Asden Developments Pty Ltd (in liq) v Dinoris (No 3) - [2016] FCA 788

FEDERAL COURT OF AUSTRALIA
Asden Developments Pty Ltd (in liq) v Dinoris (No 3) [2016] FCA 788

File number: QUD 578 of 2014

Judge: REEVES J

Date of judgment: 5 July 2016

Catchwords: CORPORATIONS – liquidators’ statutory duties – whether liquidator breached s 180 of the Corporations Act 2001 (Cth) – whether liquidator’s conduct demonstrated the required degree of care and diligence that was reasonable in all the circumstances – whether breach of s 180 of the Corporations Act 2001 (Cth) caused the applicant company damage or loss under s 1317H of the Corporations Act 2001 (Cth) – consideration of principles on causation – consideration of principles on subjective evidence regarding what an individual would or would not have done in particular circumstances

Legislation:
Civil Liability Act 2002 (NSW)

Civil Liability Act 2003 (Qld)

Civil Liability Act 2002 (Tas)

Civil Liability Act 2002 (WA)

Corporations Act 2001 (Cth)

Evidence Act 1995 (Cth)

Federal Court Rules 2011 (Cth)

Trade Practices Act 1974 (Cth) (now s 18 of the Australian Consumer Law)

Cases cited:
Adler v Australian Securities and Investments Commission (2003) 179 FLR 1; [2003] NSWCA 131

Agricultural Land Management Ltd v Jackson (No 2) (2014) 48 WAR 1; [2014] WASC 102

Australian Securities and Investments Commission v Dunner (2013) 303 ALR 98; [2013] FCA 872

Australian Securities and Investments Commission v Fortescue Group Ltd (No 5) (2009) 264 ALR 201; [2009] FCA 1586

Australian Securities and Investments Commission v Fortescue Metals Group Ltd (2011) 190 FCR 364; [2011] FCAFC 19

Australian Securities and Investments Commission v Rich (2009) 236 FLR 1; [2009] NSWSC 1229

Australian Securities and Investments Commission v Vines (2003) 48 ACSR 291; [2003] NSWSC 1095

Australian Securities and Investments Commission v Vines (2005) 55 ACSR 617; [2005] NSWSC 738

Dasreef Pty Limited v Hawchar (2011) 243 CLR 588; [2011] HCA 21

Forge v Australian Securities and Investments Commission (2004) 213 ALR 574; [2004] NSWCA 448

Jenkins v Jonkay Pty Ltd [2007] FCA 858

Lord Buddha Pty Ltd (In Liq) v Harpur (2013) 41 VR 159; [2013] VSCA 101

March v E & MH Stramare Pty Ltd (1991) 171 CLR 506

Pace v Antlers Pty Ltd (in liquidation) (1998) 80 FCR 485

Rosenberg v Percival (2001) 205 CLR 434; [2001] HCA 18

Shafron v Australian Securities and Investments Commission (2012) 247 CLR 465; [2012] HCA 18

Sydlow Pty Ltd (In Liquidation) v TG Kotselas Pty Ltd (1996) 65 FCR 234

Tabet v Gett (2010) 240 CLR 537; [2010] HCA 12

Viscariello v Macks (2014) 103 ACSR 542; [2014] SASC 189

Final Report of the Review of the Law of Negligence, (Commonwealth of Australia, Canberra, September 2002)

Freckelton and Selby, Expert Evidence (5^th ed, Law Book Co, 2013)

Date of hearing: 14–16 July, 7–8 September and 16 November 2015

Registry: Queensland

Division: General Division

National Practice Area: Commercial and Corporations

Sub-area: Corporations and Corporate Insolvency

Category: Catchwords

Number of paragraphs: 184

Counsel for the Applicant: Mr M Martin QC

Solicitor for the Applicant: Mills Oakley Lawyers

Counsel for the Respondents: Mr I Erskine

Solicitor for the Respondents: HBM Lawyers

REASONS FOR JUDGMENT

QUD 578 of 2014

BETWEEN:
ASDEN DEVELOPMENTS PTY LTD (IN LIQUIDATION) ACN 115 851 833

Applicant

AND:
PETER DINORIS

First Respondent

NICK COMBIS

Second Respondent

JUDGE:

REEVES J

INTRODUCTION

Mr Clout is the current liquidator of Asden Developments Pty Ltd (In Liquidation). Before his appointment on 13 August 2013, Mr Dinoris and Mr Combis, the respondents in this proceeding, held that role jointly and severally.
In this proceeding, Asden claims that Mr Dinoris and Mr Combis (hereafter I will refer to them jointly as Mr Dinoris unless the context requires otherwise) breached their statutory duty to it as its liquidators and thereby caused it damage.
To make out that claim, Asden relies on two series of transactions. One occurred in late 2010, coincidentally with Asden being placed in voluntary liquidation. The other occurred in early 2011. Both series of transactions directly, or indirectly, involved Ms Melinda Nichols, who was the sole director and shareholder of Asden. Also involved in both series of transactions was a Mr Levis, who was at the time advising Ms Nichols about Asden’s financial affairs. Indeed, it was Mr Levis who advised Ms Nichols to place Asden in voluntary liquidation.
The first series of transactions concerned the transfer of funds out of Asden’s bank accounts and ultimately into two other bank accounts, one held by TJI Investments Pty Ltd (TJI Investments), a company owned by Ms Nichols, and the other held by Urban Property Consulting Pty Ltd (Urban Property), a company owned by Mr Levis. These transactions occurred in the period immediately before 22 December 2010, the date Asden was placed in voluntary liquidation and Mr Dinoris and Mr Combis were appointed as its joint and several liquidators. They occurred against the backdrop of a dispute that had developed between Ms Nichols and her estranged husband’s family, particularly his father and her father-in-law, Mr George Nichols. That dispute related to the financial affairs of Asden with respect to a residential property development in which Asden was involved.
The second series of transactions related to the sale of a boat that was owned by Asden. That series occurred in March/April 2011, after the voluntary liquidation of Asden, when Mr Dinoris instructed a company called Auctioneering Link Pty Ltd to sell the boat.
In summary, Asden claims that Mr Dinoris failed to take any, or any adequate, steps to recover the funds transferred out of its bank accounts and he failed to properly supervise the sale of the boat, in breach of his statutory duty as Asden’s liquidator.
FACTUAL BACKGROUND
The following paragraphs contain my findings of fact concerning the factual background to this matter. The parties have agreed upon almost all the facts in relation to the central events of late 2010 and early 2011. Insofar as they record the history of Asden and the dealings between Ms Nichols and various members of the Nichols family, my findings are largely based upon two affidavits Ms Nichols filed in the family law proceeding issued against her by her former husband. Ms Nichols was cross-examined on those affidavits at the trial of this proceeding and they were later tendered in evidence. I received two copies of each affidavit in the tender. One was a copy of the original affidavit and in the other some paragraphs in the original were redacted to reduce the quantity of the tender to those parts of the affidavits upon which Ms Nichols was cross-examined. I mention this because, in order to give a complete account of all the relevant background events, I have, to a limited extent, relied upon some paragraphs in the redacted versions of those two affidavits. That applies to parts of [13], [17], [18] and [22] below.
The incorporation of Asden
Asden was incorporated in August 2005. It was used by the Nichols family to undertake a subdivisional and residential development at Wakerley, a suburb of Brisbane. The Nichols family relevantly comprised, first, Mr Phillip Nichols, Ms Melinda Nichols’ former husband. They were married in 2007 and separated in about October 2010, shortly before the events to which this proceeding relates. Secondly, it comprised Phillip Nichols’ parents, George and Jennifer Nichols, and his uncle and aunt, Peter and Debra Nichols. The latter four members of the family were the primary investors in the Wakerley development mentioned above.
From its incorporation in 2005, Ms Melinda Nichols was the sole director and shareholder of the company. At the time of its incorporation, Mr Phillip Nichols was either bankrupt, or about to be declared so. As a consequence, he did not have any direct role in Asden, nor in the Wakerley development.
The Wakerley development and land purchase
The Wakerley development involved the purchase and subdivision of an area of land into 10 separate lots and the construction of houses on each of those lots. Mr George Nichols and the other three members of the Nichols family mentioned above provided all the funds necessary to undertake the development. Neither Ms Melinda Nichols nor Mr Phillip Nichols provided any funds to Asden. Ms Nichols’ primary role with Asden was to maintain the company’s MYOB accounting system.
The land associated with the Wakerley development was purchased in about July 2006 for approximately $1.6 million. Mr George Nichols made all the arrangements associated with that purchase. That included borrowing the necessary funds for the purchase from the National Australia Bank Ltd. The purchasers were Mr George Nichols and Mrs Jennifer Nichols; Mr Peter Nichols and Mrs Debra Nichols; and Ms Melinda Nichols as tenants in common as to a one-third interest each. Despite the fact she was not involved in the financial aspects of the development, Ms Nichols said that Mr George Nichols informed her that her name had to be included in the loan documentation because she was to be the registered owner of a one-third interest in the land. He told her that, in order to avoid including her as a borrower, he had instead nominated her as a guarantor for the loan agreement. In one of her family law proceeding affidavits she said:
… He explained to me that the NAB required my name on the documents. George requested I sign the paperwork, stating that I would agree to be the guarantor of the loan. He advised me upon signing the loan, that it would be ok, he has a large list of assets as security for this loan, therefore I would never have to worry about being ordered by the NAB to make the repayments as the guarantor.
The boat purchase
Before describing how the Wakerley development was carried out, it is convenient to interpose an event that occurred in October 2008. In that month, Ms Melinda Nichols caused Asden to purchase a Haines Signature 632F boat together with a Suzuki 200 HP outboard engine and a trailer. She said she did this because Phillip, her husband, wanted the boat and he could not enter into a contract to purchase it because he was an undischarged bankrupt. Ms Nichols said that Asden paid $86,900 for the boat, $55,000 of which was paid in cash and the balance was financed under a chattel mortgage with Yamaha Motor Finance Australia Pty Ltd. While that chattel mortgage was taken out in Ms Melinda Nichols’ name, Asden made the monthly payments on it of $757.59.
