Chopsonion Pty Ltd (Controllers Appointed) v Watts Meat Machinery Pty Ltd (No 2)

[2025] FCA 4

FEDERAL COURT OF AUSTRALIA

Chopsonion Pty Ltd (Controllers Appointed) v Watts Meat Machinery Pty Ltd (No 2) [2025] FCA 4

File numbers:

SAD 109 of 2020
SAD 76 of 2022

Judgment of:

O'SULLIVAN J

Date of judgment:

15 January 2025

Catchwords:

SAD 109 of 2020

CORPORATIONS — breach of director’s/officer’s duties — one shadow director/shadow officer — one registered director and officer of the first applicant — where directors not a party to the proceedings — where directors breached duty to act in good faith, in the best interest of corporation and for a proper purpose — duty not to misuse position — ss 181(1) and 182(1) of the Corporations Act 2001 (Cth) (Act) — whether directors breached their fiduciary duties to the first applicant — where directors obtained funding for corporation using false documentation — where directors improperly gained an advantage for related entities — where directors used their position to cause detriment to the company by exposing it to a liability for funding in excess of that which was required using documents they knew to be false — contraventions established — compensation ordered

CORPORATIONS — accessorial liability — whether second respondent was knowingly involved in contraventions of ss 181(1) and 182(1) within the meaning of s 79 of the Act — whether second respondent knowingly assisted the directors in their breaches of fiduciary duties — dishonest and fraudulent design — liability established

CONSUMER LAW — whether the first and second respondents engaged in conduct that was misleading or deceptive in contravention of s 18 of Australian Consumer Law (ACL) — whether directors engaged in conduct contrary to s 18 of the ACL — where applicants allege respondents made false or misleading representations by preparing and providing false documentation to the directors/officers of the first applicant for the provision of those documents to the applicant lenders through a mortgage manager — funding for the acquisition of abattoir equipment — where majority of representations found to be made — where lenders and the mortgage manager relied on the false documentation in deciding to provide funding to the first applicant and were misled — liability established

CONSUMER LAW — whether the directors/officers of the first applicant engaged in conduct contrary to s 18 of the ACL — attribution of director’s/officer’s knowledge to the first applicant — fraud exception — whether first and second respondents were involved in the contravening conduct of the directors within the meaning of s 2 of the ACL — whether second respondent had actual knowledge of the essential facts constituting the contravention — liability established

TORTS — deceit — false or misleading representations — where claim in deceit arises out of same facts as claim for misleading or deceptive conduct — where lenders relied on representations — liability established

LIMITATION OF ACTIONS — whether applicants’ causes of action under s 18 of the ACL are statute barred – where applicants claim for an extension of time pursuant to s 48 of the Limitation of Actions Act 1936 (SA) (Limitation Act) to the extent required — where it was not until the loss crystallised that time began to run — cause of action not out of time —where, in any event, the law of South Australia applies by virtue of s 14 of the Fair Trading Act 1985 (SA) such that the six year limitation period imposed by ss 236 and 237 of the ACL may be extended under s 48(1) of the Limitation Act

ESTOPPEL — whether a third party made representations relating to the withdrawal of legal proceedings against the respondents — no estoppel

DAMAGES — assessment of damages — where applicants have succeeded in each of their causes of action — damages awarded for each cause of action in the first proceeding

SAD 76 of 2022

TORTS — negligence — whether first respondent owed a duty of care to the applicant lenders to protect against pure economic loss — whether documents relied upon contained negligent misstatements — where preparation of document was based on an honestly held opinion and relevant experience — duty of care established — breach of duty not made out

CONSUMER LAW — whether first respondent engaged in conduct contrary to s 18 of the ACL in the provision of a valuation of abattoir equipment to the seventh applicant — whether second respondent was involved in that conduct within the meaning of s 2 of the ACL — where claims arise out of same facts as claim for negligence — no contravention established

TORTS — deceit — whether first respondent through second respondent committed the tort of deceit — where no false representations made as to the valuation of abattoir equipment — claim dismissed

Legislation:

Competition and Consumer Act 2010 (Cth), Schedule 2, ss 2, 18, 236, 237

Corporations Act 2001 (Cth), ss 2(1), 9AC(1)(b), 9AD(1)(b), 79, 181, 181(1) & (2), 182, 182(1) & (2), 1317H

Federal Court of Australia Act 1976 (Cth), s 51A

Limitations of Actions Act 1936 (SA), s 48, 48(1) & (3)

Fair Trading Act 1985 (SA), s 14

Cases cited:

ABN AMRO Bank NV v Bathurst Regional Council [2014] FCAFC 65

Adler v Australian Securities & Investments Commission (2003) 179 FLR 1; [2003] NSWCA 131

Ancient Order of Foresters in Victoria Friendly Society Limited v Lift Plan Australia Friendly Society Limited (2018) 265 CLR 1; [2018] HCA 43

Andrews v ANZ [2012] HCA 30; (2012) 247 CLR 205

Arab Bank Australia Ltd v Sayde Developments PtyLtd [2016] NSWCA 328; (2016) 93 NSWLR 231

Australian Securities and Investments Commission v ActiveSuper Pty Ltd (in liq) (2015) 235 FCR 181; [2015] FCA 342

Baden Delavaux v Societe General [1993] 1 WLR 509

Barnes v Addy (1874) LR 9 Ch App 244

Beach Petroleum NL v Johnson [1993] FCA 283; (1993) 43 FCR 1; (1993) 115 ALR 411

Bell Group Ltd (in liq) v Westpac Banking Corp (No 9) [2008] WASC 239

Berry v CCL Secure Pty Ltd [2020] HCA 27

Bilta (UK) Ltd (in liquidation) v Nazir [2015] UKSC 23; [2015] 2 All ER 1083

Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336

Buzzle Operations Pty Ltd (in liq) v Apple Computer Australia Pty Ltd (2011) 277 ALR 189; (2011) 81 NSWLR 47

Campbell v Backoffıce Investments Pty Ltd (2009) 238 CLR 304; 257 ALR 610; 73 ACSR 1; [2009] HCA 25

Campomar Sociedad, Limitada v Nike International Ltd [2000] HCA 12; (2000) 202 CLR 45

Chew v The Queen [1992] HCA 18; (1992) 173 CLR 626

Commonwealth v Cornwell [2007] HCA 16; (2007) 229 CLR 519

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

Director, Office of the Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2013] FCAFC 8

Dunlop Pneumatic Tyre Company Ltd v New Garage and Motor Company Ltd [1915] AC 79

Environmental Systems Pty Ltd v Peerless Holdings Pty Ltd (2008) 19 VR 358; [2008] VSCA 26 at [109]

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

Fox v Percy [2003] HCA 22; 21 CLR 118

Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd [1984] FCA 167

Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6

Grove v Flavel (1986) 43 SASR 410

Harriton v Stephens (2006) 226 CLR 52; [2006] HCA 15

Henville v Walker (2001) 206 CLR 459; [2001] HCA 52

Hill v Rose [1990] VR 129

Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125 at 147

I & L v HTW Valuers [2002] HCA 41; (2002) 210 CLR 109

John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; (2010) 241 CLR 1

Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 9

Kellas-Sharpe v PSAL (2013) 2 Qd R 233; [2012] QCA 371

Keller v LED Technologies Pty Ltd [2010] FCAFC 55; (2010) 185 FCR 449

Kowalczuk v Accom Finance Pty Ltd [2008] NSWCA 343; (2008) 77 NSWLR 205

Magill v Magill (2006) 226 CLR 551; [2006] HCA 51

Marks v GIO Australia Holdings Ltd [1998] HCA 69; (1998) 196 CLR 494

Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357; [2010] HCA 31

Morley v ASIC [2010] NSWCA 331; (2010) 81 ACSR 285

Paciocco v Australia & New Zealand Banking Group Ltd [2016] HCA 28; (2016) 258 CLR 525

Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44; (1982) 149 CLR 191

Perre v Apand Pty Ltd [1999] HCA 36; (1999) 198 CLR 180

PT Thiess Contractors Indonesia v PT Arutmin Indonesia [2015] QSC 123

R v Byrnes [1995] HCA 1; (1995) 183 CLR 501

Ringrow Pty Ltd v BP Australia Pty Ltd [2005] HCA 71; (2005) 224 CLR 656

SanSebastian Pty Ltd v The Minister (1986) 162 CLR 340; [1986] HCA 68

Self Care IP Holdings Pty Ltd v Allergan Australia Pty Ltd [2023] HCA 8; 408 ALR 195

Shaddock v Parramatta (1981) 150 CLR 225; [1981] HCA 59

Shafron v ASIC (2012) 247 CLR 465; [2012] HCA 18

Taco Co of Australia Inc v Tacobell Pty Ltd [1982] FCA 136; (1982) 42 ALR 177

United Petroleum Australia v Herbert Smith Freehills [2018] VSC 347

Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387

Warner v Hung, in the matter of Bellpac Pty Ltd (Receivers and Managers Appointed) (In Liquidation) (No 2) [2011] FCA 1123; 297 ALR 56

Watson v Foxman (1995) 49 NSWLR 315

Division:

General Division

Registry:

South Australia

National Practice Area:

Commercial and Corporations

Sub-area:

Corporations and Corporate Insolvency

Number of paragraphs:

804

Date of last submission/s:

2 August 2023

Dates of hearing:

12 - 16 December 2022; 1 - 5 May; 24 May; 14 June; 24 July 2023

Counsel for the Applicants:

Mr B Roberts KC with Mr I Thomas

Solicitor for the Applicants:

Charlton Rowley

Counsel for the Respondents:

Dr C Ward SC with Mr D Ratnam

Solicitor for the Respondents:

Morgan English Commercial Lawyers

ORDERS

SAD 109 of 2020

BETWEEN:

CHOPSONION PTY LTD ACN 142 890 971 (CONTROLLERS APPOINTED) (and others named in the Schedule)

First Applicant

AND:

WATTS MEAT MACHINERY ACN 111 528 771 (and another named in the Schedule)

First Respondent

SAD 76 of 2022

BETWEEN:

MEG INVESTMENTS PTY LTD ACN 008 198 221 (and others named in the Schedule)

First Applicant

AND:

ROLTON LIMITED NZBN 942 903 805 4464 (and another named in the Schedule)

First Respondent

ORDER MADE BY:	O'SULLIVAN J
DATE OF ORDER:	15 JANUARY 2025

THE COURT ORDERS THAT:

1.The Court will hear the parties as to the form of orders sought consequent upon the Court’s reasons.

