Cassaniti v Ball as liquidator of RCG CBD Pty Limited (in liq) and related matters; Khalil v Ball as liquidator of Diamondwish Pty Ltd (in liq) and related matters

[2022] NSWCA 161

Court of Appeal

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Cassaniti v Ball as liquidator of RCG CBD Pty Limited (in liq) and related matters; Khalil v Ball as liquidator of Diamondwish Pty Ltd (in liq) and related matters [2022] NSWCA 161

Hearing dates:

16, 17, 18 May 2022

Date of orders:

25 August 2022

Decision date:

25 August 2022

Before:

Gleeson JA; Leeming JA; Mitchelmore JA

Decision:

Cassaniti appeals (2021/242905, 242906, 242909, 242910 and 242957)

(1)   Appeals dismissed.

(2)   In each appeal, the appellant to pay the respondents’ costs in this Court.

Khalil appeals (2021/242618, 242626, 242639, 242648 and 242667)

(1)   Extend time for the filing of the notice of appeal to the date on which the document was filed in each appeal.

(2)   Appeals dismissed.

(3)   Dismiss the respondents’ notice of motion filed 7 April 2022 in each appeal.

(4)   In each appeal, the appellants to pay the respondents’ costs in this Court, including the costs of the respondents’ notice of motion filed 7 April 2022.

RCG appeal (2021/289069)

In the liquidator's appeal on behalf of RCG CBD Pty Ltd (in liq) against the Borg parties, dismiss ground 1 of the notice of contention.

Catchwords:

EQUITY – fiduciary duties – breach – accessorial liability – second limb in Barnes v Addy – involvement in contravention of director’s statutory duties – where fiduciary and some accessories released from liability – whether Civil Procedure Act 2005 (NSW) s 95 abrogates joint liability release rule – whether the common law rule applies in equity

EQUITY – fiduciary duties – breach – accessorial liability claim – whether assistant had requisite knowledge of dishonest breaches of fiduciary duty – whether facts would have indicated to honest and reasonable person that invoices were contrived and payments lacked genuine commercial purpose

Legislation Cited:

Civil Liability (Contribution) Act 1978 (UK), s 3

Civil Procedure Act 2005 (NSW), s 95

Corporations Act 2001 (Cth), ss 79, 180, 181, 182, 183, 184, 185, 1317E, 1317H(1), Pt 5.7B

Law Reform (Contributory Negligence and Tortfeasors’ Contribution) Act 1947 (WA), ss 5, 7

Law Reform (Law and Equity) Act 1972 (NSW)

Law Reform (Miscellaneous Provisions) Act 1946 (NSW), ss 5(1)(a), 11

Supreme Court Act 1970 (NSW), s 97

Trustee Act 1925 (NSW), s 85

Uniform Civil Procedure Rules 2005 (NSW), rr 6.18, 6.21, 42.1, 51.36

Wrongs Act 1958 (Vic), ss 23A, 24AA

Cases Cited:

Apley Estates Co Ltd v De Bernales [1947] Ch 217

Baden v Sociéte Générale pour Favoriser le Développement du Commerce et de l'lndustrie en France SA [1993] 1 WLR 509

Barnes v Addy (1874) LR 9 Ch App 244

Blackwood v Borrowes (1843) 4 Dru & Watts 441

Blyth v Fladgate [1891] 1 Ch 337

Brinsmead v Harrison (1872) LR 7 CP 547

Carr and Purves v Thomas [2009] NSWCA 208

Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373; [1975] HCA 8

Daniels v Anderson (1995) 37 NSWLR 438

Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 213 CLR 543; [2002] HCA 49

Dorgal v Buckley (1996) 22 ACSR 164

Dubai Aluminium Co Ltd v Salaam [2003] 2 AC 366; [2002] UKHL 48

Duck v Mayeu [1892] 2 QB 511

Edgewater Homes Pty Ltd v Donohoe [2019] NSWSC 44

Ex parte Waterfall (1851) 4 De G & SM 199; 64 ER 797

Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2003) 230 CLR 89; [2007] HCA 22

Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; [2012] FCAFC

Harplex Pty Ltd v Konstandellos (2018) 54 VR 174; [2018] VSCA 67

Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd (2013) 247 CLR 613; [2013] HCA 10

In re EWA [1901] 2 KB 642

In the matters of Earth Civil Australia Pty Ltd v RCG CBD Pty Ltd, Bluemine Pty Ltd, Diamondwish Pty Ltd and Rackforce Pty Ltd (All in liq) [2020] NSWSC 293

Kendall v Hamilton (1879) 4 App Cas 504

King v Hoare (1844) 13 M & W 494; 153 ER 206

Lavin v Toppi (2014) 87 NSWLR 159; [2014] NSWCA 160

Lowe & Sons v Dixon & Sons (1885) 16 QBD 455

Madox v Jackson (1746) 3 Atk 405; 26 ER 1034

Massoud v Nationwide News Pty Ltd; Massoud v Fox Sports Australia Pty Ltd [2022] NSWCA 150

Michael Wilson & Partners Ltd v Nicholls (2011) 244 CLR 427; [2011] HCA 48

Nau v Kemp & Associates (2010) 77 NSWLR 687; [2010] NSWCA 164

Newcrest Mining Ltd v Thornton (2012) 248 CLR 555; [2012] HCA 60

Purves v Thomas [2009] NSWCA 208

Ramsay v Pigram (1968) 118 CLR 271; [1968] HCA 34

R v Reynhoudt (1962) 107 CLR 381; [1962] HCA 23

Robinson v Tait [2002] 2 NZLR 30; [2001] NZCA 217

State of New South Wales v Loh Min Choo [2012] NSWCA 275

Thompson v Australian Capital Television Pty Ltd 186 CLR 574; [1996] HCA 38

Thompson v Harrison (1787) 2 Bro CC 164; 29 ER 94

United States Surgical Corporation v Hospital Products International [1982] 2 NSWLR 766

Vella v Commissioner of Police (NSW) (2019) 269 CLR 219; [2019] HCA 38

Walker v Bowry (1924) 35 CLR 48; [1924] HCA 28

Woodgate v Davis (2002) 55 NSWLR 222; [2002] NSWSC 616

Yeshiva Properties No 1 Pty Ltd v Marshall [2005] NSWCA 23; 219 ALR 112

Texts Cited:

Annual Report of the American Bar Association (48 Annu Rep ABA 560 (1925)

M Conaglen, "Equitable Compensation for Breach of Trust:  Off Target" (2016) 40 Melbourne University Law Review 126

J Dietrich and P Ridge, Accessories in Private Law (Cambridge University Press, 2016)

Daniell’s Chancery Practice (5th ed, Stevens, 1871)

C Eberhart, 13 Cornell Law Quarterly 640 (1928)

Glanville Williams, Joint Obligations (Butterworths, 1949)

Halsbury’s Laws of England (4th ed)

D Hayton et al, Underhill and Hayton, Law Relating to Trusts and Trustees (19th ed, LexisNexis, 2016)

Higgins and Fletcher, The Law of Partnership in Australia and New Zealand (8th ed, LBC Information Services, 2001)

Lewin on Trusts (19th ed, Sweet & Maxwell, 2014)

Lewin on Trusts (20th ed, Sweet & Maxwell, 2020)

C Mitchell, in P Birks and A Pretto (eds), Breach of Trust (2002, Hart Publishing)

J Perry, A Treatise on the Law of Trusts and Trustees (Cambridge Mass, 1871)

G Sweet, Bythewood’s and Jarman’s System of Conveyancing (3rd ed, S Sweet, 1844)

Williston’s A Treatise on the Law of Contracts (rev ed 1936 by S Williston and G Thompson)

Category:

Principal judgment

Parties:

Cassaniti appeals

2021/242905
Gino Cassaniti (Appellant)
Mitchell Warren Ball in his capacity as Liquidator of RCG CBD Pty Ltd (in liq) (First respondent)
RCG CBD Pty Ltd (in liq) (Second respondent)

2021/242906
Gino Cassaniti (Appellant)
Mitchell Warren Ball in his capacity as Liquidator of Bluemine Pty Ltd (in liq) (First respondent)
Bluemine Pty Ltd (in liq) (Second respondent)

2021/242910
Gino Cassaniti (Appellant)
Mitchell Warren Ball in his capacity as Liquidator of Earth Civil Australia Pty Limited (in liq) (First respondent)
Earth Civil Australia Pty Limited (Second respondent)

2021/242909
Gino Cassaniti (Appellant)
Mitchell Warren Ball in his capacity as Liquidator of Diamondwish Pty Ltd (in liq) (First respondent)
Diamondwish Pty Ltd (Second respondent)

2021/242957
Gino Cassaniti (Appellant)
Mitchell Warren Ball in his capacity as Liquidator of Rackforce Pty Ltd (in liq) (First respondent)
Rackforce Pty Ltd (Second respondent)

Khalil appeals

2021/242618
Faouzi Khalil (First appellant)
Peter Abboud (Second appellant)
George Khalil (Third appellant)
Mitchell Warren Ball in his capacity as Liquidator of Diamondwish Pty Limited (in liq) (First respondent)
Diamondwish Pty Limited (Second respondent)

2021/242626
Faouzi Khalil (First appellant)
Peter Abboud (Second appellant)
George Khalil (Third appellant)
Mitchell Warren Ball in his capacity as Liquidator of Rackforce Pty Limited (in liq) (First respondent)
Rackforce Pty Limited (Second respondent)

2021/242639
Faouzi Khalil (First appellant)
Peter Abboud (Second appellant)
George Khalil (Third appellant)
Mitchell Warren Ball in his capacity as Liquidator of Earth Civil Australia Pty Limited (in liq) (First respondent)
Earth Civil Australia Pty Limited (Second respondent)

2021/242648
Faouzi Khalil (First appellant)
Peter Abboud (Second appellant)
George Khalil (Third appellant)
George Said (Fourth appellant)
Mitchell Warren Ball in his capacity as Liquidator of RCG CBD Pty Limited (in liq) (First respondent)
RCG CBD Pty Limited (Second respondent)

2021/242667
Faouzi Khalil (First appellant)
Peter Abboud (Second appellant)
George Khalil (Third appellant)
George Said (Fourth appellant)
Mitchell Warren Ball in his capacity as Liquidator of Bluemine Pty Limited (in liq) (First respondent)
Bluemine Pty Limited (Second respondent)

RCG appeal

(2021/289069)
Mitchell Warren Ball in his capacity as Liquidator of RCG CBD Pty Limited (in liq) (First appellant)
RCG CBD Pty Limited (in liq) (Second appellant)
Borg Family Pty Ltd (First respondent)
Tanya Michelle Borg (Second respondent)
Borg Civil Australia Pty Ltd (Third respondent)
Michael Borg (Fourth respondent)

Representation:

Counsel:
I Young (Gino Cassiniti)
I D Faulkner SC / S V Shepherd (Mitchell Ball (liquidator) and Bluemine, Earth Civil, Diamondwish, Rackforce and RCG)
C W Robinson (Khalil Parties)
M Condon SC / P Afshar (Borg parties)

Solicitors:
Craddock Murray Neumann Lawyers (Mitchell Ball (liquidator) and Bluemine, Earth Civil, Diamondwish, Rackforce and RCG)
Cambridge Law (Khalil parties)
Kekatos Lawyers (Borg parties)

File Number(s):

2021/242905; 2021/242906; 2021/242910; 2021/242909; 2021/242957; 2021/242618; 2021/242626; 2021/242639; 2021/242648; 2021/242667; 2021/289069

 Decision under appeal 

Court or tribunal:

Supreme Court of New South Wales

Jurisdiction:

Equity Division

Citation:

[2021] NSWSC 966; [2021] NSWSC 1161

Date of Decision:

6 August 2021; 15 September 2021

Before:

Ward CJ in Eq

File Number(s):

2016/194955; 2016/195008; 2016/256135; 2016/256272; 2016/256503

HEADNOTE

[This headnote is not to be read as part of the judgment]

Fifteen appeals were heard together arising from the principal judgment and a supplementary judgment of Ward CJ in Eq in relation to proceedings brought by five companies and their liquidator making claims of breach of fiduciary and statutory duty and accessorial liability in equity and under statute for knowing assistance or knowing involvement in those breaches of duty.

