Akierman Holdings Pty Ltd v Akerman

[2019] NSWSC 1486

Supreme Court

New South Wales

Medium Neutral Citation:

Akierman Holdings Pty Ltd v Akerman [2019] NSWSC 1486

Hearing dates:

6, 7, 9, 13 November 2018; 13, 14 December 2018; 17 April 2019

Date of orders:

31 October 2019

Decision date:

31 October 2019

Jurisdiction:

Equity - Corporations List

Before:

Parker J

Decision:

See [359].

Catchwords:

CORPORATIONS — Directors and officers — Authority and powers – appointment of managing director by purported resolution of sole director - articles did not provide for sole director – appointment not valid – resolution approving of director’s remuneration not valid – payment of legal fees on behalf of company not valid.

 

CONTRACTS — Formation — Agreement – informal oral agreement for sale of Company property – parties contemplated later execution of formal documents – oral agreement not enforceable.

 

CONTRACTS — Formation — Agreement – informal written agreements contemplated later execution of formal document but otherwise unqualified and specific in terms – immediately binding if entered with authority.

 

CORPORATIONS — Directors and officers — Authority – Unanimous Assent – where one share held on trust by estate and transfer not registered until some time later – application of doctrine – informed consent.

   

CORPORATIONS — Directors and officers — Authority – entry into agreements for sale of land absent proper authority – party likely unaware he lacked proper authority – party a solicitor and likely aware Company’s articles must be changed to facilitate sole directorship – validation of agreement to sell Company’s share of property under s 1322 refused.

  CORPORATIONS — Membership — Register — Rectification of register – rectification of share register – share held on trust – transfer from beneficiary’s estate belatedly recorded in Company’s register – transfer recorded as occurring on date omission discovered not prior date of intended transfer – evidentiary purpose of Company register – rectification granted to accord with parties’ intent to transfer all shares from beneficiary’s estate.

Legislation Cited:

Companies Act 1961 (NSW), Schedule 4, Table A, rr 70, 73, 76, 79, 84, 86
Corporations Act 2001 (Cth) ss 126, 127, 169, 178A, 201A, 1317H, 1317S, 1318, 1322
First Corporate Law Simplification Act 1995, sch 4 item 25
Uniform Civil Procedure Rules 2005 (NSW) r 31.13

Cases Cited:

Angas Law Services Pty Ltd v Carabelas (2005) 226 CLR 507
Bamford v Bamford [1970] Ch 212
Brick & Pipe Industries Ltd v Occidental Life Nominees Pty Ltd [1992] 2 VR 279
Coomber v Coomber [1911] 1 Ch 723
Grant v John Grant & Sons Pty Ltd (1950) 82 CLR 1
Hall v Busst (1960) 104 CLR 206; [1960] HCA 84
Hall v Poolman [2007] NSWSC 1330
Herrman v Simon (1990) 4 ACSR 81
Hill v Newth (2014) 17 BPR 32,787; [2014] NSWSC 298
Masters v Cameron (1954) 91 CLR 353; [1954] HCA 72
Multinational Gas and Petrochemical Co v Multinational Gas and Petrochemical Services Ltd [1983] 1 Ch 258
MYT Engineering Pty Ltd v Mulcon Pty Ltd (1999) 195 CLR 636
Re Compaction Systems Pty Ltd [1976] 2 NSWLR 477
Re Duomatic Ltd [1969] 2 Ch 365
Re Horsley & Weight Ltd [1982] Ch 442
Salomon v Salomon & Co Ltd [1897] AC 22
Sinclair Scott & Co Ltd v Naughton (1929) 43 CLR 310
Union Bank of Australia v Harrison, Jones & Devlin Ltd (1910) 11 CLR 492
Winthrop Investments Ltd v Winns Ltd [1975] 2 NSWLR 666

Texts Cited:

J D Heydon, Heydon on Contract: The General Part (2019, Lawbook Co.) at [3.170]
J D Heydon, M J Leeming and P G Turner, Meagher Gummow and Lehane's Equity: Doctrines and Remedies (5th ed, 2015, LexisNexis Butterworths Australia) at [5-015]

Category:

Principal judgment

Parties:

Akierman Holdings Pty Ltd (Plaintiff)
Steven Akerman (Defendant)

  Cross-claim
Steven Akerman (Cross-claimant)
Akierman Holdings Pty Ltd (First Cross-defendant)
Emilia Marr (Second Cross-defendant)
Gillian Dar (Third Cross-defendant)

Representation:

Counsel:
G Curtin SC/E Cowpe (Plaintiff/ First and Third Cross-Defendants)
S Goodman SC/N Kabilafkas (Defendant/Cross-Claimant)

 

Solicitors:
Harris Freidman Lawyers (Plaintiff/First and Third Cross-Defendants)
Rankin Ellison Lawyers (Defendant/Cross-claimant)

  Submitting appearance:
James Tuite & Associates Lawyers (Second Cross-Defendant)

File Number(s):

2015/323943

Publication restriction:

Nil

Judgment

1. These proceedings concern the affairs of Akierman Holdings Pty Ltd (“Akierman Holdings” or “the Company”). It is a family company which was established almost fifty years ago as a vehicle for holding property investments. The Company now belongs to a brother and sister who have fallen out over the steps taken to liquidate its property holdings.

2. The Company was established by an immigrant couple, David Henry (known as Henry) Akierman and Jana (also known as Jane) Akierman. Over time, the Akiermans built up a portfolio of properties in Sydney’s eastern suburbs.

3. Some of the Akiermans’ property ventures were undertaken with another couple, Wilem (known as Bill) Markovitz and Emilia (or Emelka) Markovitz. The Markovitzes also used the surname Marr. Mrs Akierman was Mrs Marr’s sister. In some cases shares of the properties were held by the Company or Mrs Akierman personally. Other properties were held in a company owned by the Akiermans and the Marrs.

4. The Akiermans had two children, Steven Akerman (he changed his surname so as to drop the “i”) and Gillian Dar. Mr Akerman is a solicitor whose firm is called Sowden Akerman. Ms Dar is a primary school teacher.

5. On the death of Jana Akierman (who had become the sole owner of the family property interests following the death of Henry Akierman) Mr Akerman and Ms Dar inherited her estate in equal shares. They were also their mother’s executors. Initially they worked together co-operatively to realise the estate. They decided to divide up the family’s investments and go their separate ways financially. The process began in 2004 or 2005. It was a lengthy one and the sale of the properties was only completed in 2015. In the meantime, in December 2009, Ms Dar fell out with Mr Akerman. She accused him of cheating her and others, and since then they have been estranged.

6. During Mrs Akierman’s lifetime, she and Mr Akerman had been the directors of the Company. Following her death, Mr Akerman was left as the only director of the Company. He continued to direct the Company’s affairs, acting as if he was entitled to act as sole director. But he was not; the Company’s articles did not provide for sole directorship.

7. These proceedings are mainly concerned with the steps taken to dispose of the Company’s interests in two properties in Miller Street, Bondi. The properties were an apartment building at number 9 and a pair of semi-detached houses at numbers 5 and 7. The Company owned a quarter share of each property. Between them, the Marrs held a half share and the remaining quarter share was owned during her lifetime by Mrs Akierman. On her death, a one-eighth share passed to each of Mr Akerman and Ms Dar.

8. According to Mr Akerman, in May 2005 he agreed with Ms Dar and the Marrs to buy the seven-eighths of 9 Miller Street which he did not already own, and he similarly agreed to buy the other seven-eighths of 5 and 7 Miller Street in February 2007. Ms Dar was paid the agreed prices for her shares of the two properties. The Marrs were also paid out for number 9, and Mr Akerman made arrangements satisfactory to them to pay them out for numbers 5 and 7.

9. The sales were completed, and the transfers registered, in March 2010 (some shares of the properties were transferred into the names of members of Mr Akerman’s family but this is not important for the purposes of the case). The sale and transfer of the Company’s shares were effected on its behalf by Mr Akerman, purporting to act as sole director.

10. The sale prices for the Company’s shares in the properties did not reflect their market value as at March 2010. Instead they reflected prices struck at the time of the earlier alleged agreements. Payment (or at least payment of the amount Mr Akerman considered to be due) was eventually made in April 2013.

11. The property valuation evidence in this case was undertaken in April 2018. The evidence showed that there was a strong run up in property values over the six years or so prior to 2018, particularly after about 2012. Mr Akerman and his family have benefited greatly from this market exuberance. On the valuations presented in this case, by April 2018, 9 Miller Street had increased in value by about 160% over the 2005 price. Numbers 5 and 7 Miller Street had increased by about 130% over the 2007 price.

Issues for determination

12. Ms Dar does not complain about the sale of her own shares of the Miller Street properties. But she says that no agreement, or at least no enforceable agreement, was reached in 2005 and 2007 concerning the sale of the Company’s shares of the properties. Her contention is that the later transfer of the Company’s shares in the properties was improper.

13. Ms Dar makes two other complaints. The first concerns a payment of $180,000 in director’s fees (together with a superannuation contribution of $16,200) which Mr Akerman took out of the Company in about April 2013. The second complaint concerns a payment of $85,000 for fees charged by Mr Akerman’s firm and by counsel retained by his firm, purportedly on behalf of the Company. Ms Dar contends that these payments were improper. In particular, she contends that the legal fees were incurred in Mr Akerman’s interests not the Company’s.

14. In July 2014, Ms Dar commenced proceedings in this Court seeking leave to bring a derivative action in the name of the Company against Mr Akerman for breaches of his duties as director of the Company. Leave was granted by Black J in September 2015. The present proceedings, in which the Company is plaintiff and Mr Akerman is the defendant, were commenced in November 2015.

15. Initially the relief claimed on behalf of the Company included the reversal of the transfers of its shares in the two properties. That claim has not been pursued and the Company’s claim is now limited to a claim for compensation under statute (Corporations Act 2001 (Cth), s 1317H) or in equity.

16. The hearing took place before me in three stages. The first stage spanned four days in November last year. There were two further days of hearing in December. The parties then presented their closing submissions in April this year.

17. Ms Dar contends that the sale and transfer of the Company’s shares of the Miller Street properties, and the payment of the disputed director’s fees and legal bills, was contrary to the interests of the Company and a breach of Mr Akerman’s duties as a director. Mr Akerman disputes this. He also contends that, in effecting the transfers of the Company’s shares of the Miller Street properties in March 2010, he was only giving effect to agreements which had previously been reached. Mr Akerman contends that the Company was contractually bound to transfer the properties at the prices for which they were transferred. Accordingly, he could not be in breach of his duties by giving effect to the transactions.

18. Initially the only allegation on behalf of the Company was that Mr Akerman had breached his director’s duties. But as a result of amendments foreshadowed in the course of the November hearings, the additional point was taken that Mr Akerman lacked authority to act on the Company’s behalf.

