Potts v National Australia Bank Limited (ABN 12 004 044 937)

[2023] HCATrans 131

[2023] HCATrans 131

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S48 of 2023

B e t w e e n -

MICHAEL THOMAS POTTS

Appellant

and

NATIONAL AUSTRALIA BANK LIMITED (ABN 12 004 044 937)

Respondent

GAGELER J
GORDON J
EDELMAN J
STEWARD J
GLEESON J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON TUESDAY, 10 OCTOBER 2023, AT 10.00 AM

Copyright in the High Court of Australia

MR N.C. HUTLEY, SC:   If your Honours please, I appear with my learned friends MS M.E. ELLICOTT and MS A. ZHENG for the appellant.  (instructed by Hall & Wilcox)

MR B.W. WALKER, SC:   May it please the Court, I appear with my learned friends MR J.A. ARNOTT, SC, MS C.G. WINNETT and MS M. MELLOS for the respondent.  (instructed by Norton Rose Fulbright)

GAGELER J:   Thank you, Mr Walker.  Yes, Mr Hutley.

MR HUTLEY:   Your Honours, the only contested findings made by Justice Ball about the state of Dick Smith – and I will use that to refer to the relevant company – in January 2015 and how it got there form the relevant background to ascertaining whether Dick Smith engaged in misleading and deceptive conduct.

These findings – and I can go through them shortly – were that a form of revenue earned by Dick Smith was from the payment or allowance of rebates on goods sold by Dick Smith or services provided by Dick Smith – and your Honours will find that finding at primary judgment 25, core appeal book 19.  One of the type of such rebate was what was called an “over and above” rebate, or “O&A” rebate.  They were:

generally negotiated in connection with the promotion of a particular product or range of products or as a contribution by the supplier to a discount offered on a product –

and that is at paragraph 26 of the primary judgment, core appeal book 20.  O&A rebates were usually treated:

as a contribution to marketing.

That is primary judgment 26, core appeal book 20 – which meant it reduced the cost of doing business, which was an amount deducted off revenue generated through sales in order to derive Dick Smith net profit.  That is the primary judgment at paragraph 31.  In the first half of calendar year 2014, Dick Smith began to place greater emphasis on O&A rebates, prompted at least to some extent by the fact that in March 2014 it was about $0.9 million behind budgeted EBITDA for the year to that point.  That is the primary judgement of paragraph 79:

In order to meet budgeted EBITDA for the year, Mr Abboud, Mr Potts and Mr Skellern developed a plan in April 2014 –

which relevantly involved:

increasing the target for O&A rebates from $10.2 million to $17.2 million.

Mr Abboud increased the open to buy, which is called OTB, which is another word for the budget available for buyers.  Your Honours will see that at Court of Appeal paragraph 11 in the core book at paragraph 306:

an increase in OTB by $20 million and subsequently $23 million.

Your Honours will see that at paragraph 82 of the primary judge’s judgment, core appeal book 41:

The emphasis placed on collecting O&A rebates continued throughout FY15.

Primary judgment 113, and core appeal book 53.  In late October 2014 Mr Abboud released a further $15 million of OTB with an emphasis on obtaining $3 million in O&A rebates in late October 2014 – that is the primary judgment at 113 to 114, core appeal book 53 to 54.  Mr Borg, who was the general manager of planning – his role was described at paragraph 18 of the primary judgment – a member of the senior management of Dick Smith sent a series of emails in late 2014, not only to Mr Potts and Mr Abboud but also to other members of the senior management team, that identified Dick Smith’s O&A strategy as contributing to Dick Smith being “overstocked”.  That is paragraph 411 of the primary judgment.

Those emails are set out, your Honours, at primary judgment 127 to 130, and summarised at paragraph 20 of our submissions.  They were sent to a Mr Skellern, the director of commercial property procurement and supply chain; a Mr Orrock, the director of buying, and his roles are set out at judgment 20 in the primary judge’s reasons; and a Mr Bonham, who was a merchandise manager, and his role is set out at judgment 21 in the trial judge’s reasons.  I am not taking your Honours through them, they have been referred to extensively in the written submissions, unless your Honours wish me to.  Justice Ball found that the likelihood was, quote:

that those emails reflect discussions within DSH.

And your Honours will find that at paragraph 411 of his reasons.  Next, it was found that by January 2015, Dick Smith was overstocked – carrying $365 million worth of stock on 8 January 2015 – primary judgment 141 – compared to a target of $250 million of stock – that is the primary judgment at paragraph 387.  His Honour found that a substantial cause of the overstocking was the emphasis Dick Smith placed on obtaining O&A rebates and buying practices that emphasised the obtaining of such rebates.  Your Honours will find that at primary judgment 412, core appeal book 164, and it is also referred to further at the primary judgment at 570, core appeal book 229.

Next, it was found – his Honour found – that both Mr Potts and Mr Abboud knew that to be the case because of the emails sent to them by Mr Borg on 19 December 2014, which connected the overstocked position with the pursuit of those rebates – that is at his Honour’s reasons at paragraphs 414 to 415, at core appeal book 165 to 166.  In particular, his Honour found that Mr Abboud was the main driver of the O&A strategy.  He approved purchases and increases in the budget – the OTB – to obtain more O&A rebates and to meet profit projections.  That is his Honour’s reasons at primary judgment 384 and 390.

He released, in fact, $15 million of OTB in October 2014 to acquire more O&A rebates, even though Mr Borg was already expressing concerns that Dick Smith was overstocked.  That is his Honour’s judgment at 385, core appeal book 154.  In early 2015, the board recognised that Dick Smith was overstocked, and a plan was developed by management to address the position.  That is at his Honour’s judgment at paragraphs 471 to 472, core appeal book 192.  However, his Honour found that the emphasis on O&A rebate had not changed, and that is primary judgment 570 and 572.  Now, all those central findings were repeated in the Court of Appeal’s reasons to a greater or lesser extent, and your Honours can see that from the Court of Appeal’s reasons at paragraphs 10 to 26 and paragraph 50.

That was the background against which Dick Smith entered into discussions with the NAB to replace its then‑existing facility with Westpac.  On 28 April, Mr Potts and Mr Abboud met with officers of the NAB and Justice Ball found that the following occurred:  Dick Smith prepared a slide show presentation, which was given to the NAB officers.  It contained statements made by Dick Smith about, among other things, “improved inventory management”.  Your Honours will find those findings at the primary judge’s reasons, paragraphs 205 to 206, page 91 of the core book.

