Postorino v Encryption Technologies Corporation Pty Ltd
[2015] FCCA 1634
•19 June 2015
FEDERAL CIRCUIT COURT OF AUSTRALIA
| POSTORINO v ENCRYPTION TECHNOLOGIES CORPORATION PTY LTD & ORS | [2015] FCCA 1634 |
| Catchwords: CONSUMER LAW – Application commenced under the Trade Practices and Australian Securities and Investments Commission Act 2001 (Cth) claiming misleading or deceptive conduct in relation to the purchase of shares in respondent company – whether Court has implicit or accrued jurisdiction – whether federal claim “colourable” or bound to fail – whether to assume jurisdiction – application dismissed. |
| Legislation: Australian Securities and Investments Commission Act 2001 (Cth), ss.12BAA, 12BAB, 12BA(2), 12DA, 12GF, 12GJ |
| ABN AMRO Bank NV v Bathurst Regional Council (2014) 224 FCR 1 Ahmed v Harbour Radio Pty Ltd (2009) 180 FCR 313 Allied Mills Industries Pty Ltd v Trade Practices Commission (No.1) (1981) 34 ALR 105 Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 Australian Competition and Consumer Commission v Dukemaster Pty Ltd [2009] FCA 682 Australian Competition and Consumer Commission v Jones (No.5) [2011] FCA 49 Australian Competition and Consumer Commission v MSY Technology Pty Ltd & Ors (No.2) (2011) 279 ALR 609 Australian Competition and Consumer Commission v Shell Company of Australia Ltd (1997) 72 FCR 386 Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640 Australian Securities and Investments Commission v Edensor Nominees Pty Ltd & Ors (2001) 204 CLR 559 Beck & Anor v Spalla & Anor (2005) 142 FCR 555 Burgundy Royale Investments Pty Ltd & Ors v Westpac Banking Corporation & Ors (1987) 18 FCR 212 Butcher & Anor v Lachlan Elder Reality Pty Ltd (2004) 218 CLR 592 Cambridge Gulf Investments Pty Ltd (in liq.) & Anor v Dandoe Pty Ltd & Ors (1999) 91 FCR 146 Campbell & Anor v Backoffice Investments Pty Ltd & Anor (2009) 238 CLR 304 Campomar Sociedad, Limitada v Nike International (2000) 202 CLR 45 Commercial Banking Co of Sydney Ltd v RH Brown & Co (1972) 126 CLR 337 Cook v Pasminco Ltd (2000) 99 FCR 548 Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2009] NSWSC 1370 Dennis v Australian Broadcasting Corporation [2008] NSWCA 37 Elna Australia Pty Ltd v International Computers (Australia) Pty Ltd (No.2) (1987) 16 FCR 410 Fencott v Muller (1983) 152 CLR 570 Fitzroy Motors Pty Ltd v Hyundai Automotive Distributors Australia Pty Ltd (1995) 133 ALR 445 General Newspapers Pty Limited & Ors v Telstra Corporation (1993) 45 FCR 164 George v Rockett & Anor (1990) 170 CLR 104 Gould & Anor v Vaggelas & Ors (1985) 157 CLR 215 Henville v Walker (2001) 206 CLR 459 Houghton & Anor v Arms (2006) 225 CLR 553 Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets (No. 6) [2007] NSWSC 124 Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (2000) 104 FCR 564 Leadenhall Australia Ltd & Ors v Peptech Ltd [2001] NSWCA 272 Macteldir Pty Ltd v Dimovski & Anor (2005) 226 ALR 773 Maio v Sacco [2009] NSWSC 413 Matheson v Findex Australia Pty Ltd (2011) 252 FLR 197 McDermott v King & Anor [2013] FCCA 2348 Moorgate Tobacco Co Ltd v Philip Morris Ltd & Anor (1980) 145 CLR 457 National Exchange Pty Ltd v Australian Securities and Investments Commission [2004] FCAFC 90 Paper Products Pty Ltd v Tomlinsons (Rochdale) Ltd & Ors (No.2) (1993) 44 FCR 485 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 Peek v Gurney (1873) LR 6 HL 377 Philip Morris Inc & Anor v Adam P Brown Male Fashions Pty Limited (1981) 148 CLR 457 Phoenix Commercial Enterprises Pty Ltd v City of Canada Bay Council [2009] NSWSC 17 Platinum Investment Management Ltd v Chief Commissioner of State Revenue [2009] NSWSC 988 Postorino v Track ‘N’ Find & Anor [2012] FMCA 342 Queensland & Anor v JL Holdings Pty Ltd (1997) 189 CLR 146 R v Cook; Ex Parte Twigg (1980) 147 CLR 15 Ramsey & Ors v Vogler [2000] NSWCA 260 Re the Judiciary Act 1903-1920 and Re the Navigation Act (1921) 29 CLR 257 Re Wakim; Ex Parte McNally & Anor (1999) 198 CLR 511 Security Pacific Gold Ltd v Tricontinental Corp Ltd & Ors (1991) 31 FCR 213 Shahid v Australasian College of Dermatologists (2008) 168 FCR 46 Sidhu v Van Dyke (2014) 251 CLR 505 Sydbank Soenderjylland A/S v Bannerton Holdings Pty Ltd (1996) 68 FCR 539 Taco Co of Australia Inc & Anor v Taco Bell Pty Ltd & Ors (1982) 42 ALR 177 Total Australia Ltd v Trade Practices Commission (1975) 8 ALR 153 Unilan Holdings Pty Ltd v Kerin (1993) 44 FCR 481 Voth v Manildra Flour Mills Pty Ltd & Anor (1990) 171 CLR 538 WG & B Manufacturing Pty Ltd v Tesla Farad Pty Ltd [1999] FCA 1776 Yorke & Anor v Lucas (1985) 158 CLR 661 |
| Applicant: | SANDRINA POSTORINO |
| First Respondent: | ENCRYPTION TECHNOLOGIES CORPORATION PTY LTD (ACN 104 040 299) |
| Second Respondent: | ROBERT GRAEME PRITCHARD |
| Third Respondent: | ANTHONY COLIN COOMBS |
| File Number: | SYG 187 of 2009 |
| Judgment of: | Judge Lloyd-Jones |
| Hearing dates: | 3, 4 June 2014 |
| Delivered at: | Sydney |
| Delivered on: | 19 June 2015 |
REPRESENTATION
| Counsel for the Applicant: | Mr J Giles |
| Solicitors for the Applicant: | O’Neil Partners Commercial Lawyers |
| Counsel for the Second Respondent: | Mr V Bedrossian |
| Solicitors for the Second Respondent: | McCullough Robertson Lawyers |
| Solicitors for the Third Respondent: | Mr B McNab of Bruce McNab Solicitors |
ORDERS
The name of the first respondent be amended to “Encryption Technologies Corporation ACN 104 040 299”.
The Application filed 27 January 2009 be dismissed.
There be no order as to costs.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 187 of 2009
| SANDRINA POSTORINO |
Applicant
And
| ENCRYPTION TECHNOLOGIES CORPORATION PTY LTD (ACN 104 040 299) |
First Respondent
| ROBERT GRAEME PRITCHARD |
Second Respondent
| ANTHONY COLIN COOMBS |
Third Respondent
REASONS FOR JUDGMENT
Introduction
On 27 January 2009, the applicant, Ms Sandrina Postorino (“Postorino”) commenced proceedings in this Court against the First Respondent, Track ‘N’ Find Pty Ltd, ANC 104 040 299 (now known as Encryption Technologies Corporation Pty Ltd) (“ETC”) and the Second Respondent, Robert Graeme Pritchard (“Pritchard”) under the provisions of the Trade Practices Act 1974 (Cth) (the “TP Act”) and Australian Securities and Investment Commission Act 2001 (Cth) (the “ASIC Act”). On 1 November 2012, the solicitors for Postorino filed an application for a joinder of a third respondent to the proceedings, being Anthony Colin Coombs (“Coombs”). At a hearing on 13 December 2012 orders were made that Coombs be joined as a third respondent to the proceedings. Pritchard was a director and the chairman, while Coombs was a director of ETC at the time of the events relevant to these proceedings in 2008.
At the final hearing, the Court was advised that ETC was not defending these proceedings. Its Director, Mr Steven Wollstein (“Wollstein”) gave evidence in Postorino’s case, as did another former director, Mr Devlin Stuart Miotti (“Miotti”). ETC was struck off the register by ASIC on 30 July 2014. As the company has been struck off the register before judgment, there is no need (or power) to proceed against the company; however the pleadings against ETC are not abandoned.
In accordance with normal practice adopted by the Court, the matter was referred to a Registrar for mediation pursuant to Part 27 of the Federal Magistrates Court Rules 2001 (Cth) (the “FMC Rules”) on a date to be fixed by the Registry. Mediation took place on 9 September 2009 and Court was adjourned until 29 October 2009. Mediation was ultimately unsuccessful and the matter was returned for further directions.
Pritchard was a director and the chairman of ETC. As a consequence of a failure on behalf of Pritchard or his representative to appear at a number of directions hearings, and the failure to file a Defence on 3 September 2010, leave was granted to Postorino to seek a default judgment against Pritchard. On 7 October 2010, Postorino filed an Application in a Case seeking an order pursuant to the FMC Rules, 13.03B(c) and/or (b) for judgment against Pritchard. At an interlocutory hearing on 29 October 2010, the following orders were made:
1. Pursuant to Rule 13.03B(2)(c) of the Federal Magistrates Court Rules 2001, judgment be entered against the second respondent in the amount of $438,400.68.
2. The second respondent is to pay the applicant’s cost of the proceedings, fixed in the sum of $38,404.15.
On 22 July 2011, Pritchard filed an Application in a Case seeking an order pursuant to r.16.05 of the FMC Rules setting aside orders (1) and (2) made and entered in these proceedings on 29 October 2010. Pritchard relied on affidavits sworn by him on 22 July 2011 and 29 September 2011. The matter was before her Honour Barnes FM (as she was then) on 30 March 2012 and the following order was made:
Orders 1 and 2 of the Court’s orders on 29 October 2010 be set aside under Rule 16.05(2)(a) of the Federal Magistrates Court Rules 2001 (Cth).
The reasons for that decision are contained in Postorino v Track ‘N’ Find & Anor [2012] FMCA 342.
Documents and Witnesses Relied Upon by Postorino
The Application was advanced by the Second Further Amended Statement of Claim (“Second FASOC”), filed 24 September 2012.
Postorino filed and read the following:
a)Affidavit of Sandrina Postorino, sworn 3 May 2013, along with Exhibit “SP1” (the “First Postorino Affidavit”). Paragraphs [15], [32], [63], [97] and [136] admitted subject to an Evidence Act 1995 (Cth) (the “Evidence Act”) s.136 order;
b)Affidavit of Sandrina Postorino, sworn 29 November 2013, along with Exhibit “SP2”, (the “Second Postorino Affidavit”). Paragraphs [25] and [26] were treated as submissions while [39] is admitted, subject to an Evidence Act s.136 order;
c)Affidavit of Steven Miotti, sworn 13 March 2014 (the “Miotti Affidavit”). Paragraphs [27]-[38] admitted, subject to an Evidence Act s.136 order;
d)Affidavit of Devlin Stuart Wollstein, sworn 28 February 2014 (the “Wollstein Affidavit”). Paragraphs [35]-[45] admitted subject to an Evidence Act s.136 order.
Postorino gave evidence and also relied on Miotti and Wollstein, both of whom gave evidence.
Documents and Witnesses Relied Upon by Pritchard
Pritchard filed a Defence to the Second FASOC on 25 January 2013.
Pritchard filed and read the following;
a)Affidavit of Robert Graham Pritchard, sworn 6 August 2013 with Exhibit “RGP1” (the “Pritchard Affidavit”);
b)Exhibit “R1” – Emails between Wollstein and Ms Jane Matis (“Matis”) around 14-16 August 2008;
c)Exhibit “R2” – one page document between Wollstein and Mr Andrew Davis, dated 23 June 2009;
d)Exhibit “R3” – one page document of email, dated 23 June 2009;
e)Exhibit “R4” – shareholder update, dated December 2010.
f)Exhibit “R5” – one page document dated 16 July 2009.
Pritchard gave evidence and was cross-examined.
Documents and Witnesses Relied Upon by Coombs
Coombs filed a Response of the Third Respondent on 25 January 2013.
Coombs filed and read the following:
a)Affidavit of Anthony Collins Coombs, affirmed 15 November 2013 (the “Coombs Affidavit”).
Coombs gave evidence and was cross-examined.