19. Mr Akerman relied by way of defence on the doctrine of unanimous assent, among other things. His contention was that Ms Dar and he had agreed on the transactions with the result that any lack of authority on his part as director, and any question of breach of his duties, did not arise.

20. The Company contested this defence on various grounds. One was a technical one concerning the Company’s shareholding. One of the shares in the Company had been held by Mrs Marr as trustee for Mrs Akierman. In the ordinary course, this share should have been transferred out of Mrs Marr’s name as part of the realisation of Mrs Akierman’s estate. Mr Akerman took steps to have this done in February 2005. But in fact the transfer was not recorded in the Company’s share register until September 2011. The Company contended that, as a result, the doctrine of unanimous assent could not apply. At the relevant times Mrs Marr was a shareholder and even if (contrary to the Company’s contentions) Ms Dar had agreed to the transactions in question, Mrs Marr had not.

21. This provoked a cross-claim, filed in December 2018, under which Mr Akerman sought rectification of the Company’s share register so as to record the transfer out of Mrs Marr’s name as having occurred in February 2005. Mrs Marr, who was joined as a cross-defendant, did not appear or contest the relief. But the Company and Ms Dar did resist it. The cross-claim also sought relief under the Corporations Act, s 1322, validating any unauthorised transactions.

22. Mr Akerman also relied on a limitation defence to the claims for breach of fiduciary duty concerning the transfer of 9 Miller Street. On behalf of Ms Dar, a reply was filed alleging fraudulent concealment. Finally, should all other defences fail, Mr Akerman sought orders under Corporations Act, s 1317S and s 1318, exonerating him from liability for breach of duty.

23. At the end of the hearing in April, it became clear that the assessment of any compensation or damages to which the Company might be entitled was more complex than had first been appreciated, and would require further calculations, and possibly further evidence and submissions. The parties agreed that I should deal only with the liability issues as a matter of principle, and defer all questions of quantum.

Summary and analysis of evidence

Witnesses

24. Ms Dar was the only lay witness in the Company’s case. Two affidavits from her, one in chief and one in reply, were read. She was cross-examined and her credit was challenged.

25. Mr Akerman was the principal witness for the defence. Six affidavits from him were read. His cross-examination extended over two days. His credit too was challenged.

26. Evidence was also led in the defence case from Stephen Guthrie, who was the Company’s accountant from 2009 onwards. He was briefly cross-examined.

27. Evidence from the Marrs might have assisted in the resolution of some of the disputed factual issues in the case. But neither party called evidence from them. On the face of it, they were in neither party’s camp. Neither party suggested that any adverse inference should be drawn against the other in this regard. The lack of evidence from them is neutral.

28. Expert evidence was led from David Bryan Bird and Gregory Wiese. Mr Bird is a valuer who was called by the Company. He gave evidence about the value of the properties the subject of the proceedings. He was briefly cross-examined. Mr Wiese is an accountant who was retained for Mr Akerman. He presented calculations, on various different scenarios, of the damages claimed on the Company’s behalf. He was not cross-examined. In the light of the parties’ agreement to defer the assessment of quantum, it is not necessary to refer to the expert evidence any further in this judgment.

Ms Dar’s testimony

29. Ms Dar holds degrees in psychology and early childhood education. She has worked primarily as a pre-school teacher. She does not appear to have been a director of any of the Akierman family companies, or, so far as the evidence goes, any other companies. But she does seem to have participated from time to time in some of the Akierman family property ventures. She has also been involved in at least twenty property transactions in Australia and abroad on her own account.

30. The evidence makes it clear that Ms Dar strongly dislikes Mr Akerman. That dislike has been open since the rupture in their relationship in December 2009. But Ms Dar said in her evidence that she had never liked or trusted her brother even before that. It seems that she has always resented what she perceives as favouritism towards him by their parents.

31. Ms Dar has done very well out of the assets which were built up by her parents. Directly and indirectly she has already received more than $5 million from her mother’s estate. More than $7 million is held by the Company, of which (subject to payment of capital gains tax) she will receive half.

32. As already noted, Ms Dar makes no complaint about the sale of her own shares of the properties in question. No doubt that is because she recognises that she agreed to the prices struck at the time, and is bound by those agreements. For reasons which I give in more detail below, I am satisfied Ms Dar also agreed to the sale of the Company’s shares of the properties at prices which reflected the prices which she agreed to accept for her shares. Whether the Company is bound by Ms Dar’s agreements is, of course, another question; but on my findings, on a commercial level, Ms Dar was happy with the prices at the time.

33. The amount claimed in these proceedings for the allegedly wrongful sale of the Company’s shares in the properties is about $3.6 million, but half of any compensation which Mr Akerman might have to pay would, after deduction of costs, go back to him as a half shareholder in the Company. The potential benefit to Ms Dar from the proceedings is large in absolute terms, but it is not so imposing in the context of the family assets as a whole, or when compared with the unchallenged gains Mr Akerman has received from increases in the property market. Regrettably, I think that this litigation is motivated, at least in part, by jealousy and spite on Ms Dar’s part. I think that Ms Dar’s attitude towards her brother has probably coloured her evidence.

34. Of itself, this would be enough to make me cautious about accepting Ms Dar’s evidence, particularly of conversations which occurred many years before this litigation took place. But there is more. As will be seen, I have rejected Ms Dar’s evidence on a number of points. I thought her belated denials in cross-examination of matters she had not denied in her affidavit were particularly unconvincing. Overall, I approach her evidence with scepticism.

Mr Akerman’s testimony

35. Mr Akerman has practised as a solicitor since 1976. His practice has encompassed conveyancing (including the transactions which are the subject of these proceedings); commercial litigation, leasing disputes; personal injury litigation; professional negligence; and taxation matters.

36. Mr Akerman professed surprise at Ms Dar’s evidence that she had never liked or trusted him, even before December 2009. He said that he thought they had a warm and cordial relationship, and referred to apparently affectionate post cards and messages he had received from Ms Dar over the years. He did say however that she became colder towards him after he declined to get involved in a childcare venture she suggested to him in about March 2007. His evidence on this subject was not challenged and I accept it.

37. But it was clear that since December 2009, Ms Dar’s antipathy to Mr Akerman has been reciprocated by him. At the time Mr Akerman gave evidence in November 2018, his wife was gravely ill. Mr Akerman and Ms Dar were involved in a spat outside the court room, the details of which I will not go into. Mr Akerman’s resentment at having to answer the allegations his sister made against him, especially at such a time of tribulation, was plain for all to see.

38. As with Ms Dar, this was not the only difficulty for Mr Akerman’s credibility. As will be seen, there are a number of points where I disbelieve his testimony. At best, I think his enmity towards his sister led him to exaggerate his evidence. As I will shortly describe, the genuineness of some of the documents that he produced as evidence in the case is under a cloud. These are serious failings in any witness, but they are particularly serious for a solicitor. The most that can be said in his favour is that he must have been under great strain at the trial and in the end I do not accept all of the charges against him by Ms Dar. But I still lack confidence in his evidence and I approach it with caution.

Mr Akerman’s file notes

39. In evidence as part of Mr Akerman’s case were twenty-one file notes. These file notes were only produced at a late stage of the preparation of the affidavit evidence and their genuineness was questioned. This became a significant issue in the case.

40. Mr Akerman’s earliest affidavit account of the transactions, the subject of the proceedings, was contained in the affidavit which was sworn in early April 2015 for the purposes of the leave application. The affidavit made no mention of the disputed file notes.

41. Mr Akerman’s next affidavit was his main affidavit in answer to the claim in these proceedings. This affidavit was sworn in August 2017 in response to an affidavit made by Ms Dar in July the previous year. The affidavit recorded the shareholding of the family companies and a detailed account of the sale of the properties, but also made no mention of the disputed file notes.

42. The notes were first mentioned in an affidavit Mr Akerman swore at the end of October 2017. The affidavit annexed the notes and gave an account of how they had been prepared. Mr Akerman said that he drafted some file notes by hand and typed others. Where file notes had been handwritten, they were occasionally typed up by his employees and the original note discarded.

43. On Mr Akerman’s account, the files of his dealings with Mrs Akierman’s estate and the Company’s affairs had been dismantled. This was actually after he first received a solicitor’s letter on behalf of Ms Dar in December 2011. He said that there were or might be some remaining file notes but they could not be found despite a thorough search.

44. Naturally, when he gave evidence at the trial, Mr Akerman was pressed in cross-examination about why the notes had not been produced at an earlier stage of the proceedings, and in particular why he had not annexed them to his August 2017 affidavit. Mr Akerman said in response that he had provided copies of the documents to his solicitors, the implication being that they had decided not to include them. This was challenged by counsel for Ms Dar. That afternoon counsel foreshadowed calling evidence from Snezana Vojvodic and Cherrie Homer who were the solicitors acting for Mr Akerman at the time (he subsequently changed firms and was at the trial represented by a new firm).

45. The following day Mr Akerman altered his account. He said that he could not recall whether he had provided the notes to the solicitors or not. In cross-examination, counsel for Ms Dar returned to the topic and, at the outset of counsel’s questions, the following exchange took place:

Q.   Those file notes annexed or exhibited to your October 2017 affidavit are they inventions by you?

A.   Yes.

46. This evidence appeared to come as a surprise to those in the court room. Counsel for Ms Dar did not probe further. Instead, counsel pressed forward with questions concerning Mr Akerman’s provision of documents to his solicitors:

Q.   Is it the case that you did not give them to your solicitors prior to the preparation of your April 2015 affidavit?

A.   Sorry repeat that?

Q.   Is it the case that you did not give those file notes to your solicitors for the preparation of your April 2015 affidavit?

A.   The ones that are annexed to the affidavit?

Q.   The ones annexed to your October 2017 affidavit?

A.   I can't recall specifically what documents I gave them.  I have something in the order of 100 cartons of documents, numerous documents were‑‑

HIS HONOUR: I think you've answered the question.

Q.   As of today you have no recollection whether or not you gave the file notes annexed to your October 2017 affidavit to your legal advisors who prepared your April 2015 affidavit.  Is that correct?

A.   I have no recollection of providing the specific documents to my legal advisors.  I have a very distinct recollection of providing vast amounts of documents.  I can't tell you what each and every one of them were.

Q.   Do you have any recollection of providing the file notes annexed to your October 2017 affidavit to your legal advisors who prepared your April 2015 affidavit?

A.   No I don't have any recollection of providing those specific    documents.  Nor do I recall what the other documents were.

47. Mr Akerman was asked in re-examination about his agreement that the notes were an “invention”. He gave the following evidence:

Q.   Mr Akerman, you were asked earlier today whether the file notes annexed to your 31 October 2017 affidavit were inventions of yours.  What did you understand by the expression "inventions of yours"?

A.   Was I the author or creator of those documents.

48. Ms Vojvodic and Ms Homer were called later that day. Their evidence was that had the notes been provided to them they would have considered them important. This evidence was obviously correct, and they were not challenged on it.