Mr Abboud also made a number of statements to the NAB officers at this meeting including, relevantly, that inventory requirements were “seasonal” with a high peak season of December and that the Chief Financial Officer, Mr Potts, would send through projections to validate this.  That is primary judgment 207, core appeal book 91.  Next, Mr Abboud stated that margins on each product category were monitored and discounting was “used to push sales”, and that Dick Smith negotiated with suppliers to obtain scan rebates with the objective of protecting gross profit margin.  That is his Honour’s reasons at paragraphs 207 and 209 to 210 of the core book 91 to 93, and the primary judgment at paragraph 547 in the core book page 221.

Now, your Honours will see that we rely on this meeting as a particular occasion in which information was provided by Dick Smith to the NAB that meant Dick Smith – resulted in Dick Smith misleading the NAB when it made the clause 21.1(t) representation, which we will come to, and your Honours are familiar with.  Dick Smith, both by itself and Mr Abboud, provided information to the NAB about Dick Smith’s inventory position and its pursuit of rebates in order to improve margin.

GORDON J:   I am sorry, I am just a bit lost.  Are we still talking about 28 April 2015 at this point?

MR HUTLEY:   Yes, your Honour.

GORDON J:   Thank you.

GLEESON J:   Is there a finding that that presentation gave rise to misleading or deceptive conduct by the 21.1(t) representation?

MR HUTLEY:   No, your Honour, that is because – which we will come to – Justice Ball did not deal with the 21.1(t) representation and the issue as to proportionate liability.

GLEESON J:   So, we would have to make a finding of fact in relation to that?

MR HUTLEY:   Your Honour would have to – that those representations were made is undoubted, those communications, they are his Honour’s findings.  Our case, of course, is based on 21.1(t) about the representation made at the time of entry into the facility with the NAB.

GORDON J:   I am a bit lost.  There is no doubt that there was, as I understand the position – we will come to 21.1(t), that is, a representation made as a result of the warranty, and one can describe its effect and terms – but I had understood, when I read the primary judge, that he had found that the information provided at the meeting on 28 April 2015 was not misleading.

MR HUTLEY:   Your Honour, he found it was not misleading at that time, because it was a high‑level meeting between ‑ ‑ ‑

STEWARD J:   It was preliminary.

MR HUTLEY:   Preliminary meeting, quite.  But the character – to assess whether the 21.1(t) representation is misleading, one has to analyse what that is, and that is a representation that no information supplied at the time it was supplied was misleading by reason of omission.  So, in other words, that is a representation which is made by Dick Smith on 22 June 2015.  It is not the same question as the question of whether, in April 2015, what was said by Mr Abboud and Mr Potts – essentially, Mr Abboud – at a meeting with the NAB then misled them.  It is a different question.

STEWARD J:   You say the 21.1(t) representation is a fresh or new endorsement of what was said in the past.

MR HUTLEY:   Quite.  We will come to what we say precisely, your Honour, but we ‑ ‑ ‑

EDELMAN J:   But to give future effect to a past representation in the sense of turning the past representation into one that has continuing future effect.

MR HUTLEY:   I have to make a slight qualification to that, your Honour, because you will – it says it is not misleading by reason of admission at the time.

GORDON J:   What is “at the time”?  Are you talking about the time of the 21.1(t) representation or are you talking about 28 April?

MR HUTLEY:   At the time of 28 April.  It has to be not misleading by way of admission at that time.  That – and I will come to it, your Honour – is to deal with this possibility.  Your Honour will see 21.1(t) has two limbs.

GORDON J:   It does.

MR HUTLEY:   One which says all positive information given is accurate and remains so on 22 June.  It says with respect to representations at the time, they were not misleading because of omissions at that time.  Now, that distinction is obviously drawn because a representation on 22 April may be not misleading because of omission at that time, but if one, in effect, as it were, brought forward misleading by way of omission to a later date, it may become misleading because of subsequent events.

GLEESON J:   But, Mr Hutley, at the special leave hearing – in answer to a question from Justice Gageler – you said that this case would involve “absolutely no factual enquiry”.  This sounds like a factual enquiry.

MR HUTLEY:   No.  What we said – your Honour, what I said at the special leave application, as I understood it, we say on the findings made by his Honour, we would win.  As we pointed out, his Honour made no findings dealing with this aspect.  But his Honour found that what occurred by reference to all the representations – his Honour found that what was said at the meeting of 28 April – his Honour found that the representations in the sense of what was said, that the accounts were sent, and his Honour found that Ms Puja communicated with the Bank.  What his Honour did not go on to deal with was that aspect thereafter ‑ ‑ ‑

GORDON J:   What is “that aspect”, again?

MR HUTLEY:   The aspect, his Honour – because his Honour did not deal with it, his Honour did not make a finding that they were misleading as at 22 June.  But we say that follows from what his Honour found.  His Honour found there had been a failure to communicate the findings – the matters – about the O&A materials.  We say, once one takes that finding together with what was communicated, what was communicated was necessarily misleading.

You just have to say, this was communicated – the accounts.  We say they are necessarily misleading because there has been an omission of the other findings made by his Honour.  His Honour did not make a finding that there was a misleading case as at 22 June, because, as we told the court on the day, there was no finding – his Honour did not deal with this aspect of the case.

The Court of Appeal dealt with this aspect of the case by, in our respectful submission, asking themselves the wrong question.  What we do say, however, is when you have the findings made about the state of this business, the findings made about the communication, the comparison of them leads necessarily to a misleading conduct.  In fact, the NAB accepted that the representation under 21.1(t) was made, and it alleged that it was misleading because of the matters which his Honour has found and accepted, they relied upon it.

EDELMAN J:   Is that the entirety of your case, those three matters in paragraph 5(a), (b), and (c)?

MR HUTLEY:   Of our submissions?

EDELMAN J:   Yes.

MR HUTLEY:   I think so, your Honour.

GLEESON J:   Can I please check that?  So, paragraph 4 of your outline does not involve the submission that Mr Potts’ conduct caused the 21.1(t) representation to be false?

MR HUTLEY:   We are not relying upon Mr Potts’ conduct.

GLEESON J:   Can I just check, then, paragraph 44 of your written submissions?

MR HUTLEY:   If your Honour bears with me a moment, just so I can pick that up.

GLEESON J:   It says:

in assessing whether the cl 21.1(t) representation was misleading . . . this was readily established on the facts as found . . . First, and obviously, it is established in respect of the statements made by Mr Potts . . . The fact that those statements were misleading made the cl 21.1(t) representation misleading.