The Wakerley subdivision
Returning to the Wakerley development, the subdivision of the Wakerley land occurred in early 2009. As noted above, the land was to be subdivided into 10 lots. After that had occurred, Ms Nichols said that she was approached by Mr George Nichols who told her that he had received advice from his accountant and his solicitor on the most beneficial way for him to structure the development. As a consequence, in about January 2010, Mr George Nichols met Ms Nichols by arrangement at her parents’ home. He had with him a bundle of documents. Ms Nichols said that he advised her that under the structure he was advised to put in place, she was to be recorded as the registered owner of one of the 10 lots, namely Lot 6, 8 Nile Close, Wakerley. The other nine lots were to be registered in the names of George, Jennifer, Peter and Debra Nichols and various other members of the Nichols family, including Debra Nichols’ sister and Peter and Debra Nichols’ son. She said Mr Nichols asked her to sign various documents, including a loan agreement and a mortgage, for the amount of $825,000. She said that when she asked Mr George Nichols why she was required to sign the mortgage, he said:
… “don’t worry Mel, the mortgages will never be registered, they have only been prepared for tax purposes, it is simply just paper’.
She went on to say:
George explained the reason for this was only for tax purposes. He stated that the owners of each lot would not actually receive the $825,000.00 loan amounts as the paperwork stated. George also advised us the $825,000.00 loaned amounts would also not have to be re-paid due to the fact that we will never receive the loaned amount in the first instance.
Ultimately, Ms Nichols said that, while she did not understand this explanation, she “trusted George” and she was therefore happy to proceed to sign the documents in question.
The construction of the houses at Wakerley
When the time came to commence construction of the houses on the Wakerley lots, Ms Nichols said that Mr George Nichols approached her again and asked her to sign a building contract in relation to the house to be constructed on Lot 6. That contract was with a building company called Earth Spirit Homes Pty Ltd.
Construction began on the houses for the Wakerley development in about late January or early February 2010. Despite his lack of experience, Ms Nichols said the Nichols family allowed Mr Phillip Nichols to undertake the construction of five of the houses. By October 2010, those five houses were still far from completion and Ms Nichols claimed that she had been informed that there were numerous faults present in them, that the timber frames were starting to rot and they were beginning to deteriorate. Ms Nichols said this situation led to the intervention of Mr George Nichols and, as a result, Phillip was removed from the project. Then, from early November 2010, the building company mentioned above, Earth Spirit Homes Pty Ltd, took over the whole project. Ms Nichols claimed that Mr Brett Blacklow, the principal of Earth Spirit Homes, agreed to take over the project on the understanding that it would require a significant amount of cash flow to repair the five faulty houses and complete the 10 houses in the project to lock up stage by Christmas 2010.
Asden’s financial pressures
Ms Nichols said the rearrangements with respect to the construction of the houses at Wakerley placed considerable pressure on Asden’s finances and, in turn, required a significant increase in the contribution of funds from the Nichols family. As a consequence, she said she became quite concerned about Asden’s financial situation. She said she raised her concerns with Mr George Nichols in an email on 2 November 2010 seeking an assurance that necessary funds would be made available to complete the Wakerley project. At about the same time, Ms Nichols said she considered the possibility of changing the directorship of Asden. She said she “just wanted to get away and start my life afresh.”
Ms Nichols applies for a domestic violence order
These concerns about Asden’s financial situation occurred in the midst of another development. As is already noted above, Ms Melinda Nichols and Mr Phillip Nichols separated in about October 2010. At about that time, Ms Nichols moved out of the matrimonial home and began living with her parents. In about mid-November 2010, Ms Nichols said that she was physically threatened by Phillip and, as a consequence, she went to the local police station and applied for a domestic violence order against him. She said when she went to George and Jennifer’s home a few days later to explain why she had done that, they were “completely negative towards me”. From that day, she claimed “their attitude towards me changed and they no longer were willing to help or support me at all”.
Ms Nichols’ requests for funds for Asden
On 16 November 2010, Ms Nichols said she sent an email to Mr George Nichols asking him to arrange to provide more funds for Asden as they were beginning to fall short. At approximately the same time, she informed him that she did not want to have anything more to do with Asden. She claimed Mr Nichols responded that he would take over the company. She said he then sent an email to Asden’s office advising the staff that he would need to obtain access to the company’s records to enable him to achieve the takeover.
Despite this indication that Mr George Nichols would take over responsibility for Asden, it is apparent that did not happen. On 29 November 2010, Ms Nichols emailed Mr George Nichols and requested him to make some further contributions to Asden as its funds were quite low and she was concerned. Mr Nichols replied on 30 November and arranged for her to collect a cheque for $50,000.
Asden’s taxation and other debts
Shortly before the end of November 2010, Ms Melinda Nichols hired a book-keeper to assist her to bring the company’s Business Activity Statements (BAS) up-to-date. After that exercise was completed, it emerged that Asden owed the taxation authorities approximately $100,000 in BAS instalments, approximately $80,000 in company tax and approximately $30,000 in superannuation contributions. At about the same time, Ms Melinda Nichols had a discussion with Mr Blacklow during which he told her that at least $300,000 to $400,000 would be required to complete the work on the Wakerley project.
Ms Nichols receives two cheques totalling $270,000
On 4 December 2010, Ms Nichols said she attended at Mr George Nichols’ office in West End, Brisbane. She said she was concerned about the taxation and other debts which Asden owed. She presented Mr Nichols with a list of those debts and explained to him that $300,000 was required in order to settle all the company’s debts. She also provided him with an MYOB report which showed that approximately $170,000 was owed to trade creditors. In response, she said that he “looked me in the eye and said ‘not to worry Mel, I will have a cheque for you at the house to collect in the next couple of days’”.
There is some confusion in Ms Nichols’ evidence as to the timing and details of the events that occurred after this meeting on 4 December. Nonetheless, it is common ground that Mr George Nichols provided two cheques to her between the date of that meeting and 15 December, or thereabouts. The first cheque was for the sum of $100,000 and the second cheque was for the sum of $170,000. Ms Nichols deposited them into Asden’s bank account at the Suncorp Bank on 6 December and on 14 December respectively.
Ms Nichols told she is responsible for Asden’s debts
On 15 December, Ms Nichols claimed she was informed by various members of the Nichols family that they considered she was responsible for Asden’s debts. The first notification of this view came in the form of an email Mr George Nichols sent to her on 14 December, which she read on 15 December. In that email, Mr Nichols informed her that the BAS instalments and taxation debts were Asden’s problems and he chastised her for “not having [her] finger on the pulse and not having everything under control”. The second notification was an email Ms Nichols received on 15 December from Mr Peter Nichols and Mrs Debra Nichols. In part, it stated that Ms Nichols was not to incur any debts on behalf of George, Jennifer, Peter or Debra Nichols and that, from that date, Ms Nichols was not authorised to be on the Wakerley construction site and that the Nichols family had taken possession of it. The third notification was a telephone call Ms Nichols received from Mrs Debra Nichols on the same date. In that telephone discussion, Ms Nichols said that Debra Nichols told her that Asden’s debts were her problem. Ms Nichols said that when she hung up from that call, she was extremely distraught and upset, and could not come to terms with what was happening.
Ms Nichols receives advice from Mr Levis
By this time, Ms Nichols said she was already deeply concerned about her personal liability as a director of Asden in circumstances where the Nichols family were withdrawing their support for the company. She said that she thought Asden might be trading whilst it was insolvent and, as its director, she may have some personal liability for its debts. She was vague about when it was that she first developed these concerns, but she agreed in cross-examination that it may have been as early as October/November 2010. These concerns caused her to seek advice from Mr Cor Frederiks of Frederiks Accountants. That firm was Asden’s accountants in late 2010. Mr Frederiks referred her to Mr Levis. While she signed the Consultancy Agreement to retain Mr Levis on 21 December 2010, it is apparent from the date of incorporation of TJI Investments – which he advised her to incorporate – (see at [35] below) that she must have begun receiving advice from Mr Levis with respect to the financial affairs of Asden on or before 14 December 2010. She claimed that the general thrust of Mr Levis’ advice at that time was that she would be left in extreme debt and destitute if she did not protect herself and the outcome would possibly mean bankruptcy.
The bank transfer on 15 December

