Bert v Red 5 Limited[2016] QSC 302

SUPREME COURT OF QUEENSLAND

1. The first plaintiff, Mr Bert, is a tour operator and a private investor.  He has taught economics in France and has held a Financial Services Representative Licence in Australia.  The second, third and fourth plaintiffs are his wife and two daughters. 
2. The first defendant, Red 5 Limited, is an Australian mining company.  Its shares are traded on the Australian Stock Exchange (“ASX”).  Its major asset is an open cut gold mine in the Philippines known as the Siana Mine.  The second defendant, Mr Jackson, was a director and the chairman of the company.
3. Starting in 2004, Mr Bert invested in Red 5 on his own behalf and on behalf of his wife and two daughters.  He was not a passive investor, and had a distinct approach to investment decisions.  Rather than having a diversified portfolio as a means of spreading risk, as many investment advisers would recommend, Mr Bert thought it made more sense to own a very concentrated portfolio of a very few securities in terms of the “risk return trade off”.
4. Mr Bert and Mr Jackson met at an Investors’ Expo in Melbourne in March 2004.  Mr Bert bought a large number of shares in Red 5 on his family’s behalf and on his own behalf in 2004.  Further shares were acquired between 2004 and 2011, in what Mr Bert described as small transactions compared to the large holding initially acquired.  Although Mr Bert initially claimed that the shares were acquired by his wife and daughters on the basis of his recommendations, this was not true.  His daughters were very young at the time.  It appears that Mr Bert invested the family’s wealth in Red 5 shares in his and their names. 
5. From 2004 to 2011, the Siana Mine went through various phases of preparation and was well into the commissioning phase by late 2011.  The mine is an open pit mine which over a long period of inactivity after its closure in 1990 had become a lake.  A major aspect of the preparation of the mine involved developing and implementing a plan to dewater the pit.  By March 2012 the mine was in the early phase of production, and Red 5 went to the market to raise extra capital.  It made no secret of the fact that it was seeking to raise $15 million to “provide a working capital buffer, as a prudent measure during completion of the commissioning phase and ramp up of production”.  On 19 March 2012, Mr Bert received a letter from stockbrokers which told him this.  On 20 March 2012 an ASX announcement was made before the market reopened.  It stated that $15 million had been raised and that it would be “allocated to a working capital contingency for the next six months”.
6. Later that day, after trading reopened, Mr Bert invested the sum of $350,164 in purchasing Red 5 shares at $2.12.  He invested further sums between May 2012 and April 2013.
7. The mine encountered problems, the most significant of which was the compromise of a tailings storage facility in April 2013.  This resulted in a cease and desist order being issued in June 2013.  Processing only recommenced in January 2015.
8. Mr Bert sold his and his family’s shares in March 2015 at $0.12 per share.  He and his family seek to recover their losses on the basis of three causes of action.

The first cause of action

9. The first cause of action alleges misleading or deceptive conduct in contravention of ss 12BB and 12DA of the Australian Securities Investment Commission Act 2001 (Cth).  Mr Bert claims that he and his family made the March 2012 investment on the basis of a 15 March 2012 telephone conversation with Mr Jackson about the purpose of the capital raising.  Mr Bert says that Mr Jackson told him that the proposed capital raising was intended to raise funds for copper exploration.  According to Mr Bert, there was no mention of an intention to raise money for working capital.  The defendants also are alleged to have not notified Mr Bert that this purpose had changed.  This cause of action is based on misrepresentations which Mr Jackson is alleged to have made during that telephone conversation, including alleged statements that he had met representatives of BHP and Rio Tinto and discussed with them the prospect for copper on Red 5’s tenements in the Philippines.
10. An immediate problem with this claim is that, in the course of the trial, Mr Bert resiled from his pleaded case.  In the face of previewed evidence as to why Mr Jackson could not and would not have made representations about meetings with representatives of BHP and Rio Tinto, or even have had any discussions with those representatives about the prospect for copper on tenements which Red 5 had in the Philippines, Mr Bert said that his pleading was “badly worded”.  Despite claiming in his oral evidence that he had “a very accurate recollection” of the conversation and having included reference to alleged meetings between Mr Jackson and representatives of BHP and Rio Tinto in his affidavit affirmed 21 July 2016, Mr Bert resiled from this evidence and sought to depart from his pleaded case.  He explained that what he intended to say was that Mr Jackson had told him that he had attended an industry conference where a bullish sentiment for copper was expressed, and at which BHP and Rio Tinto representatives may have been in attendance. 
11. Even if I was to allow, over the defendants’ objections, the plaintiffs to depart from their pleaded case, the plaintiffs’ first cause of action encounters additional problems.  One is the familiar problem facing any claimant who alleges that words spoken in the course of a conversation were misleading.  The spoken words must be proved with a degree of precision, and human memory of what was said in a conversation is fallible for a number of reasons.^[1]  As McLelland CJ in Equity observed in Watson v Foxman, this is particularly the case:

“where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said.  All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed.”^[2]

12. There is, however, a bigger problem for Mr Bert in relation to both his pleaded case and his unpleaded case.  It is the quality of his evidence and the adverse view which I have reached about his credibility and reliability as a witness.  For the reasons which I will further develop in respect of the critical issue of what was said in the 15 March 2012 telephone conversation, I conclude that:

1. Mr Bert is an unreliable witness about what was said.

2. It is highly improbable that Mr Jackson would conceal the fact that one of the purposes of the capital raising was to raise working capital because Red 5 was telling the market (including Mr Bert) that fact.

3. Mr Bert was in fact told this in writing on 19 March 2012, again in an ASX announcement on 20 March 2012 and in later documents, including reports which Mr Bert concedes that he read.

4. Despite being told in these documents about the equity placement to raise $15 million for additional working capital, for a very long time Mr Bert did not complain to Mr Jackson or Red 5 that he had been misled by Mr Jackson not telling him about the working capital purpose in their conversation.  Even after Mr Bert had suffered substantial losses, he made no complaint about being misled in March 2012.  He made no complaint until 24 October 2013.  He failed to give a plausible explanation for the absence of complaint.

5. The obvious inference is that Mr Bert did not complain because he was in fact told by Mr Jackson about the plan to raise working capital, and also read about it, before making his investment.

13. Because I reject Mr Bert’s version of the 15 March 2012 conversation as unreliable and improbable, I am not satisfied that he was in fact misled in that conversation.  Nor was he misled when Mr Jackson did not personally contact him after 15 March 2012 to advise of a change, namely that instead of raising $25 million for working capital ($15 million) and copper exploration ($10 million), the $15 million already raised by 18 March 2012 would be used for working capital alone.  Mr Bert was not misled when Mr Jackson did not make such a personal call because Mr Bert, like other potential investors, was informed of the purpose of the capital raising and its amount in communications he received before he made the investment on 20 March 2012.  He was not misled because he knew the true facts. 
14. Mr Bert’s failure to prove misleading or deceptive conduct makes it strictly unnecessary to address issues of causation and loss.  However, I will do so later in these reasons.  If, contrary to my findings, Red 5 and Mr Jackson had contravened the ASIC Act by not disclosing that the purpose of the capital raising was to raise working capital, then I would have been required to decide an issue of factual causation.  This requires consideration of what Mr Bert would have done if the (assumed) contravening conduct had not occurred.  In that regard, I find that disclosure of the purpose of the $15 million capital raising would not have altered his decision to invest in a company with which he was familiar and which he had analysed.  He had faith in the company and its prospects, and considered that paying $2.12 per share represented good value.  Assuming for the purpose of argument there had been no contravention, his investment would have been the same.  He also would have made the further investments which he did, after the share price fell and when he purchased additional shares, based on his view that the price of the shares would improve. 
15. Notably, he continued to invest in the company well after a time when, on any view, he knew about the purpose of the $15 million capital raising.  He continued to hold the shares which he purchased in March 2012, together with his original investment, well after this time.  Apart from failing to prove “factual causation”, his conduct after that date in acquiring additional shares and in not selling the shares which he had acquired means that his losses after that date were not caused, in a legal sense, by the alleged contravention.  They were caused by his decision to maintain that investment and invest more in Red 5 after he was aware, on his case, that he had been misled.
16. In summary, for the reasons to be developed further, the plaintiffs fail to prove the alleged misleading or deceptive conduct, that the alleged conduct caused them to enter the relevant transactions when they otherwise would not have done so, and that the losses which they claim were caused by the alleged contravention.

Second and third causes of action

17. The plaintiffs say that around the time of the capital raising the company failed to disclose certain information to the market.  Between 2004 and 2011, the mining project went through various stages of preparation.  These included feasibility studies, commissioning and the engagement of technical and other experts.  One aspect was the dewatering of the pit.  The company engaged a hydrogeologist to devise a plan to achieve this.  Issues arose throughout this process and were dealt with by the company.  From time to time, the company reported its activities in announcements to the market and in annual reports.  The plaintiffs’ second and third causes of action concern whether these reports, particularly between October 2011 and June 2012, were sufficient in providing price sensitive information to investors.
18. In precise terms, the plaintiffs say the company failed to disclose that “there were significant quantities of groundwater flowing into the Siana Mine which prevented dewatering of the pit”.^[3]  On the plaintiffs’ case, this failure was a breach of the company’s continuous disclosure obligations under Listing Rule 3 of the ASX Listing Rules and of ss 674 and 677 of the Corporations Act 2001 (Cth).    The plaintiffs claim that they would have sold their shares if the information had been disclosed.  Finally, and related to the issue of non-disclosure, the plaintiffs claim that announcements in October 2011 and March 2012 which suggested that the dewatering of the pit was complete were misleading or deceptive, or likely to mislead or deceive, in breach of s 1041H of the Corporations Act.
19. For the reasons outlined later in this judgment the plaintiffs fail to establish these second and third causes of action.    In summary, in relation to the second cause of action, I conclude:

1. The fact of significant groundwater flowing into the pit was not material information for the purposes of the company’s statutory continuous disclosure obligation because this information had already been publicly disclosed;
2. The fact that revised estimates of the amount of groundwater inflow exceeded previous estimates was not material information because the dewatering plan included pumps and bores which had ample capacity to deal with groundwater inflows along with rainfall;
3. The company was not required to disclose that significant quantities of groundwater flowing into the Siana pit prevented complete dewatering of the pit because this was not the information which was available to the company.  On the contrary, the advice and information available to the board was that its dewatering plan would dewater the pit within a relatively short time;
4. Information about operational aspects of the dewatering process was not information which would, or would be likely to, influence persons who commonly invest in securities in deciding whether to acquire or dispose of Red 5 shares.

I also conclude that neither announcement relied on for the third cause of action, when read in context, was misleading or deceptive or likely to mislead or deceive someone in Mr Bert’s position.

Facts – first cause of action

20. As noted, Mr Bert is financially educated.  He held teaching positions in economics in France for more than 17 years and had a special interest in investment.  He says that his approach to investment reflects the approach of Mr Benjamin Graham, a famous “value investor” who says that investing is like buying a business.  The plaintiffs own a small private company called “Hypatia Finance Pty Ltd”, which was incorporated as a condition of Mr Bert holding a Financial Services Representative Licence.  The company is now inactive.  Mr Bert also has an educational blog called Hypatia Education in which he explains his investment approach. Some of its content appears to reflect decisions which he made about investment in Red 5, although Red 5 is not named in the blog.
21. Mr Bert is the person in charge of the financial affairs of his family and of making investment decisions on behalf of his family.  He explained that he makes long-term investments and gives careful consideration to an investment as if he was investing in a business as an owner/investor.  His approach is to maintain a concentrated portfolio and stay continuously informed about the state of affairs of his investment. 
22. Mr Bert is a self-represented litigant and this presented some practical difficulties with his giving his evidence-in-chief.  His affidavit could not stand as his evidence-in-chief.  This was because many parts of his affidavit affirmed 21 July 2016 were objectionable, consisting of irrelevant material, inadmissible hearsay,^[4] inadmissible opinion evidence, speculations and submissions.  However, Mr Bert was prompted by me, by reference to that affidavit (which was made a matter for identification), to tell his story, and he was cross-examined.  The essence of Mr Bert’s case is that he took a considered approach to investment in general and in making investments after 2004 in Red 5.  He undertook due diligence, read reports and ASX releases and assessed the risk and reward of the family’s investment on a regular basis. 
23. From time to time when he required clarification about matters, he would email Mr Jackson and, typically, Mr Jackson would reply by email.
24. Mr Jackson had been elected to the board of Red 5 in December 2003 and was its non-executive chairman from April 2007 to November 2013.  Part of Mr Jackson’s function was investor relations.
25. The Siana Mine had operated in different forms before and after World War II.  It closed in the 1960s and reopened in 1980 as an open pit operation.  However, there were operational problems and, with the business being under-capitalised and the gold price falling, the mine closed again in 1990.  Red 5 acquired an 80 per cent equity interest in the project in 2004.  By this time there had been no gold mining at Siana for many years and the original pit had filled with water, forming a large lake which villagers used for fishing.  Red 5 conducted investigations to decide if mining was technically and financially feasible, and the reports were positive.  The operation required the “dewatering” of the lake so as to expose parts of the pit so that mining could commence.
26. The remaining water and whatever lay at the bottom of the pit would then be removed to allow mining and production to continue on a larger scale.  From 2004 to 2011, the mine went through various phases of preparation and was well into the commissioning phase by late 2011.  On 6 February 2012, Red 5 announced the pouring of the first gold bar at the Siana site.  On 1 March 2012, the company announced its production and cost guidance for what was called the Siana Gold Project, which stated that in the four months to June 2012 it expected to produce 18,000 ounces of gold and that 75,000 ounces of gold were expected to be produced in the following financial year. 
27. On 15 March 2012, the company lodged with the ASX an investor presentation titled “Red 5 Limited - the Newest Philippines Gold Producer” about a proposed capital raising for the project.  It included information about production guidance, the current status of the commissioning phase and growth opportunities, with some detail about the exploration potential in nearby sites such as Mapawa  The same day, trading was suspended and Mr Bert emailed Mr Jackson asking about the capital raising and its purpose.  Mr Jackson called Mr Bert in response.  The content of that telephone conversation is a key issue in this case, as is the conduct of both parties following that conversation.
28. The context of the conversation is important.  As noted, by early March 2012 the company had produced its first gold bar and announced its production forecast until June 2013.  It was nearing the end of the commissioning phase and the commencement of commercial production, which in the event commenced on 20 April 2012.
29. On 15 March 2012, the company’s secretary approached the ASX requesting a trading halt pending the release of an announcement about a capital raising by the company.  The company issued a release to the ASX that day which stated:

“The securities of Red 5 Limited (the ‘company’) will be placed in pre-open at the request of the company, pending the release of an announcement by the company.  Unless ASX decides otherwise, the securities will remain in pre-open until the earlier of the commencement of normal trading on Monday, 19 March 2012 or when the announcement is released to the market.”

30. At 9.52 am on 15 March 2012, Mr Bert emailed Mr Jackson with the subject “Capital Raising?”.   Having just seen the trading halt announcement about a capital raising, Mr Bert made a comment and posed a question.  He wrote:

“I am wondering why a capital raising now?  after [sic] the recent consolidation at a time the company should become Cash Flow positive and when the share price seems still really undervalued (from what the analysts are saying) just before a re-rating.”  (emphasis added)

31. He concluded that while he was sure there was a logical explanation, he was completely lost as to why a capital raising would be decided at that time.  Mr Jackson replied to this email at 11.48am, saying that he would call Mr Bert that afternoon.  The parties agree that Mr Jackson called Mr Bert later that afternoon, but they do not agree about what was said.
32. For present purposes, it is sufficient to say, by reference to contemporaneous documents, including minutes of a board of directors’ meeting, that as at 15 March 2012 the board resolved to raise $25 million in equity, with $15 million as a working capital buffer and another $10 million for exploration.
33. Mr Jackson gave evidence about the process of the capital raising.  It was to be conducted as a private placement, where sophisticated investors could purchase shares at a discount of market price while the trading halt was in effect.  The placement was in the hands of Casimir Capital in New York and Petra Capital in Sydney as brokers.  E L & C Bailieu Stockbroking were the settlement agent for Casimir in Australia.  Red 5’s plan was to approach sophisticated institutional investors, including both present and potential shareholders, who did not require prospectuses and could make investments on short notice.
34. After his conversation with Mr Bert, Mr Jackson had two further phone calls on 15 March with portfolio managers of two institutional shareholders, JB Management in London and Gabelli Gold Fund in Connecticut.  They were influential investors and important institutional shareholders in Red 5.  Both supported the capital raising, but expressed displeasure that funds were being raised for exploration. They only wanted to participate on the basis that the raising was for working capital alone.
35. Mr Jackson reported this to the company’s directors and a further board meeting was held on Sunday, 18 March.  It seems that, by this point, the company had commitments from investors for up to $15 million.  The company resolved to pursue only $15 million and only for the purpose of working capital. It was agreed that the commitments made by investors to that point had to be reconfirmed because of the change.  Mr Jackson explained in his evidence that once the capital raising was in the hands of the brokers, the company would advise them of any change to the plan and its background, and it was up to the brokers to contact the investors who had made bids in the placement.  He says that he did not return a call, or provide an update about the change in circumstances to any shareholder, either institutional or retail.  The changes were communicated to the brokers in charge, who had requested the company to suspend trading for a further day so they could reconfirm current commitments.
36. This occurred the following day, Monday, 19 March 2012.  The company issued a market release before trading opened, which stated:

“The securities of Red 5 Limited (the “Company”) will be suspended from quotation immediately, at the request of the Company, pending the release of an announcement.”

37. Mr Bert, for his part, after the phone call on 15 March 2012, emailed Mr Jackson at 3.21pm that day saying that he would be happy to participate in the placement with up to 165,000 shares at $2.12.  Mr Jackson referred him to Bailieu Stockbroking, who responded to Mr Jackson that they would “look to accommodate this professional investor.”  Mr Jackson did not respond to Mr Bert.
38. Bailieu sent a letter by email to Mr Bert dated 19 March 2012, the day on which the company voluntarily suspended trading.  The letter was headed “Urgent – Confirmation of acceptance required by 4:00pm, Monday 19 March 2012”. In the first sentence the letter referred to the private placement seeking to raise $15 million.  On the second page, under the heading “Use of proceeds”, it stated the funds raised would be used to “provide a working capital buffer, as a prudent measure during completion of the commissioning phase and ramp up of production, at the Company’s Siana gold mine; fund plans to accelerate exploration on existing tenements; and fund new project generation”.  It also enclosed an acceptance form, which required the investor to confirm warranties and representations set out in the letter, which included a representation that the investor was a “sophisticated investor” within the meaning of s 708(8) or s 708(11) of the Corporations Act.  In the result, Mr Bert was unable to participate in the placement because he did not meet those criteria.
39. The company made the foreshadowed further announcement to the ASX on the morning of 20 March, again before the market reopened.  In a release titled “Equity placement completed”, it reported the placement of $15 million worth of shares to existing institutional investors.  Importantly, the second paragraph of the announcement stated that:

“…the proceeds will be allocated to a working capital contingency for the next six months when extensive open pit stripping continues.”