MR HUTLEY:   Yes.  But we cannot rely – your Honour, can I make my position clear?  We do not rely upon Mr Potts’ conduct as making the 21.1(t) submission misleading.  Technically, I think one could have, consistently with the argument, but that is not how it was run at first instance before Justice Ball or in the Court of Appeal.  I think that submission was made at 44 to show logical consistency as that – why we say it could, but we have never relied upon it, and I do not.

EDELMAN J:   There has never been a case of proportionate liability based on agency.

MR HUTLEY:   Well, it would not technically be an agency point.  That was one of the interesting things here, because if one gets to 21.1(t), that is a representation solely by the company.  There is no vicarious liability case.

GORDON J:   No, no, we are talking about apportionment. 

MR HUTLEY:   I am sorry.  I do apologise.  I thought we were talking about ‑ ‑ ‑

EDELMAN J:   No.  No.  The question was there has never been a case of proportionate liability based upon falsification of the representation in the facility agreement arising from agency.

MR HUTLEY:   We have never relied upon or said that there could be proportionate liability between a company and a person who is found liable, and the company is found liable only because of vicarious liability.  We accept the statements of principle to the effect one cannot have proportionate liability in that case.

GORDON J:   Can I just test – I am being really slow here.  If one takes the representation made by reference to 21.1(t) in June at the time the SFA is entered into, the three pieces of information you rely upon are set out in your outline.  One tests whether or not that information is misleading, does one not, at the time at which the information is provided in the context in which it is provided.

MR HUTLEY:   Well, your Honour, that becomes a different – that is apt, with respect.  If the context includes who is listening to it then, we would disagree with that, because, in effect, we say it is a new representation made about earlier information.

GORDON J:   Does that mean the consequence of your submission is that an entity who is providing a warranty, which is a standard warranty in all facility agreements – I mean, the Bank would not give the facility without a warranty of that nature – has to go back and check and update every piece of information that is provided in the course of a negotiation?

MR HUTLEY:   Your Honour, when one – can I ‑ ‑ ‑

GORDON J:   I am testing this idea that one is testing misleading and deceptive ‑ ‑ ‑

MR HUTLEY:   I understand that, your Honour, but one has to, in effect, go to the terms of 21.1(t), which our learned friends submitted was misleading and admitted when we submit – we alleged, it was misleading – that it was, and they relied upon it.  One has to go to the precise language of 21.1(t), if we could go there, if I could, your Honour.

GAGELER J:   Mr Hutley, as you do, so that I can understand the structure of your case, you say that the information within the meaning of section 21.1(t) is that provided on the three dates that you identify in paragraph 5 of your outline.

MR HUTLEY:   Yes, your Honour.

GAGELER J:   Am I right in understanding that you say the problem with that information was that it was – and the only problem with it, is that, on the date provided, it was misleading by omission.  Is that correct? 

MR HUTLEY:   Yes, your Honour.

GAGELER J:   And the omission is what you identify at the end of paragraph 4.

MR HUTLEY:   Could I just make sure I ‑ ‑ ‑

GAGELER J:   The last sentence of paragraph 4.

MR HUTLEY:   Of our submissions?  I will just make sure it is.  Of our outline, your Honour, or of our submissions?

GAGELER J:   I am looking at your outline.

MR HUTLEY:   I am sorry, your Honour.  Yes, essentially, your Honour.

GAGELER J:   That is the long and short of it?

MR HUTLEY:   That is it.  I mean, we have, of course to an extent, compressed in the three pages what I am going to say, but in essence that is the point.

EDELMAN J:   As at 22 June 2015.

MR HUTLEY:   Yes.  Yes, your Honour.

STEWARD J:   Do you need paragraph 5?  Or you may need a bit of it, but in the sense that your case – let us just say the Bank had simply given the financial records across ‑ ‑ ‑

GORDON J:   You mean the company?

STEWARD J:   Sorry, the company – yes, I am grateful to Justice Gordon.  Your case is that there was a failure to disclose the true position, as you call it, and that would not – the fact that that did not take place does not depend upon anyone saying anything in particular at all to the Bank other than ‑ ‑ ‑

MR HUTLEY:   Well, your Honour, 21.1(t) is tied to information supplied.  That is why ‑ ‑ ‑

STEWARD J:   But what if they just supplied the financials?

MR HUTLEY:   If they – it has not been dealt with for reasons which I will not bore your Honours with.  But essentially, your Honour, if one can say that that information is materially misleading because of an omission, yes, what your Honour – and I will go through each of the examples.  For example, when one comes to Ms Puja, the communications there, a specific question was asked about how you deal with stocking.

STEWARD J:   Yes, or to put it a different way, when the Bank made its warranty in 21.1(t), it was incumbent upon it to make sure that it had disclosed by then the true position.

MR HUTLEY:   Quite.  Your Honour, I just want to deal with the warranty point for the moment.  The case was pleaded as a representation case in entering into the facility, and so not a warranty as such; a representation case.  That is why one has to go to paragraph 19 of the relevant pleadings.  It was not just that there was a breach of the warranty, it said that the representation in 21.1(t) induced the entry into the agreement.

GORDON J:   The interesting thing is – that is a matter of logic, one understands that.  As I put to you, the Bank is not going to give the facility without a provision like this, but what is ‑ ‑ ‑

MR HUTLEY:   And there is going to be negotiation before the provision and somebody is going to say, I am prepared to give it, so it is going to be a representation.

GORDON J:   Well, assume for the moment you are right about representation, assume you are right about reliance, we will have to come to 21.1(t) in a moment because (u) excludes accounts and financial projections, so it is dealing with information which is not within (u).  Do you accept that?

MR HUTLEY:   No, I only exclude, I think, financial projections and certain other matters.  I do not exclude accounts, per se.  If 21.1(t) has a specific exclusion, if we could go to it, your Honour ‑ ‑ ‑

GORDON J:   Because we are trying to work out the parameters of (t) and (u), and we are trying to work out what is information and at what point you assess it, especially if it is by omission.

MR HUTLEY:   Yes:

all information (excluding financial projections, estimates and forecasts) –

So, financial accounts would be information, to the extent that they are not projections – financial projections, estimates and forecasts.

GORDON J:   So, management accounts, where do they fall, which is your item 2?

MR HUTLEY:   We say insofar as they refer to, as it were, inventory and profit, they are not neither estimates or – they are statements of fact.  The statement of fact – and I will come to the documents in due course – showed that the peak inventory was some $365 million, and as his Honour found, that was brought about by the overstocking, brought about by the O&A policy.  We say to supply those management accounts without exposing that those management accounts were the product of a policy which led to overstocking, as it were, with a view to inflating profit, was misleading.

