Commonwealth v Davis Samuel Pty Ltd (No 7)
[2013] ACTSC 146
•1 August 2013
COMMONWEALTH OF AUSTRALIA v DAVIS SAMUEL PTY LTD AND ORS
(NO 7) [2013] ACTSC 146 (1 August 2013)
CORPORATIONS – Director – means of becoming – acting in position of – officer – decisions affecting corporation – maker of or participant in
EQUITY – Fiduciary duty – breach of – Barnes v Addy – receipt and assistance – liability for – third party – participatory liability – receipt liability – company – knowledge of – imputation to
EQUITY – Fiduciary duty – breach of – Barnes v Addy – remedies – In rem – In personam – constructive trust – imposition of – discretionary – occasion for – tracing – multiple fiduciary duty breaches – multiple claims
EQUITY – Breach of confidence – fundamental or operative mistake – ultra vires payment of public money
TRADE PRACTICES ACT – misleading and deceptive conduct
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No. SC 75 of 1999
Judge: Refshauge J
Supreme Court of the ACT
Date: 1 August 2013
IN THE SUPREME COURT OF THE )
) No. SC 75 of 1999
AUSTRALIAN CAPITAL TERRITORY )
BETWEEN:COMMONWEALTH OF AUSTRALIA
Plaintiff
AND:DAVIS SAMUEL PTY LIMITED
First Defendant
AND:DAVID JOHN MUIR
Second Defendant
AND:CALLFORM PTY LIMITED
ACN 072 099 668
Third Defendant
AND:PETER MICHAEL CAIN
Fourth Defendant
AND:ALLAN PAUL ENDRESZ
Fifth Defendant
AND:CTC RESOURCES NL
ACN 009 061 036
Sixth Defendant
AND:JOZSEF ENDRESZ
Seventh Defendant
AND:DAWN MAY ENDRESZ
Eighth Defendant
AND:WILLIAM ARTHUR FORGE
Ninth Defendant
AND:KAMANGA HOLDINGS PTY LIMITED
ACN 003 316 292
Tenth Defendant
AND:PELLON PTY LIMITED
ACN 082 375 951
Eleventh Defendant
AND:MICHAEL McCANN
Twelfth Defendant
AND:AMATIVE PTY LIMITED
ACN 082 375 924
Thirteenth Defendant
AND:MARK JOSEPH ENDRESZ
Fourteenth Defendant
AND:BISOYA PTY LIMITED
ACN 003 016 242
Fifteenth Defendant
AND:WINTON OIL NL
ACN 001 863 878
Sixteenth Defendant
AND:QUANCORP PTY LIMITED
ACN 002 755 133
Seventeenth Defendant
AND:ALLAN PAUL ENDRESZ as representative of the members of ‘BORDER BASKETBALL ASSOCIATION INC’ an unincorporated association
Eighteenth Defendant
AND:RODNEY JAMES ENDRESZ
Nineteenth Defendant
AND:JOY BEVERLEY ENDRESZ
Twentieth Defendant
AND:TRESMONAY PTY LIMITED
ACN 073 120 635
Twenty-first Defendant
AND:ACT ORGANICS PTY LIMITED
ACN 008 628 662
Twenty-second Defendant
AND:GRAHAM McCANN PTY LIMITED
ACN 008 653 969
Twenty-third Defendant
AND:SANDRA ENDRESZ
Twenty-fourth Defendant
AND:LORRAINE OLIVE FORGE
Twenty-fifth Defendant
AND:CHRISTOPHER MUIR
Twenty-sixth Defendant
AND:TNG LIMITED
ACN 008 817 023
Twenty-seventh Defendant
AND:DARREN SMAILES
Twenty-eighth Defendant
AND:SHANE SMAILES
Twenty-ninth Defendant
AND:PETER JOHN CLARK
Third Party
ORDER
Judge: Refshauge J
Date: 1 August 2013
Place: Canberra
THE COURT DECLARES THAT:
The payment of $6 million to CTC Resources NL on or about 17 April 1998 was void and illegal.
The payment of $2.725million to Quancorp Pty Limited and Kamanga Pty Limited trading as Davis Samuel on or about 24 September 1998 was void and illegal.