49. Counsel for Ms Dar submitted that I should not be satisfied that the notes were contemporaneous. Counsel attacked the credibility of Mr Akerman’s evidence on the subject, especially his initial evidence that he had provided the documents to his former solicitors.

50. Counsel’s submissions had considerable force. I have no hesitation in rejecting Mr Akerman’s evidence about providing the notes to his solicitors. I accept counsel’s submission that Mr Akerman made up this evidence and later modified his position to say that he could not recall because it was obvious that what he initially said could not be sustained. This reflects very poorly on his credit.

51. Given their provenance the notes can only be treated with suspicion. But there are two factors which, to my mind, tend to qualify that suspicion.

52. First, the notes are not confined to the disputed conversations with Ms Dar. They also purport to record conversations with accountants and with Mr Marr. The notes of this type tend to be plausible and consistent with contemporaneous correspondence, and none of them was specifically challenged. Of course it would have been possible for Mr Akerman to have produced notes of such conversations after the event. But that would have been a very elaborate exercise; it is hard to see why Mr Akerman would have bothered to create notes dealing in detail with the matters that were peripheral to the litigation if the notes were only created to shore up his affidavit.

53. The second point is that the notes are not entirely self-serving. As will be seen, in some instances Mr Akerman gave oral accounts of the relevant conversations. Where this is the case, the notes and Mr Akerman’s affidavit agree reasonably well with each other. This suggests that the affidavit was prepared by reference to the notes or the notes were prepared by reference to the affidavit. But in some instances the note is less favourable to Mr Akerman than his affidavit account of the conversation.

54. It is easy to see how that could have happened if the notes were produced first and Mr Akerman had used them to prepare his affidavit, embroidering details which were not recorded in the notes. But it is difficult to see why, if the notes were created afterwards, Mr Akerman would have created a note which did not support his affidavit account. Counsel for the Company acknowledged the force of this, but observed that Mr Akerman could have made mistakes in producing the notes. While that is a possibility, I do not think it is a very likely explanation. It seems to me much more likely that the notes in fact existed and were used by Mr Akerman to prepare his affidavit.

55. What this point underlines is that the notes undoubtedly represent a recollection of Mr Akerman’s. Even if they were not contemporaneous, they would still be of some value as a later attempt by Mr Akerman to recollect and record what had transpired. Even so, the fact that they are typed means also that even if parts of them were produced contemporaneously, other material might have been introduced later. Because of the murky circumstances surrounding their provenance, I treat them with caution. I do not think that they can automatically be accepted as having been contemporaneous, or all contemporaneous. They need to be analysed document-by-document for reliability. But with those limitations, they are still significant evidence in the case.

Chronology of key events

56. Incorporation of the Company and issue of shares: The Company was incorporated in June 1972. There were two subscribers to the Memorandum of Association, Henry Akierman and Jana Akierman, with one share each.

57. No contrary provision being made in the Memorandum of Association, the Company’s Articles of Association adopted the regulations set out in Table A in the Companies Act1961 (NSW), Schedule 4. It appears that the regulations were later supplemented by two special resolutions in December 1972 and a further special resolution in May 1974. The special resolutions of December 1972 are not in evidence.

58. The Company’s share register shows that the shares issued to Henry and Jana Akierman on incorporation were preference shares. In October 1972 a further share was issued to Mrs Marr. This was an ordinary share. At the same time Mrs Marr executed a declaration of trust over that share in favour of Jana Akierman. The declaration of trust continued:

AND I HEREBY COVENANT AND AGREE that at any time here-after if called upon so to do by the said JANE AKIERMAN I will execute all such documents and do all such things as shall be necessary to enable the said Share to be transferred on the books of the Company hereunder mentioned into the name of the said JANE AKIERMAN or her nominee AND I HEREBY FURTHER ACKNOWLEDGE that the purchase money for the said Share was supplied by the said JANE AKIERMAN and that I have this day executed a transfer of the said Share which I agree the said JANE AKIERMAN shall be at liberty to complete in her favour or in favour of any other person or persons and at any time hereafter to lodge for registration with the Company the said transfer AND I HEREBY REQUEST the Company hereunder mentioned and the Directors thereof to register the said transfer as and when presented to it for registration …

59. Two months later, in December 1972, there was a further share issue. The Company issued nine more ordinary shares to Jana Akierman, taking the number of issued ordinary shares to ten. The Company also issued 7,998 more preference shares to Henry Akierman, taking the number of issued preference shares to 8,000.

60. In May 1974 a special resolution was passed altering the Company’s share structure. The articles were amended to create three classes of share: ordinary shares; cumulative preference shares class A (which represented the 8,000 cumulative preference shares then on issue); and cumulative preference shares class B. On the following day, the Company issued 100,000 class B preference shares to Henry Akierman.

61. Initial officers of the Company: The Table A regulations provided in conventional form for the appointment, removal and remuneration of directors; the powers and duties of directors; proceedings of directors (regulations 79 to 90); and the appointment, remuneration and powers of a managing director (regulations 91 to 93). Regulation 63 provided that the numbers of the directors and the names of the first directors should be determined in writing by the subscribers of the Memorandum of Association or a majority of them. Regulation 67 provided that the members of the Company might, by ordinary resolution, increase or reduce the number of directors.

62. The Company’s register of directors, managers and secretaries is in evidence. It records that Henry and Jana Akierman were appointed as directors of the Company on incorporation in June 1972. It also shows Henry Akierman as having been appointed as manager and Jana Akierman as having been appointed as secretary on the same date.

63. Death of Henry Akierman and management of the Company thereafter: In June 1974, Henry Akierman died. In evidence are two minutes of directors’ meetings held following his death. The first was held on 10 June and the second on 29 June.

64. The 10 June minute recorded Jana Akierman and Dr Eric Resler as being present (Dr Resler was apparently the Company’s accountant, but was recorded as attending as secretary) and Steven Akerman attending by invitation. The minute recorded the death of Henry Akierman on 2 June and a resolution that Steven Akerman be appointed to the board.

65. The 29 June minute recorded Jana Akierman and Steven Akerman as being present with Jana Akierman as chairman. It recorded the following resolution:

IT WAS RESOLVED to accept the resignation of JANE AKIERMAN as a Working Director of the Company and to appoint as from the date hereof STEVEN AKIERMAN at a Salary to be determined in the subsequent year.

66. The minute went on to provide for the payment of a gratuity to Jana Akierman in recognition of Henry Akierman having “died whilst in the service of this Company” and also for her to be paid a retirement allowance on retirement as a Working Director of the Company. Both the gratuity and the retirement allowance were largely paid out of a superannuation fund which had apparently been established by the Company.

67. The Table A regulations do not provide for a person to be appointed as a “Working Director” of the Company. Table A regulation 91 provides in the usual way for one of the directors to be appointed as Managing Director, but this cannot be equated with “Working Director”, if only because there could only be one Managing Director and it appears that both Henry Akierman and Jana Akierman had been Working Directors. The office of Working Director was probably created in the additional regulations adopted as a result of the December 1972 special resolutions, which are not in evidence. Presumably, designation as a Working Director was a means of providing superannuation benefits, and perhaps other remuneration, to directors who were involved in managing the Company’s business.

68. Henry Akierman’s shares in the Company were inherited by Jana Akierman. After June 1974, Mrs Akierman and Mr Akerman continued as directors of the Company until Mrs Akierman’s death in September 2001. No further directors were appointed and no change was made to the articles of Association.

69. Property holdings of the Company: Before Mrs Akierman’s death, the three properties in Miller Street Bondi had been (along with a unit block in Liverpool Street Dover Heights) the subject of a partnership between Mrs Akierman; the Company; Mr Marr and Mrs Marr. The partnership was known as “Miller Street Partnership”. Each partner had a one-quarter share. The properties were registered in the names of the partners accordingly.

70. There was another partnership known as “A&M Leasing Partnership” which did not own real estate, but acted as a property management agent for some of the properties.

71. The Company also owned a block consisting of two flats in Murriverie Road Bondi and a half share in a property consisting of twelve flats and two shops in Gardeners Road, Kingsford. The other half of the Kingsford property was held by Wilfers Developments Pty Ltd, a company controlled by the Marrs.

72. In addition, Mrs Akierman held a fifty per cent share in two other companies, Akmar Investments Pty Ltd and Akmar Developments Pty Ltd. The other fifty per cent was held by the Marrs. Akmar Investments owned a property in Fletcher Street, Bondi. Akmar Developments did not own property, but acted as a management entity.

73. At the time of Mrs Akierman’s death, the Company’s accountants were a firm known as Selingers Chartered Accountants. They were responsible for preparing the accounts of the partnerships and of the companies Akierman Holdings, Akmar Investments and Akmar Developments. Selingers did not act for Mr Akerman or Ms Dar. Mr Akerman had his own accountants who looked after his personal affairs. So did Ms Dar.

74. Administration of Mrs Akierman’s estate: Mrs Akierman’s will had been made in 1976. The will appointed Mr Akerman and Ms Dar as Mrs Akierman’s executors. Apart from legacies of $5,000 to three of her nephews and nieces (which Mr Akerman and Ms Dar voluntarily increased to $10,000), the estate was divided equally between Mr Akerman and Ms Dar. Mr Akerman said in his affidavit that he and Ms Dar worked closely together as executors. They jointly decided on the funeral arrangements and the erection of a gravestone and went through Mrs Akierman’s personal effects, donating some to charity and dividing the others. Ms Dar did not dispute this evidence.

75. Mr Akerman said in his affidavit that following Mrs Akierman’s death he had a conversation with Ms Dar about what to do with the partnerships and the companies. He said that Ms Dar proposed that financially they go their separate ways and sell the assets. Mr Akerman said that he agreed and obtained the Marrs’ agreement by speaking to Mr Marr. Ms Dar said she could not recall this conversation but did not dispute that she wanted to go her separate way financially.

76. In early 2002 Ms Dar began seeking appraisals for the Miller Street, Fletcher Street and Dover Heights properties. But for reasons which are not fully explained in the evidence, the administration of the estate was protracted and ultimately took more than three years. During this period the properties remained unsold, and indeed they remained registered in Mrs Akierman’s name. So did the shares in the Company, Akmar Investments and Akmar Developments which had been registered in her name.

77. Strictly speaking, the effect of Mrs Akierman’s death had been to dissolve the Miller Street Partnership. But the Partnership was treated as continuing, with Mr Akerman and Ms Dar being substituted as equal (one-eighth) holders of Mrs Akierman’s interest. The properties were managed and the accounts prepared on this basis.

78. The sale of the properties would of course leave the companies with cash representing their shares of the proceeds. It appears to have been contemplated that the companies would be liquidated and Mrs Akierman’s shares in them distributed to Mr Akerman and Ms Dar. A note of Mr Akerman’s dated November 2004 records a conference between Mr Selinger, Mr Akerman and Ms Dar at which Mr Selinger advised that this was the only tax-effective course.