Pleadings
These proceedings were initiated by an Application and a Statement of Claim filed on 27 January 2009. On 17 April 2009 orders were made requiring the ETC and Pritchard to file and serve a Defence on or before 1 May 2009. On 29 May 2009 orders were made requiring Postorino to file an Amended Application by 5 June 2009. An Amended Application and Amended Statement of Claim were filed on 26 June 2009. On 18 June 2010 orders were made granting leave for Postorino to file and serve an Amended Application and Amended Statement of Claim by 2 July 2010.
On 3 September 2010 Postorino was required to file and serve an Amended Application and Amended Statement of Claim by 24 September 2010. ETC was required to file and serve any Defence or Cross-Claim by 22 October 2010. Also on 3 September 2010 leave was granted to Postorino to file an Application for Default Judgment against Pritchard (who had failed to appear but was mentioned by Postorino’s then solicitors on two occasions).
By way of an Application in a Case, filed on 7 October 2010, Postorino sought an order for judgment and/or orders as set out in Postorino’s Further Amended Application and Further Amended Statement of Claim against Pritchard. Pritchard did not appear on that date. An affidavit of Nicholas Kallipolotis, the then solicitor with carriage of the matter for Postorino, was filed in support of Postorino’s application. Pritchard had failed to file a Defence in the proceedings, appear at Court or file a notice of appearance despite numerous orders and adjournments to facilitate for this to happen. Pritchard, who was a director of ETC, attested that from the time the original application was filed on 27 January 2009 until 27 May 2009 Miotti, a solicitor and director of ETC acted as Pritchard’s solicitor but no Notice of Address for Service or any other document was filed on behalf Pritchard during that time. Nor was there anything filed for or on behalf of Pritchard before orders were entered against him, despite the matter being listed for directions on approximately nine occasions and in addition to the two days of mediation over a period of approximately 21 months.
On 29 October 2010 Judgment was entered against Pritchard, as follows:
1. Pursuant to Rule 13.03B(2)(c) of the Federal Magistrates Court Rules 2001, Judgment be entered against the Second Respondent in the about of $438,400.68.
2. The Second Respondent is to pay the Applicant’s costs of the proceedings, fixed in the sum of $38,404.15.
On 24 April 2012, Federal Magistrate Barnes (as she was then), under r.16.05(2)(a) of the FMC Rules, set aside Orders 1 and 2 of the Court’s orders made on 29 October 2010: Postorino v Track ‘N’ Find & Anor [2012] FMCA 342. On 2 July 2012 Postorino was ordered to file and serve an Amended Application together with a proposed Second FSAOC on or before 30 July 2012.
On 16 October 2012 Postorino was ordered to file and serve any Application in a Case seeking to join Coombs as a party to the proceedings by 1 November 2012. On 13 December 2012, Coombs was joined as the Third Respondent to the proceedings and the Respondents were ordered to file and serve Defences to the Second FSAOC by 25 January 2013.
Third Further Amended Statement of Claim
On 21 March 2013, in response to consent orders forwarded by the parties, leave was granted to Postorino to file the Third Further Amended Statement of Claim by 22 March 2013 and the Respondents to file and serve Defences to the Third Further Amended Statement of Claim thereafter. In an email forwarded to the Court on 13 June 2014, approximately 9 days after the hearing, Mr Munce representing Postorino attached Closing Submissions and a draft proposed Third Further Amended Statement of Claim. Mr Munce sought leave to file that document on the basis that it contained limited amendments as was foreshadowed by Mr Giles at the hearing. An examination of the document entitled “Plaintiff’s Statement of the Case” makes no reference to the Third Further Amended Statement of Claim. Nor is there any direct reference to that document during the hearing. A review of the transcript of the hearing confirms this view. Further, the document entitled “Applicant’s Closing Submissions” do not refer to the Third Further Amended Statement of Claim.
In Pritchard’s Closing Submissions it is claimed that it is not satisfactory or acceptable that Postorino seeks to change the case being conducted during the course of the final hearing. Prichard argues that he would be prejudiced in his conduct of these proceedings if Postorino were permitted to amend her claim at this stage. Pritchard identifies the following issues in respect to the prejudice:
a)Pritchard assessed Postorino’s evidence in light of the pleaded case and prepared his evidence in response on the basis of that pleading;
b)The presentation of Pritchard’s case in Court, including the cross-examination of witnesses, was undertaken by reference to the pleadings;
c)Pritchard did not plead any proportional liability defence under either the Corporations Act 2001 (Cth) (the “Corporations Act”) or the ASIC Act, because there was no claim brought against him pursuant to either the Corporations Act or the ASIC Act;
d)If a claim had been brought against him under either the Corporations Act or the ASIC Act, it would have been open to him, as foreshadowed in the interlocutory hearing before her Honour Federal Magistrate Barnes (as she was then), to plead a proportionate liability defence as there having been no claim brought under either of those statutes, there was no reason to pleaded any such defence; and
e)In pleading a proportionate liability defence, Pritchard would have given consideration to leading further evidence relevant to that topic and it is likely that he would have provided such additional evidence.
The position taken by Postorino’s Counsel is recorded in the Transcript of the Federal Circuit Court proceedings (“T/”) at T/17.9-24 and is summarised as following:
a)An acknowledgment that the only claim pleaded by Postorino was a Fair Trading Act 1987 (NSW) (the “FT Act”) claim;
b)An assertion regarding the importance of the pleadings;
c)An assumption that significant amendments to Postorino’s pleaded case have no relevant impact upon the Respondents; but
d)An insistence that any amendment to Pritchard’s case, in response to the proposed amendments by Postorino, would cause undue prejudice.
In the circumstances set out above and in response to the question of whether the Third Further Amended Statement of Claim should be admitted, I rely on the decision of the High Court in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175.
Aon confirms the case management principles have changed significantly by the rules of procedure enacted by various jurisdiction since the decision in Queensland & Anor v JL Holdings Pty Ltd (1997) 189 CLR 146. The statutory duty imposed by Civil Procedure Rules such as the Federal Court Rules 2011 (Cth), the Federal Circuit Court Rules 2001 (Cth) and the Civil Procedure Act 2005 (NSW) in New South Wales requires a court, in mandatory terms, to give effect to the overriding purpose of case management rules being “the just resolution of disputes… as quickly, inexpensively and efficiently as possible including limiting the number of documents that may be tendered in evidence”. That duty is a significant qualification to the power to grant leave to amend, and by extension powers, to grant leave to vary from the Court’s timetable with respect to evidence in proceedings.
Aon is a significant and unanimous decision of the High Court considering the principles of the proper case management in the context of current rules of courts concerning the practice and procedure, that since that time has been applied by State and Federal Courts with respect to applications to adduce further evidence at hearing (see Platinum Investment Management Ltd v Chief Commissioner of State Revenue [2009] NSWSC 988; Phoenix Commercial Enterprises Pty Ltd v City of Canada Bay Council [2009] NSWSC 17 and Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2009] NSWSC 1370). It should not be overlooked that even before Aon, the New South Wales Court of Appeal, in a judgment by Chief Justice Spigelman (with which Basten and Campbell JJA agreeing), held that Queensland & Anor v JL Holdings Pty Ltd (supra) must be understood as subject to statutory duty imposed on the Court by the rules of civil procedures: Dennis v Australian Broadcasting Corporation [2008] NSWCA 37 at [28]-[29].
Leave was granted on 21 March 2013 for the filing of the Third Further Amended Statement of Claim, together with a corresponding order in relation to the filing of Defences to that document. Nothing was forthcoming until after the hearing had been completed and the timetable for the filing of Closing Submissions was in operation. If that document was admitted, the other parties would have to be granted additional time to file a Further Defence and Submissions. The matter has been before the Court for a period in excess of six years and this would result in a further delay in the case’s resolution. Consequently, the filing of the Third Further Amended Statement of Claim is refused.
Postorino’s Statement of the Case
Pursuant to orders made by Judge Barnes on 19 June 2013 “the Applicant file an outline of case and list of authorities 14 days before the final hearing.” In setting out the following material, I have quoted directly, with some minor editing, from the submissions prepared by Mr Giles, Counsel for Postorino. I have not made any further attribution as this would make the summary unwieldy.
Background
Postorino met Pritchard and Coombs in early 2008 and, although there is some dispute in evidence as to precisely when that occurred, it is immaterial. Also in early 2008, Postorino met Matis. Pritchard was a director of ETC, which was then known as Track ‘N’ Find Pty Ltd, and remained a director throughout 2008.
In 2008 ETC owned a concept for a technology involving a detector, which, in effect, emitted a laser, and an isotope which pulsed when hit by the laser. It was apparently believed that there were a number of products which could use this technology. However, the technology had never been converted into a marketable product. ETC never developed a commercial product, never had a customer and as far as can be determined, in the absence of financial records (ETC has no records after 30 June 2007), never earned any money from its technology. Essentially, ETC has failed. That is not to say that there had not been an opportunity to exploit the product, but by 2008 ETC was reliant on Pritchard to raise money for it which he was unable to do. Throughout 2008 ETC was in need of funds and without valuable assets it could not borrow and was seeking to raise equity in the vicinity of $1 million through Pritchard. Although there is obscurity in relation to the document recording arrangements (one version apparently bears Coombs’ signature, which he claims to be a forgery), it is clear that ETC had engaged Pritchard or one of his companies to raise those funds. That engagement proved to be unsuccessful from ETC’s perspective. Pritchard only ever raised $250,000 and that was from Matis in mid-2008.
Through a company, Bond Street Alliance Securities Limited (“Bond Street”), which Pritchard controlled, he was entitled to a substantial number of shares in ETC. Again, the facts are somewhat obscure, but Bond Street was entitled to either 20% or 30% of the issued shares in ETC. Those shares were ultimately issued to Bond Street as consideration for Bond Street or Pritchard seeking to raise the $1 million ETC required. Another arrangement that is also obscure is that Coombs worked with Pritchard.
After they met, Postorino, Matis, Pritchard and Coombs starting carrying on business together through a company known as Marketforce One Business Strategies Pty Ltd (“MFOBS”). MFOBS’ business was, in effect, to provide marketing support to start-up companies. Postorino withdrew from that business in late 2008. MFOBS provides some context to the events which occurred, but it is not an issue in these proceedings. During discussions about the concept which became MFOBS in early 2008, Pritchard spoke to Postorino about ETC, describing it to her as a business opportunity. Pritchard suggested to Postorino that she may be interested in investing in ETC. Postorino, who has worked in strategy roles with a number of sophisticated employers, was concerned to know if ETC had any income. Pritchard told her that it did not. At that time, Postorino did not invest in ETC. One reason for her concern was that the company had no income. Subsequently, Pritchard further spoke to Postorino about investing in ETC.
Both Pritchard and Coombs made representations to Postorino about ETC. Postorino argues that those representations were misleading. Induced by, and in reliance to those representations, Postorino bought 773,740 shares in ETC (1.25% of the issued capital) from Bond Street for $125,000. Although relevant only to an assessment of his credit, it should be noted that Pritchard’s conduct in causing Bond Street to sell shares for Pritchard’s benefit to Postorino, instead of raising capital for ETC, is prima facie discreditable. Bond Street had received the shares in ETC because Pritchard promised to raise $1 million for ETC but instead he sold some of those shares to Postorino.
Postorino’s claim is that the representations Pritchard and Coombs made in relation to the shares sold to Postorino were misleading and/or deceptive conduct, which contravened s.42 of the FT Act, s.12DA of the ASIC Act and s.1041H of the Corporations Act. Those sections have materially the same operation. As the representations were made in relation to shares in the company, which are securities (s.761A of the Corporations Act) and a “financial product” (s.764(1)(a) of the Corporations Act), the proper characterisation of Pritchard’s and Coombs’ conduct is likely that they have contravened s.1041H, but nothing in substance turns on the distinction. Through the definition of “financial product” and “financial services” in s.12BAA and s.12BAB of the ASIC Act their conduct is also a contravention of s.12DA of the ASIC Act. The damages remedied by s.68 of the FT Act, s.1041I of the Corporations Act and s.12GF of the ASIC Act are the same.
Procedural Matters
A variety of different causes of action are pleaded in the Second FASOC. Only the misleading and/or deceptive conduct claims are pursued, and only in relation to, in substance, the two representations referred to in detail later in this judgment. To the extent ETC made the representations (by its then director, Pritchard), Postorino pursues her claim that Pritchard and Coombs were knowingly concerned in ETC’s conduct. If Postorino is successful in her claim that Pritchard and Coombs made the representations there is no need to determine the knowingly concerned claim.