Each of the first, fourth, fifth, sixth, seventh, eighth, ninth, tenth, fifteenth, sixteenth, seventeenth, twentieth, twenty-first, twenty-fifth and twenty-seventh defendants hold any payments derived directly or indirectly as traceable to the payments referred to in the first and second declarations on trust of the plaintiff.
THE COURT ORDERS THAT:
The plaintiff and the twenty-seventh defendant have leave to make submissions as to the consequences of the plaintiff’s election to recover funds from Mr Mark Endresz.
If required, the plaintiff elect as to whether it seeks a remedy in respect of the trust of property, being shares and options in Kanowna Lights NL, from the twenty-seventh defendant or from those defendants to whom the purchase price for those securities or any of them were paid.
There be judgment for the twenty-seventh defendant on its counter-claim against the first, second, fourth, fifth, sixth, seventh, eighth, ninth, tenth and seventeenth defendants for damages to be assessed.
There be judgment for the twenty-seventh defendant on its third party notice against the third party for damages to be assessed.
The counter-claim by the twenty-seventh defendant against the plaintiff be dismissed
The counter claim by the first, second, fifth, sixth, seventh, eighth, ninth, tenth, fifteenth, sixteenth, nineteenth, twentieth, twenty-first and twenty-fourth defendants be dismissed.
The application to re-open the proceedings be dismissed.
The parties be heard as to consequential or further orders arising from these orders and the reasons for judgment, and as to costs.
These reasons for judgment are divided into the following sections:
Table of Contents [1] The Facts [2] to [10] The Parties [11] to [112] Appearances and Representation [113] to [120] The Transactions [121] to [230] Further Preliminary Matters [231] to [248] Premium Bonds and Article 2A [232] to [243] Takeover of Petroz NL [244] to [248] The Submissions [249] to [275] The Commonwealth’s claims [249] to [250] The Defences [251] to [254] The Counter-claim [255] to [267] The Reply and Defence to Counter-Claim [268] to [275] The Issues in the Proceedings [276] to [1961] Breach of fiduciary duty [277] to [458] Fiduciary Duties [277] to [296] Did Mr Muir and Callform owe a fiduciary duty to the Commonwealth? [297] to [312]
What fiduciary duties did Mr Muir and Callform owe? [313] to [333]
Was there a breach of any of the fiduciary duties? [334] to [458] (a) The April Payment [339] to [394] (b) The September Payment [395] to [458] Liability of the defendants other than Mr Muir and Callform as a result of the breaches of fiduciary duty [459] to [1668]
(a) Knowledge [481] to [1470] (i) The Law [486] to [495] (ii) The Relevant Parties [496] to [497] (iii) Corporate knowledge [498] to [509] (iv) Knowledge of the breach of fiduciary duty by Mr Muir and Callform regarding the April Funds [510] to [1009]
(v) Conclusion on the receipt of April Funds [1010] to [1011]
(vi) The Kanowna Lights NL takeover [1012] to [1026] (vii) Knowledge of the breach of fiduciary duty by Mr Muir and Callform for the September Funds [1027] to [1329]
(viii) Conclusion on the September Funds transaction [1330] (ix) The TNG takeover [1331] to [1462] (x) Conclusion regarding the TNG takeover [1463] to [1470] Defence of the Primary Defendants to the Claimed Breach of Fiduciary Duty [1471] to [1655]
(a) Contract [1474] to [1506] (i) April payment as a contract [1478] to [1489] (ii) Does ASIC’s receipt bind the Cth? [1490] to [1495]
(iii) Was there a contract? [1496] to [1504] (iv) September payment as a contract [1505] to [1506] (b) Mr Muir as agent of the Commonwealth [1507] to [1547] (c) Election [1548] to [1637] (i) Re-opening [1572] to [1621] (ii) Abuse of Process [1622] to [1628] (iii) Affirmation [1629] to [1637] (d) Authority [1638] to [1655] The Commonwealth’s claim against Ms Scott [1656] to [1665] Conclusion on breach of fiduciary duty [1666] to [1668] Breach of Confidence [1669] to [1677] Mistake [1678] to [1727] Ultra Vires [1728] to [1763] Trade Practices Act claim [1764] to [1778] The Commonwealth’s claim against TNG [1779] to [1961] Mr Forge and Mr Muir as directors of TNG [1807] to [1814] The relevant transactions by TNG [1815] to [1821] The knowledge of TNG as to the provenance of the Kanowna Lights Securities [1822] to [1824]