79. Mrs Akierman’s death left Mr Akerman as the only director of the Company. Legislation in 1995 (First Corporate Law Simplification Act 1995, sch 4 item 25; see now Corporations Act, s 201A) had permitted single-director companies. But this legislation did not automatically allow existing companies whose articles required that they have at least two directors (as the Company’s did) to operate as single-director companies. For the Company to take advantage of this it would have needed a change to its articles. No-one seems to have noticed this. Instead, Mr Akerman simply carried on as if he were the director of a single-director company.

80. Transfer of estate’s share of partnership properties to Mr Akerman and Ms Dar: The transmission of Mrs Akierman’s personal shares in the partnership properties to Mr Akerman and Ms Dar was eventually effected by registration in December 2004. The result so far as properties in which the Company had an interest, was as follows:

Property	Dar interest	Akerman interest	Company interest	Marrs’ interest
5 Miller St Bondi	12.5%	12.5%	25%	50%
7 Miller St Bondi	12.5%	12.5%	25%	50%
9 Miller St Bondi	12.5%	12.5%	25%	50%
121 Murriverie Rd North Bondi	-	-	100%	-
65 Liverpool St Dover Heights	12.5%	12.5%	25%	50%
30 Gardeners Rd, Kingsford	-	-	50%	50%

81. Transfer of estate’s shares in companies to Mr Akerman and Ms Dar: Mrs Akierman’s shares in Akmar Investments and Akmar Developments were to pass to Mr Akerman and Ms Dar, leaving them each with one quarter of the shares in each company (the other shares were, it will be recalled, held by the Marrs). This was straightforward. Mr Akerman and Ms Dar were also to receive Mrs Akierman’s shares in the Company. This proved to be somewhat more complicated.

81. As already noted, Mrs Akierman was at her death the holder of nine of the ten ordinary shares issued by the Company (the tenth share being held by her sister, Mrs Marr, on trust for her in accordance with the 1972 declaration of trust). Mrs Akierman also held all of the 8,000 A class preference shares and the 100,000 B class preference shares.

82. The original list of assets attached to the application for probate of Mrs Akierman’s will showed Mrs Akierman as holding nine ordinary shares in the Company. In August 2004 Mr Akerman wrote to Selingers pointing out the omission and stating it would be necessary to obtain an amended grant of probate to reflect the additional share held for her by Mrs Marr. One of Mr Akerman’s notes of his November 2004 conference with Mr Selinger and Ms Dar (see at [78]) noted that the share had to be transferred from Mrs Marr to the estate.

83. Share transfer forms were drawn up, signed and dated 10 December 2004. On that day or shortly afterwards the transfers were stamped. Fresh share certificates were also issued, bearing the date 10 December, to Mr Akerman and Ms Dar. There was no difficulty with the preference shares where Mrs Akierman had previously been registered as the holder of all of the shares which would be transferred. But there was a complication with the ordinary shares. At this stage, the share owned by Mrs Marr remained in her name, and the share register showed Mrs Akierman as the holder of only nine of the ordinary shares.

84. The transfer forms for the ordinary shares were for a total of ten shares, five for Mr Akerman and five for Ms Dar. But consistently with the then state of the Company’s share register, the fresh share certificates which were issued covered only the nine shares registered in Mrs Akierman’s name. Five were allocated to Mr Akerman and four to Ms Dar.

85. In February 2005 Mr Akerman took steps to formalise the transfer of Mrs Marr’s share. I analyse the evidence in more detail below. For present purposes it is enough to say that Mrs Marr had previously (in accordance with her 1972 declaration of trust) signed a transfer form in blank for the share. The form was completed, apparently by Mr Akerman, and dated 10 February. It was stamped on the same day.

86. By letter dated 25 February 2005 Mr Akerman wrote to Selingers enclosing completed and stamped transfers for the shares in the Company, Akmar Investments and Akmar Developments. For the ordinary shares in the Company, Mr Akerman included the two transfers dated 10 December 2004 (which, it will be recalled, were for 5 shares each) and the transfer of Mrs Marr’s share. He said:

Please note that this share is included in the Transfers of the five shares each to Steven Akerman and Gillian Dar set out above. That is, the 9 shares held by the deceased together with the one share now transferred to the estate by Emilia Markowic have been transferred equally to Steven Akerman and Gillian Dar.

88. Mr Akerman’s letter ended:

Please confirm that the company records have been amended and provide us with written confirmation of all share holdings in each company.

We would be obliged if you would provide us with your response as soon as possible.

89. There is no written confirmation or response from Selingers in evidence. Nevertheless, a few weeks later, on 11 March, Mr Akerman wrote to Ms Dar concerning the status of the estate. The letter stated that specified numbers of shares in the Company, Akmar Investments and Akmar Developments “have been transferred to you” and stated that copies of the transfers were enclosed. So far as the Company was concerned, the share holdings specified were 5 ordinary shares, 4,000 A class preference shares and 50,000 B class preference shares.

90. In evidence is a copy of an ASIC form 484 signed by Mr Akerman notifying the new shareholdings in the Company. The form identified Selingers as the lodging party and was dated 29 March 2005. It recorded the transfer of the nine shares registered in Mrs Akierman’s name to Mr Akerman (as to five) and Ms Dar (as to four) as having occurred on 10 December 2004 and their names as having been entered on the register of the Company on the same date. It recorded the transfer of Mrs Marr’s share to Ms Dar as having occurred, and Ms Dar’s name having been entered on the register, on 29 March 2005. Also in evidence is a share certificate for the share in Ms Dar’s name bearing the same date.

91. Presumably the form was signed by Mr Akerman on the basis that Selingers would attend to its lodgement with ASIC. In fact, apparently due to an oversight by Selingers, the form was not lodged and the Company’s share register was not altered. This does not seem to have been discovered until September 2011 (see [136]-[137] below).

92. Attempt to sell Miller Street properties and agreement concerning 9 Miller Street: In early 2005, Mr Akerman, Ms Dar and the Marrs agreed to list the Miller Street and the Dover Heights properties for sale. Ms Dar sounded out several real estate agents. Eventually she and Mr Akerman settled on Ray White Real Estate.

93. The agency agreement with Ray White for the Miller Street properties is in evidence. The agreement was completed in the names of all four owners of the Miller Street properties (the Marrs, Mr Akerman, Ms Dar and the Company). It was signed by Mr Akerman, Ms Dar and the Marrs. The agreement was dated April 2005 and provided for an exclusive agency for the period until June. The solicitor for the agreement was Sowden Akerman.

94. Ray White undertook a marketing campaign which culminated in an auction on 18 May 2005. Numbers 5 and 7 were passed in. The highest bid for number 9 was $5 million. The bidder made it clear that the amount would not be increased and number 9 was also passed in.

95. Following the auction there was a meeting at the Marrs’ house attended by the Marrs; Mr Akerman and his wife Susan; Ms Dar and her daughter Hannah. What happened at that meeting and immediately afterwards is the subject of dispute but it is common ground that agreement was reached for Mr Akerman to purchase at least the Marrs’ and Ms Dar’s shares of 9 Miller Street for $3.125 million (62.5% of $5 million). Mr Akerman claims, and Ms Dar disputes, that it was also agreed that Mr Akerman would buy the Company’s share as well, for $1.25 million (25% of $5 million).

96. It seems that the conveyancing for the sale was complicated by the fact that the Marrs held their undivided half share of the property as tenants in common, but had been issued with separate share certificates. A file note from Mr Akerman’s office shows that within two days of the agreement, on 20 May, Mr Akerman asked a member of his staff to get advice from the Land Titles Office on how to effect the registration of the transfer of the Marrs’ interest.

97. It is clear that the parties always contemplated that formal contracts would be drawn up to reflect the sales. But they did not want to do so immediately, so as to avoid having to pay commission to their agent. Mr Akerman also wanted until February the following year to obtain the necessary finance, to which Ms Dar and the Marrs agreed.

98. In evidence is a one page document purporting to be an agreement between Mr Akerman and the Company (signed by Mr Akerman purportedly on the Company’s behalf) for the sale of the Company’s share of 9 Miller Street for $1.25 million. The document is dated 1 July 2005. There are questions about its genuineness, which I deal with as part of the factual issues below.

99. Formal contracts and transfers were later drawn up and signed to effect the sale of the Marrs’, Ms Dar’s and the Company’s shares of 9 Miller Street. I deal with this in more detail below. The contracts were stamped and the transfers lodged, in the case of the Marrs, in February 2006; in the case of Ms Dar, in June 2007; and in the case of the Company, in March 2010. But Mr Akerman claimed the contracts and transfers were actually drawn up, and sent to the different vendors (in the case of the Company, a copy being sent to Ms Dar) in about July 2005. I deal with this as part of resolving the disputed issues of fact below.

100. Mr Akerman has second thoughts about winding up the Company: As already noted, Selingers’ advice, at least as at November 2004, appears to have been that the Company, along with Akmar Investments and Akmar Developments, should be wound up once the properties in its name had been sold. But it seems that Mr Akerman thought that it would, or at least might, be better for him to buy Ms Dar’s shares in the Company instead. Presumably he was hoping to avoid stamp duty on the transfer of the Company’s shares of the properties it owned.

101. The evidence does not reveal when Mr Akerman first came up with this idea. But it was either in or before December 2005 when Mr Akerman had two meetings with Mr Ramesh Chandra of Selingers. Among the matters referred to was the sale of 9 Miller Street. On 23 December Mr Akerman wrote to Mr Chandra stating that he wished, subject to tax and stamp duty questions, to purchase Ms Dar’s interest in the Company and thereby acquire the Murriverie Road property and the Company’s share of 9 Miller Street. The Company’s shares of 5 and 7 Miller Street and of the Kingsford property were not mentioned; it seems the plan at that stage was that they would be sold. The Dover Heights property had already been sold to an external buyer in September 2005, following an auction in June.

102. Transfer of the Marrs’ and Ms Dar’s shares of 9 Miller Street: In February 2006, Mr Akerman moved to complete his purchase of the Marrs’ and Ms Dar’s shares of 9 Miller Street. Receipts in evidence record that the purchase monies were paid on 4 February. From that point, Mr Akerman assumed control of the property. He received the income and paid for the outgoings. He also undertook extensive renovations (at his own expense). Ultimately these spanned the next eleven years.

103. There was a delay between the payment of the purchase monies and the registration of the transfers. In April 2006, Mr Akerman wrote to a valuer seeking a valuation of the Marrs’ share of the property for stamp duty purposes. Stamp duty was paid on the Marrs’ contracts, apparently, on 16 May (the date is hard to read). The contracts were dated, apparently in Mr Akerman’s handwriting, 4 February. The Marrs’ transfers were lodged on 19 May.