Note:   Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

OVERVIEW	[1]
CAUSES OF ACTION	[32]
ISSUES	[37]
WITNESSES	[40]
Applicants’ witnesses	[51]
Richard Walter Cumming Willson	[52]
Jeffrey John Cannan	[56]
John Charlton Rowley	[59]
Annette Joy How (née Conn)	[60]
Nicholas David Cooper	[63]
Michael James Hodge	[64]
Respondents’ witnesses	[65]
Roland John Smith	[66]
Noelene Joyce Smith	[68]
Keith Douglas Watts	[70]
Nancy Watts	[75]
FACTUAL NARRATIVE	[77]
WMM’s business	[81]
WMM’s email accounts	[85]
WMM invoices and quotes	[89]
Rolton’s business	[92]
The Chains	[97]
The Sharpes	[118]
Invoices nos. 1045, 1058 and 1059	[122]
Invoice no. 1147	[128]
Invoice no. 1148	[134]
The July 2014 Chains invoice	[157]
The admission by Mr Watts to Ms How	[170]
The $90,000 deposit email	[193]
The Open Letter	[198]
The Rolton valuation	[203]
The Modified Rolton valuation	[244]
The Sharpes, PFM and Ms How	[247]
Funding the Loan to Chopsonion	[285]
Funding the Rowley Investment	[297]
Events following the acceptance of the Funding Offer	[299]
The Design	[328]
Subsequent attempts to recover the Funding	[343]
FG Agri Claim and Settlement	[353]
Sale of the properties and status of the remaining plant equipment	[356]
The Rowley Loan	[363]
Knowledge	[367]
No transaction	[371]
The Lenders’ decisions to invest	[372]
Mr Willson	[372]
Mr Cannan	[376]
Mr Rowley	[380]
PLEADED CASE/CAUSES OF ACTION – WATTS PROCEEDINGS	[383]
Issue 1 – Are the applicants estopped from bringing the Watts proceedings?	[383]
Estoppel	[384]
THE CLAIMS BY CHOPSONION	[418]
Breach of statutory and fiduciary duties	[418]
Issue 2 – Was Ms Sharpe a shadow director/officer of Chopsonion?	[420]
Statutory provisions and principles	[425]
Issue 3 - Did Mr and/or Ms Sharpe breach their statutory duties to Chopsonion pursuant to ss 181 and 182 of the Corporations Act	[434]
Sections 181(1) and 182(1) - Statutory provisions and legal principles	[434]
Section 181	[441]
Section 182	[453]
Issue 4 - If so, was Mr Watts, and through him WMM, involved in the breach of statutory duties by Mr and Ms Sharpe within the meaning of s 79 of the Corporations Act?:  2FASoC [17]–[19]	[456]
Section 181(1)	[459]
Section 182(1)	[462]
Issue 5 - Did Mr and/or Ms Sharpe owe fiduciary duties to Chopsonion and if so, did they breach those duties?:  2FASoC [15] and [16]	[466]
Issue 6 - If so, did WMM through Mr Watts knowingly assist in the breach of fiduciary duties?:  2FASoC [20]	[473]
Issue 7 - Did Mr Watts, and through him WMM, engage in conduct contrary to s 18 of the ACL?:  2FASoC [21]	[486]
The pleaded conduct	[492]
What was the conduct?	[493]
Trade and commerce	[504]
What meaning did that conduct convey?	[505]
Was the conduct misleading or deceptive or likely to mislead or deceive?	[508]
Causation and reliance	[511]
Lenders	[514]
Chopsonion	[535]
Issue 8 - Did Mr Sharpe and/or Ms Sharpe engage in conduct contrary to s 18 of the ACL?:  2FASoC [21.2]	[547]
Issue 9 - Was Mr Watts, and through him WMM, involved in the contravening conduct of Mr Sharpe and/or Ms Sharpe within the meaning of s 2 of the ACL?:  2FASoC [21.2]	[548]
Issue 10 - Involvement by Mr Watts and through him WMM in misleading and deceptive conduct by Rolton	[555]
Issue 11 - Extension of time for bringing proceedings under the ACL	[558]
Issue 12 – Deceit:  2FASoC [21A]	[572]
Issue 13 - Extension of time for bringing a claim in deceit	[583]
PLEADED CASE/CAUSES OF ACTION - ROLTON PROCEEDINGS	[589]
Issue 14 - Did Rolton owe a duty of care to the Lenders, and if so what was the scope of that duty?	[604]
Issue 15 – Did Rolton through Mr Smith breach its duty of care?	[614]
Issue 16 - In preparing the Rolton valuation, did Rolton engage in conduct contrary to s 18 of the ACL?	[630]
Claim by the Lenders	[633]
Issue 17 – Was Mr Smith involved in Rolton’s contravention of s 18 of the Act?	[640]
Claim by Chopsonion	[641]
Issue 18 - Extension of time for bringing proceedings under the ACL	[643]
Issue 19 - Did Rolton through Mr Smith commit the Tort of deceit?	[646]
LOSS AND DAMAGE	[650]
Watts proceedings – respondents’ submissions on loss generally	[652]
Heads of loss suffered by the Lenders	[671]
Principal	[671]
Funds advanced by Mr Rowley	[678]
Interest on principal and pre-judgment interest	[685]
Heads of loss - joint and several losses - Lenders	[689]
Penalty	[690]
Principles	[692]
Loan agreement	[697]
Management Fee	[710]
Receiver’s fees and legal costs - $220,698.31	[718]
Mortgage Management fees - $1,617,975	[733]
Legal fees $167,664.71 (excluding litigation costs)	[745]
Heads of loss suffered by Chopsonion	[749]
Principal - $1.175m	[751]
Unpaid interest and Management Fee under the Loan Agreement - $5,471,900	[752]
Receivers’ costs and legal fees - $220,698.31	[756]
Storage charges - $173,766.98	[760]
Legal fees - $22,332.01	[765]
Credit for Additional Equipment	[770]
Summary	[774]
THE ASSESSMENT OF LOSS BY REFERENCE TO EACH CAUSE OF ACTION - LENDERS	[776]
Misleading and deceptive conduct against WMM and Mr Watts	[777]
Involvement in the misleading and deceptive conduct of Mr and Ms Sharpe	[784]
Deceit	[787]
THE ASSESSMENT OF LOSS BY REFERENCE TO EACH CAUSE OF ACTION - CHOPSONION	[790]
The Involvement of WMM and Mr Watts in the breach by Mr and Ms Sharpe of their statutory duties - s1317H of the Corporations Act	[791]
Knowing assistance in a dishonest and fraudulent design by Chopsonion’s Directors	[795]
Misleading and deceptive conduct against WMM and Mr Watts	[798]
Involvement in the misleading and deceptive conduct of Mr and Ms Sharpe	[800]
CONCLUSION	[802]

O’SULLIVAN J:

OVERVIEW

1. These proceedings involve two related actions, both of which concern the sale of two small animal abattoir chains (Chains).

2. In the first action, SAD 109 of 2020, Chopsonion Pty Ltd ACN 142 890 971 (Controllers appointed) brought proceedings against the first respondent, Watts Meat Machinery Pty Ltd (WMM), and the second respondent, its sole Director and one of two shareholders, Keith Douglas Watts (Watts proceedings).  The remaining shareholder in WMM is Mr Watts’ wife, Nancy Joy Watts (Ms Watts).

3. In the second action, SAD 76 of 2022, MEG Investments Pty Ltd, John Charlton Rowley, Red Dog No. 1 Pty Ltd, Richard Willson, Leigh Willson (Ms Willson) and R.J.C. Willson Nominees Pty Ltd (collectively the Lenders) brought proceedings against the first respondent, Rolton Ltd NZBN 942 903 805 4464, the second respondent, Roland John Smith, who is its sole Director, and the third respondent Mulga Corporation Pty Ltd ACN 144 810 435 as trustee for The Mulherin Family Trust (Rolton proceedings).

4. Prior to trial, the applicants in each matter were granted leave to file an amended originating application joining Chopsonion as an applicant in the Rolton proceedings and the Lenders as applicants in the Watts proceedings.

5. The two matters proceeded to trial together, with evidence in one being evidence in the other.

6. At the commencement of the hearing, the action between the applicants and the third respondent in the Rolton proceedings, Mulga, was stayed until further order.  On 20 January 2023, the applicants filed a notice of discontinuance against Mulga.

7. On 30 October 2015, Jason Walter Bettles and Nicholas David Cooper were appointed Receiver/Managers of Chopsonion.  Mr Bettles’ appointment ceased on 22 August 2017 and Mr Cooper continued as Receiver/Manager of Chopsonion until 20 October 2021.

8. As from 20 October 2016, Chopsonion has been under the control of Mr Willson pursuant to an undated General Security Agreement (GSA) entered into on or about 21 January 2015 between Chopsonion in its own right and as trustee for the Collarenebri Trust as grantor and the Lenders.

9. Ms Wendy Kellas-Sharpe was the sole Director and secretary of Chopsonion between 31 March 2010 and 8 August 2011.  Ms Sharpe’s husband, James Trevor Sharpe, was the sole Director and Secretary of Chopsonion between 8 August 2011 and 17 October 2016.

10. As at 2012, Silver Fern Farms (SFF) operated an abattoir at Dannevirke in New Zealand (Oringi Plant).  In 2012, SFF sold the Oringi Plant to an energy company as a result of which SFF had to dispose of abattoir equipment.  It asked Mr Watts/WMM to sell the Chains for it, however the Chains could not be sold to any entity in New Zealand.

11. Mr Watts/WMM could not find a buyer for the Chains and in early 2013, Rolton was engaged by SFF to deal directly with WMM and Mr Watts in relation to the sale of the Chains.

12. In June 2013, WMM agreed to purchase the Chains (one which was complete and the other 90% complete) from SFF for NZ$200,000.  There were terms of the contract for sale that the Chains could not be resold or otherwise used in New Zealand and that the Chains could not be dismantled and removed until the purchase price had been paid.

1. At the time WMM agreed to purchase the Chains, it did not have a buyer.  The purchase price was payable in instalments and WMM agreed to pay SFF NZ$3,843.75 per month in rental charges pending removal of the Chains.

2. Commencing from in or about July 2014, Ms Sharpe, on behalf of Chopsonion, sought funding for Chopsonion to buy the Chains and for the cost of dismantling the Chains, removing them and transporting them to Australia (Removal costs).

3. From on or about November 2014 to January 2015, Ms Sharpe, on behalf of Chopsonion and Mr Sharpe as Chopsonion’s Director, sought and applied for funding (Funding) from Private Funds Management Pty Ltd (PFM). 

4. The Funding sought was for Chopsonion to purchase the two Chains from WMM, as well as for the Removal costs.

5. In order to assist Chopsonion in obtaining the Funding, WMM provided a number of documents to Ms Sharpe.  These documents comprised WMM invoice no. 1148 in the sum of $850,000; a version of invoice no. 1148 with the words “24/06/14, updated 21/07/14” (July 2014 Chains invoice) in the sum of $760,000; an “Open Letter” authored by Mr Watts; and an email from Mr Watts to Ms Sharpe sent 24 October 2014 (deposit email) confirming that on 21 July 2014 a deposit of $90,000 had been received by WMM against the July 2014 Chains invoice for the sale of the Chains from WMM to Chopsonion.

6. On 5 November 2014 and following, Ms Sharpe provided a number of documents, including the documents provided to Ms Sharpe by WMM, to the sole Director and Secretary of PFM, Ms Annette How (née Conn).  Those documents included:  the July 2014 Chains invoice, the Open Letter and the deposit email.  Also included was an invoice from Chopsonion to FG Agri Pty Ltd for the sale of the Chains for AUD$2.2m and a spreadsheet prepared by Ms Sharpe, which indicated a balance of $760,000 owing to WMM on the July 2014 Chains invoice together with other sums resulting in an “Amount required to borrow” in the sum of $1,414,212.

7. There are issues as to the authenticity of the July 2014 Chains invoice and the deposit email.

8. The documents were provided by Mr Watts, and through him WMM, to Chopsonion with the knowledge and intention that they would be provided by Ms Sharpe on behalf of Chopsonion to potential funders of the purchase of the Chains, and the Removal costs.

9. By email sent 27 November 2014, Mr Smith provided an “assessment of value” for the Chains, dated 26 November 2014, to Ms Sharpe via Mr Watts (Rolton valuation) which assessed the value of a single Chain at between $1.1m to $1.3m.

10. Between 16 and 21 January 2014, Ms Sharpe provided a bundle of documents to PFM.  Those documents were documents provided in support of an application to an invoice funder named “The Invoice Market”.  The application to TIM was for the purposes of obtaining invoice funding for the Chains and Removal costs.

11. One of the documents within the TIM bundle was an amended valuation purportedly prepared by Rolton giving a total market value of each Chain as $1.1m - $1.3m (Modified Rolton valuation).

12. There is an issue as to the authenticity of the Modified Rolton valuation.

13. Another document within the TIM bundle was an invoice from Chopsonion to FG Agri for the purchase of two Chains for $2.2m.

14. Shortly thereafter, PFM provided the TIM documents to the Lenders for the purpose of them considering whether to provide funds, through PFM, to Chopsonion.

15. On 20 January 2015, PFM offered, and Mr Sharpe accepted on behalf of himself, Chopsonion and Jechbo Pty Ltd, an offer of finance in the sum of $1,175,000 (Loan) for purchase of the Chains and the Removal costs.  The term of the Loan was for 3 months at which point the Loan had to be repaid.

16. On 21 January 2015, via PFM, a Mortgage Management Agreement was entered into between PFM (defined as the “Mortgage Manager”); the Lenders (defined as the “Mortgagee”); Chopsonion in its own right and in its capacity as trustee for the Collarenebri Trust; Mr Sharpe; and Jechbo in its own right and as trustee for the Jechbo Trust (defined as the “borrowers”).  The Mortgage Management Agreement was consequent upon the funding offer being accepted.

17. As collateral security, General Security Agreements referenced at [8] were entered into between Chopsonion and the Lenders and between Jechbo and the Lenders respectively.  The GSAs are undated, but there is no issue they were entered into on or about 21 January 2015.

18. The invoice funding from TIM did not eventuate, nor did the sale to FG Agri such that Chopsonion defaulted on the Loan.

19. The Lenders have recovered some of their investment but they allege they have suffered ongoing losses.

    CAUSES OF ACTION

20. In the Watts proceedings as against Mr Watts and WMM, Chopsonion plead the following causes of action:

    (a)On the basis of breaches by Mr and Ms Sharpe of their statutory duties owed to Chopsonion pursuant to ss 181 and 182 of the Corporations Act 2001 (Cth), involvement of Mr Watts, and through him WMM, within the meaning of s 79 of the Corporations Act;

    (b)On the basis of breaches by Mr and Ms Sharpe of fiduciary duties they each owed to Chopsonion, knowing assistance by Mr Watts, and through him WMM, in those breaches;

    (c)Misleading and deceptive conduct or conduct likely to mislead and deceive contrary to s 18 of the Australian Consumer Law set out in Schedule 2 to the Competition and Consumer Act 2010 (Cth);

    (d)Involvement within the meaning of s 2 of the ACL in the misleading and deceptive conduct of Mr and Ms Sharpe contrary to s 18 of the ACL; and

    (e)Involvement with the meaning of s 2 of the ACL in the misleading and deceptive conduct of Rolton contrary to s 18 of the ACL.