40. Mr Bert denies having read the Bailieu letter dated 19 March 2012, other than in part, and denies having read the one page ASX report to shareholders dated 20 March 2012 at all.  I found his denials unconvincing.  He concedes that he received the Bailieu letter and read at least part of the front page.  This letter made clear that the sum being raised was $15 million, a change from the amount Mr Jackson would have told him.  Consistent with his approach towards investment, namely gaining relevant information and analysing it, I consider it highly likely that Mr Bert read the part of the letter which indicated that the capital was being raised to provide a working capital buffer during the completion of the commissioning phase and ramp up of production.  Mr Bert worked from home and read ASX releases and other announcements about Red 5.  It is highly unlikely that he failed to read the one page ASX report to shareholders issued on 20 March 2012.  I find that he probably did so and understood that the $15 million capital raising would be allocated for working capital contingencies over the following six months.
41. Mr Bert had good reason to read the Bailieu letter of 19 March and the 20 March ASX announcement.  He was, after all, investing part of the proceeds of sale of the family home.  It was a major investment of his family’s wealth.  He agreed under cross-examination that he did not have any reason to not read the 19 March letter.  He said that once he discovered he could not participate in the placement he did not go back to it.  However, as a prudent investor he had every reason to read what the letter said about the size of the capital raising and its purpose.  His denial of having read the 20 March ASX announcement is equally unconvincing.  His explanation that he relied on Mr Jackson and thought that Mr Jackson would have given him all the relevant information is implausible.  He acknowledged that he received the ASX announcement titled “Equity Placement Completed” before he made his investment.  He was aware that the announcement contained price sensitive information.  A prudent investor, with Mr Bert’s interest in undertaking due diligence and analysing available information, would have read the ASX announcement before making such a substantial investment.  He would have done so even if he completely trusted Mr Jackson.  The ASX release might contain different and new information.  I find that Mr Bert did read the ASX announcement.
42. Mr Bert bought a total of 165,016 shares at around $2.12, for a total of $350,164, after the suspension was lifted on the morning of 20 March 2012.  Importantly, this was after the company’s ASX announcement had been made to the market, including Mr Bert.
43. He sent an email to Mr Jackson at 10:27am that morning, explaining that he had not been able to participate in the placement because he was not “pre-registered as s 708”, but that he had bought shares on the open market that morning.  Mr Jackson did not respond to this email.
44. After making the investment on 20 March 2012, Mr Bert continued to follow the fortunes of the company.  On 30 April 2012 an ASX quarterly activities report for Red 5 was released.  Relevantly it reported that:

“An equity placement, representing a modest 6% increase in issued capital was conducted to provide a working capital contingency in light of early operational performance.”

Mr Bert conceded that he read this report.  He maintains that he read the words as suggesting that it was only after 20 March 2012 that it was decided to apply the funds raised to working capital.  That, however, is not what the report says.  In any case, if, as Mr Bert suggests, raising money for working capital was anathema to him on 20 March 2012, it would have prompted him to raise questions in an email to Mr Jackson. 

45. I do not accept Mr Bert’s evidence that he thought that the report was referring to a later decision to apply the money to working capital.  The announcement clearly refers to an equity placement for working capital.  If Mr Bert is to be believed, he objected to any such capital raising for that purpose.  Any such news would have prompted him to ask questions of Mr Jackson and the company.  He did not do so.  In my view, the reason that he did not do so is that the 30 April 2012 announcement did not contain any news.  It confirmed the equity placement about which Mr Bert knew and the purpose to which the capital had been allocated.
46. Red 5’s annual report released on 26 September 2012 reported:

“However, with production delays of an unknown duration during the early silt removal program, the company opted to raise $15 million in additional working capital.  Whilst this action disappointed some shareholders, prudence and protecting the value of the asset in place was foremost in the decision making process.”

This served to further confirm the capital raising and its purpose.  If Mr Bert is to be believed, Mr Jackson did not tell him on 15 March 2012 about any plan to raise capital for working capital and he remained in ignorance of this.  His evidence is implausible because of the documents which he had and his interest as an investor in analysing information about a company in which he had concentrated his family’s investments.  Most importantly for present purposes, at no stage during this long period did Mr Bert complain that he had been misled by Mr Jackson or anyone else, or, in particular, that he had not been informed prior to making his investment on 20 March 2012 that $15 million was being raised for working capital purposes.

47. On 19 July 2013 Mr Bert wrote to Mr Jackson to advise that he would not be participating in the most recent equity placement.  He noted “I have already lost our home”.  Despite the poor performance of the Red 5 shares and the investment loss which Mr Bert had suffered, there was no suggestion by Mr Bert that Mr Jackson or Red 5 had misled him or had failed to disclose the purpose of the March 2012 capital raising.  Mr Bert said in his evidence that he did not complain because he was not “confrontational”.  However, a non-confrontational person who claimed to have been misled or deceived would be expected to record that he had been misled and lost a large part of his family’s wealth as a result.
48. Mr Bert made no complaint until 24 October 2013 when he wrote to Mr Jackson claiming compensation for loss of capital invested in Red 5 in March 2012 and thereafter.  In that letter Mr Bert alleged that Mr Jackson had told him that he “had a meeting with representatives of BHP and Rio Tinto and has spoken with them about the potential and the prospect for copper which Red 5 has on their tenements in the Philippines”.  This allegation is reflected in representations pleaded in the statement of claim.  Mr Bert also complained that Mr Jackson explained to him that the capital raising was to accelerate exploration for copper.

Were the pleaded representations made?

49. The plaintiffs’ case is that Mr Jackson made a number of representations during the 15 March 2012 conversation about the capital raising, and in particular about its purpose.  At paragraph 10 of their further amended statement of claim, the plaintiffs allege that Mr Jackson made the following representations:

“(a)That he had a meeting with representatives of BHP and Rio Tinto;

2. During that meeting the second defendant and the representatives of BHP and Rio Tinto discussed the potential and the prospect for copper which the defendant has on its tenements in the Philippines;

3. The purpose of the capital raising was to accelerate the exploration for copper on the first defendant’s tenements in the Philippines.”

The pleading was filed originally in the District Court on 23 July 2014.  The proceeding was the subject of case management by Flanagan J in the Supervised Case List and the plaintiffs have had ample opportunity to revise the pleading and to seek leave to amend the alleged representations.  They have not done so.

50. The defendants deny that any such representations were made.  They say no meeting had ever occurred with BHP or Rio Tinto and that Mr Jackson never indicated that it had.  On their case, Mr Jackson told Mr Bert that:

1. Red 5 was pursuing the capital raising in order to “obtain working capital for its Siana Gold Project because commissioning was taking longer than had been expected” and to “recommence exploration activities for copper and gold at its Mapawa site”;

2. “there was a positive general market sentiment for copper and gold”;

3. “Red 5 had previously been a party to a joint venture with AngloGold”; and

4. “there was some prospect that gold or copper was present upon [Red 5’s] tenements in sufficient quantities to attract interest from a major mining company such as BHP or Rio Tinto.”

Mr Bert’s version of the conversation

51. In his précis of evidence of 21 July 2016, Mr Bert affirmed that in the relevant conversation Mr Jackson told him that Mr Jackson “had met with industry representatives, among them representatives of BHP and Rio Tinto, and during their discussions they spoke about the potential and the prospect for the commodity copper”.  Despite having claimed in his oral evidence to have a “very accurate recollection” of the conversation, Mr Bert concedes that these things were not said.  The concession came in the light of a précis of Mr Jackson’s evidence. 
52. Mr Jackson explained that he did not make the alleged representations concerning BHP or Rio Tinto.  Mr Jackson explained, and there is no reason to not accept his evidence, that Red 5 did not have any meetings with BHP or Rio Tinto and that Mr Jackson did not even know anyone from those companies, let alone someone who might have authority to enter into some venture with Red 5.  If there had been such a meeting and such a proposal, it would have been declared to investors and to the market generally.  There was no discussion with representatives of BHP and Rio Tinto about the potential and the prospect for copper on Red 5’s tenements in the Philippines. 
53. In the face of Mr Jackson’s evidence, Mr Bert gave a different account of the alleged conversation on 15 March 2012.  Red 5 understandably objects to the plaintiffs resiling from their pleaded case and attempting to litigate unpleaded representations.  In my view, some latitude should be accorded to self-represented litigants in civil proceedings.  However, there are two reasons why the defendants’ objection should be upheld. 
54. The first is a basic principle of fairness in litigation.  The pleadings define the issues for trial and a party in the defendants’ position is entitled to defend a proceeding on the basis of the pleaded representations.  The goal posts should not be moved without good reason, and only after the defendant is told of the proposed change. 
55. The second reason is that Mr Bert is neither uneducated nor unsophisticated.  He is intelligent.  Although English is his second language and he speaks with a heavy French accent, he shows no sign of any great difficulty in communicating in written English.  His correspondence and submissions show a command of written English.  He conducts a business in Australia and writes a blog in English.  The version of the conversation to which he committed in writing was not the product of someone who lacked a command of written English. 
56. When, in the course of his evidence, Mr Bert resiled from his pleading and said it was “badly worded”, he gave a new version.  It was that Mr Jackson had told him that he had attended an industry conference where a bullish sentiment for copper was expressed, and at which BHP and Rio Tinto representatives may have been in attendance.  This is far removed from a pleading which alleges meetings at which representatives of BHP and Rio Tinto discussed, not just the potential and prospect for copper in general, but the prospect for copper which Red 5 had on its tenements in the Philippines.
57. Although I conclude that the plaintiffs should not be permitted to depart from their pleaded case, it is appropriate, for completeness, to consider the plaintiffs’ new and unpleaded version of the conversation.
58. Mr Bert said that he told Mr Jackson that he was surprised by the announcement of the capital raising and that he did not understand why the company was seeking to raise money at this time when it was starting production and had money in the bank.  He told Mr Jackson it was illogical to start raising money now.  Mr Bert says that Mr Jackson replied that he had attended an industry conference, or something similar, at which there were representatives of BHP and Rio Tinto, amongst others.  He says Mr Jackson mentioned that the attendees at the conference spoke about copper and that Mr Jackson referred to a bullish sentiment for copper being expressed.  Mr Bert says he specifically recalls Mr Jackson stating that “sentiment was very, very bullish for copper”.  Mr Bert concedes this statement was made about copper generally and not about the tenements of Red 5.  He says Mr Jackson then referred to the fact that Red 5’s tenements were “highly prospective for copper” and that a decision had been made to accelerate the exploration for copper on those tenements, including at the Siana Mine.  He says that Mr Jackson explained that the reason for the capital raising was to accelerate the exploration for copper and that the company “wanted to prove that they had copper on this tenement”.
59. Mr Bert gave further evidence, which was consistent with the plaintiffs’ pleaded case, that Mr Jackson did not mention the funds being raised for working capital.  To avoid doubt, in this context the parties agree that a reference to “working capital” would not encompass funds used for the purpose of exploration.  Working capital is understood to be a reference to capital available for ongoing projects.

Mr Jackson’s version of the conversation

60. Mr Jackson gave evidence at the trial about the content of the telephone conversation.  He did not profess to have a detailed recollection of what was said.  He says that on the day he called Mr Bert he made a number of other calls to local and international institutional investors.  When he called each of these investors he had a copy of a script or notes that summarised key points in relation to the capital raising.  The discussion that he had in each of the conversations was substantially the same.  He gave evidence of the substance of the conversation and what he thought he probably said.
61. Mr Jackson said that, in essence, his purpose in talking to Mr Bert was to “make it clear that the equity raise, as conceived at that point in time, was for $25 million of which $15 million was for working capital and $10 million was for exploration.”  Mr Jackson said in his written précis of evidence that he explained to Mr Bert that Red 5 was seeking to raise money for working capital “as the commissioning was taking longer than had been allowed for”.  When pressed on this point in cross-examination, Mr Jackson admitted that he could not recall the specific words that were said, but confirmed that this would have been the nature of the discussion.
62. Mr Jackson says he probably told Mr Bert that the funds the company sought to raise for copper exploration were to be directed towards exploration for copper-gold at the Mapawa site.  Although he did not have a specific recollection, he says he would have discussed the issue of copper with Mr Bert because it was a significant component of the equity raise.  He says he “would have made similar statements to all of the domestic and international institutions with whom [he had] phone calls that day”.  He gave evidence that there had been prior exploration which had found copper at the company’s Mapawa site which was 20 kilometres to the north and at its Allegria site which is five or six kilometres south of the mine at Siana, and that he probably would have mentioned both of these areas.  To the best of his recollection, he told Mr Bert that if copper was discovered at the Mapawa site, it would involve mining on a much bigger scale and the find might be of interest to companies like BHP or Rio Tinto.  Mr Jackson denies, however, that he mentioned any meeting with representatives of BHP or Rio Tinto.  He did not know of any meetings with those companies and did not know anyone from either company. 
63. Mr Jackson says that he would not have told Mr Bert that he had recently been to an industry conference about copper which BHP and Rio Tinto attended because he has no recollection of going to such a conference.  In any case, the conferences attended by Red 5 were not usually attended by the big companies.

Should Mr Bert’s version of the conversation be accepted?

64. The essence of Mr Bert’s allegation is that during the telephone conversation Mr Jackson indicated that there was only one purpose for the capital issue, being to accelerate copper exploration, and that there was no mention of capital being raised for use as working capital.  In a case of this kind, where the alleged misleading conduct is the speaking of words, the plaintiffs must prove what was said with a reasonable degree of precision.  A plaintiff is not required to prove the precise words which were used.  However, to prove the essential elements of the pleaded cause of action, a plaintiff must persuade the Court and prove to its reasonable satisfaction that the alleged representations were made.  Mr Bert’s evidence does not persuade me at all that the conversation was as he alleges.  Instead, I conclude that Mr Jackson disclosed the reasons for the capital raising and that Mr Bert was satisfied with his explanation.
65. In my view, Mr Bert is unreliable in his recollection of the conversation.  Mr Bert’s version of the conversation, as pleaded and as reformulated in his oral evidence, has all the hallmarks of a reconstruction.  There are no contemporaneous documents supporting his version of the conversation and there is no other satisfactory corroboration. 
66. If Mr Jackson misled Mr Bert, as Mr Bert alleges, then the absence of complaint until 24 October 2013 is remarkable.  It has not been satisfactorily explained.  I have noted the various announcements that were made about the purpose of the capital raising.  The public, including Mr Bert, was informed that the funds raised would be used for working capital.  These included a letter sent by the brokers to Mr Bert on 19 March 2012, an ASX announcement on 20 March 2012, and an ASX quarterly report released on 30 April 2012.  The first two of these important documents were received by Mr Bert before he made his significant investment on 20 March 2012.  The defendants correctly submit that if Mr Jackson had in fact told Mr Bert that the funds were being raised only for the purpose of copper exploration, one would have expected him to complain at these points.  As it happens, he did not complain about being misled or about the conversation until his 24 October 2013 letter.  
67. In short, if Mr Bert had not been told about the working capital purpose, then it is very likely that he would have raised concerns when he discovered that purpose.  The absence of timely complaint is not satisfactorily explained by him. 
68. In my view, the absence of such complaint is explained by the fact that Mr Bert was informed about the working capital purpose.  He was informed of it by Mr Jackson.  I do not accept that he did not read the relevant parts of the 19 March letter.  I also do not accept his denial of having read the 20 March 2012 public announcement.  In any event, he acknowledges that by the end of April 2012 he had been told about capital raising for working capital and still did not raise any concerns.
69. The plaintiffs submit, in effect, that Mr Jackson deliberately concealed the true purpose of the capital raising when he spoke to Mr Bert on 15 March 2012.  The plaintiffs suggest that I should infer something from the fact that Mr Jackson chose to respond to Mr Bert’s email by telephoning him, rather than in a return email as he would usually have done.  They submit that this suggests that Mr Jackson was trying to avoid communicating about issues that the company was facing.  This submission seems to imply that Mr Jackson wished to avoid reducing his response to writing so that there was no record of it.  I do not accept this submission.  Such an allegation of dishonest concealment would require persuasive proof and would have to be a plausible explanation of a party’s behaviour.  There is no such proof.  I accept Mr Jackson’ explanation that he had been on the phone all day, was paying Mr Bert the same respect as other institutional shareholders by telephoning him and that, given the surprised tone of the email, he felt the need to assure Mr Bert that there was nothing wrong with the company’s business.
70. I reject the plaintiffs’ serious allegations against Mr Jackson, including the allegations of dishonesty.  Mr Jackson had no motive or incentive to mislead Mr Bert.  As at 15 March 2012 the board had two purposes for the capital raising.  Mr Jackson had a script or notes that summarised the key points and he had no reason to depart from them, let alone deliberately conceal one of the purposes from Mr Bert.  After all, Red 5 was intending to go to investors and would be required to tell the world, as it in fact did, that capital was being raised for working capital.  Mr Jackson had no motive to lie to Mr Bert.  Apart from anything else, any lie would be quickly exposed by the truth.  The whole world, including Mr Bert, would be told before the market reopened that funds were being raised for working capital.
71. There is no persuasive evidence to suggest that Mr Jackson would have sought to conceal these purposes from Mr Bert. I am not persuaded by the submission that he avoided doing so because it would have been difficult to explain in the wake of then recent issues with the commissioning process, which the company had announced it had resolved. This is a serious allegation, which suggests that Mr Jackson consciously deceived Mr Bert. It seems unlikely in the circumstances. The company had reported commissioning issues to the market previously and there is no reason why it would conceal that it needed additional working capital to provide it with a buffer during the commissioning of the mine and ramping up production.
72. Mr Jackson impressed me as an honest witness.  He did not falsely profess to have a complete and accurate recollection of the precise words that were spoken.  That concession was properly made, whereas Mr Bert wrongly asserted a “very accurate” recollection of the conversation.
73. As one might expect of a short conversation which occurred over four years ago, Mr Jackson did not have a specific recollection of the words used. However, his evidence accords with objective evidence about the company’s purpose in raising capital at the time. This includes a 13 March 2012 diary note made by Mr Jackson of a conversation he had with the then managing director of Red 5, Mr Edwards. This note records a reference to a “$15M Buffer” and “$10M exploration and proj generation”.  Minutes of a board of directors meeting held by teleconference the next day indicate the meeting discussed the following:

“The delay in commissioning of the plant and commencement of gold production had depleted the planned working capital buffer. Management recommendation was to raise $25 million in equity to replace the working capital buffer of $10-15 million plus allow a further $10 million to accelerate drilling programmes and project generation activities.”

