IN THE SUPREME COURT OF VICTORIA AT …xx) Annual Report 2009 Presentation, 14 September 2009; ... (xxx) ASX Company Announcement Platforms: New Waratah Central to Sydney's Transport

IN THE SUPREME COURT OF VICTORIA AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

LIST E

SCI 2014 01423

BETWEEN

CAMPING WAREHOUSE AUSTRALIA PTY LIMITED

(FORMERLY MOUNTAIN BUGGY AUSTRALIA PTY LIMITED)

(ACN 097 355 578)

Plaintiff

AND

DOWNER EDI LIMITED (ACN 003 872 848)

Defendant

DEFENCE TO FURTHER AMENDED STATEMENT OF CLAIM

Date of document: 25 March 2015 Filed on behalf of: The Defendant Prepared by: Colin Biggers & Paisley Lawyers Level 31, Rialto Towers 525 Collins Street Melbourne VIC 3000

Solicitor's Code: 105577 DX: 640 Melbourne

Tel: (03) 8624 2000 Fax: (03) 8624 2031

Ref: PAB:MER:142436 Attention: Paul Bannon Email: [email protected]

To the Plaintiff's Further Amended Statement of Claim dated 8 August 2014 (FASOC), the

Defendant (Downer) says by way of defence:

1. As to paragraph 1, Downer:

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(a) admits that the Plaintiff brings the proceeding as a group proceeding

pursuant to Part 4A of the Supreme Court Act 1986 (Vic);

(b) otherwise does not admit the allegations contained therein.


(a) admits that the Plaintiff brings the proceeding on its own behalf and on

behalf of all persons who acquired shares in the defendant on or after 12

January 2010 and who were at the commencement of trading on 1 June 2010

holders of any those shares who have claims for loss and damage caused by

the conduct of the defendant in the period 12 January 2010 to 31 May 2010 as

alleged in the statement of claim;

(b) says that Group Members as defined in the FASOC do not include persons

who have previously made claims against and have settled with Downer in

respect of the matters the subject of the proceeding commenced by the

plaintiff, for shares acquired by them on or after 25 February 2010.

3. As to paragraph 3 Downer:

(a) admits the allegations in sub paragraphs (a) to (c) inclusive; and

(b) Downer does not admit the allegations in sub paragraph (d) and says that, at

all material times:

(i) Downer had a number of subsidiaries; and

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(ii) those subsidiaries provided various services to the mining,

energy, transport, telecommunications, water and property

sectors.

4. As to paragraph 4, Downer says:

(a) on or about 3 December 2006, a contract (PPP Contract) was entered into

between:

(i) Rail Corporation New South Wales (RailCorp) at that time being

a statutory State Owned Corporation under the Transport

Administration Act (NSW) 1988 and the State Owned Corporations

Act (NSW) 1989, operating railways on behalf of the New South

Wales Government; and

(ii) Reliance Rail Pty Limited as trustee of the Reliance Rail Trust

(Reliance Rail);

for, amongst other things, the design, manufacturing and commissioning of

rail cars as part of the Waratah Train Project, upon the full terms and effect of

which Downer will rely at trial;

(b) the Waratah Train Project consisted of three parts:

(i) the Rolling Stock Manufacture (RSM) involving the financing,

design, manufacture, commissioning and delivery of 624 new double

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deck passenger rail cars, comprising 78 eight car sets together with

simulators for crew training;

(ii) the Auburn Maintenance Facility (AMF) involving the financing,

designing, manufacturing and commissioning of a purpose built

maintenance facility; and

(iii) the Through Life Support (TLS) being for the maintenance and

availability of rail car sets until 2043 - a 30 year maintenance

period;

(c) Reliance Rail was a special purpose vehicle owned 49% by Downer and 51%

by others unrelated to Downer.