Five of the appeals were brought by Gino Cassaniti, five by the Khalil parties, and five by the liquidator. The appeals by Gino Cassaniti and the Khalil parties, and a notice of contention by the Borg parties as respondents to one of the liquidator’s appeals, raised a single issue concerning the “release” defence relied upon by those parties which the primary judge rejected, namely, that the liquidator’s releases of a party who was said to be primarily liable for the relevant breaches of fiduciary duty, and other parties said to be accessorily liable for such breaches, had the consequence that the liquidator can no longer pursue claims for knowing assistance.

The two appeals by George Said (as part of the appeals by the Khalil parties) raised a separate issue as to whether George Said had the requisite knowledge of the breaches of fiduciary duty by Gino Cassaniti.

The liquidator’s and the companies’ appeals against the dismissal of the accessorial liability claims against some of the defendants are the subject of a separate judgment: Bluemine Pty Ltd (in liq) and related matters [2022] NSWCA 160.

The specific issues raised by this appeal were:

1. Whether the Civil Procedure Act 2005 (NSW), s 95 abrogates the common law rule that a release of one joint and several wrongdoer releases all other joint and several wrongdoers.

2. Whether the common law joint release rule applies in equity.

3. Whether the primary judge erred in applying the test of knowledge in finding George Said liable for knowing assistance.

4. If so, whether George Said had the requisite knowledge of Gino Cassaniti’s breaches of duty.

The Court held, dismissing the appeals:

As to issue 1

The rule at common law was that the release of a joint and severally liable obligor was effective to release all of the obligors: [53]-[55].

Section 95 of the Civil Procedure Act is a re-enactment of s 97 of the Supreme Court Act 1970 (NSW), which abrogated the rule that judgment against a joint obligee would discharge any other joint obligee. Both provide that they do not apply to a judgment to which s 5(1)(a) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) applies: [58]. Section 5(1)(a) abrogated the rule that obtaining judgment against one joint tort-feasor discharged all other joint tortfeasors: [59].

Applying the dispositive reasoning in Thompson v Australian Capital Television Pty Ltd produces the result that s 97 must impliedly abrogate the concept that the non-tortious cause of action was one and indivisible and s 97(2)(a), in its application to co-obligors who are not joint tortfeasors, impliedly abolishes the rule that the release of one co-obligor releases the others: [73].

It is natural to impute to the Legislature an intention to apply the settled construction of s 5(1)(a) to the broader field now covered by s 95, given it had a similar reforming effect: [81]. In circumstances where s 97 is explicitly linked to s 5(1)(a), and where the latter has been held impliedly to abrogate a disfavoured rule of common law, after which s 97 has been re-enacted in materially identical terms, this Court would introduce disharmony in the law if it held that the rule impliedly abrogated by s 5(1)(a) in the subject area to which it applies was not impliedly abrogated by s 95 in the wider subject area to which it applies: [82].

Therefore, s 95 of the Civil Procedure Act impliedly abrogated any rule that the appellants were released by the liquidator’s release of other persons such as Mr Frank Criniti: [87].

Thompson v Australian Capital Television Pty Ltd (1996) 186 CLR 574; [1996] HCA 38 applied.

King v Hoare (1844) 13 M & W 494; 153 ER 206; Walker v Bowry (1924) 35 CLR 48; [1924] HCA 28; Dorgal v Buckley (1996) 22 ACSR 164; Carr and Purves v Thomas [2009] NSWCA 208; Harplex Pty Ltd v Konstandellos (2018) 54 VR 174; [2018] VSCA 67 referred to.

As to issue 2

If there were a similar rule in equity applicable to co-obligors subject to equitable obligations, then it did not survive the enactment of s 97 of the Supreme Court Act and s 95 of the Civil Procedure Act: [88].

The law in equity on discharges of liability has long diverged from common law, including in relation to a general release of trustees, partnership debts and joint obligors effected by bankruptcy: [97]-[101]. Some differences about releases in equity are substantive and some are based in equitable remedies, for instance, where a fiduciary and accessory profit from a breach of trust, the profits to account need not be the same: [102]-[105].

Blackwood v Borrowes (1843) 4 Dru & Watts 441; Blyth v Fladgate [1891] 1 Ch 337; Woodgate v Davis (2002) 55 NSWLR 222; [2002] NSWSC 616; Lowe & Sons v Dixon & Sons (1885) 16 QBD 455; Michael Wilson & Partners Ltd v Nicholls (2011) 244 CLR 427; [2011] HCA 48; Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; [2012] FCAFC; United States Surgical Corporation v Hospital Products International [1982] 2 NSWLR 766 referred to.

Although authorities and commentators have not been unanimous as to whether the common law release rule applies in equity, at the level of principle there is no reason for an unjust and disfavoured rule at common law to be followed in equity, where liability is conceptually different, is subject to discretionary defences and is apt to be measured differently as between defendants: [120].

Lavin v Toppi (2014) 87 NSWLR 159; [2014] NSWCA 160 distinguished.

As to issue 3

Although the primary judge correctly stated the test of knowledge for an accessorial liability claim, her Honour did not apply that test in terms of an express finding that George Said’s knowledge of Gino Cassantiti’s breaches of duty answered one of categories (i) to (iv) in Baden, which the High Court accepted in Farah is sufficient, there was error in the finding of liability against George Said: [130], [153].

Baden v Sociéte Générale pour Favoriser le Développement du Commerce et de l'lndustrie en France SA (Baden) [1993] 1 WLR 509; Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2003) 230 CLR 89; [2007] HCA 22 referred to.

As to issue 4

The facts as known to George Said would have indicated to an honest and reasonable person that the invoices he was creating for Involved Recruitment were contrived and that the payments and cash withdrawals he was making to RCG and Gino Cassaniti lacked any genuine commercial purpose: [162]. This was in circumstances where it can be inferred that George Said knew that the amounts of the cash withdrawals which Gino Cassaniti instructed him to take were arbitrary, and he knew that he had no arrangement for the payment of director’s fees, salary or wages to himself: [162]. Accordingly, the finding of liability against George Said should be upheld: at [165].

Judgment

1. THE COURT: These reasons are organised under the following headings.

Table of contents

Introduction

Background

The issues raised by the appeals

The appeals by Gino Cassaniti, the Khalil parties (except George Said) and the Borg parties’ notice of contention

Background and parties’ submissions

Summary of what this judgment determines and does not determine

Section 95 of the Civil Procedure Act and its antecedents

The rule that a release of one joint and severally liable obligor releases all

Williston’s Model Joint Obligations Act

Earlier legislative reform in New South Wales concerning the entry of judgments

Rationale for the rule abrogated by s 5(1)(a) and s 95

The significance of s 5(1)(a) of the Law Reform (Miscellaneous Provisions) Act 1946

The significance of re-enacting the provision

Remaining submissions on s 95

Was there ever any such rule applicable in equity?

Conclusion

The appeals by George Said

Overview

The knowledge issue

George Said’s evidence

The primary judge’s reasons

Whether the primary judge applied the wrong test of knowledge?

Whether George Said had the requisite knowledge of Gino Cassaniti’s breaches of duty?

Conclusion and Orders

Cassaniti appeals (2021/242905, 242906, 242909, 242910 and 242957)

Khalil appeals (2021/242618, 242626, 242639, 242648 and 242667)

RCG appeal (2021/289069)

Introduction

2. Fifteen appeals were heard together arising from the principal judgment and a supplementary judgment of Ward CJ in Eq concerning proceedings brought by five companies and their liquidator making claims of breach of fiduciary and statutory duty, accessorial liability in equity and under statute for knowing assistance or knowing involvement in those breaches of duty and also claims of unreasonable director-related transactions and uncommercial transactions under Pt 5.7B of the Corporations Act 2001 (Cth). The five proceedings were heard together in the Equity Division over 29 days in February and March 2020.

3. Five of the appeals are brought by Gino Cassaniti, five by the Khalil parties and five by the liquidator. This judgment deals with the appeals by Gino Cassaniti and the Khalil parties (relevantly, Faouzi (Fred) Khalil, Peter Abboud and George Khalil) which raise a single issue in common with ground 1 of a notice of contention by the Borg parties in the liquidator’s appeal against the Borg parties. This judgment also deals with the two appeals by George Said which raise a different issue from that raised by the other Khalil parties.

4. The liquidator’s five appeals on behalf of the companies against part of the judgment and orders of Ward CJ in Eq are the subject of separate reasons delivered contemporaneously with this judgment: see Bluemine Pty Ltd (in liq)v AKA (Civil) Pty Ltd [2022] NSWCA 160.

Background

5. The facts giving rise to the appeals can be summarised briefly. Earth Civil Australia Pty Ltd (in liq) (Earth Civil), Bluemine Pty Ltd (in liq) (Bluemine), RCG CBD Pty Ltd (in liq) (RCG), Diamondwish Pty Ltd (in liq) (Diamondwish) and Rackforce Pty Ltd (in liq) (Rackforce) were each wound up voluntarily by special resolution of its members in either June or August 2013. Mr Mitchell Ball was appointed liquidator of each company.

5. The liquidator, together with each company, then brought separate proceedings against numerous defendants. The liquidator’s elaborate pleadings included an alleged conspiracy by an accounting firm, Banq Accountants and Advisors Pty Ltd (Banq), and principals of or persons employed by that firm, namely Gino Cassaniti, Fred Khalil, Peter Abboud and George Khalil, to promote and recommend a tax scheme to clients of the firm. The alleged conspiracy was only relied upon to establish that the nature of the alleged breaches of fiduciary duty by the relevant director of Earth Civil, Bluemine, RCG, Diamondwish and Rackforce were dishonest. No claim was made by the liquidator based on the tort of conspiracy, nor was it alleged that the defendants said to be liable as accessories to the breaches of duty were parties to a conspiracy.

