to amend their pleadings. There is an application by Mr Crowley to reopen his case and adduce further evidence, which I deal with in my reasons in relation to Question 13 at [261]-[262] below.

3. It is common ground that the following general principles apply to the present remitter, as stated in Harvard Nominees Pty Ltd v Tiller (No 4) at [45]-[47] (Jackson J), and as approved by the Full Court in Harvard Nominees Pty Ltd v Nicoletti [2022] FCAFC 179 at [96] (Banks-Smith, Colvin and O’Sullivan JJ):

   (a)the court on remitter must act consistently with the appellate court’s judgment, including not only the ultimate orders made but also the reasons for decision;

   (b)where the appellate court has disturbed findings of the primary court, it will be open to the primary court to determine those issues afresh, provided that it does so in accordance with the judgment of the appellate court; and

   (c)the primary court on remitter cannot go outside the scope of what is remitted, or reconsider any of its previous findings that have not been disturbed by the appellate court, unless it determines in accordance with ordinary principles that it is in the interests of the administration of justice to give leave to reopen.

   As is apparent from the reasoning below, there is significant controversy between the parties as to the application of those principles in relation to the particular questions which arise for determination.

4. In my view, a further exception must be made to the principles set out in the last paragraph to deal with the circumstance of an obvious clerical error or slip either by the original primary judge or by the appellate court, which, in my view, the primary judge on remitter is able to correct. An example is provided in the present case by the finding of the Full Court at AJ[127] that Mr Bradie reported to Mr Holt, whereas the evidence unequivocally established that Mr Bradie reported to Mr Wood (as the primary judge correctly found at PJ[97(2)]). I do not regard that exception as inconsistent with the Full Court’s reasons in Harvard Nominees Pty Ltd v Nicoletti, as no argument was put to (let alone rejected by) the Court in that case as to the existence of such an exception, and judicial reasoning cannot be read as though it were a statute. However, that exception does not extend to the circumstances where either the original primary judge or the appellate court has made a finding which is clearly intentional but which appears to be wrong, or even plainly wrong. The principles set out in the last paragraph are not simply the result of the doctrine of legal precedent and the hierarchy of courts, but are also the result of the basal principle that the remitted hearing is a continuation of a trial that has already begun, despite having been interrupted by the orders and reasons of an appellate court which have set aside the orders of the original primary judge. There is therefore an imperative for continuity and consistency in decision-making. In the event that an appellate court takes a different view on that issue, I have identified instances below where I regard findings made by either the original primary judge or the Full Court as wrong or untenable, but where I regard myself as bound to follow and adopt that erroneous reasoning.

5. A further clarification of the relevant principles is required to deal with circumstances where the primary judge or the appellate court has made an error in what should be regarded as incidental remarks which do not constitute findings or operative reasoning, such as by way of merely introductory or parenthetic observations. An example is provided by the Full Court in AJ[33], which misread the primary judge’s paraphrase of Mr Crowley’s opening submissions at PJ[47] as her Honour’s own description of the Management Adjustments, whereas the primary judge’s own findings were expressed later in the judgment in different monetary amounts: see in particular PJ[201] and [243]. I refer to that at [72] below. I do not regard the Full Court as having disturbed the primary judge’s actual findings as to the amounts of the Management Adjustments.

   Misleading and Deceptive Conduct: Reasons of the Full Court

6. The Full Court’s reasons in relation to the misleading and deceptive conduct case commence with an analysis of the Holt Memorandum, in the context of the November 2013 Revised Earnings Guidance having led to reflection among WOR’s senior management about what might have gone wrong in WOR’s budgeting process: AJ[19]. Mr Holt interviewed WOR managers and others, made the Holt Memo Interview Notes, and prepared his memorandum of 5 December 2013 accompanied by his notes of the interviews: AJ[19]. The subject of the Holt Memorandum was “Financial forecasting process” and its stated purpose was quoted at AJ[20] as being:

   … to provide a review of the current process that WorleyParsons [ie WOR] follows with respect to its budgeting and forecasting and to discuss certain changes to this process being actioned or considered by management.

7. The Full Court referred to the “Background” section of the Holt Memorandum as recording that in the past six years, WOR had underperformed its original budget by 10% or more five times, and re-forecasts done during the year had also proved to be less reliable than WOR would have expected: AJ[21]. That section of the Holt Memorandum also referred to WOR having been in a position where it was required to make a number of formal and informal profit downgrades, and referred to the stated intention of the budgeting process being that the budget should be a P50 Budget: AJ[21].

8. Section 3 of the Holt Memorandum was headed “Recent Results”, and included a table reproduced in AJ[22] comparing WOR’s original budget, re-forecast and final NPAT numbers, and analysts’ views over the previous five years. The Holt Memorandum said that the table showed that, with the exception of FY12, WOR had underperformed on its original budget by at least 10% for every year back to FY09, and would do so again for FY14, and said that the numbers suggested that the re-forecasts by WOR had probably not been much better than the budget from an accuracy perspective, although the figures did indicate that WOR had done a good job at year end of guiding the analysts to a consensus that was approaching the budgeted figure: AJ[23].

9. Section 4 was headed “Reasons for poor budgeting/forecasting performance”, and referred to Mr Holt having undertaken a review which included discussions with ExCo, the Managing Directors of Operations and the Finance Leadership Team including the Finance Directors: AJ[24]. The Full Court quoted the following statement of the key points about the budget referred to by Mr Holt:

   •There are some practical and cultural issues around the budgeting process including whether it is the right process for all locations.

   •Expectations of growth at the senior management level have been too optimistic and have not matched what the locations are seeing on the ground.

   •There is insufficient allowance made in the budget process for potential downsides.

   •There is continued tension between locations and senior management as to whether locations are “stretching” themselves sufficiently in preparing their budgets.

   Those points were then elaborated upon in the passage extracted at AJ[26]. Under the heading “A culture of optimism”, Mr Holt said that a consistent message was that there had been an expectation at group level that the company would grow, or grow at a certain rate compared to previous years, and that expectation was then communicated back to the Locations with the consequence that, in many cases, the bottom-up build that the Location submitted did not match the expectations of growth from senior management. Further, Mr Holt said that in order to meet those expectations, the most common response was for Locations to simply include a greater level of Blue Sky revenue in the second half of their budget period; in essence, Locations were budgeting on the hope that work would materialise, rather than any real expectation that it would, and thus the probability that the budget would be met decreased and WOR’s budgets had not genuinely been P50 Budgets, as was supported by the fact that WOR had missed budget five out of the previous six years. As to there being “Insufficient allowance for potential downsides”, Mr Holt noted that the WOR business model had moved into larger and more complicated projects, such that the potential for material downside on one or more of those projects in a particular accounting period was high, but that potential downside was not built into the budgeting process; in other words, WOR’s budget assumed that everything would go right in a world where it was known that things would go wrong. Mr Holt added that the way in which WOR budgeted and operated meant that it was unlikely that there would be unknown upside sufficient to offset the potential downside. Mr Holt commented that in cases where potential problems had been identified on projects, the feedback was that Locations were actively discouraged from including potential downside in their budgets. Mr Holt dealt with the question of whether WOR was “stretching”, saying that there was an assumption that Locations were not “stretching” when they put in their initial budgets and the perceived lack of trust in the initial Location budget placed pressure on the process, and had the potential of penalising Locations which made a genuine effort to get their forecasts correct, but who were still assumed to be Sandbagging.

10. On the topic of re-forecasts, Mr Holt said that the intention behind the re-forecast process was to give management an assessment on a quarterly basis as to how WOR was tracking against its original budget, which was then used to determine whether WOR’s current market guidance was appropriate. Mr Holt said it appeared that similar issues to those identified in the budget were cropping up in the re-forecast process, and in particular, Locations were under significant pressure to “hold the line” with respect to their original Blue Sky forecasts, even in situations where the local market conditions were such that it had become less likely that this work would materialise: AJ[27].

11. Under the heading “Consequences”, Mr Holt said that WOR had been good at guiding the market to its budgeted number, but what the market did not necessarily realise was that this was a “P50” number, and in reality, was probably lower than that, and consequently the market was probably more surprised than it should have been when WOR did not reach that number: AJ[28]. Mr Holt also noted that the inaccurate budgeting had had a direct impact on WOR’s incentive schemes with very low payouts in recent years, and further that the setting of budgets that were considered unrealistic had, at least in some parts of the business, a de-motivating effect in that it was hard to engage staff when their views on budgets were not being taken into account and when they were being set targets which they believed had a low probability of being met: AJ[28]. Mr Holt concluded by noting that changes arising from a review process would be implemented in the FY15 budget process: AJ[29].

12. Appendix One to the Holt Memorandum was headed “The current budget process”, noting that the “current process is, at least in theory, a ‘bottom up’ process” which was explained as involving the following: AJ[30]. The Locations forecast their revenue and gross margin based on work that was Secured, Prospects or Blue Sky, although certain Locations budgeted based on the number of people. Revenue and gross margin were split across the three CSGs and four service lines. The Location then determined what a reasonable level of overhead was for the location, and derived the Location BEBIT, which was the EBIT of the Location before global charges. That number was subject to review by the Managing Director responsible for the Location and then by the Global Director of Operations. The BEBIT for all the Locations was then consolidated to reach a group “Operational BEBIT” number. The Global Services Group costs were then determined and subtracted from the Operational EBIT number to arrive at a Group EBITDA number, and estimates were then made of group interest, tax, depreciation and amortisation to arrive at a Group NPAT number. The full result was then reviewed by the CEO and the CFO, and after all changes were made, the final pack was presented to the Board for its review and approval. Appendix One also recorded that the stated intention of the budgeting process should be a P50 Budget: AJ[31]. As to re-forecasts, Appendix One included the statement that WOR did regular forecasts, previously 4+8 (that is, four months into the financial year for the next eight months) and 8+4 (that is, eight months into the financial year for the next four months): AJ[32].