(a) it admits that Downer EDI Rail Pty Ltd (Downer Rail), previously known as

EDI Rail Pty Ltd and EDI Rail PPP Maintenance Pty Ltd (ERPM) were at all

relevant times wholly owned subsidiaries of Downer;

(b) by a contract constituted by a Deed of Agreement made on 6 December 2006,

Reliance Rail entered into an agreement with Downer Rail and Hitachi

Australia Pty Limited to undertake the RSM (RSM Contract);

(c) in or about December 2006, Reliance Rail entered into agreements with

Downer Rail to record the terms on which Downer Rail would design,

construct and commission the AMF;

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(d) in or about December 2006, Reliance Rail entered into agreements with

ERPM to record the terms on which the TLS would be delivered;

(e) in or about December 2006, Downer entered into:

(i) the RSM Contract Side Deed with RailCorp, Reliance Rail,

Downer Rail and others;

(ii) the AMF Construction Contract Side Deed with RailCorp,

Reliance Rail, Downer Rail and others;

(iii) the TLS Contract Side Deed with RailCorp, Reliance Rail, ERPM

and another;

(f) in or about December 2006, Downer Rail entered into three Approved

Escrow Deeds (Core Contractors) with RailCorp, Reliance Rail and others in

relation to the RSM, the AMF and the TLS;

(g) in or about December 2006, Downer Rail entered into a Right of Entry Deed

for Cardiff Maintenance Depot with RailCorp and Reliance Rail;

and otherwise it denies the allegations contained therein.


(a) says that the Plaintiff became a registered shareholder in Downer on 31

March 2010;

(b) does not admit the purchase date of 26 March 2010;

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and otherwise it admits the allegations in paragraph 6.


(a) does not admit the allegations contained therein; and

(b) says that the closing price quoted on the Australian Securities Exchange

(ASX) market for ordinary fully paid shares in Downer (DOW ED

Securities) on 26 March 2010 was $6.96 and the price at which DOW ED

Securities traded on that day did not exceed $7.09.


(a) admits that the Plaintiff held 2,500 DOW ED Securities at the opening of the

ASX market on 1 June 2010;

(b) admits that the Plaintiff acquired DOW ED Securities after 12 January 2010

and at the commencement of trading on 1 June 2010, was a holder of those

Securities; and

(c) denies that the Plaintiff has a claim for loss or damage caused by the conduct

of Downer in the period 12 January 2010 to 31 May 2010 which is alleged in

the FASOC.


(a) does not admit the date upon which the Plaintiff sold its DOW ED Securities

as alleged;

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(b) does not admit the price received by the Plaintiff upon the sale of its DOW

ED Securities as alleged;

(c) if, which is not admitted, the Plaintiff's sale proceeds were less than it had

paid for its DOW ED Securities as alleged, it specifically denies that any such

loss suffered by the Plaintiff was caused by any conduct or omission of

Downer;

(d) says further that the pleading of the loss alleged in paragraph 9 is

embarrassing by reason that it is inconsistent with the basis of loss claimed

by the Plaintiff in paragraph 38 of the FASOC.

10. As to paragraph 10, Downer says that at all relevant times it maintained corporate

governance procedures and policies to ensure adherence to all applicable regulatory

requirements and best practice, including:

(a) compliance with the ASX Corporate Governance Council's Corporate

Governance Principles and Recommendations (2nd Edition);

(b) the adoption of, and compliance with, its Board Charter, Audit Committee

Charter and Risk Committee Charter; and

(c) a Continuous Disclosure Policy to ensure compliance with its legal and

regulatory disclosure obligations including in accordance with the

Corporations Act 2001 (Cth) and the ASX Listing Rules;

and save as aforesaid, Downer does not admit the allegations in paragraph 10.