On 15 December 2010, acting on Mr Levis’ advice, Ms Melinda Nichols withdrew $264,531.02 from Asden’s account at the Suncorp Bank and deposited it into an account in Asden’s name at the Bank of Queensland. The Suncorp Bank account was the account into which the two cheques totalling $270,000 had been deposited (see at [24] above). Ms Nichols said that she had been advised by Mr Levis to establish an account in Asden’s name at the Bank of Queensland so that this transfer could be made.
Mr Levis first approaches Mr Dinoris on 15 December 2010
It was also on 15 December 2010 that Mr Levis first approached Mr Dinoris and enquired whether he would be willing to act as the liquidator of Asden if it were to be placed in voluntary liquidation. When Mr Dinoris agreed, Mr Levis asked him to provide the documentation necessary to make that appointment.
The Nichols family demands monies from Ms Nichols
On 20 December 2010, Ms Nichols said she received a letter dated 16 December from Anthony’s Lawyers acting for the Nichols family. The letter demanded that she personally pay the Nichols family the sum of $270,000 within seven days or they would commence legal action against her. The sum of $270,000 referred to the two cheques totalling that amount that Mr George Nichols had provided to Ms Nichols (see at [24] above).
The letter went on to allege that those monies had “not been applied for the purpose of the loan and you are in default of your loan agreement and mortgage”. Ms Nichols said in one of her family law proceeding affidavits that she understood this to be a reference to the documents Mr George Nichols had her sign to put in place the structure for the Wakerley project as advised by Mr George Nichols’ accountant (see at [13]–[15] above).
After she received this letter, Ms Melinda Nichols said she obtained advice from Doyle Keyworth Harris Family Lawyers about her rights under the Family Law Act 1975 (Cth). She said that she was advised that the sum of $270,000 formed part of the joint matrimonial property because it had been advanced to her under a loan. Ms Nichols did not, therefore, respond to this letter.
On about the same date, Ms Nichols said she received a letter from Mrs Debra Nichols enclosing a large number of invoices and stating that the Nichols family did not intend to pay the sub-contractors associated with those invoices because they had nothing to do with the Wakerley project site. Ms Nichols claimed that the invoices were all for materials that had been ordered by her husband, Mr Phillip Nichols, while he was involved in the Wakerley project.
The bank transfers on 21 December
On 20 December, Ms Nichols said she took delivery of a car she had earlier ordered and paid $22,322.43 for it. This amount was paid out of the bank account Ms Nichols had established in Asden’s name at the Bank of Queensland. After this payment, the balance in that bank account was approximately $240,000.
On 21 December 2010, Ms Melinda Nichols withdrew $236,500 from Asden’s Bank of Queensland account above and deposited that amount in an account in the name of Urban Property. Mr Levis was the sole director of Urban Property. On the same date, Mr Levis caused $180,000 to be withdrawn from that Urban Property account and deposited into an account in the name of TJI Investments at the Bank of Queensland.
The company, TJI Investments Pty Ltd, was incorporated by Ms Nichols on 14 December 2010. Ms Nichols was the sole director and shareholder of that company. As I have already mentioned above, she said in evidence that she incorporated TJI Investments on advice from Mr Levis.
The voluntary liquidation of Asden on 22 December
As recorded in the minutes of Asden, the sole member of the company, Ms Nichols, met on 22 December 2010 and resolved that the company be wound up voluntarily and that Mr Dinoris and Mr Combis be appointed joint and several liquidators. Ms Nichols said she took this step because she had been advised by Mr Levis that the company was trading insolvent once the Nichols family had withdrawn their support for it.
The steps taken by Mr Dinoris on 22 December
After his appointment as the liquidator of Asden on 22 December 2010, Mr Dinoris obtained possession of the boat owned by Asden (see at [12] above) and gave instructions to Auctioneering Link Pty Ltd to store and, ultimately, to sell it. In addition to taking that step, he sent letters to the major banks, including the Bank of Queensland, enquiring about the details of any bank accounts held in the company’s name. He also sent a letter to Ms Nichols containing: a notice requiring her to deliver the books, records, monies and property of the company to him; a questionnaire for directors and officers; and a statement outlining the responsibilities of a director of a company.
The investigations of the bank transfers on 22 and 23 December
At 4.55 pm on 22 December 2010, Ms Del Monte of Mr Dinoris’ office received an email from the Bank of Queensland attaching a bank statement showing a withdrawal of $236,500 from Asden’s account with that bank. This information did not reveal the destination of the withdrawn funds.
At 5.28 pm on 22 December 2010, Ms Del Monte sent an email to Mr Levis enquiring about the destination of the withdrawn funds. She received no response.
At 4.40 pm on 23 December 2010, Ms Del Monte received an email from the Bank of Queensland attaching a copy of the withdrawal slip signed by Ms Melinda Nichols to undertake the withdrawal mentioned above. This information also did not reveal the destination of the withdrawn funds.
Shortly thereafter, Mr Dinoris telephoned Mr Levis and asked him if he knew of the destination of the funds. In response, Mr Levis advised that they were not received by Ms Melinda Nichols personally and that Mr Dinoris should further investigate the withdrawal of the funds.
The Nichols family threatens Court proceedings on 22 December 2010 and following
From soon after his appointment on 22 December 2010, Mr Dinoris exchanged correspondence with a barrister named Mr David Edwards concerning the assets of Asden. Mr Edwards’ first letter to Mr Dinoris was sent by facsimile on 22 December 2010. In it, Mr Edwards stated that he was instructed by Mr Phillip Nichols in relation to a proposed family law proceeding involving his wife, Ms Melinda Nichols. He asserted that one of the matrimonial assets that was to be the subject of that proceeding was “Asden Developments Pty. Ltd. and its assets”. He noted that one of the assets of Asden, a boat, had been collected that day from “land owned by Phillip’s father, Dr. George Nichols”. Finally, he stated that Mr George Nichols had recently advanced $90,000 and a further $270,000 to Ms Melinda Nichols “so that the company’s current liabilities could be paid”.
Upon receiving Mr Edwards’ letter, Mr Dinoris sent an urgent letter in response. In that letter, he requested clarification as to whether Mr George Nichols had advanced $360,000 to Ms Melinda Nichols, or to Asden. He also sought clarification as to whether Mr Edwards also acted for Mr George Nichols. He stated he had ascertained that the assets and undertakings of Asden were subject to a fixed and floating charge and also a mortgage had been provided to the National Australia Bank Ltd over the Wakerley land. He noted that he had informed the National Australia Bank Ltd that the company’s assets were alleged to be matrimonial assets and were to be the subject of family law proceeding. He requested that Mr Edwards’ clients deliver up to him all the assets of the company. In this regard, he stated that “[a]s Liquidator of the company, I have a duty to preserve, secure, take possession and realise the assets of the company”. Finally, he requested that Mr Edwards’ client deliver up possession of 27 items of plant and equipment (listed in the letter) which were located on the Wakerley development site.
Mr Edwards responded to Mr Dinoris’ letter above on the next day, the 23 December 2010. He stated:
I am advised Dr. and Mrs. George Nichols and Mr. and Mrs. Peter Nichols assert that they are the owners of the materials set out in your letter arising from a resulting trust My client’s parents and Mr. and Mrs. Peter Nichols advanced the company the monies specifically to purchase the subject items and on the understanding that the company would hold them as such trustee.
Mr Edwards went on to inform Mr Dinoris that the Nichols family would be joining in the family law proceeding and “seeking injunctions to prevent your taking possession of those items and to restrain you from disposing of any items already in your possession”. He asserted that “the company owns those materials only as trustee for them and the company’s liquidators have no entitlement to take possession of them without the consent of those trustees which consent is expressly denied”.
Mr Dinoris responded by letter on the same date, 23 December 2010. He began by noting a telephone conversation that had occurred between Ms Del Monte of his office and Mr Edwards on 22 December in which he claimed Mr Edwards had stated that Mr Dinoris had “produced a good list of assets and documentary evidence of the purchase of the assets” and “[i]t would be difficult for your client to deny the items were not owned by the company”. Mr Dinoris then noted the claim that the Nichols family were the owners of the items listed in his letter of 22 December 2010 pursuant to a “resulting trust”. He also noted that no documentary evidence had been provided to substantiate that claim. He then set out nine queries as follows:
1.The basis and authority your client had to withdraw funds from the bank account of the company.
2.The reasons your client had any access to the bank account of the company.
3.Whether your client made any representations to any parties on behalf of the company.
4.Whether your client and Dr Nichols were shadow directors of the company.
5.Any written agreements substantiating the terms of the advance of any funds by Dr & Mrs George Nichols and Mr & Mrs Peter Nichols.
6.A list of all payments made by Dr & Mrs George Nichols and Mr & Mrs Peter Nichols along with documentary evidence of the payments made. As you would have noticed from my letter dated 22 December 2010, the company commenced purchasing its assets from as early as November 2006.
7.Details of the nature of all services provided by the company since its incorporation for the benefit of real property owned by Dr & Mrs George Nichols and Mr & Mrs Peter Nichols.
8.The reasons Dr & Mrs George Nichols and Mr & Mrs Peter Nichols do not consider themselves to be debtors of the company.
9.Copies of any financial statements and taxation returns substantiating any trust arrangements.
Mr Dinoris concluded his letter by stating:
I am presently investigating the affairs of the company as per my duties and responsibilities as Liquidator of the company, which include transactions involving your client, in particular the withdrawal of funds from the company’s bank account.
He added that he would report the results of those investigations to the Australian Securities and Investments Commission and to relevant authorities.
Mr Edwards responded by letter on the next day, 24 December 2010. He stated that the materials Mr Dinoris had requested would be provided “early in the new year”. He also stated:
Please be advised that proceedings will be instituted in the Federal Magistrates Court this morning seeking orders which inter alia include an injunction preventing the liquidators of Asden Developments Pty. Ltd. from taking possession of or dealing with any of the assets of that company pending further orders upon the undertaking of the applicant not to remove, deal with or in any way attempt to conceal the whereabouts of any such company assets. You will be served a copy of such application this afternoon.