After some discussion, Mr Edwards is recorded as confirming what he saw as the minimum capital raising amount to be targeted, saying that $20 million would be comfortable and “$15 million would cover working capital but would not fund an immediate aggressive exploration program.” The board agreed the company would seek the $25 million target. 

74. Accordingly, while Mr Jackson’s memory of the specific words which passed in the conversation is limited, his recollection of what he conveyed as the purpose of the capital raise seems more likely than Mr Bert’s. I find it probable that he mentioned both the working capital and exploration purposes to Mr Bert.
75. Mr Bert was an unimpressive witness.  His evidence about the content of the conversation changed.  He departed from his pleaded case and the evidence in his affidavit.  He was evasive in a number of his answers under cross-examination.  For someone who professed a good recollection of what was said in the conversation, he claimed not to recall if the figure of $25 million, $15 million or some other figure was mentioned in the conversation.  If his recollection was sound, then the figure would have been $25 million.  But then he would have had to explain why he did not react when reading the different figure of $15 million on 19 March 2012.  His lack of recollection on this point was a convenient one.  If, however, his recollection was poor, then he probably could not recall years after the conversation what was said about working capital.  He has reconstructed a recollection in which nothing was said about working capital.
76. In summary, I am not persuaded by Mr Bert’s version of the conversation.  I conclude that Mr Jackson’s recollection is far more reliable.  It is probable that Mr Jackson mentioned both the working capital and the exploration purposes to Mr Bert.
77. The result is that the plaintiffs have failed to prove either the pleaded representations or the different and unpleaded version of what was said.  I find that Mr Bert was in fact informed on 15 March 2012 that the board of Red 5 intended to raise $25 million from institutional investors, being $15 million for working capital and $10 million to fund exploration.

Was the defendants’ conduct misleading or deceptive?

78. I have found that the representations contained in paragraph 10 of the plaintiffs’ pleading do not reflect the terms or content of the 15 March 2012 conversation.  Alleged representations (a) and (b) do not reflect what was said.  There was reference to raising capital for the purpose of exploration for copper on Red 5’s tenements in the Philippines.  However, the plaintiffs have failed to prove that Mr Jackson said that this was “the purpose of the capital raising”.  Instead, he referred to both exploration purpose and the other purpose, namely working capital. 
79. Because the plaintiffs have failed to prove the representations referred to in paragraph 10, their claim about misleading and deceptive conduct based upon these alleged representations must fail.  However, it is appropriate to make findings about the nature of what was said by Mr Jackson and whether it was misleading or deceptive.  The statements made by Mr Jackson on 15 March 2012 reflected Red 5’s intention at the time the statements were made.  As noted, Red 5’s plan at the time was to raise $25 million in equity with $15 million for working capital and $10 million for exploration.  The representations about the company’s intention at the time were accurate.  They were not misleading or deceptive.  Insofar as they related to future matters, Mr Jackson’s statements reflected conversations which he had with Red 5’s managing director and the decision reached by the board in its teleconference on 14 March 2012.  Mr Jackson had reasonable grounds to say what he did about the company’s plans.
80. Next, and although the matter is not clearly pleaded as a case involving alleged misleading or deceptive conduct by reason of representations coupled with a subsequent change of circumstances giving rise to a duty to disclose, I will consider the point.  The plaintiffs argue that, even if it is accepted that Mr Jackson told Mr Bert about the dual purposes for the capital raising, subsequent events rendered what Mr Jackson had said about the purpose of the capital raising misleading or likely to mislead.  The plaintiffs submit that, in light of the change to the exploration purpose, the defendants had an obligation to inform Mr Bert that the planned allocation of funds had changed.
81. There is no dispute about the general principles which apply in such a case.  The plaintiffs cite cases under the general law in which, in certain circumstances, a party has been found to be under a duty to disclose a change of circumstances which makes a statement which was true when made, untrue because of those changed circumstances.  It is unnecessary to resort to cases under the general law because it is well-established under case law interpreting statutes prohibiting misleading or deceptive conduct that, depending on the nature of the relationship between the parties and the circumstances, silence or some other failure by a party to inform the other party of certain matters may constitute misleading or deceptive conduct.^[5] 
82. The present issue does not concern the relevant principle.  It relates to the application of that principle to the facts. 
83. I am prepared to assume, for the purposes of argument, that Red 5 was obliged, in the circumstances, to inform Mr Bert as a potential investor of the purpose of the capital raising before he invested.  Red 5’s position is that it did so by disclosing to potential investors (including Mr Bert) the purpose of the capital raising, and that it did so on 19 March 2012 via brokers such as Bailieu and 20 March 2012 via its ASX announcement.  The issue is a narrow one.  The issue is whether or not Mr Jackson should have informed Mr Bert personally, by a telephone call or an email, of Red 5’s change of plans, and whether, in failing to do so, Red 5 and he engaged in misleading or deceptive conduct.
84. The defendants correctly submit that if Mr Bert was participating in the private placement, the defendants could have expected him to be informed by the brokers of the changed purpose of the capital raising after 18 March.  In any event, as a purchaser on the open market, Mr Bert had access to the same information as other investors, including the 20 March announcement which was released before trading reopened.  There was no reason for the defendants to expect that he would not read that announcement.  He had initiated contact with Mr Jackson after having read the 15 March announcement of the trading halt and capital raising.  Red 5 could reasonably expect him to read the ASX announcement which the company had previewed would be released before trading resumed.  His relationship with Mr Jackson consisted of his occasionally seeking clarification about company notices, and he agreed Mr Jackson had never initiated contact with him.  According to the defendants, it was reasonable to expect he would read this latest announcement before investing, particularly where the only information he had to work from was a brief conversation which, on his case, was only in vague terms.  He agreed in his evidence that he did not ask Mr Jackson for further information about the prospect for copper at the site during the call, despite claims that his practice was to obtain as much information as he could before investing because he had a concentrated investment portfolio.
85. The plaintiffs submit that it was reasonable for Mr Bert not to read the 20 March 2012 ASX announcement because “it was unreasonable to think that the only reason he was given for the capital raising would have changed in such a short period of time”.  This submission is unpersuasive.  Two reasons had been given by Mr Jackson for the capital raising.  Mr Bert conceded in his evidence that Mr Jackson’s statements were statements of intention and the capital raising process was ongoing.  Potential investors might come back to a company and refuse to participate on the terms put forward by the company, and the company would have to change plans.  That was in fact what happened in this case.
86. I do not accept the plaintiffs’ submission that it was reasonable for Mr Bert not to read the 20 March 2012 ASX announcement.  It might qualify, contradict or supplement what Mr Jackson had said some days earlier about the capital raising, including the amount to be raised.  It was reasonable to expect Mr Bert, as an investor who read announcements which were intended to inform investors in Red 5, to read the ASX announcement.  I find that he in fact did so.
87. In summary, following the 18 March meeting of Red 5’s board, Red 5 was obliged to inform participants in the placement and the market generally about the amount of the capital raising and its purpose before trading reopened.  In this sense, there was a duty to disclose Red 5’s current (and revised) intentions.  Red 5 did so by informing the stockbrokers tasked with conducting the private placement, who might reasonably be expected to pass that information on to participants in the placement, and also by informing those not participating in the placement (which, as matters transpired, included Mr Bert) through the 20 March 2012 ASX announcement.  There was no separate and additional duty upon Mr Jackson and the company to contact Mr Bert personally in order to give him the same information.  It was reasonable to expect Mr Bert to read the information which was given to potential participants in the private placement and to the market.  Prior to the plaintiffs’ making a further investment in Red 5 on 20 March 2012, the defendants disclosed their revised plans for the capital raising, both in terms of the amount to be raised and its purpose. 
88. The plaintiffs have failed to establish a case of misleading or deceptive conduct “by silence” or, more precisely, by failing to disclose matters to Mr Bert.  The fact that Mr Jackson had previously spoken by telephone to Mr Bert did not require him to communicate personally.  Finally, any failure to make a personal communication is of no consequence because, as I have found, Mr Bert knew the purpose of the capital raising by the time he made the relevant investment.
89. The plaintiffs have failed to prove the defendants contravened the ASIC Act, and therefore they have failed to establish their first cause of action.

Causation – loss and damage

90. Because the plaintiffs have failed to establish conduct which contravened the Act, either on the basis pleaded or on the basis argued by them, it is strictly unnecessary to consider issues of causation and the plaintiffs’ claimed losses.  However, I will do so on the hypothetical and false assumption that Red 5 and Mr Jackson did not disclose to Mr Bert prior to 20 March 2012 the purpose of the capital raising and that, as a result, Mr Bert acted in reliance upon incomplete and false information about its purpose.  The first relevant issue, which may be characterised as one of “factual causation”, is whether Mr Bert would have acted differently had Red 5 and Mr Jackson not engaged in the (assumed) misleading or deceptive conduct.  A second issue, sometimes characterised as “causation in law”, arises if factual causation is proven.  The issue is whether the scope of liability extends to the claimed losses. 
91. Issues of factual causation and the scope of liability for losses which are proven to have in fact been caused by a defendant’s conduct involve two different kinds of enquiry:

“[99]When lawyers use the term “causation” one of two different types of enquiry may be involved.  The first and factual enquiry is the role played by something in the history of an outcome.  It is about “how things came about”.^[6]  It may be an enquiry into whether a defendant’s breach of contract, negligence or contravention of statute played a role, along with other conditions or “causes”, in the plaintiff’s entry into a loss-making transaction. This is a “factual causation” enquiry.

[100]The second enquiry is not about how things came about.  It proceeds on the basis of an understanding of factual causes.  It enquires into whether legal responsibility should be attributed to the defendant for a given occurrence, for example, the economic loss suffered by the plaintiff arising from a transaction.

[101]Causation in law is not concerned simply with a factual or historic enquiry into the relationship between conditions.  As Mason CJ stated:

‘In law, ... problems of causation arise in the context of ascertaining or apportioning legal responsibility for a given occurrence.  ...  Thus, at law, a person may be responsible for damage when his or her wrongful conduct is one of a number of conditions sufficient to produce that damage.’^[7]

[102]In undertaking the second type of enquiry in deciding whether or not to attribute legal responsibility for a given occurrence, value judgments are made about the appropriate scope of liability.

[103]A court may refuse recovery of all or part of claimed losses, despite, as a matter of incontrovertible fact, the defendant’s conduct being a cause of the loss, in the sense that the loss would not have occurred but for the defendant’s conduct.  Sometimes this occurs because the losses were incurred beyond a certain date.  In other cases it is because the losses are characterised as too remote or not foreseeable.  In some cases the loss, although having been caused as a matter of historical fact by the defendant’s conduct, will not be recoverable because extreme or unreasonable conduct by the plaintiff occurs, such that the court concludes that the defendant’s conduct should be found not to have “caused” the plaintiff’s loss.  In other cases, recovery of all or part of claimed losses may be denied because of a supervening factor.  In each of these cases the court limits the recovery of losses on the basis of a judgment about the appropriate scope of legal responsibility, not on the basis of an enquiry into historical fact.

[104]At law, a person may be responsible for a loss when his or her conduct was one of a number of conditions sufficient to produce that loss.  Whether or not the person is made legally responsible for all or part of a loss for which his or her conduct was a cause is an enquiry into whether it is appropriate to attribute legal responsibility for a given occurrence in the context of [a] particular legal norm.^[8]”^[9]

Factual causation

92. In March 2012 Mr Bert trusted Mr Jackson and was interested in making a further investment in Red 5.  There is no suggestion that he had any alternative investment in mind.  He closely followed the affairs of Red 5 and other matters by way of due diligence.  I have found that Mr Bert in fact knew about the purposes of the capital raising, and raised no concerns in relation to it.  For the purpose of the present argument, I am required to assume that he was not told about the capital raising purpose, and I have to consider his likely response if he had been.  In this regard, I place very little weight on any evidence from Mr Bert about this past hypothetical fact.  I have an adverse view of his reliability as a witness in general.  In any event, evidence about “what I would have done if I’d been told” is affected by hindsight bias.  Therefore, I should not give it too much weight.^[10]
93. I do not accept that raising capital for Red 5 to have prudential levels of working capital would have been anathema to Mr Bert and deterred him from making a further investment, let alone persuaded him to sell all of the stock which his family then held in Red 5.  If Mr Bert had asked further questions of Mr Jackson about why working capital was required, then Mr Jackson would have explained the situation.  Given the trust which Mr Bert placed in Mr Jackson and the commercial decision which Red 5’s board had made, Mr Bert was likely to have accepted Mr Jackson’s explanation.
94. Mr Bert saw his family’s investment in Red 5 as a long-term investment.  If Red 5 needed additional working capital during the commissioning phase in order to ensure the long-term success of its mining operation, then Mr Bert would have taken this information on board and assessed the long-term prospects of the stock.  He is unlikely to have altered the favourable view which he had about Red 5 and the long-term prospects of an improvement in its share price.
95. Mr Bert had long been aware that working capital might be needed during production and that it might be obtained through either financing or an equity placement.  He was aware of this in 2009.  The proposition that the company might require additional working capital, obtained through equity raising in March 2012, would come as no great surprise to Mr Bert.  Even on his own case, when he found out about the capital raising that had been undertaken and that it had been used for working capital, he did not complain or sell his family’s shares. 
96. Mr Bert’s focus in March 2012 was on Red 5’s core asset, namely its gold mine.  He was not particularly interested in its copper tenements.  After Mr Jackson mentioned something about copper exploration on 15 March 2012, Mr Bert did not make further inquiries about Red 5’s other tenements, its exploration plans or the copper market.  In fact, given that the telephone call from Mr Jackson occurred in the early afternoon on 15 March and Mr Bert emailed Mr Jackson just after 3.00pm indicating that he would be happy to participate up to 165,000 shares, the due diligence he could have completed regarding copper exploration in that time would have been very limited.  This suggests that Mr Bert, who was interested in being thoroughly informed about his investment decisions, decided to make his further substantial investment for another reason.  His interest was in Red 5’s gold mine and its prospects.  If he had been expressly told in a telephone conversation with Mr Jackson on 18 or 19 March 2012 that Red 5 was no longer going to raise $10 million in order to pursue copper exploration, that news would not have altered Mr Bert’s investment decision.
97. The defendants observe in their submissions that in early 2012 Mr Bert regarded Red 5 as a very attractive investment opportunity.  The defendants note the following:

“(a)In Mr Bert’s view, the gold price moves in cycles but the peaks are increasingly higher;

2. The share price of Red 5 had increased steadily from December 2011;

3. A chart of the share price (especially if compared to the gold price) shows that it was rising steadily right through to 14 March 2012;

4. Mr Bert has made clear in his blog – Hypatia Finance – that he considers charts to be an important source of information;

5. There had been analysts’ reports to the effect that, even though Red 5 shares were trading at about $2.28, they might be worth $3.00 or more;

6. Mr Bert himself was very conscious that, on the analysts’ view, the shares appear to be ‘really undervalued’;

7. The Company’s momentum was evidenced by the fact that the first gold pour had occurred on 6 February 2012;

8. It was also evidenced by the fact that Red 5 appeared to enjoy low costs of production and the support of many institutional investors;

1. Mr Bert had sold his family home and, according to his blog, he was looking to invest;

10. Mr Bert believes that retail investors should find stocks in which they have a high level of confidence and then focus their money on them;

(k)Mr Bert had so much confidence in Red 5 that it had been the major focus of his investment strategy since 2004.”

98. I find that before the telephone conversation with Mr Jackson on 15 March 2012, Mr Bert assessed Red 5 to be an attractive investment opportunity.
99. Mr Bert viewed the shares as an attractive opportunity which were gaining substantial momentum in the market.  He did not wish his existing holding to be diluted.  He was interested in participating in the private placement, if he could.  He was interested in investing in Red 5.  I conclude that the disclosure of additional information about the purpose of the $15 million capital raising, namely that it was to be used for working capital, and that money was not to be raised for copper exploration, probably would not have made a difference to his decision to invest.  The plaintiffs have failed to prove factual causation.