13. The Full Court noted that WOR did not call Mr Holt to give evidence, nor did WOR call Mr Bradie, Mr Allen or Mr Daly who were directly involved in the amendments to the 27 May 2013 Draft Budget, in which a budgeted NPAT of $252 million (or $284 million with foreign exchange increases up to August 2013) was increased in the FY14 Budget to an NPAT of $352.1 million: AJ[33]. The Full Court at AJ[33] quoted from PJ[47] as to that process:

    (1)the 27 May 2013 draft budget produced a forecast NPAT of $252 million;

    (2)Messrs Bradie and Daly then added $34.9 million in operational EBIT and Mr Allen added $12 million for acquisition stretch with the result that the budgeted FY14 NPAT was $288.6 million;

    (3)Messrs Bradie and Daly then added $20.7 million in operational EBIT with the result that budgeted FY14 NPAT increased to $295 million;

    (4)CEOC then resolved to include an additional $43.8 million in overhead savings in the FY14 budget, of which $33 million would be recorded in operational EBIT; and

    (5)$32 million was added to the budget NPAT figure using the current foreign exchange spot rate (Mr Crowley makes no complaint about this adjustment).

14. The Full Court referred to an email on 31 May 2013 by Mr Daly to Mr Holt and Mr Allen about the 27 May 2013 Draft Budget noting that “you see that the level of blue sky in ANZ (North and West) in particular is very high (ANZ South is high but is not such a worry given the nature of their business)”: AJ[34]. On 11 June 2013, Mr Allen made the following comments to Ms Wallace following a conversation with Mr Daly, quoted at AJ[35]:

    Our guess is that Stu Stu [ie Mr Bradie] got a rocket from Andrew [Wood] last week re the budget and has been told to change everything – making somewhat of a mockery of the process. If there was going to be a top down target why didn’t we start with that in the first place??

    I am also concerned that we are putting the company’s reputation at risk. If we go out with another unrealistic budget, and need to do another profit downgrade next year, it is not going to look good at all in the market. Something to discuss with Simon [Holt].

15. The Full Court referred to an email of 3 August 2013 by Mr Bradie to all RMDs about the draft budget, noting that the first and second half weighting of 43:57 was too second-half weighted and the RMDs needed to look across Locations to see if more revenue could be moved into the first half: AJ[36]. On 7 August 2013, Mr Daly emailed Mr Holt, saying the following as quoted at AJ[37]:

    As an fyi only, there remains a strong sense within the business that the FY14 targets – both full year and H1 – are a stretch and I agree with that given current performance and the reliance on timely realisation of the cost saving targets. Something to bear in mind during your briefings over the coming weeks!

16. The Full Court referred to WOR releasing its final FY14 results on 27 August 2014, reporting statutory NPAT of $249 million, down 23%, and underlying NPAT of $263 million, down 18%: AJ[38]. The Full Court commented that, having represented to the market that it expected to achieve NPAT in excess of $322 million in FY14 and that it had reasonable grounds to so expect, WOR in fact achieved NPAT of only $263 million: AJ[38].

17. The Full Court then referred to some key findings made by the primary judge which were not the subject of challenge: AJ[39]. These were as follows:

    (a)at AJ[39], by publishing and maintaining the August 2013 Earnings Guidance Statement, WOR made the FY14 Guidance Representation on 14 August 2013 and thereafter, including on 9, 10 and 15 October 2013, represented that it expected to achieve NPAT in excess of $322 million in FY14 and that it had reasonable grounds to so expect: PJ[29];

    (b)at AJ[40], the August 2013 Earnings Guidance Statement was based on its expected NPAT, calculated by reference to WOR’s FY14 Budget: PJ[111];

    (c)at AJ[41], WOR professed to adopt the P50 parameter to produce its budgets: PJ[114]; however, the FY14 Budget was not a P50 Budget: PJ[197];

    (d)at AJ[42], as the FY14 Budget setting process began, WOR’s major markets were “either not growing or were deteriorating”: PJ[418]; WOR admitted that there would be “continued uncertainty in the markets for its services in FY14”: PJ[419]; the 27 May 2013 Draft Budget compiled from the budgets provided by each of the Locations resulted in an NPAT of approximately $252 million: PJ[165]; and on Mr Wood’s evidence, that draft budget generally reflected the Locations’ efforts to identify “aggressive yet achievable budget targets”: PJ[196];

    (e)at AJ[43], CEOC directed a reconsideration of the draft budget as a result of which, by late June 2013, the revised draft budget instead reflected an NPAT of $352.1 million: PJ[254]-[263]; as a result of that revision ExCo was concerned that “[e]veryone will be challenged to meet their budgets” and also that the split between the first and second halves of the year needed “more work … to reduce the weighting to the second half”: PJ[286]; and the weighting to the second half of the year in fact increased as a result of further work: PJ[294]-[295];

    (f)at AJ[44], on 13 August 2013 the Board approved the FY14 Budget with an NPAT of $352.1 million, a 9% increase on the FY13 result of NPAT of $322.1 million: PJ[309]; the August 2013 Earnings Guidance Statement was developed in meetings of the A&RC on 12 and 13 August 2013: PJ[303]; and the Board approved the August 2013 Earnings Guidance Statement to the market: PJ[298]-[303];

    (g)at AJ[45], by statements to the market, WOR aimed to get the analysts to align with WOR’s expectations and to encourage analysts to forecast WOR’s FY14 NPAT at around $352 million: PJ[307]-[308];

    (h)at AJ[46(1)], by the 23 February 2013 and 17 May 2013 ASX announcements, WOR had downgraded its earning guidance on two recent occasions before the FY14 Budget was approved and stated that the downgrades were required because of WOR’s underperformance against its internal budget, and those were additional matters that provided WOR’s officers with a basis for approaching the FY14 Budget with caution: PJ[416]-[417];

    (i)at AJ[46(2)], as the FY14 Budget setting process began, WOR’s major markets were “either not growing or were deteriorating” and WOR was aware that in FY13 it had experienced challenging conditions in a number of its key markets and there would be continued uncertainty in the markets for its services in FY14, and that was a persuasive reason for approaching the FY14 Budget with caution: PJ[418]-[421];

    (j)at AJ[46(3)], there was evidence that aspects of the 27 May 2013 Draft Budget were optimistic and that, overall, the draft budget was “ambitious”: PJ[423];

    (k)at AJ[46(4)], the Holt Memorandum tended to support Mr Crowley’s case that WOR’s historical performance against budget reflected defects in WOR’s budgeting process: PJ[600]; and

    (l)at AJ[46(5)], the Holt Memorandum demonstrated a significant record of underperformance by WOR against its internal budget every year since FY09, with the exception of FY12, stating that in five of the past six years WOR had underperformed its original budget by 10% or more: PJ[410]; the Holt Memo Interview Notes provided “a basis for suspecting that some locations may have submitted to pressure to accept adjustments to their respective budgets that they considered to be unrealistic, or may even have proposed budgets that they considered to be unrealistic”: PJ[329].

1. At AJ[53] and [75], the Full Court accepted Mr Crowley’s contentions that the primary judge’s process of reasoning had miscarried. The essence of those contentions is encapsulated at AJ[47] and [75], to the effect that the primary judge made all necessary findings to support the conclusion that WOR lacked reasonable grounds for the August 2013 Earnings Guidance Statement which conveyed the FY14 Guidance Representation other than the ultimate finding to that effect, and that failure resulted from four fundamental errors in the primary judge’s approach, namely:

   (1)a focus on justifying a decision of the Board to approve the FY14 Budget and the August 2013 Earnings Guidance Statement, rather than the required focus on the reasonableness or otherwise of WOR using the FY14 Budget to justify the August 2013 Earnings Guidance Statement;

   (2)an unwarranted search for a level of detail in the evidence which would permit the primary judge to identify a calculation of NPAT for FY14 which would have been reasonably based;

   (3)failing to appreciate the full significance of the evidence that was tendered and the findings made by considering the issues through too narrow a lens and failing to assess the evidence in the context of the other evidence; and

   (4)failing to weigh the evidence and the proper inferences to be drawn consistently with the principles in Blatch v Archer (1774) 98 ER 969 and Jones v Dunkel (1959) 101 CLR 298.

2. As to the first of those matters, the Full Court said that the relevant issue was not what was actually known by the Board, what views the Board held, or the reasonableness of the conduct of the Board, as the maker of the FY14 Guidance Representation was WOR, not the Board, and accordingly the issue was whether WOR had reasonable grounds for making the FY14 Guidance Representation, not whether the Board acted reasonably or unreasonably given the information made available to it by WOR’s officers: AJ[54]. The Full Court said that the erroneous focus of the primary judge on the conduct and knowledge of the Board, as opposed to the conduct and knowledge of WOR, was most evident in the way in which the primary judge dealt with the finding that the FY14 Budget was not a P50 Budget at PJ[428]. The Full Court said at AJ[57] that the relevant issues were that the FY14 Budget was not a P50 Budget and whether WOR knew that to be so or knew the facts from which it should be inferred that WOR knew that was so, such that if WOR knew, or by its knowledge of underlying facts should be taken to have known, that the FY14 Budget was not a P50 Budget then that would have been evidence supporting the inference that the FY14 Budget did not provide reasonable grounds for the August 2013 Earnings Guidance Statement. Further, the fact that Mr Holt, Mr Bradie, Mr Daly and Mr Allen were not called to give evidence was itself relevant to the question whether the inference should be drawn that relevant persons within WOR (whether officers of WOR or not) knew or should be taken to have known that the FY14 Budget was not a P50 Budget: AJ[57].

3. The Full Court then dealt with a pleading issue as to how it had been alleged by Mr Crowley that the FY14 Budget did not provide reasonable grounds for the making of the FY14 Guidance Representation: AJ[58]. The Full Court said that WOR’s contention that it was not part of Mr Crowley’s case that there was no reasonable basis for the FY14 Budget because it was not a P50 Budget did not withstand scrutiny: AJ[59]. While the Full Court accepted that Mr Crowley did not plead that the FY14 Budget was not a P50 Budget (at AJ[59]), the Full Court said that the 4FASOC did sufficiently plead the alleged deficiencies in the budgeting process which meant that the FY14 Budget was not a P50 Budget, and referred further to the oral and written opening submissions and oral and written closing submissions to the effect that the FY14 Budget was not a P50 Budget: AJ[60].

4. The Full Court reviewed the way in which the trial was conducted at AJ[61]-[66] and then said the following at AJ[67]:

   Given the above, in particular the way WOR conducted its defence, WOR cannot now complain in the appeal that it was not part of the appellant’s case below that the FY14 budget was unreasonable and not fit for use to prepare the August 2013 earnings guidance statement because of: (a) WOR’s history of material budget underperformance, (b) WOR having to twice downgrade its earnings forecasts in 2013, (c) the fact that the FY14 budget was not a P50 budget and should have been known by WOR (and, it must be inferred, was known by some WOR employees) not to be such when it was adopted, (d) the fact that the FY14 budget did not result from a risk-adjusted approach to forecasting, (e) the fact that WOR’s markets were not growing or were deteriorating when the FY14 budget was being prepared, and (f) the fact that WOR maintained the 19% blue sky revenue, the same as 2013 when markets were buoyant, given that blue sky performance was a function of market buoyancy.