The knowledge of TNG [1825] to [1904] (a) It does not apply to a “fraud” being committed against an innocent third party [1852] to [1866]
(b) There must be a “total fraud” on TNG [1867] to [1880] (c) That the knowledge of the “fraud” on the Commonwealth was not integral to the “fraud” on TNG [1881] to [1888]
(d) TNG had ratified the transaction [1889] to [1897] (e) The pleadings do not permit TNG to raise the point [1898] to [1904]
Election [1905] to [1942] Absence of breach of trust [1943] to [1959] Conclusion regarding the Commonwealth’s claim against TNG [1960] to [1961]
Claim by TNG [1962] to [2165] The Commonwealth’s defence [1973] to [1976] The defences of the Counter-Claim Defendants (other than the Commonwealth) [1977] to [2140]
(a) The claim against the Commonwealth [1979] to [2016] (b) The claim against certain of the Defendants other than the Commonwealth [2017] to [2140]
Knowledge of the participants [2141] to [2164] Conclusion of the claim by TNG [2165] The Defence of the Counter-Claim Defendants [2166] to [2226] Election [2169] to [2200] Estoppel [2201] to [2226] Counterclaim by Defendants other than TNG [2227] to [2314] Contract Claims [2231] to [2229] Breach of Contract: April Funds transaction [2231] to [2249] (a) Affirmation [2235] to [2243] (b) Breach of Contract [2244] to [2251] Breach of Contract: September Funds transaction [2252] to [2261]
Negligence [2262] to [2291] There was no loss or damage [2283] to [2291] Trade Practices Act [2292] to [2314] Remedies [2315] to [2323] Appendix [2324] to [2387] Misleading the Court [2325] to [2333] ASIC Share Allotment Form [2334] to [2338] Request for a Royal Commission [2339] to [2347] The non-commerciality of CTC and the transactions [2348] to [2355]
Licence Agreement between CTC Resources and Kamanga [2356] to [2358]
The Davis Samuel Rollover Letters [2359] to [2363] Dealing in Mining Licences [2364] to [2384] Discovery [2385] to [2387] Mr Muir and Pellon [2388] to [2392] Conclusion and Orders [2393] to [2394]
INTRODUCTION
In March 1996, there was a change in the Australian Federal Government. The new Government, amongst other things, proceeded to implement changes to the administrative arrangements under which the Commonwealth Public Service had operated.
It decided to sell to the private sector a number of functions that had operated as business units or commercial businesses of the Department of Administrative Services. A Business Closures Unit was established for this purpose on 1 September 1997. In October 1997, the new government also amalgamated the Departments of Administrative Services and Finance into the Department of Finance and Administration. The Business Closures Unit was then located in that new amalgamated department.
The Department of Administrative Services had operated, in connection with the business units, a trust account, the Business Services Trust Account (BSTA), used to administer the accounts arising from these units. Into the account was paid revenue from the business units and out of it was paid expenses that had to be met. When the units were sold, however, it was necessary to retain the account for a period of time to cater for closing payments, debt collection and other post-sale purposes. Eventually it was wound up.
David Muir, an employee of a company, Callform Pty Ltd as trustee for the Doull Family Trust, which was a contractor to the Department of Administrative Services and later to the Department of Finance and Administration, was engaged to provide accrual accounting services to the Departments. He was initially tasked to look after accounts for one of the business units, the Australian Operational Support Services (AOSS), and later for another of those units, the Australian Property Group. This involved preparing books at point of sale and in a consolidated fashion at the time the two Departments merged, debt collection from customers of the business units and monitoring the rent account of the Australian Property Group. Mr Muir was not required or authorised to invest any funds from the BSTA.