8


(a) save that it refers to and relies upon an Investor Presentation at the Downer

Investor Day on 11 June 2008, the slides of which were released to the ASX

on the same day, it does not admit the allegations in sub-paragraph (a);

(b) save that it refers to and relies upon the Financial Report for the year ended

30 June 2008 published 21 August 2008, it does not admit the allegations in

sub-paragraph (b);

(c) save that it refers to and relies upon Downer’s Condensed Consolidated

Financial Report for the half-year, the Half Year Results 2009 presentation

and its announcement to the ASX on 27 February 2009, it does not admit the

allegations in sub-paragraph (c);

(d) save that it refers to and relies upon an Investor Presentation at the Downer

Investor Day on 10 June 2009, the slides of which were released to the ASX

on the same day, it does not admit the allegations in sub-paragraph (d);

(e) save that it refers to and relies upon the Downer Company Announcement

on 29 June 2009 to the ASX, it does not admit the allegations in sub-

paragraph (e); and

(f) save that it refers to and relies upon a “2009 Full Year Results” Presentation

on 20 August 2009, the Downer Preliminary Final Report and Appendix 4E

Announcement together with audit report on the financial statements for the

9

period and market release, it does not admit the allegations in sub-paragraph

(f).

12. As to paragraph 12 Downer:

(a) Denies the allegations contained therein;

(b) Says that with respect to each of the occasions referred to in paragraph 11 of

the FASOC, Downer refers to and relies upon the announcements identified

in sub-paragraphs 11(a) – (f) respectively herein, upon the full terms and

effect of which it will rely at trial;

(c) Says that on the following occasions prior to 1 June 2010 it announced the

progress of the RSM project, including as part of its financial results in

accordance with applicable accounting standards, such announcements

being made as follows:

(i) Downer Media Release, 10 November 2006;

(ii) Downer PowerPoint presentation to the market, 10 November

2006;

(iii) Downer Media Release, 8 December 2006;

(iv) Downer Presentation to Market, 8 December 2006;

(v) Downer Media Release, 3 August 2007;

(vi) 2007 Annual Report, 25 September 2007;

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(vii) Downer Half Yearly Report, 21 February 2008;

(viii) 2008 Half Yearly Results Presentation, 21 February 2008;

(ix) Half Yearly Report Media Release, 21 February 2008;

(x) 2008 Annual Report, 21 August 2008;

(xi) Full Year Results 2008 Presentation, 21 August 2008;

(xii) Condensed Consolidated Financial Report for the Half-Year

ended 31 December 2008, 27 February 2009;

(xiii) Half Yearly Results 2009 Presentation, 27 February 2009;

(xiv) Half Year Results 2009 webcast presentation, 28 February 2009

(xv) 2009 Half Year Report, 18 May 2009;

(xvi) Downer Investor Day: CEO Presentation, 10 June 2009;

(xvii) ASX Company Announcement Platforms: Sydney's Newest Train

Movers into Major Manufacturing Phase, 29 June 2009;

(xviii) Preliminary Final Report, 20 August 2009;

(xix) Full Year Results 2009 webcast presentation, August 2009;

(xx) Annual Report 2009 Presentation, 14 September 2009;

(xxi) Annual Review 2009 Presentations, 19 September 2009;

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(xxii) Downer's ASX Announcement released 2 October 2009 attaching

a copy of a media release by Fitch Ratings;

(xxiii) Downer EDI AGM: CEO and MD's presentation to shareholders,

15 October 2009;

(xxiv) Half Yearly Reports and Accounts, 25 February 2010;

(xxv) Downer's Half Year Results 2010 webcast presentation, 25

February 2010;

(xxvi) ASX Company Announcement Platforms: Reliance Rail Credit

Rating, 10 March 2010 attaching a copy of media releases by

Reliance Rail and Moody's Investor Services respectively;

(xxvii) ASX Company Announcement Platforms: Update on Reliance

Rail, 26 March 2010 attaching a copy of a media release by

Standard & Poor's Ratings Services;

(xxviii) Downer Investor Conference Call, 26 March 2010;

(xxix) Half Year Review, 9 April 2010;

(xxx) ASX Company Announcement Platforms: New Waratah Central

to Sydney's Transport Future, 3 May 2010.

(d) Further, the progress of the RSM project, and analysts’ concern about

Downer’s ability to deliver on time and on budget and that there was a delay

to the delivery of carriages in the RSM project, were the subject of various

12

announcements, updates and reports which were publicly available, upon

the full terms and effect of which Downer will rely at trial..

