De Bortoli Wines Pty Limited v HIH Insurance Limited (in Liquidation)

[2012] HCASL 157

DE BORTOLI WINES PTY LIMITED

v

HIH INSURANCE LIMITED (IN LIQUIDATION) & ORS

[2012] HCASL 157
S94/2012

1. The applicant held more than 19.5 million shares in the first respondent ("HIH") at the time HIH went into provisional liquidation in March 2001.  The shares had been acquired over the period 11 August to 22 December 2000 in some 66 transactions.  During this period, the HIH share price fell from $1.04 to $0.22.  Mr Darren De Bortoli, the applicant's Managing Director, made the decisions to purchase the shares on its behalf. 

2. In February 2009 the applicant lodged a proof of debt for the cost of the shares in the winding up of HIH. It claimed that it had been induced to purchase the shares by representations made by HIH that were misleading or deceptive contrary to s 52 of the Trade Practices Act 1974 (Cth) ("the TPA"). In a statutory declaration, Mr De Bortoli claimed to have relied on various statements made in documents published by HIH or in "Stockbrokers' Advices", which were based on those statements, and on statements made by HIH's General Manager of Public Affairs, Mr John Clarke and Mr Randolph Wein, a director of HIH. Mr De Bortoli stated that "Had the Creditor known the true financial position of HIH at the time, as has now been revealed by the HIH Royal Commission, the Creditor most certainly would not have purchased the shares".

3. The liquidators rejected the proof of debt.  The applicant appealed to the Federal Court of Australia (Stone J) against that determination[1].  The principal evidence upon which the applicant relied in the Federal Court was Mr De Bortoli's statutory declaration.  The respondents admitted that statements contained in three documents were misleading or deceptive or likely to mislead or deceive.  No other admissions were made.  The applicant did not attempt to prove that other representations made by HIH were misleading or deceptive or likely to mislead or deceive.  Stone J identified the issue between the parties as whether there was a causal connection between the statements that were admitted to be misleading or deceptive and the applicant's loss.  Her Honour concluded that any inference that Mr De Bortoli's purchase of HIH shares had been induced by the representations made by HIH had been rebutted. 

   [1]Corporations Act 2001 (Cth), s 1321.

4. The Full Court of the Federal Court (Jacobson, Siopis and Nicholas JJ) dismissed the applicant's appeal from Stone J's orders.  In so doing, their Honours observed that there had been no issue with Stone J's statement of the legal principles.  In question on the appeal was whether her Honour erred in finding that Mr De Bortoli did not rely on the misrepresentations.  The Full Court found that she did not.  Their Honours identified a number of features of the evidence that supported that finding.  These included that Mr De Bortoli's initial purchase of shares in HIH had been prompted by information received from his broker that Mr Rodney Adler was buying HIH shares.  Another feature was that the purchases were made in a falling market.  Mr De Bortoli's evidence was that he had invested in numerous companies in circumstances in which there had been a significant drop in the share price.  He had taken a "longer term view" in those cases and that view had proved to be correct.  

5. The applicant applies for special leave to appeal notwithstanding the concurrent findings against it on the one issue which appears to have been live below.  The applicant contends that the decision of the Full Court gives rise to two questions suitable for special leave.  The first question asks "whether the Full Federal Court of Australia erred in determining that a shareholder cannot rely on statements as to the financial health of a corporation made by the corporation's share information officer when making investment decisions."  However, the Full Court made no such finding.  It accepted that Stone J did not err in holding that statements attributed to Mr Clarke had not been "a hook on which to rely for the purchase of many millions of dollars of shares".  This was a factual finding of no wider significance.

6. The applicant's second special leave question contends that the Full Court erred in approaching the appeal upon a view that it was necessary to prove reliance in order to establish that it had suffered loss and damage by the conduct of HIH for the purposes of the claim under s 82 of the TPA. The applicant submits that if HIH had "told the truth about its financial position" its shares would have been "effectively worthless" and it would not have acquired them. As the respondent submits, this was not the way the applicant's case was put and met below. The factual findings do not make the application a suitable one in which to consider any wider question of causation under s 82 of the TPA.

7. The application is dismissed.

8. Pursuant to r 41.11.1 we direct the Registrar to draw up, sign and seal an order dismissing the application with costs.

J.D. Heydon
13 November 2012 V.M. Bell