During his contract with the Department, Mr Muir improperly transferred two relatively large sums of money to a company in which he had financial or other interests: R v Muir (Unreported, Supreme Court of the Australian Capital Territory, Gray J, 25 September 2001) at [4]-[5].
Thus, on 17 April 1998, Mr Muir caused the sum of $6 m to be transferred by electronic transfer from the BSTA to CTC Resources NL, a company being the sixth defendant. This payment was not authorised by any officer of the Commonwealth and neither Mr Muir nor Callform Pty Ltd had authority to affect the transfer. I shall refer in these reasons to that transfer as “the April payment” and the funds so transferred as “the April Funds”.
On 24 September 1998, Mr Muir caused the sum of $2.725m to be transferred from the BSTA to a bank account in the name of Davis Samuel, a partnership of two companies, Kamanga Holdings Pty Ltd, the tenth defendant, and Quancorp Pty Ltd, the seventeenth defendant. In these reasons, I shall refer to that transfer as “the September payment” and, again, the funds so transferred as “the September Funds”. No officer of the Commonwealth authorised the September payment and neither Mr Muir nor Callform had authority to make it.
The April Funds and the September Funds were thereafter paid directly or indirectly to a large number of the defendants and, if not, those defendants to whom the proceeds were not paid were otherwise involved in the transactions whereby the proceeds were paid to the others. Of course, some of the defendants to whom moneys were paid were also involved in such transactions.
The Commonwealth now seeks to have these payments, they not having been authorised, to be recovered from the defendants in various ways which will be detailed below.
THE PARTIES
It is convenient to describe first the parties, to give their short titles to be used in these reasons and to refer briefly to their status in these proceedings. As a preliminary note, throughout this judgment, the Australian Securities and Investments Commission will be abbreviated to the ASIC and the Australian Stock Exchange will be abbreviated to the ASX.
The Commonwealth of Australia is the plaintiff, seeking to recover the April Funds and the September Funds the subject of the April payment and the September payment and, where appropriate, damages and interest. I shall refer to it as “the Commonwealth”. The Commonwealth was established by the Commonwealth of Australia Constitution, set out in s 9 of the Commonwealth of Australia Constitution Act 1900 (UK) (63 and 64 Vict ch 12). It is an organisation or institution of government “possessing distinct individuality”. Whilst formally not a juristic person, it is “amenable to the jurisdiction of courts”: Sue v Hill (1999) 199 CLR 462 at 501-2; [91]; Bank of New South Wales v Commonwealth (1948) 76 CLR 1 at 363. It is sometimes referred to as “a body politic”: State Chamber of Commerce and Industry v Commonwealth (1987) 163 CLR 329 at 357. That term, however, has a range of meanings: Hoxton Park Residents Action Group Inc v Liverpool City Council (No 2) (2011) 256 FLR 156 at 169-171; [48]-[57]. The extent to which other agencies are the Commonwealth is a matter I need to address below.
Davis Samuel Pty Ltd, the first defendant, shall be referred to as “Davis Samuel”. It is a company that was incorporated on 23 June 1998 and Peter Cain and Allan Endresz were the original and only directors. There is also reference in the facts in these proceedings to a partnership of the same name, Davis Samuel. It was a partnership of two companies, which are also defendants, Kamanga Holdings Pty Ltd, the tenth defendant, and Quancorp Pty Ltd, the seventeenth defendant. I shall refer to the partnership as the “Davis Samuel Partnership”.
The Davis Samuel Partnership conducted business advisory services. The business name was deregistered on 23 June 1998, though a bank account maintained in its name with the Commonwealth Bank of Australia continued to be operated after that time. It is unclear whether the partnership continued and for how long. This becomes relevant in these proceedings and will be referred to later. Clearly the deregistration of the business name does not of itself wind up the partnership. See Partnership Act 1892 (NSW), Div 4. If authority is needed, I draw the conclusion from the terms of the Business Names Act 1962 (NSW) and the principles articulated in cases such as Re Johnson; Ex parte Greendale Engineering and Cables Pty Ltd (1968) 11 FLR 335 at 341-343; Tec & Tomas (Australia) Pty Ltd v Matsumija Computer Co Pty Ltd (1984) 1 FCR 28 at 37.