21. In the Watts proceedings, as against WMM and Mr Watts, the Lenders plead the following causes of actions:

    (a)Misleading and deceptive conduct;

    (b)Involvement in the misleading and deceptive conduct of Mr and Ms Sharpe;

    (c)Involvement in the misleading and deceptive conduct of Rolton; and

    (d)Deceit.

22. In the Rolton proceedings, as against Rolton and Mr Smith, Chopsonion pleads:

    (a)In providing the Rolton valuation and/or the Modified Rolton valuation, Rolton has engaged in conduct which was misleading and deceptive; and

    (b)As against Mr Smith, involvement in Rolton’s misleading and deceptive conduct within the meaning of s 2 of the ACL.

23. In the Rolton proceedings, as against Rolton and Mr Smith, the Lenders plead the following causes of actions:

    (a)Negligence;

    (b)Misleading and deceptive conduct; and

    (c)Deceit.

24. In each case where the applicants claim for either misleading and deceptive conduct or in deceit, insofar as is required, the applicants claim an extension of time within which to bring proceedings under the ACL pursuant to s 48 of the Limitation of Actions Act 1936 (SA).

    ISSUES

25. The following liability issues arise as against WMM and Mr Watts in the Watts proceedings:

    (i)Are the applicants estopped from bringing the Watts proceedings?

    (ii)Was Ms Sharpe a director and/or officer of Chopsonion within the meaning of s 9AC(1)(b) and/or s 9AD(1)(b) of the Corporations Act?

    (iii)Did Mr and/or Ms Sharpe breach their statutory duties to Chopsonion?

    (iv)If so, was Mr Watts, and through him WMM, involved in the breach of those statutory duties within the meaning of s 79 of the Corporations Act?

    (v)Did Mr and/or Ms Sharpe owe fiduciary duties to Chopsonion, and if so, did they breach them?

    (vi)If so, was Mr Watts, and through him WMM, knowingly involved in the breach of those fiduciary duties?

    (vii)Did Mr Watts, and through him WMM, engage in conduct contrary to s 18 of the ACL?

    (viii)Did Mr Sharpe and/or Ms Sharpe engage in conduct contrary to s 18 of the ACL?

    (ix)Was Mr Watts, and through him WMM, involved in the contravening conduct of Mr Sharpe and/or Ms Sharpe within the meaning of s 2 of the ACL?

    (x)Was Mr Watts, and through him WMM, involved within the meaning of s 2 of the ACL in conduct by Rolton contrary to s 18 of the ACL? and

    (xi)Are the Lenders entitled to an extension of time within which to bring a claim under s 18 of the ACL?

    (xii)Did Mr Watts, and through him WMM, commit the Tort of deceit? and

    (xiii)Are the Lenders entitled to an extension of time within which to bring a claim in deceit?

26. The following liability issues arise as against Rolton and Mr Smith in the Rolton proceedings:

    (xiv)Did Rolton owe a duty of care to the Lenders, and if so what was the scope of that duty?

    (xv)If so, did Mr Smith, and through him, Rolton breach that duty of care?

    (xvi)Did Rolton engage in conduct contrary to s 18 of the ACL?

    (xvii)Was Mr Smith involved within the meaning of s 2 of the ACL in conduct by Rolton contrary to s 18 of the ACL?

    (xviii)Are the applicants entitled to an extension of time within which to bring claims under s 18 of the ACL and in deceit? and

    (xix)Did Rolton, through Mr Smith, commit the Tort of deceit?

27. It is for the reasons that follow, that:

    (a)In the Watts proceedings:

    (i)Chopsonion has made out its causes of action against Mr Watts and WMM for involvement in breach of statutory duties by Mr and Ms Sharpe and for knowing assistance in breach of fiduciary duties by Mr and Ms Sharpe;

    (ii)The applicants have made out their cause of action against Mr Watts and WMM for conduct in contravention of s 18 of the ACL;

    (iii)The Lenders have made out their cause of action against Mr Watts and WMM for involvement in the conduct of Mr and Ms Sharpe in contravention of s 18 of the ACL;

    (iv)The Lenders have made out their cause of action against Mr Watts and WMM in deceit; and

    (v)The applicants have failed to make out their cause of action against Mr Watts and WMM for being involved in conduct by Rolton contrary to s 18 of the ACL;

    (b)In the Rolton proceedings, the applicants have failed to make out any of the pleaded causes of action such that the proceedings are dismissed.

    WITNESSES

28. The applicants make various submissions as to the credibility of the respondents’ witnesses.  They submit that Mr Watts’ evidence should be treated with caution and in some respects it should be found that his evidence was given dishonestly.

29. They submit that Ms Watts’ evidence should not be viewed as reflecting her honest and independent recollection.

30. They submit that Mr Smith’s evidence should be treated with caution.

31. Ms Smith was not cross-examined.

32. The respondents submit that Ms How’s evidence in relation to a conversation she had with Mr Watts on 23 September 2016, and which Ms How confirmed in an email sent 26 September 2016, was not credible and should not be accepted.

33. To the extent the submissions made by both parties in relation to credibility rely upon the demeanour of the various witnesses, that requires a cautious approach.  As far as possible, conclusions should be reached on the basis of contemporary materials, objectively established facts, and the apparent logic of events:  Fox v Percy [2003] HCA 22; 21 CLR 118 at [30]-[31].

34. The events which occurred in this matter were some eight to nine years old at the time of trial.  Not only that, Mr Smith was aged in his late 70s and Mr Watts was suffering, and had suffered for some time, from ill health.

35. In Watson v Foxman (1995) 49 NSWLR 315, 319 McLelland CJ in Eq observed:

    … human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.

36. It is in that context that the oral and written testimony of all the witnesses must be assessed by reference to contemporaneous records, objective facts and to the extent they are ascertainable, whatever motives the parties’ witnesses may have.

37. In Warner v Hung, in the matter of Bellpac Pty Ltd (Receivers and Managers Appointed) (In Liquidation) (No 2) [2011] FCA 1123; 297 ALR 56, at [48] Emmett J said:

    Under s 140(2) of the Evidence Act 1995 (Cth) (the Evidence Act), the Court must, in deciding whether it is satisfied that a case has been proved to the requisite standard, take into account:

    § the nature of the cause of action or defence;

    § the nature of the subject matter of the proceeding; and

    § the gravity of the matters alleged.

    When proof of any fac  is required, the Court must feel an actual persuasion of the occurrence or existence of that fact before it can be found. Mere mechanical comparison of probabilities, independent of any belief in reality, cannot justify the finding of a fact. Actual persuasion is achieved where the affirmative of an allegation is made out to the reasonable satisfaction of the Court. However, reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequences of the fact to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, and the gravity of the consequences flowing from a particular finding are considerations that must affect whether the fact has been proved to the reasonable satisfaction of the Court. Reasonable satisfaction should not be produced by inexact proofs, indefinite testimony or indirect inferences (see Briginshaw v Briginshaw (1938) 60 CLR 336 at 361-2).

38. This matter raises serious issues against Mr Watts, Ms Watts, Mr Sharpe, Ms Sharpe and Mr Smith.  It is for those reasons that I make any findings of fact involving adverse findings against Mr Watts, Ms Watts, Mr Sharpe, Ms Sharpe and Mr Smith keeping in mind the principles in Briginshaw [1938] HCA 34.

    Applicants’ witnesses

39. The applicants called five witnesses.

    Richard Walter Cumming Willson

40. Mr Willson’s evidence-in-chief was given by way of a single affidavit sworn 16 September 2022.  He gave limited oral evidence following the grant of leave to do so.

41. Mr Willson is a Director of Red Dog, is married to the sixth applicant, Ms Willson, and is the Secretary of the fourth applicant, Willson Nominees.  Mr Willson gave evidence on his own behalf and on behalf of Red Dog and Willson Nominees.  Ms Willson did not give evidence but her interests and the interests of Mr Willson coincide.

42. Mr Willson, Ms Willson, Red Dog and Willson Nominees provided funds to PFM for lending to Chopsonion, however Mr Willson had no specific involvement in the transaction with Chopsonion.  Mr Willson’s evidence when tested in cross-examination was vague.  It became apparent during cross-examination that his affidavit had been prepared for him, albeit on his instructions, and whereas he had read it and agreed with its contents prior to swearing the affidavit, he was unable to recall independently the detail of a number of matters to which he had deposed, including in some cases the topics themselves.

43. Nonetheless, I considered Mr Willson to be doing his best to assist the Court in giving his evidence but was hampered by his general inability to recall specific matters of detail.  I am not critical of that inability after a period of nearly eight years between the initial events and the date he swore his affidavit.  However, given that his affidavit had been prepared for him, it was apparent that he had accepted a number of the propositions in the affidavit without critical thinking.  To that limited extent, I have some concerns about his reliability as a witness and accordingly, I approach his evidence with some caution.

    Jeffrey John Cannan

44. Mr Cannan is the Managing Director of Cold Logic Pty Ltd.  He is also the Director of MEG.  He gave his evidence-in-chief by way of two affidavits sworn 16 September 2022 and 11 December 2022.

45. Mr Cannan, through MEG, provided funds to PFM for lending to Chopsonion to the extent of $200,000.  Other than the investment, he was not concerned with the recovery aspects, leaving that to others.

46. Mr Cannan gave his evidence in a straight-forward fashion.  I consider him to be a truthful witness who gave his evidence to the best of his ability, albeit he was seeking to remember matters from nearly eight years ago.  I accept his evidence.

    John Charlton Rowley

47. Mr Rowley is one of the applicants who invested money with PFM for the purpose of providing funds to Chopsonion.  Mr Rowley is 85 years old.  He gave his evidence-in-chief by way of a single affidavit sworn 16 September 2022.  His evidence was somewhat vague for which I do not criticise him.  I accept he gave his evidence truthfully and to the best of his ability.

    Annette Joy How (née Conn)

48. Ms How is the sole Director and shareholder of PFM, the mortgage managers who arranged the funding for the purchase of the Chains.  Ms How gave her evidence-in-chief by way of two affidavits:

    (a)Sworn 4 November 2020 (first How affidavit); and

    (b)Sworn 17 September 2022 (second How affidavit).

49. Ms How gave limited oral evidence-in-chief following the grant of leave to do so.

50. Ms How was an impressive witness who gave her evidence in a clear and cogent fashion, answered questions directly, and made appropriate concessions.  I have no hesitation in accepting her as a truthful and reliable witness.

    Nicholas David Cooper

51. Mr Cooper was the Receiver of Chopsonion.  He gave his evidence-in-chief by way of a single affidavit sworn 16 September 2022.  Mr Cooper gave his evidence in a dispassionate and professional manner.  I accept his evidence.

    Michael James Hodge

52. Mr Hodge is employed as a Customer Relations Specialist with the Commonwealth Bank of Australia.  He swore a single affidavit on 7 June 2023 which was received into evidence.  He was not required for cross-examination.

    Respondents’ witnesses

53. The respondents called four witnesses.

    Roland John Smith

54. Mr Smith is the second respondent and is one of two Directors of Rolton Limited, the first respondent.  Mr Rolton lives in New Zealand and has worked in the meat processing industry for the majority of his life.  He has extensive experience in advising on the disposal and valuation of abattoir equipment.  Mr Smith is 77 years old and gave his evidence-in-chief by way of two affidavits sworn 7 November 2022 (first Smith affidavit) and 21 April 2023 (second Smith affidavit).

55. He gave his evidence in a defensive way, clearly conscious of the potential liability of both himself and Rolton.  On occasions he was not prepared to commit to even the most obvious of proposals and he was antagonistic towards counsel.  There were times when his evidence was inconsistent with his affidavit evidence-in-chief, notwithstanding his affidavit had been sworn recently, and rather than conceding that to be the case, he sought to clarify his evidence in his affidavit in a general way in an attempt to justify the inconsistency.  Nonetheless, generally I accept his evidence.  In particular, I make allowances for the passage of time which had passed since the events in this matter.  Where Mr Smith’s evidence is inconsistent with contemporaneous documents, save for the Modified Rolton valuation, I prefer the contents of the documents to Mr Smith’s evidence.

    Noelene Joyce Smith

56. Ms Smith is married to Mr Smith and is the second of two Directors of Rolton.  She swore two affidavits which stood as her evidence-in-chief:

    (a)Sworn 22 April 2023 (first Noelene Smith affidavit); and

    (b)Sworn 2 May 2023 (second Noelene Smith affidavit).