Postorino’s Claim
Postorino claims that although the representations are clear and substantially in writing, something further should be said about the context of the representations. That is because both Pritchard and Coombs appear to say they “passed on” the misleading information and raised, in effect, a mere conduit defence. Postorino submits that at the time the representations were made, Pritchard was a director of ETC and he was engaged by ETC to raise capital for it as he had also told Postorino. He was, in point of fact, involved in negotiation with a potential licensee of ETC in Russia. It is anticipated that the evidence will show he was more closely involved in those negotiations than he now claims. On 30 May 2008, he sent an email to Postorino and others to the effect that he was about to commence negotiations for licensing in ETC technology in Russia. That statement was made by Pritchard in the context of writing about raising money for ETC. Pritchard did not disclaim a belief in the truth or falsity of what he later wrote about an asserted (but non-existent) licence agreement.
Coombs had a business relationship with Pritchard and often spoke or acted on behalf of Pritchard and used Pritchard’s email address. Coombs told Postorino various matters in communications made in Pritchard’s interest and in relation to the sale ETC shares by Bond Street to Postorino. Pritchard also never disclaimed a belief in the truth of what he wrote.
The following misrepresentations were made:
a)In an email date 10 August 2008 (First Postorino Affidavit, “SP1”, p. 10) to Postorino and others, Pritchard represented, in unequivocal terms, that ETC had “reached agreement with Russian company, Mistrel-Fluro, based in Moscow, for an exclusive licensing agreement for Russia for 5 years with a minimum guaranteed royalty of $US15 million…” after further describing Mithrel-Fluro (also frequently referred to in submissions and evidence as “Mistrel-Fluro”) in the email he wrote, stating “This is the beginning of an excellent business for [ETC]”. The representation that ETC had entered into an agreement with Mithrel-Fluro with a guaranteed minimum royalty of $US15 million over five years was, to say the least, misleading. In point of fact, Mithrel-Fluro and ETC had entered into a “letter of intent” (the “Letter of Intent”) which was expressly not binding on either company. Postorino submits that Wollstein’s evidence was expected to be that Mithrel-Fluro made clear that it would only progress the Letter of Intent if ETC made a loan secured by a convertible note, an unlikely prospect for a company in ETC’s position, unless Pritchard could raise some money. Further, had the Letter of Intent been converted into a binding agreement, which it never was, the royalty payable was 15% of the projected minimum sales of the $US15 million. That is, ETC did not have the guaranteed income represented because the arrangement was not binding and the proposed agreement did not provide for the represented income. That representation was made in circumstances where Postorino had previously declined to invest in ETC because it did not have any income. Pritchard subsequently repeated that representation to Postorino at a meeting on 16 August 2008. Pritchard does not appear to dispute the representation was inaccurate. Plainly it was misleading, in that the representation had a tendency to lead Postorino into error. Pritchard’s defence appears to be that he did not know of the inaccuracy. That is a matter disputed by Wollstein and Pritchard’s evidence in that respect should be rejected. However, even if Pritchard did not know that the representation was false, that is no defence. He made the representation which is objectively misleading;
b)Pritchard also appears to suggest that he was passing on the information as a mere conduit. The three recognised classes of case in which a representor will be held not to have engaged in misleading or deceptive conduct, because the representor is “passing-on” the information, are identified by McHugh J in Butcher & Anor v Lachlan Elder Reality Pty Ltd (2004) 218 CLR 592 at [123] (although McHugh J dissented, his identification of the principles has later been repeatedly applied). In the circumstances already referred to, Pritchard was not merely passing on information. Further, he did not disclaim any relief in its truth or falsity of his email, and did not make clear that he was merely passing the information on for what it was worth. The email of 10 August 2008 demonstrates the opposite, as does his position as the director of ETC, his role in raising equity for ETC and the fact that he held himself out has being involved in the negotiations. By sending the email on 10 August 2008, and in repeating the representations contained in the email, Pritchard engaged in misleading or deceptive conduct;
c)Coombs then communicated with Postorino, while she was on holidays, in relation to whether she wished to buy shares in ETC from Pritchard. By email dated 18 August 2008 he asked, in effect, whether Postorino was interested in purchasing 1.25% of ETC from Pritchard for $125,000 (First Postorino Affidavit, “SP1”, p.12). Later in the same email chain, on 19 August 2008, Coombs sent a copy of ETC’s 2007 Business Plan to Postorino (First Postorino Affidavit, “SP1”, p.13-79). Based on the price at which Pritchard had raised, $250,000 from Matis, by email dated 20 August 2008, Postorino asked Coombs whether the valuation had doubled from that stated in the 2007 Business Plan “based on the Russian deal” (First Postorino Affidavit, “SP1”, p.80). Coombs responded by email dated 19 August 2008 (it appears that either Postorino or Coombs was using a computer with an incorrect date code). Coombs’ email ought to be read as a whole, but the effect of the email is that Coomb represented, consistent with what he had said was ETC’s Board’s view, that ETC was worth $30 million. He also attributed the increase in value, at least in part to the “Russian deal” (First Postorino Affidavit, “SP1”, p.80). That representation was misleading. The evidence shows that ETC had no value in August 2008 as it had no income and no assets which could be realised. No one had been able to raise any capital for ETC except for the $250,000 raised from Matis. ETC had no customers and there was no product which in point of fact used the technology. ETC also had no financial statements on which it could be valued. There was no “Russian deal” and the representation was misleading and/or deceptive either because it was wrong or because there was no reasonable basis for an opinion that ETC was worth $30 million. Postorino submits that Coombs does not appear to say that the representation was correct. Coombs appears to suggest that the email does not convey a representation that the company was worth $30 million or that it was reasonable to assert that it was worth $30 million. That contention involves a question of reading and understanding the email dated 19 August 2008 in context. When that is done it is clear that Coombs made the representation alleged. Coombs also said that he was merely passing on the information contained in the email dated 19 August 2008. As was with Pritchard, Postorino argues that defence does not withstand scrutiny. The email is not, in terms, passing on information. Coombs expressly adopted the Director’s stated position and made his own statement as to the value of ETC and the quality of Postorino’s proposed investment. Coombs also asserted that he copied and pasted the information into the email. He states the source of that material was Pritchard. Postorino argues that it is to be accepted that the email from Coombs did not make clear that he was merely repeating what Pritchard had said to him and the defence fails; and
d)Pritchard also represented that ETC was worth $30 million. It is to be inferred that he gave the information to Coombs with the intention that Coombs informed Postorino of the asserted value of the company, as he did in the email dated 19 August 2008. Coombs communicated with Postorino for the benefit of Pritchard and for the purpose promoting the sale of ETC shares by Pritchard’s company. The communication was designed to induce Postorino to buy the shares from Pritchard or his company Bond Street, and was made at Pritchard’s instigation. Pritchard also sent Postorino a further version of the ETC Business Plan. He did so under cover of email dated 1 October 2008 in which he wrote “Not quite finished yet… interested in your comments” (First Postorino Affidavit, “SP1”, p.118). The terms of the email are inconsistent with passing on the information of what it was worth, it attributes to Pritchard involvement in preparing the new version of the Business Plan. The draft Business Plan repeated the representation that the licence agreement had been entered into with Mithrel-Fluro. In point of fact by 1 October 2008 the Letter of Intent had expired. The Business Plan also repeated the inaccurate recital of the “guaranteed” income from the arrangement with Mithrel-Fluro and asserts the value of ETC in excess of $35 million. In those circumstances it is clear that he too made the misleading representation as to the value of ETC.
In effect, Pritchard made two representations to Postorino:
a)That there was a contract between ETC and Mithrel-Fluro with a guaranteed minimum royalty payment to ETC over five years of the $US15 million; and
b)ETC was worth $30 million or more.
Both representations were quite wrong and misleading. Coombs made the same representation. He squarely made the second representation. He made the first in the context of his emails referring to the “Russian deal”, which was the asserted agreement between ETC and Mithrel-Fluro as having increased ETC’s value. Each was knowingly concerned in the making of the two representations by ECT to the extent not made by Pritchard or Coombs.
Postorino relies on those two representations in deciding to buy the shares in ETC from Bonds Street for $125,000 on 3 October 2008, shortly after Pritchard’s email sending to her a copy of the updated version of the Business Plan. Postorino’s evidence is that she relied on the misrepresentation. It is inherently likely that she did rely on two misrepresentations, both of which were to the value of the shares in ETC she required and the income of ETC. Those were both objectively and in point of fact matters of considerable interest to Postorino in deciding whether to invest in ETC: Gould & Anor v Vaggelas & Ors (1984) 157 CLR 215 at 236 per Wilson J, with whom Gibbs and Dawson JJ agreed. His Honour stated:
…If a material representation is made which is calculated to induce the representee to enter into a contract and that person in fact enters into the contract there arises a fair inference of fact that he was induced to do so by the representation.
This was reaffirmed by the High Court in Sidhu v Van Dyke (2014) 251 CLR 505 at 19 [52]. It is submitted that the misrepresentation were calculated to induced Postorino to invest in the ETC shares as there was no other reason to make the representations.
In reliance on the representations made to Postorino she paid $125,000 to Bond Street and in return she received shares in ETC which were, and remain, worthless. Despite attempts the Respondents argue that they were not able to find a buyer for Postorino’s shares, which, Postorino argues is not a surprising fact as ETC was a private company with no assets of any value, no income, no customers and no current financial records.
There is evidence attempts to float ETC through a “backdoor” listing in Europe which apparently were made by Pritchard and those associated with him, but ETC was not floated. To the extent that Pritchard claimed that ETC’s assets were transferable to another company and the ETC shareholders, including Postorino were issued in shares in that other company, the limited evidence shows no market for shares in that company and Postorino did not agree to receive the other company’s shares.
Pritchard’s Statement of the Case
Pursuant to orders made by Judge Barnes on 19 June 2013 “the respondents file an outline of case and list of authorities 7 days before the final hearing”. In setting out the following material, I have quoted directly, with some minor editing, on the submissions prepared by Mr Bedrossian, Counsel for Pritchard. I have not made any further attribution as this would make the summary unwieldy.
In the submissions tendered on behalf of Pritchard it suggests that Postorino has altered the nature and extent of the case which she now wishes to bring before the Court. Contrary to what is pleaded in the Second FASOC and contrary to what was pleaded in each previous incarnation of the Statement of Claim (dating back to the commencement of the proceedings on 27 January 2009), Postorino now puts her case forward as primarily a case for relief under the Corporations Act, notable ss.1041H and 1041I. It is not correct to say that “nothing in substance turns on the distinction” between the claims previously pleaded and the now proposed Corporations Act claim.
Pritchard claims that Postorino, for the first time, abandons:
a)The entirety of her case based upon an alleged breach of the “agreement and warranties” (Second FASOC, [12]-[28]);
b)The entirety of her case based upon an alleged entitlement to restitution for unjust enrichment (Second FASOC, [46]); and
c)The entirety of her case based upon an alleged non-compliance with an alleged requirement for a financial services licence (Second FASOC, [47]-[52]).
Pritchard further claims that Postorino has abandoned each of the alleged representations pleaded in [30(a), (c), (d), (e), (f), (h) and (i)]. The two remaining allegations are those which were combined into the one pleading at [30(g)] of the Second FASOC).
Pritchard reserves his position regarding the proper costs consequences of the above significant alteration of position, including as to whether Postorino ought to be given leave to conduct her case upon any new basis. In any event, the nature and significance of those changes ought to reflect upon the credibility and accuracy of the allegations, which Postorino had (until her submissions were served) been pursuing since 27 January 2009.
The substantial submission is that Pritchard is not legally responsible for Postorino’s purchase of shares. Postorino herself actually pursued the acquisition of the shares from ETC. She did so without relevant inducement from Pritchard and certainly not with any inducement for which Pritchard ought to be held liable. Postorino is and was, at the relevant time, a person with a significant degree of sophistication and intelligence.
Whether or not any communication received by Postorino was misleading or deceptive, in the matter required under the relevant statutory provisions upon which she brings this claim, must be assessed as at the time of those communications and by reference to the entire content and circumstances of the communications. In circumstances where Pritchard provided the 10 August 2008 email in good faith and reliance upon the accuracy of the information supplied to him by Wollstein, Pritchard ought not to be held responsible for how that information was subsequently used, if at all, by Postorino.