Causation in law – scope of liability

100. On the basis of my conclusion that Mr Bert read relevant parts of the 19 March letter and the announcement on 20 March, he cannot be said to have relied on any false representations made by Mr Jackson in the telephone conversation after he read those documents and ascertained the revised amount of the capital raising and its working capital purpose.  Neither the alleged representations nor the defendants’ failure to specifically inform him of the changed purpose of the capital raise can be said to have caused him to invest.  He could not have reasonably relied on representations he knew were no longer accurate.  I have found that Mr Bert was not misled about the purpose of the capital raising.  However, if I am wrong in that conclusion, he still would have invested if there had been no contravening conduct. 
101. The next inquiry about legal causation assumes, contrary to these findings, that the alleged contravening conduct in fact caused Mr Bert and his family to purchase the shares which they did in March 2012. 
102. Even when, on the plaintiffs’ case, Mr Bert found out about the fact that the equity raising had been for working capital, he did not complain or sell any of the shares which he had purchased on 20 March 2012, let alone the shares which his family already held at that date.  Instead, he increased their shareholding.  He adopted a strategy which he characterises as a strategy of mitigation.  It is unnecessary to dwell on the wisdom of that strategy.  According to the financial planning expert called by the defendants, Mr Kilkenny, by continuing to buy and sell the same stock without consideration for other stocks they could have held, the plaintiffs’ strategy was not reducing their losses, but adding to their existing risk.  According to Mr Bert, however, it was a strategy to reduce his losses and to reduce the average cost of his Red 5 shares.  It was undertaken in the expectation that the additional shares which he acquired represented good value because Red 5’s fortunes would reverse and the share price would increase above the price at which he purchased the additional shares.
103. On the plaintiffs’ case, they continued their investment in Red 5 and even increased it after ascertaining that they had been misled.  The plaintiffs made a calculated choice to maintain their investment, rather than crystallise their losses and seek compensation for them, if they had a valid claim for compensation.  The price of Red 5 shares did not increase.  Instead it experienced further falls, particularly after a tailings storage facility was compromised.  The plaintiffs held onto their investments until 2015 when their shares were sold at $0.12 per share.  They seek to recover substantial losses on the basis that those losses were in fact caused by the alleged misleading and deceptive conduct of March 2012.
104. I am not persuaded that, even if I found the claimed losses to have been caused by, among other things, the defendants’ alleged misleading or deceptive conduct in March 2012, that the defendants’ liability should extend to those losses.
105. As an astute and educated investor, Mr Bert was in a position to ascertain, shortly after 15 March 2012, the purpose of the $15 million capital raising.  I find that he in fact did so prior to making the investment.  However, even if that had not been the case, he was in a position in March-April 2012 to ascertain the extent and purpose of the capital raising and to assess, more generally, the potential risks and potential rewards of maintaining his family’s investment in Red 5.  He made calculated decisions in this regard after (on his case) he became aware that he had been misled.  Knowledge that he had been misled did not deter him from maintaining his investment. 
106. In simple terms, Mr Bert took his chances.  These included the chance that the gold mine would prove a success as well as the chance that it would be unsuccessful due to any number of causes, including operational problems.  Having taken his chances and suffered substantial losses, particularly after the gold mine was forced to close between mid-2013 and early 2015, Mr Bert seeks to recover these losses on the basis that they were caused “by” the alleged contravention.^[11] 
107. I am required to make an evaluation of whether Red 5 and Mr Jackson’s (assumed) liability to compensate for losses caused, in part, by the alleged contravention should extend to those losses.  I am not persuaded that it should.  The losses which were suffered by the plaintiffs after the plaintiffs became aware of the alleged contravening conduct are losses for which the plaintiffs rather than the defendants should be responsible.  In large measure, they are the result of calculated decisions by Mr Bert to maintain his family’s investment in Red 5. 
108. The claimed losses may be characterised as being too remote, having been suffered long after the contravening conduct and long after the plaintiffs became aware of it.  They may be characterised as having been caused by Mr Bert’s calculated decision to maintain, and even increase, his family’s investment in Red 5.  They may be characterised as primarily the result of extraneous causes, unrelated to representations about working capital in March 2012, including the compromise of the tailings storage facility in 2013.  However characterised, I am not persuaded that the losses are losses which the plaintiffs are entitled to recover in law.  They fall outside the scope of liability for the claimed contravention.  Expressed differently, even if the alleged contravening conduct was one amongst many causes of the claimed loss, the plaintiffs have not established that the alleged contravening conduct should be regarded as a “cause in law” of all that loss.  The loss for which the defendants might be made legally responsible should not extend to losses suffered after the plaintiffs became aware of the alleged contravening conduct, at which point they might have sold their shares and avoided further losses.

Conclusion: first cause of action

109. The plaintiffs have failed to establish conduct by the defendants which contravened the Act.
110. Even if they had, they would not have proved that they would have acted differently if the contravention had not occurred.  They would have invested as they did on 20 March 2012, having assessed Red 5 as an attractive investment.  When its share price fell, they would have adopted the same “averaging” or “mitigation” strategy in the belief that the price would recover.  The plaintiffs would have retained their Red 5 shares and made the losses which they did.
111. Those losses were the result of continuing to hold Red 5 shares after the plaintiffs (on their case) were aware that they had been misled in March 2012.  They were also the result of a tailings storage facility failure in April 2013.  The losses were remote in point of time to the alleged contravention, and should be regarded as beyond the scope of liability for an alleged contravention which related to raising working capital in March 2012 for the commissioning of the mine.

The second cause of action: non-disclosure of information to the market

112. The plaintiffs’ second cause of action contends that certain information should have been disclosed to the market about the Siana mine.  Specifically, the plaintiffs plead that the company failed to disclose “the presence of significant quantities of groundwater flowing into the Siana pit”.^[12]  They say that this breached continuous disclosure obligations under the ASX Listing Rules and the Corporations Act 2001 (Cth), and that they would have sold their shares if the information had been disclosed.
113. The essential issue is whether information about the presence of significant groundwater flowing into the Siana pit “would, or would be likely to, influence persons who commonly invest in securities” in deciding whether to acquire or dispose of shares in Red 5.^[13]

Legal context

114. Relevantly, subsections 674(1) and (2) of the Corporations Act provide:

“674 - Continuous disclosure—listed disclosing entity bound by a disclosure requirement in market listing rules

Obligation to disclose in accordance with listing rules

1. (1)
   Subsection (2) applies to a listed disclosing entity if provisions of the listing rules of a listing market in relation to that entity require the entity to notify the market operator of information about specified events or matters as they arise for the purpose of the operator making that information available to participants in the market.

2. (2)
   If:

1. (a)
   this subsection applies to a listed disclosing entity; and

2. (b)
   the entity has information that those provisions require the entity to notify to the market operator; and

3. (c)
   that information:

(i) is not generally available; and

(ii) is information that a reasonable person would expect, if it were generally available, to have a material effect on the price or value of ED securities of the entity;

the entity must notify the market operator of that information in accordance with those provisions.”

115. The essence of the provision is that a listed company is under an obligation to disclose information to the relevant market that a reasonable person would expect to have a material effect on the company’s share price.  Section 677 identifies what is meant by “material effect on price or value” in s 674:

“677 –  Sections 674 and 675 –  material effect on price or value

For the purposes of sections 674 and 675, a reasonable person would be taken to expect information to have a material effect on the price or value of ED securities of a disclosing entity if the information would, or would be likely to, influence persons who commonly invest in securities in deciding whether to acquire or dispose of the ED securities.”

116. These provisions have been considered in a number of cases.  As Perram J confirmed in Grant-Taylor v Babcock & Brown,^[14] the test posed by section 677 is an objective one which takes into account the available information at the time it is alleged that disclosure should have occurred.  While the subjective views of the company and individual investors at that time can be considered as part of the overall factual matrix, these views are not determinative.  It remains for the court to consider what a reasonable person would have expected in all of the circumstances.  The key issue for the court to determine, having regard to all the circumstances, is whether the information would, or would be likely to, influence persons who commonly invest in securities in deciding whether to acquire or dispose of the shares.
117. Before considering what the market’s reaction would have been if information had been disclosed, it is necessary to identify precisely what it was that it is alleged should have been disclosed.^[15]  That must be considered in the context of the facts and the company’s activities as a whole.  The “information” can include matters of fact, opinion and intention that are relevant to whether the information has the deemed material effect on the price of the company’s shares.  For example, disclosure of only factual information or data may be misleading if taken out of the commercial context of the company’s intention as to how it will deal with that factual information.^[16]  Further, it does not follow simply that the information which a plaintiff alleges should have been disclosed is, in fact, the correct expression of the relevant information.^[17]
118. The Court should then turn, under s 677, to the effect which disclosure of that information would have had on the minds of persons who commonly invest in securities.  The inquiry is to determine whether the information, properly conceived, would or would not be likely to influence this hypothetical class of persons “who commonly invest in securities”.^[18]
119. In considering whether the information would be likely to influence the investment decisions of this class of investors, it is insufficient that the information “may” or “might” influence a decision.  It must be at least likely that it will.^[19]  Materiality may depend on the balancing of both the probability that an anticipated event will occur and the anticipated magnitude of the event on the company’s affairs.^[20]
120. Because Red 5 is listed on the ASX, that is the relevant market for the purpose of these rules.  The ASX has its own Listing Rules with which listed companies must comply.  Listing Rule 3.1 deals with continuous disclosure generally, and provides that:

“Once an entity is or becomes aware of any information concerning it that a reasonable person would expect to have a material effect on the price or value of the entity’s securities, the entity must immediately tell ASX that information.”

121. Save in one respect, it is substantially the same as the requirement in s 674(2) above.  The only difference is that Listing Rule 3.1 does not expressly exclude information which is “generally available”, in contrast to the limitation in s 674(2)(c)(i).^[21]

Dewatering

122. This aspect of the case contains frequent reference to “dewatering”.  This word is used to describe two processes.  The first is the removal of the lake beneath which the mine was located.  The pit had been under about 100 metres of water for over 20 years and an estimated 8.2GL of water in the lake had to be removed.  The second aspect of dewatering was the ongoing process of removing groundwater inflow and rainfall.
123. Over the years, Red 5 had informed the market of the challenges presented by the environment of the Siana project.^[22]  When he invested in 2004, Mr Bert would have appreciated that the mine was located beneath a lake. 
124. Over the following years, investors and potential investors were informed of the challenges in dewatering the pit, in both the respects I have outlined.  The lake would have to be removed and dewatering of groundwater inflow and rainfall would be a continuing process.  The 2006 pre-feasibility report to shareholders, which Mr Bert read, states the following:

“Pit dewatering

The existing flooded pit is estimated to contain 8.2GL of water.  Data recorded during the previous mining operation provided a useful basis for estimating the water flows into the pit area.  The pit operations are susceptible to flooding due to heavy rainfall, as well as groundwater inflows.  Suricon reports recorded annual abstraction rates from the pit varying between 3.2GL and 6.7GL.

In a recently updated mine groundwater model the annual inflow is estimated at 6.8GL/yr, including rainfall.  The rainfall is estimated at an average rate of 3600mm/yr over an area of 28.4ha equivalent to 1GL/yr.

The pit will be dewatered in two stages using in-pit pumps and external bores.  Stage one is to dewater the pit over a four month period (approximately) using pontoon mounted electric drive pumps, with power from the main grid.  The total volume to be pumped including inflows is estimated to be 9.64GL over 120 days, allowing for 50% of the groundwater inflow to be taken up by external water bores.

Stage two comprises ongoing pumping from bores and in-pit pumps.  Historically, the southern limestone was a major source of groundwater inflow into the pit.  Bores abstracting 3.2GL/yr will be located at the southern end of the pit to dewater this aquifer, and the remaining inflows of approximately 3.6GL/yr will be pumped from the pit.” (emphasis added)

Similar information and comments appeared in later reports to the market.

The plaintiffs’ case

125. The plaintiffs’ case, as appears from the pleading which I granted leave to amend on 16 August 2016 (the fourth day of trial), relates to the disclosure of “the presence of significant groundwater flowing into the Siana pit”.  Its focus is on the time of the capital raising between 15 and 19 March 2012, when the company is said to have had information that significant quantities of groundwater were flowing into the Siana Mine.  Particular reliance is placed upon the contents of a report received on 14 March 2012 from Mr Meyer, an expert hydrogeologist that the company had engaged to develop the plan to dewater the pit.
126. The plaintiffs’ submissions are broader than their pleaded case.  Reliance is also placed on what is said to have been apparent at the end of October 2011 about groundwater flowing into the mine.  The plaintiffs say that the following should have been disclosed: “that there were significant quantities of groundwater flowing into the Siana mine which prevented complete dewatering of the pit”.  Their case is that this information should have been disclosed:             

“At the time of the capital raising, between 15 March and 19 March 2012 or even before when the significant issues become [sic] ostensibly apparent at the end of October 2011.”^[23]

127. In broad outline, the plaintiffs’ case is that:

1. significant quantities of groundwater flowing into the Siana Mine prevented complete dewatering of the pit;
2. dewatering of the pit was critical to expected production, and removal of groundwater also was important to maintain the stability of pit walls;
3. groundwater inflows were higher than previously estimated;
4. dewatering was judged critical by the company’s managing director and its board.

Part of the plaintiffs’ case is that dewatering was delayed in late 2011 and early 2012.  Another aspect of the plaintiffs’ argument is that dewatering was an ongoing process.  However, this fact would hardly be news to investors, or to Mr Bert.  As noted, the market was informed, over the years, that dewatering would remain a significant challenge even after the lake was removed, because of the extent of inflow into the pit each year, most of which would be groundwater.

128. If held strictly to their pleading, the plaintiffs’ claim on the second cause of action would fail because the presence of significant groundwater flowing into the Siana pit had long been disclosed.  Instead, the plaintiffs’ case, as conducted, concerns the proposition that the amount of groundwater flowing into the Siana Mine (which exceeded previous estimates) prevented complete dewatering of the pit, such that groundwater remained at the bottom of the pit in mid-March 2012, at the time of the capital raising.  The plaintiffs plead that the groundwater inflow at the bottom of the pit was only disclosed to the market on 30 April 2012 in an ASX Quarterly Report.^[24]  However, in argument, the plaintiffs contended that this disclosure was inadequate.

The defendants’ response

129. The defendants emphasise that the market, including Mr Bert, was informed over the years that dewatering would remain a significant challenge, even after the lake was removed, because of the extent of inflow into the pit each year, most of which would be groundwater.  The extent of groundwater inflows was based on estimates, as the emphasised passages from the 2006 report indicate. 
130. By late 2011, around 99 per cent of the water had been removed. 
131. With the lake water having been removed, the dewatering system had to be reconfigured.  It seems that water levels increased by about 10 metres while the system was being reconfigured.  Despite this, higher areas of the pit had been exposed and Red 5 was able to assess during this period the level of groundwater inflows.  Even before the bottom of the pit was dewatered, the company was able to mine gold from higher sections of the pit.
132. As at 15 March 2012 there was no problem with groundwater inflow and dewatering that was insurmountable.  It was simply a matter of ensuring that its consultant hydrogeologist’s design and recommendations were implemented.  Its expert consultant,  Mr Meyer, was confident that if those steps were taken, dewatering would proceed successfully, and the managing director of Red 5 on 14 March 2014 advised that this was a “good plan”.^[25] 
133. Based on the advice which it received, the board of Red 5 did not consider that there was any cause to review the production guidance given on 1 March 2012.  As noted, even before the bottom of the pit was dewatered, the company was able to mine gold from higher sections of the pit.  The pumps and bores which were installed had ample capacity to deal with groundwater inflows and rainfall.
134. Different operational issues, including aspects of the dewatering process, needed to be addressed in the course of commissioning the mine and commencing production, and dewatering was not a significant issue so far as the company was concerned.  Like other operational issues, it was not a matter which it was required to disclose because it was not expected to affect production to any great extent.
135. As explained by Dr Rudenno in his expert report, dewatering information was not likely to affect the market price of the shares.  The temporary operational problems which had been encountered and the fact that groundwater inflows were higher than previously estimated were not matters of significance to the market.  As Dr Rudenno stated in his oral evidence:

“…  as long as the market felt that they had the pumping capacity to operate, it didn’t make any difference that there was [sic] slightly higher inflows in the pit as part of the day-to-day operations”.^[26]

136. In summary, the defendants submit that it was unnecessary to disclose the presence of significant groundwater flowing into the Siana pit because this was something which the market, including Mr Bert, had been informed about over the years.  Temporary operational problems, of the kind addressed by the company in consultation with Mr Meyer in March 2014, were not matters which had to be disclosed.  The failure to use the pumps and systems which had been developed, and to follow Mr Meyer’s advice, could have a critical effect on production.  However, in March 2012 the company had adopted Mr Meyer’s advice, and had every reason to suppose that the water which remained at the bottom of the pit would be removed. 
137. According to the defendants, it would be inappropriate to simply disclose the fact that significant issues could arise in the future if the dewatering plan was not implemented, as intended.  Moreover, to disclose that:

1. significant issues could arise in the future if the dewatering plan was not implemented as intended; and

2. in fact, steps could and would be put in place to see that it was implemented

would be a meaningless or unnecessary announcement.

The causation issue

138. If the plaintiffs prove a breach of the continuous disclosure obligations contained in the ASX Listing Rules and the Corporations Act, then, to recover damages, they must prove the loss that was caused to them by this breach.  They need to prove what they would have done if the breach had not occurred and, instead, the required disclosure had been made.  For example, they must establish that if the company had disclosed that the presence of significant groundwater flowing into the Siana Mine prevented dewatering of the pit and that this, in turn, affected mining operations and expected production, then the plaintiffs would have acted differently by, for example, not investing as they did on 20 March 2012 and thereafter.
139. Part of the defendants’ case is that even after Mr Bert was informed about problems which had been encountered with dewatering, namely that pit dewatering had fallen behind schedule, he did not make any complaint about non-disclosure, seek further information or sell any of his shares.  According to the defendants, he demonstrated, in effect, that the dewatering information was not material to him.  Expressed differently, he would not have sold his shares if he had received the information which he says should have been disclosed on 14 March 2012.  Mr Bert is said to have effectively conceded this point.

Factual overview

140. The issues requiring resolution include what investors, including Mr Bert, were told from time to time about groundwater inflows and dewatering.  They also include what the company knew at relevant times, including from the advice it received from Mr Meyer, its managing director and others about dewatering and production targets.  The multiple issues that arise, both in respect of the alleged breach and issues of causation, make it convenient to outline the course of events in some detail.  Before doing so, it is appropriate to note some matters by way of overview.
141. Dewatering, in both the respects noted, was one of a number of operational issues which the company was required to address in the course of commissioning the mine and commencing production.  Other operational issues related to the poor performance of a contractor in moving materials, problems with processing “sticky ore”, problems with power supply from the grid and, following the removal of water at the bottom of the pit, the removal of silt (the extent of which was not fully appreciated until water was fully removed).
142. The evidence of witnesses called by Red 5 before me does not suggest that dewatering was a significant issue so far as the company was concerned.  They did not seek out Mr Meyer in order to solve a problem.  Mr Meyer had contacted the company to inquire whether Red 5 was interested in his firm reviewing, which the company in fact commissioned him to do in early March 2012.  The minutes of board meetings during late 2011 and early 2012 do not record problems with dewatering which could not be addressed. 
143. One operational matter in connection with dewatering, to be addressed in greater detail below, was a delay in the changeover of the dewatering systems, after the lake had been mostly drained and pontoons were no longer able to be used.  This resulted in water levels rising by about ten metres.  This proved to be a temporary problem.  However, the pumping systems and sumps that had been devised remained available to be used to reduce the water and this was in fact achieved.
144. The next significant operational matter in relation to dewatering, to be addresses in greater detail below, occurred in March 2012, following the receipt of Mr Meyer’s report about his visit.  In essence, it emerged that the systems and pumps which had been installed in accordance with his advice were not being fully used.  The system which he had devised was not being properly implemented.  Mr Meyer spoke with Mr Edwards and he also provided a report.^[27]  That report made clear, in essence, that the dewatering plan needed to be followed or the operation would encounter serious problems.  Mr Meyer explained the steps which needed to be taken.
145. The evidence before me does not indicate that any problem with groundwater inflow and dewatering was insurmountable.  Mr Meyer did not suggest that there were insufficient bores.  It was simply an issue of ensuring that his plan was carried into effect.
146. In March 2012 the company’s board met and considered reports about dewatering and other matters.  The board received advice and decided that it was not required to change its production forecast.
147. Subsequently, dewatering continued and after water was removed, a new operational problem emerged: an unexpected quantity of silt had to be addressed by the company.  The removal of silt delayed production.