6. Stripped of their complexity, the pleaded claims alleged that various defendants who were referred to as scheme participants entered into and implemented a series of transactions, by arrangement with Gino Cassaniti, the director of Earth Civil, Bluemine and RCG, or Frank Criniti, the director of Diamondwish and Rackforce, and that those transactions constituted what are known as “carousel” frauds. It was alleged that the transactions involved each of Earth Civil, Bluemine, RCG, Diamondwish and Rackforce (a) without providing consideration, receiving money to which it had no legal entitlement, (b) without receiving consideration, paying money without legal obligation, and (c) being left with no money to satisfy its only legitimate creditor, the Commissioner of Taxation, upon being wound up in a creditors’ voluntary winding up within two years of incorporation.

7. The alleged purpose of the carousel payments was for the relevant defendants to obtain improper tax benefits by claiming GST input credits and income tax expense deductions and thereby reduce its taxable income.

8. The case against the scheme participants was based on accessorial liability under the second limb in Barnes v Addy (1874) LR 9 Ch App 244 and the provisions of the Corporations Act. The equitable claims alleged that the respective breaches of fiduciary duty by Gino Cassaniti and Frank Criniti involved a dishonest and fraudulent design, and that the scheme participants knowingly assisted or knowingly participated in the dishonest and fraudulent design of those directors.

9. The statutory claims relevantly alleged that Gino Cassaniti and Frank Criniti breached ss 181 and 182 of the Corporations Act, in the case of Gino Cassaniti, as a director of Earth Civil, Bluemine and RCG, and, in the case of Frank Criniti, as a director of Diamondwish and Rackforce, by failing to exercise his powers and discharge his duties in good faith in the best interests of the company and for a proper purpose (s 181) and by improperly using his position to gain an advantage or to cause the company detriment (s 182).

10. Sections 181 and 182 are civil penalty provisions: Corporations Act, s 1317E. By s 1317H(1), a court may order compensation to be paid for “damage suffered by the corporation” if the person has contravened a civil penalty provision and “damage resulted from the contravention”. The damage claimed to be suffered by Earth Civil, Bluemine, RCG, Diamondwish and Rackforce was the amount of taxation liabilities incurred by those companies by reason of payments received from the scheme participants, and the amounts which were paid away by Earth Civil, Bluemine, RCG, Diamondwish and Rackforce for no corporate purpose or benefit.

11. A person who is involved in a contravention of s 181(1) and s 182(1) also contravenes those provisions: ss 181(2) and 182(2). By s 79 of the Corporations Act, a person is involved in a contravention if, and only if, the person was relevantly, in this case, “in any way, by an act or omission, directly or indirectly, knowingly concerned in or party to the contravention”: s 79(c). Section 79 is a definitional provision.

12. In her principal judgment delivered on 6 August 2021 (In the matters of Earth Civil Australia Pty Ltd, RCG CBD Pty Ltd, Bluemine Pty Ltd, Diamondwish Pty Ltd and Rackforce Pty Ltd (all in liq) [2021] NSWSC 966), her Honour relevantly held that:

• Gino Cassaniti was liable in equity and under statute for breach of fiduciary and statutory duty owed to Earth Civil, Bluemine and RCG;

• Frank Criniti was liable in equity and under statute for breach of fiduciary and statutory duty owed to Diamondwish and Rackforce;

• Gino Cassaniti was also liable in equity and under statute as an accessory for knowing assistance and knowing involvement in Frank Criniti’s breaches of duty owed to Diamondwish and Rackforce; and

• Fred Khalil, Peter Abboud, George Khalil and George Said (the Khalil parties) were liable in equity and under statute as accessories for knowing assistance and knowing involvement in various breaches of fiduciary and statutory duty, relevantly:

1. Fred Khalil, Peter Abboud and George Khalil were liable for Gino Cassaniti’s breaches of duty owed to Earth Civil, Bluemine and RCG, and for Frank Criniti’s breaches of duty owed to Diamondwish and Rackforce; and

2. George Said was liable for Gino Cassaniti’s breaches of duty owed to RCG and Bluemine.

14. Her Honour also found that the liquidator’s claims against several defendants failed, including the accessorial liability claims by RCG against the Borg parties (Borg Family Pty Ltd, Tanya Borg, Borg Civil Australia Pty Ltd and Michael Borg).

15. In a supplementary judgment delivered on 15 September 2021, her Honour granted declaratory relief and entered judgments and made orders in favour of Earth Civil, Bluemine, RCG, Diamondwish and Rackforce against, relevantly, Gino Cassaniti and Fred Khalil, Peter Abboud and George Khalil, and in favour of RCG and Bluemine against, relevantly, George Said. Her Honour dismissed the claims against, relevantly, the Borg parties: In the matters of Earth Civil Australia Pty Ltd, RCG CBD Pty Ltd, Bluemine Pty Ltd, Diamondwish Pty Ltd and Rackforce Pty Ltd (all in liq) (No 2)[2021] NSWSC 1161. It is not necessary to refer to the detail of the relief granted against Gino Cassaniti and the Khalil parties. It is sufficient to observe that monetary judgments in significant sums were entered against those defendants.

The issues raised by the appeals

16. The common issue raised by the appeals by Gino Cassaniti and three of the Khalil parties (Fred Khalil, Peter Abboud and George Khalil) against RCG, Bluemine, Diamondwish and Rackforce, and by the Borg parties’ notice of contention (ground 1) in the liquidator’s appeal on behalf of RCG against the Borg parties is the “release” defence relied upon by these defendants at trial, which was rejected by her Honour. No other grounds were ultimately pressed by either Gino Cassaniti or the Khalil parties (except George Said). Nor were the appeals by Gino Cassaniti and the Khalil parties against Earth Civil pressed.

17. The two appeals by George Said, as part of the Khalil appeals, raise a different issue. He challenges the finding that he had the requisite knowledge of Gino Cassaniti’s breaches of duty to amount to accessorial liability in equity and under statute.

The appeals by Gino Cassaniti, the Khalil parties (except George Said) and the Borg parties’ notice of contention

Background and parties’ submissions

18. It will suffice for present purposes to summarise the background insofar as it related to the defendant Ms Ivana Cassaniti, although she did not reagitate the “release” defence by way of notice of contention on the appeal to which she was a respondent.

19. Ms Cassaniti was sued on the basis that she was knowingly involved in breaches of fiduciary and statutory duties owed by Mr Frank Criniti to Rackforce and Diamondwish. The primary judge found that Mr Criniti had caused Rackforce and Diamondwish to enter into carousel transactions for the purpose of incurring liabilities to the Commissioner of Taxation which they could never pay, and that this was a dishonest and fraudulent breach of his fiduciary duties as well as a breach of his statutory duties as sole director of both companies. The liquidator sued Ivana on the bases that she was liable in equity for knowingly assisting those breaches of fiduciary duty, and under s 79 of the Corporations Act as a knowing participant in the breaches of statutory duty. However, the liquidator had, in exchange for payment and a promise of assistance, granted a release to Mr Criniti.

20. Ms Cassaniti’s senior counsel first raised the following point, towards the end of the trial (apparently, shortly after he was retained). Ms Cassaniti submitted that the liquidator’s release of Mr Criniti from liability for breaches of equitable and statutory duties owed by him meant that the liquidator could no longer pursue her for claims that she had knowingly assisted and knowingly participated in the same breaches of those duties

21. Numerous other defendants availed themselves of the same point (the details are succinctly summarised at [2348]-[2351] of her Honour’s reasons and need not be reproduced here). This defence had not been pleaded. It needed to be pleaded, turning as it did on the effect of deeds between the liquidator and other parties. The primary judge granted leave to amend, despite the evidence having closed, and no appeal was brought from the decision to grant the amendment.

22. Depending on whether ancillary liability is characterised as primary or secondary, the analysis might in principle be different depending upon whether (a) a knowing assistant or knowing participant sought to take advantage of a release of the person who owed the equitable or statutory duty to the company in liquidation, or (b) the person owing the equitable or statutory duty sought to take advantage of a release of a knowing assistant or knowing participant. Not least because of the use of language such as “accessorial” and “ancillary” and “secondary”, it has been thought from time to time that the liability of a knowing assistant or participant may be parasitic upon the liability of the fiduciary (for an account of the debate see J Dietrich and P Ridge, Accessories in Private Law (Cambridge University Press, 2016), pp 12-25). However, in Michael Wilson & Partners Ltd v Nicholls (2011) 244 CLR 427; [2011] HCA 48 at [106] it was said that “liability to account as a constructive trustee is imposed directly upon a person who knowingly assists in a breach of fiduciary duty”, and that the language of “accessorial” does “no more than recognise that the assistant’s liability depends upon establishing, among other things, that there has been a breach of fiduciary duty by another”. That authoritative recognition that the liability of a knowing assistant is not secondary or parasitic upon that of the fiduciary means that it is sufficient to consider the case where the fiduciary is released and the knowing participant is sued (for it is difficult to see how the position under statute could be more generous to defendants).

23. The primary judge correctly observed that there was no binding authority and addressed a very wide range of judicial and academic writing bearing on the effect of a release upon one of a number of co-obligors in equity, before resolving it as a question of principle. Ultimately, her Honour rejected the submission on the bases that (a) s 95 of the Civil Procedure Act 2005 (NSW) abrogated the common law rule that a release of one joint and several wrongdoer releases all other joint and several wrongdoers, and (b) in any event, the rule did not apply in equity.

24. The subject addressed by s 95 of the Civil Procedure Act is “joint liability”:

“95 Joint liability (cf Act No 52 1970, section 97)

(1) If two or more persons have a joint liability and, in any proceedings, judgment on the liability is given against one or more but not all of them—

(a) the liability of the other or others of them is not discharged by the judgment or by any step taken for the enforcement of the judgment, and

(b) after the judgment takes effect, those of them against whom the judgment is given and the other or others of them become liable, as between those of them against whom the judgment is given on the one hand and the other or the others of them on the other hand, severally but not jointly, and

(c) if there are two or more such persons against whom the judgment is not given, they remain, after the judgment takes effect, jointly liable amongst themselves, and

(d) if the judgment is satisfied wholly or in part by payment or by recovery under execution, the liability of the persons against whom the judgment is not given is taken also to have been satisfied in the amount of the payment or recovery.

(2) This section does not affect a person’s right to contribution or indemnity in respect of the person’s satisfaction, wholly or in part, of a liability that the person has (whether jointly or severally or jointly and severally) with any other person.

(3) This section does not apply to a judgment to which section 5 (1) (a) of the Law Reform (Miscellaneous Provisions) Act 1946 applies.

(4) In this section, liability includes liability in contract, liability in tort and liability under a statute.”

25. Despite being found in the Civil Procedure Act s 95 is evidently substantive, and deals with the circumstances when joint liability is discharged or qualified It will be convenient to notice the following textual points concerning the application of the provision immediately, because they may not all be immediately apparent:

1. the provision is expressed to apply “in any proceedings”;

2. the provision is expressed to apply only where a judgment is given against some but not all of persons who have a joint liability;

3. “liability” is expressed to include liability in contract, tort and under statute;

4. however, the provision does not apply to judgments to which s 5(1)(a) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) applies;

5. nor does the provision affect rights of contribution.

26. Her Honour’s account of the parties’ submissions and reasons disposing of the issues presented are extensive. They amount to a valuable review of the entire area, including not merely Australian but also New Zealand, United Kingdom, Canadian and United States decisions and academic writings on the point. We have been considerably assisted by that account, which occupies in excess of 200 paragraphs ([2252]-[2485]). However, the point being one of law, it would add needlessly to the length of this judgment to summarise that reasoning.