He concluded with a request that Mr Dinoris agree not to attempt to seize any of the assets of Asden until the question of their ownership had been determined or agreed and he noted that “[g]uards have been placed on those properties where the items are located and this otherwise unnecessary expense could be avoided upon your agreement not to act contrary to the injunction sought”.
Moving forward to 30 December 2010, on that day, Mr Edwards sent a letter to Mr Dinoris enclosing a copy of an initiating application that had been filed in the Federal Magistrates Court on 24 December 2010. The parties to the proceeding were Mr Phillip Nichols and Ms Melinda Nichols. In his letter, Mr Edwards drew attention to the interlocutory injunctive relief sought in that initiating application as follows:
That an injunction issue to the liquidators of Asden Developments Pty. Ltd. Mr. Peter Dinoris and Mr. Nick Combis of Vincents Chartered Accountants of 32 Turbot Street Brisbane restraining those liquidators from taking possession of or dealing with any of the assets of that company until the true ownership of assets of the company have (sic) been determined.
Mr Dinoris confirmed in cross-examination at the trial of this proceeding that he was not subsequently served with any injunction order preventing him from taking possession of, or dealing with, any of the assets of Asden.
Mr Levis pays $10,000 to Mr Dinoris
On 23 December and 29 December 2010, Mr Levis drew two cheques in the amount of $5,000 on Urban Property’s bank account and sent them to Mr Dinoris. These cheques were deposited in Vincents Chartered Accountants’ trust account in the name of Asden.
Further steps in Asden’s liquidation from 24 December
On 24 December 2010, Mr Dinoris received Asden’s books and records from Mr Levis.
On 24 December 2010, Mr Dinoris sent the first report to creditors.
On 29 December 2010, Mr Dinoris received Asden’s MYOB records.
The first meeting of creditors of Asden was held on 7 January 2011. At that meeting, Mr Dinoris was confirmed as the liquidator of Asden.
The events concerning the sale of the boat
As is already mentioned above, Mr Dinoris took possession of the boat on 22 December 2010 and instructed Auctioneering Link to store it pending its sale (see at [37] above).
In late January 2011, Ms Del Monte of Mr Dinoris’ office gave instructions to Mr Khoury of Auctioneering Link to sell the boat. On 10 March 2011, Ms Del Monte contacted Mr Khoury and asked him to contact Yamaha Motor Finance to ascertain the payout figure for the loan on the boat and Yamaha’s attitude towards its sale. When Mr Khoury contacted Yamaha, he was informed that it was not willing to allow him to sell the boat while the loan was outstanding, but instead it required that it be sold by an auctioneer appointed by Yamaha. On about the same date, Mr Khoury had a discussion with Mr Levis about Ms Nichols paying out the loan on the boat so that it could be sold.
On 22 March 2011, Mr Dinoris received an email from Mr Levis which stated “Peter, as per our conversation can you confirm to Melinda Nichols that if she has paid out the Yamaha loan she is allowed/authorised to instruct Paul Khoury to sell the boat”.
On 23 March 2011, Mr Dinoris responded by email stating:
Peter,
I refer to your email below.
I understand that Melinda Nichols will be satisfying the secured debt owed to Yamaha and stepping in the shoes of that secured creditor to realise the boat under the common law principle of “subrogation”.
I would not be in a position to object to any party claiming a secured interest over the boat from selling it.
On the same day, Ms Melinda Nichols said that she obtained advice from her family lawyer, Mr Doyle, about the “subrogation” issue mentioned in this email and, assured by him that she was protected, she paid $21,348.24 from the TJI Investments account mentioned above to Yamaha to discharge the outstanding loan on the boat.
On 28 March 2011, Ms Nichols sent an email to Mr Khoury at Auctioneering Link, which was copied to Mr Levis and her family lawyer, Mr Doyle, stating that:
My name is Melinda Nichols, I have been authorised by Vincents Accountants whom (sic) are the appointed liquidators for the company Asden Developments Pty Ltd to instruct you and to give you my authorisation to sell the boat ...
From the sale proceeds I expect to receive the amount of $21,348.24 as reimbursement to myself for the payment of the finance loan, then any remainder proceeds to be forwarded on to Vincents Accountants.
Please do not hesitate to contact myself by replying to my email or phoning me on 0478 022 583 or alternatively contacting Peter Levis whom you have been previously dealing with.
Auctioneering Link sold the boat at auction on 18 April 2011 for the sum of $52,000. The proceeds of the sale were distributed as follows:
(a)$11,650.00 to Auctioneering Link
(b)$4,278.82 GST
(c)$21,348.24 to TJI Investments account at the Bank of Queensland;
(d)$9,790.00 to Private Equity Financial Services Pty Ltd;
(e)$4,932.94 to Mr Dinoris.
Private Equity Financial Services Pty Ltd (Private Equity) was a company of which Mr Levis was the sole director.
The family law proceeding and its aftermath
In April 2011, the Nichols family joined in the family law proceeding between Mr Phillip Nichols and Ms Melinda Nichols mentioned above (at [50]). They claimed that the sum of $270,000 mentioned above was an asset held on a resulting trust to them and they asserted that those funds were provided to Ms Nichols for the purpose of completing the Wakerley Project.
Between February and May 2011, on advice from Mr Doyle, Ms Nichols paid the balance of the funds held in the TJI Investments account to Mr Doyle’s trust account. That transfer was undertaken in two stages. The total amount transferred was $173,831.53.
In mid-2012, the Nichols family successfully applied to join Mr Doyle, Mr Levis and Urban Property as third parties to the family law proceeding mentioned above. In a letter their lawyers, ClarkeKann, sent to Mr Dinoris at about that time, they explained the reason for their application in the following terms:
Our clients intend to join the Third Parties to the Proceeding on the basis that the moneys paid to [Asden] (and subsequently withdrawn by Ms Nichols) were paid to the company for the express purpose of paying its creditors. Our clients intend to claim that those moneys are held on a trust and should be repaid to them by the Third Parties …
On 13 March 2013, the Nichols family obtained judgment in their constructive trust claim against Ms Nichols and other parties mentioned immediately above. In summary, they obtained judgment against:
(a)Ms Nichols in the sum of $62,670.00 plus interest in the sum of $12,690.00;
(b)Ms Nichols’ family lawyer, Mr Doyle, and the partner in his law firm, in the sum of $91,967.00 plus interest in the sum of $9,963.40; and
(c)Mr Levis and Urban Property in the sum of $56,500 plus interest in the sum of $11,441.25.
In addition to the above orders, Mr Doyle and the partner in his law firm were ordered to pay the sum of $81,863.63 held in their firm’s trust account to the trust account of the solicitors for the Nichols family and Ms Nichols, Mr Doyle and his partner, Mr Levis and Urban Property were ordered to pay the Nichols family’s costs of the proceeding. On 18 December 2013, Mr Doyle and his partner paid $33,100 in full settlement of this costs order. It is an agreed fact in this proceeding that the Nichols family incurred $170,803.06 in pursuing this proceeding.
As a consequence of the judgment against her, Ms Nichols was declared bankrupt on 8 May 2013.
As for Mr Levis, an order for the liquidation of Urban Property was made in June 2013 and he was declared bankrupt in July 2013.
THE ISSUES THAT ARISE
Prior to closing submissions at the trial, counsel for the parties agreed upon an issues template that set out the main issues that fell to be determined in the proceeding. That issues template was as follows:
I.         BREACH OF DUTY
(a)      Funds ($236,500)
1.Did Mr Dinoris breach the duty owed under s180 of the Corporations Act 2001 (herein the “CAct”) -
(a)did Mr Dinoris owe a duty to contact Melinda Nichols in relation to the missing funds –
(i)personally;
(ii)on 22 or 23 December 2010; or
(iii)at all.
(b)whether the conduct of Mr Dinoris in relation to contacting Melinda Nichols was unreasonable in the circumstances, stating the circumstances;
(c)if the conduct was unreasonable in the circumstances was it sufficiently serious to constitute negligence or did it constitute a mere non-negligent error of judgment?
(b)      Boat ($9,790)
(a)did Mr Dinoris owe a duty to supervise the process of sale of the Boat –
(i)prior to the sale of the Boat;
(ii)at all.
(b)whether the conduct of Mr Dinoris in relation to the sale of the Boat was unreasonable in the circumstances, stating the circumstances;
(c)if the conduct was unreasonable in the circumstances was it sufficiently serious to constitute negligence or did it constitute a mere non-negligent error of judgment?
II.       LOSS
(a)       Funds ($236,500)
2.Did such breach cause, or result in, any damage to the Company sufficient to warrant an order for compensation under s1317H of CAct and if so in what amount -
(a)whether the Applicant has established the factual basis for the Applicant’s contention that the funds ($264,541.02) was the property of the Company as alleged in para. 5(c) of the Amended Statement of Claim;
(b)had Ms Nichols been contacted is it more probable than not that she would have repaid the monies to Mr Dinoris;
(c)what effect (if any) does the NAB charge have on the question of loss;
(d)if so, what quantum of loss (if any) was suffered by the Applicant as a consequence of breach;
(e)is the loss too remote as a matter of law?
(b)      Boat ($9,790)
3. Did such breach relation to the Boat cause, or result in, any damage to the Company sufficient to warrant an order for compensation under s1317H of CAct and if so in what amount -
(a)what quantum of loss (if any) was suffered by the Applicant as a consequence of breach;
(b)what effect (if any) does the NAB charge have on the question of loss;
(c)is the loss too remote as a matter of law?
(c)       Set off ($56,692.02)
4. Whether the Respondents can claim a set-off as pleaded in paragraph 18(a)(iii) of the Amended Defence;
(a)as a matter of law;
(b)if so, what quantum of loss have the Respondents’ established in respect of the set-off.
III.     DEFENCES
(a)      Business Judgment Rule
5.Was the determination of Mr Dinoris to seek funding from creditors to conduct a public examination of Melinda Nichols a business judgment within the meaning of s180(2) as pleaded in para. 48 of the Amended Defence.
6.Was the determination of Mr Dinoris that there was little utility in speaking personally with Melinda Nichols a business judgment within the meaning of s180(2), as pleaded in para. 49 of the Amended Defence.
7.If so, are the requirements of 180(2)(a), (b), (c) and (d) satisfied, viz.:
(a)was the judgment made in good faith and for a proper purpose;
(b)did Mr Dinoris not have a material personal interest in the subject matter of the judgment;
(c)did Mr Dinoris inform himself about the subject matter of the judgment to the extent he reasonably believed to be appropriate;
(d)did Mr Dinoris rationally believe the judgment was in the best interest of the Applicant company.
(b)      Other Statutory Defences – s1317S; s1318
8.If the Respondents are found to be liable to the Applicant for breach of duty owed under s180(1), ought they be relieved in whole, or alternatively in part, from any liability by reason that the Respondents:
(a)acted honestly; and
(b)having regard to all of the circumstances of the case;
ought fairly to be excused for any such breach.