We say that was the representation made by the company – 21.1(t) – at the time it was made, when it was communicated.  We say by omission it was misleading because it failed to advert to the matters which Justice Ball found.  That is why we say in answer to your Honour Justice Gleeson’s question, your Honours do not have to make further findings.  One merely has to, as it were, put together the findings made with the undoubted communications which were found to have occurred, and we say the answer falls out. 

GAGELER J:   Mr Hutley, you say in paragraph 6 of your outline that 21.1(t) contains two representations, one speaking as at the date the information is provided, and the other speaking as at the date of entry into the facility agreement ‑ ‑ ‑

MR HUTLEY:   No – sorry, yes, your Honour, I do apologise.

GAGELER J:   ‑ ‑ ‑ in June.  It seems that you are putting your case on the basis of the earlier of those dates – as at the date provided there was an initial ‑ ‑ ‑

MR HUTLEY:   At the date provided, yes.

GAGELER J:   It is the second of the representations you identified.

MR HUTLEY:   Quite.  The first goes to accuracy of the representation.  The second goes to misleading, whether by omission or otherwise, as at the date of the supply of the information, because that is not a representation.  That is supply of the information.  The question is, you concentrate on the moment of supply of the information and you ask, quoad that information, was that information misleading by reason of omissions as at that date.  Now, that is the question.  We say in respect of these three matters, on the findings made by his Honour, the policy and inflationary effect on profit and inventory existed at all material dates, and the information supplied was misleading by omission in not adverting to that fact.

GLEESON J:   Does that not raise a more complex factual inquiry about whether the context made that particular occasion an appropriate occasion for provision of additional material?

MR HUTLEY:   With respect, no.  That in a sense directs to the wrong question because that takes you back to whether it was misleading at the time.  Let me assume they supplied a document, saying, A, the people who received it set it aside at that time because they were expecting further information.  We say at the 21.1(t) time, the representation is that all material information at the time it is supplied was not misleading – that is, likely to mislead or deceive – because of omissions, and we say in that circumstance you would be in breach of the 21.1(t) representation, although you may have engaged in no misleading and deceptive conduct at the time of the supply of the information with proposition A in it.

GORDON J:   So, can I just break up this – I know I am being slow, Mr Hutley – but you are right to say it has got two limbs.  The first limb is dealing with, at the date of this document ‑ ‑ ‑

MR HUTLEY:   Yes, 22 June.

GORDON J:   And we are putting that to one side for the moment.  Let us call that A.  We are not dealing with A.  We are dealing with B.

MR HUTLEY:   Yes.

GORDON J:   B is, not by omission or otherwise, so only dealing with omission.  Misleading in any material respect.  So, we have a materiality consideration or assessment?

MR HUTLEY:   There cannot really be a debate about materiality here.  The whole case was ‑ ‑ ‑

GORDON J:   No, we are just trying to work out what the extent of the clause is, for the moment.

MR HUTLEY:   I am sorry, your Honour, I thought you said, “we have to”, your Honour.  I was thinking your Honour is involved in a factual finding.

GORDON J:   At the date provided – whether by its inclusion or by omission, or other information ‑ ‑ ‑ 

MR HUTLEY:   It was misleading, yes.

GORDON J:   So, to pick up the points that Justice Gleeson is making to you, it is at the time, we are dealing with the audience; we are dealing with the request; the position; the reason why they asked for the information – why are we not, in order to determine whether or not what they are being provided for – being what they have asked for; who the ordinance is; what they have provided.

MR HUTLEY:   With respect, the representation is a representation now that all information, at the time it was provided was not misleading by reason of omission; not that it did not mislead; that it was not misleading.  That is, “misleading” means the act to mislead.

GLEESON J:   At where?  At the date provided?

MR HUTLEY:   At the date provided, quite.  No, no, it is a representation that now – that at the date provided it was not misleading.  This is about inducing you to enter into the facility now.

GLEESON J:   We did not lie to you back then.

MR HUTLEY:   What?

GLEESON J:   We did not lie to you back then.

MR HUTLEY:   We did not supply to you information which, by reason of omission, was misleading; not that we did not lie to you, not that we did not mislead you, because it is a representation being made now to induce you to enter into the facility now.  What it is taking into account and the reason why it is looking backwards, your Honour is the simple proposition – is, unlike the first limb which goes to accuracy, it is not updating all information to today’s date because they may have things that occurred between the supply of the information and today’s date which would make its omission misleading.

GORDON J:   So, I put a proposition to you earlier about updating.  That is, in a sense, what this submission is about – i.e., there was an obligation on you to go back and look at the information you provided in connection with the finance documents and update them.

MR HUTLEY:   To satisfy yourself, had you, in those documents, communicated; were they, at that time, apt to mislead by reason of omission?  Not whether they did mislead because you could not know whether somebody relied upon them or not, at the time.  All you could do, at the time you were giving this representation, is say, I am saying of all information that I have supplied – looking at that information – that was, not by reason of any material admission, misleading.

I do not know whether you were misled or even read the document, necessarily, at the time.  I do not know who in the organisation read the document.  But here is an inducement to enter into the facility.  I am telling you now, you can look back over all communications today and be satisfied that at the time you received that information, it was not apt to mislead, or misleading, because of omission, et cetera.  That is what it is aimed to do.  That is the only purpose of making a representation.  This is a representation to induce you to enter into the facility, as was found.

GAGELER J:   So, materiality is material by reference to the act of entering into the facilities.

MR HUTLEY:   Quite, because this whole negotiation that is leading up is to enter into a facility.  This is not – because this is:

information . . . provided . . . in connection with the finance documents –

So, not any information you happen to receive.  That is, for example, why we do not take account and we are not relying upon information they received from brokers.  Your Honours will have seen we do not rely on that, because that was not information provided by Dick Smith as part of the – in connection with the finance documents.

GORDON J:   It does say “or on its behalf”, so it may have been by a broker, for a broker being instructed to provide it.  Now, I am just testing this ‑ ‑ ‑

MR HUTLEY:   Theoretically, your Honour.

GORDON J:   We are testing the extent of this provision and your construction of what I call B.

MR HUTLEY:   Can I say I accept that, your Honour.  For example you may have had a finance broker.

GORDON J:   Correct.

MR HUTLEY:   You might have had a merchant – you know, what used to be called merchant bankers, kind of spruiking your interests, and they may have been communicating, and they never engaged in misleading ‑ ‑ ‑ 

GORDON J:   On your construction of B, you would be obliged to ask the merchant banker, the finance broker, for all of the information they have provided over the course, in connection with the finance documents and update them.