The course of events

148. As noted, the development of the mine required the draining or “dewatering” of an enormous lake.  The pre-feasibility study, publicly announced on 1 May 2006, estimated that the existing pit contained 8.2 GL of water, and that the pit was susceptible to flooding due to both groundwater inflows and high rainfall.  Annual “abstraction” modelled the total groundwater inflow at 6.8 GL, whilst the average rainfall was estimated at 3,600 mm over an area of 28.4 hectares, being an equivalent to 1 GL per year.  The first stage of planned dewatering was to dewater the pit over a four month period using pontoon-mounted electric pumps.  About half of the groundwater inflow would be pumped or abstracted by external bore holes.  Stage two involved the use of in-pit pumps and external bores.
149. By October 2010 construction of the mine and dewatering of the pit had commenced.  At some stages in the dewatering process water was released by gravity fall into an adjacent river.  The end of 2010 was affected by high levels of rainfall, and the first quarter of 2011 recorded rainfall that surpassed records for the last one hundred years, with a total of four metres falling during those three months.  However, pit dewatering was on schedule.
150. By May 2011 the water level was rapidly dropping, and a total of 6 GL of initial pit water, together with 4.4 metres of rainfall had been discharged.  By the end of June 2011 dewatering was 85 per cent complete.  The pumps had the capacity to handle anticipated inflows.
151. The expert evidence is that operational issues during the commissioning process are not an uncommon occurrence for new plants in the mining industry.^[28]  This mine was no exception.  By the end of September 2011 most of the mine’s construction, including civil and earthworks, was complete.  The pit dewatering was complete except for a body of remaining water that was to be used for wet commissioning of the plant.  Initial gold production had been affected due to an unreliable power supply, but these problems seemingly were resolved.  Another operational problem which affected commissioning of the plant was that the low-grade stockpile ore had a high clay content.  It was described as “sticky” and caused discontinuous flow of material to the plant.  Modifications to the plant were undertaken to correct this problem.
152. Another significant operational issue concerning mining production performance was the work and productivity of a contractor engaged to move material. 
153. The company’s activities report for the three months ended 30 September 2011 reported on various aspects of the commissioning of the mine and included the statement:

“Pit dewatering complete – total of 14 billion litres discharged, remaining water to be used in wet commissioning.”^[29]

This appears to be an accurate statement of the position as at 30 September 2011. 

154. The effective removal of the lake by September 2011 necessitated the reconfiguration of pumping systems.  This was because the floating pontoon system could no longer be used. 
155. In October 2011 the dewatering pumping configuration was altered to a cascade system.  However, there were delays in the changeover and this resulted in pit water levels increasing by about ten metres whilst the system was being reconfigured.  This matter was the subject of a report from the managing director to the board and discussed at a meeting of the board on 27 October 2011.  The managing director, Mr Edwards, advised the board that “water is now the critical issue for commissioning the plant”.  Directors queried who the designated responsible person was for managing the changeover and how this delay might affect the timing and establishment of a “box cut” at the pit bottom.^[30]  Mr Edwards advised the board that timing for access to ore from the box cut was under review.  As noted, the pit did not need to be fully drained in order for mining operations in the pit to commence.  As Mr Jackson explained in his evidence, the pit would not need to be completely drained provided the area in which you were immediately planning to extract ore had been.  A pit floor is not one level and some of the faces might be five or ten metres above the bottom of the pit.  The whole pit does not need to be free of water in order for mining to commence in accordance with a production schedule.^[31]
156. In fact, the evidence is that “you don’t dewater the pit to the maximum ability until you need to extract the ore from that position.”  This is because there is a continuous water inflow.  As Mr Jackson explained, there is no point in “dewatering to the bottom of the pit if you are not, then, going to extract ore from it immediately”.  The water that was removed from the pit would be replaced by other water coming into it.  So it is only when a miner is ready to extract ore from a particular location that the pit needs to be fully dewatered to that point.^[32]
157. The December 2011 quarterly report, which was released on 30 January 2012, reported that the box cut at the bottom of the pit was anticipated to commence shortly. 
158. On 6 February 2012 the company announced the first gold to be produced from low-grade stockpiles during the commissioning phase.
159. On 20 February 2012 the managing director reported to the board on numerous aspects concerning the outlook, including a number of risks.  By then the wet season had begun with a total of 1.3 metres of rain falling since the beginning of the year.  The report addressed issues concerning the construction and commissioning of the plant.  As for mining, there was a detailed report concerning ore bodies.  Dewatering was one of several points reported on in relation to aspects of mining.  The managing director reported that the pit dewatering/cascade pump system had problems keeping up with recent rainfall and associated inflow.  An additional two pumps had been installed and a third was expected to be operational within days.  On that basis, the plan was to have the base of the pit ready for ore mining by mid-March.^[33]
160. Minutes of the board meeting for 22 February 2012 record various matters that were included in the report from the managing director to that meeting.  They include the fact that the managing director emphasised “the importance of high grade ore material being accessed as soon as possible for processing through the Siana plant”.  Sources of stand-by debt and equity funding were discussed.  Discussions also related to operational issues about material handling aspects (which were said to have improved), the availability of grid power and the fact that the processing plant was running at about 80 per cent availability and reliability.
161. On 28 February 2012 the company provided a “Company Insight” which was in the form of questions and answers by the managing director.  It identified some problems and a “modest delay in the commissioning phase”.  However, the project was said to be remarkably similar in scope and outlook to the feasibility study.^[34]
162. On 1 March 2012 the company provided production and cost guidance in an ASX report to shareholders.  The expectation for the four months to 30 June 2012 was 18,000 ounces of gold production at a cash cost of below $450 per ounce and for the 12 months following was 75,000 ounces of gold production at a cash cost of below $325 per ounce.  As would be apparent, the expected production for the four months to 30 June 2012 was not anticipated to be the same amount each month.  A graph of the expected rate of production would be an upward curve.^[35]
163. The 1 March 2012 announcement anticipated that the plant would reach commercial production (30 continuous days at an average of 60 per cent capacity of the interim or throughput rate) by the end of March 2012. 
164. As noted, Mr Gary Meyer is a highly-qualified hydrogeologist who had been consulted by Red 5 and developed systems for dewatering.  He was not directly involved in implementing his plan.  However, on 9 January 2012 he wrote to mine staff to inquire about the performance of the dewatering, and to enquire whether Red 5 was interested in commissioning his firm to conduct a review.  Red 5 agreed to fund a site visit by Mr Meyer, and he visited the site from 5 to 9 March 2012.  The evidence of witnesses called by Red 5 does not suggest that dewatering was a significant issue so far as the company was concerned in the sense that they did not seek out Mr Meyer in order to solve a problem.  The minutes of board meetings during late 2011 and early 2012 do not record significant problems with dewatering, requiring Mr Meyer’s intervention or a change of plans.  However, the board was advised by the company’s managing director, Mr Edwards, on 27 October 2011 that water was a critical issue for commissioning the plant.^[36]  This was an unremarkable observation in the light of pit water levels increasing during the reconfiguration of the system.
165. When Mr Meyer visited the site in early March 2012 he found that the system which he had devised was not being properly implemented.  Most of the bores were not operating and one bore had a worn cable so that, even with a pump, it would not be operational.  There was more groundwater than had been initially expected and some bores had not been equipped with pumps.  Mr Meyer spoke with Mr Edwards and he also provided a report.^[37]  That report made clear, in essence, that the dewatering plan needed to be followed or the operation would encounter serious problems.  Mr Meyer explained the steps which would need to be taken.
166. For reasons which Mr Meyer explained in his evidence, he was confident that, provided that steps were taken, dewatering would proceed successfully.  He adopted this view because:

1. the hydrologist for the previous owners had reported that they had successfully used the in-pit pumping system;

2. his plan improved that system by adding external bores;

3. the places that the bores were inserted in the aquifer had a very high yield, ensuring that water could be effectively diverted;

4. the existing system was demonstrated to work because almost the entire lake had been drained;

5. the bores, although not previously used in the Philippines, had been successfully deployed in Australia;

6. the abstraction rate was based on the use of one bore rather than five;

7. the expected abstraction rate for the bores was conservative;

8. the inflows would reduce after the wet season;

1. sumps were introduced to store water before it was abstracted, ensuring that the mine could deal with any major inflow of water; and

10. additional pumps could have easily been installed to increase pumping capacity, if necessary.^[38]

167. On 13 March 2013 the managing director spoke to Mr Jackson about the Meyer report and operational matters in general.  Mr Jackson’s notes record being told that the plant was working reasonably well except for some pumps.  However, mining and stripping was not “quick enough”.    He was told about Mr Meyer’s advice that 70 per cent of the water was groundwater and needed to be drawn down and about certain problems which Mr Meyer had identified with the operation of the pumps.^[39]  He was told about production including silver production.  Incidentally, and of relevance to the first cause of action, with some risk concerning revenue flows, Mr Edwards recommended the raising of $25 million with $15 million as a buffer and $10 million for exploration and project generation. 
168. These matters were discussed at a board meeting on 13 March 2012 and the minutes relevantly record discussion about the company’s working capital position and the timing and amount of any equity raising.  A director, Mr Scanlan, noted that management should provide a revised production and revenue forecast to enable an informed assessment to be made of working capital requirements.^[40]
169. Mr Edwards on 14 March 2012 reported in writing to the board.  His report included reports about gold and silver production.  In short, the company was “going to be about 1,200oz of gold short and 10,000oz of silver over the budgeted dore (sic) by the end of this month”.  Importantly, and in response to Mr Scanlan’s request for revised production and revenue forecasts, Mr Edwards reported:

“Of the matter of the quoted cash costs in the recently announced guidance statement to the ASX I must stand by the figures as they adhere to the standard accounting treatment of amortising waste removal costs.  Whilst there are some companies that have tried to set a different standard (and probably over complicating the issue) the majority of companies and their advisors use the standard we have employed.”  (emphasis added)

In short, Mr Edwards’ advice was that the 1 March 2012 production and cost guidance did not need to be revised.

170. Most importantly in relation to the second cause of action and the company’s knowledge of productivity, groundwater inflows and dewatering, Mr Edwards reported:

“The mine productivity is reasonable at the moment albeit there has been less waste stripped this month than budgeted.  The figures in the attachment reflect this.  The northwest orebody is fully exposed to a width of at least 20 metres and is wider than anticipated and has meant that less stripping has been required for the requisite ore tonnes.  Exceptionally high silver grades have been encountered (beyond the high grades anticipated) meaning carbon stripping is required more frequently (a hassle but positive on the bottom line).  The dewatering situation has been clarified by our consultant hydrologist and with the test work undertaken over the past few weeks there is a good plan to have the last of the water removed as soon as possible.” (emphasis added)

171. The minutes of the board meeting held on 14 March 2012 include detailed reference to these matters and the possibility of capital raising.  They include reports about the mining of part of the orebody, and record that mining of the north-west orebody would continue until the end of April, “after which mining would need access to the bottom of the open pit”.  The meeting minutes record that Mr Edwards “outlined measures which had been introduced to remove groundwater inflows which would assist in the effectiveness of the pit dewatering system.  The mine schedule anticipated mining from the box cut from the last two weeks of April and this would become the primary source of ore in May and June”.^[41]
172. Discussion turned to the issue of equity raising.  The minutes record that Mr Scanlan sought clarification of whether information available in the market was current and whether the market was fully informed in relation to the achievement of commercial production and production guidance.  Discussions took place on market information, cash costs, total costs and capital development costs.  Mr Edwards confirmed his view to the meeting that the “information available in the market was current and that the market was fully informed”.  On the basis of these matters, Mr Scanlan inquired what management viewed as the minimum capital raising amount to be targeted and Mr Edwards noted “$20 million would be comfortable and $15 million would cover working capital but would not fund an immediate aggressive exploration program”.  As a result, the company agreed to proceed with a capital raising target of $25 million.  Capital was raised to provide a prudent buffer, not to meet some crisis over dewatering.  As noted, dewatering of the bottom of the pit was expected shortly.
173. The Meyer report was dated 14 March 2012.^[42]  On 15 March 2012 the company released the document earlier referred to: “Red 5 Limited - The newest Philippines gold producer”.^[43]  It briefly outlined various aspects of the company’s financial position and reported that commissioning was almost complete with commercial production expected to be declared on 1 April 2012.  Relevantly for present purposes, and for the purposes of the third cause of action, the section of the presentation concerned with the commissioning phase stated in a dot point “dewatering of pit – almost complete”.^[44]
174. The 22 March 2012 board papers, which adopted a familiar form in identifying a variety of risks and reporting on production and processing, stated that major risks over the next few months included the lack of ore production due to the delay of the dewatering of the open pit.  It also reported that production from the pit and delivery to the plant had been reasonable.  The movement of material since the beginning of the month had been hampered by poor availability of the earth moving fleet.^[45]
175. The board meeting on 22 March 2012 included discussion on these and other matters.  Relevantly for present purposes, the minutes recorded Mr Edwards’ emphasis that dewatering of the bottom of the pit was a critical item to be completed during April 2012 to maintain adequate levels of ore production.  Numerous other operational matters were discussed including the performance of the mining contractor and the appointment of a new mining engineer to assist with mining production issues and to improve excavator and hauling efficiencies and dewatering systems.  The board minutes record:

“The summary of the hydrologist report prepared by Gary Meyers [sic] of Meyer Water Environmental Solutions was discussed, including findings and recommended measures to improve dewatering efficiencies.  Discussions took place on the installation and capacity of ground water and in-pit bore pumps, ground water inflows and progress towards being able to mine ore from the bottom of the pit”.^[46]

176. On 20 April 2012 the company declared commercial production, defined as 30 continuous days at an average of 60 per cent of the interim throughput, had been achieved on 16 April.^[47]   It reported that mill throughput largely comprised ore from the upper benches of the cutback in the north-west corner of the pit, which had a high silver-to-gold ratio relative to the ore body average.
177. On 20 April 2012 Mr Bert emailed Mr Jackson in relation to the commercial production declaration, describing it as another step in the right direction and inquired whether the 18,000 ounces gold production forecast to June 2012 still held.  Mr Jackson responded “Directors question management on guidance every fortnight – no change contemplated, but as with all ramp-ups, every day has to be better than the last”.^[48]
178. On 23 April 2012 Mr Meyer provided a further report based upon another trip which he had made to the mine between 14 and 18 April 2012.  His report addresses numerous technical matters including the improvement of in-pit pumping performance.  As will be recalled, his previous trip report of 14 March remarked upon the failure to utilise pumps and equipment.  His new report stated that four out of five bores were now running and that both the in-pit sump pumps and the external dewatering bores were important and had to be kept running at the highest practicable pumping rates at all times.  Mr Meyer gave evidence that the dewatering issues faced by the company in March 2012 were temporary.^[49] His evidence was that by April, because a number of the recommendations in his March report had been implemented, he was “confident that Red 5 had thereby remedied the problem and that the dewatering of the mine could be completed without further difficulty”.^[50]
179. On 30 April 2012 Red 5 advised the market in its ASX quarterly activities report for the three months ended 31 March 2012 about the state of the mine and its production.  In relation to dewatering, the overview dot point was:

“Pit dewatering progress behind schedule due to groundwater ingress at base of pit – additional pumping now operational.”^[51]

180. By way of further explanation, the document reported:

“The earthmoving and pit dewatering activities have not yet achieved expectations.  The Company assumed management responsibility for the earthmoving contractor’s fleet spares procurement at the end of the period.  Pit dewatering continues to require constant attention with a recently commissioned report confirming measured water inflows from below the original pit floor.  Two dewatering bores and two depressurisation bores are now operational and significant progress is being made to expose the balance of the ore body at the base of the open pit.  Approximately 40% of the pit floor is exposed and access to three separate ore sources has now been achieved.”

181. As previously noted, the report referred to the equity placement in issued capital that had been conducted to provide a working capital contingency in light of early operational performance.
182. The report of the mine’s operations dealt with matters such as material movement.  Relevantly in relation to dewatering, it reported:

“The final phase of pit dewatering fell behind the schedule during the period principally due to the requirement to ensure discharge is within environmental standards.”^[52]

This would appear to be a reference to the need to ensure that water discharged from the sumps into the local environment was free of silt.

183. This 30 April 2012 release concerned the three month period to 31 March 2012.  As at late April 2012 the managing director reported to the board that the major risk over the next few months continued to be lack of ore production due to the delay of the dewatering of the open pit.  However, he reported:

“Pit dewatering now making significant progress.”^[53]

184. The meeting of the board on 30 April 2012 received a report from the managing director about Mr Meyer’s recent visit to the mine and was informed that Mr Meyer “had been satisfied with the progress of the dewatering system and would be preparing an updated hydrological report”.  Mr Edwards also explained that the previous cascade pumping system was considered to be energy inefficient.^[54]
185. On 6 June 2012 the company issued a report to shareholders concerning production and changes which had been implemented to address mining performance.  The process plant was said to be performing well with mill throughput rates greater than 3,000 tonnes per day being achieved.  Relevantly, the report stated:

“Dewatering performance is now steadily improving with the base of the original pit totally exposed with the water table below the current working benches.  The entire northeast bench of the pit has been levelled and is free of silt.  The original slide material that caused the mine to close over twenty years ago has now been fully excavated.  A further modest drawdown of the water table will allow mining in the northeast, northwest and centre of the pit, including a new ore position available in the southwest of the pit.”^[55]  (emphasis added)

186. On 14 June 2012 the board met and in his report Mr Edwards outlined, amongst other things, the progress and current status of the dewatering system.^[56]
187. On 31 July 2012 an ASX quarterly activities report for the period to 30 June was published.  In it Red 5’s managing director reported that:

“… pit dewatering completed behind schedule due to ground water ingress at base of pit.  Removal of 140,000 BCM of silt ongoing. 

…  The current pit has now been successfully dewatered under the supervision of a dedicated, multi-disciplined experienced team.  This team is now designing the system and procedures necessary to keep the pit dewatered for its entire operating life.

With the pit dewatered, the mining challenge progressed to the removal of an estimated 140,000 cubic metres of silt accumulated at the pit floor over the last twenty years …  Commercial production, defined as 30 continuous days at an average of 60% of the interim throughput of 750,000 dry tonnes per annum, was declared on 20 April 2012.

Subsequent process plant through put rates have exceeded 3,000 tonnes per day, equivalent to in excess of the final 1.1M tonne per annum nameplate capacity.