Because of the conclusions I have reached below about the Breach of Duty (b) Boat sub-issue, it is unnecessary for me to consider the loss issues above relating to that sub-issue (II. Loss (b) Boat). As well, because of the conclusions I have reached about Asden’s failure to establish the critical causation element of the Funds sub-issue above (II. Loss (a) Funds (2)(b)), it is unnecessary for me to consider the other loss issues relating to that sub-issue above. Finally, because of these conclusions, it is also unnecessary for me to consider the Set off issue above (II. Loss (c) Set off) and all of the Defences issues (III.).
I will address the remaining issues in the order in which they appear above, beginning with Breach of Duty (a) Funds sub-issue.
I. BREACH OF DUTY (A) FUNDS
As appears above (at [71] I. Breach of Duty (a) Funds (1)(a)), the crux of Asden’s funds sub-issue claim is that Mr Dinoris breached his duty to it under s 180 of the Corporations Act 2001 (Cth) (Corporations Act) by failing to contact Ms Nichols personally in relation to the funds transfer on 22 or 23 December 2010, or at all.
Contentions
On this “funds” sub-issue, Asden contended that Mr Dinoris was obligated to attempt to make direct personal contact with Ms Nichols and his failure to do so constituted a breach of his duty under s 180(1). It contended that Mr Dinoris knew that Asden had only one director and that she was most probably the sole signatory to its bank accounts. It contended it was therefore reasonable for Mr Dinoris to conclude that it was Ms Nichols who withdrew the funds from the company’s bank accounts the day before he was appointed as liquidator. Asden contended that, in those circumstances, it was inexcusable for Mr Dinoris not to contact Ms Nichols personally when it was, or should have been, clear to any reasonably competent liquidator that she had “cleaned out” the bank account the day before the liquidation commenced.
Asden submitted that company directors had a statutory obligation to cooperate with liquidators and that Mr Dinoris should have activated this obligation by contacting Ms Nichols personally once it became clear that the funds had been removed from the company’s bank account. In this respect, it submitted that it mattered not whether Mr Dinoris thought Ms Nichols would not cooperate with him.
Asden also pointed out that the letter Mr Dinoris issued to Ms Nichols on 22 December 2010 was in a standard form and made no mention of the funds that had been removed from the company’s bank account. It submitted that the “competing claims” by the Nichols family to the assets of the company and the threatened injunction proceeding by them did not provide any excuse for Mr Dinoris to fail to discharge his duty to contact Ms Nichols personally. It submitted that the obligation of a liquidator was to take custody of the assets of the company and it was immaterial whether there might be a dispute over who was entitled to those assets. Finally, Asden submitted that Mr Dinoris’ conduct was not simply an error of judgment or mistake, but rather was a breach of the duty he owed to it.
Mr Dinoris contended that there is no hard and fast rule of law compelling a liquidator to “speak directly” with a company director concerned in a liquidation of a company. He contended that such a rule would “visit a degree of inflexibility and place too restrictive a standard on liquidators” and unnecessarily restrict the discretion that is vested in a liquidator. Accordingly, he submitted that whether or not he ought to have personally contacted Ms Nichols was a matter for his judgment, falling within the bounds of his general discretion. He submitted that was to be judged only by reference to the circumstances known, or which ought reasonably to have been known, on the information available to him at the time. He contended that, while he had no direct oral communication with Ms Nichols, he did write to her on 22 December 2010 and on 23 December and he had a discussion with Mr Levis, the agent she appointed for the purposes of the liquidation.
Further, Mr Dinoris contended that the duty under s 180(1) of the Corporations Act did not, in the circumstances of this case, require him to contact Ms Nichols personally because it was not at the relevant time reasonably foreseeable that harm might be caused to the interests of the company as a consequence of any omission on his part to contact her. Mr Dinoris emphasised the importance of a liquidator’s independence. He also relied on the expert opinion of Mr Stimpson as to the reasonableness of his conduct (see at [104]–[110] below). He pointed to a range of circumstances which affected his decision not to make direct personal contact with Ms Nichols. He also pointed to the risk of Ms Nichols further dispersing the funds if he made contact with her and the fact that Mr George Nichols and Mr Phillip Nichols had both threatened to obtain an injunction to prevent him selling the assets of the company.
The relevant legal principles
As can be seen from the issues template above (at [71]), Asden’s breach of duty claim is based on s 180(1) of the Corporations Act. That section provides:
A director or other officer of a corporation must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they:
(a)were a director or officer of a corporation in the corporation’s circumstances; and
(b)occupied the office held by, and had the same responsibilities within the corporation as, the director or officer.
(Note omitted)
There is no issue that Mr Dinoris was an “officer” of Asden within the meaning of s 9(f) of the Corporations Act at all relevant times and that, by reason thereof, he owed Asden the duty prescribed by s 180(1).
The High Court illuminated the standard set by s 180(1) in the following terms in Shafron v Australian Securities and Investments Commission (2012) 247 CLR 465; [2012] HCA 18 at [18]:
The degree of care and diligence that is required by s 180(1) is fixed as an objective standard identified by reference to two relevant elements – the element identified in para (a): “the corporation’s circumstances”, and the element identified in para (b): the office and the responsibilities within the corporation that the officer in question occupied and had. No doubt, those responsibilities include any responsibility that is imposed on the officer by the applicable corporations legislation. But the responsibilities referred to in s 180(1) are not confined to statutory responsibilities; they include whatever responsibilities the officer concerned had within the corporation, regardless of how or why those responsibilities came to be imposed on that officer.
(Emphasis in original)
With respect to the particular role liquidators perform as officers of a company, Middleton J observed in Australian Securities and Investments Commission v Dunner (2013) 303 ALR 98; [2013] FCA 872 that liquidators were subject to the same statutory duty as directors, but they were also required to meet the high standard of care and diligence expected of persons who were paid to exercise their professional skills. His Honour said:
28As officers, liquidators and receivers are subject to the same statutory duty of care and diligence as directors under s 180 of the Act.
29Specifically in relation to liquidators, I note that a liquidator is appointed and paid to exercise a particular professional skill, and a high standard of care and diligence is required in the performance of their duties (Pace v Antlers Pty Ltd (in liq) (1998) 80 FCR 485 at 497; 26 ACSR 490 at 501 (Pace).
30 In Pace (1998) 80 FCR 486 at 499, Lindgren J stated that a liquidator:
… must exhibit care (including diligence) and skill to an extent that is reasonable in all the circumstances. “All the circumstances” will include the facts that a liquidator is a person practising a profession, that a liquidator holds himself or herself out as having special qualifications, training and experience pertinent to the liquidator’s role and function, and that a liquidator is paid for liquidation work. ‘All the circumstances’ will also include the fact that some decisions and courses of action which a liquidator is called upon to consider will be of a business or commercial character, as to which competent liquidators acting with due care, but always without the benefit of hindsight, may have differences of opinion.
Having indirectly mentioned the observations of Lindgren J in Pace v Antlers Pty Ltd (In Liquidation) (1998) 80 FCR 485 (Pace), it is convenient at this point to dispose of a submission made on behalf of Mr Dinoris. That submission was to the effect that the relevant test for a liquidator’s duty under s 180(1) was whether the liquidator’s conduct was so unreasonable that no reasonable liquidator could have acted in that manner. Lindgren J dealt with a similar submission in Pace and rejected it in favour of the test set out above (at 498–499). I respectfully agree with his Honour’s approach and accordingly reject Mr Dinoris’ similar contention about that test.
Before leaving Pace, it is also worth noting that, in defining a liquidator’s duty under s 180, Lindgren J relied upon authorities dealing with a company officer’s liability in tort. In his submissions, Mr Dinoris contended for that approach albeit relying upon Austin J in Australian Securities and Investments Commission v Vines (2005) 55 ACSR 617; [2005] NSWSC 738 at [1070] where his Honour observed that “the general law of torts may now be called in aid as a source of guiding principles for the content of the statutory standard of care of company directors and officers”. See also Australian Securities and Investments Commission v Rich (2009) 236 FLR 1; [2009] NSWSC 1229 (Rich) at [7231] per Austin J. I agree and therefore accept Mr Dinoris’ submission in this respect. That being so, I should also mention a decision on the same question that Asden relied upon: Sydlow Pty Ltd (In Liquidation) v TG Kotselas Pty Ltd (1996) 65 FCR 234, where Tamberlin J outlined the following pertinent common law principles (at 243–4):
•Liquidators can be liable in an action at common law for failure to exercise due care and skill in the performance of their duties and are therefore tortfeasors within the strict sense of the term. This liability is analogous to that of directors.
•Liquidators have a duty to exercise particular professional skill, care and diligence in the performance of duties. See B H McPherson and J O’Donovan, The Law of Company Liquidation (3rd ed, 1987), p 218; Ford and Austin’s Principles of Corporations Law (7th ed, 1994), pp 1013-1017; Palmer’s Company Law Service, p 15130, par 15.323.
•In Maelor Jones Investments (Noarlunga) Pty Ltd v Heywood-Smith (1989) 54 SASR 285, Olsson J held that a liquidator was liable in negligence on the basis that he failed to display that degree of care and skill, which by accepting office he held himself out as possessing.
•In Daniels v Anderson (1995) 37 NSWLR 438 at 505, the NSW Court of Appeal (by majority, Clarke and Sheller JJA) confirmed a decision that directors owe a duty of care in tort and could be sued for contribution pursuant to s 5(1)(c) of the LRMPA and that negligent directors are tortfeasors within the meaning of that subsection.
•The principles adopted in Daniel ‘s [sic] case are relevant and are of even greater force when considering the duties of a liquidator. Directors, unlike liquidators, are not necessarily professionals, and they do not necessarily hold themselves out as possessing any particular skill or experience.
While it will ultimately be unnecessary to consider the “business judgment” rule defence that Mr Dinoris has raised (see at [71] above: III. Defences (a)), I will, for completeness, mention a decision that Mr Dinoris relied upon bearing upon that issue: Viscariello v Macks (2014) 103 ACSR 542; [2014] SASC 189. In that matter, Kourakis CJ made the following observations about the operations of ss 181 and 182:
815In Yeomans v Walker Hodgson J explained the general approach taken by supervising courts to the statutory duties imposed on liquidators as follows:
In my view, the general approach of the Court in a case like this is that it should not interfere with a decision made by a liquidator unless either there is fraud, or it can be said that the discretion has not been exercised bona fide, or it can be said that the liquidator has acted in a way in which no reasonable liquidator could have acted … it may be that if a liquidator does take into account entirely irrelevant considerations, then it would be appropriate to intervene, but, in my view, that is not the case here.
816There is great reluctance on the part of courts to interfere in commercial decisions. There is an analogy between the business judgments of directors and the discretionary decisions of liquidators involving business judgments.
817I accept that judgments about the liquidator’s conduct must be made in the context of the circumstances as they existed at the time, without the benefit of hindsight, and with the distinction between negligence and mistakes of error of judgment firmly in mind.
(Footnotes omitted)
If I had to consider the availability of this defence, I would have concluded that it would not have been available to Mr Dinoris in the circumstances of this matter. That is so because Asden’s complaint against Mr Dinoris concerns the performance of his statutory duty as its liquidator under s 180(1) and particularly his statutory obligation to take custody of, and control, all of the property to which the company is, or appears to be, entitled (s 474(1) of the Corporations Act). It does not concern a decision he made in the conduct of any business or commercial activity of Asden. In this respect, I consider the observations of Keane CJ (with whom Emmett and Finkelstein JJ agreed) in Australian Securities and Investments Commission v Fortescue Metals Group Ltd (2011) 190 FCR 364; [2011] FCAFC 19 are applicable (at [197]):
This difficulty apart, the decision not to disclose the true effect of the agreements cannot be described as “business judgment” at all. A decision not to make accurate disclosure of the terms of a major contract is not a decision related to the “business operations” of the corporation. Rather it is a decision related to compliance with the requirements of the Act.
For these reasons, I would not have concluded Mr Dinoris’ decision not to contact Ms Nichols personally on or after 22 December 2010 was covered by the “business judgment” rule.
Finally, it is appropriate to mention the distinction Mr Dinoris drew between mistakes, or errors of judgment, and a breach of the statutory duty imposed by s 180(1). On this aspect, he relied upon the observations of Austin J in Rich which succinctly made that distinction. His Honour said (at [7242]):
The statutory issue under s 180(1) is not whether the defendants made mistakes in the process of financial forecasting, and a fortiori, it is not whether they formed opinions different from the opinions of ASIC or even of the court. The statutory issue is whether they failed to meet the standard of care and diligence that the statute lays down. The statute requires the court to apply a standard defined in terms of the degree of care and diligence that a reasonable person would exercise, taking into account the corporation’s circumstances, the offices occupied by the defendants and their responsibilities within the corporation. That requires the defendants’ conduct to be assessed with close regard to the circumstances existing at the relevant time, without the benefit of hindsight, and with the distinction between negligence and mistakes or errors of judgment firmly in mind. If the impugned conduct is found to be a mere error of judgment, then the statutory standard under s 180(1) is not contravened and it is unnecessary to advert to the special business judgment rule in s 180(2). In the view that I have taken of it, explained below, s 180(2) provides a defence in a case where the impugned conduct goes beyond a mere error of judgment, and would contravene the statutory standard but for the defence (cf ASR [351-2]).
To sum up, the test is an objective one. It requires an assessment as to whether Mr Dinoris’ conduct as a professional liquidator demonstrated the requisite degree of care and diligence that was reasonable in all the relevant circumstances. That assessment is to be made at the time of Mr Dinoris’ alleged breach and not with the benefit of hindsight. It is to have regard to the degree of care and diligence expected of a skilled and professional accountant performing the role of a liquidator. It also requires care to be taken to distinguish between conduct amounting to a breach of the statutory duty and that amounting to a mistake or error of judgment.
There are two other provisions of the Corporations Act that should be mentioned before leaving this outline of the relevant legal principles. Both were relied upon by Mr Dinoris. The first was the content of a liquidator’s duty when there were insufficient funds in the company to cover his or her expenses. In this respect, s 545 of the Corporations Act provides:
(1)Subject to this section, a liquidator is not liable to incur any expense in relation to the winding up of a company unless there is sufficient available property.
(2)The Court or ASIC may, on the application of a creditor or a contributory, direct a liquidator to incur a particular expense on condition that the creditor or contributory indemnifies the liquidator in respect of the recovery of the amount expended and, if the Court or ASIC so directs, gives such security to secure the amount of the indemnity as the Court or ASIC thinks reasonable.
(3)Nothing in this section is taken to relieve a liquidator of any obligation to lodge a document (including a report) with ASIC under any provision of this Act by reason only that he or she would be required to incur expense in order to perform that obligation.
On the operation of this section, Finkelstein J observed in Jenkins v Jonkay Pty Ltd [2007] FCA 858 at [10]:
10… In deciding whether the liquidator is acting unreasonably it is necessary to have regard to s 545 of the Corporations Act. Subsection (1) provides that “a liquidator is not liable to incur any expense in relation to the winding up of a company unless there is sufficient available property”. (There are certain exceptions in relation to lodging of documents with ASIC: see s 545(3).) The effect of the section is that, apart from lodging certain documents, a liquidator is not required to do anything if he cannot recover his expenses. It means the liquidator commits no wrong in failing to carry out any duties.
I will return to this issue later in these reasons.
Secondly, Mr Dinoris raised the fact that a breach of s 180 of the Corporations Act is a civil penalty provision: see s 1317DA. Accordingly, if a court is satisfied that a person has contravened such a provision, it must make a declaration of contravention (s 1317E) and it may order that person to pay the Commonwealth a pecuniary penalty (s 1317G). It should be emphasised that, while a declaration of contravention has been sought by Asden, it has not sought a pecuniary penalty order. Nonetheless, while s 1332 of the Corporations Act applies the civil standard of proof, Mr Dinoris referred to the factors outlined in s 140(2) of the Evidence Act 1995 (Cth) and relied upon the following observations of Gilmour J in Australian Securities and Investments Commission v Fortescue Group Ltd (No 5) (2009) 264 ALR 201; [2009] FCA 1586 at [82], which, I accept, accurately describe the approach I should take in determining whether or not Mr Dinoris contravened s 180 in this matter:
In conclusion, the standard of proof that I must apply is the balance of probabilities as prescribed by s 1332, and I accept that in deciding whether ASIC’s allegations are made out on the balance of probabilities I am required to take into account the causes of action and the gravity of the matters alleged and their consequences: s 140(2) Evidence Act; Briginshaw. If inferences are to be drawn, ASIC has to establish that the circumstances appearing from the evidence give rise to a reasonable and definite inference and not merely to conflicting inferences of equal degrees of probability: Australian Securities and Investments Commission v Macdonald (No 11) (2009) 256 ALR 199; [2009] NSWSC 287 at [186] …; Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia at [38].
Mr Dinoris’ evidence about the relevant circumstances affecting his decision