MR HUTLEY:   If you wanted to give this warranty you might want to negotiate and say, we cannot give it in these extreme terms.

STEWARD J:   Your point, really, is it is a sole undertaking and if they are not prepared to give it, they have to make an effort to make sure that they disclose their true hand to the Bank before it lends them money.

MR HUTLEY:   If they want to complain, they have to make it, certainly – it is their choice to make it.  That is simply all there is to it.  The important point is, NAB pleads, and has admitted, that it relied upon this.  The reason why one would rely upon it as an organisation is it relieves one of, in effect, worrying about Rumsfeldian unknown unknowns.

GORDON J:   I know you will come to this, but I have three concerns about it.  Was this the way the case was run below?

MR HUTLEY:   Yes.

GORDON J:   But not addressed?

MR HUTLEY:   Not addressed by his Honour.

GORDON J:   And not addressed by the Court of Appeal?

MR HUTLEY:   Well, the Court of Appeal addressed it, and I will come to the paragraphs where the Court of Appeal addressed it, but with respect to them, the Court of Appeal, in effect, got diverted by failing, with respect to them, to concentrate that 21.1(t) is a representation about fact.  They saw it in terms of fault and states of mind, and that was wrong.

They got diverted from the question – the simple question is:  take information at point X, what was that information; was it, by reason of admission, of material matters as at that date misleading, yes or no?  It is a pure question of fact, in our respectful submission, in the facts of this case as the case is put.  The Court of Appeal never asked that question, never looked at that question; Justice Ball never asked that question, never looked at that question.  That is why we are here.

GLEESON J:   I thought that we were here to deal with the question of general importance about the source of knowledge of a company.

MR HUTLEY:   Quite.  I think we put two points, your Honour, with respect – I do not want to – firstly we said, it is not about knowledge at all, I think, that is the question which comes out of the Full Court’s decision in a case, the name of which I have now forgotten, of about whether one looked to the mind of the board – the facts known to the board ‑ ‑ ‑

GLEESON J:   I can remember, it was Crowley v WorleyParsons.

MR HUTLEY:   Thank you, your Honour, an extraordinary event, as we all know.  There was that issue.  That was the issue after the question of, is it just a misrepresentation, or misrepresentations get tied up in knowledge.  Our first point was that the whole thing went wrong because it was just a question of fact.  But if and to the extent states of mind were relevant, we said the state of the mind is the company as a whole and is not determined by what might be called the non‑executive directors on a board, one had to have, in effect, looked at rules of attribution in representation by the company.  That was the question of importance.

That question maybe seemed to have gone, because our learned friends really do not defend the Court of Appeal’s reasoning at all.  The whole case they seek to run is by a series of what should be on notices of contention but seem to have been – that, as it were, procedural vulgarity seem to have been set aside – and run a whole series of cases, most of which have never been mentioned until the High Court.

So, the points of general importance are, in effect, conceded that the Court of Appeal, in a sense just asked the wrong questions, answered the wrong questions, and to the extent that knowledge was involved, looked at the wrong question.

GAGELER J:   Does it take us to paragraph 8 of your outline?

MR HUTLEY:   Your Honour, I hope.  Can I just check that, your Honour – I did have some notes – but it probably does.  Yes.  I would like to explain a little bit about the information, for just a moment or two, if I might, your Honour.

GAGELER J:   Of course.

MR HUTLEY:   I was taking you to the findings of fact made by Justice Ball about the meetings of 28 April.  I have taken your Honour’s reference to those, and I have pointed out how it was dealt with.  Can I deal with the management accounts.  The provision of the management accounts was sought at the meeting of 28 April, or offered, and your Honours will see that at primary judgment 566, and I am not going to go to them.  The relevant emails, your Honour, are in the appellant’s book of further materials.

Because of the way that Justice Ball dealt with the question – and your Honours will see that at primary judgment 549 – he said the NAB claimed that the management accounts involved misleading and deceptive conduct by Mr Potts.  That was rejected by Justice Ball at paragraph 549 in the primary judgment at core appeal book 222, because his Honour held that it was not a representation by Mr Potts.  He was acting in a purely ministerial capacity.

That is why his Honour did not then go on – because his Honour did not deal with the proportionate liability case – did not deal with a comparison of the accounts, make factual findings about the accounts.  But the accounts are before the Court and there is no doubt as to what the accounts show.  They are just clear demonstration.  Your Honours can find the relevant communications at paragraphs 8 and 9 ‑ ‑ ‑

GORDON J:   Of what?

MR HUTLEY:   Pages 8 and 9, I am sorry, of the appellant’s book of further materials, your Honour.

GAGELER J:   These are emails?

MR HUTLEY:   Emails, yes, your Honour.  I am just making good.  You will see on 4 May – this is on 9, the top email – his understanding that “the financial information you requested”, monthly P&L, balance sheet and cash flow – do your Honours see that – and some forecasts.  Then if one goes over to page 8, the second email from Mr Potts on 5 May at 3.29 pm, he attached the monthly financial year P&L, balance sheet and cash flow, et cetera.

Now, if your Honours go over to paragraph – they do not seem to have the numbers, because they were attached, but it is 11 and 12 – it should be 11 and 12 in that book – your Honours will see what are called “Statutory P&L” for the financial year 2015.  But if your Honours then go over to the next page, and your Honours will see the balance sheet from June 2014 up until March 2015, they were alleged, and there was no debate that they were actuals.

GORDON J:   So, this comes back to the intersection between (t) and (u), and I do not want to take you away from it, but these have got projections within them.

MR HUTLEY:   Quite, to the extent they are projections, they are ‑ ‑ ‑

GORDON J:   You do not rely upon them.

MR HUTLEY:   I do not rely upon them.  To the extent that they are projections, they are a matter of irrelevance.

GORDON J:   So, just so we are clear, on this document, what are we to take into account on your case in relation to pages 11 and 12?

MR HUTLEY:   Up until March 2015, because you can see it from the date.

GORDON J:   When you say “up to”, am I including the March 2015 column?

MR HUTLEY:   Yes, yes.  I am sorry, yes, up until – including.

GORDON J:   So, the entries for April, May, June and the full year I am to exclude?

MR HUTLEY:   Yes, your Honour.  Your Honour can set those aside.

GORDON J:   Because they fall within (u).

MR HUTLEY:   Projections.

GORDON J:   Just so I am clear, and I am sorry to be pedantic about this ‑ ‑ ‑

MR HUTLEY:   Not at all.