With respect to the communications between Coombs to Postorino and the reference to the amount of $30 million, a number of observations may be made about Postorino’s claim based upon those communications:
a)The information given by Coombs to Postorino was factually correct. It cannot, therefore be misleading or deceptive;
b)Coombs (not Pritchard) supplied the information. It is, therefore, not possible for Pritchard to be held responsible for the conduct of Coombs. It is to be recalled that Coombs had communicated with Pritchard (in the period of about 18-20 August 2008) at the request of and on behalf of Postorino;
c)The information was supplied by way of a communication from Coombs to Postorino while Postorino was in Mexico. Being outside of Australia, receipt of the information by Postorino occurred outside Australia and therefore no jurisdiction under the statutory provisions put forward by Postorino to claim relief based upon a representation (if that is what it was) received outside of Australia: Paper Products Pty Ltd v Tomlinsons (Rochdale) Ltd & Ors (No. 2) (1993) 44 FCR 485 at 495 per French J (as he was then); and
d)The pleadings as to Pritchard’s alleged involvement in that communication, so as to give rise to any alleged liability on his part, are grossly inadequate and defensive. The claim must be rejected purely on that basis: Security Pacific Gold Limited v Tricontinental Corp Ltd & Ors (1991) 31 FCR 213 at 355-356 per Foster J.
It is argued for Pritchard that for the above reasons and by reference to the entire content and circumstances of the case, Pritchard ought not to be held personally responsible for any of the decisions and actions taken by Postorino. If blame is to be allocated for Postorino’s current situation, that blame lies other than with Pritchard. Further, it is not accepted that shares in ETC were of no value. It is beside the point and, therefore, irrelevant as to whether those shares now have value. Given the alleged conduct upon which Postorino brings her claim, occurred in 2008, we are now six years removed from that time. Postorino cannot seek to argue that her claim has somehow improved by reason of that lapse of time.
Effectively, Postorino seeks that Pritchard acts as an insurer for her decision to acquire shares in ETC. Moreover, she seeks interest upon her investment from 2008 to date. One needs only to ask the question to whether Postorino would be bringing this claim if her investment in ETC had proved fruitful to appreciate Postorino has entirely failed to take any responsibility for her own independent and voluntary investment decision.
Coombs’ Statement of the Case
Pursuant to orders made by Judge Barnes on 19 June 2013 that “the respondents file an outline of case and list of authorities 7 days before the final hearing”. In setting out the following material, I have quoted directly, with some minor editing, from the submissions prepared by Mr McNab, solicitor for Coombs. I have not made any further attribution as this would make the summary unwieldy.
When the proceedings were instituted in 2009 no allegations were made against Coombs, but he was joined to the proceedings as a consequence of the denial on behalf of Pritchard that any communications to Postorino by Coombs were undertaken by Coombs as agent, representative or otherwise in any way on behalf of Pritchard. Coombs’ evidence is that the communications were undertaken at the specific request of Postorino. In any event it is readily apparent from the context and content of the email now complained of that Coombs was acting as an intermediary and that at the time of receipt Postorino did not read or consider the email as a representation by or on behalf of Coombs.
The only allegation now made by Postorino against Coombs is set out in [38(c)]. The way in which the allegation is now put is that “read as a whole, the effect of Mr Coombs’ 20 August 2008 email was that he represented that ETC was worth $30 million and that he also attributed that increase in value, as least in part, to the ‘Russian deal’”. However this allegation is not consistent with Postorino’s evidence at [88] of the First Postorino Affidavit. It is not her evidence that Coombs represented that ETC was worth $30 million only that Coombs email of 20 August 2008 confirmed that ETC’s Board had valued the company at $30 million (which it had). It is also not Postorino’s evidenced that Coombs represented or stated that he had attributed the increase in the value to the Russian deal. He expressed no opinion whatsoever about that matter.
In respect to the evidence against Coombs, Postorino’s evidence comprises the First Postorino Affidavit, the Wollstein Affidavit, and the Miotti Affidavit. There is no mention whatsoever of Coombs in the Miotti Affidavit and the reference to him in the Wollstein Affidavit are at [53] and [78] that relate solely MFOBS.
The relevant evidence involving Coombs is found only in the First Postorino Affidavit. On that evidence there is general agreement between Postorino and Coombs concerning the circumstances of the meeting and the setting up of the MFOBS. The important points of difference as to facts are limited to:
a)Who told who about Matis purchase of ETC shares; and
b)Whether or not Matis commenced proceedings against Coombs as alleged by Postorino at [149] of the First Postorino Affidavit.
There is no evidence or allegations of any verbal representations by Coombs and the only specific evidence as to the only conduct of Coombs now complained of by Postorino is at [80] of the First Postorino Affidavit. Paragraphs [72]-[79] of the First Postorino Affidavit provide some context.
In respect of the context of the email exchanges between Postorino and Coombs between 18 August 2008 and 20 August 2008, Postorino, Pritchard and Coombs all worked together MFOBS Pty Ltd. This company had an engagement arrangement by Pritchard, under which it was to market the products and services of ETC. Pritchard also wanted to raise capital for ETC. The reasons for the sharing of information about ETC between various parties must be understood in the context of there being members of the MFOBS “team”. Paragraphs [47] and [48] of the First Postorino Affidavit supports this.
Postorino and Coombs were on an equal footing in regards to their knowledge of and access to information about ETC. Information came from Pritchard who was a director of ETC. Pritchard’s emails were sent as “dear all”, “dear team” or “hi team”.
It appears that Postorino became particularly interested in purchasing shares in ETC after receiving the 10 August 2008 email referred at [62] of the First Postorino Affidavit. Coombs’ evidence is that Postorino asked him to make enquiries of Pritchard as to whether similar deals of shares in ETC as to that taken up by her friend Matis could be struck while she was away on holiday in Mexico. That request is entirely consistent with all of the emails. It emerged that Coombs asked Pritchard about what was available, and then reported back to Postorino. Postorino confirms this in her 20 August 2008 email “Hola, Tony, thanks for talking to Bob on my behalf…”.
Postorino asked Coombs for a copy of the Business Plan. This was provided to her. It is not suggested that this amounts to any form of representation by Coombs. Postorino now says that in the 19 August 2008 email from Coombs represented that ETC was worth $30 million and that he attributed the increase in value in least in part, to the Russian deal. It is said that this representation is misleading and deceptive either because it was wrong or because there was not a reasonable basis for that opinion that ETC was worth $30 million. It is further said that a reading and understating of the email in context makes it clear that Coombs made the representation alleged.
It is stated on behalf of Coombs that the email speaks for itself as it says:
Hi Sandrina,
the T&F Board has determined the value of the company to be $30M so that 2.5% of the shares is now $750K.
However, Bob is still prepared to stand by his offer and sell you 1.25% for $125K. He has also indicated that whilst it would be tough ask there is a chance that you could get a further 0.5% from TnF possibly for $125K (based on current val). That would give you 1.75% for $250K. The shares would therefore actually be valued currently at $525K.
It is a great deal. Understood you wish to read the BP however definitely need a decision soon. Please advise ASAP.
Just so you know, Jane’s was a “once off” offer as stated in the initial email Bob sent out asking us to find investments (and yeas(sic) was also pre Russia) with funds used to complete Qld Uni prototype except ETC.
Thanks
Tony.
(First Postorino Affidavit, “SP1”, pp. 14-15)
There is not a representation from Coombs as to the value of the company, only a statement about what the Board had determined. There is no attribution by Coombs as to any increase in value. There is not even any mention of an increase in value.
The email makes it clear that Coombs is passing on information received from Pritchard and Postorino knows this because:
a)As a partner in the MFOBS she knew that all information about the company came through Pritchard;
b)She had asked Coombs to speak to Pritchard about whether shares could be purchased and had thanked him for speaking to Pritchard on her behalf; and
c)The email expressly said, “Bob is still prepared to…” and “he has also indicated that … ”.
In the earlier versions of the Statement of Claim, Postorino pleaded that the email was sent by Coombs as a representative of Pritchard. She did not at that time consider that Coombs was making any personal statement or representations whatsoever.
The outline contains detailed written submissions in respect of the relevant law which are not reproduced but addressed under a separate heading later in this judgment. However, the submissions do state that other than the specific legal issues referred to, Coombs does not dispute the general description provided by Postorino (see [69] below).
It is submitted on behalf of Coombs that he is not legally responsible for Postorino’s purchase of shares and did not make any false representations. The relevant conduct of Coombs was undertaken at the request of Postorino who actively pursued the acquisition of the shares in ETC. The intention of Coombs was only to assist Postorino as he was requested to do, as he had no interest in the transaction.
Postorino is and was at the relevant times a person with significant degrees of sophistication and intelligence. Her role within MFOBS included assessing the commercial viability of start-up companies. To the knowledge of Postorino, Postorino and Coombs were on an equal footing with regard to knowledge of the company. Both received information in the capacities of partners in MFOBS from Pritchard who was a director of ETC. The email complained of was received by Postorino in Mexico. Accordingly there is no jurisdiction under the statutory provisions put forward by Postorino to claim relief based on any alleged representation received outside of Australia: Paper Products Pty Ltd v Tomlinsons (supra). In making her decision Postorino drew information form a number of sources, including emails received from Pritchard, verbal discussions with Pritchard, all of the information in the Business Plan and her knowledge that Pritchard was the director of ETC. Coombs does not accept that the shares of ETC were of no value. Postorino’s investment decision was an independent and voluntary decision made over a period of weeks, if not months. The conduct of Coombs was unlikely to mislead or deceive a reasonable person.
The Court’s Jurisdiction
In Postorino’s Statement of the Case there is a statement in respect of the relevant law in the following terms. Conduct will be misleading or deceptive if “the impugned conduct viewed as a whole has a tendency to lead a person into error”: Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640 at [49] per French CJ, Crennan, Bell and Keane JJ, approving Campbell & Anor v Backoffice Investments Pty Ltd & Anor (2009) 238 CLR 304 at [25] per French CJ. The assessment of the quality of the conduct is made in all circumstances: Backoffice (supra) at [25] per French CJ, at [102] per Gummow, Hayne, Heydon and Kiefel JJ approving Butcher v Lachlan Elder Reality (supra) at [109] per McHugh J. It is irrelevant whether the person making the representation knew it to be misleading: Yorke v Lucas (1985) 158 CLR 661 at 666 per Mason ACJ, Wilson, Deane and Dawson JJ, although proof of an intention to mislead can result in an inference that a plaintiff was misled: Campomar Sociedad, Limitada v Nike International (2000) 202 CLR 45 at [33]. Of course to be knowingly concerned in misleading or deceptive conduct requires that the defendant knows the essential facts which make the conduct misleading: Yorke & Anor v Lucas (1985) 158 CLR 661 at 667. Conduct will usually be the conduct both of the person who spoke and that person’s employer or principal: Houghton & Anor v Arms (2006) 225 CLR 553.
In Pritchard’s Statement of the Case it is indicated, in broad terms, that Pritchard does not dispute the general description provided by Postorino, as set out above, of the relevant principles.
In Coombs’ Statement of the Case it indicates that Coombs does not dispute the general description provided by Postorino, as set out above, and further expands on that material to the extent that conduct will only be misleading or deceptive or likely to mislead or deceive if the representee labours under some erroneous assumption or may be expected to so labour: National Exchange Pty Ltd v Australian Securities and Investments Commission [2004] FCAFC 90. Further, in that same case his Honour Dowsett J, by reference to Taco Co of Australia & Anorv Taco Bell Pty Ltd & Ors (1982) 42 ALR 177 per Finkelstein J, identified four steps in this inquiry, namely:
a)Was there a false representation?;
b)What was the intention underlying the conduct in question? (his Honour identified correctly that intention to mislead was not essential, but nevertheless was relevant to the inquiry);
c)Was the conduct such as to lead to an erroneous assumption on the part of the representees?; and
d)Did the conduct mislead or deceive or was it likely to do so, having regard to the behaviour of a reasonable representative of the whole class of representees?
Coombs raises the issue that the Court does not have jurisdiction under FT Act, ASIC Act and the Corporations Act in respect of conduct occurring outside Australia. The relevant conduct of Coombs occurred in Mexico. The issue is expanded on below.
Lack of Jurisdiction
In Pritchard’s Closing Submissions an argument advanced is that this Court lacks jurisdiction in this matter. It is submitted that Postorino claims relief by reference and pursuant to a number of statutory provisions immediately summarised in Postorino’s Statement of the Case, filed 22 May 2014, but when combined with those pleaded with the Second FASOC filed 24 September 2012 (at least insofar as they were pursued at the final hearing) comprised the following:
a)The FT Act, ss.42 and 68;
b)ASIC Act, ss.12DA and 12GF; and
c)The Corporations Act, ss.1041H and 1041I.
On behalf of Pritchard it is submitted that there is no pleaded claim by Postorino against him in reliance upon the Corporations Act, (hence the application for leave to amend) and there is no pleaded claim against Pritchard under the ASIC Act (the challenge to this statement is addressed below).