Davis Samuel was trustee of a number of trusts: Davis Samuel Unit Trust, the Falcons Unit Trust, the Hallmark Unit Trust (the HUT) and Petroz Unit Trust (the PUT). On 23 September 2002, Kamanga Holdings Pty Ltd replaced it as trustee of these trusts. From 12 November 2001 to 28 August 2002, it held one ordinary unit in the Allan Endresz Family Trust.
The shareholders of Davis Samuel were Kamanga Holdings Pty Ltd and Quancorp Pty Ltd.
David John Muir, the second defendant, was an accountant with degrees in commerce and science. He was a director of Callform Pty Ltd. I shall refer to him as Mr Muir. He was, as appears from above (at [5]), the consultant provided by Callform Pty Ltd to perform duties that the company had contracted to provide to the Commonwealth. The plaintiff has resolved the proceedings against Mr Muir; judgment has been entered against him: R v Muir at [41]. He was not an active party in the trial as that phrase is defined in the Dictionary of the Court Procedures Rules 2006 (ACT).
Mr Muir was a director of various companies after 1993. In particular, he became, on 24 September 1998, a director of four no liability companies, including, for a brief period, TNG Ltd (formerly known as Hallmark Gold NL), the twenty-seventh defendant. His directorship of these companies ended on 18 December 1998. So far as TNG Ltd was concerned, the Federal Court of Australia declared that his directorship had actually ended on 22 October 1998 when he was not re-elected at the annual general meeting: Australian Securities and Investments Commission v Hallmark NL (1999) 30 ACSR 688.
Callform Pty Ltd, the third defendant, is a corporation, which contracted from 8 October 1997 to 30 November 1997 to provide services to the Commonwealth, described in the contract as “Professional Services in relation to provision of accrual accounting services”. The company, called in these reasons “Callform”, was the trustee of the Doull Family Trust and of the Doull Family Unit Trust, a trust that Mr Muir had separately established in 1998.
A later consulting agreement was entered into between Callform and the Commonwealth on 25 August 1998, which was for provision of “Financial and Management Accounting Services” to be provided by Mr Muir as the “Specified Personnel” for the period of 6 August 1998 to 24 December 1998. Between 1 December 1997 and 5 August 1998, both inclusive, the Commonwealth, Callform and Mr Muir acted as if the original contract was still in force. Time sheets and invoices from Callform were provided to the Commonwealth and paid apparently on this basis.
The Commonwealth has resolved its claim in relation to Callform and does not seek relief against it in these proceedings. It is not an active party in the trial.
Peter Michael Cain, the fourth defendant, is a lawyer who has practiced in Albury and then Melbourne. He is admitted to practice in Victoria and in New South Wales and holds a Victorian practising certificate. I shall refer to him as “Mr Cain”.
He is a director of a number of relevant companies: Davis Samuel (the first defendant), Quancorp Pty Ltd (the seventeenth defendant), and Tresmonay Pty Ltd (the twenty-first defendant). He resigned as a director of Davis Samuel in 2000.
Mr Cain is divorced from his wife but has re-partnered. He has two children with his wife. The property arrangements following the divorce have been affected by orders made in these proceedings.
Mr Cain has also been involved in other businesses. He met Mr Allan Endresz in 1985 and shared an office with him in 1987 and 1988. He has been in business relations with him since 1994.
Mr Cain established a family trust, the P & A Cain Family Trust, of which Quancorp Pty Ltd was trustee. It owned a property in Melbourne which is relevant to these proceedings. Quancorp Pty Ltd ceased to be trustee on 15 June 2001.
Mr Cain had been a director of a number of private companies between 1981 and 1999 and, briefly in 1995-6, of Growth Resources NL.
Mr Cain appeared for himself in the proceedings and also as counsel for Davis Samuel (the first defendant), CTC Resources NL (the sixth defendant), Bisoya Pty Ltd (the fifteenth defendant), Winton Oil NL (the sixteenth defendant) and Tresmonay Pty Ltd (the twenty-first defendant).