Particulars

Full particulars will be provided.

(e) By reason of the matters set-forth in sub-paragraphs 12(c) and (d) hereof,

ordinary and reasonable purchasers of DOW ED Securities, knew or ought to

have been aware of the progress of the RSM project including delays thereto

and the potential for adverse financial consequences for Downer.

Particulars

Full particulars will be provided.

(f) Further, Downer refers to its announcement to the ASX on 1 June 2010, upon

the full terms and effect of which Downer will rely at trial.


(a) it admits that it made an announcement ‘Half Yearly Report and Accounts’

published to the ASX on 25 February 2010 attaching the Condensed

Consolidated Financial Report – Appendix 4D for the six months ended 31

December 2009 in accordance with applicable accounting standards,

independent auditors’ review report on the financial statements for the

period, market release and results presentation, upon the full terms and

effect of which Downer will rely at trial; and

13

(b) it otherwise does not admit paragraph 13.


(a) it admits that it made an announcement 'Update on Reliance Rail' published to

the ASX on 26 March 2010, upon the full terms and effect of which Downer

will rely at trial;

(b) it also released to the ASX on 26 March 2010 the Standard & Poor’s Ratings

Services press release, dated 23 March 2010, which had no material adverse

impact upon Downer’s financial performance;

(c) it otherwise denies paragraph 14.


(a) it admits that it made an announcement ‘New Waratah Central to Sydney’s Transport Future’ published to the ASX on 3 May 2010, upon the full terms and effect of which Downer will rely at trial;


16. As to paragraph 16, Downer refers to and relies upon:

(a) an Investor Presentation at the Downer Investor Day on 11 June 2008, the

slides of which were released to the ASX on the same day;

(b) an Investor Presentation at the Downer Investor Day on 10 June 2009, the


and otherwise does not admit the allegations in paragraph 16.

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(a) save that it refers to a Downer Company Announcement to the ASX and a

presentation 'Downer EDI preferred for NSW PPP', both of which were

released to the ASX on 10 November 2006 and upon the full terms and effect

of which Downer will rely at trial, it does not admit the allegations in sub-

paragraph (a);

(b) save that it refers to media releases issued by Downer and Reliance Rail and

published to the ASX, amongst others, and a presentation 'Downer EDI NSW

PPP Update', each of which were released to the ASX on 8 December 2006

and upon the full terms and effect of which Downer will rely at trial, it does

not admit the allegations in sub-paragraph (b);

(c) save that it refers to its 2007 Half Year Results released to the ASX and a

presentation '2007 Half Year Results', both of which were released to the ASX

on 23 February 2007 and upon the full terms and effect of which Downer will

rely at trial, it does not admit the allegations in sub-paragraph (c);

(d) save that it refers to a Downer Company Announcement to the ASX on 26

March 2010 and an investor conference call of the same date, upon the full

terms and effect of which Downer will rely at trial, it does not admit the

allegations in sub-paragraph (d).

18. Save that it says that for the Financial Year ended 30 June 2009 Downer earned a net

profit after tax and one-off significant items of $189.376m and that it refers to its

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2009 Annual Report and the Financial Statements contained therein, released to the

ASX on 14 September 2009, upon the full terms and effect of which Downer will

rely at trial, it otherwise does not admit the allegations in paragraph 18.


(a) admits that on 14 September 2009 it released its 2009 Annual Report to the

ASX, upon the full terms and effect of which it will rely at trial;

(b) admits that on 15 October 2009 it released to the ASX a copy of the transcript

of an address to shareholders by the Chairman of Downer at its Annual

General Meeting, upon the full terms and effect of which it will rely at trial;

(c) admits that on 25 February 2010 it released to the ASX a copy of its

Condensed Consolidated Financial Report Appendix 4D for the six months

ended 31 December 2009, independent auditor’s review report on the

financial statements for the period, market release and results presentation,

upon the full terms and effect of which it will rely at trial;

(d) says that at all relevant times alleged Downer’s NPAT and other earnings

guidance was reasonable and the best estimate Downer could give having

regard to the matters set forth in paragraph 43 hereof;

otherwise does not admit the allegations in paragraph 19.