   The Full Court said that it was not to the point that WOR repeatedly asserted that it held Mr Crowley to his pleading, and Mr Crowley was entitled to respond to the positive case asserted by WOR that its FY14 Budget was the result of a robust and reasonable budgeting process, that it was in fact reasonable as a matter of substance, that it was a P50 Budget, and that the FY14 Budget was suitable to found the making of the August 2013 Earnings Guidance Statement: AJ[68]. At AJ[71], the Full Court said that it was not to the point that:

   (1)the 4FASOC did not refer to the FY14 Budget as not being a P50 Budget;

   (2)the 4FASOC did not assert that the FY14 Budget was unreasonable and not fit for use as the foundation for the August 2013 Earnings Guidance Statement because the FY14 Budget was not a P50 Budget; and

   (3)there was no evidence that the Board itself knew that the FY14 Budget was not a P50 Budget.

   Further, the Full Court said that it was open to Mr Crowley to prove that the FY14 Budget was not a P50 Budget and that relevant persons within WOR knew that to be so before the FY14 Budget was adopted and before the August 2013 Earnings Guidance Statement was made: AJ[72]. The Full Court said that the primary judge was satisfied that the FY14 Budget was not a P50 Budget, and having so concluded, the issue was whether WOR knew or ought to have known that before it adopted the FY14 Budget and used it as the foundation for the August 2013 Earnings Guidance Statement: AJ[73]. Further, the Full Court said that Mr Crowley was entitled to seek to prove that WOR’s reliance on its asserted robust budget process did not establish the reasonableness of the FY14 Budget or provide reasonable grounds for the August 2013 Earnings Guidance Statement: AJ[74]. The Full Court said that the primary judge had found all the underlying facts in relation to whether WOR had reasonable grounds for the August 2013 Earnings Guidance Statement, but failed to draw the relevant inferences from those facts because of the four fundamental errors referred to at AJ[47]: AJ[75].

5. At AJ[76], the Full Court stated that the primary judge had made the following findings (and WOR had not filed a notice of contention that her Honour erred in so doing):

   (1)the FY14 Budget was not a P50 Budget: PJ[197], [426];

   (2)WOR had historically materially underperformed against its budgets from FY09 to FY13 (except in FY12) and had to twice downgrade its earnings guidance in 2013, and these facts provided a basis for WOR’s officers to be sceptical about the FY14 Budget, and raised an issue about systemic forecasting problems in WOR: PJ[410]-[415];

   (3)the FY14 Budget process was not materially different from the process that had been followed in the preceding years: PJ[411];

   (4)WOR’s markets were not growing or were deteriorating when the FY14 Budget was set which was a persuasive reason for approaching the FY14 Budget with caution: PJ[421];

   (5)aspects of the 27 May 2013 Draft Budget (forecasting an NPAT of $252 million) were optimistic and that draft budget, overall, was “ambitious”, but the FY14 Budget forecast NPAT of $352.1 million: PJ[423];

   (6)ExCo was concerned that the FY14 Budget meant that “[e]veryone will be challenged to meet their budgets” and the split between the first and second halves of the year needed “more work … to reduce the weighting to the second half”: PJ[286]; and

   (7)the Holt Memo Interview Notes record strong criticism by senior management of “aspects of WOR’s budgeting and reforecasting processes”: PJ[602]; and

   (8)consistent with the Holt Memorandum (PJ[601]):

   (a)WOR’s budget setting process was affected by a culture of optimism. The Holt Memorandum and the Holt Memo Interview Notes recorded a “consistent message” of expectations of growth from senior management. There were cases where Locations inflated their projections of Blue Sky revenue in order to meet senior management expectations;

   (b)insufficient allowance was made in the WOR budget setting process for potential downsides. There was feedback that Locations had been actively discouraged from including potential downside in their budgets where potential problems had been identified on projects; and

   (c)there was a belief held by some of WOR’s senior management that Locations were not sufficiently stretching in their initial budgets which was not necessarily valid.

6. The Full Court said that the primary judge’s reasons did not bring all those facts together in assessing whether WOR’s defence, and Mr Crowley’s rebuttal of that defence, should be accepted, but rather, the primary judge focused on each piece of evidence explaining why, in and of itself, that piece of evidence did not support Mr Crowley’s rebuttal: AJ[77]. That explained why the primary judge repeatedly considered that to draw the required inferences more evidence and analysis would be required: AJ[77]. Further, the Full Court said that it was not apparent that the primary judge had regard to the fact that the inferences contended for by Mr Crowley were available on the whole of the evidence, including the facts as found by the primary judge, and whether or not to draw those inferences should be informed by the principles in Blatch v Archer and Jones v Dunkel respectively that “all evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted” and when a party who is capable of testifying fails to give evidence without explanation “it may lead rationally to an inference that his evidence would not help his case”: AJ[78]. The Full Court said that those principles were important in the present case because the evidence established that: (a) Mr Bradie, Mr Daly and Mr Allen, as well as Mr Holt to whom they reported, were key participants in the budget process which caused the forecast NPAT to be increased from $252 million to $352.1 million, (b) Mr Bradie, Mr Daly and Mr Allen expressed significant concerns about the FY14 Budget before it was adopted, and (c) Mr Holt conducted the Holt interviews and prepared the Holt Memorandum in the aftermath of the publication of the November 2013 Revised Earnings Guidance; however, none of Mr Bradie, Mr Daly, Mr Allen and Mr Holt was called by WOR to give evidence: AJ[79].

7. At AJ[82], the Full Court referred to the statement by the primary judge at PJ[600] that the Holt Memorandum “tends to support Mr Crowley’s case that WOR’s historical performance against budget reflects defects in WOR’s budgeting process”, but the primary judge then said that the memorandum did not analyse how any particular defect affected any element of any budget, nor did it attempt to quantify the impact of any defect in the budget process, nor did it seek to test whether there might be any other explanation for the identified discrepancies between budget and actual performance apart from defects in the budgeting process, nor did it contain a broad conclusion that WOR’s budget process was “not reliable”. At AJ[83], the Full Court referred to the findings of the primary judge:

   (1)at PJ[601], that the Holt Memorandum supported the conclusions that WOR’s budget setting process was affected by a culture of optimism, including cases where Locations inflated their projections of Blue Sky revenue in order to meet senior management expectations, insufficient allowance was made in the WOR budget setting process for potential downsides and active discouragement from including potential downsides in Locations’ budgets where potential problems had been identified on projects, and a belief by some of WOR’s senior management that the Locations were not sufficiently stretching in their initial budgets which was not necessarily valid; and

   (2)at PJ[426], that the FY14 Budget was not a true P50 Budget because, as Mr Holt concluded:

   (a)WOR’s budgeting process had been infected with optimism bias;

   (b)there was an expectation of growth which was not driven by WOR’s own assessment of the markets in which it operated; and

   (c)in many cases, the bottom-up build that the Locations submitted did not match the expectations of growth from senior management and the most common response was for Locations to simply include a greater level of Blue Sky revenue in the second half of their budget period, thereby budgeting on the hope that work would materialise rather than any real expectation that it would.

8. The Full Court then said that it was not easy to reconcile the primary judge’s findings about the conclusions the Holt Memorandum supported and her Honour’s rejection of it as evidence that WOR’s budget process was not reliable, and the primary judge appeared to have been looking in the Holt Memorandum for an express statement that the budget process used by WOR in FY14 was unreliable: AJ[84]. The Full Court then said the following at AJ[84]:

   Given that: (a) WOR’s budget process was the same in FY14 as it had been in previous years, (b) WOR had materially underperformed against its budget in FY09 to FY13 other than in FY12, (c) WOR had to twice downgrade its earnings guidance in FY13, (d) markets in FY14 were not growing or were deteriorating when the FY14 budget was being set, the caution and scepticism with [sic] which the primary judge said WOR ought to have brought to bear on a FY14 budget which increased forecast NPAT from $322 million in FY13 to $352.1 million in FY14 would seem to involve material understatement. When the lack of evidence from Mr Bradie, Mr Daly, Mr Allen and Mr Holt are factored in, the primary judge’s approach to the drawing of inferences supports the appellant’s contentions of error in that process.

9. At AJ[85], the Full Court referred to the primary judge’s reasoning at PJ[600] as reflecting the primary judge’s search for a line-by-line analysis of the FY14 Budget sufficient to enable the primary judge to identify the number or the range for NPAT which would have been reasonable. However, the Full Court said that it was not necessary for the appellant to identify a reasonable forecast range in order to demonstrate that WOR’s NPAT forecast in the FY14 Budget was unreasonable and did not provide reasonable grounds for the August 2013 Earnings Guidance Statement: AJ[85]. The Full Court said that a budget and earnings forecast might be proved unreasonable by a line-by-line analysis or by demonstrating that the reasonable range was materially lower than the forecast NPAT, but these were not the only methods by which a forecast might be proved to have lacked reasonable grounds when made: AJ[85].