27. In this Court, the principal submissions challenging the conclusion reached by her Honour on s 95 were as follows:

1. The premise of s 95 was that a judgment had been given. Section 95 abrogated the former rules concerning the merger of single causes of action into judgment, but said nothing of the position here, where there had merely been a release. “[T]he legislature has selected one aspect of the principle, namely, the merger rule … The provision says nothing as to the joint release rule or that the whole principle should be held to have gone”. That was said to be supported by the extrinsic materials and the commentary upon the section and its predecessor, s 97 of the Supreme Court Act 1970 (NSW).

2. Section 97 was enacted in 1970 following the very substantial review by the NSW Law Reform Commission in its Report on Supreme Court Procedure (LRC 7), as part of the long delayed introduction of the judicature reforms in New South Wales. Section 97 was a related reform drafted by the Commission, of which it wrote at para 25:

“A further innovation we propose is that where two or more persons are jointly liable for money and judgment is given against one or more but not all of them, the liability of the other or others shall not be discharged by the judgment or by any step taken for the enforcement of the judgment. The purpose of this provision is to mitigate the harshness of the present rule which, at times, deprives a creditor of his rights for purely technical reasons. Our proposed section (section 97) has its origin in the Model Joint Obligations Act (USA), sections 1 and 2.”

The appellants said this confirmed that the provision was confined in its effect to cases where judgment had been entered against some but not all debtors. The explanatory memorandum was to the same effect.

3. The (current) commentary in Ritchie’s Supreme Court Procedure NSW includes the following:

“The section only refers to the effect of a judgment. Historically, a consensual release of a person who was jointly liable was still regarded as discharging any other persons jointly liable. This explains the use of the “covenant not to sue” as an alternative to a formal release of joint obligees. Such a covenant protected the covenantee from further claims by the principal creditor, but still allowed the creditor to claim against the others jointly liable. It also left the covenantee exposed to claims for contribution from those other jointly liable persons. However, these authorities, and the general proposition about the indivisibility of a joint cause of action on which they are based, must now be read in the light of the decision in Thompson v Australian Capital Television Pty Ltd (1996) 186 CLR 574; 141 ALR 1. There, in a case dealing with joint tortious liability (as to which see [s 97.4]) the High Court held that contribution legislation such as the Law Reform (Miscellaneous Provisions) Act 1946 impliedly abrogated the rule that release of one joint tortfeasor released all.” (Citations omitted.)

The appellants pointed to the reference to “the effect of a judgment” in the first sentence of that passage and said that the commentary concerning Thompson v Australian Capital Television Pty Ltd 186 CLR 574; [1996] HCA 38 was inapplicable because the statute was materially different.

4. The appellants also sought to rely upon the definition of “liability” being expressed in terms of “liability in contract, a liability in tort and a liability under a statute”, and not explicitly referring to liability in equity.

28. The appellants recognised that it was necessary also to challenge the reasoning to the effect that even if s 95 was inapplicable, equity should not follow the common law joint release rule. The appellants emphasised what had been said in Yeshiva Properties No 1 Pty Ltd v Marshall [2005] NSWCA 23; 219 ALR 112 at [80] by Bryson JA with the agreement of Mason P and Beazley JA:

“To my mind it is doubtful whether an equitable remedy against an alleged accessory should be granted to a plaintiff who has given the alleged defaulting trustee or fiduciary a release, or has decided not to sue the trustee or fiduciary. Doing equity as between the plaintiff and the accessory, who is not the person principally liable, seems to me to be possible only if the plaintiff also pursues his claim against the person principally liable. A plaintiff who seeks an equitable remedy commits himself to a suit in which all equities in the controversy will be resolved together, and the court should not allow the plaintiff to decide which party to sue and which party to ignore or give a release, perhaps for forensic advantages related to assessed readiness to contest the claim. … While I feel these concerns strongly, they were not debated on appeal and the appeal can be disposed of without reaching conclusions on them.”

29. The appellants also said that the joint release rule had been “too often affirmed to admit of doubt”, and “the correct approach is by legislative reform and not unilaterally declining to follow the common law rule”.

30. In response, the liquidator submitted that in circumstances where “s 95 abrogates the merger into judgment rule, there is no point of principle or authority in support of the appellant’s proposition that the joint release rule itself remains unaffected, because the joint release rule is based on the cause of action merging into judgment”. The liquidator said that there could be no principled reason for excluding settlement, as opposed to judgment, from the beneficial effect of the legislation, and that “[s]trict adherence to the text of the legislation at the expense of purposive interpretation of legislation would defeat the beneficial purpose of s 95”.

Summary of what this judgment determines and does not determine

31. For the reasons which follow, we have concluded that the primary judge reached the correct conclusion on both points. Insofar as there was a rule which had the result that a release of a fiduciary brought about the release of a person who knowingly assisted in that fiduciary’s breach of duty, it cannot survive the enactment of s 95 of the Civil Procedure Act. Further, the better view is that there was no such rule in equity.

32. Two observations may be made at the outset concerning the parties’ submissions and the way argument was presented on appeal. One derives from the analysis of the primary judge at [2477]-[2478] regarding the finding in Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; [2012] FCAFC 6 holding that the liability of a fiduciary and a third party assistant acting in concert was joint and several. The primary judge pointed to the incongruity of the result that a fiduciary and a third party who acted in concert were jointly and severally liable, such that the release rule applied, while a third party who did not act in concert with the fiduciary was not jointly and severally liable, and therefore would not be released by a release of the fiduciary if the release rule applied. The appellants said that the difficulty arose not from the joint release rule, but from the decision in Grimaldi itself. The liquidator’s written submissions challenged reliance on the obiter dicta in Grimaldi to the effect that where the principal and accessory acted in concert for their mutual benefit, their liability was joint and several to compensate for loss. The liquidator said that (a) that proposition was wrong in law and (b) no factual findings had been made sufficient to establish that there was the requisite acting in concert (this reflecting the fact that the point was only raised later in the trial).

33. The second observation is that the liquidator added that there was no challenge to the breach of statutory duties nor the findings of knowing participation for the purposes of s 79 of the Corporations Act, and that it had been held that the statutory duties were owed severally by the directors. In Daniels v Anderson (1995) 37 NSWLR 438 at 505, Clarke and Sheller JJA had said, of the duty at common law owed by directors, that “[t]he duty is a common law duty to take reasonable care owed severally by persons who are fiduciary agents bound not to exercise the powers conferred upon them …” (emphasis added). The liquidator observed that s 185 confirmed that ss 180-184 were in addition to and did not derogate from other duties owed by directors. Hence it was said that there was “clear statutory indication that the statutory duties are stand-alone duties and their force and effect should be construed having regard to the statutory text, and that their effect must not be bound by equity”.

34. The appellants did not address the second point, to the effect that even if everything that was said about liability in equity and s 95 of the Civil Procedure Act was accepted, that still left them liable for knowingly participating in breaches under the Corporations Act, despite this being drawn to their attention during the hearing, save in a brief supplementary note. For his part, the liquidator made only brief oral submissions. No oral submissions at all were made by the liquidator developing his challenge of Grimaldi. It should be made clear that Ivana, whose recently briefed senior counsel had introduced the issue, elected not to participate in the argument on this point on the appeal, but rather confined her submissions to defending the demeanour-based findings made by the primary judge to the effect that she was not knowingly involved in the breaches. It was perfectly appropriate for Ivana to adopt that approach. But the consequence was to diminish the assistance the Court had from argument on the point.

35. Sometimes courts have to resolve questions of law without the benefit of argument, including oral argument. However, it is generally undesirable to do so, especially if it involves departing from the reasons of another intermediate appellate court, and the precedential value of a decision made in the absence of argument is diminished for that reason. These grounds can be resolved on the basis of the points which were fully developed in the parties’ submissions, and for that reason, should be so confined. The principle of judicial economy reflected in this approach is discussed in Massoud v Nationwide News Pty Ltd; Massoud v Fox Sports Australia Pty Ltd [2022] NSWCA 150 at [35]-[41].

Section 95 of the Civil Procedure Act and its antecedents

36. It is convenient, in an area which is far from straightforward, to start with statute. The appellants’ submissions focussed on the text of s 95, and the requirement for there to be a judgment in order for the provision to be engaged. No judgment having been entered against or in favour of Frank Criniti, the appellants submitted that the section could not override the rule that the release of a fiduciary must also release a third party knowingly involved in the fiduciary’s breach of duty.

37. That submission has the attraction of simplicity, but it cannot suffice to resolve the point. There are two reasons for this. The first is that s 95 was directed to altering or abrogating a pre-existing rule, and its content can only be understood against the rule which was altered or abrogated by the provision. Secondly, it is to be borne in mind that the appellants’ argument is not that they fall within the terms of s 95. The appellants say that s 95 was not engaged, and therefore they can continue to take advantage of the pre-existing rule which, according to them, survives the enactment of s 95 and entitles them to a discharge. That is to say, an implicit but essential element of the appellants’ submission is that s 95 has no effect on any pre-existing rule of judge-made law applicable in circumstances which do not involve giving or entering a judgment. Thus, it is necessary not merely to analyse the explicit effect of s 95, but also how and to what extent it amends or abolishes the pre-existing rule.

38. Those considerations make it essential to consider not merely the text of s 95, but how the section came to be enacted. The background is not without interest. The essential steps are:

1. Section 95 was a consolidation of s 97 of the Supreme Court Act 1970 (NSW);

2. Section 97 of the Supreme Court Act was introduced as one of the reforms effected following the delayed enactment of judicature legislation in New South Wales and was proposed following consideration by the Law Reform Commission in LRC 7. It derived from the Uniform Joint Obligations Act, model legislation drafted by Samuel Williston acting under the auspices of the Commissioners on Uniform State Laws, although the Law Reform Commission consciously departed from that proposed uniform legislation.

3. Section 97 of the Supreme Court Act (and its modern equivalent, s 95 of the Civil Procedure Act) are explicitly linked to the reforms made by s 5(1)(a) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW). As will be seen below, the language is similar and they were directed to the same end but operating in the area of joint liability which was not joint liability in tort. They should be construed in the same way.

39. The United States ancestry of s 95 is unusual. However, it is neither controversial nor concealed. Indeed, it is apparent from the paragraph of LRC 7 reproduced above, on which the appellants relied, and from the legislative side-notes to s 95 of the Civil Procedure Act and s 97 of the Supreme Court Act 1970.

40. Williston’s model legislation is reproduced in the Annual Report of the American Bar Association (48 Annu Rep ABA 560 (1925) at 595-6, accessed via Heinonline), which records the application for endorsement of the statute by the American Bar Association as part of the campaign for its enactment by the various States. The committee reported that:

“It is universally agreed that the common law in regard to joint obligations is likely to work injustice. … The committee stated that in most of the states statutes have somewhat changed the common law in regard to joint obligations, but that the statutes are not uniform in character. They are aimed chiefly against the rule requiring the joinder of all joint debtors, that declaring a joint obligation discharged by either a judgment or release of a joint debtor, and that providing that on the death of the joint obligor his estate is free from liability to the creditor. Less often is any change made in the right of joint obligors; and it will be recalled that a common provision in these statutes that the liability of joint debtors shall be joint and several does not affect the objectionable rule that the release of one discharges all”: 48 Annu Rep ABA 588-9.