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20. Save that it says that the term ‘therefore’ is embarrassing, Downer refers to and

relies upon sub-paragraphs 19(a) to (c) hereof and otherwise does not admit the

allegations in paragraph 20.


(a) admits that on 1 June 2010, it published an announcement (1 June 2010

Announcement) to the ASX entitled ‘Waratah Train Project Review and Asset

Impairments’, upon the full terms and effect of which it will rely at trial;

(b) says that it also published that company announcement to the New Zealand

Stock Exchange (NZX);

(c) says that the 1 June 2010 Announcement included, inter alia, statements

advising to the effect that Downer had raised:

(i) a $190 million pre-tax provision on the $1.9 billion NSW Waratah

Rolling Stock Manufacture project ($133 million NPAT) (RSM

Provision); and

(ii) a $70 million pre-tax asset impairment charge ($66 million NPAT)

(UK/NZ Asset Impairment Charge);

and it otherwise denies the allegations contained therein.

22. As to paragraph 22, Downer refers to its 1 June 2010 Announcement to the ASX and

NZX entitled ‘Waratah Train Project Review and Asset Impairments’ referred to in

17

paragraph 21 hereof, upon the full terms and effect of which it will rely at trial, and

it otherwise denies the allegations contained therein.

23. As to paragraph 23, Downer refers to its 1 June 2010 Announcement to the ASX and

NZX entitled ‘Waratah Train Project Review and Asset Impairments’ referred to in

paragraph 21 hereof, upon the full terms and effect of which it will rely at trial, and

it otherwise does not admit the allegations contained therein.


(a) refers to and relies upon its 1 June 2010 Announcement to the ASX and NZX

entitled ‘Waratah Train Project Review and Asset Impairments’ referred to in

paragraph 21 and hereof, upon the full terms and effect of which it will rely

at trial;

(b) says that in a Market Presentation issued by Downer to the ASX on 1 June

2010 Downer confirmed that FY 2010 results were in line with previous

guidance save for the RSM Provision and the UK/NZ Asset Impairment

Charge;

(c) says that the UK/NZ Asset Impairment Charge was announced as part of its

regular review of asset carrying values which gave rise to a number of

adjustments which were unrelated to the Waratah RSM Contract;

and otherwise does not admit the allegations contained in paragraph 24.

18


(a) it refers to:

(i) the 1 June 2010 Announcement referred to in paragraph 21 hereof;

(ii) the Market Presentation issued by Downer to the ASX on 1 June

2010 referred to in sub-paragraph 22(b);

(iii) the Downer Market Update conference call with Downer Chief

Executive Officer Geoff Knox on 1 June 2010;

(iv) the Downer Annual Investor Day Presentation on 2 June 2010, the


upon the full terms and effect of which Downer will rely at trial;

(b) at all relevant times statements by Downer comparing the Waratah Train and

the Millennium Train projects were, and would have been understood by a

reasonable person to be, a reference to Downer’s expected mitigation of train

design risks in the RSM contract having regard to the following matters:

(i) Downer’s subsidiary Downer Rail had experience in building and

delivering the Millennium Train to RailCorp;

(ii) under the RSM Contract, the Waratah Trains were also to be built

and delivered to RailCorp;

(iii) Downer Rail was experienced in dealing with RailCorp;

19

(iv) the experience of building and delivering the Millennium Train

Project could reasonably be expected to mitigate the risks to

Downer Rail of performing the RSM Contract; and

(v) the similarities which existed between the Waratah Train and the

Millennium Train projects.

(c) it specifically denies that on 1 June 2010 it told the market that the

comparison between the Waratah Train and the Millennium Train projects

was wrong at the time it was made;

(d) it refers to the matters set forth in paragraphs 26 to 28 hereof;

it otherwise does not admit the allegations contained therein.