GORDON J:   ‑ ‑ ‑ but the attachments that you took us to, can we just go to page 9, which I assume is what you are going to take us to, these are the various attachments, to attach to the email.

MR HUTLEY:   Yes, the relevant attachment.  Nobody has suggested any others were ‑ ‑ ‑ 

GORDON J:   Which ones of these are (t) and which ones are (u)?

MR HUTLEY:   I have not put in anything to do with (u) because (u) – no leave was given in respect of (u).

GORDON J:   No, I know, but what are we to look at?

MR HUTLEY:   Well, to the extent ‑ ‑ ‑

GORDON J:   What are the facts?

MR HUTLEY:   I am sorry, with respect to (u), just to go back to ‑ ‑ ‑

GORDON J:   No, no, by reference to these documents, is what I am trying to see.  How do we know which bits of this are relevant to your case?

MR HUTLEY:   Insofar as they are statements of the actual position, they are relevant.

GLEESON J:   So, the inventory line item?

MR HUTLEY:   Yes, particularly.  Your Honour will see, for example, the inventory line item is a critical one because that is said to be, gets to inventory up until – your Honour will recall the finding made that the highest point in the inventory, we have got to 360 million, and your Honours will see that in January 2015, and that was actually a finding which was made about this document.

GAGELER J:   So just mapping this onto your structure of argument as identified in your outline, this is the information provided on 5 May?

MR HUTLEY:   Yes.

GAGELER J:   And you say this information is misleading by failing to disclose that the overstocking was caused by the O&A strategy?

MR HUTLEY:   Yes.

GAGELER J:   You would expect to find that in these numbers somewhere, would you?

MR HUTLEY:   No.  We say to send this document, unqualified, without saying that inventory of this company had been, in effect, artificially inflated by a policy which was introduced to drive profit, rendered this document misleading, because there was an omission of a material particular in the communication of the information.

We say, if you put it this way, if they had been told that, would they have viewed these documents in a different fashion?  And we say, it is obvious they would have, because the accounts were sent forward as reflecting, as it were, on their face, what would appear to be the ordinary course of business.  And the whole thing about this company is there was an extraordinary course of business.  And that is what Justice Ball found that, in effect, the whole of this was being done to pump – and it went to the profit line as well.

I have not taken your Honour to it, but your Honour will recall there were findings that, in effect, they took these matters to the profit line as soon as humanly possible.  What they were doing, there was a policy to hunt for O&A and, to do that, you had to increase the budget, which led inexorably to overstocking, which also led to the inflation of the profit.

GLEESON J:   But is not this material that led to the National Australia Bank having a meeting with Mr Potts to ask him some questions to try to work out what the qualifications might be to the financial position?

MR HUTLEY:   Well, it did not really lead to him to ask that meeting, but he did subsequently have a meeting, your Honour, I accept that.  And at that meeting, communications which were made, which have been found to be misleading – and I am not disputing that – but if one goes back to 21.1(t), it says, is this information, by reason of omission at the time it was supplied, misleading.  And we say, objectively, one does not take into account what happened subsequently, one takes into account what happened at the communication at the time.

And we say that omission, of that communication, as it were, what you might call a qualification to the email of the 5th and, by the way, these accounts are affected by the following policy which has had the following result, i.e., overstocking which has been done to, as it were, inflate the profit.

GLEESON J:   Is there a finding that NAB relied on these pages?

MR HUTLEY:   There is no doubt there are findings that they considered them and took them into account, your Honours – and I will just give your Honours the pages where that was considered.  The management accounts – if your Honours sees it at judgment 216.

GORDON J:   Is that paragraph or page?

MR HUTLEY:   Primary judgment paragraph, your Honour.

GORDON J:   That paragraph is Mr Menzies and Mr Taylor noticing monthly figures – have I got the wrong paragraph?

MR HUTLEY:   Yes.  They:

noticed that the monthly figures revealed that DSH’s inventory peaked in January 2015 –

et cetera.  So, they obviously considered it.

GORDON J:   But the question was whether they relied – I did not finish giving you my three problems.  One of the problems here is that we do not actually have before us the landscape of information provided.

MR HUTLEY:   But your Honour, it is not whether they relied – NAB sued Mr Potts on the basis of these accounts, and they had to prove – the reliance is on the representation, with respect, under 21.1(t).

GORDON J:   Sorry, maybe “reliance” was wrong.  We do not have the landscape of information provided.  We do not know which bits are subject to omission or non‑omission on your case.  So, even if you are right, how do you apportion?

MR HUTLEY:   But, your Honour, can we come down to apportionment after the event, but we never got to that ‑ ‑ ‑ 

GORDON J:   We can, but this is why we are asking these questions, because ‑ ‑ ‑ 

MR HUTLEY:   We never got to apportionment.  Now, we will say, if you get to apportionment, we say this.  Solemnly, in order to induce NAB to enter into this facility, Dick Smith determined to make a very significant representation.  And, as your Honour has observed, that may have made incumbent upon them before they did so to, in effect, audit their communications of information that had taken place, and satisfy themselves that there was nothing by omission or otherwise which rendered the communications misleading at the time they were made.

Now, if they chose to make it and there is no evidence called to suggest that they went through that audit, no submission is made on behalf of our learned friends, or is pointed to any evidence to suggest that they went through that exercise, then one looks to the question of responsibility and looks at the question of the last chance, a solemn last chance to make sure, from the point of view of the person seeking the credit, to be in a position to make this representation – one looks to responsibility for what has gone wrong here.  We say there is fairly good basis – a very strong basis for apportionment, and one substantially adverse to Dick Smith.

It seems to be the submission made on the other side, to the effect that this is nothing, this representation is just a bit of paper.  This, in effect, was designed to make sure that before you took our money, before you received our money, you were in a position to tell us that you were ‑ ‑ ‑

EDELMAN J:   Did you run a Henville v Walker no-transaction case?

MR HUTLEY:   No, there was no dispute about it, because they said, if your Honour goes to the pleadings, their case was not an audit case.  It induced them, and they relied upon it to enter into the facility.  It was not a case on warranty, and it seems to be a position – I should take your Honours to the pleadings in relation to this, because it is quite important.  It is not as if they were taken by surprise in relation to this, because that was what the NAB pleaded.  If your Honours go to our bundle of further materials.

GORDON J:   I think you have three bundles.  Are we still on the first bundle, or are we in the second or third bundle?