104. The transfer of Ms Dar’s share was delayed even further. Mr Akerman explained this as an oversight by his office. Ms Dar’s contract was not stamped, and her transfer was not registered, until September 2007. The contract bears the handwritten date, apparently inserted by Mr Akerman, of 29 June 2007. How this date came to be inserted was not explained in the evidence. It may be that the date was selected so as to create the impression, for stamp duty purposes, that less than three months had elapsed between the signing of the contract and its lodgement for registration on 25 September.

105. Continued consideration of purchase of Ms Dar’s shares in the Company by Mr Akerman: Meanwhile, in March 2006 the idea of Mr Akerman buying Ms Dar’s shares in the Company was taken up with another accountant at Selingers, Mr Roger Ellinson. According to Mr Akerman’s file notes there was a meeting between himself, Ms Dar and Mr Ellinson, after which Mr Akerman and Ms Dar agreed to look into it. Mr Akerman wrote to Mr Ellinson later in the month asking whether there were tax benefits from purchasing the shares in the Company. He also asked whether the tax liabilities on liquidation could be reduced or delayed while still obtaining access to the moneys in the meantime.

106. Mr Ellinson responded by suggesting a meeting, but also asked for Selingers’ outstanding fees to be paid in the meantime. No fees appear to have been paid, and no meeting appears to have taken place. In August, Ms Dar wrote saying that she and Mr Akerman had decided to wind up all the companies. But it seems that she had misunderstood Mr Akerman; as subsequent correspondence shows, he was still interested in the idea of buying her shares in the Company. Mr Ellinson’s response to Ms Dar was that there should be a meeting and the outstanding fees should be paid.

107. Further attempt to sell 5 and 7 Miller Street and agreements of 28 February 2007: Meanwhile, the Murriverie Road and Fletcher Street properties were sold to external buyers; the Murriverie Road sale being completed in December 2006 and the Fletcher Street sale being completed in February 2007. In late 2006 or early 2007 it was decided between Mr Akerman, Ms Dar and the Marrs to make another attempt to sell 5 and 7 Miller Street. The parties signed an agency agreement with Laing+Simmons Double Bay in January 2007. That agreement provided for an exclusive agency period commencing on 19 January and ending on 27 March. Sowden Akerman was nominated as the vendors’ solicitor.

108. On 28 February Mr Akerman and Ms Dar discussed the sale of 5 and 7 Miller Street. There is some dispute about the detail of what was said, but the upshot was that they agreed that the properties should be withdrawn from sale and the shares of Ms Dar, the Marrs and the Company sold to Mr Akerman instead. The Marrs (who were consulted by telephone) also agreed. For the purposes of the sale, the value of the properties as a whole was agreed at $1.508 million. The Marrs were to receive half of this amount ($754,000); the Company one quarter ($377,000) and Ms Dar one eighth ($188,500).

109. On the same day, two one page agreements concerning 5 and 7 Miller Street were drawn up and signed by Mr Akerman and Ms Dar. One provided for the sale of Ms Dar’s share of the properties to Mr Akerman. The other concerned the sale of the Company’s share. I refer to these agreements, and the evidence about the oral discussion which preceded them, in more detail when dealing with the factual issues in the case, below. On the following day, 1 March, Mr Akerman wrote to the agent with instructions that the properties were to be withdrawn from sale.

110. The one page agreements concerning Ms Dar’s and the Company’s shares provided that formal contracts would be entered into once the exclusive agency period had expired, and completion would occur six weeks after that. The same arrangement seems to have been agreed by Mr Akerman with the Marrs. But payment was not necessarily to be made on completion. Instead, it was agreed between Mr Akerman and the Marrs that he would pay them on the liquidation of Akmar Investments. The one page agreements concerning Ms Dar’s share and the Company’s share provided that Mr Akerman could defer payment for those shares until the liquidation of the Company.

111. Subsequently, a contract and transfer was prepared for each property reflecting the sale to Mr Akerman of seven-eighths of the property (being the combined shares of the Marrs, Ms Dar and the Company) at the agreed price. The contracts and transfers were signed by the Marrs, Ms Dar and Mr Akerman (for the Company) as vendor. They were eventually stamped, and the transfers lodged for registration, in March 2010 (see below). There is a dispute about when they were drawn up and signed. I deal with this dispute when considering the factual issues below.

112. Unlike 9 Miller Street, Mr Akerman does not seem to have taken control of the properties on his own account. Rent received from them continued to be deposited into the A&M Leasing Partnership account until March 2010 when title to the properties was transferred.

113. Cohen & Krass replace Selingers as the accountants for the companies and partnerships: There is no evidence of a meeting taking place (or of Selingers’ fees being paid) after August 2006. It seems that both Mr Akerman and Ms Dar had become dissatisfied with Selingers. In March 2007, presumably with Mr Marr’s agreement, the retainer for the companies and trusts was transferred to another accountant, Mr Gary Marx. His firm was called Cohen & Krass.

114. Payment of Ms Dar and supplementary agreement concerning deferred settlement payments: Mr Akerman apparently decided to pay Ms Dar for her share of numbers 5 and 7, rather than waiting for the winding up of the Company. There is no direct evidence to fix the date of payment, but it seems to have occurred by mid-2007.

115. The one page agreements for the sale of the Company’s shares of the Miller Street properties had provided that if Mr Akerman elected to defer payment until the winding up of the Company, he would pay interest at the bill rate paid by the Commonwealth Bank of Australia on the Company’s deposits. According to Mr Akerman, in or around late July 2007 he and Ms Dar agreed to amend this arrangement so as to provide that Mr Akerman would pay the greater of the CBA deposit rate and the net income received from the properties. In evidence is a one page written agreement, described as a supplementary agreement, to this effect. The document was signed by Mr Akerman on his own behalf and also purportedly on behalf of the Company. It bears the date 1 August 2007.

116. Ms Dar had of course signed the earlier one page agreement concerning 5 and 7 Miller Street. But, as already noted, her evidence was that she had never agreed to the original one page agreement concerning 9 Miller Street. She also denied that she had agreed to the terms recorded in the supplementary agreement.

117. ADP Prosperity appointed as accountant for the companies and the partnerships: Meanwhile, Mr Akerman had become dissatisfied with Cohen & Krass’ performance as the accountants for the companies and the partnerships. According to a note of Mr Akerman’s dated August 2007, Ms Dar and Mr Marr were also dissatisfied. Mr Marr canvassed the possibility of his own accountant, Mr Ross Phillips, doing the work. The note records that Mr Akerman thought he would probably go along with this but Ms Dar’s approval would be needed.

118. Eventually, in June 2008, Mr Akerman met Mr Phillips to discuss his firm, ADP Prosperity, taking over the accounting work for the companies and the partnerships. A few weeks later, ADP Prosperity was formally retained.

119. In November 2008 the necessary resolution was passed to wind up Akmar Investments. Mr Marr and Mr Akerman were appointed as the liquidators. But little other progress seems to have been made in the months after July. In January 2009 Mr Akerman wrote to Mr Phillips to complain. Mr Akerman also stated that since June 2008 he had been waiting for advice on the most tax-effective way to realise the Company’s property holdings. He said that as a result the Kingsford property and all other assets remained “in limbo”.

120. By May 2009 nothing further seems to have happened and Mr Akerman met with Mr Marr to discuss the delays. His file note of that meeting records Mr Marr’s agreement that they terminate Mr Phillip’s retainer. Ms Dar appears to have held the same views. But the correspondence between Mr Phillips and Mr Akerman continued on into September.

121. Mr Akerman briefs another accountant: At the end of September 2009 Mr Guthrie became involved for the first time. He contacted Mr Akerman to advise that he had newly been appointed as a director of ADP (there is no evidence of any further involvement by Mr Phillips and it seems that Mr Guthrie had taken over the account).

122. Mr Guthrie sought a meeting to discuss the work which Mr Phillips had been asked to do, and Mr Akerman’s concerns about the liquidation of Akmar Investments. He also sought payment of ADP’s outstanding fees, which totalled $39,000.

123. About ten days later, Mr Akerman responded. He enclosed copies of his correspondence with Mr Phillips about the liquidation and the need to obtain advice on the way in which to dispose of the remaining assets. On the latter question he added:

As to Akierman Holdings Pty Ltd, Ross Phillips was informed at our first meeting in June 2008 that the relevant parties had agreed to terms pertaining to the purchase/sale of specified properties. In the absence of an advice from Ross Phillips those transactions could not be completed. If, as I consider it likely, one or more of the parties renege on the agreement on the grounds that they were not completed within a reasonable time, your firm will be held responsible for the loss incurred which we anticipate will be substantial. In that event, the quantum of your claim for fees will pale into insignificance.

124. In his reply, Mr Guthrie stated that he was in a position to provide the necessary advice concerning the realisation of the Company’s assets, but would need a meeting to discuss Mr Akerman’s plans. He also sought $16,000 in fees be paid in advance of providing the advice, which he said related to other work and was not in dispute.

125. Mr Akerman did not want to proceed in this way. Instead he wanted to obtain the assistance of a new tax accountant, Ms Margaret Gosper. In November 2009 Mr Akerman wrote to Ms Gosper, enclosing a summary of the “Akerman Group” financial affairs. His letter stated:

Jana held all shares in Akierman Holdings P/L which have now been transferred to Steven and Gillian equally.

126. One of Mr Akerman’s file notes records a conversation between Mr Akerman and Ms Gosper on 2 December. The note reads:

She strongly advises against buying Gillian’s shares. That will only result in postponing paying the tax. Tax will have to be paid at some stage. Government can change the rules at any time and increase amount of tax payable. She has seen many serious fights within families over this kind of issue especially how much tax the vendor of the shares should allow when working out the purchase price for the shares. She says to sell off Kingsford, wind up all companies, finalise sales and transfers of Miller St properties, pay all tax assessed. That way everyone can move along with their lives.

127. Breakdown in relationship between Mr Akerman and Ms Dar: Later on 2 December Mr Akerman and Ms Dar spoke. One of Mr Akerman’s file notes purports to be a record of the conversation, and its accuracy was not disputed. According to the note, he reported on Ms Gosper’s advice, saying that the liquidation of Akmar Investments would be completed soon, he would pay out the Marrs and this would leave only the Company to be paid. He said that he wanted to complete the transfers, and she was content with that. It would then be necessary to sell the Kingsford property.

128. At this point, according to the note, Ms Dar referred to Mr Guthrie’s reply to Mr Akerman, and accused him of being the cause of all the delay. The note records her saying “I have a theory why you have done this but I hope I am wrong.” Mr Akerman denied that the delay was his fault, and the conversation descended into recrimination. Mr Akerman said he had heard that Ms Dar was saying he had engaged in all sorts of illegal or criminal conduct towards herself, the Marrs and the companies, and she should not repeat those statements.