26. Further, at all relevant times:

(a) Reliance Rail’s contract with RailCorp for the RSM under the PPP Contract;

and

(b) the RSM Contract Side Deed referred to in paragraph 5(e)(i) hereof;

were publicly available documents.

27. At all relevant times the market knew and it was the fact that the PPP Contract

permitted RailCorp to require variations to the design specification for the RSM and

required Reliance Rail to accept all of the risks (PPP Risk) associated with the

20

project the subject of the PPP Contract (subject to specific assumptions of risk by

RailCorp) which expressly included terms to the effect that:

(i) the project's costs might be higher than estimated;

(ii) the time required to meet its delivery phase obligations (and

hence the time before payments were received from RailCorp)

might be greater than expected; and

(iii) inadequate provisions may have been made by it for the work

and materials required to meet its obligations.

28. In relation to variations by RailCorp to the RSM specification under the PPP

Contract, by reason of the publicly available documents referred to in paragraph 26

hereof and the matters referred to in paragraph 27 hereof, the market knew that:

(a) the RSM Contract permitted Reliance Rail to require those same variations to

the design specification of the RSM Contract;

(b) Downer Rail had assumed the PPP Risk for which Reliance Rail had

obligations to RailCorp including as to variations of the specification of the

RSM.

29. As to paragraph 26, Downer refers to:

(a) the 1 June 2010 Announcement to the ASX;

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(b) the Market Presentation issued by Downer to the ASX on 1 June 2010;

(c) the Downer Market Update telephone conference call with Downer Chief

Executive Officer Geoff Knox on 1 June 2010;

(d) the Downer Annual Investor Day Presentation on 2 June 2010, the slides of

which were released to the ASX on the same day;

upon the full terms and effect of which Downer will rely at trial, and admits that it

informed the market of the matters referred to therein, but otherwise does not

admit the allegations contained in paragraph 26.


(a) Save that it says that the allegations made in sub-paragraphs 27(a)-(c) are

embarrassing and fail to identify facts or dates upon which such facts if made

generally available would have been expected by a reasonable person to

have a material effect on the price or value of DOW ED Securities, it denies

the allegations contained in paragraph 27;

(b) refers to the matters set forth in paragraph 12 hereof and says that

information concerning the Waratah train project matters was made

available generally and on the dates as therein set out save for such

information as alleged by the plaintiff of which Downer was aware prior to

31 May 2010 concerning the RSM Contract and which was not known to the

market (which is not admitted), which was:

22

(i) confidential;

(ii) subject to legal privilege;

(iii) subject to negotiations with RailCorp and counter parties;

(iv) uncertain having regard to the then stage of completion of the

RSM Contract;

(v) subject to financial quantification and project review by Downer;

and/or

(vi) indefinite until quantified.

(c) the 1 June 2010 Announcement advised the ASX of the realization of risk

previously known to the market in the performance of the RSM Contract.

31. Downer denies the allegations contained in paragraph 28.

32. Save that it says that it made the 1 June 2010 Announcement to the ASX

immediately following upon a meeting of the Downer Board of Directors at which

the matters set forth therein were definitely ascertained, it otherwise denies the

allegations contained in paragraph 29.

33. Downer denies the allegations contained in paragraph 30 and says further that the

Plaintiff’s FASOC fails to identify any particular information which the Plaintiff

alleges that Downer should have but failed to disclose to the market pursuant to

23

section 674(2) of the Corporations Act 2001 or Listing Rule 3.1, or any date or dates

upon which such information should have been disclosed, and in the premises

thereby fails to disclose a cause of action.

34. As to paragraph 31 Downer says:

(a) it denies the allegations made against it in paragraph 31;

(b) it otherwise refers to the matters set forth in paragraphs 12, 16, 32, 33, 37 and

43 hereof.


(a) it refers to the announcements to the ASX and other communications by

Downer set forth in paragraphs 17 to 19 hereof, upon the full terms and effect

of which it will rely at trial;

(b) save as aforesaid it does not admit the allegations in paragraph 32;

(c) says further that the allegations contained in paragraph 32(a)-(g)(i)and(ii) are

non-sensical or embarrassing and should be struck out.