10. At AJ[86], the Full Court dealt with the primary judge’s conclusion that the Holt Memorandum did not deal with the topic of how the FY14 Budget process miscarried, with reference to PJ[596]. The Full Court said that in circumstances where Mr Wood requested Mr Holt to prepare a memorandum after the November 2013 Revised Earnings Guidance (PJ[577]) and the Holt Memorandum records its purpose as being to “provide a review of the current process that [WOR] follows with respect to its budgeting and forecasting” (PJ[571]), it could not be the case that the Holt Memorandum did not deal with the FY14 Budget and FY14 Budget process: AJ[86]. The Full Court said that it was not reasonably open to construe the matters recorded in the Holt Memorandum as relating generally to WOR’s budget process and budgets and not also specifically to the FY14 Budget process and FY14 Budget, and that there was an obvious inference open on the face of the Holt Memorandum that Mr Holt was identifying why the FY14 Budget process and the FY14 Budget miscarried, an inference which could more readily be drawn given that Mr Holt was not called by WOR to give evidence: AJ[87]. The particular issues listed by the Full Court at AJ[87] in that connection were: (a) WOR underperforming against budget by more than 10% in five out of the last six years, (b) WOR’s budget process reflecting senior management’s too optimistic expectations of growth compared to the view of Locations, (c) Locations budgeting for Blue Sky revenue in the hope rather than the expectation that work will materialise, (d) insufficient allowance made in the budget process for potential downsides, and (e) tension between senior management and Locations in the budget process as to whether Locations were “stretching” sufficiently in their draft budgets. The Full Court said that it “must be inferred from the circumstances that the Holt memorandum is conveying Mr Holt’s assessment (in part based on senior management’s views) as to why the FY14 budget, amongst others, miscarried”: AJ[89]. The Full Court pointed out that the Holt Memorandum was a relatively contemporaneous document, brought into existence within a month of the November 2013 Revised Earnings Guidance, it was prepared by the CFO who was intimately involved in the FY14 Budget, and was identifying things said to be known about the budget process, not things said to have been uncovered or discovered about the budget process: AJ[89].

11. The Full Court said at AJ[90] that, considered in isolation, the Holt Memorandum suggested that: (a) senior management required the budgets of Locations to reflect year-on-year growth, (b) Locations used Blue Sky revenue to meet the expectations of senior management, (c) WOR’s budgeting process assumed no downsides even though managers knew downsides would emerge, and (d) these dynamics were at play in the preparation of the FY14 Budget process (which saw the Locations’ budgets forecasting NPAT of $252 million to the final NPAT forecast in the FY14 Budget of $352.1 million in the context of flat or deteriorating markets). The Full Court added that it was also relevant that Mr Holt, Mr Daly and Mr Allen were not called to give evidence: AJ[90]. The Full Court said that while the whole of the evidence must be considered, which could not be done in the context of the appeal, there was an obvious question as to whether Mr Holt should be inferred to have known that the FY14 Budget (and earlier budgets) were not P50 Budgets at all: AJ[90]. The Full Court said that none of those matters were apparent from the primary judge’s reasoning, given her Honour’s focus on the notion of a required line-by-line budget analysis and the processes of the Board in considering and adopting the FY14 Budget: AJ[90].

12. The Full Court referred to the position of Mr Allen, who reported directly to Mr Holt, and in particular the contents of Mr Allen’s email of 11 June 2013, which gave rise to the available inference that Mr Allen considered that the adjusted budget by June 2013 was unrealistic: AJ[91]. The Full Court said that the potential inference as to the basis of Mr Allen’s concerns, in the context in which they were expressed, was obvious, namely that the forecast EBIT and NPAT were too high, reinforced by the fact that WOR did not call him to give evidence, but added that whether any such inference should be drawn depended on a consideration of the whole of the evidence: AJ[91]. The Full Court referred also to Mr Daly, who also reported directly to Mr Holt, and was intimately involved in the adjustments to the draft budget after late May 2013, and wrote the email of 7 August 2013 referred to above, and also undertook the review of the FY14 Budget in mid-November 2013 which identified that $97 million of operational EBIT relating to Blue Sky projections should be removed altogether, adding that Mr Daly was not called to give evidence: AJ[92]. The Full Court said that the primary judge’s observation at PJ[69] that Mr Crowley’s case was “mostly hindsight and is not supported by detail that might have contradicted the evidence of WOR’s witnesses in substantial respects” could not be accepted to be correct: AJ[93]. The Full Court referred also to WOR not having called an RGM (which I assume was intended to mean RMD) from the ANZ or USAC Regions to seek to justify the Blue Sky revenue attributed to those Regions in the budget, noting that together with CAN, they were the main profit centres of WOR, generating 67% of aggregate revenue: AJ[94].

1. The Full Court said that, if considered in isolation, a number of those circumstances, in and of themselves, would be sufficient to support the conclusion that the FY14 Budget did not provide WOR with reasonable grounds to make the August 2013 Earnings Guidance Statement, that being WOR’s case and noting that WOR did not rely on any other matter to constitute reasonable grounds: AJ[95]. The Full Court said that the same conclusions would apply to the subsequent maintenance and reconfirmation of the August 2013 Earnings Guidance Statement: AJ[95]. However, the Full Court said that the identified circumstances could not be considered in isolation but had to be considered along with the whole of the evidence, and the appeal was not the appropriate vehicle for that reconsideration to take place: AJ[96]. It followed that the matter needed to be remitted to a single judge for determination: AJ[96].

2. The Full Court then turned to consider various other submissions which were made by WOR in the appeal.

3. As to whether the Full Court was being asked on appeal to interfere with the primary judge’s findings of fact based on the credibility of witnesses, the Full Court said that this was not such a case: AJ[99]. The Full Court said that Mr Crowley’s case challenged the primary judge’s approach to the inferences which should be drawn from the underlying facts, and (it seems with one exception) the principles in Fox v Percy (2003) 214 CLR 118 were not engaged: AJ[99]. The Full Court noted that, with one exception, Mr Crowley accepted and relied upon the primary judge’s factual findings, that exception being the finding of the primary judge at PJ[173(9)] and [179] based on Mr Wood’s evidence, that the 27 May 2013 Draft Budget had the revenue projections “pretty right” and “[t]he revenue picture” hardly changed from the start to the end of the budget process. The Full Court said that that finding (presumably referring to the latter piece of Mr Wood’s evidence) was demonstrated to be wrong because the undisputed evidence was that the aggregated revenue increased by $851 million between the 27 May 2013 Draft Budget and the FY14 Budget ultimately adopted and, at most, only $644 million of that increase was due to changes in foreign exchange assumptions: AJ[100].

4. On a separate matter, the Full Court at AJ[102] rejected WOR’s contention that various matters raised on appeal were not in issue before the primary judge, namely that:

   (1)the FY14 Guidance Representation lacked reasonable grounds because the FY14 Budget was not a P50 Budget;

   (2)the lack of reasonable grounds analysis put forward by Mr Crowley below included the fact that in four of the previous five years WOR had fallen materially short of its budget forecast;

   (3)WOR’s budget process lacked a risk-adjusted review for the purpose of making statements to the market; and

   (4)it was not reasonable for WOR’s management to insist on overhead reductions at the same time as retaining the Blue Sky forecast that had been embedded in the 27 May 2013 Draft Budget.

5. At AJ[105]-[108], the Full Court reiterated the point referred to at [23(1)] and [24] above that the question of whether WOR had reasonable grounds to make the FY14 Guidance Representation was a question which extended beyond the Board, and included senior executives of WOR such as Mr Holt who were involved in the decision-making process. At AJ[112], the Full Court said that Mr Crowley did not have to quantify the errors that were made in order to show that reasonable NPAT for FY14 did not exceed $322 million. Mr Crowley did not have to identify any specific line item error in the budget, and it was not to the point that the Board gave itself $30 million “headroom” between the forecast NPAT in the FY14 Budget of $352 million and the FY14 Guidance Representation referring to NPAT in excess of $322 million: AJ[112]. Further, Mr Crowley did not need to impugn the reasonableness of one or more inputs to an extent which implied that any objectively reasonable NPAT forecast was less than $322 million: AJ[112]. Further, the Full Court said that it would suffice if Mr Crowley established that the overall forecast NPAT of $352 million was unreasonable, because WOR only adduced evidence of the FY14 Budget and the process by which it was prepared, including the assertion that it was a P50 Budget, as evidence of reasonable grounds for the making of the FY14 Guidance Representation: AJ[113]. The Full Court explained that, if the budget process was inherently unsuitable for use as the basis for earnings guidance to the market because it would not produce a P50 Budget and thus, by definition, was not at least equally likely as not to be correct as to the forecast NPAT, or if the forecast NPAT in the FY14 Budget was itself unreasonable, it must follow that WOR did not have reasonable grounds for making the FY14 Guidance Representation: AJ[113].

6. As to the $30 million “headroom” argument, the Full Court said that this was misconceived because the forecast NPAT of $352 million in the FY14 Budget was either reasonable or it was unreasonable, and if it was not reasonable there were not reasonable grounds for the making of the FY14 Guidance Representation: AJ[114]. The Full Court commented that the “headroom” argument appeared to assume that even if the NPAT in the FY14 Budget had been $322 million, WOR would have made the same FY14 Guidance Representation, that there was no suggestion in the evidence to support that inference, and in any event, there were materiality considerations in play because the FY14 Guidance Representation conveyed a representation of achieving an NPAT materially in excess of $322 million: AJ[114].

7. At AJ[117], the Full Court affirmed the principle stated in Sykes v Reserve Bank of Australia (1998) 88 FCR 511 at 513 (Heerey J) to the effect that if there was a representation as to a future matter, the representor must show some facts or circumstances, existing at the time of the representation, which are objectively reasonable, and which support the representation made. The representor here was WOR, not the Board: AJ[117].

8. At AJ[119], the Full Court dealt with the knowledge properly attributable to WOR, which was the relevant question, not merely knowledge of the Board of WOR. The first issue was the knowledge of the relevant employee, such as Mr Holt, which included what he actually knew and what he was taken to have known in the circumstances as a matter of inference. The attribution of the knowledge of employees to WOR was then to be resolved on orthodox principles of attribution of knowledge to a corporation. The next step in the inquiry was directed to the existence or not of reasonable grounds for WOR making the FY14 Guidance Representation, which included identifying what WOR in fact relied on to make the representation and deciding if those facts in fact relied on were objectively reasonable: AJ[119]. The Full Court said that the question of the objective reasonableness of the FY14 Budget and budget process as supporting the representation made must be evaluated by reference to all of the knowledge properly attributable to WOR by reason of the knowledge of its employees as WOR’s agents: AJ[120]. The Full Court said that that does not involve impermissibly attributing to WOR what it “ought to have known”, but involves attributing to WOR what, in law, it actually knew and, by operation of orthodox principles attributing knowledge of an employee to a corporation, what it is to be taken as having known: AJ[120].