MR HUTLEY:   I will call the second one the bundle of further materials and then the third one called the supplementary bundle of further materials, your Honour.  I am dealing with what might be called the first bundle.  If your Honours go to paragraph 17 of our learned friend’s, what is called “Third Amended Commercial List Statement”, which starts at page 72, if one then goes to paragraph 17, that is where the NAB pleaded ‑ ‑ ‑ 

EDELMAN J:   Sorry, which book are we looking at?

MR HUTLEY:   The appellant’s book of further materials, your Honour.  Paragraph 17 pleads the relevant provisions:

representations and warranties –

if your Honour sees that.  If your Honour goes over to 19, it said:

In entering into the Loan Agreements and making advances in accordance with their terms, each –

et cetera.  So, the case run that was pleaded by them, that this induced them to enter into the facility, that was pleaded back at them.  If your Honours go to my client’s response at paragraph 133, which your Honours see commencing at page 162 in the same document, at page 163, subparagraph (b), that was pleaded back in the same term and, unsurprisingly, in the NAB’s reply at paragraph 9 at page 49 in the same bundle – the sequencing was done because of the dates of the documents, these things get amendments, so – it is no criticism; that is just how it was chosen.  If your Honours go to page 49, paragraph 9, your Honours will see that 133 is admitted.  So, this case was run on the common ground that the 21.1(t) representation induced the entry into the facility.

Now, our learned friends seek to try and depart from that, and we say they cannot – could have led to being the subject of evidence and all manner of things, cross‑examination – but it was common ground, and a moment’s thought tells you why it was.  These documents go backwards and forwards before they are signed.  The critical thing about a representation like this is no party will sign it until they see that the other party is prepared to represent that to induce them to enter into the facility.  So, questions of warranty do not arise.

The only question is, what did the representation mean, and we say it is clearly demonstration, as we put it.  So, all questions – that is why we say when one gets to apportionment, to return to your Honour Justice Gordon’s question, Dick Smith must have known that this representation was a very significant one – for that matter, the other ones were – and it determined, for the purposes of obtaining a large sum of money from the NAB, to make it, and the NAB was entitled to assume they would have done what might be called an audit of communications and be satisfied that they were satisfied that at the time they were made by omission nothing was left out.  If they did not, well, that goes to their responsibility and it makes it all the greater.

In effect, one looks at Mr Potts’ conduct months before, or well over a month before this facility and his failure to communicate in May, there was a critical, vital last chance in favour of the NAB – in favour of Dick Smith, and for whatever reason they chose not to, and we say, when one comes to apportionment your Honours have the basis for a very substantial apportionment and we have said at the minimum it would be 50/50, but we would say, if you look at the four occasions, it is more likely to be a 25 per cent apportionment adverse to my client.

But critically, because there are four, if they had ordered any one of the three we referred to, they would have realised.  Therefore, one infers that, in effect, failed in all regards.  We say, that should go to the apportionment.  I have dealt with the management accounts.  Can I now deal with the – I am not going to go through Mr Potts’ misleading and deceptive conduct from 6 and 11 May – that is what it is, and your Honours have those findings.  We do not challenge them.  Your Honours will see what they are.

Can I turn to Ms Puja’s information – what we have called Ms Puja’s information.  Your Honours will see the particular information is only referred to shortly in his Honour’s judgment at trial, at paragraph 242 – this information is trade and working capital and information supply – and it says – the only reference to it is at 242.  That requires us to take your Honours to the actual communications.  If your Honours go to the appellant’s book of further materials – what might be called the first book – at page 18, your Honours will see these communications, I hope, yes.

What had occurred is that NAB had sent some questions to Dick Smith.  Your Honours can see those questions at page 19 and 20 – and the answers, your Honours can see them in the way – the questions are in bold – the answers are typed beneath them.  That is a communication from Dick Smith to the Bank.  Your Honours, one needs only to go to question e, on page 19.

GORDON J:   Question 1e?

MR HUTLEY:   Yes, 1e, your Honour:

With respect to stock control, how are inventory provisioned and how are excess stock identified and managed?

That is a direct question to Dick Smith – a frank answer to which would necessarily have disclosed the overstocking, we say – just plain to demonstration.  The answer it gets – “Answer”:

Inventory is provisioned on a monthly basis.  The calculation of the provision is applied at an item level based on the age of the item, the level of weeks cover and any items with a negative margin.

Nothing said about excess identified and managed.  The classic omission.  Any frank – that was apt, we say, to be a communication which was misleading by omission.

GORDON J:   What is the omission in the context of request about stock control, inventory provision and excess stock identified and managed?  What is the omission in that answer?

MR HUTLEY:   We obtain excess stock because we have a policy of driving purchases to get O&A.  We, in effect, produce excess stock.  Our excess stock is not managed, and as I said, the finding was they had not dealt – Justice Ball’s finding was, they had not dealt with, at this time, the implications of the policy.  They had not addressed it, and your Honours know that and are aware of that finding.  In other words, throughout 2015, they did not address – they kept driving the O&A policy which, in effect, was driving an overstocking situation.  That spoke to how excess stock is managed; it was managed by getting more.  In other words, we say that is a clearly misleading communication at the time by omission.

Now, I have taken your Honours, in the debate between the bench and myself, your Honours understand how we put the representation with respect to 21.1(t).  Just to summarise – firstly, 21.1(t) was a representation about all information provided, unqualified.  It was all information that had been disclosed, relevantly, by Dick Smith.  There is no debate about that.  As we said, it had two aspects.  One, as at 22 June, or if later provided, was:

accurate in all material respects and –

secondly:

not, by omission or otherwise, misleading in any material respect at the date provided (whether by its inclusion or omission of other information) –

Now, therefore that accuracy representation at the 22nd, other representation as to not misleading as at the date supplied, and that, we say, that time difference is to avoid, in effect, an updating characteristic which would apply.  Now, to some extent, your Honour, interestingly, that updating aspect was dealt with in the – and we do not rely on it, but just to explain to your Honour how the construct worked, if your Honours went to 21.1(s), and your Honour sees there that is qualified by “known to it”, so it is a different sort of representation.

So, in effect, there has been a clear distinction drawn between (s) and (t).  Our learned friends try to, in effect, read down the representation of (s) to (t) in an argument which has never been advanced until this Court.  But, critically, one should notice that (s) is expressed in very different terms, seeking a very different analysis. 

EDELMAN J:   Is this paragraph 10 that you are addressing now?  This is the point about the difference between state of mind and fact.

MR HUTLEY:   Yes.  But I just want to make that point there.  Therefore, we say – we have been through, I think, how we put our position in relation to the various communication – the communication of 28 April.  We say, those communications, if looked at in the way we say the representation in 21.1(t) requires them to be looked at, were clearly misleading by reason that they did not – they omitted a material matter, same with respect to the management accounts and the Puja information.  Can I deal, shortly, with the pleadings? 