(a) it refers to the announcements to the ASX and other communications by

Downer set forth in paragraphs 17 to 19 hereof, upon the full terms and effect

of which it will rely at trial, and says that in so far as the same contained or

24

constituted representations about future matters as alleged in sub-

paragraphs 32(i) and (ii) of the FASOC (which is not admitted), Downer had

reasonable grounds for making such representations;

Particulars

Particulars will be provided.

(b) it otherwise denies the allegations contained in paragraph 33.


(a) it does not admit the representations as alleged;

(b) further, it says that by reason of the matters referred to in paragraphs 17 to 19

hereof, and the matters set forth in paragraphs 12(c) and (d) hereof, being

Downer's ASX announcements and the ratings agency reports, media

reports, broker and analyst reports, and the general and specific risks known

to the market concerning large complex infrastructure construction projects,

if the representations were made as alleged (which is not admitted) the same

did not in fact and were not reasonably likely to mislead or deceive the

reasonable and ordinary purchaser of DOW ED Securities;

(c) the Plaintiff was not in fact misled or deceived in purchasing the DOW Ed

Securities which it did purchase as alleged in paragraphs 6 and 7 of the

FASOC;

25

(d) as to the allegations contained in sub-paragraph 34(e), Downer refers to and

repeats sub-paragraph 36(a) hereof;

(e) it says further that in the absence of an alleged obligation to disclose

particular information pursuant to section 674(2) of the Corporations Act 2001

and Listing Rule 3.1, any non-disclosure by Downer of matters concerning

the Waratah train project matters as alleged by the Plaintiff cannot constitute

a breach of section 1041H of the Corporations Act 2001 as alleged or at all;

(f) it otherwise denies the allegations contained in paragraph 34.


(a) it admits the allegations contained in sub-paragraph 35(a) thereof;


39. It does not admit the allegations contained in paragraph 36.

40. It denies the allegations contained in paragraph 37.


(a) it says that the allegations contained in sub-paragraphs 38(a) and (b) are

embarrassing;

(b) it otherwise denies paragraph 38;

26

(c) it further says that the downward movement in the price of Dow ED

Securities quoted on the ASX following the 1 June 2010 Announcement was:

(i) a market overreaction;

(ii) a re-pricing of Dow ED Securities upon the realization of project

risks known to the market;

(iii) partly attributable to the announcement of an asset impairment

write-down unrelated to the RSM Contract which was also

announced in the 1 June 2010 Announcement;

(iv) attributable to other causes.

42. It denies the allegations contained in paragraph 39.

43. Further, Downer says that at all relevant times the estimates for NPAT and other

earnings guidance provided by Downer, including as at 25 February 2010, were in

fact:

(a) reasonable and the best estimate Downer could give, having regard to:

(i) the size and complexity of the Waratah Train Project and the RSM

Contract;

(ii) the incomplete but ongoing financial and project reviews of the

RSM Contract and the construction work being carried out

thereunder;

27

(iii) the measure of revenue recognition as publicly stated, including

in the 2009 Downer annual report;

(iv) the inherent risks associated with the performance of a large and

complex infrastructure project;

(v) the confidential and continuing negotiations between Downer,

Downer Rail, Reliance Rail and RailCorp which involved

contractual and other claims by Downer, pursuant to pass

through rights against RailCorp and which were to be the subject

of a confidential mediation in March 2010 and subsequent

negotiations including with the NSW Treasury;

(vi) the fixed-price terms of the RSM Contract and the complex

difficulties in precisely estimating and quantifying the financial

consequences of delays in performance of the RSM Contract;

(vii) the fact that Downer had implemented a train delivery recovery

programme which was designed and intended to ameliorate

delays in train set delivery.

(b) prepared by Downer with the approval of its auditors and such estimates

and guidance conformed with the relevant requirements of the Corporations

Act 2001.

44. In the premises, the estimates for NPAT and other earnings guidance provided by

Downer, including on 25 February 2010 as at 31 December 2009, were or should

28

have been understood by ordinary and reasonable purchasers of DOW ED

Securities to be the reasonable opinion of its directors and the best estimate Downer

could give at the relevant times.