It is apparent from the relevant legal principles summarised above (at [89]) that Mr Dinoris’ conduct as the liquidator of Asden has to be assessed in all the relevant circumstances. Mr Dinoris filed an affidavit in this proceeding in which he described in considerable detail the background to the events of late December 2010, what it was that he did once he was appointed as liquidator of Asden, why it was that he decided not to make direct personal contact with Ms Nichols and what circumstances he took into account in making that decision. Since each of these aspects of Mr Dinoris’ evidence is important in assessing whether or not he breached his duty of care under s 180(1), it is appropriate to set out his evidence in some detail.
As to the relevant background to his decision, Mr Dinoris provided the following evidence in his affidavit:
14.My first point of contact with Mr Levis in respect of the Company was on 15 December 2010, when Mr Levis contacted me by telephone and (in substance or effect):
(a)       he advised:
(i)that he, or his Company, was an insolvency consultant;
(ii)that he had a potential voluntary Liquidation that may or may not arise involving a small number of creditors, some debtors, land and some equipment;
(iii)that the name of the Company that he was assisting was Asden Developments Pty Ltd ACN 115 851 833; and
(iv)that he would be the point of contact between me and the director, Melinda Nichols, as she was under a lot of pressure and stress by reason of a family dispute;
(b)       he requested:
(i)whether I would be prepared to accept an appointment as Liquidator; and
(ii)that I provide, or caused to be provided, precedent appointment documents for his client’s consideration.
15.I was not provided with the telephone number or email address of the director by Mr Levis as he wanted the communications directly through him. Without a telephone number I was not able to contact the director by telephone.
16.      After that telephone call, I arranged, on 15 December 2010, for:
(a)an historical extract search for the Company to be obtained from the records of the Australian Securities and Investment Commission (“ASIC”) which revealed the Company was subject to a fixed charge in favour of De Lage Landen Ply Ltd and a fixed and floating charge in favour of the National Australia Bank Limited (“NAB”) …; and
(b)an email (15.12.10 (2:30pm)), which included a link to the Form 509 Presentation of summary of affairs of a Company, to be sent to Mr Levis in accordance with his request which attached:
(i)precedent Notice of Member Meeting;
(ii)precedent Consent to Short Notice;
(iii)Letter addressed to Melinda Nichols (with attachments dated 15 December 2010 providing information regarding the information and documentation required by me to initiate creditors’ voluntary liquidation, the process for initiating such a winding up and the effect of the appointment of Liquidators (“Director Letter 15.12.10”). This letter also disclosed that the Form 509 requires the director to disclose a summary of the estimated assets and liabilities of the Company. It also disclosed that the Corporations Act 2001 requires her to provide to the meeting of creditors a full and complete Report as to Affairs (Form 507) accompanied by a report on the circumstances leading up to the proposed winding up. It was noted that the Form 507 addresses a more detailed listing of assets and liabilities of the Company;
(iv) precedent Minutes of Director Meeting; and
(v)precedent Minutes of Member Meeting ...
…
17. During the telephone conversation with Mr Levis held on 15 December 2010, I noted that I would be prepared to accept an appointment as Liquidator for an upfront contribution of $10,000.00 towards the professional fees and outlays to be incurred in the Liquidation. I do not recall whether it was Mr Levis or me that suggested the amount of $10,000.00.
18.It is my usual practice to seek a voluntary contribution towards professional fees and outlays from a director for a creditors’ voluntary Liquidation. This amount does not represent a fixed fee to undertake the appointment but a contribution towards the professional fees and outlays of the Liquidators.
19.      The Director Letter 15.12.10 stated-
“Before I can accept appointment as liquidator of the company, I require minimum funds of $x,xxx.00 (inclusive of GST) to be deposited into the bank account detail below ...”.
I do not recall the reasons the Director Letter 15.12.10 referred to “$x,xxx.00” in respect to the upfront contribution. It may have been an oversight by my staff and subsequently myself.
20.The amount of $10,000.00 was not, and was never intended to be, a fixed price quote for the Liquidation. Generally prior to an appointment as Liquidator, there are too many unknowns, each Company Liquidation is different and more often than not the costs involved are unpredictable. I did not at any stage agree that the appointment as Liquidators of the Company would be limited to a fixed amount of $10,000.00.
(Emphasis in original)
The steps Mr Dinoris undertook as liquidator once he was appointed are already described in some detail above (at [37]–[50]) and do not require repeating here. In addition to those steps, Mr Dinoris described the following:
(k)the offices of Vincents Chartered Accountants closed at the end of trade on Thursday, 23 December 2010 for the Christmas period and re-opened on Tuesday 4 January 2011. It is noted that 25 December 2010 to 28 December 2010 (inclusive) and 3 January 2011 were public holidays or weekends. I did however work on 24 December 2010;
(l)on 24 December 2010, the Liquidators received boxes of Company records;
(m)I prepared the Report to Creditors dated 24 December 2010 and a copy was provided to Mr Levis and Mr Nichols. The Report to Creditors was also lodged with the ASIC. It stated at page 2-
“…
ŸA number of fixed assets of the Company are held at a property owned by Dr George Nichols, who is understood to be the director’s father-in-law. At the time of the preparation of this report, we had not been granted access to collect the balance of the fixed assets of the Company.
ŸCorrespondence has been received from the barrister of Phillip Nichols, ex-husband of the director, claiming that various parties are the rightful owners of the fixed assets of the Company pursuant to a “resulting trust” and that an injunction is being sought to prevent the Liquidators from collecting and selling the assets of the Company. No documentary evidence has been provided to substantiate this alleged claim. Phillip Nichols was recently discharged from bankruptcy.
ŸThe assets and undertakings of the Company are subject to a fixed and floating charge held by National Australia Bank Limited. Complete details have been provided to the bank regarding the above-mentioned issues arising with the assets of the Company.
ŸDe Lange Landen Pty Ltd holds a fixed charge.
ŸI am awaiting information from the secured creditors regarding the debt and security positions.
ŸMy investigations are continuing into transactions involving the director and various associated parties, in particular the withdrawal of Company funds. I am also investigating the issue of shadow directors and other voidable transactions.”
…
(n)the Liquidators then turned their attention to investigating the Company’s MYOB file which was provided by an email received from Mr Levis on 29 December 2010, for which the user name and password were received on 5 January 2011, and the boxes of Company records provided on 24 December 2010 …
(o)ultimately, by about 20 January 2011 it was becoming increasingly clear (and probably 8 February 2011 at the latest), that our investigations, including of the MYOB and other records of the Company, did not provide any information regarding the destination of the funds;
Mr Dinoris devoted a paragraph of his affidavit to explaining why it was that he did not speak to, or meet, Ms Nichols personally. In that paragraph, he stated as follows:
(a)it is correct that I did not speak or meet personally with Melinda Nichols prior to the appointment or during the administration of the the (sic) Liquidation;
(b)this was a consequence of Mr Levis being the conduit for communications between the Liquidators and the director as was the case since the appointment. In this case, I was not provided with Melinda Nichols telephone contact and I was requested to communicate through the director’s representative, Mr Levis;
(c)I understood, from what I was told by Mr Levis, that Melinda Nichols was under stress and distracted by the Matrimonial Proceedings involving Phillip Nichols and the Nichols family;
(d)I consider that a prudent Liquidator would communicate with those parties whom she or he believes have knowledge of the examinable affairs of the relevant Company and are able to provide additional information and documentation. In this case, I considered that person to be Mr Levis. There was good reason in the early stages of the Liquidation, to consider that Melinda Nichols was not the prime controller of the Company. She was married to Phillip Nichols. There was evidence that Phillip Nichols was, despite his bankruptcy, dealing with creditors and entering into transactions on behalf of the Company. A purpose of the Company was to act as construction or project manager of the Wakerly (sic) Development; which development was funded by George Nichols and/or the Nichols family. I also had concerns that the funds may have been dealt with by either the director or a shadow director;
(e)I did consider there was a real possibility that the funds had been removed from the Company’s bank account by Melinda Nichols in breach of her duty to the Company. I stated as much in the Report to Creditors dated 24 December 2010. I also referred to Phillip Nichols’ apparent involvement as a shadow director …
(f)In his conversation with me on 23 December 2010, Mr Levis had stated ‘matter-of factly’ that the funds were not received by or held personally by Melinda Nichols …
(g)as previously mentioned herein, though I held reservations about what I was being told by Mr Levis, there was at that stage no, or no sufficient, evidence available to challenge the veracity of what I was being told by Mr Levis as it was, at that stage, unclear as to where the funds had gone;
(h)I considered, in the circumstances of this case, that there was little to be gained in speaking or meeting personally with Melinda Nichols. I considered, in the circumstances, that any such attempts to do so would prove fruitless and I was not at all confident that I would obtain the information from Melinda Nichols in any event. No such information was forthcoming in any documentation, records, computer files or statutory forms already provided by or on her behalf;
(i)I considered, in all of the circumstances, that the best course was to investigate the transaction further by reference to the documentary evidence including the Company’s MYOB, the tracing of the transaction and other documents, which investigations were undertaken. Ultimately that led to me determining to seek funding in order to utilise statutory powers to conduct a public examination of Melinda Nichols and others regarding the examinable affairs of the Company. The public examination could have been utilised to obtain information and documentation regarding transactions involving the funds, the history of the Company and the claims of various parties to the ownership of the funds; and
(j)I believe that in the circumstances of this Liquidation appropriate and adequate steps were undertaken in terms of the investigations to determine the destination of the funds ($236,500.00) withdrawn from the Company’s bank account.
He also stated earlier in his affidavit that:
41. In response thereto, and by way of further explanation, I state:
…
(b)the Liquidators did make enquiry of Melinda Nichols in the letter dated 22 December 2010 which contained a notice requiring delivery of books, records, monies and property of the Company; a questionnaire for directors and officers; and statement of responsibilities as director of the Company; and
(c)The Form 507 (Report as to Affairs) signed by the director did not include any reference to the funds withdrawn from the bank account of the Company.
In cross-examination, Mr Dinoris agreed that, once he obtained a copy of the withdrawal slip on the afternoon of 23 December 2010, he was able to see that it bore what appeared to be the signature of Ms Nichols. He also agreed that he knew she was the sole director of Asden. Further, when he spoke to Mr Levis by telephone shortly thereafter, he agreed that Mr Levis did not tell him not to contact Ms Nichols and he said he did not ask Mr Levis for Ms Nichols’ telephone number or contact details. In that context, he was asked why he did not thereafter contact Ms Nichols personally. In response, he said as follows:
Okay. Well, there were a few reasons. Firstly, our communications on this matter were through the representative of Ms Nichols, which was Peter Levis. From my discussion with him on 23 December I was not confident that Melinda Nichols would provide any additional information to that provided by him. Secondly, I didn’t have the contact details for Melinda Nichols as they weren’t provided to me. And that’s in respect to her telephone number and email. Thirdly, a letter was issued to Melinda Nichols on 22 December, which was the date of our appointment giving a notice under section 530A of the Corporations Act to send to us all records and assets of the company, and also disclose if anything had been fraudulently withdrawn in the last 10 years. And finally, even from the outset of the liquidation there were competing claims to the funds. There was threats of injunctions and actual applications for injunctions. There were matrimonial proceedings on hand. There wasn’t clear indications at that point that any withdrawal was unlawful. So in the circumstances I had decided that I was going to conduct further investigations on the documents before considering any contact with her directly.
In re-examination, Mr Dinoris gave the following evidence on this issue:
[MR ERSKINE] Yesterday Mr Martin asked you why did you not contact Melinda Nichols direct after speaking with Mr Levis. Do you recall that?---Yes, I do.
He suggested to you it was a reasonable thing to do. Can you assist his Honour with what the process – your process of reasoning was in terms of contacting Melinda Nichols after speaking with Mr Levis on 23 December?---Okay. After speaking with Mr Levis it was my position that I determined to investigate the matter on the documents, conduct various investigations and one of the reasons for that was to determine the purpose and reason for the withdrawal of the funds. After conducting those investigations, by late January 2011/early February 2011 I determined that it was best for this liquidation under the circumstances that a public examination be conducted. We sought funding for a public examination and my concerns were if the transaction had been unlawful, whether contacting a director without conducting some investigations prior to that may have resulted in the funds being further dispersed.
In terms of that last part of your answer - - -?---Yes.
- - - you were concerned that – I’m just trying to understand what you said there?---Yes, yes.
You’re saying that if you contacted Melinda Nichols prematurely - - -?---Prematurely without conducting adequate investigations - - -
You made - - -?--- - - - there may be a risk of the – of the funds being further dispersed.
Pertinent to the above evidence, in a later paragraph of his affidavit, Mr Dinoris set out the “relevant circumstances known to exist at the time and taken into account in this case in determining that the best course was to seek funding to conduct a public examination of [Ms Nichols]”. That is, rather than attempt to speak to her personally. Insofar as they relate to the period in late December 2010 and January 2011, the circumstances Mr Dinoris described repeat much of the information set out above (at [96]–[99]). However, since his description of those circumstances is an important consideration, it is appropriate to set them out in full. They are as follows:
(a)on 22 December 2010, Mr [George] Nichols had advised Ms Del Monte that he would be seeking an injunction to preclude the Liquidators from selling Company assets and that no funds were to be withdrawn from the Company bank account as he was owed $270,000.00 and required his money back and that my office should contact his Barrister, David Edwards …
(b)on 22 December 2010, David Edwards telephoned me and confirmed that his client (Phillip Nichols) was considering obtaining an injunction to prevent Liquidators from selling the Company’s assets by reason that they formed part of the matrimonial assets in a family law dispute between Phillip Nichols and Melinda Nichols …
(c)on 22 December 2010, David Edwards sent a facsimile to me confirming that the Company’s assets were considered matrimonial assets in the matrimonial proceedings and that Mr Nichols had recently advanced $360,000.00 to the Company director to pay the Company’s then current liabilities …
(d)on 23 December 2010, David Edwards sent a facsimile to me advising that the Nichols family asserted that they were the owners of the Company’s list of assets (set out in my letter dated 22 December 2010) under a resulting trust and referring to an injunction to restrain the Liquidators from collecting and selling any of the Company assets …
(e)as at 23 December 2010, an email from Mr Levis enclosed a copy of the Company’s summary of unpaid invoices which revealed - $81,805.04 of unpaid contractor’s invoices; $18,057.65 of unpaid subcontractor invoices; and $6,334.27 of unpaid supplier invoices …
(f)as at 23 December 2010, an email from Mr Levis disclosed an amended Form 509 which resulted in a revised deficit of assets to liabilities of $393,562.00 …
(g)on Friday 24 December 2010, David Edwards sent a facsimile to me advising that proceedings were being instituted in the Federal Magistrates Court that day seeking an injunction to prevent the Liquidators from taking possession of, or dealing with, any of the assets of the Company. He advised that the Liquidators would be served with a copy of the Applications that afternoon …
(h)on 24 December 2010, I informed each of the secured creditors (NAB and De Lage Landen Pty Ltd) of the proposed injunction proceedings and that members of the Nichols family had claimed ownership of the Company’s assets under a constructive trust …
(i)on 30 December 2010, the Liquidators were served with the Initiating Application filed 24 December 2010 in the Matrimonial Proceedings seeking an injunction to prevent the Liquidators from taking possession or dealing with any of the Company’s assets until the true ownership of the assets was established …
(j)on 7 January 2011, Dale Cliff (then of ClarkeKann Lawyers) sent an email to me stating that caveats had been lodged by Mr Nichols over the Company’s land …
(k)on 11 January 2011, the Liquidators received notice that Bunnings Group Limited had lodged a caveat over the Company’s land …
…
(r)there was no available property in the Liquidation of the Company sufficient to enable the Liquidators to carry out further investigations or conduct a public examination and Mr Combis and I, by reason of Section 545 of the Corporations Act, were not obliged (save for lodgement of formal records with the ASIC) to incur any expense in relation to the winding up of the Company;
(s)requests for funding, including of Mr [George] Nichols, to carry out further investigations and conduct a public examination were unanswered and in particular the requests to ClarkeKann Lawyers dated 20 January 2011 …, 21 February 2011 …, 5 August 2011 … and 22 May 2012 …
…
(w)Melinda Nichols did not provide any hard copy or computer files that included information on the transactions involving the funds or disclose any such information in the statutory forms relevant to the Liquidation;
(x)neither Melinda Nichols nor any other party surrendered to the Liquidators the computer(s) of the Company to enable the Forensic Technology Division of Vincents Chartered Accountants to conduct an examination of the computer files to attempt to identify an information relevant to transactions involving the funds; and
(y)no information regarding transactions involving the funds was provided by Mr Levis who was representing Melinda Nichols.