However, in the light of the silt removal issue, the declaration of commercial production in hindsight could be seen as premature, given the inability of the mine to deliver consistent ore feed to the process plant …”.^[57]

188. As is apparent from this release, the completion of dewatering of the pit presented a challenge with the unexpected volume of silt.  It is unnecessary to outline the various technical steps that were taken to have water removed from the silt and the silt then excavated and loaded into trucks.
189. The high level of silt in the base of the pit was the subject of a “Company Insight” document released to the market on 21 September 2012.  It concerned the plant’s performance, the improvement of mining, what had been done to resolve the issue of silt and why the removal of silt had proven to be a slow-going process.  However, 80 per cent of the silt had been removed and the report stated “the orebody has now been exposed across the full width of the northern bench of the pit”.^[58]
190. These and other matters were the subject of disclosure in the company’s 2012 Annual Report.  The report contained substantial detail about pit dewatering and the techniques that were developed utilising deep sumps to drain the remaining silt of free water.  The silt was described as primarily the accumulation of 20 years of soil runoff from the pit surrounding area.  The removal of the silt was described as a “one off event, as the pit is now protected by a perimeter drain”.  The report recorded that the silt delayed access to the pit floor where the orebody average was 70 metres wide.^[59]
191. By November 2012 the company was implementing staff changes and a new mine superintendent to address various operational issues.  Another operational issue which Mr Jackson explained to Mr Bert was the rapid deterioration of the grid power.  This caused major interruptions to production and dewatering.  However, the resolution was described as straightforward: the acquisition of power units.^[60]
192. Mr Edwards ceased to be managing director in late November 2012.  The annual general meeting was held on 27 November 2012 and Mr Jackson, as chairman, reported on the fact that by the end of September the pit floor had been cleared at the northern end, but that throughout October 2012 the company found itself becoming increasingly vulnerable to a deterioration in the power supply from the grid.  The company had installed its alternative power source. 
193. The fortunes of the company deteriorated after April 2013 when ground movement was detected associated with the tailings facility (a matter unrelated to the pit).  On 26 April 2013 the company requested a trading halt pending the release of an announcement regarding a review of that matter.^[61]  On 30 April 2013 trading was suspended.^[62]  The matter was the subject of a report to shareholders on 13 May 2013.  In essence, the geotechnical advice to the board was that the tailings wall dam had been compromised and alternatives were under consideration.  A new facility would take time to construct and as a result the company suspended milling operations.  Mining activities, including the stockpiling of ore, were to continue in the interim.^[63]
194. In June 2013 the relevant authority issued a cease and desist order.^[64]
195. Over time, the company developed a new open pit mining strategy and production recommenced.  By September 2015 the company was reporting strong operational performance.  This is reflected in the movement of its share price in 2015.  As noted, the plaintiffs sold their shares at 12 cents per share in March 2015.  By late 2015, after the resumption of production, the share price had markedly improved.  However, it remained only a fraction of the price at which the plaintiffs had purchased a substantial body of shares on 20 March 2012.

What did the company actually know at the relevant times?

196. As appears from the foregoing, the company knew that dewatering of the pit would be an ongoing challenge.  It knew by October 2011, after most of the lake had been removed, that there were significant groundwater inflows.  This was apparent from the way in which water levels increased when dewatering ceased during the changeover in the system.  The board also was aware that delay in dewatering risked delay in expected ore production.  However, ore production could continue whilst some water remained in the bottom of the pit. 
197. For the purpose of the plaintiffs’ claim, the focus is upon what the company knew “at the time of the capital raising, between March 15^th and March 19^th 2012”.  Red 5 is alleged to have had information by that time which it was required to disclose to the ASX.  The particularised information is that “significant quantities of groundwater were flowing into the Siana Mine”.  In my view, the critical issue is not so much the ingress of groundwater, which was always a fact known to the board and to the market, including Mr Bert, but whether dewatering processes were capable of removing it.
198. In early March 2012 Mr Meyer had identified problems with the implementation of the process which he had designed.  He recommended steps to be taken.  As he explained in his evidence, he had every confidence that, provided the steps were taken, dewatering would proceed.^[65]  Mr Meyer’s expert opinion about how water would be removed was reported to the board by the managing director.  The board was told on 14 March 2012 that the dewatering situation had been clarified by an expert in the field and, with the test work undertaken over the past few weeks, there was “a good plan to have the last of the water removed as soon as possible.”^[66]
199. The evidence before me concerning the company’s consideration of matters as at 14 March 2012 is that the board considered that the dewatering issue was in hand and unlikely to affect production rates.  I accept the evidence of Mr Jackson and Mr Milazzo in this regard.^[67]
200. The dewatering issue and other operational issues were the subject of consideration by the board.  A member of the board, Mr Scanlan, an experienced executive in the mining industry, sought clarification about whether information relating to the achievement of commercial production and production guidance which was then in the market needed to be reviewed.  The response from the managing director was that the commercial production forecast did not require revision.  Mr Scanlan asked an appropriate question, and the board was, in effect, assured that the production forecast did not require revision.  This tends to confirm that the opinion of the company’s managing director, senior management and the board was that the dewatering issue had been addressed and that there was an effective plan to have the remaining water removed as soon as possible.
201. The view of the company as at 14 March 2012 about dewatering was based upon advice which it had received from a leading expert in the field.  It was not simply wishful thinking.  The advice of that expert, Mr Meyer, was well-founded.  I have outlined the basis for it above.
202. To the extent that subsequent events may be taken into account in assessing the reasonableness of the board in acting on the advice and opinions that were available to it on 14 March 2012, the prediction that the process would lead to the removal of the remaining water was vindicated.  On 6 June 2012, Mr Edwards wrote to the shareholders that “dewatering performance is now steadily improving with the base of the original pit totally exposed …”.^[68]  On 31 July 2012, a detailed ASX activities report noted that the pit had been successfully dewatered^[69] and that situation was confirmed on 28 September 2012 in the Annual Report.^[70]  It is not seriously suggested that these reports were untrue.
203. The focus of matters must, however, remain on the company’s state of knowledge as at 14 March 2012 and in the period immediately thereafter, since this is the focus of the plaintiffs’ case that there should have been a disclosure at the time of the capital raising and before Mr Bert made the further investment on 20 March 2012. 
204. The evidence before me, both in the form of contemporaneous documents, and in the form of the evidence of Mr Jackson and Mr Milazzo, supports the conclusion that the company, including its board, considered that the dewatering process was working and that there was a good plan to have the remaining water removed.

What precise information, if any, should have been disclosed and when?

205. The first task is to precisely identify the information which should have been disclosed.
206. I have earlier quoted the plaintiffs’ case about what information should have been disclosed and when.  The defendants submit that the correct expression of the hypothetical announcement would have been as follows:

1. significant issues could arise in the future if the dewatering plan was not implemented as intended; and

2. in fact, steps could and would be put in place to see that it was implemented.

So formulated, the defendants say that it is clear it would not have been a meaningful announcement.

207. The company’s case is that it did not disclose what was essentially an operational issue with the pumping because it had a plan to deal with it and was implementing it.
208. According to the defendants, there was no obligation to simply disclose potential or actual problems with dewatering.  That would be an inadequate disclosure without reference to the plans and processes which existed to address the problem. 
209. Jubilee Mines v Riley^[71] illustrates the need to correctly identify the relevant information.  In that case, the plaintiff alleged a failure by a mining company to disclose the results of drilling tests conducted on a tenement in 1994.  The trial judge decided that the contents of the tests should have been disclosed.  However, the evidence also showed that the company did not intend at that time to conduct exploration or other mining operations on the tenement.  In fact, it lacked the financial capacity to do so.^[72]  The Western Australian Court of Appeal, in allowing the appeal, concluded that the information to be considered was not the results of the tests alone, but those results together with the fact that the company had no present intention to further exploit the tenement.^[73]  The Court concluded that the disclosure of all the relevant information would not have been likely to influence persons who commonly invest in securities in deciding whether or not to buy or sell shares in the company.  When all the relevant information was taken into account, the company was under no obligation to disclose it.^[74]
210. In this case, and for the reasons which follow, to announce that there were significant quantities of groundwater flowing into the pit would not disclose anything new.  Even to say that groundwater flows were higher than previously estimated would not address the issue of whether there were dewatering measures to cope with it.
211. Disclosing the operational problem which had been detected by Mr Meyer without disclosing the solution that was at hand and was being implemented would be to give incomplete and therefore misleading information.

Was there an obligation to disclose the presence of significant ground water flowing into the pit?

212. As noted, the plaintiffs’ pleaded case is that there was an obligation to disclose the presence of significant groundwater flowing into the pit.  However, the fact that dewatering was a continuing process, and would continue for the life of the mine and long after the original lake was removed, was a matter about which the market, including Mr Bert, was informed in 2006.  Mr Bert read the 2006 report to shareholders which referred to stage two of dewatering, comprising ongoing pumping from bores and in-pit pumps.  It predicted that the southern limestone would be a major source of groundwater inflow into the pit.  Similar information and comments appeared in later reports to the market.
213. Unsurprisingly, the plaintiffs’ submissions shift the focus away from groundwater inflow as such and contend that the required disclosure was that significant quantities of groundwater flowing into the mine prevented complete dewatering of the pit.  I would accept that there would be an obligation to disclose the extent of anticipated groundwater inflows and their consequences if the dewatering processes were incapable of removing the inflows.  However, the systems which were developed based on the advice of Mr Meyer, and further revised in the light of his visit in early March 2012, were capable of dewatering the pit.  The advice to the board was that the company had a good plan.  As at the critical period, so far as the plaintiffs were concerned, namely the time of the capital raising between 15 and 19 March 2012, the company was told, and was entitled to believe, that the operational problems with the system identified by Mr Meyer and the company’s management had been addressed and that there was a “good plan” for the successful dewatering of the pit.  The contemporaneous documents show that the company expected dewatering to be completed in the near future, with access to the box cut by the end of April. 
214. Simply stated, the company was not under an obligation to disclose that the significant quantities of groundwater flowing into the pit were such as to prevent complete dewatering of it.  This is because the information available to the board did not indicate this.  On the contrary, it indicated that the pit was able to be dewatered and that, if properly implemented, the dewatering plan would result in the bottom of the pit being exposed.
215. Incidentally, and insofar as it is permissible to take into account subsequent events, the advice and information available to the board proved correct because dewatering was completed.
216. The plaintiffs’ submissions refer to the fact that the volume of groundwater inflow was greater than had previously been modelled.  However, this fact would only assume significance if the quantities of groundwater flowing into the pit were not able to be removed through the various dewatering processes.  The information available to the board, including the advice of Mr Meyer, was that the systems that had been developed were capable of removing expected inflows. 
217. In summary, the correct identification of the information is not that pleaded by the plaintiffs.  It is not simply that significant quantities of groundwater flowed into the pit.  If the dewatering measures available to Red 5 could not cope with the inflows then this would be material information.  However, the evidence is that as at 14 March 2012 they were able to deal with the inflows, and this was the information available to the company.
218. The plaintiffs’ submissions proceed on the assumption that in March 2012 the quantities of groundwater prevented dewatering.  But the evidence does not establish this contention.  It also does not establish that the company and its board believed this to be the case.

The October 2011 increase in water levels

219. The plaintiffs’ submissions place particular reliance upon events in October 2011, when water levels increased by about ten metres whilst the dewatering pumping system was being reconfigured.  Obviously, the removal of that water and the continuing removal of groundwater inflows and rainfall thereafter were critical to achieving the expected production at the mine.  However, the fact that water levels increased by about ten metres in October 2011 is not something which itself necessitated disclosure.  It was apparent to the board and the company in general that pit water levels had increased temporarily whilst pumping systems were being reconfigured.  The board may have concluded that the reconfiguration took too long.  However, the temporary increase in levels could be and was reversed over time.

Operational issues in early 2012

220. In retrospect, the cascade system which was originally part of the dewatering process may have been inefficient.  This was Mr Edwards’ advice to the board and others in an email dated 11 April 2012 which reviewed dewatering pumping efficiency and other matters.  He concluded that the cascade system was cumbersome with a prolonged set-up time and of doubtful efficiency.  In the light of experience and Mr Meyer’s advice, improvements were made in relation to dewatering sumps with the use of deep, well-constructed sumps, ensuring that pumping rates were as high as possible.  Improvements were proposed by Mr Edwards in relation to pump, cable and pipe maintenance and for pumps to be arranged so that they would remove at least 700 litres per second including repair, maintenance and transfer time.  According to Mr Edwards, “the pit could be dewatered in 8 to 10 days if these matters were attended to”.^[75]
221. These and other operational issues in relation to the dewatering system and processes for its improvement are interesting to presently review.  However, they are not necessarily matters which the company was required to disclose.  Were it otherwise, a company in the position of Red 5 would be required to disclose an enormous volume of day to day operational matters.

Dewatering and other operational matters and their implications for production

222. Operational matters may, depending upon the circumstances, need to be disclosed if they have implications for matters such as previously-released production forecasts. 
223. The evidence shows that the board considered dewatering and a range of other operational issues, and specifically considered their implications for production forecasts.  The plaintiffs’ submissions (page 10) note that on 14 March 2012 a board member, Mr Scanlan, sought clarification on whether information relating to achievement of commercial production and production guidance available to the market was current and the market fully informed.  This matter was addressed in a considered way by the company’s senior management, and the advice was that the previous guidance did not require revision.  The evidence is that Mr Scanlan was a highly experienced mining executive and had been a general manager and chief financial officer in substantial mining companies.  He showed particular attention to detail in relation to forecasts and costs.^[76]  The responses to his inquiries led the board, including Mr Scanlan, to conclude that production guidance did not need to be revised and that the market had adequate information.

The silt issue

224. As noted, the presence of silt in the water and the presence of a large body of silt at the bottom of the pit after the pit was dewatered, became significant operational issues.  Processes to dewater by the use of deep sumps were deployed.  Ultimately, the largest problem proved to be the volume of silt which had to be removed.  The presence of water in the silt was a problem.  However, the silt removal problem, with its substantial cost and associated delay, only emerged as a significant problem following the complete dewatering of the pit.  Although, in a general sense, the presence of groundwater had implications for the process of removal of silt, this was always going to be a problem once the groundwater inflows and rainfall were removed, leaving wet silt at the bottom of the pit.  Paradoxically, if the dewatering systems had not been capable of dewatering the pit, then the silt would not have been exposed.  It was the process of dewatering which revealed the extent of silt and a new, major operational matter to be addressed.  Of course, any groundwater inflows or heavy rain might exacerbate problems with silt removal.  Processes were always going to have to be developed to remove a large amount of silt.  The plaintiffs point to Mr Meyer’s evidence concerning silt.  However, as his cross-examination showed, it was only because the dewatering system worked, and was able to pull “the water back down again”, that the base of the pit was exposed and silt was found there.^[77]  Relevantly, for the purposes of disclosure requirements in mid-March 2012, the problem with silt and its extent were not apparent at that time.  As matters transpired, it took months to remove the silt.

Overview of operational issues

225. Operational matters which are likely to assume importance for the purpose of the continuous disclosure obligations are matters which, either in isolation or in conjunction, were likely to affect a company in Red 5’s position achieving production targets or the long-term viability of the mine.  This would be the case if the ongoing dewatering system was not adequate so that the bottom of the pit could not be reached so as to allow production to occur.  However, the evidence is that the system was capable of dewatering the pit.  The company encountered a number of operational issues.  I have noted some of them.  They include the “sticky ore”, defaults by the contractor and under-performance by it in moving materials, and delays in dewatering.  The combined effect of these and other operational issues had the potential to delay the expected production.  However, even with these problems, the company was able to mine gold from higher sections of the pit and was not greatly delayed in commencing production.  The mine was expected to have a life of many years and as at mid-March 2012 a delay of a matter of weeks might not be thought to be of particular significance to any investor, let alone a long-term investor like Mr Bert. 
226. Delays in initial production and the generation of revenue might be significant if the company was deprived of sufficient working capital to continue production.  However, the operational and other issues encountered by Red 5 (of which dewatering was only one and a relatively minor issue at that) prompted the company to raise $15 million as a prudent buffer.

Dewatering as “critical” to production

227. At different stages, and in different contexts, reports to the board and board minutes refer to dewatering as a critical issue.  The use of the term “critical” was explained by witnesses.^[78]  When cross-examined on this topic, Mr Milazzo, who was a director and a former non-executive director of Red 5, explained the use of the word “critical” in this sense.  He says that the word was used in “much the same way that breathing is critical – if we cease breathing that has some dreadful consequences.  If we were to cease pumping that would have consequences.  However, it wasn’t something which was not considered to be technically and operationally solvable.  It was on the critical path to the production, looking forward.”^[79]  I accept Mr Milazzo’s evidence in this and in other respects.  In fact, all of the defendants’ witnesses impressed me as honest and reliable. 
228. Mr Milazzo accepted under cross-examination that it is very important to continue to dewater and that dewatering had to be undertaken to achieve the ore level that was scheduled at the end of April 2012.^[80]  However, he explained that in the relevant months the company had no reason to believe that they could not achieve the production forecasts.^[81]  The board adopted Mr Meyer’s recommendations about the operation of pumps and, as Mr Milazzo explained, if the company “needed some extra firepower”, extra firepower was installed.  He also explained in answer to questions about power, that there was adequate power for the pumps to work.^[82]  As matters transpired, the national grid proved to be unreliable and additional generating capacity was installed to provide a base load.^[83]  In summary, continuing operation of the dewatering system, in accordance with Mr Meyer’s recommendations and improvements to it which were undertaken in the light of operational experience, was critical if the mine was to achieve its expected production.  However, the dewatering system was successfully operating by mid-March 2012 and, at the critical date for the plaintiffs’ purposes, namely 20 March 2012, the board had been told, and was entitled to rely upon the advice it was given, that things had improved and that there was a “good plan” to achieve the required further dewatering and the intended production.