9. At AJ[125], the Full Court said that the fact that Mr Wood (and, it must be inferred, other key employees involved in the budget setting process) knew that WOR’s markets were not growing or were deteriorating when the FY14 Budget was prepared was important. The Full Court said that WOR’s markets were not growing or were deteriorating compared to FY13, but the FY14 Budget and August 2013 Earnings Guidance Statement involved a material improvement in NPAT in FY14 compared to FY13, and that improvement was not achieved solely through cutting costs but included increased revenue: AJ[125]. At AJ[126], the Full Court said that if the primary judge was accepting Mr Wood’s evidence that revenue was “flat” in the budget in early June at PJ[195], then it was clear that this concerned the 27 May 2013 Draft Budget compiled from budgets provided by each Location, not the FY14 Budget as adopted. The Full Court said that the evidence showed that ExCo decided to challenge the 27 May 2013 Draft Budget on both revenue and costs (PJ[219]), despite it being common knowledge that WOR’s markets were flat or falling (see PJ[220]). The Full Court said that Mr Bradie, to Mr Wood’s knowledge, then worked hard to push the Locations for both increased BEBIT and to make additional cuts to overheads, and it was in that context of Mr Bradie pushing the Locations hard for increased EBIT and decreased costs that Mr Allen sent his email of 11 June 2013: AJ[126]. The Full Court said that by the time the FY14 Budget was adopted, revenues were estimated to increase to give an additional operational EBIT of 13.8% greater in FY14 compared to FY13; in other words, the efforts of Mr Bradie in particular, who was said (wrongly) to have reported directly to Mr Holt (in fact he reported to Mr Wood), ensured that in flat or falling markets for WOR’s services, the FY14 Budget reflected a 13.8% increase in earnings over the buoyant FY13 market, and Mr Wood and Mr Holt must have known exactly what the process involving Mr Bradie’s hard work with the Locations involved: AJ[127].

10. At AJ[129], the Full Court said that Mr Crowley’s point about the Blue Sky Revenues and the 27 May 2013 Draft Budget prepared by the Locations being already “aggressive” seemed obvious, and said that the basis for the primary judge’s statement at PJ[133] that the submission was not made out on the available evidence was not apparent to the Full Court. The Full Court said that the available undisputed evidence included that: (a) FY13 was a buoyant market, (b) FY14 was a flat or falling market, (c) Blue Sky revenue is a function of market buoyancy, and (d) the Blue Sky gross margin percentage allowed in FY14 was the same as in FY13, namely 19%: AJ[129]. Further, the Full Court said there was sufficient evidence for the primary judge to make findings about the objective reasonableness of the Blue Sky forecast in the FY14 Budget without descending into a region-by-region analysis: AJ[130]. The fact that in November 2013 Mr Daly reviewed the FY14 Budget and stripped $110 million or $97 million of Blue Sky revenue from it was also relevant evidence: AJ[130]. The Full Court said that WOR’s reliance on what it described as Mr Wood’s uncontroverted evidence that he was “comfortable that Blue Sky was budgeted at 19% as this was within the ordinary bounds of Blue Sky that had been achieved in the past” was misplaced, as it had to be weighed along with the other evidence about the relationship between Blue Sky and market buoyancy and the flat or falling FY14 markets: AJ[131].

11. At AJ[133], the Full Court rejected WOR’s submissions that “there was nothing in the Holt Memorandum that could impugn the process by which guidance was arrived at, and it did not allow any inference that guidance was unreasonable in a given year” (emphasis in original). The Full Court said that the August 2013 Earnings Guidance Statement was founded on the FY14 Budget, and if the FY14 Budget did not provide WOR with reasonable grounds for the August 2013 Earnings Guidance Statement then the FY14 Guidance Representation conveyed by the August 2013 Earnings Guidance Statement was taken to be misleading: AJ[133]. Accordingly, the Holt Memorandum and the inferences properly to be drawn from it could establish that the FY14 Guidance Representation was misleading: AJ[133]. Whether an inference should be drawn that the fact that Mr Holt was instrumental in the process of adopting the FY14 Budget supported the reasonableness of the material placed before the Board as a foundation for approving the FY14 Budget and formulating the August 2013 Earnings Guidance Statement was a matter which depended upon the whole of the relevant evidence, including the circumstance that WOR did not call Mr Holt: AJ[135].

12. At AJ[136], the Full Court rejected WOR’s various submissions that after August 2013, WOR may have been below budget but above guidance. The issue as at August 2013 was the existence of reasonable grounds, and the issue after August 2013 was the continued existence of reasonable grounds. The fact that WOR was tracking materially below the FY14 Budget later in 2013 was highly relevant to the continued existence of reasonable grounds or otherwise: AJ[136].

13. I turn then to the particular questions in the Joint List pertaining to the misleading or deceptive conduct case, namely Questions 1-4.

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

14. The parties are agreed that this question should be answered as follows, consistently with the primary judge’s conclusion at PJ[687]: Yes, to the extent only that it conveyed the representation that WOR expected to achieve NPAT in excess of $322 million in FY14. I adopt that agreed position as correct.

    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?

15. The applicant’s position is that, while the primary judge answered this question “No” at PJ[688], that finding was disturbed on appeal and the question arises for determination on the remitter. The respondent’s position is that the finding at PJ[688] was disturbed on appeal because the primary judge failed to take into account (in combination with undisturbed findings of fact as recorded in the PJ), the following matters:

    (a)whether, at the time the FY14 Guidance Representation was made, it was known to any person whose knowledge was properly attributable to WOR according to orthodox principles, that the FY14 Guidance Statement lacked reasonable grounds, referring to AJ[106], [116], and [118]; and

    (b)it is not necessary for the purposes of determining liability (as distinct from quantification of loss and damage) for the applicant to identify that particular integers or portions of the FY14 Budget were overstated or understated so as to be unreasonable or unjustifiable, referring to AJ[112] and [136]-[138].

    The parties appropriately have treated para 2.2 of the question as intended to include whether, in making the FY2014 Guidance Representation, WOR had “reasonable grounds for making the representation” within the meaning of s 4(1) of the ACL and s 12BB(1) of the ASIC Act.

16. There is an initial issue between the parties, reflected in WOR’s proposed answer to Question 2 set out in the preceding paragraph, as to whether the scope of the remitter is confined to the findings by the primary judge which can be shown to have been infected by the four kinds of error set out in AJ[75], or more precisely the first two of those four matters, being an erroneous focus on the conduct of the Board rather than of WOR, and a search for a level of detail in the evidence to enable the primary judge to decide what would have been a reasonable forecast of FY14 NPAT. While it is true to say that the four matters referred to at AJ[75] were the fundamental sources of error as found by the Full Court, the Full Court did not limit the remitter specifically to issues which can be demonstrated to have been infected by one or more of those errors. On the contrary, the matter was remitted in general and unlimited terms. The Full Court was emphatic that the remitter must consider the whole of the evidence (see AJ[90], [96] and [116]), and that on the remitter the single judge would have to undertake an “overall evaluative exercise” (at AJ[101]). I approach that task on the basis stated by the Full Court in Harvard Nominees Pty Ltd v Nicoletti, which I have summarised above, in particular that where the appellate court has disturbed the findings of the primary court, it is open to the primary court to determine those issues afresh provided that it does so in accordance with the judgment of the appellate court. On that approach, it is neither necessary to identify specifically those findings by the primary judge which were infected by one or more of the four fundamental errors identified at AJ[75], nor is such a course desirable in that it would divert attention from a consideration of the whole of the evidence in undertaking the overall evaluative exercise.

17. A further preliminary question arises concerning what WOR submits is a lack of conformity between Mr Crowley’s submissions on the remitter and the case as pleaded in the 4FASOC. Mr Crowley’s submissions in relation to the misleading and deceptive conduct case as at 14 August 2013 are structured around the matters referred to by the Full Court in AJ[67], [69] and [102]. WOR submits that those matters involve impermissible departures from the 4FASOC in relation to the allegations and particulars as to the lack of reasonable grounds for the FY14 Guidance Representation, in particular submitting that there is no pleaded allegation that the following matters deprived WOR of reasonable grounds:

    (a)WOR’s historical performance against budget or its revisions to earnings guidance in FY13; and

    (b)the amount of Blue Sky revenue in the FY14 Budget, except in respect of the ANZ Region and the SWO Location (in the USAC Region).

    WOR does not appear to maintain the submission that it is not open to Mr Crowley to contend that there was no reasonable basis for the FY14 Budget because it was not a P50 Budget, a matter which was rejected by the Full Court at AJ[59]-[73]. However, at AJ[67], the Full Court expressly held that WOR could not complain in the appeal that it was not part of Mr Crowley’s case below that the FY14 Budget was unreasonable because of six identified matters, including WOR’s history of material budget underperformance, and WOR having twice to downgrade its earnings forecast in 2013, as well as the fact that WOR maintained the 19% Blue Sky revenue, the same as in 2013 when markets were buoyant, given that Blue Sky performance was a function of market buoyancy. Further, the Full Court specifically rejected WOR’s contentions that Mr Crowley’s case did not include WOR’s historical performance against budget (at AJ[102] and [103]) and that Mr Crowley’s pleaded case in relation to Blue Sky revenue was confined to the ANZ Region and SWO Location (at AJ[130]). In light of those findings, I am bound on the remitter to accept that those issues arose as part of Mr Crowley’s case. Accordingly, I reject WOR’s submissions on this preliminary pleading point.

18. Both parties have helpfully structured their written submissions concerning whether there was a reasonable basis for the FY14 Guidance Representation as at 14 August 2013 under seven topics. Before dealing with those seven topics individually, however, it is appropriate to deal with WOR’s general submissions concerning the Holt Memorandum, and the Holt Memo Interview Notes. WOR submits that the Holt Memorandum was created after the FY14 Budget process and after a significant revision to guidance was announced to the market on 20 November 2013, and that it did not specifically concern the FY14 Budget but was a review of WOR’s budget and forecasting processes generally. WOR submitted that, ultimately, the outcome of the Holt Memorandum and the review undertaken by WOR in relation to its budget processes do not reveal any defect in WOR’s budget processes and, as at the time of the initial trial in September 2019, the budget process remained “largely” unaltered (referring to Mr Wood’s re-examination at T610.38-611.10). WOR submits that the Holt Memorandum was written from a hindsight perspective, created after WOR revised its guidance, and well-established authority which the Full Court accepted at AJ[117]-[120] demonstrates that the existence of reasonable grounds is to be judged at the date of the representation. WOR submits that the examination of later events is relevant only insofar as it sheds light on the position at the time of the representation, and it is vital to guard against hindsight illusion, citing City of Botany Bay Council v Jazabas Pty Ltd [2001] NSWCA 94 at [83] (Mason P). Accordingly, WOR submits that it would be an error to find that the observations recorded by Mr Holt in the Holt Memorandum were matters that falsified the FY14 Budget and were known to him at the time he put the FY14 Budget and the August 2013 Earnings Guidance Statement before the Board for approval.