41. It is plain from the above that the mischief to which the reform was directed extended to the release of joint obligors. Something should be said of the injustice to which the committee referred.

The rule that a release of one joint and severally liable obligor releases all

42. A joint obligation was regarded by the common law as a single cause of action. To use Glanville Williams’ example, if A and B jointly covenanted to pay £100 to C, there was a single promise, which each of A and B was liable to pay in full. That is quite distinct from several promises by each of A and B to pay £50 to C. Most significantly for present purposes, Glanville Williams explained in his classic work Joint Obligations (Butterworths, 1949) that:

“Since there are not two cumulative obligations, it follows not only that performance by one discharges the other but that (in general) whatever else discharges the obligation for the one will discharge it for all. The singleness of the joint promise is emphasised by a number of other rules, which will be considered as we proceed with the subject.” (p 34)

43. One of those “other rules” is the rule that an unqualified release of one joint promisee releases all joint promisees. The underlying theory was the “singleness” of the joint promise.

44. Likewise, if two persons are joint tortfeasors (for example, the partners of a firm give negligent advice), then there is a single cause of action. It was stated in State of New South Wales v Loh Min Choo [2012] NSWCA 275 at [72] that:

“As their rights are joint, they are in law, for this purpose, one person only. As pointed out in King v Hoare (1844) 13 M&W 494 at 505; 153 ER 206 at 210, in the case of both joint torts and joint contracts there is only one cause of action and whether an action is brought against one or two persons jointly liable, it is in either case for the same cause of action …”

45. The difficulties associated with joint obligations led to the creation of joint and several obligations from a very early period. This was recognised as possible by the language in a deed or a bond, and in various United States jurisdictions statutes were enacted many years ago deeming all joint obligations to be joint and several or otherwise modifying the rule: many are summarised in S Williston, A Treatise on the Law of Contracts (rev ed 1936 by S Williston and G Thompson), vol II, §336. In days when there could only be a single cause of action in a writ, it was more important than it is now that there can be joinder of causes of action in the same proceeding (see UCPR r 6.18) and until such reform was made, the promisee with the benefit of a joint and several promise by A, B and C could sue A, B and C on the one writ, or each of them on a separate writ, but could not sue two of them on the one writ. See the anonymous 16^th century case at 3 Dyer 310a; 73 ER 702 and the decisions there mentioned, and Glanville Williams, Joint Obligations, pp 60-61.

46. Baron Parke’s analysis in King v Hoare (1844) 13 M & W 494; 153 ER 206 has proven to be influential. His Lordship explained that it had never squarely been decided whether a judgment recovered against one of two joint contractors was a bar to an action against the other. It was settled that a judgment obtained against a joint tortfeasor was a bar against an action against the other, on the basis that there was a single cause of action, which had merged into the earlier judgment. His Lordship considered that the same must be true where there were joint contractors. He then turned to joint and several contractual liability:

“The distinction between the case of a joint and several contract is very clear. It is argued that each party to a joint contract is severally liable, and so he is in one sense, that if sued severally, and he does not plead in abatement, he is liable to pay the entire debt; but he is not severally liable in the same sense as he is on a joint and several bond, which instrument, though on one piece of parchment or paper, in effect comprises the joint bond of all, and the several bonds of each of the obligors, and gives different remedies to the obligee.”

47. Baron Parke then added:

“If there be a judgment against one of two joint contractors, and the other is sued afterwards, can he plead in abatement, or not? If he cannot he would be deprived of a right by the act of the plaintiff, without his privity or concurrence, in suing and obtaining judgment against the other. If he can, then he may plead in bar the judgment against himself; and if that be not a bar, the plaintiff might go on, either to obtain a judgment against himself and his co-contractor, so that he would be twice troubled in the same cause; or the plaintiff might obtain another judgment against the co-contractor, so that there would be two separate judgments for the same debt. Further, the case would form another exception to the general rule, that an action on a joint debt, barred against one, is barred altogether …”

48. Those considerations led to the conclusion that where judgment had been obtained for a debt, no differently from the case of a tort, the right given by the record merged with the inferior remedy by action for the same debt or tort against another party.

49. Glanville Williams wrote that King v Hoare was decided “in ignorance of earlier authority to the contrary”: at 94. Although doubted in Chancery by Knight-Bruce VC in Ex parte Waterfall (1851) 4 De G & SM 199 at 203; 64 ER 797 at 799, King v Hoare was upheld by the House of Lords in Kendall v Hamilton (1879) 4 App Cas 504. Glanville Williams regarded the analysis as unsatisfactory, stating that the analogy with tort could not provide strong support for the rule, because legislation had abrogated the rule in tort, while “[t]he theory of merger is pure technicality and should not be allowed to work injustice”: at 95-96.

50. The reasoning in King v Hoare assumed heightened significance because, with a striking disregard for internal consistency, common law treated the release of a joint and several obligation as having the same effect as a release of a joint obligation. Once again, in Glanville Williams’ words:

“A believer in the logical consistency of English law might therefore be forgiven for supposing that a release of one joint and several covenantor would not work a release of a co-covenantor, for, although it would release the joint obligation, it would not release the other several ones. This, however, is not the rule. The rule is that a release of one joint and several covenantor discharges the others, in precisely the same way as with purely joint covenants.” (Joint Obligations, p 135).

51. Even the ordinarily restrained authors of Halsbury’s Laws of England regarded this rule as “perhaps surprising”: 4^th ed, vol 9 para 627. Glanville Williams explained that the source of the rule was a case of 1641 where no judgment was reported, after which “the rule became settled by a series of cases that followed each other uncritically, and prevails at the present day”.

52. Likewise, Williston stated at §334 that not only were all joint debtors discharged by a release of one of them, but the same rule applied to the joint liability of joint and several debtors, and that it was also “early decided that the several as well as the joint liability of all the debtors was discharged”. With considerable understatement, Williston added “It is not easy to find a technically satisfactory reason for this latter rule”. Nonetheless, Williston wrote that “[t]he rule in the early English cases has been widely adopted”, noting what was said in In re EWA [1901] 2 KB 642 at 648: “It is too late now to question the law – that where the obligation is joint and several, the release of one of two joint debtors has the effect of releasing the others”. He noted that a commonly enacted provision to ameliorate the effect of the harshness of the common law rules about joint obligations, namely, deeming all joint obligations to be joint and several, could have no effect on a rule which applied indifferently to joint obligations and joint and several obligations.

53. It is not necessary to trace the evolution of the rule for present purposes, because it was upheld in Walker v Bowry (1924) 35 CLR 48; [1924] HCA 28, decided at a time when the High Court was for most practical purposes bound by the House of Lords. At 56, Isaacs ACJ drew upon the justification given by Baron Parke:

“True, Bowry had contracted to pay ‘jointly and severally’ and not ‘jointly’. He had thereby consented to the Bank suing and recovering judgment against Walker severally or jointly, and, even if severally, he undertook to be liable to pay the creditor severally himself. Even if several judgments are obtained, all would be liable. But he did not undertake that Walker should be released and still be liable himself to pay as if he had contracted ‘severally’ only. So far as the Bank released Walker from his liability to pay the secured debt, the condition of ‘joint and several’ liability, on the faith of which Bowry had entered into his obligation, would have been rendered impossible of observance.”

54. Starke J (at 57-58) was perhaps less enthusiastic as to the history and rationale of the rule, but accepted that it had been held that joint suretyship was the “essential condition of the liability” in such cases, even if the liability were joint and several. Irrespective of the persuasiveness of the explanation, there can be no doubt that this Court is bound (subject always to the effect of subsequent legislation) by what was held in Walker v Bowry. McLelland CJ in Eq proceeded on the same basis, despite considering the rule “impossible to justify” in principle, in Dorgal v Buckley (1996) 22 ACSR 164 at 167, as did this Court in Carr and Purves v Thomas [2009] NSWCA 208 at [15].

55. The upshot is that for Australian purposes, it was accepted that the release of a joint and several liability was effective to release all of the obligees. This was the same position noted by the committee reporting to the American Bar Association in 1925 mentioned above.

Williston’s Model Joint Obligations Act

56. Williston’s Model Act was adopted in Nevada in 1927 and then, much more importantly, in New York in 1928: see the note by C Eberhart in 13 Cornell Law Quarterly (as the Cornell Law Review was then known) 640 (1928). A detailed analysis of the statute and the mischief to which it was directed may be found in Williston’s A Treatise on the Law of Contracts at §§336 and 336A. Former paragraphs 97(2)(a) and (d) of the Supreme Court Act 1970 derive broadly from ss 2 and 3 of Williston’s Model Act, which provide:

“2. A judgment against one or more of several obligors, or against one or more of joint, or of joint and several obligors shall not discharge a co-obligor who was not a party to the proceeding wherein the judgment was rendered.

3. The amount or value of any consideration received by the obligee from one or more of several obligors, or from one or more of joint, or of joint and several obligors, in whole or in partial satisfaction of their obligations, shall be credited to the extent of the amount received on the obligations of all co-obligors to whom the obligor or obligors giving the consideration did not stand in the relation of a surety.”

57. Sections 4 and 5 dealt in terms with releases of joint, or several, or joint and several obligors. Those provisions were not picked up by the Law Reform Commission. No doubt an argument might be made based on the inference that the Law Reform Commission had consciously chosen not to recommend enacting those provisions of the Model Act concerning releases but confined the reforms to those based on the effect of a judgment. As noted above, no such submission was made in this Court, because the appellants did not direct themselves to the Model Act. We return to this below. It is sufficient for the moment to note that the submission would amount in substance to an application of the principles associated with the expressio unius maxim, upon which it is dangerous to rely: see for example Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 213 CLR 543; [2002] HCA 49 at [34].

Earlier legislative reform in New South Wales concerning the entry of judgments

58. The enactment of s 97 of the Supreme Court Act 1970 and s 95 of the Civil Procedure Act 2005 must be seen as an extension of earlier statutory reforms of the effect of a judgment upon a joint obligation. Both sections provide that they do not apply to a judgment to which s 5(1)(a) of the Law Reform (Miscellaneous Provisions) Act1946 (NSW) applies. Thus, the provisions were on their face supplementary to earlier, more narrowly confined, legislative reform.

59. Section 5(1)(a) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) provides:

“(1) Where damage is suffered by any person as a result of a tort (whether a crime or not):

(a) judgment recovered against any tort-feasor liable in respect of that damage shall not be a bar to an action against any other person who would, if sued, have been liable as a joint tort-feasor in respect of the same damage.”

Thus s 5(1)(a) abrogated the rule in Brinsmead v Harrison (1872) LR 7 CP 547 that obtaining judgment against one joint tort-feasor discharged all other joint tortfeasors.