129. The conversation ended on this note and marked the final rupture in the relationship between Mr Akerman and Ms Dar. Thereafter they communicated only in writing or in the presence of accountants or lawyers.

130. Mr Guthrie takes over as accountant: Although Mr Akerman wished to terminate ADP’s retainer, that did not happen. Mr Guthrie remained as the accountant for the companies and partnerships, in which capacity he dealt with both Mr Akerman and Ms Dar separately.

131. Completion of purchases of Miller Street properties: In March 2010 Mr Akerman moved to complete the transfer of the remaining shares in the Miller Street properties. These were the seven-eighths shares of numbers 5 and 7 (representing the Marrs’, Ms Dar’s and the Company’s shares) and the Company’s one-quarter share of number 9. The contracts for numbers 5 and 7 were stamped on 17 March, and the contract for number 9 was stamped on 19 March. The transfers appear to have been lodged for registration on 19 March.

132. Although stamped in March, the contract bore earlier dates which had been inserted by hand. The contract for numbers 5 and 7 were dated 17 December 2009 and 4 January 2010 respectively. The contract for number 9 was dated 19 January. As already noted, Mr Akerman said that the contracts and transfers had in fact been prepared and signed much earlier, and I deal with this below.

133. The Marrs appear to have been paid out for their share of 5 and 7 Miller Street at around this time. The A&M Leasing Partnership was dissolved. But no payment was made by Mr Akerman to the Company for its share of the Miller Street properties. Of course, the winding up of the Company had not yet been put in train, so on the terms of the one page agreements, Mr Akerman was entitled to continue to defer payment.

134. Correspondence up until May, which I refer to in more detail below, shows that both Mr Guthrie and Ms Dar thought that the Company still held one quarter of 5 and 7 Miller Street. It was not clear from the evidence when they learned of the sale.

135. The winding up of Akmar Investments was completed, and it was de-registered, by late October 2010. Akmar Developments had also been put into liquidation and its winding up was completed in June. But this still left the Company, which still owned the Kingsford property. Mr Akerman and Ms Dar could not agree about the sale of the property or the liquidation of the Company. The debate (conducted through hostile correspondence between Mr Akerman and Ms Dar, and occasional communications with Mr Guthrie) dragged on inconclusively.

136. Registration of transfer of shares in the Company: In September 2011 the Company’s share register was belatedly updated by ADP so as to record the transfer of Mrs Akierman’s and Mrs Marr’s shares in the Company to Mr Akerman and Ms Dar. The transfer date was shown as 20 September. At the same time, a form 484 recording the transfers was lodged with ASIC. The form also showed the transfer as having been effected on 20 September.

137. Presumably this happened as a result of the discovery that the earlier instructions to Selingers had not been acted upon and the earlier form 484 had not been registered. But there was no direct evidence of this, and no explanation for why the transfer was not recorded as happening on 10 February 2005, the date of the instructions to Selingers.

138. Ms Dar retains lawyers: In early December 2011, Mr Adam Stack, acting for Ms Dar, wrote a solicitor’s letter to Mr Akerman. The letter stated that Ms Dar was not consulted about the transfer of the Company’s shares in the Miller Street properties, and requested copies of the agreements, transfers and further documents recording the transactions, in addition to similar documents for the Murriverie Road and Kingsford properties. In response, Mr Akerman purported, as sole director of the Company, to retain himself (as Sowden Akerman) to represent the Company and briefed Mr Michael Cashion SC. Mr Akerman then replied to Mr Stack denying any wrongdoing and the debate continued.

139. Payment to the Company concerning Miller Street properties: In April 2013 Mr Akerman paid the sum of $2.2 million to the Company. This amount represented payment for the Company’s shares in the Miller Street properties in accordance with the one page agreements and formal contracts, together with rental income for 9 Miller Street for the years 2007 to 2010, and $382,000 for interest.

140. Disputed director’s fees: The parties agree that in the financial year ended 30 June 2013 the Company paid $180,000 to Mr Akerman by way of director’s fees, together with a superannuation contribution on account of those fees of $16,200. Of the $180,000, the amount of $123,000 was paid in April as part of a round-robin of cheques which in effect operated as a set-off against the $2.2 million payment by Mr Akerman to the Company. The evidence does not identify when the balance was paid.

141. The basis for these payments was a purported resolution of the Company dated 1 March 2013 and signed by Mr Akerman as director. It stated:

RESOLUTION OF SOLE DIRECTOR OF

AKIERMAN HOLDINGS PTY LTD

A.C.N 001 021 754

It was RESOLVED to pay Steven Akerman, the managing director of the company, an annual salary/fee of $30,000.00 plus the minimum compulsory superannuation guarantee contribution as remuneration for carrying out the duties of the managing director.

The salary/fee is to be paid for each year from 1 July 2001.

The managing director may, in his discretion, resolve to pay the salary/fee for the previous years by a single payment or instalment payments.

142. Disputed legal fees: In evidence are fee notes issued by Mr Cashion for advising on the response to Mr Stack’s correspondence from early 2012, which total $15,000. It is agreed that these fees were paid by the Company, apparently in the year ended 30 June 2012.

143. The other disputed payment of legal fees was made in April, also as part of the round-robin of cheques associated with the $2.2 million payment. It was a payment to Sowden Akerman of $69,300. The payment was supported by a one page Sowden Akerman invoice which referred to work on the proposed liquidation of the Company, the proposed sale of the Kingsford property, and responding to “various claims by G Dar”.

Factual issues

144. In the rest of this section of the judgment, I refer to the evidence on some of the key factual aspects of the case in more detail. In doing so, I resolve the factual issues in dispute between the parties.

Payment of Director’s fees

145. In evidence are extracts from the Company’s financial accounts from June 1980 to June 1991. The accounts record annual payments to Mrs Akierman described as “director’s fees” and to Ms Dar described in earlier years as “director’s fees” and later years “management fees”. Also recorded are two payments to Mr Akerman in 1983 and 1985, described as “director’s fees”.

146. On Mr Akerman’s account, after Mrs Akierman’s death in 2001 and several times in the period up to 2009, he proposed to Ms Dar that he be paid a director’s fee for time spent on Company affairs, and Ms Dar expressed no objection. According to Mr Akerman, this conversation followed an earlier conversation with Mrs Akierman before her death, in which she agreed that the Company would compensate him for past and future work once its financial position improved.

147. Mr Akerman’s version of the alleged conversation with Ms Dar was:

Me:   I am spending quote a lot of time on company matters such as dealing with the accountants regarding the loan accounts and tax issues, managing the company’s investments, dealing with everything relating to realising the assets in addition to the usual requirements of companies. I propose to pay a director’s fee to me for my time since 2001 and ongoing. I will speak with the accountants to determine a reasonable fee.

Gillian:   I have no problem with that.

148. In her affidavit evidence, Ms Dar denied that she was informed or consented to payment of fees to Mr Akerman or in general, directors of the Company.

149. In his defence, Mr Akerman contended that the payments of director’s fees to Mrs Akierman, Ms Dar and himself between 1983 and 1991 gave rise to an “implied agreement” that he would receive reasonable remuneration for his services as de facto managing director. But on the evidence, only two director’s fee payments were made to Mr Akerman between 1980 and 2012. Both were made before Mrs Akierman died.

150. Although the evidence shows more regular payments to Mrs Akierman, from 1980 to 1991, the pattern is not uniform and there is no evidence that such payments continued between 1992 and her death in September 2001. In my view the evidence falls short of establishing any discernible pattern at all, let alone a pattern which is clear and specific enough to compel an implication (or perhaps an inference is what was meant) about payment of fees to Mr Akerman from 2001 onwards.

151. Mr Akerman’s account of the supposed conversations with Ms Dar is difficult to accept. Mr Akerman did not strike me as the sort of person who would make a deal which would entitle him to substantial sums of money and then fail to take advantage of it. Given Ms Dar’s denial and Mr Akerman’s lack of credibility, I am not satisfied that any such conversations ever took place.

Mr Akerman as sole director and secretary of the Company

152. It will be recalled that Mr Akerman raised an estoppel defence to the claim of a lack of authority. The defence was based on an alleged discussion between Mr Akerman, Ms Dar and Mr Selinger some time after Mrs Akierman’s death. He also claimed that he regularly discussed the Company’s affairs with Ms Dar. Mr Akerman’s version of the alleged discussion with Mr Selinger and Ms Dar was:

Mr Selinger:   The law does not require that the Company have more than one director. Unless you want to appoint another director, it might facilitate the work and transactions required to be done if Steven continued as the sole director.

Gillian:      I’m happy to go along with your suggestion.

Mr Selinger:   I will prepare a document to the effect that the Company resolved to have one director and that a quorum of one director and one shareholder is required for meetings and resolutions.

Gillian:   We are the only shareholders. We discuss most things between us on the phone. Do we have to get together for meetings and comply with all rules?

Mr Selinger:    You can agree to dispense with many of the formalities.

153. Ms Dar denied recollection of this conversation and disputed that she and Mr Akerman regularly discussed Company affairs. According to Ms Dar, she and Mr Akerman conversed “where necessary” and in an ad hoc, rather than regular, fashion. On her account, Mr Akerman sought her approval about the sale of properties in an equally ad hoc manner. She said:

…I agree that Steven sought my views and approval in connection with steps and transactions relating to the financial affairs of the Company including the sale of properties, however, there were also many occasions when he did not…

…Steven did not consult me when he and his family purported to pay for the Company’s interests in the Miller Street Properties. Steven has not sought my views or approval in connection with the affairs of the Company for some years now.

154. Mr Akerman’s account of the supposed discussion with Mr Selinger raises more questions than it answers. There is no evidence of Mr Selinger preparing the “document” which he supposedly said would allow the Company to be operated by Mr Akerman as sole director, or of Mr Akerman following this up. Furthermore, Mr Selinger supposedly advised that Mr Akerman and Ms Dar could dispense with “many of” the formalities, but did not identify what formalities could not be dispensed with.

155. In fact the problems go even deeper. As recounted by Mr Akerman, Mr Selinger’s advice was simply wrong. Had it been decided that the Company would continue under Mr Akerman’s sole directorship, it would have been necessary to alter the Articles of Association, rather than simply pass a resolution. What this underlines is how strange it is to suppose that Mr Selinger, who was not a lawyer, would have been advising Mr Akerman, who was, on legal questions and on the drafting of legal documents.

156. In my opinion the conversation as alleged is inherently incredible. Given that it is disputed by Ms Dar, I am not prepared to accept that any such conversation took place.

157. Mr Akerman’s evidence of having regular discussions with Ms Dar does not take the matter any further. If anything, the fact that he did consult her militates against any finding of some sort of delegation of authority to him to act on his own, at least in commercially significant matters.

Distribution of shares in the Company to Mr Akerman and Ms Dar

158. I have already referred to the share transfers for the ordinary shares which were completed and stamped in December 2004 and February 2005. There were three of them: one for one share from Ms Dar to the estate, dated 10 February 2005, and two, each for five shares, from the estate to Mr Akerman and Ms Dar.