57. Ms Smith was not required for cross-examination.

    Keith Douglas Watts

58. Mr Watts describes himself as the Managing Director of WMM and swore four affidavits, each of which was received into evidence and stood as his evidence-in-chief:

    (a)13 October 2020 (first Watts affidavit);

    (b)23 October 2022 (second Watts affidavit);

    (c)8 November 2022 (third Watts affidavit); and

    (d)21 April 2023 (fourth Watts affidavit).

1. Mr Watts is an experienced buyer and seller of abattoir equipment having worked in the area for over 30 years. 

2. Mr Watts has been ill and suffers from a number of medical conditions.  Consequently, he gave evidence by AVL from his home.  I take his medical condition into account in assessing his evidence as well as the difficulties inherent in giving evidence remotely.

3. Generally, Mr Watts was a witness who gave his evidence on non-contentious matters in a straight-forward manner.  However, when he perceived a potential risk of liability, he became evasive or took a position which was not credible such that I have significant reservations about Mr Watts’ credibility on issues which impact on his and WMM’s liability.  I treat his evidence with a great deal of caution and where it conflicts with contemporaneous documents, I prefer the contents of the documents to Mr Watts’ evidence.

4. One of the issues in this matter concerns documents apparently authored by him or on his instructions which he denies were created by him or on his instructions.  I do not accept that evidence for the reasons I set out later in these reasons.  

   Nancy Watts

5. Ms Watts is married to Mr Watts and swore four affidavits, each of which were received into evidence and stood as her evidence-in-chief:

   (a)9 November 2022 (first Nancy Watts affidavit);

   (b)15 December 2022 (second Nancy Watts affidavit);

   (c)21 April 2023 (third Nancy Watts affidavit); and

   (d)28 April 2023 (fourth Nancy Watts affidavit).

6. Ms Watts gave her evidence by AVL from her home.  I make allowance for the fact that Ms Watts gave her evidence by AVL and that the events occurred eight years previously.  Nonetheless, when it came to invoices issued by WMM, she was evasive and I approach her evidence with a great deal of caution.  Where it conflicts with documentary evidence, I prefer the contents of the documents to Ms Watts’ evidence.

   FACTUAL NARRATIVE

7. In this section of my reasons, I set out a factual narrative which contains the findings I have made and which are relevant to my consideration of the applicants’ causes of action.

8. A number of the matters in the factual narrative are not contentious and arise from admitted facts on the pleadings or simply are not in dispute, such that the narrative comprises my findings.  Where matters are controversial or the circumstances are such that a specific finding is required, I make specific findings and explain my reasons for doing so.

9. In these reasons I refer to WMM and Mr Watts, as its sole Director, interchangeably.  So too, I refer to Chopsonion, Ms Sharpe and Mr Sharpe interchangeably, and to Rolton and Mr Smith, as its sole Director, interchangeably.

10. Prices are in Australian dollars unless indicated otherwise.

    WMM’s business

11. Since about 1984, Mr Watts has been involved in stripping meat plants, stripping abattoirs and reselling equipment for major companies and building relationships in Australia and New Zealand.  He incorporated Watts Machinery Ltd in New Zealand in 1994.

12. Ultimately, Mr Watts considered there were greater business opportunities in Australia and in 1998 dissolved Watts Machinery Ltd to commence trading in Australia under “Keith Watts Trading”.  He incorporated WMM on 26 October 2004.

13. With only a few businesses selling abattoir equipment, Mr Watts and WMM operate in a niche market.  Mr Watts has a large network of buyers and sellers and claims that there are no others in the business of selling abattoir equipment with better connections than him.  I accept that Mr Watts is well known in the market for the sale and purchase of abattoir equipment.

14. WMM is not a sophisticated business.  It operates on a relatively small-scale and involved Mr and Ms Watts, with Mr Watts being the primary person in the business doing the buying and selling and Ms Watts performing an administrative role.

    WMM’s email accounts

15. During the period 2013 to 2016, Mr Watts primarily communicated by way of email and used the email address:  [email protected] (BigPond email address).

16. Around May 2016, Mr Watts commenced a website rebrand which involved the use of a new email address:  [email protected].  As such, Mr Watts’ BigPond email address was no longer in use as WMM’s primary email address as of May 2016 but it was still operative.

17. Following the rebrand, Mr Watts made attempts to inform clients that the BigPond email address would cease being used and directed them to communicate by way of the new address.  At the hearing, Ms How confirmed that this was the case.

18. Despite the change in address, Mr Watts confirmed that he “infrequently monitored the e-mail for a few months after May 2016” and that in August or September 2016, there were one or two emails in the BigPond email address account inbox.

    WMM invoices and quotes

19. Mr Watts’ usual practice was to use invoices as a form of quotation.  First, he would generate an invoice as a pro forma document which he would treat as a quote.  Upon the request of a legitimate interested buyer, Mr Watts would cause what he described as an “invoice proper” to be prepared.

20. Ms Watts is responsible for the preparation of WMM’s invoices.  Since Mr Watts was the primary person in the business doing the buying and selling, I infer Ms Watts prepared WMM’s invoices on Mr Watts’ instructions.

21. When an invoice was not paid on time, either Mr or Ms Watts would mark it with the status including the word “cancelled” and the date of cancellation for non-payment.  In one respect, that practice is inconsistent with an invoice being a quotation, however it is also consistent in the sense that no action was taken for recovery of an amount the subject of the invoice in question.

    Rolton’s business

22. Mr Smith has worked in the meat processing industry in New Zealand either directly or as a consultant in relation to asset disposal since he left school in 1962.  He incorporated Rolton in 1997 for the purpose of taking on contract work using connections he had made in New Zealand and Australia during the preceding 20 years.

23. Rolton mainly works in asset disposal by which it acts as a contractor arranging contracts between vendors and purchasers in the meat processing industry who are looking to sell or buy machinery for their own plants.

24. Rolton, through Mr Smith, also consults on maintenance, upkeep and the sale of meat processing machinery.

25. Mr Smith is not a valuer, however he has provided assessments of value from time to time, which he described as “evaluations” or “assessments of value” based on what he describes as “my ultimate knowledge of the industry and the particular plant or equipment in question”.  He describes that part of Rolton’s business in which he provides evaluations as being used mostly for base data to give Rolton’s clients “directional focus within major projects”.  He describes Rolton’s evaluations as being “… usually given from very limited data sources, heavily supplemented by his detailed knowledge of the industry.”  He said the purpose of the evaluation, in most cases, was to assist Rolton’s clients in forward planning or for use as a reference point in insurance applications.

26. Self-evidently, if Rolton and Mr Smith are giving evaluations of plant and machinery for “insurance applications”, whether he chooses to describe it as an evaluation or an assessment of value or not, he is valuing that plant and machinery and I find accordingly.  In each case, however, the basis of that valuation and thereby its inherent limitations are drawn from the terms of the document.

    The Chains

27. SFF had been seeking to sell the Chains since at least 2012.  

28. The Chains are what is known as “inverted chains” which allows for a more efficient method of dressing a carcass.

29. In or about late 2011, or early 2012, SFF negotiated the sale of the Oringi Plant to Trust Power, an electricity company.

30. Since SFF was selling the Oringi Plant, SFF had to dispose of its meat processing equipment, including the Chains.

31. In 2012, Mr Ray Jenkins, SFF’s Group Engineer, approached Mr Watts and inquired whether Mr Watts had any clients in Australia who had an interest in acquiring the Chains.

32. Mr Watts attempted to find a buyer for the Chains in Australia for SFF and from late 2012 negotiated with a limited number of potential buyers in Australia. 

33. SFF had initially wanted to sell the Chains for a least NZD$1m, however as time went on and the need for SFF to sell the Chains became more pressing, it reduced the price significantly.

34. Mr Watts’ asking price for the Chains was $480,000 plus GST (i.e. $528,000), but if somebody had offered less, he would have taken it.

35. On 17 September 2012, WMM issued invoice no. 00774b to Southern Cross Meats Processing for the purchase of the Chains.  The price of the Chains was $510,000 inclusive of GST, however this invoice reflects a number of adjustments.

36. The sale to Southern Cross Meats Processing did not proceed following which WMM, with the consent of SFF, advertised the Chains for sale in Australia.

37. Rolton, and consequently Mr Smith, was engaged by Mr Jenkins on behalf of SFF in early 2013 for the purpose of assisting and advising Mr Watts on the disposal of the Chains for which Mr Smith was to be paid an hourly rate plus expenses.

38. Mr Smith and Mr Watts were well-known to each other over a number of decades and are friends.  Mr Smith was aware of the difficulties that WMM was having in selling the Chains.

39. Mr Watts could not find a buyer for the Chains prior to the Oringi Plant being completely decommissioned and sold.

40. In June 2013, WMM agreed to purchase the Chains from SFF for NZD$200,000.

41. The arrangement between SFF and Mr Smith was that WMM would be invoiced for the Chains by Rolton as SFF’s agent and on 1 July 2013, Rolton issued an invoice to WMM for NZD$200,000.

42. The terms upon which WMM purchased the Chains (reflected in an unsigned letter of intent dated 10 October 2013) included payment of a $10,000 deposit, which had been paid by WMM on 12 September 2013.  The deposit had been paid by WMM to secure its exclusivity and the payment of the balance of the purchase price was to be by way of five equal payments of NZD$35,000 commencing on 25 October 2013 with a final payment of NZD$25,000 by 25 March 2014.  There were further terms that the Chains were to remain at the Origini Plant until full payment, and that WMM would be responsible for covering SFF’s rental costs levied by Trust Power for the ongoing storage of the Chains.  The Chains could not be resold in New Zealand.

43. Trust Power invoiced SFF for rent for holding the Chains at NZD$3,843.75 per month.  Those charges were then on charged to WMM.  WMM received a number of invoices for rent commencing from August 2013.

44. On 4 October 2013, WMM issued invoice no. 01079 to Newman Wholesalers Pty Ltd for the purchase of the Chains at a price of $460,000 (excl GST).  Although a first payment of $76,666.67 was noted on the invoice as being received on 23 October 2013, the sale did not go ahead and the payment of $76,666.67 was refunded by WMM.

45. On 5 November 2013, SFF issued an invoice to Rolton for the sum of NZD$40,250 for the first instalment due by WMM for acquisition of the Chains.  The invoice charged NZD$35,000 for the first instalment for the Chains, plus an additional $5,250 for GST (totalling NZD$40,250).  WMM paid a further sum of NZD$25,000, with credit being given for the NZD$10,000 deposit.

46. When the sale to Newman Wholesalers Pty Ltd did not proceed, Mr Watts agreed with Mr Jenkins that WMM did not have to make the monthly payments of $35,000 and that the (by then) $35,000 he had paid would be treated as a further deposit to secure the Chains.

47. Subsequently, SFF issued an invoice to WMM on 28 September 2014 for the sum of NZD$165,000.  The invoice confirmed the purchase price for the Chains in the sum of NZD$200,000 and acknowledged payment of NZD$35,000 received from WMM (leaving a balance owing of NZD$165,000).

    The Sharpes

48. Mr Watts met Mr and Ms Sharpe in or about 2012 in relation to abattoir chains generally.  Mr and Ms Sharpe hoped to realise what Ms Sharpe described to Mr Watts as their ‘paddock to plate’ dream and become active in the meat processing industry.  From about that time, Mr Watts sold a number of items to the Sharpes with the invoices issued to one of three companies, Annomac Pty Ltd (of whom Mr Sharpe was sole Director and shareholder), Chopsonion and Jechbo.

49. Between 2012 and 2015, on numerous occasions Ms Sharpe requested WMM to procure pricing for various pieces of abattoir machinery, including the Chains, as well as other meat processing machinery from other sellers.

50. In the course of Mr Watts’ overall dealings with Ms Sharpe, WMM issued a number of invoices to Chopsonion which were “cancelled”.  On each of these invoices there is a typed notation “cancelled” followed by the date:

    (a)Invoice no. 1044, dated 22 May 2013, to Chopsonion, directed to “Wendy” for the purchase of a refrigeration plant, cancelled on 28 June 2013;

    (b)Invoice no. 1058, dated 1 July 2013, to Chopsonion, West Wyalong, NSW, directed to “Wendy” for the purchase of a single small stock abattoir kill floor, in the sum of $330,000 (incl GST), cancelled on 3 August 2013.  This invoice is for one of the two Chains;

    (c)Invoice no. 1059, dated 1 July 2013, to Chopsonion, Collarenebri, NSW, directed to “Wendy”, for the purchase of a single small stock abattoir kill floor, in the sum of $198,000 (incl GST) to be taken to Collarenebri, also cancelled on 3 August 2013.  This invoice is for the other Chain; and

    (d)Invoice no. 1060, dated 1 July 2013, to Chopsonion, Inglewood, Qld, directed to “Wendy”, for the purchase of a refrigeration plant, cancelled on 3 August 2013.