60. Section 5(1)(c) goes on to provide that a tort-feasor may recover contribution between tort-feasors liable in respect of the same damage. This paragraph overturned the rule that contribution was not available either at law or in equity between tortfeasors: see Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd (2013) 247 CLR 613; [2013] HCA 10 at [12] and [80]. The fact that these paragraphs address different problems was noted in Newcrest Mining Ltd v Thornton (2012) 248 CLR 555; [2012] HCA 60 at [45] (referring to the materially identical Western Australian provision, s 7(1) of the Law Reform (Contributory Negligence and Tortfeasors’ Contribution) Act 1947 (WA)):

“The impact of s 7(1) on this position was as follows. The mischief dealt with in s 7(1)(a) was the common law prohibition stated in Brinsmead v Harrison against a plaintiff who had recovered against one joint tortfeasor from recovering against another. Section 7(1)(a) improved the position of plaintiffs by abolishing that common law prohibition. The mischief dealt with in s 7(1)(c) was the rule in Merryweather v Nixan, which did not affect plaintiffs but tortfeasors. Section 7(1)(c) dealt with that mischief by abolishing the rule. Those changes to the common law position left the risk that plaintiffs, freed from the ban that Brinsmead v Harrison imposed on any action against joint tortfeasors after one tortfeasor had been sued to judgment, would abuse that new found freedom by pursuing a multiplicity of actions.”

61. Section 5(1)(a) has not been amended since it was enacted in 1946. It was not derived from the United States proposals of the 1920s. Instead, it was derived from the reforms in the United Kingdom in the 1930s concerning joint obligations in tort and the rule that there could be no contribution between tortfeasors, summarised in Nau v Kemp & Associates (2010) 77 NSWLR 687; [2010] NSWCA 164 at [34]-[35]:

“The 1935 Act, which led to the passing of the 1946 Act, addressed reforms recommended by the Law Revision Committee (Great Britain), Third Interim Report, Cmnd 4637 (1934) (the “Third Interim Report”). The Law Revision Committee was tasked with considering, inter alia, the common law doctrine that there could be no contribution between tortfeasors and “the liability of a husband for the torts of the wife” and “the liability of a married woman in tort and contract” (at [1]). The Third Interim Report addressed the contribution issue and what the Committee apparently perceived to be related issues.

The Law Revision Committee’s Fourth Interim Report, Cmnd 4770 (1934) (at [23]), addressed the issue of a husband’s liability for his wife’s torts and, inter alia, recommended the abolition of the common law rule under which husbands were responsible for their wife’s torts and also for her liabilities. The reforms proposed in both the Third and Fourth Interim Reports found their way into the 1935 Act – hence its name.”

62. In short, a 1946 statute abrogated the rule that judgment against a joint tort-feasor would discharge another joint tortfeasor, and a separate statute in 1970 abrogated the rule that judgment against a joint obligee would discharge any other joint obligee, but only in circumstances where the 1946 legislation did not apply. The 1946 legislation conferred a right of contribution, which was necessary because contribution was not available at law or in equity between tort-feasors. The 1970 legislation did not address contribution, it being unnecessary to do so because there already were rights of contribution between joint obligees which would continue so long as the liability was not discharged.

Rationale for the rule abrogated by s 5(1)(a) and s 95

63. Although the reforming legislation commenced with tort and then expanded to include joint liability in areas other than tort, the modern reason given by the law for the effect of a judgment given in relation to one joint obligee having the effect of discharging all other joint obligees was the same: the cause of action against the joint tortfeasors or joint obligees was “one and indivisible”. Thus, in Duck v Mayeu [1892] 2 QB 511 at 513, A L Smith LJ said:

“It is, we think, clear law, that a release granted to one joint tortfeasor, or to one joint debtor, operates as a discharge of the other joint tortfeasor, or the other joint debtor, the reason being that the cause of action, which is one and indivisible, having been released, all persons otherwise liable thereto are consequently released. The case of Cocke v Jennor is distinct upon the point, and there are many subsequent cases to the same effect.”

64. This was the approach taken in the Restatement of Contracts. The passage from Duck v Mayeu was reproduced by Morton LJ delivering the leading judgment of the Court of Appeal in Apley Estates Co Ltd v De Bernales [1947] Ch 217 at 220-221, by Taylor J (with whom Kitto J agreed) in Ramsay v Pigram (1968) 118 CLR 271 at 286 who added that “as far as I can see has never been questioned” and by this Court’s unanimous judgment in Carr and Purves v Thomas [2009] NSWCA 208 at [14].

The significance of s 5(1)(a) of the Law Reform (Miscellaneous Provisions) Act 1946

65. Section 5(1)(a) of the Law Reform (Miscellaneous Provisions) Act 1946 plays an important part in the analysis in this appeal because of what has been authoritatively decided of its Australian Capital Territory counterpart in Thompson v Australian Capital Television Pty Ltd (1996) 186 CLR 574; [1996] HCA 38. The decision has received a mixed reception in New Zealand (see Robinson v Tait [2002] 2 NZLR 30; [2001] NZCA 217) but the reasoning binds this Court. There the High Court considered the effect of s 11(2) of the Law Reform (Miscellaneous Provisions) Act 1955 (ACT) which provided:

“Judgment recovered against a tort-feasor liable in respect of the damage is not a bar to an action against any other person who would, if sued, have been liable as a joint tort-feasor in respect of the same damage.”

66. The 1955 ACT legislation was directed to the same end, and was materially identically worded, as s 5(1)(a) of the 1946 NSW statute.

67. The joint judgment of Brennan CJ, Dawson and Toohey JJ said at 582 that “The effect of s 11(2) is that the cause of action against joint tortfeasors is no longer one and indivisible”. After dealing with Singaporean, English and Australian authority on counterpart provisions, their Honours explained at 584:

“Similarly, under s 11(2) of the ACT Act it is no longer the case that the victim of a tort committed by joint tortfeasors has only one cause of action; the cause of action is no longer one and indivisible. The concept of a single wrong and a single cause of action having gone, the rule that a release given by one joint tortfeasor releases any others must have gone with it, for that rule is nothing more than another aspect of the same thing, namely, that there is only one cause of action against all joint tortfeasors in respect of the one tort. In other words, once the cause of action is by statute no longer one and indivisible, there is no conceptual basis for the rule that the release of one joint tortfeasor releases the others. The rule must therefore be taken to have been impliedly abolished by the statute.

It is true that the draftsman of the legislation could have included, as did the draftsman of s 3(3) of the Tortfeasors and Contributory Negligence Act 1954 (Tas), an express provision that the release of one joint tortfeasor does not release the other joint tortfeasors in respect of the same tort, but the absence of such a provision does not affect the necessary implication that the common law rule in relation to releases must have gone at the same time as the cause of action became no longer one and indivisible.” (footnote omitted, emphasis added).

68. Gummow J, with whom in this respect Gaudron J agreed, wrote to the same effect at 613-614:

“Once it has been determined, as it has been in this Court, that a necessary implication of a provision in the terms of s 11 of the Law Reform Act is that the unity of the cause of action against all joint tortfeasors is to be treated as severed, the answer to the present issue becomes apparent. This is that the common law, as it operates in the Territory with respect to the effect of the release of one of several joint tortfeasors, can no longer operate on the foundation that that which is the subject of the release is an indivisible unity. The existence of that indivisible unity is, as has been seen with particular reference to the reasoning in Duck v Mayeu, the ground upon which the remaining joint tortfeasors are treated as released. The present case thus is an example of the class of case referred to in this Court in Lamb v Cotogno, namely the implied abrogation of a rule of law.” (Citation omitted.)

69. Of course, s 5(1)(a) of the 1946 NSW statute and s 11(2) of the ACT legislation were confined in their operation to tortfeasors. For that reason, the High Court limited the implied abrogation effected by the legislation to the release of joint tort-feasors.

70. But why should not the same reasoning apply to the more broadly applicable s 97 of the Supreme Court Act 1970 and s 95 of the Civil Procedure Act 2005 directed to joint obligations other than those arising in tort? The provisions have materially identical wording and are directed to the same end. Both are explicitly tied to the 1946 NSW statute insofar as their application is delimited by reference to the area of operation of that statute.

71. A submission to this effect was made to the primary judge and was recorded at [2301] and [2303]:

“The plaintiffs further say that the effect of the High Court’s finding in Thompson v Australian Capital Television that s 11(2) of the Law Reform (Miscellaneous Provisions) Act 1955 (ACT) (the ACT Law Reform Act) had the effect that a cause of action against joint tortfeasors is no longer one and indivisible (and thus, there is no conceptual basis for the rule that the release of one joint tortfeasor releases the other – see Gummow J at 614-615), is that the equivalent provision of s 5(1)(a) in the Law Reform (Miscellaneous Provisions) Act 1946 (NSW)) (the NSW Law Reform Act) similarly abrogated the common law rule.

…

the plaintiffs say that the existence of s 95 of the Civil Procedure Act, which in terms is wider than the Victorian legislation, operates to destroy unity of action in every cause of action or claim that would be a joint liability in any proceeding (including all such claims at law and in equity). …”

72. When Thompson v Australian Capital Television Pty Ltd was decided, s 97 of the Supreme Court Act 1970 provided:

“(1) In this section, ‘liability’ includes a liability in contract, a liability in tort and a liability under a statute.

(2) Where two or more persons have a joint liability and, in proceedings in the Court, judgment on the liability is given against one or more but not all of them—

(a) the liability of the other or others of them shall not be discharged by the judgment or by any step taken for the enforcement of the judgment;

(b) after the judgment takes effect, those of them against whom the judgment is given and the other or others of them shall, as between those of them against whom the judgment is given on the one hand and the other or others of them on the other hand, be liable severally but not jointly;

(c) if there are two or more such persons against whom the judgment is not given, they shall, after the judgment takes effect, remain jointly liable amongst themselves; and

(d) if the judgment is satisfied wholly or in part by payment or by recovery under execution, the liability of the persons against whom the judgment is not given shall be satisfied in the amount of the payment or recovery.

(3) This section does not affect any right of any person to contribution or indemnity in respect of the satisfaction by him wholly or in part of a liability which he has jointly or severally or jointly and severally with one or more other persons.

(4) This section does not apply to a judgment to which paragraph (a) of subsection one of section five of the Law Reform (Miscellaneous Provisions) Act, 1946, applies.”

73. Each of paragraphs (2)(a), (b), (c) and (d) is inconsistent with a judgment effecting a release of other joint obligees. Applying the reasoning which was dispositive in Thompson produces the result that the provision must impliedly abrogate the concept that the non-tortious cause of action was one and indivisible. That is to say, s 97(2)(a) of the Supreme Court Act 1970 provides that where a judgment is given against one of a number of persons who have a joint liability, then the liability of the others is not discharged by the judgment or any step taken for its enforcement. That is to the same substantive effect as s 5(1)(a) of the 1946 NSW statute and is contrary to the proposition that there could be a single cause of action which merged in the judgment obtained against one of the persons jointly liable. If s 5(1)(a) impliedly abolishes the rule that the release of one joint tortfeasor releases the others, then so too must s 97(2)(a) in the cases to which it applies, namely, co-obligors who are not joint tortfeasors. Paragraphs (b), (c) and (d) of s 97(2) confirm that that is so.