GAGELER J:   With all of those things, with that submission, you were asking us to make those findings of fact ‑ ‑ ‑

MR HUTLEY:   Yes, we say, on the findings found, it follows.

GAGELER J:   ‑ ‑ ‑ for the first time.

MR HUTLEY:   Yes, quite.  We say that because nowhere else in the Court – if your Honours think there has been an error in failing to make – your Honours could send back the case for those findings.  But we sought those findings – as I will come to ‑ ‑ ‑

GORDON J:   Where do we find those set out being sought below?

GAGELER J:   This is paragraph 8, I think, is it not?  You are coming to it.

MR HUTLEY:   I am coming to those, your Honour, I have to deal with the pleading first.  I have to deal with the pleading, if I could, your Honour.  I have to deal with the pleading, if I could.  I have taken your Honours, in the list statement, to paragraph 17, about the loan agreement, and 19, about reliance.  Then, there are paragraphs 28 to 42.  Could I just ask your Honours to deal with one or two of the paragraphs.  Paragraph 28, at page 79 – this is in the appellant’s book of further material.  That refers to the “Rebate Maximisation Policy”.  That was the policy that his Honour found.  If your Honours then go down to 30, that refers to the continuation of the policy.  His Honour found that was, at all material times, in place up to 22 June 2015.  If your Honours look at 31(a), it says, the Rebate Maximisation Policy led to:

employees of DSH and the DSE Group who were responsible for buying inventory engaging in buying practices which focused on and prioritised maximising rebates –

That was found by his Honour.  If your Honours would then go over to paragraph 34, your Honours will see 34, the chapeau, and (a) and (b).  His Honour found those.  Now, if your Honours then drop down, if your Honours would, to paragraphs 39, and if your Honours go to paragraph 39(d1), that was as his Honour found.  If your Honours then go over to paragraph 98, this is of some significance, having regard to some of the points raised by our learned friend.  That said:

By reason of the conduct . . . Potts in effect represented . . . that –

certain matters – they are irrelevant to our question, but the matters of relevance, are (g), (i) and (j) – the questions of fact.  And your Honours will see:

(g)did not have appropriate and effective inventory management practices;

. . . 

(i)DSH’s excess inventory was not the consequence of events beyond DSH’s control or was otherwise explicable.

(j)DSH’s excess inventory was a consequence –

et cetera.  Now, those paragraphs we emphasise because Justice Ball found that to be the true position regarding Dick Smith.  That is, this January stock position was caused by over-ordering to maximise rebates and boost profits.  And in May, no real steps had been taken to address that issue.  Finally, I need take your Honours to paragraph 102, which is the heart of some of our learned friend’s submissions.  It says:

By reason of the contraventions by Potts –

et cetera, of the sections – and there are a number of sections.  All were said to be engaged and no distinction was made:

and in reliance on the representations pleaded in paragraphs 98(a) to 98(f) NAB entered into the Loans Agreements and advanced the loans to DSE as pleaded above and has suffered loss and damage.

Can I now take you to our concurrent wrongdoer defence.  I have taken your Honours to certain paragraphs of it, but I can deal with it relatively shortly.  The relevant page in this book is page 161.  Now, that plead – the proportionate liability defence, I do not need to trouble you any further with that at the moment – pleaded that.

GORDON J:   Sorry, what paragraph was that?

MR HUTLEY:   Paragraph 129, your Honour.

GORDON J:   Paragraph 129 or 161?  Did you mean ‑ ‑ ‑

MR HUTLEY:   Page 161, I am sorry, I think I said – but paragraph 129.

GORDON J:   Thank you.

MR HUTLEY:   And then one drops down.  If your Honours would note 132, but it is of no longer any relevance, just that it was part of the defence that has been superseded.  Then paragraph 133, to which I took your Honours, and I would like to take your Honours shortly to it.  It says:

If the matters in paragraphs –

and then it recites various paragraphs:

are established, then:

(a)DSH represented to NAB and HSBC that –

It does not matter.  Could I tell your Honour in the chapeau, paragraph (i), (ii), and (iii) was only of relevance to HSBC, so it is of no significance any further.  I will come back to how the others are dealt with.

GAGELER J:   I am sorry, paragraph (a) of ‑ ‑ ‑

MR HUTLEY:   No, no, in the chapeau, there is a reference to paragraph 123 – your Honour sees that?

GAGELER J:   I see.  Yes.

MR HUTLEY:   That solely was concerned with HSBC.  Your Honours will see there is reference to in paragraphs – including the paragraphs I have taken your Honours to – where the findings were made.  Then it sets out the representation – (ii) is, of course, the representation with which we are concerned.  Then (b) says:

NAB and HSBC relied upon each of the representations . . . in entering into the Loan Agreements and making advances in accordance with their terms –

Now, your Honours see that cross‑references to paragraph 19 of our learned friend’s NAB pleading.  So, it repeats that, as I told your Honours before.  Now it says:

each of the representations . . . above was misleading or deceptive, in contravention . . . by reason of DSH’s failure to disclose to NAB –

the various matters, which included the matters to which I have taken your Honours to, and the matters his Honour found – and his Honour found sufficient to make Mr Potts liable.

MR HUTLEY:   I do it at the level of the representation and 21.1(t).  That is the level at which the misleading conduct took place.  That is the

misleading conduct.  No-one sued, for example, nobody sued Dick Smith.  Our learned friend said nobody sued Dick Smith because there was no money.  That is right.  Nobody sued Dick Smith.  Of course, the reflexive liability - - - 

EDELMAN J:   I do not think you can separate the two, because the culpability under (t) depends upon the nature of the breach that it is picking up, and the nature of the breach that it is picking up is going to involve these sorts of arguments.

MR HUTLEY:   It could, and if there is no knowledge, because I do not believe sending it back to the trial judge – Ms Puja, for example, gave no evidence.  We are where we are; but I cannot say to your Honour that Justice Ball would be in a better position to look at these things than your Honours, and I am not in a position to make that submission.  He might be, and if your Honours thought it was appropriate to go back to the trial judge, so be it, because I accept that he could be.  But there has been, in the predicate, failure in the steps.

I think I have dealt with the submissions, your Honour.  Thank you, your Honour.

GAGELER J:   Thank you, Mr Hutley.  The Court will reserve its decision in this matter and will adjourn until 10.00 am tomorrow.

AT 3.43 PM THE MATTER WAS ADJOURNED