The submission on behalf of Pritchard is that the Federal Circuit Court of Australia (formerly known as the Federal Magistrates Court of Australia) is a statutory court with on such jurisdiction as is given to it under legislation (Federal Circuit Court of Australia Act 1999 (Cth) (the “FCC Act”), s.10) and has no inherent jurisdiction. Pursuant to ss.14 and 18 of the FCC Act, the Federal Circuit Court has both accrued and associated jurisdiction. However:
a)Section 14 does not extend the Federal Circuit Court’s jurisdiction so as to deal with contraventions where no part of the controversy arises under Federal Law; Australian Competition and Consumer Commission v Shell Company of Australia Limited (1997) 142 ALR 569 per Drummond J at 577 (72 FCR 386) (being a case considering the scope of the accruement provisions in the Federal Court of Australia Act 1976 (Cth) at ss.22 and 23); and
b)Section 18 does not create associated jurisdiction, if there is not a justiciable matter before the Court (that is, a controversy in respect of at least part of which the Court has jurisdiction); a “matter” comprises a justiciable dispute and not merely a legal proceedings: Re the Judiciary Act 1903-1920 and Re the Navigation Act (1921) 29 CLR 257 at 265.
In Closing Submissions tendered on behalf of Coombs, it is indicated that he agrees and adopts Pritchard’s submissions above concerning jurisdiction. By Postorino abandoning her claim based on [4]-[28] of the Second FASOC, Postorino has removed her claim from the jurisdiction of the Federal Circuit Court. This is denied by Postorino and it is argued that it is wrong that her claim, based on [4]-[28] of the Second FASOC, was abandoned.
Fair Trading Act Jurisdiction
The closing submissions on behalf of Pritchard, it is submitted that the Competition and Consumer Act 2010 (Cth) (“CCA Act”) was enacted by Federal Parliament and commenced operation on 1 January 2011. The relevant New South Wales legalisation was the Fair Trading Amendment (Australian Consumer Law) Act 2010 (NSW). Notwithstanding the enactment of the CCA Act, the FT Act continues to apply in respect of the conduct or other events occurring or arising prior to 1 January 2011 (FT Act, Schedule 5, clause 16). Neither the FT Act as it stood as at 31 December 2010 (prior to the commencement of the Australian Consumer Law Provisions in the CCA Act), nor in the FT Act as it now stands was there (or has there ever been) provision for the conferral of jurisdiction upon the Federal Circuit Court. The Federal Circuit Court has no jurisdiction to consider any claim, or to grant any relief, under the FT Act.
ASIC Act Jurisdiction
Pritchard’s closing submissions assert that s.12GJ of the ASIC Act identifies the jurisdiction of the Court to grant relief under that legislation. However, the Federal Circuit Court is not a court granted jurisdiction under the ASIC Act and, therefore, has no jurisdiction to consider any claim or grant any relief under the ASIC Act.
Further the ASIC Act does not apply to the facts of this case as s.12DA is limited to conduct “in relation to financial services”. “Financial product” is defined in s.12BAA and includes a security (s.12BAA(7)(a)). “Financial services” is defined in s.12BAB and includes a “dealing” in a financial product (s.12BAB(1)(b)). The notion of “dealing” is further defined in s.12BAB(7) as including “disposing of a financial product” (s.12BAB(7)(e)). However, s.12BAB(9) identifies that a person is “taken not to deal in a financial product if a person deals in the product on their own behalf.”Pritchard sold the shares in ETC to Postorino on his own behalf and the ASIC Act does not apply.
In Pritchard’s Closing Submissions it is stated that it has already been observed that Postorino pleaded no claim against Pritchard in reliance upon the ASIC Act. This observation is correct in respect of the Statement of Claim, Amended Statement of Claim, the Further Amended Statement of Claim which were all prepared by Postorino’s original solicitors, Marsden Law Group. However, in the Second FASOC, which is the document relevant to these proceedings and prepared by O’Neil Partners Commercial Lawyers, being the firm now representing Postorino, there is reliance on the ASIC Act against Pritchard and the relevant pleadings are:
35. By reason of the matters pleaded in paragraphs 29, 30, 31, 32, 33 and 34 above, the First Respondent has engaged in conduct in contravention of section 52, and/ or 51AB and/ or 51AC of the Trade Practices Act 1974 (Cth) and in contravention of section 12DA and/or 12CB of the ASIC Act 2001 (Cth).
36. By reason of the First Respondent’s contravention of the Act the Applicant has suffered loss and damage and is entitled, pursuant to section 82 of the Trade Practices Act 1974 (Cth) and section 12GA of the ASIC Act 2001 (Cth) to recover the amount of the loss or damage by action against the First Respondent.
37. By reason of the matters pleaded in paragraph 29, 30, 31, 32, 33, 34, 35 and 36 above, the Second and Third Respondents
was awere persons involved in the First Respondent’s contravention of section 52, and/ or 51AB and/or 51AC of the Trade Practices Act 1974 (Cth) in that the Second and/or Third Respondents:(a) aided, abetted, counselled and procured the contravention; or
(b) was knowingly concerned in and party to the contravention.
38. By reasons of the First and Second and Third Respondent’s contravention of the Trade Practices and ASIC Act the Applicant has suffered loss and damage and is entitled, pursuant to section 82 of the Trade Practices Act 1974 (Cth) and section 12GA of the ASIC Act 2001 (Cth) to recover the amount of the loss or damage by action against the Second Respondent as a person involved in the contravention.
Postorino, in response to Pritchard’s Closing Submissions, submits that reference in [77]-[79] above is beside the point as the submission is wrong for two reasons:
a)In point of fact it is wrong as Pritchard was not the vendor of the ETC shares to Postorino as Pritchard’s company, Bond Street, was the vendor. Consequently, s.12BAB(9) has no application. Section 12BAB(9) states:
(9) A person is taken not to deal in a financial product if the person deals in the product on their own behalf, unless:
(a) the person is an issuer of financial products; and
(b) the dealing is in relation to one or more of those products.
b)In point of law the submission is wrong as Pritchard provided a financial service because he provided financial product advice (s.12BAB(1)(a) and (5) of the ASIC Act) or provided a service otherwise provided in relation to a financial product (s.12BAB(1)(f) of the ASIC Act). Section 12BAB(9) does not condition either those parts of the definition. The point is to be made, it is not that Postorino needs to rely on the ASIC Act, it is to highlight the high level of caution which is required in considering Pritchard’s submissions. The proposition advanced is wrong in point of fact and law. In s.12BAB the meaning of financial services – when does a person provide a financial service:
When does a person provide a financial service?
(1) For the purposes of this Division, subject to paragraph (2)(b), a person provides a financial service if they:
(a) provide financial product advice (see subsection (5)); or
…
(f) operate a financial market (see subsection (15)) or clearing and settlement facility (see subsection (17)); or
…
Meaning of financial product advice
(5) For the purposes of this section, financial product advice means a recommendation or a statement of opinion, or a report of either of those things, that:
(a) is intended to influence a person or persons in making a decision in relation to a particular financial product or class of financial products, or an interest in a particular financial product or class of financial products; or
(b) could reasonably be regarded as being intended to have such an influence;
but does not include anything in:
(c) a document prepared in accordance with requirements of Chapter 7 of the Corporations Act, other than a document of a kind prescribed by regulations made for the purposes of this paragraph; or
(d) any other document of a kind prescribed by regulations made for the purposes of this paragraph.
Corporations Act Jurisdiction
Pritchard submits that Part 9.6A of the Corporations Act contains the provisions identifying the grant of jurisdiction and on review of ss.1337B to 1337G, the Federal Circuit Court is not a court granted any jurisdiction under the Corporations Act: McDermott v King & Anor [2013] FCCA 2348 at [1].
Pritchard submits there is no claim pleaded by Postorino pursuant to the Corporations Act. As indicated above, this statement is true in respect of the Statement of Claim, the Amended Statement of Claim and the Further Amended Statement of Claim prepared by Marsden Law Group, however the Second FASOC does make pleadings against Pritchard under the provisions of the Corporations Act, as follows:
47. By reason of the facts pleaded in paragraphs 1 to 46 above, neither of the First and/or the Second and or the Third Respondents held a licence to deal in financial products under s911A of the Corporations Act (CA).
48. The entry into the Agreement involved the making a financial investment within the meaning of s.763A and s.763C of the CA.
Particulars
a) The financial investment was the Applicant paying money to the First Respondent or to the Second Respondent as the representative of the First Respondent for the issue of shares.
b) Further particulars may be provided prior to trial.
49. By reason of paragraph 48 the First, Second and/or Third Respondents were providing a financial service by dealing in a financial product within the meaning of s 766A of the CA.
50. On or about 30 August 2012 the Applicant gave a notice to the First, Second and Third Respondents as non-licencee’s that it wished to rescind the financial investment pursuant to s.925A of the CA.
51. By reason of paragraphs 47 to 50 herein and ss 925B and 925E of the CA the financial investment is unenforceable against the Applicant.
TP Act Jurisdiction
In Postorino’s response to the Closing Submissions of Pritchard and Coombs, she claims that the submissions regarding jurisdiction are erroneous as they start from an erroneous proposition, in that Pritchard’s submissions start from the wrong premise as he incompletely summarises the case pleaded by Postorino. Pritchard has ignored the case pleaded and opened under the TP Act (an Act amended and remained the CCA Act). It is noted that transitional provisions do not need to be considered in any detail as the effects are described in Australian Competition and Consumer Commission v MSY Technology Pty Limited & Ors(No.2) (2011) 279 ALR 609 per Perram J at [4]-[5]. The CCA Act is the same Act as the TP Act, although renamed and amended. Contrary to Pritchard’s submissions Postorino pleaded (and opened) a case against ETC for a contravention of s.52 of the TP Act (Statement of Claim, filed 27 January 2009, [29]-[36]). Although not necessary to the analysis, Postorino pleaded and opened a case that Pritchard and Coombs were knowingly concerned in those contraventions (Second FASOC at [37]-[38], opening paragraph [14]-[33]). Contrary to Coombs’ submissions, none of that was abandoned.
It is submitted that jurisdiction is conferred on the Federal Circuit Court in relation to the claim under the TP Act (and the CCA Act), subject to a presently irrelevant gap of $750,000 on claims (s.86AA of the TP Act as it stood at the time of events (2008) and s.138A of the current CCA Act). That is, contrary to Pritchard’s submissions, this Court has jurisdiction in relation to pleaded claims.
Engaging the Court’s Jurisdiction
On behalf of Postorino it is submitted that in light of the argument raised by Pritchard and Coomb it is necessary as well to identify how the Court jurisdiction is engaged in the relation to the balance of Postorino’s claim. It is submitted that the Court’s jurisdiction having been engaged by the TP Act claim, s.18 of the FCC Act has operation. By s.18 the Court has jurisdiction in relation to “matters” which are “associated with matters in which the jurisdiction of the [Court] is involved”. Section 18 of the FCC Act is in terms relatively the same as s.32(1) of the Federal Court Act 1976 (Cth).
The operation of s.32 (and thus, in effect, s.18 of the FCC Act) has been considered in various cases, most of which are discussed by his Honour Allsop J (as he was then) “Federal Jurisdiction and the Implications of the Federal Court of Australia in 2002” (2002, 23 Australian Bar Review 29 (“Allsop – Article”); see also Macteldir Pty Ltd v Dimovski & Anor (2005) 226 ALR 773 per Allsop J (as he was then) at [67]-[70]) where he stated:
67. With the utmost respect, I cannot agree. The only High Court authority is to the effect (conformably with the words of s 32) that s 32 of the FCA Act deals with separate and distinct matters. It is not what is sometimes called “accrued” jurisdiction. This latter expression may be better expressed as the limit of the matter or controversy. Associated jurisdiction under s 32 is the conferral of jurisdiction in another, different, federal matter, in respect of which jurisdiction could be, but has not been, conferred. The word “associated” is not a synonym for “accrued”. In Philip Morris Inc v Adam P Brown Male Fashions (1981) 148 CLR 457, Barwick CJ at 476 indicated that “associated” embraced matters which may be disparate from each other, that is, not within the “accrued” jurisdiction of the already conferred federal matter. Gaudron J in PCS Operations Pty Ltd v Maritime Union of Australia (1998) 153 ALR 520 , 521 was of the view that Barwick CJ’s views were implicit in the other judgments in that case. (See Philip Morris at 494–95, 518, 521–22.)