74. That reasoning was applied in Harplex Pty Ltd v Konstandellos (2018) 54 VR 174; [2018] VSCA 67 at [60]:

“on the authority of Thompson, s 24AA destroys the unity of the cause of action in debt which, on the authority of Walker, is the basis for the common law rule as it applies to both joint and joint and several liability. It is not possible, given the High Court’s conclusion in Thompson that the statute impliedly abolishes the common law rule by destroying the unity of the cause of action in relation to tort, to avoid the same conclusion in respect of the unified cause of action in contract. In the circumstances, the reasoning governing the position regarding joint, or joint and several, tortfeasors applies equally to joint, or joint and several, debtors.”

75. Section 24AA of the Wrongs Act 1958 (Vic) provides that “Judgment recovered against any person liable in respect of any debt or damage shall not be a bar to an action, or to the continuance of an action, against any other person who is (apart from any such bar) jointly liable with the first-mentioned person in respect of the same debt or damage”. This section is different from s 95 of the Civil Procedure Act in its scope. Section 23A of the Wrongs Act provides that for the purposes of provisions including s 24AA: “a person is liable in respect of any damage if the person who suffered that damage ... is entitled to recover compensation from the first-mentioned person in respect of that damage whatever the legal basis of liability, whether tort, breach of contract, breach of trust or otherwise”. Thus, rather than having two separate provisions (s 5(1)(a) applicable to joint tortfeasors, and s 95 applicable to joint obligees who fall outside of s 5(1)(a)), the Victorian legislation has a single provision, extending to recovering compensation “whatever the legal basis of liability” and explicitly including “breach of trust”. The Victorian Court of Appeal found no difficulty in applying the construction of the narrower provision considered in Thompson to s 24AA, to achieve the implied abrogation of the single and indivisible status of causes of action for debt in the same way as had been held for causes of action for tort in Thompson. We respectfully agree.

The significance of re-enacting the provision

76. That conclusion is reinforced by the fact that the New South Wales Legislature chose to re-enact s 97 as s 95 of the Civil Procedure Act. This was a sensible measure to take, for there is no reason for the entry of judgment in the Supreme Court against a co-obligor to have any different effect from the entry of judgment by the District Court, and yet that would arguably be the effect of the provision as originally enacted (a point observed in Woodgate v Davis (2002) 55 NSWLR 222; [2002] NSWSC 616 at [10]). Similar concerns led to the delayed commencement of the Supreme Court Act and the enactment of the Law Reform (Law and Equity) Act 1972 (NSW).

77. When s 97 was re-enacted as s 95, the words “in proceedings in the Court” were replaced by “in any proceedings”, a point to which we shall return at [86] below. But the presently relevant significance of re-enacting s 97 as s 95 of the Civil Procedure Act is that it occurred after the reasoning in Thompson as to the implied abrogation of a broader rule of law. Indeed, it had been noted in the standard commentary. Ritchie’s Supreme Court Procedure (loose-leaf, service 197, which dates from 2003) is in materially identical terms as the current annotation to s 95 which is reproduced above.

78. As noted above, the appellants relied on the opening words “The section only refers to the effect of a judgment”. This was put as follows:

“The commentary in Ritchie’s, the opening sentence, in my respectful submission, captures the essence of my submission. That is, the section only refers to the effect of a judgment and then it refers to the historical position regarding consensual releases and covenants not to sue. … [B]ecause of the specific drafting in s 95, the reasoning in Thompson v Australian Capital Television is not automatically imported into s 95. The correct statement of principle is the clear, short, succinct first sentence in Ritchie para 95.15.”

79. We cannot accept that submission, which misses the gravamen of the paragraph in the commentary. The authors after giving the background to the rule add (after “However”) that the High Court’s decision in 1996 treated the ACT counterpart of the provision as having a wider effect, namely, that it “impliedly abrogated the rule that release of one joint tortfeasor released all”. The appellants’ submission was that “s 95 of the Civil Procedure Act has not impliedly abrogated the joint release rule but rather, only the merger into judgment rule”. Fairly read, the authors of Ritchie’s commentary were cautioning readers in terms that s 95 was to be construed in light of how the High Court had construed a materially identical provision.

136. In cross-examination, George Said was taken to his out-of-court statements made during his interview with officers of the Australian Taxation Office on 3 June 2019. Portions of the transcript of the ATO interview were provisionally admitted as Exhibit U, subject to objection. In a subsequent ruling given by her Honour on 26 March 2020, identified portions of the transcript in Exhibit U were admitted against George Said as admissions against interest, or as evidence of prior inconsistent statements, and the balance of Exhibit U was admitted only as evidence of what was put to the witness in examination or cross-examination, as the case may be: In the matters of Earth Civil Australia Pty Ltd v RCG CBD Pty Ltd, Bluemine Pty Ltd, Diamondwish Pty Ltd and Rackforce Pty Ltd (All in liq) [2020] NSWSC 293.

137. There is no challenge to these evidentiary rulings. To the extent that both parties referred on appeal to portions of Exhibit U that were not admitted into evidence against George Said, those submissions were withdrawn after the Court drew the parties’ attention to the evidentiary rulings of the primary judge.

138. The statements made by George Said during his ATO interview which were admitted as admissions against interest include those which are extracted below. The first concerned the circumstances in which he was asked by Gino Cassaniti to provide assistance in relation to invoicing and making payments:

A.   And then he said to me, like, “You can make an extra dollar. You can just run these businesses, but you can do it via still working doing real estate.” And I was, like, “Yes. Like, what does it involve?” And he said, “Well, yes, I’ll tell you what it involves.” By the time then he had, like, made me director of that company. I can’t – I think it was Involved ---

Q.   Okay.

A.   Involved ---

Q.   Involved Recruitment.

A.   Involved Recruitment.

Q.   Yes.

A.   And then pretty much he said to me, like, “I’ll let you – I’ll give you instructions on what to do.” And I was, like, “Yes, fine.” And I said, “How much am I getting paid?” He said – I think it was, like, between – some weeks it was, like, 800, 1000, 1200, depending on, like, if I did a lot of work that week or whatever. So, like, I obviously took it.

140. As her Honour noted at [859], George Said acknowledged in cross-examination that Gino Cassaniti was the person he was referring to at Banq, who he did not want to identify to the ATO officers, as appears from the following extract:

…

Q.   Yes.

A.   But that was all under instructions.

Q.   Okay.

Q.   From whom? Instructions from whom?

A.   From the company. Like ---

Q.   The company being Banq Accountants or ---

A.   The – the – no, the person that ---

Q.   The person you’re not willing to name.

A.   Yes.

Q.   Okay.

Q.   So with the invoices that you received, did you ever check – look at the details what were listed on – on the –

A.   No, not in particular. No. Because I was – I was doing real estate full-time.

Q.   Sure. So you would forward the – who would check then the emails – the invoices, rather, to make sure they were correct?

A.   No, I’d just check them.

Q.   But how would you know they were invoicing you correctly? They’re not overstating ---

A.   Because if – if they – if they invoiced me, then I send it to the – the company. They never really sent anything back. They just paid it.

141. As to his role in preparing invoices and making payments as instructed, George Said described his understanding of what he was doing in these terms:

Q.   Yes. Okay. And so – okay. And you – therefore, the invoice themselves were – did you have any understanding of what the invoices were for?

A.   No. I never paid attention to stuff like that.

…

Q.   --- did you know that there was money sitting in the bank account when you go to the bank?

A.   Yes. Because I could check.

Q.   Okay. So how did you check?

A.   Internet banking.

Q.   Okay. So you – so would you check it on your laptop, or ---

A.   Yes. On my laptop. Okay.

Q.   And who would you give the instruction for the cash? Would it be the client, or would it be the person instructing you?

A.   The person instructing me, or the client, depending.

…   

Q.   Yes.

A.   And then – so I didn’t – I never had to say, “Man, what’s this or what’s that?” They sent it. They broke it down. They gave me the figure.

Q.   Yes.

A.   Got the figure, sent it.

Q.   Okay.

A.   And we’re back there.

Q.   Okay.

A.   All my role was solely to have ---

Q.   So – so Banq Accountants would – the person at Banq Accountants would ---

A.   Yes.

Q.   --- provide you with that information. Yes.

A.   Yes. That’s – that’s all my role was, like, the …

142. As to his role in the withdrawal of cash from the bank account of Involved Recruitment and cash payments to himself, George Said described what occurred as follows:

Q.   Did you ever hand cash to the person at Banq Accountants you – you ---

A.   Did I give them cash?

Q.   Yes. You ---

A.   Yes.

Q.   Yes.

A.   I left it in the office for them.

Q.   You left it in the office for them to provide to the clients?

A.   Yes.

Q.   Yes. In those ---

A.   Yes, yes. Because either I was too busy to go meet up from – come at 8 o’clock in the morning or whatever was – I’d just leave it with them. It’s for them to deal with, but that’s all.

Q.   And that person at Banq Accountants is the person you – who got you into this; is that right?

A.   Yes.

Q.   Or did you give it to other staff at Banq Accountants?

A.   No. That same person.

…

Q.   Okay. Just a couple of other things. Now, just before when you were talking about being paid for your being the director of, like, GSP and Sydney Haulage and Involved Recruitment, how were you paid? Were you paid cash in hand or money deposited into your bank account?

A.   No. I’d – I’d just take it out.

Q.   You would take it out.

A.   Yes. So ---

Q.   And you were ---

A.   Say – how could I say it? Say, for instance, there was – like, I’ve pulled out cash or whatever, like, from that, like, I’d just take the money. You get me?

Q.   Yes. So how did you know how much to take out, because it varied, didn’t it?

A.   Yes. It varied.

Q.   This is before ---

A.   It varied depending on – like, so that person in Banq would say ---

Q.   Yes.

A.   “yes. Take 800 or 1200”.

143. George Said gave inconsistent evidence at trial concerning his role in issuing invoices for Involved Recruitment. He initially agreed that his evidence in his ATO interview was truthful when he said that he changed the letterhead for invoices for Involved Recruitment. He said that Gino Cassaniti instructed him on how to use the laptop to enable the change on the letterheads to be made, and someone at Banq’s office programmed his laptop for this work, that he left his laptop in Gino Cassaniti’s office for it to be set up, and Gino Cassaniti also instructed him as to the withdrawal of money to take for himself and to give to Gino Cassaniti: at [830].

144. He later claimed in his oral evidence that his previous answers during the ATO interview about changing the logo (on invoices) was incorrect. As her Honour recorded at [831]:

“… His evidence was to the effect that what he meant to say was that he just got an invoice or would get a timesheet and send it off, and that is all he did; he “never changed anything on it”, “never touched it”, “never amended anything”. His evidence was to the effect that he could not remember whether, if a change did occur, then that was a change that he did not make or if the computer automatically did it. His evidence was to the effect that maybe he was not understanding what the tax officers had been asking him and, when he looked over the brief, he was not happy with what he had said for agreeing to the questions from the tax officers and he further went on to say that he took back the answer in the brief.”

145. Nonetheless, her Honour found that there was nothing unfair in the nature of the questioning in the ATO interview on 3 June 2019, as George Said had inferred in his oral evidence: at [833].