Then, in cross-examination, she gave the following evidence:
[MR ERSKINE] And I suggest to you that had Mr Dinoris telephone you on 21 December enquiring about 236,500, you would have sought the advice of Mr Levis?---No. Maybe, I’m not sure. Maybe I would have. But Peter Levis, as far as I’m aware, was communicating everything that had happened between – with Peter Dinoris. So I would have thought that if Peter Dinoris was ringing me then Peter Levis would already know about it.
…
MR ERSKINE: … Now, in evidence-in-chief yesterday you gave evidence that had Mr Dinoris or Mr Combis rung you on or about 22 or 23 December and asked about these transactions and the money in the bank account of the company that had been taken out that your evidence is that you would have told them truth. Do you recall saying that?---Yes.
Where it had gone, and you would have repaid it. Do you remember saying that?---Yes.
…
MR ERSKINE: All right. I suggest you would not have repaid the money?---No, I – I think that I would have repaid the money.
I put to you that you would have sought the advice of Mr Levis?---Well, like, I’ve said Peter Levis was – Peter Levis told me that Peter Dinoris was already aware of what had happened with this money so - - -
And I suggest initially - - -
HIS HONOUR: So was the answer yes or no? You would have told – you would have sought Mr Levis’ advice or no?---Yes, I – I suppose, yes.
You would have?---As far as his advice I – I probably would have spoken to him, but as far as paying it back, I mean, Peter Dinoris, he is the liquidator as such. So he, you know, he is the – the authority so I – I guess I’m trying to say I – I would have paid it back.
MR ERSKINE: Well, you had already received a letter - - -?---I just – I - - -
I’m sorry?---Sorry. It – this is just a little bit because Peter Dinoris and Peter Levis as far as I’m aware through this whole thing knew. So had I received a phone call from Peter Dinoris I do believe I would have paid it back.
But you didn’t expect at all to have any communication with Mr Dinoris direct. You appointed Mr Levis for that sole purpose or main purpose. Mr Levis handled all of the communications between you and Mr Dinoris, correct?---Yes, yes, that’s correct.
…
MR ERSKINE: Well, it was correct, was it not, that you appointed Mr Levis to handle all of the dealings with professionals including between you and the liquidator, Mr Dinoris?---Yes.
You agree with that. And most, if not all of the communications that you received from the liquidators went through Mr Levis?---Yes.
So you, in those circumstances, would accept, I suggest, that if information or request for information was coming to you from the liquidators it would go through Mr Levis, your agent?---Yes.
Are you aware that Mr Dinoris did, in fact, request of Mr Levis what happened to the moneys? Did you know that?---No.
So Mr Levis didn’t tell you?---No.
It is unlikely Ms Nichols would have paid the funds to Mr Dinoris
When Ms Nichols’ evidence at the trial of this matter approximately five years after the events of late 2010 and early 2011 is assessed against the evidence bearing on all the relevant surrounding circumstances existing at that time, I consider the likelihood is that she would not have responded to an enquiry from Mr Dinoris in late 2010 or early 2011 by agreeing to pay back the funds. Instead, I consider she would most likely have sought advice from Mr Levis, or Mr Doyle, or both of them, and acted on that advice. Further, in the circumstances, I consider it is more likely that both Mr Levis and Mr Doyle, for different reasons, would have advised her not to repay the funds to Mr Dinoris. My reasons for reaching this conclusion are set out below.
First, I agree with Mr Dinoris that the second and most critical question put to Ms Nichols in her evidence-in-chief above (at [161]) was a leading question: “If they had asked you to repay what you had, what would you have done?” Her answer (“I would have repaid it”) must therefore be weighed accordingly. Furthermore, the question was so imprecise and the answer was so ambiguous that its meaning is difficult to discern. There is no difficulty with the word “they” in the question because, in the context of the previous question, it plainly meant Mr Dinoris or Mr Combis: “if on the 22nd or 23 December, … Mr Dinoris or Mr Combis, had rung you and asked you about these transactions and the money in the bank account of the company that had been taken out, what would you have told them?” However, in the same context, the words “repay what you had” is more problematic. It could mean the money “that had been taken out” of the company’s bank account, or it could mean the money that Ms Nichols “had” at the time. Both possibilities are open on the previous question and both suffer from similar difficulties. On the first possibility, in fact, there were at the time two company bank accounts – one at Suncorp and one at the Bank of Queensland – and different amounts had been taken out of each at different times: $264,531.02 from the Suncorp account on 15 December 2010 and $236,500 from the Bank of Queensland account on 21 December 2010. On the second possibility, the difficulty is whether “had” meant in her possession, or under her control, bearing in mind the fact that, at the time, Mr Levis had the remainder of the money, namely $56,500. These features demonstrate the importance of framing precise non-leading questions when a witness is being asked to state how he or she would have acted in a particular hypothetical situation. In this case, the imprecise and leading nature of the question significantly affects the weight that can be given to Ms Nichols’ answer.
Next, it is convenient to review the evidence relating to Ms Nichols’ emotional state in late 2010 in order to assess the effect, if any, that had on the reliability of her evidence given at the trial of this proceeding. On this aspect, two observations are appropriate at the outset. First, the only evidence I have received about the events of late 2010 concerning the dealings between Ms Nichols and the Nichols family, including her former husband Mr Phillip Nichols, comes from Ms Nichols herself. I have not heard any evidence from any member of the Nichols family as to their version of those events. It follows that my observations about those events must necessarily be read in that light. Specifically, in recording Ms Nichols’ views about the conduct of various members of the Nichols family, I should not be taken as accepting the accuracy of those views, merely that those are the views Ms Nichols held about those events. Secondly, I consider that the affidavits Ms Nichols made in April 2012 and January 2013 for the purposes of the family law proceeding commenced by her husband are more likely to reflect her state of mind in late 2010 than the evidence she gave at the trial of this proceeding.
Late 2010 was clearly a stressful period for Ms Nichols. From her affidavits filed in the family law proceeding and her oral evidence at the trial, it appears that there were many sources of this stress. They included: the separation from her husband, the domestic violence order application she made and the subsequent and related withdrawal of support from her parents-in-law: see at [19] above. They also included the contemporaneous financial pressures associated with Asden’s affairs. On this aspect, it is important to recall that Ms Nichols claimed she only became involved as the sole director of Asden because Mr Phillip Nichols and Mr George Nichols asked her to do that. She added that Mr Phillip Nichols was bankrupt at the time the company was established.
In my view, this stress affected the reliability of Ms Nichols’ evidence about the events of this period. She acknowledged as much in cross-examination when she said her recollection of those events was: “A little bit hazy, but I would try and – I will do my best. I’ve tried to put a lot of this behind me.” I do not therefore consider her hypothetical evidence about what she would have done in this period is likely to be accurate.
The above conclusion is further supported by her pattern of conduct during this period as follows. Asden’s financial pressures began to emerge in October/November 2010 and continued until its liquidation in December 2010 (see [18] and [20]–[24] above). Ms Nichols believed that they were largely brought about by Mr Phillip Nichols’ failure to complete the five houses in the Wakerley project for which he was responsible: see at [17] above. As Asden’s financial pressures began to build, Ms Nichols appears to have felt trapped. She said in one of her affidavits in the family law proceeding that she “wanted to get away and start her life afresh”: see at [18] above. At about the same time, she told Mr George Nichols that she wanted to resign as a director of Asden. However, despite an indication that he would take over responsibility for the company, this did not eventuate: see at [20]–[21] above.
Against this background, it is apparent from her affidavits in the family law proceeding and her cross-examination at the trial of this matter that Ms Nichols felt she had been betrayed by the Nichols family when it withdrew financial support for Asden and left her with the responsibility for its taxation debts and other creditors: see at [25] above. It is also apparent that this sense of betrayal was heightened when the Nichols family, through their lawyers, Anthony’s, not only demanded that she repay the $270,000 in funds, but also demanded that she pay a mortgage debt for which Mr George Nichols had years earlier assured her she would never be responsible: see at [13]–[15] and [29] above.
The views Ms Nichols held about the effects of all these stressors are already recorded above: see at [25] and [26]. In short, she believed that she was facing financial ruin from having agreed to become the director of Asden at the behest of the Nichols family. Furthermore, on the family law property front, she believed that her husband and his family intended to prevent her obtaining her rightful entitlements. In this respect, she said in one of her affidavits filed in the family law proceeding that: “I believe it is George’s [Nichols] intention through this court proceeding to ensure he removes as much asset as he possibly can from my name, therefore reducing the matrimonial pool between myself and Phillip to negative.”
It is not clear from Ms Nichols’ evidence precisely when it was that she first sought Mr Levis’ advice. She said she was referred to him by Asden’s accountants, Frederiks: see at [26] above. She said she approached Fredericks because she was concerned about Asden’s financial situation and whether it might be trading while insolvent. As I have observed above (at [26] and [35]), that approach and referral must have occurred on or before 14 December 2010 when TJI Investments was incorporated because she claims that Mr Levis advised her to incorporate that company. It is, however, clear that Ms Nichols and Mr Levis began to implement their scheme to protect her from financial ruin at the hands of the Nichols family almost immediately after she received the second cheque for $170,000 from Mr George Nichols on or about 14 December 2010. The catalyst appears to have been a telephone discussion she had with Mr George Nichols when she received that cheque. She said in cross-examination that, during that discussion, Mr Nichols told her he “would not be paying any more – any other debt apart from $170,000”.
The scheme took seven days to implement. By any measure, it was elaborate. In approximate order, it involved: incorporating TJI Investments; establishing a bank account in Asden’s name at the Bank of Queensland; transferring approximately $264,000 to that account; approaching Mr Dinoris to accept appointment as liquidator of Asden in preparation for placing it in voluntary liquidation; establishing a bank account in the name of TJI Investments at the Bank of Queensland; transferring $236,500 to Urban Property’s bank account; transferring $180,000 to TJI Investments’ bank account; and placing Asden in voluntary liquidation and appointing Mr Dinoris as its liquidator. The end result of the scheme was that approximately $264,000 was removed from Asden’s bank account and, through a series of transfers, placed in two bank accounts, neither of which bore Ms Nichols’ name. As well, Ms Nichols had removed herself from the directorship of Asden and thereby removed herself from the personal responsibilities associated with that company trading whilst insolvent.
Ms Nichols said throughout her cross-examination that Mr Levis advised her about every step of this scheme and she followed his advice. For example, when asked in evidence-in-chief why she was involved in the series of transactions on 21 December, she said: “I honestly can’t remember. I was just doing – going along with Peter’s [Levis] advice.” Another example is the following evidence in cross-examination: “So you appointed him for the purpose of him giving you advice and you would take that advice. And so from 21 December, you did precisely what he told you to?---Yes.” She also said that when she expressed concern about the transfers to Mr Levis, he told her “that it’s fine. He just kept reassuring me.”
While this evidence may suggest that Ms Nichols was naïve and compliant, as Asden contended in its submissions, my assessment of her oral and written evidence is that, from relatively early in the events of late 2010, she was sensitive to the personal financial dangers that might befall her as a result of her involvement with Asden and was astute in her actions to avoid them. Sometime before matters came to a head on 15 December, she had realised that the Nichols family may abandon Asden and leave her with the responsibility for its debts. Having appreciated that possibility, she obtained advice from Fredericks Accountants and then, on referral to, Mr Levis, she obtained advice from him. Having obtained that advice she acted on it and participated in the elaborate scheme described above. It is also important to note that Ms Nichols’ involvement with Mr Levis did not cease in December 2010. It continued in March 2011, when she obtained advice from him about the sale of the boat and paying out the loan due to Yamaha: see the email exchange above at [58]–[59].
Ms Nichols displayed the same astuteness in relation to her legal rights in connection with the family law property dispute with her husband. Soon after she received the letter from Anthony’s Lawyers on 20 December 2010, she sought and obtained advice from Mr Doyle: see at [31] above. While it is unclear from her evidence precisely when she did this, I infer that it must have happened at about the same time as the second series of bank transfers was made on 21 December 2010: see at [34] above. When Mr Doyle advised her that the funds referred to in Anthony’s letter were part of the joint matrimonial property, she acted on that advice and did not comply with the demands set out in that letter: see at [31] above. The fact that she was alert to the family law property implications of the funds at this early stage provides a further demonstration of her vigilance in relation to her legal rights.
Ms Nichols also obtained and acted on advice from Mr Doyle during the negotiations for the sale of the boat: see at [60] above. She also acted on Mr Doyle’s advice on 3 February 2011, when she transferred $30,000 out of the TJI Investments account to his trust account and again on 10 May 2011, when she transferred the balance of the funds to that account: see [65] above. These funds then remained in Mr Doyle’s trust account until March 2013 when orders were made in the family law proceeding: see at [67] above. It follows from this that Ms Nichols must have accepted Mr Doyle’s advice to defend that proceeding to final judgment. That led to her bankruptcy in May 2013: see at [69] above.
At no stage during this period from late 2010, until she, or Mr Doyle, was ordered to pay the remainder of the funds to the Nichols family in March 2013, did Ms Nichols demonstrate any intention to comply with any demand emanating from the Nichols family with respect to those funds. Nor did she comply with the demand of Mr Dinoris contained in his letter of 22 December 2010 that she deliver up any assets of the company that she held. She agreed in cross-examination that she received this letter at some time in January 2011 and she understood that it related, at least in part, to the funds. When asked whether she obtained advice from Mr Levis about this letter, she said this:
I don’t particularly recall discussing this with Mr Levis, but I do recall as I received letters from Vincents that – that Mr Levis said that – that it was fine, that I didn’t have to do anything as such. Mr Levis the whole time was acting with Vincents as far as I was concerned.
I do not therefore accept Ms Nichols’ evidence that the “authority” of a personal approach from Mr Dinoris in late December 2010 or January 2011 would have caused her to pay the funds to him. I also do not accept that Ms Nichols was naïve and merely doing what Mr Levis told her to do. To the contrary, as I have already observed above, I consider Ms Nichols was alert to the risks her directorship of Asden posed to her personal financial security and she was vigilant to protect herself from that. She was also jealous to protect her legal rights in connection with respect to the family law property dispute with her husband. It was in this light that I consider Ms Nichols received, and acted on, Mr Levis’ advice, not as a naïve compliant. The same applies to the advice she received from Mr Doyle with respect to her rights concerning the family law proceeding. In both cases, she acted on their advice in order to protect herself from attacks she was convinced were being made on her by various members of the Nichols family.
To sum up, all this evidence is consistent with Ms Nichols’ pattern of conduct throughout this period of obtaining and acting on the advice she received from Mr Levis or Mr Doyle whenever any issue arose with respect to the funds, or her family law property matters, respectively. I therefore consider that if Mr Dinoris had approached Ms Nichols in late 2010, or early 2011, and asked her about the whereabouts of the funds, she would have reacted in the same way. That is to say, she would have sought advice from either Mr Levis or Mr Doyle, or both of them, and acted on that advice. The former is reinforced by the answer she gave during cross-examination when pressed to answer whether she would have sought advice from Mr Levis: “Yes, I suppose so” (see at [162] above). If she had sought advice from Mr Levis, given the elaborate scheme he had constructed for her with respect to the funds, his personal stake in that scheme to the extent of $56,500, the evasive response he gave to Mr Dinoris on 23 December 2010 when he asked him a similar question and the tenor of his advice to her throughout this period, I consider Mr Levis would most likely have advised Ms Nichols to deny any knowledge of the funds, or to give an evasive answer similar to that which he gave to Mr Dinoris on 23 December 2010.
Alternatively, in the unlikely event that Ms Nichols did not seek advice from Mr Levis, but instead made a full disclosure to Mr Dinoris and agreed to repay him the $180,000 she held in the TJI Investments account, I consider it most unlikely that Mr Levis would have acted in the same way with respect to the $56,500 he held in the Urban Property account. In this regard, I reject as fanciful Asden’s contention that Mr Levis would have bowed to a “threatening” telephone call from Mr Dinoris.
If, on the other hand, or as well, Ms Nichols had approached Mr Doyle for advice, consistent with the advice that Mr Doyle gave to her throughout this period, I consider he would most likely have advised her that she should pay the funds into his trust account to abide the outcome of the family law proceeding. On this aspect, Asden contended I should have regard to the fact that this advice was wrong. While the orders made in the family law proceeding in March 2013 clearly demonstrate that is so, I fail to see how that affects the conclusion that Mr Doyle would most likely have given this advice.