1. The contemporaneous documents in mid-November 2013 are replete with references to information concerning the actual results available at that time as being the basis for the re-forecast announced on 20 November 2013. Mr Holt’s email of 15 November 2013 is expressly based on the results shown in the then draft of the 3+9 NPAT tracker, and contrasts those actual results against the information available in the 2+10 forecast (CB10,404). Mr Daly’s email of 18 November 2013 similarly takes the then current 3+9 forecast as the starting point for re-assessing the forecast for FY14 (CB10,613). The same starting point was adopted in the discussion on the topic conducted by the ExCo on 19 November 2013 (CB10,615). The minutes of that meeting expressly refer to the “company’s performance year-to-date” and “since the AGM [on 9 October 2013] there had been further softening in our markets in particular in Canada and Latin America”. The minutes record the ExCo discussing “the things that had changed since the AGM when we had confirmed guidance for the full year”, noting that since then the ExCo had received the September and October results which were both below budget and there had been a general weakening in WOR’s markets (CB10,615). The minutes also record the level of Blue Sky and express concern in that regard having regard to “known issues in each location and current market conditions” (CB10,615). The minutes refer to WOR being in a “tough market which appears to be deteriorating” (CB10,615). The Board minutes of 20 November 2013 record Mr Wood noting that “the company had experienced a very slow start to the year” and referring also to “the current soft market” (CB10,764). Reference was made also to “the slowdown in the market” (CB10,765).

2. The announcement on 20 November 2013 itself expressly refers to the circumstances as they appeared in mid-November 2013. The revised earnings guidance is stated as being made “After considering our current trading results and having experienced a delay in upturn in our markets”, and refers expressly to “current indications” (CB10,780). The explanation for the revised outlook given in the seven bullet points in the announcement (extracted at [199] above) is tied explicitly to the then circumstances, including “The decline in the Australian business has been greater than expected”, “The Canadian business continues to be impacted by major project deferrals and additional costs”, “The Latin American business has been impacted by the soft global minerals and metals market” and “The business in the Middle East has also experienced a slow start to the year” (CB10,780). The announcement attributes to Mr Wood a reference to the impacts which “weaker than expected market conditions are having on our performance” (CB10,781).

3. Mr Crowley’s aide-mémoire (MFI 1) indicates that the subject-matter of the various bullet points in the 20 November 2013 announcement corresponded to matters which were known to pose problems for WOR before 14 August 2013. However, as I have noted at [231] above, that analysis does not identify in quantitative terms the monetary impact of those problems on the forecast NPAT for FY14 as it was (or should have been) known before 14 August 2013, compared to the monetary impact which was discerned by senior management and the Board in mid-November 2013. Without such quantification, it is not possible to say that the revised earnings guidance of a range of $260-$300 million for FY14 NPAT should have been disclosed to the market as at 14 August 2013. The evidence in the contemporaneous documents strongly indicates that there had been a worsening of the company’s position during that three-month period, such that the revised guidance of $260-$300 million reflected the circumstances as they existed in mid-November 2013, but not the circumstances as had prevailed three months earlier. As Mr Holzwarth expressed the point in a way that was not the subject of challenge (at para 230 of his report):

   the 20 November 2013 Disclosure describes aspects of actual results for the first four months of FY2014. These results would not have been available to report about at the start of the Relevant Period and thus do not describe risks related to earnings guidance but rather actual results during the fiscal year. While the fiscal year was not complete, this disclosure describes the realisation of risks rather than the disclosure of risks about future events.

4. Mr Crowley submits that, even if the counterfactual guidance of $260-$300 million was not appropriate as at 14 August 2013, it was appropriate at subsequent points in the Relevant Period, such as on 9, 10 and 15 October 2013 when WOR repeated its earnings guidance of 14 August 2013. While it is true to say that the closer one gets to 20 November 2013, the less is the degree of hindsight which is called for, there is nevertheless a significant hindsight error in that alternative submission. As I have indicated at [238] above, the minutes of the ExCo meeting of 19 November 2013 refer expressly to adverse changes which had occurred since the AGM on 9 October 2013. Moreover, the emails and minutes of meetings from 15 to 20 November are replete with references to the October results which had been adopted in the then draft of the 3+9 forecast, as the first sentence of Mr Holt’s email on that date (extracted at [233] above) indicates, and those October results had only just come to hand as at 15 November 2013. 15 November 2013 was a Friday, and there was evidently a great deal of activity which occurred, particularly on 18 and 19 November 2013, before the Board meeting at 8 am on Wednesday 20 November 2013. It is those actual results which led to the revised guidance of $260-$300 million, and there is nothing in the contemporaneous documents to indicate that material available to WOR’s senior management before then would have reasonably led to a downgrade of the same magnitude. For example, the Board pack for the 2+10 forecast on 4 October 2013 showed NPAT for the first half of FY14 as $120.2 million (PJ[476(1)]), which was substantially higher than the first half forecast announced on 20 November 2013 of a range of $90-$110 million (CB10,780). Accordingly, I reject the submission that, acting reasonably, WOR would have announced revised earnings guidance of $260-$300 million for FY14 NPAT at any time before it actually did so on 20 November 2013.

5. The second fundamental flaw in Mr Crowley’s primary counterfactual relates to the heavy emphasis in the documents from 15 to 20 November 2013 on the stripping out of approximately $100-$120 million of Blue Sky from the FY14 Budget. When Mr Holt addressed the Board on 20 November 2013, he picked the mid-point of that range, being $110 million. That was evidently the main integer in producing the revised earnings guidance of $260-$300 million.

6. I have referred at [99] above, in that part of my reasons relating to Question 2 which is concerned with WOR maintaining the 19% Blue Sky revenue, to the concession made by Mr Crowley, both to the initial primary judge and at the hearing before me, as to the reasonableness of the 27 May 2013 Draft Budget, comprising the budgetary submissions made by the Locations. As I concluded at [100] above, Mr Crowley’s concession at the hearing before me included a concession as to the reasonableness of what the Locations had submitted for that draft budget in relation to Blue Sky. That followed as a matter of logic from the concession as to the reasonableness of the overall NPAT figure of $252 million, in that Mr Crowley made no attempt to demonstrate how the forecast FY14 NPAT in the 27 May 2013 Draft Budget of $252 million could have been arrived at without including the 19% Blue Sky revenue component. It also followed from the express concession made at the hearing before me as to the reasonableness of what was submitted by the Locations for that draft budget (see T93.13-19), which plainly included their submissions concerning Blue Sky. It would be inconsistent with those concessions for me to find that, as at 14 August 2013, $100-$120 million should have been stripped out of the Blue Sky forecasts made in the 27 May 2013 Draft Budget. The analysis undertaken by Mr Crowley, to which I referred at [98] and [101] above, demonstrated that $7.831 million appears to have been added to Blue Sky after 27 May 2013 and incorporated in the FY14 Budget of 14 August 2013, and I have found at [101] above that $6.294 million of that amount of Blue Sky lacked reasonable grounds. However, that amount falls a very long way short of the reduction to Blue Sky made in mid-November 2013, and I do not see any basis for hypothesising that the amount stripped out of the FY14 forecast in mid-November 2013 relating to Blue Sky should have been stripped out of the FY14 Budget in August 2013.

7. The third of the fundamental flaws in Mr Crowley’s primary counterfactual also relates to the concession as to the reasonableness of counterfactual guidance of $284 million as at 14 August 2013, being the sum of $252 million in the 27 May 2013 Draft Budget and the further $32 million in foreign exchange benefits. Having accepted that forecast NPAT of $284 million would have been reasonably based as at 14 August 2013, the primary counterfactual disclosure of $260-$300 million would not have been consistent with that concession. While there is not necessarily an inconsistency between saying that $284 million was reasonably based and also that a range which adopts $284 million as the mid-point would also have been reasonably based, the mid-point of the range of $260-$300 million is $280 million, not $284 million. Moreover, there is no basis on which I could infer that an appropriate range as at 14 August 2013 and subsequently during the Relevant Period would have had a width of $40 million. Whether a range which has $284 million as its mid-point, or which may have been narrower than a range of $40 million, would still have satisfied the concept of economic equivalence has not been explored at all in the evidence. For present purposes, it is sufficient to say that any such range would have differed from that which is advanced by Mr Crowley as his primary counterfactual.

8. Fourth, in relation to the primary counterfactual, Mr Crowley’s reliance on WOR’s actual performance for FY14 (being NPAT of $263.4 million as announced on 27 August 2014: CB11,570 and 11,574) involves hindsight error of an even more egregious kind than reliance on the revised earnings guidance which was formulated and announced about 9 months earlier on 20 November 2013.

9. Turning then to the alternative counterfactuals, the alternative counterfactual of $289 million in NPAT for FY14 is said by Mr Crowley to correspond to guidance which was materially less than the FY13 result of $322 million, adopting a 10% materiality threshold (which, on my calculation, yields $289.8 million). Mr Crowley relies in that regard on the reasoning of the Full Court in Masters v Lombe at [62] in which Middleton, Beach and Colvin JJ said that, generally speaking, information concerning a company’s future cashflows, earnings and NPAT or relevant forecasts on such matters may be said to be material to the extent that it involves a change over prior forecasts, where that change is 10% or more, although in some contexts it may be lower, as in Myer (where it was held to be 5%: see Myer at [1283]). The counterfactual of $289 million corresponds closely to Mr Holt’s recommendation made at the ExCo meeting on 19 November 2013 for a forecast NPAT for FY14 of $290 million (CB10,614 at 10,615).

10. I do not regard it as appropriate to reason from the proposition that appropriate reasonably-based earnings guidance on 14 August 2013 and thereafter during the Relevant Period must have been materially less than $322 million, to the conclusion that the Court should adopt a figure which is 10% less than $322 million. There must be an evidentiary basis for the counterfactual disclosure, rather than an a priori presumption based on a 10% materiality threshold. In any event, the earnings guidance given on 14 August 2013 was not that FY14 NPAT would be $322 million, but would be a figure which exceeded $322 million. If that is construed as conveying that FY14 NPAT would be materially more than $322 million, and if “materially” meant 10%, then an amount which is 10% less than that figure (being $354 million) would take one back to $319 million, not $289 million. Further, Mr Crowley’s reliance on the figure of $290 million for FY14 NPAT recommended by Mr Holt at the ExCo meeting on 19 November 2013 suffers from the same hindsight error which is inherent in the primary counterfactual, which similarly relies on the documents created in the period 15-20 November 2013 as the basis for postulating the guidance which ought to have been given on 14 August 2013 and at other dates throughout the Relevant Period. Accordingly, I reject that alternative counterfactual.