45. Further or alternatively, if particular information about the Waratah train project

matters (as alleged) or the RSM Contract was not made generally available by

Downer prior to 1 June 2010 (which is not admitted and as to which Downer refers

to and repeats the matters pleaded in paragraphs 17 to 19 above), then Downer says

that it was not required to notify the ASX of such particular information under

section 674(2) of the Corporations Act or rule 3.1 of the Listing Rules, because:

(a) rule 3.1A of the Listing Rules exempted Downer from disclosing that

information, as:

(i) the information concerned an incomplete proposal or negotiation, in

that such matters were the subject of confidential negotiation with

RailCorp; or

(ii) that information comprised matters of supposition or was

insufficiently definite to warrant disclosure, in that a full project

review was required to understand the financial impact and extent of

the matters; or

(iii) the information was generated for the internal management purposes

of Downer;

and

29

(iv) that information was confidential and the ASX had not formed the

view that the information had ceased to be confidential; and

(v) a reasonable person would not have expected the information to be

disclosed;

(b) that information was not information that a reasonable person would expect,

if it were generally available, to have a material effect on the price or value of

DOW ED Securities within the meaning of s 674(2)(c)(ii) of the Corporations

Act;

(c) alternatively, by reason of the matters set forth in paragraph 12 hereof, that

information was in fact generally available within the meaning of s 676(2)

and (3) of the Corporations Act 2001.

46. Further, or alternatively, until:

(a) The completion and failure of the mediation with RailCorp in March 2010;

(b) The undertaking and completion of the financial and project review which

commenced in April 2010;

(c) The Downer Board meetings held on 26, 27 and 31 May 2010;

Downer was for the purposes of section 674 of the Corporations Act 2001 and Listing

Rule 3.1 either not aware of information which was required to be disclosed about

the Waratah train project as defined in the Plaintiff’s FASOC or the RSM Contract,

or such information as alleged by the Plaintiff (which is not admitted) of which it

30

was aware was not required to be disclosed for the reasons set forth in paragraph 45

hereof.

47. Further if, which is denied, there was conduct by Downer in contravention of

section 1041H of the Corporations Act 2001 as alleged by the Plaintiff, Downer says

that in the premises of the Plaintiff’s allegations:

(a) such conduct did not induce any director or officer of the Plaintiff to hold an

erroneous belief as to the value of DOW ED Securities;

(b) the Plaintiff’s purchase of DOW ED Securities as alleged in paragraph 6 of

the FASOC was not made in reliance on such conduct of Downer;

(c) in purchasing DOW ED Securities as alleged in paragraph 6 of the FASOC

the Plaintiff would not have acted differently had such conduct not occurred;

and in the circumstances of the case the Plaintiff’s FASOC fails to disclose a cause of

action.

48. Further if, which is denied, there was conduct by Downer in contravention of

section 1041H of the Corporations Act 2001 as alleged by the Plaintiff, and if, which is

also denied, the Plaintiff has suffered loss or damage as alleged caused by such

conduct, Downer says:

(a) the Plaintiff suffered the loss or damage claimed as a result partly of the

Plaintiff’s failure to take reasonable care;

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Particulars

Particulars will be provided.

(b) it did not intend to cause the loss or damage and did not fraudulently cause

the loss or damage;

(c) that pursuant to section 1041I(1B) of the Corporations Act 2001, the damages

that the Plaintiff may recover in relation to the loss or damage alleged are to

be reduced to the extent to which the Court thinks just and equitable having

regard to the Plaintiff’s share in the responsibility for the loss and damage.

Filed: 25 March 2015

(G.L. Meehan)

Colin Biggers & Paisley

Solicitors for the Defendant

Documents

IN THE SUPREME COURT OF VICTORIA AT …xx) Annual Report 2009 Presentation, 14 September 2009; ... (xxx) ASX Company Announcement Platforms: New Waratah Central to Sydney's Transport