Conclusion about the relevant “information” in the context of disclosure requirements

229. Because the plaintiffs’ case about the information which it contends should have been disclosed differs as between their pleading and their submissions and, in any event, the defendants argue that the plaintiffs have not correctly formulated the terms of the relevant information, it is convenient to summarise my conclusions. 
230. There was no requirement to disclose that significant quantities of groundwater flowed into the pit because this information was generally available, having been disclosed to investors, including Mr Bert, over the years, including in the kind of detail disclosed in the 2006 report to shareholders.
231. As at March 2012 the company did not have information that the quantities of groundwater flowing into the mine prevented it from being dewatered.  The information available to the company, including the advice of its senior management and outside consultants, was that it had a good plan to complete the remaining dewatering of the pit and if its dewatering plan was implemented, mining would proceed.
232. There was no obligation to disclose day-to-day operational issues which affected the mine unless those operational issues were significant to the mine’s achieving expected production or to the long-term viability of the mine.  There was no obligation to disclose operational problems which were capable of being rectified, whether in respect of earthworks, moving materials, power supply or dewatering.  There was no obligation to disclose that water levels rose in October 2011 when there was a changeover in the dewatering processes, even though the changeover was not conducted as well as it should have been.  The water which rose in October 2011 was able to be removed.  The operational problems encountered in early 2012, which arose through inefficiencies with the operation of the cascade system and the manner in which pumps were used, was able to be addressed and rectified following Mr Meyer’s advice.  Because that operational issue was successfully addressed, there was no obligation to disclose it.  In general, identifying that operational problems existed, or had existed, without disclosing that they were being attended to would misinform the market.
233. The various operational issues encountered in early 2012, in combination, did not prevent the gold and silver production from starting or ore being mined from higher sections of the pit before the pit had been fully dewatered.  As at mid-March 2012, these operational matters, taken together, did not require, according to the advice received and acted upon by the company’s board, a revision of forecast production or costs. 
234. The plaintiffs make the valid point that the significant quantities of groundwater which flowed into the pit had to be removed (or “abstracted” to use the language deployed by some of the witnesses) in order to achieve a successful mining operation, and that a failure to do so would lead to inefficiencies.  Without the removal of groundwater there would be additional pressures on the pit wall.  Groundwater would flow up through the base of the pit.  However, the necessity to dewater the pit in order to commence and then to continue mining operations was not news. 
235. Mr Meyer’s report dated 14 March 2012 outlined the significant issues that could arise if groundwater inflow was not addressed by an effective dewatering system.  However, this did not require the company to disclose that significant issues could arise if the dewatering plan was not implemented, as intended.  To disclose the potential problem, without disclosing that a solution was at hand, would be to give incomplete and therefore possibly misleading information.  The respondents are correct to submit that a hypothetical announcement along the lines that:
     1. significant issues could arise in the future if the dewatering plan was not implemented, as intended; and
     2. in fact, steps could and would be put in place to see that it was implemented

would not have provided meaningful information to the market.

Materiality

236. In the context of the Corporations Act, the requirement to disclose only arises if that information is not generally available and is information that a reasonable person would expect, if it were generally available, to have a material effect on the price or value of the securities of the relevant entity.  Section 677 provides that a reasonable person will be taken to expect information to have such a material effect if the information “would, or would be likely to, influence persons who commonly invest in securities” in deciding whether to acquire or dispose of the securities in the relevant entity. 
237. If the relevant information concerning groundwater inflows and dewatering is correctly formulated, then the information would be to the general effect that:

1. as previously disclosed, significant quantities of groundwater flow into the Siana pit, necessitating dewatering. 
2. significant issues could arise if the company’s dewatering plan is not implemented.  The advice to the company, from its expert consultant and senior management, as at 14 March 2014, is that it has a good plan for dewatering and that if the plan is implemented the remaining groundwater will be removed so as to enable mining to continue at the base of the pit. 

I do not consider that the disclosure of such information would, or would be likely to, influence persons who commonly invest in securities in deciding whether to acquire or dispose of Red 5 shares in March 2014 and, in particular, during the period of the capital raising and prior to the plaintiffs’ substantial investment on 20 March 2012.

238. For completeness, I should say that if additional detailed information about the dewatering processes was disclosed in a similar context, along with the kind of information which was presented to the board on 14 March 2012, then the position would be no different.  It would be essentially the same information with simply greater detail about the issues that could arise in the future if the dewatering plan was not implemented and it would also contain further detail about that plan.  I conclude that the disclosure of the relevant information, either in a summary form or in elaborate detail, would not be likely to influence persons to acquire or dispose of Red 5 shares because the identified problem was being addressed.  Problems encountered in the past with dewatering and the expected operation of the plan had been addressed and the advice to the Red 5 board was that it was a “good plan”.  Dewatering was expected to allow mining to proceed, as planned, and did not call for a revision of production guidance.
239. I have reached the conclusion that I have in relation to the issue of materiality without reference to the expert opinion of Dr Rudenno.  However, his expert opinions, both in his expert report dated 26 May 2016 and in his oral evidence, fortify my conclusions.  Dr Rudenno holds the qualifications of Bachelor of Mining Engineering, Master of Commerce and Doctor of Philosophy.  He is a Fellow and Chartered Professional (Management) of the Australasian Institute of Mining and Metallurgy, a Member and Certified Mineral Valuer of the Australasian Institute of Minerals Valuers and Appraisers and a Senior Fellow of the Financial Services Institute of Australasia.  His curriculum vitae includes executive roles in mining, including corporate advisory work.  He is highly-qualified to express the opinions which he did. 
240. Dr Rudenno was engaged to provide an opinion as to whether a reasonable person would have expected the “dewatering information” to have an effect on the price or value of Red 5’s shares.  For reasons which are explained, Dr Rudenno’s opinion was that in the relevant period, the market was fully aware of the issues surrounding the large amount of water entering the existing open pit by way of high rainfall and groundwater, particularly from the limestone at the southern end of the pit.  It appeared that the pumping system the company had in place was able to remove the inflows and to dewater the pit, albeit with some short down time if very heavy rains were encountered or there were any mechanical or power failures.  The possibility of wet ore from the pit presenting milling problems was also mentioned by the company.  Dr Rudenno analysed various technical aspects of groundwater inflow, along with the contents of Mr Meyer’s 14 March 2012 report.  In Dr Rudenno’s opinion, the Meyer report’s expectation that much of the groundwater inflow would be from the bottom of the pit would not have been material to the market as “the mine appeared to have more than ample pumping capacity”.^[84]  Information about groundwater inflow would not have been material to the market as long as there was adequate pumping capacity to overcome the inflow and suitable pumps had been constructed to collect surplus flows.  The market was already aware of difficult mining conditions due to rain and groundwater inflows.
241. In his oral evidence Dr Rudenno explained that “as long as the market felt that they had the pumping capacity to operate, it didn’t make any difference that there was slightly higher inflows in the pit as part of the day-to-day operations”.^[85]  Dr Rudenno identified the problem with admirable precision in his oral evidence.  If Red 5 could not draw down the water to the bottom of the pit then “that would be the end of the mine, but the company obviously could and did drop the water down.  So therefore it was not, I think, a material issue at that point in time”.^[86]
242. In summary, I conclude:

1. The fact of significant groundwater flowing into the pit was not material information for the purposes of the company’s statutory continuous disclosure obligation because this information had already been publicly disclosed;

2. The fact that revised estimates of the amount of groundwater inflow exceeded previous estimates was not material information because the dewatering plan included pumps and bores which had ample capacity to deal with groundwater inflows along with rainfall;

3. The company was not required to disclose that significant quantities of groundwater flowing into the Siana pit prevented complete dewatering of the pit because this was not the information which was available to the company.  On the contrary, the advice and information available to the board was that its dewatering plan would dewater the pit within a relatively short time;
4. Information about operational aspects of the dewatering process was not information which would, or would be likely to, influence persons who commonly invest in securities in deciding whether to acquire or dispose of Red 5 shares.

243. In general, there were many matters critical to achieving forecast production at the mine.  Dewatering was only one of them.  Operational problems would be expected during the commissioning of any new mining operation, especially one in the challenging environmental conditions which were disclosed to the market by Red 5 over the years.  The continuous disclosure obligations did not extend to every operational aspect of the planned dewatering of the pit.  Prior to the placement of shares on or about 20 March 2012 to raise additional working capital, the market had been provided with adequate information about the planned dewatering of the pit and was aware that large amounts of water entered the pit as groundwater and by way of rainfall.  The market did not need to be told of these matters again on or about 15 March 2012 and prior to the plaintiffs’ further investment in Red 5 on 20 March 2015. 
244. The plaintiffs have failed to establish their cause of action in respect of alleged breaches of continuous disclosure obligations.

The third cause of action: alleged misleading or deceptive conduct or conduct likely to mislead or deceive

245. The third cause of action is also related to the general issue of dewatering.  It relates to two announcements to which reference has previously been made.  The first is an announcement dated 31 October 2011 in respect of activities for the three months ended 30 September 2011.  In the overview section of that report it was stated:

“Pit dewatering complete – total of 14 billion litres discharged, remaining water to be used in wet commissioning.”

The second announcement was made on 15 March 2012, being the investor presentation which at slide 5 stated, “Dewatering of pit – almost complete”.

246. The plaintiffs argue that the first announcement is misleading and deceptive because on 30 October 2011 the company was aware that water levels had increased by about 14 metres.  The level of the water was around -35 metres at this time, whereas the bottom of the pit was around -50 metres. 
247. The announcement related to the period ended 30 September 2011 and the evidence shows that at that time more than 99 per cent of the water had been removed.  Insofar as the increase in water levels during October 2011 might be thought relevant to the accuracy of a report for the period ended 30 September 2011, the increase was due to temporary matters, namely the changeover in pumps.  The report was specifically identified to be about the company’s activities until 30 September 2011, which was before this temporary increase.
248. In its context, the ASX quarterly activity report for the period ended 30 September 2011 was not misleading in referring to pit dewatering being complete save for some water remaining that was to be used in wet commissioning.  The second part of the disclosure, that remaining water was to be used for wet commissioning, implies that the pit was not completely devoid of water.  In that context, and in the context of prior disclosures, the reference to dewatering being “complete” must refer to the completion of stage one of the dewatering process.  This was substantially true insofar as it concerned the first major stage of dewatering.  The large task of removing about 14 billion litres of water had been completed by 30 September 2011.  The announcement did not refer to the continuing need to dewater, but this was something about which the market, including Mr Bert, had been informed.
249. The second announcement complained about is the investor presentation of 15 March 2012.  It is also substantially correct in its summary that dewatering of the pit was almost complete.  The Meyer report shows that water was at a similar level at the end of September 2011 and March 2012.  The temporary rise in October 2011 had been reversed and groundwater inflow and rainfall over the following months had been largely removed.  The graphs annexed to Mr Meyer’s report show the extent of dewatering, and the chronology which I have outlined above supports the conclusion that dewatering of the pit was almost complete by mid-March 2012.  Incidentally, the information available to the company suggested that the small quantity of water that remained at the base could be removed, and would be removed in the foreseeable future.  As matters transpired, it was removed.  However, as at 15 March 2012 the simple statement that dewatering of the pit was almost complete was a substantially accurate overview of the completion of the substantial task of dewatering about 14 billion litres of water.
250. The plaintiffs have not established that the announcements were misleading or likely to mislead in contravention s 1041H of the Corporations Act.  They also have not established that they were in fact misled.

Causation issues – second and third causes of action

251. I have found that the company did not breach its continuous disclosure obligations and did not mislead the plaintiffs.  I will address, however, whether any such contravention, if it had been established, caused the plaintiffs’ loss. The plaintiffs submit that if Red 5 had complied with its obligations of continuous disclosure and disclosed the presence of significant groundwater inflows into the pit, the resultant substantial increase in risk would have strongly influenced their decision to sell all of their holdings in Red 5.  The plaintiffs’ submissions highlight what are said to be geotechnical risks.  In this regard, it is important to distinguish between geotechnical risks associated with inadequate dewatering, such as groundwater entering through the base of the pit and groundwater adding pressure to the pit wall, and the unrelated issue of the tailings dam compromise.  Although Mr Bert did not give any direct evidence about what he would have done had there been the disclosure which he says the law required, he argues that the information which he says should have been released would have influenced him.
252. As to issues of causation, the defendants note that the plaintiffs’ pleaded case is that they were induced to buy shares on 20 March 2012 when trading in Red 5 reopened, and made further investments between May 2012 and April 2013.  The pleaded case in respect of the first cause of action is not that, had the conduct not occurred, the plaintiffs would have sold their existing shareholdings.  The plaintiffs’ pleading in relation to the second and third causes of action is different and argues that if the market had been informed of the presence and magnitude of the groundwater inflow, the plaintiffs would have sold all of their shareholdings in Red 5 on 14 March 2012.  They based their claim for loss on a hypothetical price discount of 20 per cent as a result of the required disclosure.
253. The plaintiffs bear the onus of proving that, assuming no breach of the continuous disclosure obligation in respect of the second cause of action and/or assuming the absence of alleged misleading or deceptive conduct in respect of the third cause of action, they would have acted differently by not purchasing the Red 5 shares that were purchased on and after 20 March 2012 and that they would have in fact sold their existing shareholding. 
254. A significant problem for the plaintiffs on these causation issues is that on 30 April 2012 Red 5 informed the market, including Mr Bert, that the pit dewatering process had fallen behind schedule due to groundwater ingress at the base of the pit.  As previously noted, the plaintiffs plead that the groundwater inflow at the bottom of the pit was only disclosed to the market on 30 April 2012 in the ASX quarterly report.  Relevantly, for the purposes of reliance and causation, the plaintiffs took no action when matters were disclosed on 30 April 2012.  They did not complain about being misled.  They did not make further inquiries about the dewatering process.  They did not sell any shares.
255. In the face of these facts the plaintiffs argue that the 30 April 2012 disclosure was inadequate.  However, I do not regard this to be the case.  The plaintiffs seek to argue that the fact that the share price of Red 5 increased by five cents after disclosure proves that the disclosure was inadequate.  However, I do not accept that argument.  For the reasons canvassed by me during the trial when this issue was raised, it is possible that the price would have increased by more than five per cent if the disclosure had not been made.  The fact that the share price improved does not prove that there was not complete disclosure.^[87]
256. For present purposes I am required to assume that on, say, 15 March 2012 Red 5 made a fuller disclosure than the one that it did about dewatering, including the problems which had been encountered and the steps that were being taken to address dewatering and other operational issues, including earthmoving.  In my view, if Red 5 had made such disclosures by, for example, disclosing the kind of information which the managing director had informed the board about on 14 March 2012, then Mr Bert would have been satisfied with the company’s explanation, particularly if coupled with the advice that neither the dewatering issues nor other operational issues were thought by the senior management of Red 5 to call for a revision of production guidelines.
257. More generally, for the reasons canvassed in respect of the first cause of action, Mr Bert in March 2012 had a very positive view about investing in Red 5 and the prospect that shares purchased at $2.12 would increase in price.  Mr Bert, on his own behalf and on behalf of the other plaintiffs, regarded investment in Red 5 as a long-term investment.  Advice in mid-March 2012 that there had been some operational issues would not have caused him to fundamentally reconsider continuing with a long-term investment in Red 5.  As I have found in respect of the first cause of action, he was in fact informed of the capital raising of $15 million to provide a working capital buffer.  This did not deflect him from making a further investment, let alone lead him to make a decision to sell the family’s existing shareholdings.  If Mr Bert had inferred, or even been told, that production had been delayed by a matter of weeks due to dewatering, earthmoving or other issues, it is unlikely to have affected his investment decisions on behalf of his family.  He had no other specific investments in mind.  It is probable that he would have retained his investment and made the further investment which he did on 20 March 2011, and thereafter followed the “mitigation” strategy which he adopted.
258. I am not persuaded that the plaintiffs have discharged the onus of proving that they would have acted differently had additional disclosure been made in relation to dewatering.  They have failed to establish causation in relation to their second and third causes of action.  Assuming for the purpose of argument the contraventions which are alleged by them, the plaintiffs have failed to discharge the onus of showing that had those contraventions not occurred, they would have acted differently.

Quantum

259. Because the plaintiffs have failed to establish each of their three causes of action, it is strictly unnecessary to address issues of quantum.  I will do so relatively briefly.  As to the first cause of action, the plaintiffs plead that if Mr Bert had been told the truth about the purpose of the capital raising, the plaintiffs would not have purchased further shares in Red 5.^[88]  As to the second and third causes of action, their pleading is that if the ASX had been properly informed of the presence and the magnitude of the groundwater inflow, the plaintiffs would have sold all of their shareholdings in Red 5 on 14 March 2012.^[89]  The plaintiffs’ submissions on quantum appear in part 6 of their written submissions.

The first cause of action

260. The assessment of compensation in relation to the first cause of action requires me to assume (contrary to my earlier findings) that Mr Bert was misled about the purpose of the capital raising, and that if he had been informed prior to making the investment on 20 March 2012 that $15 million was being raised as a working capital buffer and that $10 million was no longer being sought to immediately pursue copper exploration, then he would not have purchased shares on 20 March 2012.  The essence of the assumed contravention is that Mr Jackson did not personally contact Mr Bert and tell him these things. 
261. In assessing reasonable compensation for the alleged contravention, regard should be had to the extent to which the claimed loss was the result of Mr Bert’s failure to take reasonable care and the fact that the defendants did not intend to cause such loss.^[90]  The defendants plead, and I accept, that it is just and equitable, having regard to Mr Bert’s share in the responsibility for the loss, to reduce the amount of loss which would otherwise be assessed.  The defendants plead that by operation of s 12GF(1B) of the ASIC Act, the amount ought to be reduced to a nominal sum.^[91]  Further, they argue that the reduction of the value of the investment has come about through:
     1. exposure to the usual risks that are inherent in the course of a speculative investment, which Mr Bert made a commercial decision to assume and which he must himself bear; and
     2. matters that cannot be attributable to either or both of the defendants.^[92]
262. If I had concluded that the defendants had contravened s 12BB or s 12DA of the ASIC Act in the respect alleged, then the resultant loss would be attributed to Mr Jackson’s failure to contact Mr Bert personally about changes in the purpose of the capital raising and Mr Bert’s failure to read at least the ASX announcement dated 20 March 2012 before making the very substantial investment which he did.  As to the former, the failure to personally contact Mr Bert was not unreasonable for the reasons canvassed in relation to the first cause of action.  As to the latter, I have found that Mr Bert did in fact read the one page ASX announcement dated 20 March 2012.  However, if it is assumed for the purpose of argument that he did not, then that was extraordinarily imprudent conduct by any investor intending to make a substantial investment.  It was extraordinary conduct by an investor like Mr Bert, who prides himself upon attention to detail and due diligence as part of his investment strategy of concentrating his investments, rather than diversifying them. 
263. On the plaintiffs’ case, before making the investment, Mr Bert failed to read a simple one page ASX announcement (not to mention the 19 March 2012 letter from Bailieu).  His (assumed) failure to read the ASX announcement was grossly negligent in terms of taking care to protect his own interests.  If, as he claims, he did not read the ASX announcement then his conduct was reckless.  His conduct was so unreasonable that the defendants’ alleged contravention should not be regarded as a cause in law of the acquisition of the shares on 20 March 2012, subsequent investments and losses suffered on those investments.  The amount of any assessed loss should not be awarded because it is not appropriate in the relevant legal context to attribute legal responsibility for it to the defendants’ assumed contravention.  Expressed differently, and in terms of assessment of loss, rather than “causation in law”, recoverable losses should not extend to losses which were overwhelmingly caused by Mr Bert’s failure to take reasonable care.  One aspect is that it was reasonable for the defendants to assume that Mr Bert would read the ASX announcement or otherwise consider the purpose of the capital raising and its amount.  The simplest way, of course, was to read the ASX announcement and there is no proper reason as to why Mr Bert would not do so.  It is not reasonable to award compensation for losses which were overwhelmingly attributable to Mr Bert’s reckless conduct in not reading the ASX announcement. 
264. I should add, in the present context, that this approach assumes in the plaintiffs’ favour that it was reasonable for the plaintiffs to pursue the concentrated investment strategy.  The expert report of Mr Kilkenny and his oral evidence present a compelling case as to why it was not, and this would provide an additional basis upon which to conclude that Mr Bert, on his own behalf and on behalf of the other plaintiffs, failed to take reasonable care to protect their interests.  If, however, such an investment strategy was to be pursued, then due diligence and analysis were necessary.  The failure to read a simple one page document is the antithesis of such a requirement.
265. The circumstances are such that, had I been required to calculate quantum in relation to the first cause of action, I would have reduced the calculated sum to a nominal amount and certainly an amount no higher than 10 per cent of the losses which otherwise could be fairly assessed.  This reduction would have been on account of the plaintiffs’ failure to take reasonable care to protect their interests.
266. Another issue concerning the calculation of quantum relates to the maintenance of the investment and the purchasing of further shares after Mr Bert was aware of the alleged contravention.  I need not revisit the matters which were discussed in this regard in the context of causation.  If, contrary to my earlier findings, the losses sustained after that date were to be regarded as having been caused by the alleged contravention, then I would not have regarded them as recoverable in terms of proper assessment of loss.  In my view, the proper assessment of loss would not extend to losses that were sustained after Mr Bert became aware (or would reasonably have been aware) of the purpose of the capital raising.  Again, this assumes in the plaintiffs’ favour that Mr Bert’s “mitigation strategy” was a reasonable one.  Even if this assumption was made, contrary to the expert opinion of Mr Kilkenny, the strategy adopted by Mr Bert was a commercial judgment, and I do not consider that the assessment of loss should extend to losses suffered on the additional shares that were purchased as part of this strategy.
267. More generally, in arriving at an appropriate assessment of loss, I have regard to the fact that the $15 million capital raising in March 2012 was not the cause of most of the company’s subsequent woes, which affected its production and its share price, and which therefore resulted in the large losses claimed by the plaintiffs.
268. Dr Rudenno, in his expert report, analysed the performance of Red 5’s share price and its causes.  He was not cross-examined on this part of his expert report and there is no sound reason to not accept his opinions.  It is unnecessary to reproduce the parts of Dr Rudenno’s report which include an analysis of the company’s operational performance and its share price.  It is sufficient to set out two paragraphs of his report:

“[55] In my opinion the overall underperformance was as a result of the failure to produce the forecast gold production.  That failure was mainly the result of delivering insufficient ore to the mill for processing and to a lesser extent what appeared to be below expected gold grades in the ore, reduced mill recovery and at times shortage of power.  The lower grades were likely the result of the source of the limited amount of ore, principally low-grade stockpiles.  Lower mill recoveries appear to have been from the impact of higher silver content and later the appearance of timber from old underground workings from the bottom of the pit.

[56] In my opinion the principal reason that there was a shortage of suitable ore was the failure of the contractor to adequately pre-strip waste material to get access to the northern benches and in its inability to mine sufficient ore due to the very poor performance of its mining fleet.  This situation was exacerbated by the very large volumes of silt and waste material in the pit, which the Company had not fully anticipated and had to be removed by the contractor thus delaying ongoing operations by some 4 months.”^[93]

269. Finally, a substantial part of the plaintiffs’ claimed losses, both in respect of the first cause of action and in respect of the second and third causes of action, relates to the large decline in the share price after the tailings facility was compromised and trading was suspended in April 2013.  This seems to me to be a supervening cause of the plaintiffs’ claimed loss which does not warrant losses being assessed by reference to the sale price of shares at 12 cents per share in early March 2015.
270. In summary, the plaintiffs have not proven the quantum of their properly assessed loss.  Any properly assessed loss would not extend to the losses suffered after the date upon which Mr Bert was aware or ought to have been aware of the purpose of the capital raising.  If 30 April 2012 was adopted as an appropriate date, then the price of Red 5 shares had fallen in the vicinity of 20 per cent.^[94]  The plaintiffs had not advanced a calculation of loss up to 30 April 2012 and therefore I am unable to arrive at a calculated figure.  However, if such a figure could be arrived at, it would be necessary to reduce it on account of the plaintiffs’ failure to take reasonable care to protect their own interests.  The quantum so assessed would be either a nominal sum or no more than 10 per cent of the calculation.

Second and third causes of action

271. Similar general issues apply to the proper assessment of loss in relation to the assumed contraventions pleaded in respect of the second and third causes of action. 
272. As to the losses which might be fairly attributed to alleged omissions to disclose information and also publishing misleading information in respect of groundwater inflows and dewatering, I have earlier concluded that the dewatering information was not likely to have a material effect on the price of Red 5’s shares.  I have already quoted Dr Rudenno’s analysis of the principal reasons for the mine’s failure to produce the forecast gold production. 
273. As noted, the plaintiffs pleaded that groundwater inflow at the bottom of the pit was only disclosed to the market on 30 April 2012 in the ASX quarterly report, but sought to argue that this was inadequate disclosure.  The issue for present purposes is that the market, and Mr Bert in particular, were informed on 30 April 2012 of issues in relation to earthmoving and dewatering.  The disclosure on 30 April 2012 was adequate, at least for the purpose of alerting the plaintiffs to dewatering and other problems and to allow them to make inquiries with a view to making a commercial judgment as to whether to buy or sell Red 5 shares.  For present purposes, I am not persuaded that an initial quantification of loss in respect of the second and third causes of action should include losses that post-date 30 April 2012. 
274. Again, in the context of the second and third causes of action, issues of the date beyond which losses should not be included loom large.  Losses arose because the plaintiffs adopted the mitigation strategy (the wisdom of which was questionable in light of the expert evidence).  The adoption of the mitigation strategy was a matter of the plaintiffs’ choice.
275. Even in respect of losses that were incurred prior to 30 April 2012, there are persuasive reasons as to why the defendants would not be held legally responsible for all of them, or why any fair assessment of compensation would not extend to them.  Assuming in the plaintiffs’ favour that the non-disclosure of matters in relation to dewatering caused loss, the claimed losses also were the result of the exposure of their investment to the usual risks that are inherent in the course of a speculative investment.  The fall in the price of Red 5 shares between 20 March 2012 and 30 April 2012 was due to those risks materialising for the reasons summarised by Dr Rudenno and previously canvassed in these reasons.  A substantial part of the losses incurred by the plaintiffs up to 30 April 2012, as with the losses thereafter, is attributable to their investment strategy of concentrating their investment in a speculative gold stock.  To use a metaphor, they put all their eggs in one basket.  Then, after some of the eggs were broken, they bought more eggs and put them in the same basket.  In the context of the second and third causes of action, they did so, on their case, after investing on 20 March 2012 without reading an important, single page document released to the ASX about the company in which they proposed to invest a substantial amount of their wealth.  For the reasons addressed in the context of the first cause of action, any calculated quantum of loss in relation to the second and third causes of action would be reduced as a result of the plaintiffs’, and in particular Mr Bert’s failure to take reasonable care.
276. If I had been required to assess quantum in relation to the second and third causes of action, then the losses so assessed would have been confined to losses sustained in the period up to 30 April 2012.  That figure would have been reduced to a very small or nominal amount of no more than 10 per cent of the quantified loss on account of the plaintiffs’ failure to take reasonable care and the fact that the losses sustained were principally attributable to matters unrelated to the alleged failure to disclose additional information about groundwater inflows and dewatering.  Those losses may be said to be reflective of the inherent risks of investing in such a new mining operation.  As Dr Rudenno observed, it is not unusual during commissioning of a new mining operation to run into operational difficulties. 
277. Red 5 had only one mine and it was located outside of Australia.  It was a high-risk investment.  The plaintiffs should be responsible for losses which arose because of the materialisation of those risks and which are unrelated to the alleged contraventions.  In the case of the second and third causes of action, the plaintiffs should not recover losses in terms of falls in the share price which resulted from the failure to produce the forecast gold production.  This failure was mainly due to the failure of a contractor to adequately perform its task, the poor performance of the mining fleet and the resultant failure to deliver sufficient ore to the mill for processing.

Conclusion on quantum

278. The losses claimed by the plaintiffs are very substantial.  The assessment of loss does not depend, however, on a simple calculation of arriving at the difference between the price paid for the shares from time to time (or an average share price of $1.67) and the price at which the shares were sold in March 2015, namely 12 cents.  Instead, it must have regard to whether the claimed losses are attributable to:
     1. the alleged failure of Mr Jackson to personally communicate with Mr Bert prior to 20 March 2012 so as to inform him of the purpose of the capital raising;
     2. alleged non-disclosure of information about groundwater inflow and dewatering; and
     3. alleged misleading information about dewatering.
279. I am not persuaded that the claimed losses were caused by those matters or, if they were in the factual sense, that the principles governing fair compensation make it appropriate to assess quantum in the amounts claimed.  Overall, the claimed losses on the investments made on 20 March 2012 and thereafter (as well as losses made on the existing shareholding) were the result of the plaintiffs’ investment strategy and their decision to expose their investment to the risks that are associated with a new mining operation in a challenging environment in a foreign country.  Additional risks included adverse fluctuations in the gold price.  The plaintiffs’ losses on their investments were the result of a deterioration in Red 5’s share price and the evidence, including the expert evidence before me, indicates that the fall in the share price was due initially to the failure to produce the forecast gold production.  Delays in dewatering had a minor role to play in that regard.  The major factors are those summarised by Dr Rudenno in his report. 
280. Another major cause of the plaintiffs’ losses on their investment was the tailings facility episode in April 2013.  There is no evidence that this was caused by any problem with dewatering of the pit.  The plaintiffs attempted to introduce inadmissible material and speculation by way of Mr Bert’s affidavit.  The speculation, based upon inadmissible information, is that the high level of groundwater inflow coming from the high water table was a factor in the catastrophic events.^[95]  This is unsupported by the evidence.  Incidentally, Mr Bert’s affidavit goes on to mention that the reported reason given for the tailings dam failure was that a drainage valve stayed closed for three weeks without anyone noticing and that the closure of the valve led to the level in the tailings dam increasing.  It is sufficient for present purposes to note that the dewatering issues which arose in late 2011 and early 2012 were addressed and there is no basis to conclude that they are related to the tailings dam failure in April 2013.  Instead, the tailings dam failure was one of many risks which the plaintiffs assumed in making the investment which they did.  The eventuation of that risk is not fairly attributable to the alleged contraventions.  The plaintiffs maintained their shareholdings well after they became aware in April 2012 of delays in production due to dewatering and other operational issues.  They maintained their shareholding long after they knew of the purpose of the $15 million capital raising.  They decided to keep their investments in Red 5.   The assessment of loss in relation to the alleged contraventions should not include losses that were caused as a result of the tailings dam failure.
281. If I had been required to assess loss, then the losses would have been reflective of a fall in the price of Red 5 shares up to and including 30 April 2012, and not included losses incurred thereafter.  The sum, so assessed, would then have been reduced to a nominal or very small amount to reflect the first plaintiff’s failure to take reasonable care.  If, contrary to the expert opinion evidence, it was reasonable for the plaintiffs to pursue a concentrated investment strategy in respect of a single-mine company which was beginning a new mining operation in an environmentally challenging location outside of Australia, then Mr Bert should have been particularly attentive by way of due diligence and analysis.  The least which might have been expected of him was to read a one page ASX announcement on the day he was planning to make a major investment in the company.  I have found that he did so.  However, if he did not, then the investment made that day (along with further investments by way of a mitigation strategy) were the result of his reckless failure to read a simple document which disclosed the purpose of the capital raising.

Conclusion

282. The plaintiffs lost a substantial part of their wealth from what proved to be a disastrous investment in a single-mine gold company.  Like any new mining venture, the Siana project was always likely to face operational difficulties, as well as risks associated with fluctuations in gold prices.
283. As matters transpired, the company achieved the substantial task of removing a huge lake above the proposed mine and then, after some operational difficulties with its reconfigured dewatering system, was able to completely dewater the pit, not long after it had expected to.  However, the mine failed to achieve its previously forecast gold production.  This was principally due to the failure of the contractor to adequately pre-strip waste material, the inability to mine sufficient ore due to the poor performance of the mining fleet and the presence of very large volumes of silt and waste material in the bottom of the pit, which were revealed after the pit was dewatered.  The company had not anticipated this volume of silt and its removal delayed operations by months.  In addition, power shortages on occasions reduced the plant’s ability to treat ore.  As a result of the company’s failure to achieve the forecast gold production, its share price fell after the plaintiffs made their substantial investment on 20 March 2012. 
284. Due to Mr Bert’s belief, both at the time of the acquisitions on 20 March 2012 and in the months thereafter, that Red 5 shares were undervalued, he continued to buy more of them, expecting the share price to improve.  It did not. 
285. Long after he became aware of the matters which he claims amounted to misleading and deceptive conduct in contravention of Commonwealth statutes, Mr Bert maintained his family’s investments in the company.   As a result, they held many shares in April 2013 when a tailings dam incident resulted in the company’s shares being suspended. 
286. Remarkably, throughout this entire period, Mr Bert made no complaint about being misled about the purpose of the March 2012 capital raising, groundwater inflows and dewatering or the failure of the company to disclose information in relation to these matters at about the time of the capital raising.  It was only in October 2013 that he complained about being misled in relation to the purpose of the capital raising. 
287. It may be understandable that, having lost his family’s wealth, Mr Bert would reconstruct a recollection of the telephone conversation that occurred about 18 months earlier on 15 April 2012.  It is less understandable, and unfortunate to say the least, that he should create a theory that Mr Jackson was engaged in some form of dishonest concealment about the purpose of the capital raising.  Nothing could be further from the truth.  Mr Jackson and the company told the world, including Mr Bert, that the capital raising was for working capital.
288. There was no reason for Mr Jackson to not refer to the working capital purpose when he spoke to Mr Bert on 15 March 2012.  Given his faith in Mr Jackson and the company, Mr Bert would have been satisfied by the prudence of the company in having a working capital buffer as production was being ramped up, so that the long-term prospects of the mine were not jeopardised by a temporary shortage of working capital.
289. Mr Bert has constructed a case which is deeply flawed.  On the one hand, he seeks to justify, in the face of valid criticism, his investment strategy of concentrating his investment in a speculative goldmining venture, by saying that his approach was to carefully analyse information in relation to the company.  On the other hand, he seeks to persuade the Court that such a highly intelligent and analytical investor did not bother to read a one page ASX announcement on 20 March 2012 which disclosed the purpose of the capital raising, or the letter which he received the previous day from a stockbroker about the private placement and its purpose.  The inconvenient truth for Mr Bert is that he did read these documents.
290. Over the following months Mr Bert received reports about the capital raising and operational matters including the causes of delays in production.  During this period he said nothing and wrote nothing to the company by way of complaint.  He certainly did not allege that he was not told about the working capital purpose and did not complain that operational matters in relation to dewatering should have been revealed earlier.
291. Having put his trust in the defendants and adopted an investment strategy of putting “all of his eggs in one basket”, and then having lost most of his investment, Mr Bert has constructed a case about being misled and reconstructed an unreliable version of the conversation that occurred on 15 March 2012.  He seemingly has convinced himself that, had he been told about the working capital purpose, he would not have made the investment.  However, he was informed about it and he made the investment.  The sad fact for Mr Bert and his family is that it is improbable that:

1. Mr Jackson would have concealed the working capital purpose which was being disclosed to other potential investors and the market in general; and
2. Mr Bert, with his commitment to due diligence and being an informed investor, would not have read the 20 March 2012 ASX announcement (along with the broker’s letter) before investing.

292. Mr Bert knew that funds were being raised for working capital, and even before 15 March 2012, was looking to invest in Red 5, whose shares he considered to be undervalued.  A passing reference in a telephone conversation on 15 March 2012 to copper exploration was not influential.  Mr Bert made no inquiries about copper and when there was no reference to new copper exploration at different sites in the information released to the market on 20 March 2012 or in later disclosures, he made no complaint or inquiry.
293. I have concluded that Mr Bert and the other plaintiffs were not misled by what was said to him by Mr Jackson on 15 March 2012 because by the time he made the investment on 20 March 2012 he knew, by virtue of what he had been told by Mr Jackson and the ASX release, that $15 million was being raised for working capital purposes.  Mr Bert’s subsequent contact, including the lack of any complaint until October 2013, confirms that he knew about the working capital purpose when he invested.
294. Next, I have concluded that there was no breach of the company’s continuous disclosure obligations.  In any case, if Mr Bert (and others) had been told more about operational matters in connection with the inflow of groundwater and its dewatering, including the plans which had been developed in consultation with Mr Meyer in March 2012 and that there was a “good plan” for the ongoing dewatering of the site, Mr Bert would have been content with the explanation and not acted any differently.  As to the third cause of action, Mr Bert was not misled by the statements which he singles out because, in their context, these statements were not misleading or likely to mislead or deceive.
295. Apart from failing to establish each cause of action, the plaintiffs have failed to establish that, had the alleged contraventions not occurred, they would not have invested as they did, or that they would have sold their existing investments. 
296. Finally, any assessment of the quantum of the plaintiffs’ claims under each cause of action must take account of a date after which further losses should not be recoverable.  Given the nature of the alleged contraventions, a reasonable date would be 30 April 2012, by which time, on the evidence before me, the plaintiffs were aware of both the purpose of the capital raising, delays associated with dewatering and other, more significant operational problems.  Any loss suffered before that date would need to be reduced to take account of Mr Bert’s failure to take reasonable care to protect his and his family’s interests, as well as the risks that are inherent in such a venture, including risks unrelated to dewatering which materialised.
297. The plaintiffs, having failed to establish the contraventions alleged by them, the claim should be dismissed.  Subject to any submissions on costs, the normal rules should apply, with costs following the event of dismissal.  Subject to making directions concerning any proposed submissions on costs, I propose to order as follows:

1. The claim is dismissed;
2. The plaintiffs pay the defendants’ costs of and incidental to the proceeding to be assessed.

I direct that any submissions seeking a different order as to costs be filed and served by 27 January 2017, and that any submissions in response be filed and served within seven days of receiving those submissions.