159. The transfers were in evidence. The transfer form for Mrs Marr’s share was an older-style one. It was completed (apparently in Mr Akerman’s handwriting) in favour of “estate Jana Akierman”. At the foot of the form, before the space for signatures, were the printed words “As witness our hands the ….. day of ……… 19….” The date was completed, in Mr Akerman’s handwriting, as 10 February 2005. It was signed by Mrs Marr as transferor and by Mr Akerman as transferee. Both signatures were witnessed.

160. The transfer was stamped in the nominal amount of $10. This was appropriate for a transfer pursuant to an existing trust arrangement. But it appears that duty had never been paid on the original declaration of trust. In the course of the trial, when this was pointed out, counsel for Mr Akerman gave on his behalf the usual undertaking under UCPR, r 31.13.

161. The two transfer forms for transferring five shares each to Mr Akerman and Ms Dar were in more modern form. Both were signed by Mr Akerman and Ms Dar as executors of Mrs Akierman’s estate as transferor, and by Mr Akerman, or Ms Dar, as the case required, as transferee. The transfers were dated (in Mr Akerman’s handwriting) 10 December 2004.

162. As already noted, the application to rectify the Company’s share register was raised by way of amendment in the course of the hearing. The supplementary affidavits from Mr Akerman and Mr Guthrie filed in support of the application were uninformative. Mr Akerman only annexed the transfer forms and correspondence from 2004-2005 to which I have referred. Mr Guthrie only annexed the Company’s share register, the transfers and the form 484 which was lodged in 2011. Neither affidavit contained any explanation of the surrounding events in 2004-2005 or 2011.

163. Mr Akerman was briefly cross-examined on the issue. Mr Guthrie was not asked about it.

164. The cross-examination of Mr Akerman focused on the mismatch between the transfers to himself and Ms Dar dated 10 December 2004 (which totalled ten shares) and the other documents showing that at the time one of the shares was still registered in the name of Mrs Marr and only nine were registered in Mrs Akierman’s name. It was put to Mr Akerman that he knew on 10 December that the estate did not have “ten ordinary shares” to transfer. Mr Akerman said that he believed that including the share from Mrs Marr, the estate held ten shares. He said that he had received the transfer, as signed by Mrs Marr, well before December 2004, although he only dated it on 10 February 2005 when (he said) he was asked to do so on taking it to the Office of State Revenue to have it stamped.

165. Counsel may have been correct in saying that, as at 10 December 2004, only nine ordinary shares were available for transfer if that was a reference to the state of the register on that date. But it is quite clear that at all times Mrs Marr’s share was seen as belonging to the estate and the transfer of that share to the estate, or in accordance with its direction, was a formality. I see no reason to doubt Mr Akerman’s evidence that the transfer had already been signed in December 2004. There was a delay of two months or so in having the transfer stamped but no point was taken about that by counsel for Ms Dar.

166. As already noted, there is no evidence of any response to Mr Akerman’s request to Selingers in his letter of 25 February 2005, to confirm the shareholdings in the Company. Nor did the evidence explain why, when the mission to register the transfers was belatedly discovered, the registration date was recorded in the Company’s register, and reported to ASIC, as September 2011. But it is quite clear that Mr Akerman intended the transfers to be effective in 2004-2005, that the relevant documents were signed at the time, and that Mr Akerman relied upon Selingers to affect their recording in the Company’s share register and their notification to ASIC. It is equally clear that Ms Dar was aware of this but left it to Mr Akerman to effect the details.

Agreement to purchase 9 Miller Street

167. Mr Akerman’s case: On Mr Akerman’s account, after the auction on 18 May 2005, he reached agreement with the Marrs and Ms Dar that he would purchase 9 Miller Street for about $4.7 million. This took place in several stages. Mr Akerman recounted the initial conversation with Ms Dar as follows:

Me:   The bidding for 9 Miller has stopped at $5 million. Do you want to sell it to the highest bidder for that price?

312. On the assumption that the deed of company arrangement was governed by the rules applicable to ordinary contracts, the High Court held that the company had validly executed the deed despite the failure to comply with the articles. The Court explained this by saying that, as all the corporators had agreed that the deed should be executed, there was “no separate question” about whether the company had assented. The Court cited the judgments of Buckley J in Duomatic and of Ormiston J in Brick & Pipe.

313. MYT does not confine the doctrine to “formalities” or to actions which can be taken by the shareholders in general meeting. In the later decision of Angas Law Services Pty Ltd v Carabelas (2005) 226 CLR 507 at 519 [24], Gleeson CJ & Heydon J (with whom the other members of the Court agreed) referred to the doctrine in the terms stated by Buckley J in Duomatic. But the case concerned a claim for breach of director’s duties under statute, and the application of the doctrine was not directly relevant.

314. In the end, it is not necessary for me decide what the limits of the doctrine are, as a matter of authority. That is because I think that the narrower, or at least the more particular, statement of principle in Duomatic applies in any event.

315. Counsel submitted that to apply the doctrine in the present case would allow the shareholders of the Company to usurp functions allocated, under the Company’s Articles of Association, to the directors. But I do not think this is correct. Regulation 73 confers a general power on the directors to manage the Company’s business, but this is subject to such regulations and limitations as the general meeting may impose. It would have been open in the present case for the shareholders in general meeting to have resolved, under regulation 73, to exempt the proposed sale of 5 and 7 Miller Street from the directors’ general power to manage the Company’s business. The shareholders could then have resolved to have the Company effect the sale and to authorise Mr Akerman, Ms Dar or anyone else to execute the relevant documents on its behalf. This principle, as stated in Duomatic, thus applies.

316. Effect of Mrs Marr still being registered as shareholder: In support of their argument that the doctrine could not apply because Mrs Marr was still registered as a shareholder at the relevant times, counsel for the Company referred to Re Compaction Systems Pty Ltd [1976] 2 NSWLR 477. The company in that case had two classes of shares, “A” class and “B” class. Only the “A” class shares had voting rights. All of the shares were owned by one shareholder, Omnico, except for one “B” class share held by an individual called McDonald. A general meeting was convened for the purpose of considering a resolution to wind the company up. Omnico purported, as “the only shareholder” in the company, to dispense with the notice requirements for the convening of the meeting, and the resolution was then passed.

317. Bowen CJ in Eq held that, although he was not entitled to vote, Mr McDonald was entitled to receive notice and attend the meeting. Counsel for the liquidator, however, argued that the resolution was valid under the doctrine of unanimous assent for two reasons. First, Mr McDonald was said to hold his share as nominee or constructive trustee for Omnico, so that it was the beneficial owner of all of the shares in the company. Second, counsel argued that Omnico was the owner of all of the voting shares in the company. Each of these circumstances, counsel argued, was sufficient to attract the doctrine.

318. It is the first argument which is relevant for present purposes. Bowen CJ in Eq noted that no authority had been cited in support of it and “as at present advised” he was not persuaded of its correctness.

319. But in the present case, Mrs Marr was not merely holding a share as trustee (or even as bare trustee) for someone else. She had executed a transfer of the share, and the transfer had been accepted by Mr Akerman (on behalf of the estate) as transferee. The transaction was complete. Also, although this may not necessarily be essential, the decision had been made to register the transfer and only ministerial steps were required to do so.

320. It is not necessary for me to decide whether I should, as a matter of authority, follow the somewhat tentative decision of Bowen CJ in Eq. The circumstances of the present case are different. I was not referred to any authority governing those circumstances, and I must therefore decide the point on principle.

321. It was not suggested that the unanimous assent doctrine was excluded because of the circumstance that Mrs Akierman’s shares had not been registered in the name of her executors. That would have been artificial in the extreme. Why, then, should the doctrine be excluded because the transfer of Mrs Marr’s share had not been registered?

322. I have already explained that the ownership of shares in a company, as distinct from the exercise of rights attached to those shares, such as the right to vote, is not determined by registration. The recording of ownership in the register is evidentiary. In my view, consistently with this analysis, the unanimous assent doctrine should be applied on the basis of the transfers sent for registration by Mr Akerman in February 2005, albeit that registration had not then been effected.

323. I think this conclusion is reinforced by practical considerations. The hypothesis on which the Duomatic principle operates is that the transaction in question could have been effected by the shareholders in general meeting. In the present case, the relevant transaction took place more than eighteen months after the transfers, making Mr Akerman and Ms Dar the shareholders of the Company, had been sent for registration. Both of them believed that the transfers had been registered. Had it been thought necessary to confer a formal meeting of shareholders, the probability is that it would have been conducted on the assumption that the shareholders were Mr Akerman and Ms Dar. In the event (less likely, it seems to me) that someone had thought it necessary to check the register, the mistake would have been discovered and rectified so as to allow the meeting to take place on that basis. In such circumstances, it seems to me that it would be quite unrealistic for the Court to refuse to apply the doctrine.

324. This reasoning does not depend in any way upon the making of the rectification order. That is because I consider that the only effect of such an order is evidentiary. But if I am wrong in my view, and ownership for the purposes of the doctrine depends upon registration, then the rectification, once made, will relate back so as to operate from a date before the sale and transfer transactions took place. On either view, therefore, the doctrine applies notwithstanding the fact that at the time of the transaction Mrs Marr remained on the register.

325. Fully informed consent: In support of their submission that fully informed consent from Ms Dar was required, counsel for the Company relied on the Court of Appeal decision in Winthrop Investments Ltd v Winns Ltd [1975] 2 NSWLR 666. In that case the Court of Appeal followed the earlier decision of the English Court of Appeal Bamford v Bamford [1970] Ch 212. Each case involved a takeover where the directors of the target company responded by making an issue of fresh shares. In each case the issue was later ratified by an ordinary resolution of the shareholders of the target company. In each case the bidder challenged the share issue on the ground that it had been actuated by an improper purpose.

326. In Bamford, the English Court of Appeal decided that even if the directors had acted in bad faith and for an improper purpose in making the share issue, it was not void, but only voidable. The Court went on to say that it had been open to the directors to obtain absolution for any breach of duty on their part by obtaining a resolution of the shareholders waiving the breach and approving the issue. If a majority of the shareholders had given their fully informed consent, the bidder could not complain. In Winthrop, the Court of Appeal adopted the same view of the law. But the Court found in that case that the shareholders’ resolution was invalid because the directors had failed to make a full disclosure of the relevant facts.

327. Counsel argued that the facts of the present case were relevantly the same as in Winthrop. Counsel argued that Mr Akerman had failed to make full disclosure of the potential benefits to him of the transaction. In particular, counsel submitted that he had failed to disclose the “likely” or “anticipated” increase in the value of the property.