68. An example of the impact of associated jurisdiction is provided by Allied Mills Industries Pty Ltd v Trade Practices Commission (No 1) (1981) 34 ALR 105. There a cross-claim was brought by a party to the litigation against the Trade Practices Commission. Leaving aside the question of whether this fell within the whole controversy anyway, s 32 gave the Federal Court jurisdiction which it otherwise may not have had (the cross-claim being founded on common law and equitable causes of action) because the Trade Practices Commission was the Commonwealth for the purposes of s 75(iii) of the Constitution.
69. Another example of the use of s 32 can be seen in the dispute in PCS v MUA. There, the applicants claimed breach of an award and an enterprise agreement, contravention of the Workplace Relations Act 1996 (Cth) and of the Corporations Law against certain companies in the Patrick Group. The applicants also alleged two common law causes of action for conspiracy against the “Patrick parties”, the National Farmers Federation and the Commonwealth. The claim against the Commonwealth fell within s 75(iii) and jurisdiction to hear it was not otherwise conferred on the Federal Court. Section 32 brought it within the Federal Court’s jurisdiction. Gaudron J rejected the proposition that s 32 was limited to “matters which arise under other laws made by Parliament”. This was how Gibbs J put it in Philip Morris v Adam P Brown Male Fashions. Her Honour said that it was at odds with the words of s 32 and the views expressed by Aickin J and Wilson J in Philip Morris v Adam P Brown Male Fashions at 535 and 547 that s 32 extends jurisdiction to associated matters falling within ss 75 and 76 of the Constitution and was contrary to Turner v Owen (1990) 26 FCR 366 and Businessworld Computers Pty Ltd v Australian Telecommunications Commission (1988) 82 ALR 499, 500–1(Gummow J).
70. The possible relevance of associated jurisdiction under s 32 of the FCA Act in Pallas as recognised by Beaumont J and its less than central relevance here (though not for the reasons identified by the Full Court) is the introduction of s 39B(1A)(c) into the Judiciary Act in 1997. The possible role Beaumont J saw for associated jurisdiction if the settlement was between parties to the controversy was that the new matter (if it was not part of the existing controversy and so part of the accrued jurisdiction as his Honour also said) might well be a matter arising under a law of the Parliament. In 1985, Parliament had not conferred jurisdiction in terms of s 76(ii) of the Constitution on the Federal Court (though it could have done so). In 1997, it did so with the insertion of s 39B(1A)(c) into the Judiciary Act by s 3 of, and item 1 of Sch 11 to, the Law and Justice Legislation Amendment Act 1997 (Cth). Thus, Beaumont J in Pallas discussed the relevance of s 32 of the FCA Act. Now, the better view as to the relevant enquiry is whether s 39B(1A)(c) applies. It is to be noted that in his reasons in July 1985 Beaumont J did not refer to LNC Industries v BMW which had been handed down the previous October, but was not published in the Commonwealth Law Reports until 1985.
Further on behalf of Postorino, it is submitted that the following propositions are well established:
a)“Matter” as used in s.18 of the FCC Act means “the justiciable controversy between the actors to it comprised of the substratum of facts and clams representing or amounting to the dispute or controversy between or among them”; Allsop – Article at [35]; Re Wakim; Ex Parte McNally & Anor (1999) 198 CLR 511 per Gummow and Hayne JJ at [139]-[141];
b)Determine the essential practical question of whether there is one matter “depends on what the parties have done, the relationship between or among them and the law which attaches rights or the liabilities to their conduct and relationships”: Re Wakim, Ex Parte McNally (supra) at [140], approving Fencott v Muller (1983) 152 CLR 570 per Mason, Murphy, Brennan and Deane JJ at 608. The practical test is whether, if the proceedings were tried in different Courts, there would be a risk of inconsistent findings: Re Wakim (supra) at [141]. While that is not precisely the same question as the scope of s.18, the present analysis is to the same effect (at least of the level of generality required to determine this case). That is because, whatever the scope of s.18, s.18 extends (i.e. includes and goes beyond) the Court’s accrued jurisdiction: Philip Morris Inc & Anor v Adam P Brown Male Fashions Pty Limited (1981) 148 CLR 457 at 475, 478 per Barwick CJ; Allsop – Article at 48, citing inter alia, Allied Mills Industries Pty Ltd v Trade Practices Commission (No.1) (1981) 34 ALR 105. This is not a borderline case. In this case it is plain there is only one “matter” and relevantly s.18 has operation. The same representation which found the liability of ETC found the liability of Pritchard and Coombs, whether because they were knowingly concerned in or because they made the representations (at least Pritchard, arguable, made the representation in a way which bound ETC). If ETC’s liability was tried in this Court and Pritchard and Coombs’ liability tried in another Court, there plainly could be inconsistent findings. In short, this case involves two representations, each of which it is alleged that all three of ETC, Pritchard and Coombs made: ETC and Pritchard by the same actual conduct in relation to the first, and ETC, Pritchard and Coombs by the same conduct in relation to the second, together with and knowingly concerned allegations. The conduct arguably contravened various statutory provisions including s.52 of the TP Act, s.1041H of the Corporations Act, s.12DA of the ASIC Act and s.42 of the FT Act. The test can also be put in the negative. If several proceedings could not be joined in one proceeding, then there is unlikely to be a single “matter”. Here the proceedings were properly joined; orders for the joinder of Coombs were made by the Court and remain unchallenged. No complaint has ever been made re: misjoinder in the sense of the claim not being properly joined; and
c)A “matter” once within jurisdiction is forever within jurisdiction. “once a party involved in a controversy asserts his position and that amounts to the assertion of the matter arises under Federal Law… the whole matter or controversy is Federal”: Allsop – Article at 41ff; Australian Securities and Investments Commission (ASIC) v Edensor Nominees Pty Ltd & Ors (2001) 204 CLR 559 per Gleeson CJ, Gaudron and Gummow JJ at [7]. There is possibly an exception if the claim attracting jurisdiction is “colourable” (Unilan Holdings Pty Ltd v Kerin (1993) 44 FCR 481 at 481-482), but there is no assertion (nor could there be) that the TP Act claim was colourable (in the sense of lacking proper purpose, not by reference to its strength or weakness: Allsop – Article at 45. Unilan (supra) further demonstrates the point: there the TP Act claim had been struck out by the Federal Court by the analogy that s.18 of the FCC Act retained jurisdiction in relation to a common law negligence misstatement claim.
Pritchard in Supplementary Submissions contends that it is not correct that a mere assertion of a federal claim will invoke the federal jurisdiction of the Court as suggested at [87(c)] above. It is submitted that the correct position is accurately summarised in Matheson v Findex Australia Pty Ltd (2011) 252 FLR 197 per Lucev FM (as he was then) at [13]-[31] and, particularly, at [21] and [24]. Postorino is wrong in asserting that the mere fact that her claim against ETC pursuant to what was s.52 of the TP Act enlivens jurisdiction. The assertion of a federal claim will not secure federal jurisdiction (and hence it will not act as a foothold, from which then to assert the existence of an associated jurisdiction) where:
a)The claim is “unarguable”: Burgundy Royale Investments Pty Ltd & Ors v Westpac Banking Corporation & Ors (1987) 18 FCR 212 at 219 per (Bowen CJ, Morling and Beaumont JJ), where their Honours decided R v Cook; Ex Parte Twigg (1980) 147 CLR 15 per Gibbs J at 26, “untenable”, “bound to fail” or “hopeless” thereby properly being classified as “colourable”. The entire abandonment by Postorino of any argument pursuant to the TP Act was a fair reflection of the entire lack of any merit in that claim. Postorino’s Counsel expressly conceded that the claim was one in relation to a “financial service” (T/5.21-23). At that passage, Mr Giles stated:
Giles: …It’s a financial service if you speak about a security, and a share is a security. There is no difficulty with that.
(T/5.21-23)
This is further confirmed by the express concession in Postorino’s Submissions-in-Reply “as is clear, Pritchard provided a financial service because…” and/or
b)The legislation, pursuant to which the claim is brought, expressly denies the availably of the claim, including by stipulating a jurisdictional fact, without which jurisdiction is not enlivened; and/or
c)The part of the claim, which might be a federal claim, is a “trivial or insubstantial aspect of the controversy”: Fencott v Muller (supra) at 609-610 per Mason, Murphy, Brennan and Deane JJ. See also WG & B Manufacturing Pty Ltd v Tesla Farad Pty Ltd [1999] FCA 1776 per Finkelstein J at [12]-[13].
The onus resides with Postorino to ensure there is a proper claim with proper particulars, so that Pritchard and Coombs can contest the case as being put against them.
The arguments advanced by the respective parties in relation to the two representations are set out in detail above and do not need to be repeated. The remaining questions are whether there has been misleading and/or deceptive conduct, and if Postorino has advanced sufficient particulars to prove the allegation to a civil standard.
These substantive claims and counter claims made by Postorino and Pritchard are elucidated above and both appeared to give evidence in an honest and forthright manner, consistent with their respective positions in their pleadings. In support of her case Postorino called Wollstein and Miotti as witnesses, who appear to have come forth voluntarily and without suggestion that they were reluctant to participate, give evidence and be submitted to cross-examination. I look to the testimony of these two individuals to corroborate evidence.
Wollstein, on 28 February 2014 swore an affidavit that had been drafted and finalised over a period of five or six weeks prior to being sworn. In cross-examination he gave the following explanation:
Bedrossian: …Now, you swore your affidavit on 28 February 2014?
Wollstein: Yes.
Bedrossian: And did anyone assist you to prepare it?
Wollstein: No
Bedrossian: You did it all yourself?
Wollstein: In terms of writing the affidavit, no. I didn’t do all the writing myself. I did it verbally and that verbal – this is a translation of my verbal statement that Mr Munce prepared and I looked through with a fine-tooth comb and it is a true and accurate reflection of what I had stated.
Bedrossian: So you’re saying that from start to finish, in one uninterrupted process, you dictated to Mr Munce your affidavit? He just typed it out and that’s exactly as dictated first time?
Wollstein: No. That’s not what I’m saying. I’m saying that Mr Munce attended on a couple of occasions and I, if you like, told the story as I recalled it and I got a draft copy of it. I, in my own hand, made the amendments that – where there was a misunderstanding and anything that I had said had been not construed in the accurate way that I wanted it to be and I gave that draft back to him and he came back with another copy of that with those amendments in it and I was happy to sign on that – on the dotted line – that that is exactly what I had said.
Bedrossian: And so it’s not inaccurate to say that some of the words put into the affidavit are Mr Munce’s words, that is, his interpretation of what he thought you intended? That’s right, isn’t it?
Wollstein: That’s correct yes.
Bedrossian: And in the course of going backward and forward with Mr Munce, however many times that occurred, he – it is correct, isn’t it that he would raise with you topics or issues that he wanted you to give evidence about? I’m not suggesting you that he told you what evidence to give. I am saying he might have raised with you, “we’ve talked about this issue, but you haven’t talked about that. What do you say about that?” Those sought of things?
Wollstein: No. That’s not how it occurred. Essentially, this whole period of time and notwithstanding that the company was also a party to these proceedings – essentially, the whole period of time covered by Ms Postorino’s taking up of the shares in the company was what I wanted to cover from start to finish as I recalled it. Mr Munce didn’t prompt me to make any statements about any particular area. In fact, I recalled some things that weren’t in any way associated with any of the statements that I had seen from Mr Pritchard and I put those to Mr Munce in the most clear and comprehensive way that I could, but how to write that in the form of a statement I was not skilful at doing, so he summarised my words in that way and, as I say, I went back then and made the corrections as I saw them and then I was happy that that correctly reflected exactly what I had told him about that whole period of time from start to finish.
Bedrossian: Now, the process from your initial verbal instructions to Mr Munce to the finalisation of your affidavit on 28 February 2014, was that done over a period of days or weeks, or what?
Wollstein: Weeks, I would say. Weeks.
Bedrossian: Two, three, four weeks, maybe?
Wollstein: Look, I don’t recall the exact amount, but I would say it would be more like five or six weeks?
Bedrossian: Sure. Now, you haven’t previously sworn any affidavit in these proceedings have you?
Wollstein: No.
Bedrossian: And you haven’t previously sworn or prepared any affidavit in relation to those issues in any other proceedings, have you?
Wollstein: No.
(T/70.21-71-24)
The Wollstein Affidavit was prepared many years after the events in question and he acknowledges that at the time his recollection of events was not as good as it had been back in 2008-2009. Relevantly, he stated:
Bedrossian: Now, you acknowledge, don’t you, that your recollection of these events in February or five or six weeks before February 2014 is not as good as it was back in 2008 or 2009?
Wollstein: Absolutely.