Taking into account the difficulties associated with the form and wording of the question, the stress Ms Nichols was experiencing at the time and the evidence relating to the surrounding facts and circumstances outlined above, I do not accept Ms Nichols’ evidence that, had Mr Dinoris made an enquiry of her in late 2010 or early 2011 about the whereabouts of the funds, she would have disclosed where they were and paid them to him.
CONCLUSION
To sum up, I have found that Mr Dinoris contravened s 180(1) of the Corporations Act by failing to discharge his duties as the liquidator of Asden with the degree of care and diligence of a reasonably competent liquidator. However, I do not consider Asden has established that any damage resulted to it from that contravention as required by s 1317H(1) of the Corporations Act.
I will hear the parties as to what orders, if any, should be made, including as to costs.

I certify that the preceding one hundred and eighty-four (184) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Reeves.
Associate:
Dated: 5 July 2016

File number:	QUD 578 of 2014
Judge:	REEVES J
Date of judgment:	5 July 2016
Catchwords:	CORPORATIONS – liquidators’ statutory duties – whether liquidator breached s 180 of the Corporations Act 2001 (Cth) – whether liquidator’s conduct demonstrated the required degree of care and diligence that was reasonable in all the circumstances – whether breach of s 180 of the Corporations Act 2001 (Cth) caused the applicant company damage or loss under s 1317H of the Corporations Act 2001 (Cth) – consideration of principles on causation – consideration of principles on subjective evidence regarding what an individual would or would not have done in particular circumstances
Legislation:	Civil Liability Act 2002 (NSW) Civil Liability Act 2003 (Qld) Civil Liability Act 2002 (Tas) Civil Liability Act 2002 (WA) Corporations Act 2001 (Cth) Evidence Act 1995 (Cth) Federal Court Rules 2011 (Cth) Trade Practices Act 1974 (Cth) (now s 18 of the Australian Consumer Law)
Cases cited:	Adler v Australian Securities and Investments Commission (2003) 179 FLR 1; [2003] NSWCA 131 Agricultural Land Management Ltd v Jackson (No 2) (2014) 48 WAR 1; [2014] WASC 102 Australian Securities and Investments Commission v Dunner (2013) 303 ALR 98; [2013] FCA 872 Australian Securities and Investments Commission v Fortescue Group Ltd (No 5) (2009) 264 ALR 201; [2009] FCA 1586 Australian Securities and Investments Commission v Fortescue Metals Group Ltd (2011) 190 FCR 364; [2011] FCAFC 19 Australian Securities and Investments Commission v Rich (2009) 236 FLR 1; [2009] NSWSC 1229 Australian Securities and Investments Commission v Vines (2003) 48 ACSR 291; [2003] NSWSC 1095 Australian Securities and Investments Commission v Vines (2005) 55 ACSR 617; [2005] NSWSC 738 Dasreef Pty Limited v Hawchar (2011) 243 CLR 588; [2011] HCA 21 Forge v Australian Securities and Investments Commission (2004) 213 ALR 574; [2004] NSWCA 448 Jenkins v Jonkay Pty Ltd [2007] FCA 858 Lord Buddha Pty Ltd (In Liq) v Harpur (2013) 41 VR 159; [2013] VSCA 101 March v E & MH Stramare Pty Ltd (1991) 171 CLR 506 Pace v Antlers Pty Ltd (in liquidation) (1998) 80 FCR 485 Rosenberg v Percival (2001) 205 CLR 434; [2001] HCA 18 Shafron v Australian Securities and Investments Commission (2012) 247 CLR 465; [2012] HCA 18 Sydlow Pty Ltd (In Liquidation) v TG Kotselas Pty Ltd (1996) 65 FCR 234 Tabet v Gett (2010) 240 CLR 537; [2010] HCA 12 Viscariello v Macks (2014) 103 ACSR 542; [2014] SASC 189 Final Report of the Review of the Law of Negligence, (Commonwealth of Australia, Canberra, September 2002) Freckelton and Selby, Expert Evidence (5^th ed, Law Book Co, 2013)
Date of hearing:	14–16 July, 7–8 September and 16 November 2015
Registry:	Queensland
Division:	General Division
National Practice Area:	Commercial and Corporations
Sub-area:	Corporations and Corporate Insolvency
Category:	Catchwords
Number of paragraphs:	184
Counsel for the Applicant:	Mr M Martin QC
Solicitor for the Applicant:	Mills Oakley Lawyers
Counsel for the Respondents:	Mr I Erskine
Solicitor for the Respondents:	HBM Lawyers