51. Some invoices have no notation that they were cancelled.  Invoice no. 1085, dated 29 October 2013, to Chopsonion, Leeville, NSW, directed to “Wendy” for the purchase of a beef chain and other equipment at Yarrawonga for $189,200 inclusive of GST, and invoice no. 1088 dated 10 November 2013 to Annomac for the purchase of a mutton processing chain at Mataura, in the South Island of New Zealand for $680,000 (no GST).

    Invoices nos. 1045, 1058 and 1059

52. Chopsonion first showed interest in purchasing the Chains from WMM in May 2013.

53. In response, Mr Watts issued Chopsonion invoice no. 1045 for the Chains on 22 May 2013 for a purchase price of $480,000 (plus GST), giving a total of $528,000.

54. The purchase the subject of invoice no. 1045 did not proceed, and the invoice contained a typed note on it recording that it was cancelled on 28 June 2013.

55. On 1 July 2013, WMM sent the two invoices:  invoice nos. 1058 and 1059, to which I have referred above.  Both invoices describe a “Small stock abattoir kill floor Ex. NZ”.  The combined price of the two invoices totals $528,000 but as I have previously noted, were cancelled on 3 August 2013. 

56. By January 2014, SFF was becoming frustrated that deals for the sale of the Chains were not proceeding.  On 19 January 2014, Mr Watts sent an email to Ms Sharpe in which he said that if he did not hear back from her that day in relation to the Chains he would inform Mr Smith that Ms Sharpe did not want the Chains.  Having not received a response by 19 January 2014, Mr Watts told Mr Smith by email that he had no response from Ms Sharpe, was “pissed” at the amount of time wasted, and was going to take steps to market the Chains.

57. By 12 May 2014, WMM had made only two monthly rental payments to SFF, and Mr Watts was receiving “overdue letters” from SFF but was ignoring them.

    Invoice no. 1147

58. In or about May or June 2014, Ms Sharpe told Mr Watts that she had a person looking to help organise some finance so she could buy the Chains and also to fund her “paddock to plate” concept.  That person was later identified to Mr Watts by Ms Sharpe as being Mr Keane.

59. On 24 June 2014, WMM issued invoice no. 1147 addressed to ‘Chopsonion, Jecheo/Annomac’ in the sum of $300,000 (sic Jechbo).  That invoice has no notation that it had been cancelled and is for a “Small stock abattoir kill floor Ex.  NZ”.  It is for a single Chain.

60. Mr Watts was evasive in his evidence in relation to invoice no. 1147.

61. Mr Watts initially said that invoice no. 1147 was the start of an invoice that was never finished and that he never gave it to Ms Sharpe.

62. However, in his third affidavit at [99], Mr Watts recounts a conversation with Ms Sharpe on 24 June 2014, which was the evening before he was due to visit Ms Sharpe’s abattoir at Inglewood, NSW.  Mr Watts deposes that Ms Sharpe said she had the invoice for the single Chain and requested a “pro-forma” invoice for both Chains.  I accept Ms Sharpe requested an invoice for both Chains, however I do not accept Mr Watts’ classification of Ms Sharpe requesting a “pro-forma” invoice.  There would be no need for Ms Sharpe to describe the invoice as a pro-forma and I consider it to be a self-serving embellishment by Mr Watts.

63. I find that invoice no. 1147 was provided to Ms Sharpe electronically on the date shown on the invoice, i.e. 24 June 2014.

    Invoice no. 1148

64. On 24 June 2014, during Mr Watts’ conversation with Ms Sharpe, she asked him for an invoice for both of the Chains to “give to – to Mr Keane so he could start finding finance” and “so he can source it with his contacts”.

65. Mr Watts caused WMM invoice no. 1148 to be prepared later that day for a total sum of $850,000 (incl GST) for the Chains, not $528,000 (incl GST).  There is no reference to anything other than the Chains themselves on invoice no. 1148 and it notes that one Chain is 90% complete.  It seems the incomplete Chain required a “Bleed chain with low voltage stimulation” and also an overhaul of a “shoulder puller”.

66. Invoice no. 1148 and the July 2014 Chains invoice play a central part in the applicants’ case.

67. Ms Watts gave evidence, which I accept, that she prepared all the invoices for WMM.

68. Ms Watts was shown invoice no. 1148 in cross-examination.  She was unsure whether she prepared invoice no. 1148 and speculated she did not prepare it.  However, she accepted she could have.  Ms Watts’ caution was based on two things:

    (a)“We” did not normally put “GST import inclusive” on invoices; and

    (b)It would not have had the lines on it under each item.

69. As to the first matter, Ms Watts said she would normally put “N/A” if no GST was to be applied, but accepted she could not remember.  Under those circumstances, I attribute no weight to Ms Watts’ caution.

70. As to the second matter, invoice nos. 1058 and 1059, both of which were dated 1 July 2013, but cancelled on 3 August 2013, some 12 months before invoice no. 1148, are in the same lined format.  Further, Ms Watts could not remember if she was aware in June 2014 of the preparation of invoice no. 1148.

71. Still further, Ms Watts was cautious to the point of being evasive in relation to invoice no. 1148. 

72. It is for these reasons I find Ms Watts prepared invoice no. 1148 on instructions from Mr Watts.

73. Ms Watts also denied she knew at the time about invoice no. 1148 and the price of $850,000 (incl GST), although she accepted she would have seen it at some stage.

74. When asked about the price on invoice no. 1148 of $850,000 (incl GST), Ms Watts volunteered that the price could have had “shipping or insurance or whatever” added as opposed to an original price for both Chains of $480,000 (plus GST) or $528,000 (incl GST):  T 891.6-11.

75. In giving that evidence, Ms Watts was reconstructing the explanation as to the price on the invoice in a way which suited Mr Watts/WMM’s case.  Ultimately, Ms Watts could not explain the difference between the price on invoice no. 1148 and the Chains’ ultimate sale price of $528,000 (incl GST).

76. Mr Watts’ evidence in relation to both invoice no. 1148 and the July 2014 Chains invoice was very unsatisfactory and I do not accept it for the reasons which follow.

77. First, Mr Watts deposed that he met with Ms Sharpe and Mr Keane at Inglewood the following day, i.e. 25 June 2014, a matter he confirmed in cross-examination.  I do not accept that Mr Watts met Mr Keane at Inglewood on 25 June 2014.  That is because on 28 September 2014, Mr Keane sent an email to Mr Watts in which he said, in part:

    I would like to let you know that I am looking forward to meeting with you, Wendy and Jim speak very highly of you and although I haven't had the opportunity as yet to meet with you I am sure that once we get over this first part of the exercise the rest will flow.

1. I return to this email later in these reasons.

2. Second, Mr Watts said in cross-examination that he “might have” given invoice no. 1148 to Ms Sharpe the next day:  T 732.11-12.  Although Mr Watts was unsure, hence the use of the word “might”, I find that he did so, given that he prepared the invoice following a request by Ms Sharpe and that he was due to meet her at the Inglewood Abattoir the next day.  I also find that Mr Watts gave only a hard copy of invoice no. 1148 to Ms Sharpe at Inglewood on 25 June 2014.

3. Third, Mr Watts said under cross-examination that invoice no. 1148 was not complete because it was subject to getting a firm quotation for the removal and transport of the Chains.  Nonetheless, he accepted that the only thing he was going to do was to sell the Chains to Chopsonion and was not going to provide any of the removal or transport costs because “he doesn’t do that”:  T 724.28-34.

4. In circumstances where he was never going to provide any of the removal or transport costs, his evidence that invoice no. 1148 was not complete because it was subject to getting a firm quotation for the removal and transport of the Chains, is demonstrably wrong and I do not accept it.

5. Fourth, Mr Watts accepted in cross-examination that his deal had not changed from the two 2013 invoices, being invoice nos. 1058 and 1059, which had been cancelled on 3 August 2013 and which together totalled $528,000 (incl GST) for the Chains.

6. Fifth, although Mr Watts described invoice no. 1148 as being a “budget estimate” to give Mr Keane an idea of what he was going to be up for when obtaining funding from the Lenders, that is not true and I do not accept that evidence for the reasons I have set out above.

7. Sixth, Mr Watts received an email from Mr Keane dated 23 July 2014, which he forwarded to Mr Smith on 24 July 2014.  In that email Mr Keane informed Mr Watts that he had:

   … on behalf of Chopsonion Pty Ltd and Jim Sharpe, secured the funding for the purchase of equipment noted in Invoice 1148 along with the entire negotiation with the Sharpes.

   As you are aware this has been a lengthy process under extenuating circumstances. Our funder, NCS, have now confirmed approval of the application in as full and final settlement to Watts Meat Machinery Pty Ltd.

8. Mr Watts gave evidence that he would need to send a “correct invoice” when the funder wanted one.  Nonetheless, Mr Watts did not contact Mr Keane nor Ms Sharpe to advise one or the other that invoice no. 1148 was a “budget estimate” and not the “correct invoice”. 

9. Seventh, by 30 August 2014, Mr Watts understood that engineering and freight costs had been finalised because he sent an email to Mr Keane seeking an update on payment of invoice no. 1148 yet did not say he would re-issue the invoice in any way.

   The July 2014 Chains invoice

10. On or about 21 July 2014, the July 2014 Chains invoice, which is an updated version of invoice no. 1148 was created.  It is substantially the same to the original invoice no. 1148, but with an added reference to a deposit of $90,000 having being received leaving a “balance owing” of $760,000.  It is common ground between the parties that no such deposit had been paid.

11. There are various other changes in the July 2014 Chains invoice, one of which is the inclusion of the words in the date “update 21/7/14” and the order number has the words “Jim Sharpe” added.  Another difference is the inclusion of the words in the preamble to the invoice “balance of matching Millers Equipment now available in Australia included, held at Scone NSW depot, 2 x complete small stock chains”. 

12. Mr Watts denied that the July 2014 Chains invoice was prepared by him or Ms Watts.  Ms Watts denied she prepared the July 2014 Chains invoice because she would not have written on the invoice that it was an update, nor would she have made a reference to a deposit of $90,000 and a balance owing of $760,000.  She maintains her denial notwithstanding she also said she could not remember.

13. I do not accept that Ms Watts did not prepare the July 2014 Chains invoice for the following reasons:

14. First, there is no suggestion that Mr Watts sent invoice no. 1148 to Ms Sharpe electronically.  On the contrary, I have found that he gave that invoice to her at Inglewood on 25 June 2014.

15. Second, Mr Watts had received an email from Mr Keane sent 23 July 2014 in which Mr Keane informed Mr Watts that on behalf of Chopsonion and “Jim Sharpe” he had “secured the funding for the purchase of equipment noted in invoice 1148 along with entire negotiation with the Sharpes”.  On 30 August 2014, Mr Watts sent an email to Mr Keane asking for an update.

16. Mr Watts was told by Mr Smith on 25 September 2014 that SFF were concerned about continuing delays and that unless there was some documentation from Ms Sharpe’s funder and a timetable for payment by 31 September 2014 (sic 30), his directions from SFF were that any further commitment from SFF would be withdrawn and the plant would be put back on the market.  Mr Watts followed up with Mr Keane by email sent on 28 September 2014.

17. On 28 September 2014, Mr Watts received an email in reply from Mr Keane (headed “Re: FW: Settlement of Invoice No 1148 to Chopsonion Pty Ltd”) to Mr Watts’ emails sent 30 August 2014 and 28 September 2014.  Mr Keane’s email attached a letter from the company called NCS confirming that funding had been approved and that the first payment would be made to WMM in the amount of $760,000.

18. The attached letter is in the following terms, is written on NCS letterhead, and signed by a Mr Richard McCaughty.  The footer to the letter contains an address and telephone number for NCS:

    Warwick Keane  26th September, 2014

    Jim Sharpe

    For collection

    Re: Funding Approval for Purchase, Pack and Ship of Abattoir Chains from New Zealand

    This letter serves to verify that funding is approved in the amount of $1 130,000.00 for the purchase, removal and pack, and shipping of the Abattoir Chains from a location, Oringi, New Zealand.

    As at today, our company is processing the final documentation requirements for the payment procedure and drawdown.

    I confirm that the first payment in the drawdown is directed to Watts Meat Machinery Pty Ltd in the amount of $760,000.00. This payment is in our process system for payment currently.

    I have been advised that Mr Warwick Keane will be collecting the cheque payment for the above company, along with the project drawdown schedule.

19. The letter reflected the July 2014 Chains invoice because it referred to the sum of $760,000 which allowed for the deduction of a $90,000 deposit.