Bedrossian: And that, particularly where you set out or purport to set out terms of conversations, there’s every likelihood that you’re mistaken – I’m talking at a general level – that you’re mistaken about your recollection of context or timing or the words spoken? You accept that?
Wollstein: I accept that the words spoken may not be exact, that the context may not be exact, but the general gist or thrust or meaning of what was said was clear in my mind.
(T/72.1-10)
The Wollstein Affidavit states at [71]-[72]:
71. I have received Bob Pritchard’s affidavit that he has sworn in these proceedings.
72. At paragraph 4 of his affidavit, he states that he has not had any involvement by way of any type of decision-making on behalf of ETC since he creased to be a director. While this statement is true as far as it goes, Bob Pritchard did not have any involvement by way of decision making capacity while he was a director. His involvement with ETC before he resigned as a director was to market the company so he could raise funds for it, although he did also attend directors meetings.
Against these circumstances I now focus on a central issue in Postorino’s case which concerns the Letter of Intent document between ETC and Mithrel-Fluoro. It is the existence and associated consequences of this document that is claimed by Postorino to have induced her into the purchase of the ETC shares. Wollstein openly acknowledged that he was unable to recall with any specific certainty, effects or sequences of events and, under cross-examination, gave evidence that was directly inconsistent with his affidavit. During the course of cross examination Wollstein:
a)Acknowledged that, if there was any doubt about anything to do with negotiations in Russia, he would have contacted Miotti;
b)Acknowledged that he was “less than clear” in his recollection as to whether the Letter of Intent documented was from Miotti or Pritchard;
c)Explained his uncertainty in respect of these events on the basis that Pritchard had suggested a particular marketing/commercial model and that it was possible that Miotti had prepared the Letter of Intent document so as to reflect that model; and
d)Then acknowledged “that it is a possibility” that the Letter of Intent document came from Miotti not Pritchard.
However, Wollstein was evasive and non-responsive when it came to a series of questions and answers about whether or not Pritchard was either acting as a director or treated by Wollstein substantially as though he was a director of ETC.
Miotti states the problem about this issue is:
a)That he had himself expressly put contrary evidence in his own affidavit;
b)That he later acknowledged that basic information about ETC, such as its financial position regarding clients or potential clients, was information not provided to Mr Pritchard, other than when Pritchard required it for a particular marketing purpose; and
c)That Miotti himself gave evidence consistent with [72] of the Wollstein Affidavit, which was inconsistent with Wollstein’s asserted position during cross-examination, namely that Wollstein made most decisions on behalf of ETC (T/57.32-60.11).
Wollstein could be expected to have known that a significant issue in these proceedings concerned the arrangements reached between him on behalf of ETC and Professor Zvyagin on behalf of Mithrel-Fluro, since a portion of the Wollstein Affidavit, upon which Postorino placed great reliance dealt with the issue and circumstances in respect of the Letter of Intent. However, Wollstein failed to identify in his affidavit that the Letter of Intent document was the actual arrangement between ETC and Mithrel-Fluro rather it was a document prepared for the purposes of appearances in Russia.
Under cross-examination Wollstein’s evidence in respect to the arrangement of the directors of Mithrel-Fluro was as follows:
Bedrossian: And so the position that you told Mr Pritchard on 10 August 2008, and as I said, the position that you were saying to everyone in the days, weeks and months after then, was that there was an arrangement with Mithrel-Fluoro; correct?
Wollstein: Yes.
Bedrossian: And you were saying that not only because you believed that to be the case, correct?
Wollstein: Yes.
(T/131.42-47)
The Court was being invited to accept Wollstein’s evidence that there was actually an exclusive agency agreement in place between ETC and Mithrel-Fluro, despite Wollstein’s adamant denial in his earlier cross-examination, which is recorded as follows:
Bedrossian: … Mr Wollstein, on 10 August 2008 when you spoke with Mr Pritchard after you had signed the document, you misstated the true position to Mr Pritchard, didn’t you?
Wollstein: No, I did not.
Bedrossian: You knew that you had misstated the position as well?
Wollstein: No, I did not.
(T/114.25-29)
Near the completion of Wollstein’s cross-examination, the following change occurred:
Bedrossian: And so the position that you told Mr Pritchard on 10 August 2008, and as I said, the position that you were saying to everyone in the days, weeks and months after then, was that there was an arrangement with Mithrel-Fluoro; correct?
Wollstein: Yes.
(T/131.42-45)
I am not satisfied that the latter piece of evidence should be accepted over the prior material. Both comments were made as part of sworn testimony and are of vital significance to these proceedings. The apparent conflict that arises from these two questions puts in doubt the accuracy and reliability of Wollstein’s evidence.
I also note Wollstein’s attempts, in his affidavit evidence, to attribute any independent responsibility for information contained in the 10 August 2008 email to Pritchard with suggestions it was an inaccurate report to the MFOBS team of what Wollstein had informed Pritchard.
Again the Court is being invited to accept Wollstein’s change of position in his evidence during cross-examination on the basis it was open to Postorino’s counsel to re-examine Wollstein. However, that step was not taken. My view in relation to the invitation is contrary to the submission as I believe that it puts the integrity of Wollstein’s evidence further in doubt.
If ETC did actually have an exclusive licensing arrangement in place with Mithrel-Fluro, the Letter of Intent simply was not an accurate representation, nor was it intended to be by Wollstein or Professor Zvyagin to be an accurate reflection of the true contractual arrangement between the parties. It does not assist Postorino in establishing the material that she is relying upon in her claim.
The other witness called by Postorino in her case was Miotti who states that he is a lawyer in the employ of Romans and Romans Lawyers of Greenslopes, Queensland. Miotti prepared an affidavit in the proceedings. His evidence identifies that Wollstein did operate ETC as his own company and as though he were the sole director and the ultimate decision-maker on all matters of any significance. In addition it confirmed that matters of legal importance would be the subject of discussions of Wollstein and Miotti, not Pritchard.
In cross-examination Miotti was asked about [4] of the Miotti Affidavit. He stated:
Bedrossian:… in paragraph 4 of your affidavit, you say:
I would advise Mr Wollstein on a regular basis about matters relating to his business; and I took care of its legal administration, such as completing whatever documents were necessary to facilitate various share transactions.
Bedrossian: Now you stick by that as an accurate description of your tasks or role within the company?
Miotti: Yes I do.
Bedrossian: And so it’s a fair conclusion from that, that yours was a – and I don’t say this disrespectfully, to down play it – but yours was an administrative, legal or facilitative contribution, but the decision were by Mr Wollstein?
Miotti: I generally agree that you say, yes.
(T/58.38-59.4)
Miotti gave some background of the development of the intellectual property. Various shareholders, one being Uniquest Pty Ltd a subsidiary of the University of Queensland, undertook the early technological development of a fluorescent type of liquid used on golf balls which could be used for tracking and locating the items. The evidence of both Wollstein and Miotti is limited in its extent in that it places the claims in some context, but makes no substantial contribution in the assessment to the issue of onus and, consequently, it ultimately comes to an assessment of the evidence produced by Postorino in support of her claims.
I now turn to Postorino to evaluate her evidence to determine whether she has advanced sufficient particulars to prove the allegation to a civil standard. The relevant sections of the various acts nominated above require an obligation in trade or commerce to not engage in misleading or deceptive conduct, which is a comprehensive provision of wide impact. It establishes a norm of conduct and a failure to observe that norm has consequences detailed in the respective acts. The legislative purpose is to provide informed commercial activities based on accurate information.
In Australian Competition and Consumer Commission v Dukemaster Pty Ltd [2009] FCA 682 a summary of the principles to be applied in relation to s.52 of the TP Act is provided and I adopt that approach in relation to the matter currently before this Court, in that:
The test is objective and a court must determine the question for itself, but the section is not designed for the benefit of those who failed to take reasonable care of their own interests.
The First Postorino Affidavit indicates that Postorino has worked as a Management Consultant and Strategy Manager for over ten years. At the time of the hearing she way employed by Optus as a Strategy Manager, and had previously worked as Macquarie Bank in its Corporate Strategy division as a Principal Consultant but not as an Investment Analyst. Postorino’s only professional experience in share trading occurred when she completed a three month internship with Goldman Sachs in 1998, otherwise share trading in her personal capacity had occurred at various stages over a period of around twenty three years.
A copy of Postorino’s current curriculum vitae attached to the First Postorino Affidavit ( Annexure “SP1”, pp.2-5) which stated:
Work History
OPTUS 2012–Current
Strategy + Portfolio Manager (contract role), Transformation/Customer Experience· Managed CE team work stream for cross-functional strategic project.
· Developed framework for assessing strategic and CE risks for upcoming major product launch.
· Liaised with and influenced stakeholders across organisation on embedding a customer centric view.
· Mapped and analysed process improvement opportunities along customer corridor.
LANDLORDS CHOICE 2010-2012
Web-Based Start-Up Providing Services to Property Investors
Managing Director· Advised business founder on the business model, marketing and strategy.
· Started managing the business in early 2010 and obtained Real Estate Agent license.
· Increased revenue by over 400% within 6 months of becoming MD and started generating profits within 3 months.
· Designed and managed implementation of marketing plan, focusing on online and social media.
· Monitored the regulatory environment and obtained all required licenses for the company to comply with the laws and regulations of the real estate industry.
· Managed accounting, web design and operations, as well as supplier and customer relationships.
INDICO CONSULTING 2006-2012
Principal· Evaluated investment proposals and advised on valuations for various businesses.
· Advised start-up companies on commercialisation, revenue growth and cost reduction strategies in the entertainment, publishing, retail and green technology sectors.
· Designed business models and wrote business plans for entrepreneurs.
· Analysed and provided advice on exit strategies for privately owned, mature businesses.
MACQUARIE BANK LTD 2006
Principal Consultant, Business Improvement and Strategy· Planned and carried out major business review in property finance division, comprising strategy, process and customer reviews; Gained buy-in from senior management to implement recommended initiatives and developed implementation plan.
· Reviewed CRM capability of equity markets group and made recommendations on how to improve customer relationship management.
· Managed project planning and approval process for acquisition of foreign listed mortgage originator
· Carried out M&A related activities including financial and risk analysis, and integration planning.
WESTPAC, Secured Finance 2004-2006
Senior Manager, Process Improvement and Customer Experience· Carried out cost review within Secured Finance, identifying cost saving opportunities of $20m.
· Implemented cost saving opportunity reducing spend for outsourced service by over 30% whilst increasing productivity and service levels; managed the implementation of other initiatives.
· Implemented process enhancements across key functions, e.g. Settlements and Releases, reducing rework and improving customer experience.
· Planned and managed a business process review to implement recommended initiatives in order to significantly reduce rework.
JUPITERS LIMITED/TABCORP 2002-2004
Australia/India
Business Development Executive…
THE BOSTON CONSULTING GROUP 1999-2001
Australia/New Zealand
Consultant…
GOLDMAN SACHS INTERNATIONAL SUMMER 1998
New York and London
Summer Associate, Equity Division, Sales and TradingThe First Postorino Affidavit sets out the circumstances of how Postorino became involved with Pritchard and Coombs in the venture defined MFOBS. The parties initially met in early 2008 while working for a business known as Adpro Management which was assessing the viability of reviving the “Miss Australia” competition. The Affidavit states the following:
20. Before my involvement with Adpro creased, Mr Coombs and I had a discussion about my business interests.
21. I cannot now recall whether the discussion was in person or by telephone.
22. During the discussion, Mr Coombs and I said words to each other to the following effect:
Mr Coombs: ‘What kind of business interests do you have?’
Me: ‘Amongst other things like property and the share market, I am interested in business start-ups’.
Mr Coombs: ‘Bob Pritchard is also very interested in business start-ups. He receives a lot of business proposals and ideas from entrepreneurs but does not have the capacity to assess all of them. He and I are looking at starting up a new business venture to help commercialise those proposals and are looking for capital investors. Would you be interested in that venture?’
Me: Yes, I might be interested.
Initial discussions with Mr Coombs and Mr Pritchard about the New Venture
23. Soon after that conversation, I met with Mr Coombs and Mr Pritchard at a café called Dee Bee’s at Double Bay.
24. We met to business the new business venture (New Venture).
25. At the meeting, Mr Pritchard and I said words to each other to the following effect:
Mr Pritchard: ‘I do not only want the company that the New Venture will operate through to provide marketing advice, but I envisage that the new company will take a stake in the entrepreneur’s business to see the business beyond the concept stage through to commercialisation. Tony Coombs and I are looking for capital investors to start this New Venture. Would you like to invest in it?’