146. He gave further evidence on the voir dire (which her Honour recorded at [834]-[842]), as to his involvement in changing the letterhead or logos on invoices, which was later admitted without qualification: at [856]. This evidence was that he would put the “Involved Recruitment” invoice header or logo on the invoices, send the invoices over to whomever was requested to pay it, and, if it was a timesheet, he would normally have instructions (from the person who sent the timesheet or from Gino Cassaniti) as to the person to whom to send the invoice: at [836]. As her Honour noted, this evidence was inconsistent with George Said’s evidence that he was not changing logos (on invoices) and that his earlier evidence to the ATO to that effect was incorrect and that maybe he did not understand what they had been asking him: at [837].

The primary judge’s reasons

147. Her Honour found that George Said’s primary role in relation to Involved Recruitment was to undertake minor clerical work in the preparation of invoices, which, on his evidence, was at the direction of Gino Cassaniti, doing this on his laptop from electronic instructions received by email and using software or templates which, on his evidence, were provided to him by Gino Cassaniti; that George Said’s evidence as to whether this involved changing letterheads on invoices was more than a little confused; that George Said withdrew money from the bank which, on his evidence, was at the direction of Gino Cassaniti and for the payment of employees, and that he also withdrew large sums and gave them to Gino Cassaniti: at [857]. Her Honour observed that it was abundantly clear that George Said never made any decision himself (as to how much was to be invoiced or paid), and that he did what he was instructed to do when issuing invoices: at [858].

148. Addressing George Said’s credit, her Honour found that his evidence must be approached with some caution given the inconsistency between his ATO interview and his evidence in Court and that his identification of Gino Cassaniti as the person whom he was reluctant to identify to the ATO officers (during the ATO interview) was “telling”: at [859].

149. Her Honour’s dispositive reasons for finding that George Said’s involvement in the scheme rendered him liable in equity for knowing assistance are contained at [1655]-[1656]:

“I consider that George Said’s involvement in the scheme renders him liable for knowing assistance. While there is an argument that he was simply performing an administrative task (giving rise to a question as to whether, by issuing the invoices, he was on notice of facts that rendered the invoices false or suspicious). I consider that the evidence as to the manner in which the invoices were created (confused and inconsistent as that evidence was) must have raised a question in the mind of a reasonable and honest person. That alone might not have been sufficient. However, it must be taken in the context of the circumstances in which he withdrew large sums of cash, at Gino Cassaniti’s instructions, that he delivered to him at Banq’s offices and from which Gino Cassaniti directed him to take seemingly arbitrary amounts of money. The circumstances in which that occurred surely put him on notice of facts that would put a reasonable and honest person on enquiry. I consider that George Said’s role in issuing the invoices, making the payments, withdrawing large sums and delivering them to Gino Cassaniti is sufficient to establish his assistance in Gino Cassaniti’s breaches of fiduciary duty to RCG CBD and Bluemine.

Accordingly, I find that the claim against George Said for accessorial liability for knowing assistance is made good.” (Emphasis added.)

Whether the primary judge applied the wrong test of knowledge?

150. Farah establishes that it is sufficient for George Said to be shown to have actual knowledge of Gino Cassaniti’s breach, or to have wilfully shut his eyes to the obvious, or to have wilfully and recklessly failed to make such inquiries as an honest and reasonable person would make, or knowledge of circumstances which would indicate the facts to an honest and reasonable person.

151. Although her Honour correctly stated the test of knowledge at [987], she did not apply that test in terms. George Said submitted that her Honour erred by applying a test of constructive knowledge, pointing to the italicised sentence in [1655] which is extracted at [149] above. The liquidator said that the italicised sentence is no more than one factual finding leading to the ultimate finding of accessorial liability in the last sentence of [1655], which is to be read as referring to the second, third or fourth categories in Baden.

152. It is arguable that when [1655] is read as a whole, her Honour should be taken to have found that although the issuing of invoices viewed alone might not have been sufficient to amount to knowledge such that George Said was liable in equity and under statute for Gino Cassaniti’s breaches of duty, viewed in the context of the withdrawal of large sums of cash and the arbitrary amounts Gino Cassaniti instructed George Said to take for himself, George Said’s conduct in issuing the invoices, making the payments and withdrawing large sums and delivering them to Gino Cassaniti was sufficient to find that his knowledge was such that he was liable in equity and under statute.

153. The difficulty with reading the judgment this way is the absence of an express finding that George Said’s knowledge of Gino Cassaniti’s breaches of duty answered one of categories (i) to (iv) in Baden, which the High Court accepted in Farah is sufficient. Given the forensic significance of the subject matter of the constructive knowledge in the italicised sentence in [1655] (the withdrawal of large sums of cash), we are inclined to the view that the finding of liability against George Said was affected by error.

154. Accepting that error has been established, it is necessary to address the liquidator’s notice of contention in each appeal seeking a finding of knowledge within categories (i) to (iv) in Baden. It was not submitted on behalf of George Said that this Court was not in a position on a rehearing to determine that issue on the evidence and unchallenged findings below, including the adverse credit finding.

Whether George Said had the requisite knowledge of Gino Cassaniti’s breaches of duty?

155. It is convenient to address the issue of knowledge by reference to the fourth category in Baden: knowledge of circumstances which would indicate the facts to an honest and reasonable person. It is to be kept in mind that the “morally obtuse” cannot escape by failing to recognise an impropriety that would have been apparent to an ordinary person applying the standards of such persons: Farah at [178].

156. George Said submitted that “neither the findings made, nor the evidence of his actions relied upon in support of the [liquidator’s] notice of contention, rise above putting an honest person on their enquiry” (supplementary written submissions, par 3). In oral argument, counsel said that whilst George Said may have been negligent or careless as a director or deemed director of Involved Recruitment, including in assisting Gino Cassiniti in his breaches of duty, he did not have knowledge of the circumstances that would indicate the facts to an honest and reasonable person.

157. These submissions were not particularly helpful as they were expressed in conclusionary terms and, with one exception relating to George Said’s issuing invoices, the submissions did not engage with the evidence and unchallenged findings below.

158. Addressing George Said’s state of mind, his counsel submitted that:

1. George Said was only performing clerical work at the direction of Gino Cassaniti and there was nothing suspect with preparing invoices from timesheets for labour hire in a labour hire business;

2. changing the letterhead from that of a subcontractor to the letterhead of Involved Recruitment before being sent out to a “client”, particularly on instructions, is unlikely to have raised any serious concerns; and

3. the liquidator’s evidentiary case, taken at its highest, established no more than that “[George] Said’s preparation of the invoices should have put him on his enquiry” (supplementary written submissions, pars 7-10).

159. The premise of these submissions is that Involved Recruitment was engaged in a labour hire business supplying labour to its “clients”, which had been provided by subcontractors who invoiced Involved Recruitment, which in turn invoiced its clients. However, there is no finding by her Honour to this effect and this premise is not otherwise established on the evidence.

160. Insofar as the submission should be understood as suggesting that George Said honestly believed that the payments by Involved Recruitment to RCG and from Bluemine, and the withdrawal of large sums of cash, were for a genuine commercial purpose, there are several difficulties with the submission.

161. First, as her Honour found, George Said was unable to give a cogent and consistent explanation of the events in which he was involved: at [859]. Second, consistent with him not having an honest belief that the invoices he was preparing were genuine, George Said acknowledged in his ATO interview that he did not check the details on the invoices he received before changing the letterhead to Involved Recruitment and he never paid attention to what the invoices were for. Third, George Said did not give evidence that he held any belief at the time that the payments to RCG, the cash withdrawals he made to Gino Cassaniti, or the payment RCG received from Bluemine were for any genuine commercial purpose.

162. In our view, the facts as known to George Said would have indicated to an honest and reasonable person that the invoices he was creating were contrived and that the payments and cash withdrawals he was making to RCG and Gino Cassaniti lacked any genuine commercial purpose. That was in circumstances where it can be inferred that George Said knew that the amounts of cash which Gino Cassaniti instructed him to take for himself were arbitrary; and he knew that he had no arrangement with Involved Recruitment for the payment of director’s fees, or salary or wages. As George Said acknowledged in cross-examination, the cash payments which he received were “never a system”.

163. It is not in dispute that George Said’s conduct assisted Gino Cassaniti in his breaches of duty; on his evidence he was doing what Gino Cassaniti asked him to do. George Said accepted, despite the ASIC records, that he regarded himself to be a director of Involved Recruitment: at [1635]. Whilst he was content to take instructions regarding that company primarily, or entirely, from Gino Cassaniti alone (at [1636]), he knew from those instructions and the bank statements for Involved Recruitment which he received addressed to “The Director” at his home address in Belmore over a 21-month period (at [1639]), that Gino Cassaniti controlled the payments from Involved Recruitment to RCG, including the large sums of cash which he withdrew.

164. We conclude that in the context of withdrawing large sums of cash and delivering those amounts to Gino Cassaniti for no genuine commercial purpose, and also being instructed to take arbitrary amounts of cash for himself, the facts as known to George Said would have indicated to an honest and reasonable person the impropriety of Gino Cassaniti instructing him to issue invoices for which there was no genuine commercial transaction, and causing Involved Recruitment to pay $934,399 to RCG by 80 transactions and receive in one transaction $55,590 from Bluemine and to withdraw large sums of cash and deliver those amounts to Gino Cassaniti. George Said’s knowledge of Gino Cassaniti’s impropriety was such that he was liable in equity and under statute for Gino Cassaniti’s breaches of duty.

165. For these reasons, the finding of liability against George Said should be upheld.

Conclusion and Orders

166. The appeals by Gino Cassaniti and the specified Khalil parties against RCG, Bluemine, Diamondwish and Rackforce and ground 1 of the notice of contention by the Borg parties in the liquidator’s appeal have failed on the common issue that was pressed at the hearing. (The balance of the issues raised by the liquidator’s appeal against the Borg parties is the subject of the separate judgment referred to at [4] above.) The appeals by Gino Cassaniti and the Khalil parties (except George Said) against Earth Civil were not pressed. All the appeals will be dismissed. There is no reason why costs should not follow the event: UCPR r 42.1.

166. The appeals by George Said against RCG and Bluemine have failed. These appeals will also be dismissed with costs.

167. The liquidator’s notices of motion filed 7 April 2022 seeking dismissal of the appeals by the Khalil parties on the ground that the appeals were incompetent as being out of time, should be dismissed. However, the Khalil parties should pay the respondents’ costs of those motions, given that the notice of appeal in each matter was filed out of time without leave.

Cassaniti appeals (2021/242905, 242906, 242909, 242910 and 242957)

169. The Court makes the following orders in each appeal:

1. Appeal dismissed.

2. The appellant to pay the respondents’ costs in this Court.

Khalil appeals (2021/242618, 242626, 242639, 242648 and 242667)

170. The Court makes the following orders in each appeal:

1. Extend time for the filing of the notice of appeal to the date on which the document was filed.

2. Appeal dismissed.

3. Dismiss the respondents’ notice of motion filed 7 April 2022.

4. The appellants to pay the respondents’ costs in this Court, including the costs of the respondents’ notice of motion filed 7 April 2022.

RCG appeal (2021/289069)

171. In the liquidator's appeal on behalf of RCG against the Borg parties, dismiss ground 1 of the notice of contention.

Amendments

29 August 2022 - Amend "Conaghlen" to read Conaglen.

03 May 2023 - Amendments made and typographical errors corrected.

Decision last updated: 03 May 2023