20. Mr Watts read the NCS letter.  In cross-examination he attempted to justify the sum of $760,000, not by reference to a deposit, which he denied, nor by reference to removal and transport costs, but by reference to other machinery in addition to the Chains.  He identified that additional machinery as being the Yarrawonga Beef Chain (the subject of invoice no. 1085 dated 29 October 2013 and later invoice no. 1205 dated 22 January 2015), a shoulder puller (the subject of invoice no. 1206), and other items of machinery which he said was in his affidavit.  However, that is inconsistent with his earlier evidence that invoice no. 1148 comprised the price for the Chains and a “budget estimate” for removal and transport.

21. Third, I find that Mr Watts never queried the sum of $760,000.  Although whilst under cross-examination and having been cross-examined on invoice no. 1148 and the July 2014 Chains Invoice the previous day (day 9), while still under cross-examination the following day (day 10), Mr Watts said that he telephoned Ms Sharpe after he received the NCS letter and asked her about the total of $760,000.  He said Ms Sharpe’s answer to him was that she had to pay an agent for getting the loan and for purchasing of the plant.  I have no hesitation in rejecting that evidence.  Not only do I consider it to be a recent invention, that evidence is yet another version of what comprised the sum of $760,000.

22. Finally, Mr Watts gave evidence that in mid to late 2013 he was told by Ms Sharpe that she was able to edit WMM’s pdf invoices in order to fix a mistake.  That may or may not be right but to the extent Mr Watts relies upon that conversation as a basis to support his contention that the July 2014 Chains invoice was prepared by Ms Sharpe and not him, or Ms Watts, I do not accept it.

    The admission by Mr Watts to Ms How

23. Fourth, on 23 September 2016, Ms How spoke to Mr Watts about the sale of the Chains.  Ms How deposed:  Exhibit A10 at [65]

    On 23 September 2016, I spoke with Watts. To the best of my recollection, I was speaking to him at the time to reinvigorate conversations with him as to the sale of the Chains. In that conversation, he advised me that Wendy Sharpe had asked him to inflate the original invoice price for the Chains from an amount $490,000 to the amount of $760,000, state that a deposit for $90,000 had been paid for the purchase of the Chains when it hadn't been paid and then kick back moneys to her. I recorded the details of my conversation with him in an email communication dated 26 September 2016. I was very shocked. I had assumed that all of the information provided to me by all parties was true and correct and accurate.”

24. The email to which Ms How refers was sent on 26 September 2016.  It reads as follows:

    Keith,

    Thanks for the chat on Friday

    Here are the problems.

    You advised me that Wendy asked you to change the original invoice price ($490,000.00) and provide us with an invoice with an inflated amount.

    You in fact changed your invoice to indicate to us that she was paying $76,000.00 for both chains which is some 360K more for the chains than she actually was. The Invoice also indicated that a 90K deposit was paid, which it was not.

    You also indicated that once we paid you the $760,00.00 that you in turn kicked back the over payment to Wendy.

    Keith, this presents some serious problems with first one coming to mind, Fraud!

    Again I am extremely upset that you chose to lie to me purely because Wendy asked you to do so.

    Your actions were a direct result in us advancing funds to associated companies of Wendy’s which will result in the private investors and myself losing considerable amount of money (sic).

    I suggest that you now do everything in your power to assist us with the sale of the chains and the security properties.

    Again, I cannot express how disappointed I am in you and your firm.

    Also on another note I have to sell these chain, do you have the contact details for David that already made the offer?

25. Mr Watts denied reading the email at the time it was sent on the basis that WMM’s BigPond email was no longer working.  That is not so.  The BigPond email address was operative at that time but was no longer Mr Watts’ primary email address.

26. The respondents submit that the Court should not accept Ms How’s evidence on the basis that Mr Watts issued invoice no. 1148 to someone else in circumstances which are proper and explicable, and where the invoice was not inflated. 

27. Further, the respondents submit that as a result of a website re-brand and system overhaul, Mr Watts ceased use of his BigPond email address in or about May 2016 and advised customers and other parties that his new email address of [email protected] should be used in future correspondence.

28. Still further, the respondents suggest that Ms How attempted to construct a narrative in September 2016 for the benefit of a draft statement of claim shortly to be issued to Mr Watts.

29. Finally, the respondents take issue with the fact that the applicants did not lead any evidence from Ms Sharpe to shed light on this issue.  They invite the Court to draw an inference that evidence from Ms Sharpe would not have assisted the applicants on this issue:  Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 9.

30. As to the Jones v Dunkel point, as a general proposition, an adverse inference may be drawn when one would reasonably expect a party to call a person or when such a person is likely to be able to provide admissible evidence regarding some fact in issue:  Jones v Dunkel at 321-322 and one would have expected that party rather than another party to call the person: Director, Office of the Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2013] FCAFC 8 at [100] (Besanko and Perram JJ).

31. Properly stated, the common law rule is that an adverse inference may (not must) be drawn from the failure of a party to adduce particular evidence, where such evidence would have reasonably been expected.

32. I am not prepared to draw that inference for a number of reasons:

    (a)There is no evidence as to the availability of Ms Sharpe to give evidence;

    (b)I would not reasonably expect the applicants to call Ms Sharpe; and

    (c)It was open to the respondents to call Ms Sharpe, if available.

33. I have no hesitation in rejecting the respondents’ submissions.  As I have noted, Ms How was an impressive witness whose evidence was both truthful and reliable.

34. I do not accept Mr Watts’ evidence that he did not read Ms How’s email.  On 9 October 2016, he responded to another email he also received at the BigPond email address on 26 September 2016, the day Ms How sent her email.  Further, there were not many emails in the BigPond account at the time (maybe one or two).

35. The applicants submits that the Court should find Mr Watts made the admissions referred to by Ms How because:

    (a)It is implausible that Ms How fabricated a conversation between her and Mr Watts and then put it in an email to Mr Watts;

    (b)Ms How’s oral evidence was credible;

    (c)Ms How’s email was sent three days after the conversation, when it was still vivid in her recollection; and

    (d)Mr Watts did not send an email in reply disagreeing with its contents.

36. I accept those submissions and I find accordingly.

37. I find that the July 2014 Chains invoice was prepared by Ms Watts on behalf of WMM on Mr Watts’ instructions and provided by Mr Watts to Ms Sharpe for providing to Mr Keane.

38. That said, I am unable to find how and when WMM provided the July 2014 Chains invoice to Ms Sharpe, other than to find it was provided prior to 26 September 2014 for the reasons I have set out above.

39. It is also for these reasons that I do not accept Mr Watts’ explanation for the sum of $760,000 as being due to additional machinery and rent and I find that Mr Watts did not query the sum of $760,000 because he well knew it was the subject of the July 2014 Chains invoice.

40. I find that Mr Watts knew that Mr Keane was proceeding on the basis of the July 2014 Chains invoice in relation to his dealings with the financers, and that Mr Keane underlined that the July 2014 Chains invoice was for the purchase of the Chains at a price of $760,000 after allowing for a deposit of $90,000.  That was so despite Mr Watts’ knowledge that was not the case in the sense that no deposit had been paid and that Mr Watts only wanted a price of $480,000 plus GST, i.e. $528,000. 

41. Further, I do not accept that Mr Watts intended to send a “correct invoice” at any stage.  As far as Mr Watts was concerned, the funder was going to pay on the July 2014 Chains invoice.  It is inconceivable that Mr Watts would have allowed the matter to progress if his intention all along was to substitute the July 2014 Chains invoice with a “correct” invoice.

42. On the issue of knowledge, there is no doubt that Mr Watts knew that invoice no. 1148 and/or the July 2014 Chains invoice was going to be provided to potential funders for the purpose of raising finance so that Chopsonion could purchase the Chains and I find accordingly.

43. Having read Mr Keane’s email of 28 September 2014 and the NCS letter, Mr Watts called Mr Jenkins of SFF by no later than 9.04am on the morning of 29 September 2014 and told him that payment for the Chains and the outstanding storage costs had been released.  SFF invoiced WMM direct, rather than through Rolton.

44. On or about 14 October 2014, Mr Sharpe told Mr Watts by email (which Mr Watts forwarded to Mr Smith) that Mr Keane would be finalising the payment of the Chains with the funder “today”.  There was no suggestion of the true position regarding the July 2014 Chains invoice being corrected.  

45. However, for reasons which are not explained, funding from Mr Keane/NCS did not materialise.

    The $90,000 deposit email

46. On 24 October 2014, Mr Watts sent the deposit email to Ms Sharpe in which he confirmed with Ms Sharpe that WMM had received a deposit of $90,000 for the Chains on 21 July 2014.  Mr Watts denies that he sent this email, however I do not accept that evidence and find Mr Watts either prepared, or caused to be prepared, the email because:

    (a)Given my significant reservations as to Mr Watts’ credibility on matters which have the potential to impact on his liability and the liability of WMM, Mr Watts’ claim that he did not author the email cannot be accepted;

    (b)Mr Watts knew from as early as September 2014 that at least one lender, NCS, was acting upon the July 2014 Chains invoice that disclosed an amount payable on the Chains of $760,000 (i.e. $850,000 less the $90,000 deposit) but did not query it;

    (c)As I discuss later in these reasons, Mr Watts was not surprised when he received payment of $760,000 in January 2015, the amount referred to in the July 2014 Chains invoice; and

    (d)He admitted to Ms How that Ms Sharpe had asked him to state that a deposit of $90,000 had been paid when that was not the case.

47. The respondents refer to a series of emails and submit that NCS had been provided with the July 2014 Chains invoice by Mr Keane or Ms Sharpe which had made false reference to a $90,000 deposit, thus totalling $760,000 and that Mr Watts did not know that the invoice had been altered or provided in any form to NCS.  They refer to the following:

    (a)On 24 July 2014, Ms Sharpe emailed Mr Peter Wharehinga of P&W Engineering (copied to Mr Watts) requesting a pro forma invoice;

    (b)On 17 August 2014, Ms Sharpe emailed Mr Watts giving an update;

    (c)On 30 August 2014, Ms Sharpe emailed Mr Watts giving an update;

    (d)On 30 August 2014, Mr Watts emailed Mr Keane for an update;

    (e)On 23 September 2014, Ms Sharpe emailed Mr Watts giving an update;

    (f)On 28 September 2014, Mr Watts emailed Mr Keane for an update;

    (g)On 28 September 2014, Mr Keane emailed Mr Watts giving an update on finance with the Lender he was organising; and

    (h)The email from Mr Keane sent 28 September 2014 which attached the letter from NCS dated 26 September 2014 to which I have referred.

48. I have considered all that correspondence.  It does not support the submission by the respondents. 

49. The respondents also submit that Mr Watts’ evidence about the NCS letter in the sum of $760,000 was both convincing and unshaken.  They also referred to Mr Watts’ oral evidence that he contacted Ms Sharpe after he received the NCS letter.  It is for the reasons I have set out that I do not accept that submission.

50. It seems NCS did not end up funding the purchase of the Chains.  There is no evidence as to why that was the case.

    The Open Letter

51. On 16 October 2014, Mr Watts prepared the Open Letter which he provided to Ms Sharpe, referring to the replacement cost for the Chains being approximately $4,500,000 each, plus packaging and shipping costs.

52. Mr Watts denies creating or authoring the Open Letter for a number of reasons set out in his third affidavit.

53. Although Mr Watts identified a number of reasons why he contends he did not prepare the Open Letter, it must be seen against the following matters:

    (a)WMM had entered into a contract with SFF to purchase the Chains;

    (b)WMM was incurring monthly rental costs; and

    (c)The funding with NCS had not proceeded.

54. Further, the letter is very specific both on the Chains themselves and also the knowledge of the New Zealand meat industry.  In my view, it was written by someone with extensive knowledge of the New Zealand meat industry and particular knowledge of abattoir processing plants.

1. The rate of interest terms is stated as being 4.5% per month reducing to 3.00% per month if paid on or before the due date each month, payable at discharge of the Loan.

2. Clause 8 of the special conditions to the Funding Offer provide that the borrower was to pay interest and the management fee monthly in advance to the PFM trust account on the first business day of each calendar month during the continuance of the Loan.

3. The words “payable at discharge of the loan” in the provision setting the interest rate is simply a provision which sets the time at which the monthly interest paid into PFM’s trust account is to be paid out.

4. In that context, the Investor Proposals (received by PFM from the Lenders on or about 19 January 2015) provided that interest payments are to be made to the PFM trust account with repayment of the loan together with any interest by PFM to the funders (Lenders) at the conclusion of the term.

5. Under the terms of the Investor Proposals, interest was payable to the Lenders at 4.00% per month, 4.5% should the client pay late.  When compared to the interest rate being charged to Chopsonion in the Loan Agreement (Funding offer), being 4.5% per month reducing to 3% per month if paid on or before the due date each month, it may be seen that the interest rate payable by Chopsonion in the event of late payment is the same in both cases, such that the interest rates payable in the event interest is paid late, cannot be said to be “in terrorem”.