11. As to the alternative counterfactual of reasonable guidance having been approximately $284 million in NPAT, Mr Crowley submits that that figure:

    (a)accords with the detailed bottom-up budget prepared by the Locations before it was talked up and the additional “$100 million” in NPAT was added to the 27 May 2013 Draft Budget, which was ultimately stripped from WOR’s budget when WOR undertook the November 2013 review; $284 million is the result of adding the foreign exchange benefit of $32 million to the 27 May 2013 Draft Budget NPAT figure of $252 million;

    (b)is roughly the mid-point of the range that WOR eventually adopted when it undertook the review of Blue Sky forecasts and applied a risk-based analysis in November 2013;

    (c)was the likely estimate of FY14 earnings by late September or October 2013 if WOR’s planned HOH phasing of earnings held true, on the lower results to date against the FY14 Budget; and

    (d)is more generous than WOR’s actual performance for FY14, being $263.4 million NPAT.

12. The counterfactual of $284 million is consistent with Mr Crowley’s concessions at the initial hearing and at the hearing before me to the effect that such guidance would have been reasonably based as at 14 August 2013 and during the Relevant Period. Those concessions are to the effect that the 27 May 2013 Draft Budget, comprising the budgetary submissions of the Locations, was reasonably based at a figure for FY14 NPAT of $252 million, plus the uncontroversial foreign exchange adjustment of $32 million (see [99] and [100] above). However, the figure of $284 million presupposes that the Management Adjustments (other than the $32 million for foreign exchange movements) which were made in or about June 2013 were not reasonably based. Accordingly, it is necessary to analyse those Management Adjustments in some detail in order to ascertain whether there are amounts in those Management Adjustments which were reasonably based, and accordingly should be added to the figure of $284 million.

13. The largest of the Management Adjustments made in June 2013 was the reduction of $33 million in overheads. The FY14 Budget as presented to the Board shows that the CEOC overhead reduction commitment of $33 million was reflected in operational EBIT (in the amount of $22.6 million) and global overheads (in the amount of $10.4 million): CB6,719. The primary judge made detailed findings concerning the reduction in overheads at PJ[248]-[257], [279]-[281], [297] and [336]-[340]. Her Honour stated at PJ[336] that Mr Crowley did not submit that there was no reasonable basis for the inclusion of the $33 million in the FY14 Budget, or any of the integers that made up that amount, and added at PJ[340] that if that was suggested, then her Honour was not persuaded that there was no reasonable basis for the inclusion of the $33 million CEOC overhead reduction commitment in the FY14 Budget or that WOR lacked a reasonable basis for adding $22.6 million in operational EBIT on account of the CEOC overhead reduction commitment. At the hearing before me, Mr Crowley accepted (correctly, in my view) that I am bound by the primary judge’s finding as to the reasonableness of the overhead reduction figure of $33 million: T109.39-44, 110.31-33, T128.12-17, T415.31-416.2, and T451.34-35.

14. Mr Crowley submits, however, that if one adds integers such as the $33 million in overhead reductions to the $284 million NPAT figure, then “the build-up might lead you to a non-P50” budget, but acknowledged that that was not a matter that he was in a position to prove because of problems in proving what the outcome on a P50 basis would be: T452.36-42. Quite apart from that acknowledgement, which is itself fatal to the argument, I do not accept that the overhead reduction of $33 million would not have satisfied the parameters of a P50 Budget. There is nothing in the detailed findings of the primary judge which would tend to indicate that WOR was not as likely to achieve that reduction as it was to fall short of it. Indeed, the Holt Memo Interview Notes are replete with references to the savings which could and should have been made by reducing overheads, for example:

    Not enough discipline on O/Hs, you can take your eyes off this when the time [sic] are good and you are riding the wave (CB11,097).

    Blue Sky, allowed meeting of expectations which covered (masked) certain OHs with insufficient discipline on costs and O/Hs when we should have been focusing in these, insufficient advance warning on certain … costs vs speculative revenue (CB11,097).

    Increased O/H resulted in additional costs at locations and allocated to the locations resulting in uncompetitive and fat costs and uncompetitive tenders (CB11,097).

    Failing to curb costs has made us uncompetitive (CB11,098).

    We have not handled the OH at the location level (CB11,098).

    Budget tension and discussion revolves around the bottom line EBIT based on expectations rather than quality of earnings (revenue) nor influence on Overheads which we should have intervened, as long as EBIT was delivered we bought our own story (CB11,098).

    You have to have some BlueSky but it should not be used to defend sticky Overheads or bring a further lag on necessary cost cutting (CB11,099).

    With hindsight we would have attacked the overheads at the locations earlier (CB11,099).

    Now we are addressing the OH issue we just engaged this late, failure since we have to go there anyway (CB11,102).

    Post GFC the revenue is falling but Overheads not cut hard enough (CB11,104).

    We are not particularly good at making the hard calls with regard to overhead reduction (CB11,105).

    The Holt Memorandum itself refers to WOR having “allowed additional overhead to creep into the organisation” (CB11,120).

15. Accordingly, I am bound by the primary judge’s finding that the $33 million overhead reduction made as part of the Management Adjustments in June 2013 was not shown to lack reasonable grounds, and I also find that a reduction in overheads of that amount satisfied the parameters for a P50 budget. The figure of $33 million was a pre-tax figure, and the budgeted FY14 effective tax rate was 29% (CB6,719). Accordingly, the after-tax benefit of reducing overheads by $33 million in the FY14 Budget was $23.4 million. I regard it as appropriate to add that figure to the counterfactual NPAT of $284 million.

16. As I have indicated at [76] above, in relation to the Management Adjustments which increased earnings from the Locations by $31.046 million and $14.093 million respectively, the first of those figures included $6.6 million relating to ASCH and MENAI, and the second included $6.7 million relating to those two Regions. The primary judge referred to Mr Ashton and Mr Lucey each giving evidence that they considered their respective regional budgets for FY14 to be reasonable, setting out the steps that led to the adjustments, and it was not suggested to either of them in cross-examination that there was no reasonable basis for the adjustments incorporated in their respective draft FY14 budgets in relation to their Regions: PJ[332] and [334]. The primary judge was satisfied as to the truthfulness and credibility of the evidence given by Mr Ashton and Mr Lucey: PJ[79]. Mr Crowley accepts that I am bound by the primary judge’s reasoning to conclude that the amounts of $6.6 million and $6.7 million made by way of those adjustments were reasonably based: T127.13-35, T451.34-35. While Mr Crowley does not accept that those adjustments are necessarily consistent with the parameters of a P50 Budget, Mr Ashton expressly stated that he regarded the final MENAI FY14 Budget as being a P50 Budget (para 149 of his affidavit of 23 October 2018), and Mr Lucey’s evidence was generally consistent with the parameters of a P50 Budget for the ASCH Region (see paras 140-160 of his affidavit of 13 December 2018). Neither was challenged in cross-examination on that issue. I am satisfied that there was a reasonable basis to conclude that it was at least as likely that WOR would achieve those adjusted earnings figures in MENAI and ASCH as it was that WOR would fail to do so. Accordingly, I regard it as appropriate to include those adjustments in the counterfactual earnings guidance. The total of $13.3 million is a pre-tax figure, and taking 71% of that figure as the after-tax benefit, those adjustments yield an additional $9.4 million to the FY14 NPAT forecast. As I have indicated in my reasons in relation to Question 2 at [76] above, I do not regard the balance of the Management Adjustments of $31.046 million and $14.093 million respectively as reasonably based.

1. As to the Management Adjustments relating to “acquisitions stretch” of $12 million, that adjustment was in fact included in the 27 May 2013 Draft Budget “pending review” as a step towards the total forecast NPAT in that draft of $252 million (CB4,286 , and 4,287). Mr Crowley accepts that the 27 May 2013 Draft Budget was reasonably based. Accordingly, whether the Management Adjustment of $12 million by way of acquisitions stretch was reasonably based is a non-issue: see T125.41-42, 189.7-28.

2. The upshot of that analysis is that there should be added to the counterfactual NPAT of $284 million the amounts of $23.4 million and $9.4 million, producing a rounded figure for counterfactual NPAT for FY14 of $317 million. In my view, Mr Crowley has not established that counterfactual earnings guidance in the amount of $317 million NPAT would not have been reasonably based, or would not have satisfied the parameters of a P50 Budget.

   Has Mr Crowley established causation and quantification of loss?

3. The question then arises whether counterfactual earnings guidance for FY14 of NPAT of $317 million as at 14 August 2013 and subsequently during the Relevant Period would have had an adverse effect on the market price of WOR shares. NPAT of $317 million is only slightly less than the actual earnings of $322 million in FY13. Neither Mr Torchio nor Mr Holzwarth has considered a counterfactual of $317 million, and the expert evidence which was adduced does not consider any counterfactual above the range $260-$300 million. The average of analysts’ forecasts for FY14 NPAT appears to have varied within the range of about $352 million to about $368 million throughout the Relevant Period (see [205] above), which may provide a basis for saying that an announcement by WOR in that period of expected NPAT of $317 million might have caused a decline in the share price. However, the material available to me does not enable me to conclude that an adverse effect on the market price of WOR shares would actually have occurred on the balance of probabilities. That is a matter which would require expert evidence, whether given by an economist or a quantitative analyst or some other expert. Counterfactual earnings guidance of $317 million would have been within 15% of the average of analysts’ forecasts during the Relevant Period, which ranged from about $352 million to $368 million. There is no expert evidence as to whether the market price for WOR shares was sufficiently sensitive to earnings guidance which departed from the average of analysts’ forecasts for that to have caused a fall in the market price of WOR shares. It is conceivable that it might have done so, but the evidence does not satisfy me that, on the balance of probabilities, it would have done so. In the absence of expert evidence, I conclude that the prospect of a counterfactual disclosure of NPAT of $317 million adversely affecting the share price of WOR shares was no more than a real possibility. Mr Crowley’s case as to causation of loss is based on the proposition that the counterfactual disclosure would have caused an adverse effect on the market price of WOR shares, treating market price as a proxy for the true value of WOR shares. Accordingly, I find that Mr Crowley’s case fails on the basis that he has not discharged his onus of establishing on the balance of probabilities that the various contraventions have caused loss to himself and Group Members. Even if I had concluded that a counterfactual disclosure of $317 million would, on the balance of probabilities, have caused the market price of WOR shares to be adversely affected, there would remain the problem of insufficient evidence to quantify the loss, which I consider below in relation to a counterfactual NPAT of $284 million. The problem is even greater at a counterfactual NPAT of $317 million, given that that figure lies well above the range of $260-$300 million which was announced in the corrective disclosure of 20 November 2013.

