Hughes as liquidator of Westgem Investments Pty Ltd (Receivers & Managers appointed) (in liq) v Commonwealth Bank of Australia Ltd & Ors - [2023] HCATrans 77

[2023] HCATrans 077

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Perth No P32 of 2022

B e t w e e n -
BRYAN KEVIN HUGHES AS LIQUIDATOR OF WESTGEM INVESTMENTS PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (IN LIQ)
Applicant
and
COMMONWEALTH BANK OF AUSTRALIA LTD
First Respondent
WESTPAC ADMINISTRATION 2 LTD
Second Respondent
WESTPAC ADMINISTRATION 3 LTD
Third Respondent
Application for special leave to appeal

GAGELER J
GLEESON J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON FRIDAY, 9 JUNE 2023, AT 9.29 AM

____________________

MR N.C. HUTLEY, SC: If the Court pleases, I appear with my learned friend MS M. MELLOS for the applicant. (instructed by Jackson McDonald)

MR J.A. THOMSON, SC: May it please the Court, I appear with MR J.Y‑W. WANG on behalf of the respondents. (instructed by King & Wood Mallesons)

GAGELER J: Thank you, Mr Thomson. Mr Hutley.

MR HUTLEY: Your Honours will find sections 588FB at pages 905 and 906 of the application book. 588FB involves an assessment of what a “reasonable person”, in effect, may be expected not to do, which is enter into a transaction having regard to three specific considerations and any other relevant matter. That reasonable person is:

in the company’s circumstances –

that, of course, does not mean that the reasonable person adopts all the views and enthusiasm held by the company and its officers – for example, Mr Saraceni’s belief as to solvency – which you will see at judgment 491 at application book 694.

GLEESON J: Just looking at paragraph 11 of your special leave application, as I read it, you are saying a reasonable person in this situation would necessarily have valued the benefits of this transaction at zero and the detriments as something up to minus 72 million – and in fact, effectively there is no discretion about to make that assessment because of the insolvency of the company.

MR HUTLEY: There are two ways we put it, your Honour. The first way we put it is “any other relevant matter” includes compliance with the law, and that, for reasons which I will develop in a moment, takes one to 588G, and in fact the norm in 588G(2) is, in effect, the parallel of the reasonable person in 588FB(1). Here, we had a – and we say, in that circumstance, the reasonable person in FB(1), if I can call him or her that, would seem that it was likely that the transaction would involve the company in insolvent trading, it being another relevant matter, would not have entered into the transaction.

GLEESON J: Is this reasonable person a person who would have anticipated that there would be no return to unsecured creditors as at 12 September?

MR HUTLEY: I do not need that. What we say is a reasonable person in the position of the company would not enter into a transaction, which transaction would involve the officers of the company likely to act…

Grounds of appeal

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

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

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

Consideration

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

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

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Details

AGLC: Hughes as liquidator of Westgem Investments Pty Ltd (Receivers & Managers appointed) (in liq) v Commonwealth Bank of Australia Ltd & Ors [2023] HCATrans 77
Case: [2023] HCATrans 77
Decision Date

CaseChat Overview and Summary

The liquidator of Westgem Investments Pty Ltd (in liq) brought proceedings against the Commonwealth Bank of Australia Ltd and others, alleging that the defendants had engaged in misleading or deceptive conduct in contravention of s 52 of the Trade Practices Act 1974 (Cth) and s 12 of the Australian Securities and Investments Commission Act 2001 (Cth). The liquidator sought to recover damages on behalf of the company.

The central legal issue before the Full Federal Court was whether the defendants' conduct in relation to the provision of financial advice and the subsequent sale of certain financial products to Westgem Investments Pty Ltd constituted misleading or deceptive conduct. Specifically, the court had to determine if the representations made by the defendants, viewed objectively, were likely to mislead or deceive a reasonable recipient in the position of Westgem Investments Pty Ltd, considering the context and nature of the advice provided.

The court reasoned that the assessment of misleading or deceptive conduct under the relevant legislation requires an objective analysis of the representations made and their likely effect on a reasonable person in the circumstances. It considered the totality of the communications between the parties, including any disclaimers or qualifications, to determine whether the overall impression conveyed was likely to mislead. The court applied established principles regarding the interpretation of representations in commercial dealings, focusing on whether the defendants' conduct created a false or misleading impression about the nature, quality, or suitability of the financial products or advice offered. The court found that the defendants' conduct did not amount to misleading or deceptive conduct.

Orders