6. The Mortgage given by Chopsonion refers only to “secured money” which is defined relevantly in cl 12 as meaning:

   (a)all amounts that are or may become owing by you to the mortgagee under any agreement between you and the mortgagee now in the future, including all amounts that you owe the mortgagee under:

   (i)a loan agreement

   (ii)…

7. The respondents submit the terms of the Loan Agreement are not formulated as a “properly drafted” mortgage and are collateral and penal in nature.  They refer to PT Thiess Contractors Indonesia v PT Arutmin Indonesia [2015] QSC 123, [153] in which Jackson J explained that there was a distinction between those matters where there is a retrospective increase in the interest rate and those involving a prospective increase from the date of default, the latter not being subject to “automatic avoidance”.

8. I do not consider that the penalty doctrine applies to the Loan Agreement (Funding offer):  Kowalczuk; Thiess. 

9. Nonetheless, assuming the penalty doctrine applies to the Loan Agreement, I accept the applicants’ submissions that there is nothing in the Loan Agreement in the nature of an “in terrorem” collateral stipulation.  That is because on its face, the Loan Agreement sets an interest rate of 4.5% per month with the incentive of a lower percentage rate per month if the interest is paid on or before the due date for payment of interest.  In the event interest is paid late, PFM is obliged to pay the investors interest on the funds advanced at the same rate.

10. Accordingly, I do not accept that the interest payable under the Loan Agreement in the event of late payment of interest is unenforceable as a penalty.

    Management Fee

11. Under the Loan Agreement, the Management Fee is 1.5% per month reducing to 0.5% per month payable at discharge of the Loan.

12. The Mortgage Management Agreement is dated 21 January 2015 and is between PFM as Mortgage Manager and the Lenders who are defined collectively as the “Mortgagee”.  It sets out the terms of the agreement between the Lenders and PFM.

13. In their oral closing submissions, the respondents referred to their written submissions on the question of penalty.

14. The Management Fee is directed at the services being provided by the Mortgage Manager under cls 2.1, 2.2 and 2.5 of the Mortgage Management Agreement which provide:

    2.        … the powers of the Mortgage Manager shall include:

    2.1To receive and account for all interest and/or principal payments in respect of the Mortgage Loan and liaising with the Borrower, Mortgagor and Mortgagee in respect of these payments (irrespective of whether these payments are or have been made);

    2.2 To pay to the Mortgagee on or before the 10^th day of each month (or the next business day), the interest collected under the Mortgage Loan (to the extent that such interest is paid by the Borrower or Mortgage or to the Mortgage Manager or otherwise as provided for in this Agreement).  Such payment must be made to any personal bank account nominated in writing by the Mortgage Manager to the Borrower for and on behalf of the Mortgagee; and

    2.5 To execute any document for and on behalf of the Mortgagee as its agent which is necessary to facilitate the proper and diligent management of the Mortgage Loan or is otherwise in the interests of the Mortgagee to be executed including but not limited to any letter of offer, loan agreement, mortgage, contractual certificate, priority agreement or settlement agreement.

15. The applicants submit there is no “in terrorem” collateral stipulation but agreed contractual terms in the sense that the Management Fees is payable in any event.

16. The Management Fee reduces from 1.5% per month to 0.5%.  No event is stipulated for that reduction but as with the interest rate, I assume it applies on timely payment.

17. As with the Loan Agreement, it does not appear to me that the Management Fee can be considered properly as an “in terrorem” payment and there is nothing that indicates the Management Fee is a payment to be made in circumstances that contravene the principles I have set out above.

18. Accordingly, I do not accept that the Management Fee payable under the Loan Agreement in the event of late payment of the Management Fee is unenforceable as a penalty.

    Receiver’s fees and legal costs - $220,698.31

19. The Lenders claim the Receivers’ fees and legal costs.

20. Clause 10 of the GSA entered into between the Lenders and Chopsonion on or about 19 January 2015 provides for the Lenders to appoint a Receiver for Chopsonion.  Chopsonion is responsible for the Receiver’s remuneration.

21. Mr Cooper and Mr Bettles were appointed Receivers of Chopsonion on about 30 October 2015.

22. At the same time, the Lenders executed a Deed of Indemnity in respect of each of the Receivers, pursuant to cl 7, of which the Lenders agreed to pay the Receivers’ remuneration and expenses for work carried out in respect of the Chopsonion Receivership on the basis of time spent and at the standard rates agreed between the Receivers and the Lenders from time-to-time.

23. Mr Cooper gave evidence as to the tasks he undertook as Receiver, the unpaid remuneration both for Chopsonion and for Jechbo, as well as a liability for legal fees for advice provided to the Receivers.

24. Exhibit A1 includes the work in progress records for the Receivers and their staff on the Chopsonion Receivership which totals $95,837.23.

25. At the same time as they were appointed Receivers of Chopsonion, Mr Cooper and Mr Bettles were appointed Receivers of Jechbo pursuant to a GSA entered into between the Lenders and Jechbo on or about 19 January 2015.  The Jechbo GSA is in the same terms as the Chopsonion GSA.

26. As with Chopsonion, in relation to Jechbo, the Lenders also executed a Deed of Indemnity in respect of each of the Receivers, pursuant to cl 7, of which the Lenders agreed to pay the Receivers remuneration and expenses for work carried out in respect of the Jechbo Receivership on the basis of time spent and at the standard rates agreed between the Receivers and the Lenders from time-to-time.

27. Exhibit A1 includes the work in progress records for the Receivers and their staff on the Jechbo Receivership which totals $55,036.89.

28. The respondents submit that Mr Cooper was cross-examined on the issue of the invoices but was only able to confirm that he believed the invoices had been raised.

29. The Receivers’ invoices for remuneration for work done on the Chopsonion and Jechbo Receiverships were tendered as part of Exhibit A1.

30. In addition to the invoices, the applicants rely on the work in progress records, the remuneration report by staff members, and a summary of work performed as at 18 August 2020 for both Chopsonion and Jechbo.  Those business records confirm the amounts owing. 

31. Further, the Receivers incurred legal fees from Charlton Rowley in the sum of $69,824.19 (incl GST) in connection with both the Jechbo and Chopsonion Receiverships.

32. Since Jechbo was one of the parties providing security for the Loan to Chopsonion, the appointment of Receivers to its property is a consequence of Chopsonion’s default.

33. In view of the respective indemnity obligations, the Lenders are obliged to pay the Receivers their remuneration and expenses, including Charlton Rowley’s legal fees associated with the Receivership of Chopsonion and Jechbo, in the sum of $220,698.31 and are entitled to that amount.

    Mortgage Management fees - $1,617,975

34. The respondents submit the claim for the Mortgage Management Fee must be rejected because it is unsustainable on the terms of the Mortgage Management Agreement.  They submit that the rights to the Mortgage Management Fee applied only for the term of the loan and do not operate in perpetuity.

35. The applicants submit that the Mortgage Management Fee has been incurred by reason of:

    a)The Loan Agreement terms which impose on Chopsonion a liability to pay PFM 1.5% per month of the total amount of the Loan the subject of the Loan Agreement, payable at discharge of the loan; and

    b)The terms of the Mortgage Management Agreement by which the Mortgage Management Fee:

    i)Is payable irrespective of whether interest payments are made under the Loan Agreement (cl 4);

    ii)The Lenders are liable to indemnify PFM for all costs, fees and charges arising out of the performance by it of its obligations under the Mortgage Management Agreement (cl 3); and

    iii)The Mortgage Management Fee was never paid by Chopsonion.

36. On that basis, the applicants contend that the liability for the Mortgage Management Fee pursuant to the indemnity given by the Lenders as at 15 September 2022, calculated on the basis of 92 months at 1.5% ($17,625), totals $1,617,975 (sic $1,621,500).

37. Clause 4 of the Mortgage Management Agreement provides that the Mortgage Management Fee only represents (PFM’s) costs of performing the specific duties described in cls 2.1, 2.2 and 2.5 of the Agreement.  Each of those provisions prescribe a particular power to PFM.

38. There is no provision in the Mortgage Management Agreement that provides an ongoing liability to pay the Mortgage Management Fee after the term of the Loan expires.  Clause 4 provides that the tasks performed by PFM that relate to the Mortgage Management Fee do not include the cost of performing any function arising from a default of the Loan or the Mortgage or any other task to be undertaken by the PFM under the Agreement.  Those costs are dealt with by cl 5.

39. Clause 5 provides that if the borrower falls into default under the Loan, PFM is entitled to charge a “Loan Attendance Fee” at the rate of $250 (incl GST) per hour for all work undertaken by it in discharge of its obligations under the Agreement.  That fee is recoverable from Chopsonion and/or the Lenders.

40. It is apparent therefore that the Mortgage Management Fee is limited both in scope and in time.

41. Further, I note that special condition cl 8 to the Loan Agreement (Funding offer) provides:

    8.The Borrower shall pay interest and the management fee monthly in advance to Private Funds Management Pty Ltd Trust Account.  The Interest & Management Fee payments are due and payable on the first business day of each calendar month during the continuance of the loan.  …

42. Nonetheless, cl 12 of the Mortgage Management Agreement provides that the “… Agreement shall apply notwithstanding anything to the contrary in the Letter of Offer (Funding offer) or the Mortgage documentation or any other agreement or arrangement whatsoever as between the Borrower or Mortgagor and the Mortgagee except an agreement executed by all of the parties hereto which is expressed to be supplemental hereto or in substitution hereof.” [brackets provided].

43. On that basis, I accept the respondents’ submissions that there is no ongoing entitlement by PFM to a Mortgage Management Fee after the initial three-month term of the loan.

44. As I have noted, however pursuant to cl 5, PFM is entitled to charge a Loan Attendance Fee at the rate of $250 per hour for all work undertaken by it in discharge of its obligations under the Agreement.  There is no evidence of the work done by PFM nor the hours charged for carrying out any work.

45. It follows that PFM has no entitlement to claim any Mortgage Management Fee after the three-month term, and the Lenders and/or Chopsonion have no entitlement to claim loss for the Mortgage Management fee other than for the three-month term of the loan, which totals 3 x $17,625 = $52,875.

    Legal fees $167,664.71 (excluding litigation costs)

46. The respondents submit that the sums claimed are not referable to the loss alleged by the applicants and there is no evidence as to whether the legal fees incurred are reasonable.

47. Each of the invoices making up the total of $167,664.71 formed part of Exhibit A1.  The invoices comprise business records and on their face are consistent with work done by Charlton Rowley for PFM in relation to the Chains.

48. Clause 8 of the Mortgage Management Agreement empowers PFM to carry out any recovery action it deems necessary to recover the Loan, including by commencing proceedings.  Clause 3 of the Mortgage Management Agreement provides that the (Lenders) are to indemnify (PFM) for all costs, fees and charges arising out of its performance of its obligations under the Agreement, including but not limited to legal costs incurred by (PFM).

49. Since the Lenders are obliged to indemnify PFM for the legal costs incurred in pursuing recovery of the Loan, it forms part of the loss properly claimable by the Lenders which I find to be the sum of $167,664.71.

    Heads of loss suffered by Chopsonion

50. Chopsonion submits that as a result of entering into the Loan Agreement, Chopsonion has incurred a liability for $7,063,697.30, calculated as follows:

    (a)Principal Amount - $1,175,000;

    (b)Interest and Mortgage Management Fee - $5,471,900;

    (c)Receivers’ Costs and Legal Fees - $220,698.31;

    (d)Storage Charges - $173,766.98; and

    (e)Legal Fees - $22,332.01.

51. Some of these amounts, in particular the Principal and the Receivers’ Costs and Legal Fees, are also claimed by the Lenders.  To the extent there is any duplication.  It cannot be recovered twice.

    Principal - $1.175m

52. I have dealt with the amount borrowed by Chopsonion, the rate of interest, the recoverable Mortgage Management Fee, and the reductions in principal following the FG Agri settlement.  As I have noted, a further amount of $5,918.85 needs to be deducted from the balance of the outstanding principal giving a total of $177,307.66.

    Unpaid interest and Management Fee under the Loan Agreement - $5,471,900

53. The applicants claim that as at 15 September 2022, the amount of unpaid interest and the Mortgage Management Fee outstanding under the Loan Agreement between PFM and Chopsonion totalled $5,471,900.

54. The amount claimed for the Mortgage Management Fee as at 15 September 2022 was $1,617,975.

55. I do not accept that figure and for the reasons I have set out above, the amount recoverable for the Mortgage Management Fee is $52,875.