Me: ‘I am interested but I would like to investigate the business ideas more thoroughly before I make any kind of commitment’.
26. Following this meeting, we held a number of other meetings over the following months to discuss the New Venture.
27. A few weeks after our first meeting, Mr Coombs introduced Mr Pritchard and me to Jane Matis.
28. We met at Ms Matis’s home in Vaucluse and had a discussion.
29. During the discussion, Mr Coombs introduced Ms Matis to me as someone who had built and sold a number of businesses, who had done some property renovations, who was interested in start-ups and who was willing to invest capital in businesses’.
30. Following that meeting, we met on a number of occasions at Ms Matis’s house and, at other times, at the Double Bay café. At those meetings, we discussed the New Venture.
31. The meetings were not regular. Sometimes they would be three times a week while at tother there would not be one for a few weeks. Mr Coombs lived in Melbourne and we worked the meetings around his availability.
…
33. By around July 2008. We had agreed the following about the New Venture:
(a) we were to operate the New Venture through a company known as Marketforce One Business Strategies Pty Ltd (MFO Business Strategies);
(b) Mr Pritchard, Mr Coombs, Ms Matis and I were to be directors of MFO Business Strategies, each having separate responsibilities;
(c) Mr Pritchard’s responsibilities were to provide:
(i) an ongoing stream of start-up proposals;
(ii) shares in the start-ups that he had an existing agreement with; and
(iii) part of the director’s fees that he was receiving in respect of those agreements.
(d) Mr Coomb’s responsibilities were to:
(i) provide marketing services; and
(ii) assess the commercial viability of start-up companies
(e) Ms Matis’s responsibilities were to:
(i) contribute capital;
(ii) provide marketing advice; and
(iii) assess the commercial viability of start-up companies;
(f) my responsibilities were to:
(i) contribute capital;
(ii) provide strategy advice; and
(iii) assess the commercial viability of start-up companies;
(g) in exchange for our respective responsibilities, we were to be rewarded as follows:
(i) Mr Pritchard was to receive a larger salary and shares in MFO Business Strategies;
(ii) Mr Coombs was to also receive a larger salary and shares in MFO Business Strategies;
(iii) Ms Matis was to receive a smaller salary and shares in MFO Business Strategies;
(iv) I was to receive a smaller salary and shares in MFO Business Strategies.
34. Mr Pritchard, Mr Coombs, Ms Matis and I spoke about MFO Business Strategies being separate from Mr Pritchard’s existing company names Marketforce One Pty Ltd (MFO). I did not receive any shares in MFO.
35. A further company, Market Force One Media Pty Ltd was set up by Mr Coombs and Mr Pritchard and related to media deals that Mr Coombs had already arranged.
36. I had started working for MFO Business Strategies by around May 2008. My work involved analysing new business opportunities that had arisen. However, it did not include any dealings with the First Respondent.
37. Before these proceedings commenced, I had no personal interactions with anyone from the First Respondent about matters relating to the First Respondent other than Mr Pritchard.
38. I have subsequently learned that there is an agreement between the First Respondent and MFO Business Strategies. Behind Tab 4 of Exhibit SP-1 is a true copy of the agreement dated 1 July 2008 that has been obtained through these proceedings. I was not aware of that agreement at the time it was signed or until after the commencement of these proceedings.
39. By around July 2008, we had agreed in principle to the arrangements I have listed above but before I invested capital in MFO Business Strategies, I wanted to see that Mr Pritchard had first fulfilled his responsibilities.
40. A shareholder agreement for MFO Business Strategies was produced in around July 2008.
41. Under the arrangements, MFO Business Strategies was going to receive 5% of the First Respondent’s shares held by Mr Pritchard. The 5% was to build the MFO Business Strategies asset base.
42. Ms Matis invested in both MFO Business Strategies and MFO Media.
43. I invested $15,000 as a deposit in MFO Business Strategies in August 2008 but ultimately decided against continuing with that investment. I requested my deposit be refunded in late 2008 and it was.
It is simple to recognise the fundamental principle that the taking (or not) of reasonable care is itself a question of fact which, in common with the character of the conduct, is “to be decided by considering what is said and done against the background of all surrounding circumstances” (Taco Co of Australia Inc v Taco Bell Pty Ltd (supra) at [202]; Campbell v Backoffice (supra)). This is the reason that Postorino’s knowledge of evaluating investment proposals and advising on start-up companies as explored above sets the context within which the character of Postorino’s conduct must be assessed as a whole. In Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 per Gibbs CJ where his honour stated:
Section 52 does not expressly state what persons or class of persons should be considered as the possible victims for the purpose of deciding whether conduct is misleading or deceptive or likely to mislead or deceive. It seems clear enough that consideration must be given to the class of consumers likely to be affected by the conduct. Although it is true, as has often been said, that ordinarily a class of consumers may include the inexperienced as well as the experienced, and the gullible as well as the astute, the section must, in my opinion, be regarded as contemplating the effect of the conduct on reasonable members of the class. The heavy burdens which the section creates cannot have been intended to be imposed for the benefit of persons who fail to take reasonable care of their own interests. What is reasonable will of course depend on all the circumstances…
(emphasis added)
The prohibitions in s.52 of the TP Act and the equivalent legislation are not enacted for the benefit of people who fail to take reasonable care of their own interests: Australia Competition and Consumer Commission v TPG Internet (supra) at [39].
In Campomar Sociedad, Limitada v Nike International Limited (supra) the High Court held it was necessary to consider the likely reaction to the representations by ordinary or reasonable members of the class of person to whom the representation is directed. In the context that Pritchard, Coombs, Postorino and Ms Matis were all members and directors of MFOBS and, although all had nominated responsibilities, they all shared the task of assessing the commercial viability of start-up companies. In effect, they all shared a high degree of sophistication and knowledge of the sphere in which they operated. With that baseline a very heavy burden falls on Postorino to establish to the Court’s satisfaction that the contents of the two representations which are being pursued in these proceedings were misleading and/or deceptive to a population class formed by the membership of MFOBS.
All of the members of MFOBS would have been acutely aware that they were dealing with entrepreneurial start-up companies which had an extraordinarily high risk of failure. In the case of ETC, the objective was to commercialise intellectual property developed by Uniquest Pty Ltd with a yet to be identified end use. Postorino’s and Ms Matis’ primary roles were to contribute capital in the venture and to provide marketing and strategic advice to achieve that goal. In General Newspapers Pty Limited& Ors v Telstra Corporation [1993] 45 FCR 164 per Davis, Gummow and Einfeld JJ at [44]-[45] where the Court stated:
44. More recently, in Demagogue Pty Ltd v. Ramensky [1992] FCA 557; (1993) 39 FCR 31, Black CJ, Gummow and Cooper JJ emphasised that s.52 provides its own test, meaning that if conduct is not misleading and deceptive or likely to mislead or deceive in the circumstances in which it occurs, it will not breach s.52. That section does not require arm's length negotiations to be completely open or require full disclosure at all times. The particular facts of the case must be considered in the light of the ordinary incidents and character of commercial behaviour.
45. Thus, in the ordinary course of commercial dealings, a certain degree of "puffing" or exaggeration is to be expected. Indeed, puffery is part of the ordinary stuff of commerce. So also is a certain degree of "put-off", evasion or obfuscation by commercial people seeking to resist disclosing information which is confidential. Discussions in commerce are so understood.
The email stream upon which Postorino relies is as follows:
a)Friday 30 May 2008, 12:03pm:
Dear All,
I have spoken to members of the Track ‘n’ Find Board this morning and we have agreed that the first $250 K we bring into TnF, instead of a 2.5% shareholding, we will offer 5.5%. The next $750K will be for 7.5%.
The company has an offer in for licencing rights for TnF from Russia for all users. I am about to begin negotiations and I’ll keep you posted.
In the meantime, if you can put your thinking caps on for investors, that would be great.
b)Sunday 10 August 2008, 10:15am:
Hi Team,
TnF reached an agreement with Russian company Mithrel-Fluro, based in Moscow for an exclusive licensing agreement for Russia for five years with a minimum guaranteed royalty of $US 15 million. Mithrel-Fluro is signing a letter of intent with Bhykobo Airport to install TnF throughout the baggage and cargo systems at the new terminals to be opened in November 2008. Mithrel is also in discussions with Moscow Metro to provide security for Metro tickets (23 million/month) in addition Mithrel has a tentative agreement with Rosan the largest credit and security card manufacturer, for the provision of security for their cards. Mithrel has staff of 320.
TnF has been asked by the company provided security for the World Cup (soccer) in Africa in 2010 to enter into negotiations for security both for personnel (players, officials, media) and also for all match tickets.
This is the beginning of an excellent business for TnF.
The contents of these emails are written in extremely imprecise terms and it would not be unfair to categorise some of the contents such as the statement “the beginning of an excellent business” to be categorised as “puffing”. The basis of the ETC – Mithrel-Fluro agreement is not specified while the balance of the ongoing agreements is no higher than letters of intent with the final arrangements identified are no higher than discussions.
The next element in the sequence is the supply of the business plan in October 2008, which contains a clearly articulated disclaimer on the opening page which indicates that “the directors, officers and employees hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchant ability, fitness for practical purposes, title and non-infringement”.
The email exchange which is the subject of the second representation is as follows:
a)Wednesday 20 August 2008, 9:33am:
The T&F Board has determined the value of the company to be $30m so that 2.5% of the shares is now $750K.
However, Bob is still prepared to stick to stand by his offer and sell you 1.25% for $125K. He also indicated whilst it would be tough ask there is a chance you could get a further 0.5% from TnF possible for $125K (based on current val). That would give you 1.75% for $250K. The shares would therefore actually be valued currently at $525K.
This is a great deal. Understand you wish to read the BP, however definitely need a decision soon. Please advise ASAP.
Just so you know Jane’s was a “one off” offer as stated in the initial email Bob sent out asking us to find investment (and she’s was also pre-Russia) with funds used to complete Qld Uni prototype etc.
In the submissions set out above, there is argument and explanations as to how this valuation was undertaken. It would be expected that a sophisticated and educated corporate analyst and cautious private investor would have taken further steps to verify this material and present to the Court a basis for it to find that these figures could be accepted as a basis for this serious investment. Postorino, with her work and educational background, would be expected to be fully cognitive of the process to be adopted to determine a company’s value for the basis of a marketing or capital raising campaign. As there is no listing of ETC’s shares of which to benchmark and extrapolate corporate value, it has to be accepted that a process as suggested by Pritchard would have been adopted.
Representations by a person, in this circumstance, Pritchard, with apparent appropriate qualifications which state that they have reasonable grounds for asserting the subject matter of the representation to be true, need to be tested by reference to whether or not the maker of the representation had reasonable grounds for making it. In absence of evidence to the contrary, it must be assumed that Pritchard, who runs several business ventures undertaking capital raisings for start-up companies would be undertaking this type of valuation on a regular basis. Whether or not such determinations or estimations amount to a reasonable basis are questions to be answered subjectively and not by reference to the maker’s subjective state of mind. It must be acknowledged that this type of calculation must be somewhat speculative because of the lack of any benchmark or verification. I am satisfied that the representation of the company’s value at the time it was made was based on reasonable grounds: Australian Competition and Consumer Commission v Jones (No. 5) [2011] FCA 49 per Logan J applying George v Rockett & Anor (1990) 170 CLR 104. A sophisticated business analyst, when confronted with a company valuation prepared at the point of ETC’s development must be cognisant that the figure could not be put any higher than an estimate which is not subject to verification.
I acknowledge and accept the arguments and counter arguments by the respective parties set out above concerning the representations, but I am not satisfied that Postorino has placed before the Court enough explanations as to why a highly educated and sophisticated business analyst would be willing to accept these representations without further verification, or that the investment was reduced to being purely speculative.
I am not satisfied that Postorino has satisfied the onus that she bears to satisfied this claim consequently, the application should be dismissed. As noted elsewhere in this judgment I believe that the advice and pleadings to be highly unsatisfactory and little attempt appears to have been taken to rectify these shortfalls with the change of legal representation. Further, the proceedings have been delayed unnecessarily and causing considerable additional expenses by the actions of Pritchard. The normal consideration is that costs follow the event and that may have been the course if the various legal representatives had pursued this matter with greater vigour than has been displayed. In those circumstances it would be extremely unfair that Postorino, who was unable to argue and establish a claim effectively, should bear the full penalty of costs. Consequently, I am of the view all parties should meet their own costs.
I certify that the preceding two-hundred and eight (208) paragraphs are a true copy of the reasons for judgment of Judge Lloyd-Jones
Associate:
Date: 19 June 2015
2