4. If, contrary to my reasoning at [249]-[255] above, I had accepted Mr Crowley’s counterfactual disclosure of $284 million for FY14 NPAT as appropriate, then I would have inferred, even in the absence of expert evidence, that such a disclosure would have been more likely than not to have had an adverse effect on the WOR share price. That inference is based on the substantial fall in the WOR share price which occurred when WOR announced revised NPAT guidance for FY14 on 20 November 2013 of a range of $260-$300 million, given that $284 million falls comfortably within that revised range. Mr Crowley would thus have surmounted the obstacle of establishing causation of loss. I would also have been prepared to find that, although market price and true value are not necessarily the same, market price in an informationally efficient market would have provided a good enough proxy for true value for the purpose of quantifying loss in the present case: see Myer at [753].

5. However, that would then have led to the question whether there was sufficient evidence to make findings quantifying the loss thereby caused. I accept that, in general, where there is some evidence of loss or damage, the Court must do the best it can in assessing damages: HTW Valuers at [47]. Nevertheless, the onus remains on Mr Crowley to establish the existence and amount of loss suffered by reason of WOR’s wrongful conduct. In Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd [2003] HCA 10; (2003) 196 ALR 257 at [38], Hayne J (with whom Gleeson CJ and McHugh and Kirby JJ agreed) said the following:

   It may be that, in at least some cases, it is necessary or desirable to distinguish between a case where a plaintiff cannot adduce precise evidence of what has been lost and a case where, although apparently able to do so, the plaintiff has not adduced such evidence. In the former kind of case it may be that estimation, if not guesswork, may be necessary in assessing the damages to be allowed. References to mere difficulty in estimating damages not relieving a court from the responsibility of estimating them as best it can may find their most apt application in cases of the former rather than the latter kind. This case did not invite attention to such questions. Placer sought to calculate its damages precisely.

   Similarly, Devlin J said that “where precise evidence is obtainable, the court naturally expects to have it. Where it is not, the court must do the best it can”: Biggin & Co Ltd v Permanite Ltd [1951] 1KB 422 at 438, cited with approval and emphasis in Enzed Holdings Ltd v Wynthea Pty Ltd [1984] FCA 373; (1984) 57 ALR 167 at 183 (Sheppard, Morling and Wilcox JJ), which in turn was cited with approval in Aristocrat Technologies Australia Pty Ltd v DAP Services (Kempsey) Pty Ltd [2007] FCA 40; (2007) 157 FCR 564 at [35] (Black CJ, Jacobson and Rares JJ).

6. In the present case, Mr Crowley has sought to calculate damages with great precision. Mr Crowley’s schedule showing counterfactual FY14 NPAT guidance ranges and proportional calculations of share price inflation (MFI 2) calculates percentage inflation per WOR share to two decimal places, and dollar inflation per WOR share to the nearest cent. However, that schedule, which reflects the reasoning behind Mr Torchio’s Figure 3 in para 45 of his second report, which I have set out at [219] above, operates only in circumstances where it has been demonstrated that the counterfactual disclosure has economic equivalence with the actual corrective disclosure made on 20 November 2013. As I have indicated at [219] above, that was common ground between Senior Counsel for the parties at the hearing before me: Mr Craig KC at T357.19-358.21; Mr Sulan SC at T442.16-37, 444.9-15. It is also common ground between the parties that economic equivalence and economic correspondence require that the counterfactual and the actual corrective disclosure are sufficiently qualitatively and quantitatively similar so as to have driven in the minds and actions of market participants the same (or substantially the same) conclusion as to the foreseeable cash flow consequences: Mr Craig KC at T326.33-327.20; Mr Sulan SC at T450.9-451.2. There is no expert evidence before me which would enable me to draw the necessary conclusion as to the existence of economic equivalence, so as to enable me to rely on the figures for share price inflation set out in MFI 2 at counterfactual guidance of $284 million (being percentage inflation of -21.16% and dollar inflation of $4.57). There is no basis on which I could infer economic equivalence in the absence of any expert evidence, given the significant difference in the figures pertaining to the two disclosures (being $284 million for the counterfactual disclosure and $260-$300 million for the actual corrective disclosure). (As I indicated at [256] above, the problem is even greater at a counterfactual NPAT of $317 million, given that that figure lies well above the range of $260-$300 million announced on 20 November 2013.) Further, I am unable to conclude on the balance of probabilities that the explanation and reasons which would have been given for a counterfactual disclosure of $284 million (or $317 million) would have been the same or substantially the same as those set out in the 20 November 2013 announcement, particularly having regard to the fact that the 20 November 2013 announcement was based on detailed matters as to actual results to October which had formed part of WOR’s corporate knowledge only since about 15 November 2013. Accordingly, even if I had accepted Mr Crowley’s submission that counterfactual guidance of $284 million would have been appropriate, I would have concluded that Mr Crowley had failed to discharge his onus of proving the quantification of loss and damage.

7. I do not accept that this is a case where Mr Crowley was unable to adduce precise evidence of what had been lost, in the sense referred to by Hayne J in Placer. There may well have been techniques available for using event study analysis despite the lack of evidence of economic equivalence between a counterfactual disclosure of $284 million (or $317 million) and the actual corrective disclosure of $260-$300 million. For example, Mr Torchio referred to methodologies and metrics to deal with “parsing out” situations where the counterfactual disclosure is not as adverse as the actual corrective disclosure (T855.12-17, 872.30-38), but no such exercise has been undertaken by Mr Torchio (or any other expert witness) in the present case. Further, there was no impediment to the applicant conducting an event study analysis on different assumptions from the primary counterfactual (which was effectively the same as the actual corrective disclosure of 20 November 2013) together with a genuine attempt to prove those assumptions and the consequences for the event study analysis. Moreover, an event study analysis is not the only available approach to the issue of finding the true value of shares. As Mr Samuel said in his report of 16 November 2018, Mr Torchio did not conduct a fundamental analysis or valuation of shares in WOR, which would have required consideration and analysis of the future cashflows of the business and the risks associated in achieving those cashflows (para 53). Mr Samuel expressed the opinion that Mr Torchio did not apply any recognised valuation methodology, the two potentially relevant methodologies in this circumstance being:

   (a)a DCF methodology, which requires detailed cashflow forecasts and consideration of an appropriate discount rate; and

   (b)a capitalisation of maintainable earnings methodology, which requires consideration of a maintainable level of earnings and an appropriate multiple (para 58).

   Mr Torchio accepted that he had not sought to undertake an intrinsic valuation of the kind referred to by Mr Samuel in relation to WOR shares: T955.40-42, 950.1. However, there does not appear to me to be any reason why Mr Crowley could not have engaged an expert witness to have undertaken that exercise. While such an exercise may well have required that WOR disclose various internal documents which were not in the public domain, the process of discovery is available to ensure equality of arms between the parties in that regard.

8. Finally, during the course of his oral address, Senior Counsel for Mr Crowley made an application to reopen his evidence in order to read paras 17-20 of Mr Torchio’s second report (T149.35-37). Those paragraphs had sought to provide reasons underlying the claimed linear relationship between the counterfactual reasonable guidance and the apportioned excess return as shown in para 45 and Figure 3 of that report (which I refer to at [218]-[219] above). That claimed linear relationship also provides the basis for the schedule of proportional calculations of share price inflation at different counterfactual FY14 NPAT guidance which is set out in MFI 2. Mr Crowley relies on the schedule of expert evidence objections, which shows that paras 17-20 of Mr Torchio’s second report were not read by the then Senior Counsel for Mr Crowley. Mr Crowley submits that the reason for those paragraphs not having been read was related to the relevance objection which had been taken in respect of the issue arising from an expert report of Mr Jaski not having been relied upon. WOR opposes the application to reopen.

9. In my view, leave to reopen should be refused. The decision not to read those paragraphs of Mr Torchio’s second report was voluntarily taken by Senior Counsel. No attempt to reopen was made when this very point arose during the hearing, in circumstances where Mr Holzwarth expressed confusion as to what he was dealing with in relation to Figure 3 in Mr Torchio’s second report because that chart could not exist without the paragraphs commencing with para 17 (T832.36-45). It appears that those paragraphs may have affected the evidence of both Mr Torchio and Mr Holzwarth. More fundamentally, the issue as to whether there is a linear relationship as shown in Figure 3 and as reflected in MFI 2 arises only if economic equivalence is demonstrated between counterfactual guidance of $284 million (or $317 million) in NPAT and the actual corrective disclosure of 20 November 2013 of a range of $260-$300 million. No attempt was made by way of expert evidence to demonstrate such economic equivalence, and as I have said at [259] above, there is no basis on which I could infer economic equivalence in the absence of expert evidence. Further, the concept of economic equivalence would also have to extend to the reasons and explanation for the counterfactual earnings guidance. In the absence of any basis for the requisite economic equivalence, the conceptual issue as to the claimed linear relationship is entirely academic.

10. Accordingly, Question 13 should be answered as follows: No, in relation to both question 13.1 and 13.2. The question as to how much does not arise, but if it had arisen then the evidence would not have enabled me to provide an answer to that question.

    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?

11. The parties agree that, as found by the primary judge at PJ[698], Mr Crowley relied on the August 2013 Earnings Guidance Statement made on our about 14 August 2013 in making his decision to acquire WOR shares on 1 October 2013. Otherwise, however, the parties agree that the question should be answered “no”. Accordingly, I answer Question 14 as follows: 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?

12. 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

13. 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

14. 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.

15. 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.

I certify that the preceding two hundred and sixty-eight (268) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Jackman.

Associate:

Dated:       19 December 2023