56. As to interest, I have indicated that will need to be the subject of a further calculation.

    Receivers’ costs and legal fees - $220,698.31

57. I have dealt with the applicants’ claim for the Receivers’ remuneration and expenses, including legal fees costs, above. 

58. Clause 10.3 of the Chopsonion GSA provides that Chopsonion alone is responsible for the Receivers’ remuneration.

59. Although the Lenders have provided an indemnity to the Receivers, nonetheless Chopsonion has incurred this liability as a result of entering into the Loan Agreement.

60. Chopsonion is entitled to this loss as a part of any award of damages, subject to any adjustment for double counting.

    Storage charges - $173,766.98

61. In May 2015, a single Chain was delivered to Sydney.  The other Chain was delivered to Brisbane and ultimately sold to FG Agri.  As at 28 September 2022, the total amount owing by Chopsonion for storage to NSW Container Solutions was $173,766.98.

62. Ms How deposes in the second How affidavit that in or about March 2021 she received a Notice of Intention to Sell issued by NSW Container Solutions claiming storage charges for the single Chain delivered to Sydney.  That single Chain was put up for public auction by NSW Container Solutions in or about March 2021 but did not sell.

63. As a consequence, Chopsonion submits the Sydney Chain remains unsold and must be taken to be unsellable such that it has no market value.

64. The respondents do not address the Sydney Chain in any detail other than to submit that no evidence has been put on by the applicants as to any itemisation of equipment seized from Chopsonion under the GSA; nor as to valuations obtained for such equipment; storage efforts; efforts to preserve the value of such assets; or efforts made to sell that equipment since 2015.

65. Given that the Chain has not been sold after some eight years or more despite being put up for public auction, I accept Chopsonion’s submission that the Sydney Chain is now unsellable and has no market value.

    Legal fees - $22,332.01

66. Chopsonion alleges it has incurred further legal fees totalling $22,332.01.  Those fees relate to a debt recovery action against “Budmint” and Annomac, dealing with NSW Container Solutions and the sale of the Collarenebri and Inglewood Abattoirs to Mr Farrell.

67. The debt recovery action against Budmint arose from a contract for the sale of the Collarenebri Abattoir which did not proceed.

68. The debt recovery action against Annomac arose from the payment for alleged consulting services to Annomac by WMM which had not occurred and were the subject of a falsified invoice.

69. The dealing with NSW Container Solutions related to the storage costs for the Chain delivered to Sydney.

70. I consider Chopsonion is entitled to recover its legal fees for these matters which arise out of the transaction which but for the conduct of Mr Watts, and through him WMM, would not have proceeded.

    Credit for Additional Equipment

71. Chopsonion submits it will give credit for the value of plant and equipment acquired through use of the Funding, save for the Chain in Sydney which it contends has no value, a contention I have accepted.

72. Ms How deposes in the second How affidavit that the Beef Floor at Yarrawonga was sold for scrap and the proceeds applied to costs, fees and charges occasioned by its transport and storage which has resulted in a shortfall.

73. The Millers Shoulder Puller, Final Puller and the Breakdown Saw is the subject of WMM invoice no. 1206 dated 22 January 2015 in the amount of $46,200.  It was last in the possession of WMM and there is no evidence of it being sold.  As with the Sydney Chain, the applicants submit this piece of equipment has no value.  Mr Watts advised Ms How by email sent 21 September 2016 that the Millers Shoulder Puller and Final Puller were in Scone (from where WMM operate).  There is no evidence as to its current whereabouts or whether it has been sold.

74. I accept the applicants’ submission that the Shoulder Puller, Final Puller and Breakdown Saw should be considered as having no value.

    Summary

75. The Lenders have established loss in the following amounts:

    (a)Remaining principal owing to the Lenders after allowing for a deduction of $5,918.85 - $177,307.66;

    (b)Interest payable on the balance of the principal in accordance with the terms of the Loan, to be calculated;

    (c)Mortgage Management fees - $52,875; and

    (d)Receivers Costs and Legal Fees - $220,698.31.

    Total:  $456,799.82 plus interest.

76. Chopsonion has established loss in the following amounts:

    (a)Remaining principal owing to the Lenders after allowing for a deduction of $5,918.85 - $177,307.66;

    (b)Interest payable on the balance of the principal from time to time, to be calculated;

    (c)Mortgage Management Fees - $52,875;

    (d)Receivers costs and legal fees - $220,698.31.

    (e)Storage charges - $173,766.98; and

    (f)Legal fees - $22,332.01.

    Total:  $652,898.81 plus interest.

    THE ASSESSMENT OF LOSS BY REFERENCE TO EACH CAUSE OF ACTION - LENDERS

1. The applicants submit the losses suffered by Chopsonion and the Lenders respectively are the same for each cause of action.  Nonetheless I deal with each of the causes of action.

   Misleading and deceptive conduct against WMM and Mr Watts

2. The principles are well-settled.  The loss or damage must arise “because of the conduct of another person” in contravention of s 18 of the ACL:  s 236 ACL.

3. In calculating the amount of loss or damage suffered, one must “select a measure of damages which conforms to the remedial purpose of the statute and to the justice and equity of the case”: Henville v Walker (2001) 206 CLR 459; [2001] HCA 52 at [18].

4. Further, the enquiry to be undertaken is to identify what in particular has been suffered by way of “prejudice or disadvantage in consequence of altering [its] position by reason of the breach”: Henville at [132].

5. I have found that but for the misleading and deceptive conduct of WMM and/or Mr Watts, the Lenders would not have entered into the transaction.

6. In the circumstances of this matter, the Lenders are entitled to an award of damages which reflects the amount of the loss or damage sustained because of the conduct:  Marks v GIO Australia Holdings Ltd [1998] HCA 69; (1998) 196 CLR 494 at [95] (Gummow J). Were it not for that misleading and deceptive conduct, the transaction would not have proceeded.

7. In the circumstances of this matter, that approach conforms with the remedial purpose of the statute and the justice and equity of the case: Henville.

8. The Lenders are entitled to the sum of $456,799.82 plus interest.

   Involvement in the misleading and deceptive conduct of Mr and Ms Sharpe

9. I have found that WMM and Mr Watts were involved in the misleading and deceptive conduct of Mr and Ms Sharpe.

10. In the circumstances of this matter, the Lenders are entitled to an award of damages which reflects their loss which they have suffered because of the conduct.  Were it not for that misleading and deceptive conduct, the transaction would not have proceeded.

11. The Lenders are entitled to damages in the same amount for the involvement of Mr Watts and WMM as for the misleading and deceptive conduct by Mr Watts and WMM.

    Deceit

12. In Berry v CCL Secure Pty Ltd [2020] HCA 27 at [31], Belle, Keane and Nettle JJ said:

    … where a claimant is induced by deceit to enter into a transaction, the claimant is entitled to recover by way of damages the actual damage ‘directly’ flowing from the fraudulent inducement – including losses flowing from causes ‘inherent’ in the transaction – but is not entitled to recover losses of which the cause is ‘independent’, ‘extrinsic’, ‘supervening’ or ‘accidental’ such that those losses cannot rationally be regarded as caused by the deceit.

13. In this matter, but for the deceit of Mr Watts, and through him WMM, the Lenders would not have entered into the transaction.  The July 2014 Chains invoice and the deposit email played a central role in the transaction proceedings.

14. The Lenders are entitled to damages for deceit in the same amount as for misleading and deceptive conduct by Mr Watts, and through him WMM.

    THE ASSESSMENT OF LOSS BY REFERENCE TO EACH CAUSE OF ACTION - CHOPSONION

15. There are different causes of action brought by Chopsonion as opposed to those brought by the Lenders.

    The Involvement of WMM and Mr Watts in the breach by Mr and Ms Sharpe of their statutory duties - s1317H of the Corporations Act

16. Pursuant to ss 181(2) and 182(2) of the Corporations Act, a person who is involved in a contravention of ss 181 and/or 182 is taken to have contravened those sections.

17. Section 1317H provides:

    1317H  Compensation orders—corporation/scheme civil penalty provisions

    Compensation for damage suffered

    (1)A Court may order a person to compensate a corporation, registered scheme or notified foreign passport fund for damage suffered by the corporation, scheme or fund if:

    (a)the person has contravened a corporation/scheme civil penalty provision in relation to the corporation, scheme or fund; and

    (b)the damage resulted from the contravention.

    The order must specify the amount of the compensation.

    Damage includes profits

    (2)In determining the damage suffered by the corporation, scheme or fund for the purposes of making a compensation order, include profits made by any person resulting from the contravention or the offence.

    Damage includes diminution of value of scheme or fund property

    (3)...

    (4)...

    (4A)...

    Recovery of damage

    (5)      A compensation order may be enforced as if it were a judgment of the Court.

18. The expression “resulted from the contravention” in s 1317H is given its ordinary meaning, requiring a causal connection between the loss suffered and the contravening conduct.  They do not import equitable principles of causation applicable to fiduciaries:  Adler v Australian Securities & Investments Commission (2003) 179 FLR 1; [2003] NSWCA 131 at [709] (Giles JA).

19. As a result of the breach of statutory duties, Chopsonion incurred a liability for $1,175,000 plus interest together with other expenses.  After allowing for reduction of the principal owed because of the sale of the Chains, Chopsonion is entitled to an award of damages against Mr Watts and WMM jointly and severally in the sum of $652,898.81 plus interest.

    Knowing assistance in a dishonest and fraudulent design by Chopsonion’s Directors

20. The measure of damages for knowing assistance in a breach of fiduciary duties is equitable compensation.  In this case, Mr Watts and WMM are jointly and severally liable to compensate Chopsonion for its loss arising out of the breach of fiduciary duties by Chopsonion’s Directors.

21. The remedies available to a person who claims that an individual has breached their fiduciary duties, along with a knowing participant, include equitable compensation and an order to account.  In Foresters Gageler J said: at [71], [74]

    71Knowing participation by a non-fiduciary in a dishonest and fraudulent breach of fiduciary duty is conduct which is regarded in equity as itself unconscionable and as attracting equitable remedies against the knowing participant of the same kind as those available against the errant fiduciary…

    74… The remedies available against each, at the option of the person to whom the proscriptive obligation is owed by the fiduciary, centrally include an order for equitable compensation and an order to account …

    (Citations omitted)

    The equitable remedy of account is a personal order. The order operates to require that a defendant pay to a plaintiff the monetary value of a benefit or gain to the defendant. …

22. In the circumstances of this matter, Chopsonion is entitled to an award of damages in the same amount as the damages for breach of statutory duty so as to place Chopsonion to as nearly as possible in the position in which it would have stood had there not been a breach.  See also Hill v Rose [1990] VR 129, 143-4 (Tadgell J).

    Misleading and deceptive conduct against WMM and Mr Watts

23. I have set out the principles relating to the recovery of loss because of the conduct of a person who contravenes s 18 of the ACL above.

24. Chopsonion is entitled to damages in the same amount as for the other causes of action brought by Chopsonion.

    Involvement in the misleading and deceptive conduct of Mr and Ms Sharpe

25. I have found that Mr Watts and WMM were involved in the misleading and deceptive conduct of Mr and Ms Sharpe.

26. Chopsonion is entitled to damages in the same amount as for the other causes of action brought by Chopsonion.

    CONCLUSION

27. In the Watts proceedings, the applicants have succeeded in each of their causes of action against Mr Watts and WMM.  They are entitled to damages, including interest to be calculated.

28. In the Rolton proceedings, the applicants have failed to establish any cause of action such that the proceedings must be dismissed.

29. I will hear the parties as to the orders they seek in view of these reasons.

I certify that the preceding eight hundred and four (804) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice O'Sullivan.

Associate: 

Dated:       15 January 2025

SCHEDULE OF PARTIES

SAD 109 of 2020
Applicants
Second Applicant:	MEG INVESTMENTS PTY LTD ACN 008 198 221
Third Applicant:	RED DOG #1 PTY LTD ACN 122 895 309
Fourth Applicant:	RJC WILLSON NOMINEES PTY LTD ACN 007 790 329
Fifth Applicant:	RICHARD WILLSON
Sixth Applicant:	LEIGH WILLSON
Seventh Applicant:	JOHN CHARLTON ROWLEY
Respondents
Second Respondent:	KEITH DOUGLAS WATTS

SAD 76 of 2022
Applicants
Second Applicant:	RED DOG #1 PTY LTD ACN 122 895 309
Third Applicant:	RICHARD WILLSON
Fourth Applicant:	LEIGH WILLSON
Fifth Applicant:	RJC WILLSON NOMINEES PTY LTD ACN 007 790 329
Sixth Applicant:	JOHN CHARLTON ROWLEY
Seventh Applicant:	CHOPSONION PTY LTD ACN 142 890 971 (CONTROLLERS APPOINTED)
Respondents
Second Respondent:	ROLAND SMITH