328. The Bamford line of cases concerns ratification of a transaction as a cure for any invalidity resulting from breach of fiduciary duty on the part of the directors. The ratification may be prospective as well as retrospective (see Winthrop at 681 [E]). But the focus is on a breach of duty, not on a lack of power. In Angas Law Services (above at [316]) at 518-519 [24] Gleeson CJ & Heydon J referred to the Duomatic authorities and the Bamford authorities as “two related but distinct lines of authority”.

329. Implicit in what Gleeson CJ & Heydon J said is that the two principles may overlap in some cases. An example is the decision of the English Court of Appeal in Multinational Gas and Petrochemical Co v Multinational Gas and Petrochemical Services Ltd [1983] 1 Ch 258. That case concerned the affairs of a company which had been formed by three international oil companies for the purpose of trading. The board of directors consisted of nominees of the oil company shareholders, each director acting subject to the prior direction or subsequent approval of the shareholder which had nominated him. The company went into liquidation, and the liquidator sought to bring an action in its name as plaintiff against the directors (and, vicariously, the oil companies) on the ground that some of the transactions the directors had caused the company to enter into had been improvident. Lawton LJ said (at 269):

… when the oil companies acting together required the plaintiff’s directors to make decisions or approved what had already been done, what they did or approved became the plaintiff’s acts and were binding on it: see by way of examples Attorney-General for Canada v Standard Trust Co of New York [1911] AC 498; In re Express Engineering Works Ltd [1920] 1 Ch 466 and In re Horsley & Weight Ltd [1982] Ch 442. When approving whatever their nominee directors had done, the oil companies were not, as the plaintiff submitted, relinquishing any causes of action which the plaintiff might have had against its directors. When the oil companies, as shareholders, approved what the plaintiff’s directors had done there was no cause of action because at that time there was no damage. What the oil companies were doing was adopting the directors’ acts and as shareholders, in agreement with each other, making those acts the plaintiff’s acts.

333. The distinction between the two principles appears clearly from this passage. The shareholders could have resolved to waive any breaches of duty by the directors and approve the transactions. Provided full and proper disclosure had been made, this would only have required a majority resolution. The result would have been a prospective ratification in accordance with the Bamford principle. But Lawton LJ’s analysis went further. Because the shareholders had in effect unanimously agreed on the transactions, they became the transactions of the company and no question of breach of duty could arise. The same point was made by Dillon LJ (see at 289).

334. Where ratification or validation of conduct which would otherwise be a breach of fiduciary duty is in issue, it is natural to use the language of fully informed consent. That is what equity requires in the case of a fiduciary who seeks to be absolved, prospectively or retrospectively, from the consequences of a breach of fiduciary duty. But it is less clear that the same concept necessarily applies where the shareholders of a company give effect by unanimous approval, to a contract which would otherwise be invalid because of failure to comply with a provision of the company’s constitution. Arguably, the question of disclosure in the latter class of case should be judged on the same principles which apply to the enforceability of ordinary contracts. But it is not necessary to pursue this further.

335. In the present case, the one page agreement of February 2007 clearly provided for settlement to be delayed, at Mr Akerman’s option, until the liquidation of the Company. Mr Akerman, of course, did not know what would happen to property values in the future. There is no evidence that he had any greater knowledge about the future value of the properties than Ms Dar. The potential for a benefit to Mr Akerman if the property value increased in the meantime was obvious. In my view, all matters of substance were disclosed to Ms Dar. I reject the submission that the disclosure was inadequate.

336. Adequacy of consent: As already noted, there can be no dispute that Ms Dar consented to the terms of the one page agreement of 28 February 2007. She did not dispute, or at least did not credibly dispute, Mr Akerman’s account of the meeting which resulted in the document being signed. And, of course, she signed the document itself. No question of misrepresentation or mistake arises.

337. When she signed the agreement, Ms Dar signed on behalf of the Company. The parties knew she was not a director of the Company, but was a shareholder. This conclusion is confirmed by the handwritten document concerning the sale of the Kingsford property she signed on the same occasion. The objective interpretation is clear. Mr Akerman agreed to the transaction. So did Ms Dar. Both parties then agreed that Ms Dar should sign the agreement so as to signify the Company’s assent. In my view, a case such as the present is precisely the sort of case where the doctrine should apply.

338. The execution of the contract and the transfer were somewhat different. Ms Dar signed both documents as a vendor, but did not do so expressly on behalf of the Company. Mr Akerman also signed the documents as a vendor, and he had no other interest as vendor apart from his role in the Company. Indeed, the transfer expressly provided for execution on behalf of the Company, which was signed by Mr Akerman. Ms Dar was a party to both the contract and the transfer in her own right, as an owner of a one-eighth share of the properties. Her signature does not necessarily have to be read as a signature on behalf of the Company as well.

339. In Brick & Pipe the unanimous assent issue concerned the execution of a guarantee by a company in a corporate group. The company in question was a wholly owned subsidiary of another company in the group, called Arnsberg. Ormiston J concluded that it would be unrealistic to say that Arnsberg had not consented to the guarantee. His Honour took a number of factors into account, but one of them was that Arnsberg was itself a party to, and executed, the same instrument of guarantee (see at 42).

340. In my view, the same conclusion applies here. Apart from the fact that Ms Dar was a party to, and signed, both the formal contract and the RPA transfer, she had previously signed the one page agreement on the Company’s behalf. I think it would be unrealistic to say that she did not assent to the sale and transfer of the Company’s share in the properties.

341. In view of these conclusions, the difference in the wording between the February 2007 one page agreement and the later formal contract does not matter. But in any event, I do not accept that any such distinction is important. The critical question is whether the transfer was binding on the Company. The one page agreement of February 2007 was sufficient to support the transfer at the price stated and in my view that is enough.

342. For these reasons, I conclude that the sale and transfer of 5 and 7 Miller Street is sustained by the doctrine of unanimous assent. It is unnecessary to consider the application of s 1322(4)(a).

Conclusions

343. As a result of my conclusion concerning the doctrine of unanimous consent, the transaction was directly approved by the Company itself. No question of breach of director’s duties therefore arises.

344. In any event, had it been necessary to consider the question, I would not have concluded that the transaction involved any breach of fiduciary duty. For the reasons I have already given, the essential terms of the transaction were disclosed to the only other person with an interest in the Company, namely Ms Dar.

345. The Company’s claim concerning the sale and transfer of numbers 5 and 7 Miller Street fails.

Director’s fees

346. I have already set out the terms of the resolution upon which Mr Akerman relied in 2013 to support the payment of director’s fees. That resolution purported to rely upon Mr Akerman’s authority as sole director. For reasons I have given, he had no such authority. The resolution was invalid for this reason alone.

347. In any event, Table A regulation 70 provides:

The remuneration of the directors shall from time to time be determined by the company in general meeting. That remuneration shall be deemed to accrue from day to day. The directors may also be paid all travelling, hotel, and other expenses properly incurred by them in attending and returning from meetings of the directors or any committee of the directors or general meetings of the company or in connection with the business of the company.

348. It is quite clear that, even if Mr Akerman had been validly appointed as sole director of the Company, that would not have justified the resolution. Under regulation 70 it was for the shareholders in general meeting to determine the remuneration of directors. I doubt that the power would permit the retrospective creation of an entitlement to fees as Mr Akerman sought to do, but that does not need to be pursued. The purported resolution by Mr Akerman was plainly invalid.

349. In Duomatic, Buckley J found that some of the payments to directors, the subject of that case, were not sustained by the doctrine of unanimous assent. An application was made to have the Court validate the payments. Buckley LJ said:

Directors must, I think, take the trouble to discover just what their rights and obligations are, and if they draw on account of remuneration to which they are not entitled in anticipation of its being voted to them in the future, then normally the director could not be said to be acting reasonably and ought not to be excused.

350. The same observations apply here. Indeed I think they apply with increased force because Mr Akerman, as a lawyer, had no excuse at all for being unaware of what the articles provided.

351. I have already concluded that Mr Akerman’s lack of authority to effect the sale and transfer of the Miller Street properties was not “essentially procedural” (s 1322(6)(a)(i)). That conclusion applies with greater force to Mr Akerman’s attempt to give himself an entitlement to director’s fees.

352. When Mr Akerman passed the purported resolution, his relationship with Ms Dar had broken down. She would never have agreed to pay him director’s fees and he would have been well aware of that. Arguably, his failure to comply with the Company’s Articles of Association was so flagrant that he did not act “honestly” for the purpose of s 1322(6)(a)(ii). But I do not need to decide this.

353. Validation of the resolution would not be “just and equitable” (s 1322(6)(a)(iii)). Indeed, I think it would involve “substantial injustice” for the purposes of s 1322(6)(c). And even if the requirements of s 1322(6) were satisfied, I would still, in the exercise of my discretion, refuse to make the orders sought.

354. It is thus unnecessary to consider the allegations of breach of duty by Mr Akerman in paying the director’s fees. The payments were unauthorised and invalid for that reason alone.

Legal fees

355. Any entitlement that Mr Akerman had to bill the Company for work due by his firm depended upon the validity of his firm’s retainer by the Company. Mr Cashion SC was retained by Mr Akerman’s firm and had no direct entitlement to payment of his fees from the Company. Again, the payment of his fees by the Company depended on the validity of Sowden Akerman’s retainer.

356. In purporting to retain his firm to act for the Company, Mr Akerman relied upon his supposed authority as sole director. For reasons I have already given, he had no such authority. His application to validate the payments (or the retainer) must be refused for essentially the same reasons as I have given for refusing his application concerning the director’s fees. The payments were unauthorised and invalid.

Conclusions and orders

357. I have concluded that:

(1)   the Company’s register of members should be rectified so as to show:

(a)   the transfer on 10 December 2004 of five ordinary shares, 4000 class A preference shares and 50,000 class B preference shares from the estate of Mrs Akierman to Mr Akerman and four ordinary shares, 4000 class A preference shares and 50,000 class B preference shares to Ms Dar;

(b)   the transfer on 10 February 2005 of one ordinary share from Mrs Marr to the estate and then to Ms Dar;

(2)   the Company’s claim with respect to the sale and transfer of the Company’s shares of 5 and 7 Miller Street fails; but

(3)   the Company’s claims with respect to the sale and transfer of the Company’s share of 9 Miller Street, the payment of the disputed director’s fees and the payment of the disputed legal fees succeeds on the basis of lack of authority.

358. Given the agreement between the parties, they will need to consider how they wish to proceed with determining the financial consequences of my findings. Although the claim has been put on the basis of compensation (or alternatively damages) it may be that the appropriate principles to apply are those of restitution. I will adjourn the proceedings for a short time to allow the parties to consider this judgment and propose a way forward.

359. The order of the Court is:

1.   Order that the proceedings be adjourned for 7 days or such other period as may be arranged with my Associate for directions on the conduct of any further hearing and presentation of any further submissions required to finalise the proceedings in the light of this judgment.

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Decision last updated: 13 November 2019