Allan Paul Endresz is the fifth defendant, and because his father is also a party, I shall refer to him in these reasons as “Mr Allan Endresz”. He was employed for a time by Bird Cameron, accountants, but has not qualified as an accountant. He conducts business as a corporate advisor in Albury, NSW.
As noted, he has been in business relations with Mr Cain since December 1994, in particular through the Davis Samuel Partnership, for which he held a Power of Attorney.
Mr Allan Endresz has been involved in a variety of litigation, to some of which he specifically drew my attention, namely Australian Securities and Investment Commission v Forge [2002] NSWSC 760 (the 2002 NSW proceedings). In these proceedings, a number of the defendants were respondents. That decision reported evidence that Mr Allan Endresz had been convicted of certain offences under the Corporations Law 1989 (Cth) which led to him being disqualified from acting as a director of a company for a number of years. An appeal from that conviction was dismissed: Endresz v Whitehouse (1997) 24 ACSR 208 (though curiously the headnote to the report at (1997) 139 FLR 359 refers, quite wrongly, to the appeal being allowed).
The 2002 NSW proceedings were appealed and the penalties set aside. They later returned to the Supreme Court of New South Wales for imposition of penalties.
On 21 December 2007, penalties were imposed and Mr Allan Endresz was prohibited from managing a corporation until 10 September 2021: Australian Securities and Investments Commission v Forge [2007] NSWSC 1489.
Mr Allan Endresz acted for himself in these proceedings. After some hesitation, I permitted him to appear for some other defendants: Commonwealth v Davis Samuel Pty Ltd (No 2) [2008] ACTSC 60 at [4]. He initially appeared for Jozsef Endresz (the seventh defendant), Dawn May Endresz (the eighth defendant), William Arthur Forge (the ninth defendant), Joy Beverley Endresz (the twentieth defendant) and Peter John Clark (the third party). Later, Mr Forge, Mr Jozsef Endresz and Mrs Dawn May Endresz represented themselves in the proceedings.
CTC Resources NL, the sixth defendant, is an incorporated company. Originally known as Emu Hills Gold Mines NL, it was incorporated on 2 March 1983 but changed its name on 12 March 1991. The directors are William Arthur Forge (from 1994), Dawn May Endresz (from 1991) and Jozsef Endresz (from 1989). Mr Allan Endresz and Mr Mark Endresz had, at earlier times, been directors.
On 18 December 1990, the company was delisted from the ASX. It challenged that decision and entered into an agreement with the Davis Samuel Partnership which was to conduct the litigation in which the decision was to be challenged and damages sought. The agreement provided that the Davis Samuel Partnership would be paid 60% of any damages recovered from the ASX. On 20 April 2008, the company paid the Davis Samuel Partnership $334,427 in consideration that the share of the damages payable to the Davis Samuel Partnership would be reduced to 30%. The claim against the Stock Exchange was ultimately compromised.
The company was used to promote what was described as an innovative concept called in the proceedings “Premium Bonds”. It was said to be “an innovative preference share issue.” I describe these in more detail below.
I shall refer to the company as “CTC Resources” in these reasons.
Jozsef Endresz, the seventh defendant, is the father of Mr Allan Endresz. To distinguish them, I shall refer to him as “Mr Jozsef Endresz”. He was born in Hungary.
He was, from 1989 and at various times, a director of a number of companies, including five No Liability companies.
So far as these proceedings are concerned, he was at relevant times, a director of CTC Resources (the sixth defendant) and its subsidiary, CTC Nominees Pty Ltd, Kamanga Holdings Pty Ltd (the tenth defendant), Winton Oil NL (the sixteenth defendant) and Tresmonay Pty Ltd (the twenty-first defendant).
He joined the board of CTC Resources on 20 December 1989.
In the proceedings referred to above (at [33]), he was also prohibited from managing a corporation, in his case until 28 August 2016.
Dawn May Endresz, the eighth defendant, is the wife of Mr Jozsef Endresz and the mother of Mr Allan Endresz. I shall refer to her as “Mrs Dawn Endresz”.
She, too, was a director of a number of companies from 1991. In particular, she joined the board of CTC Resources on 9 April 1991. She was also a director of CTC Nominees Pty Ltd, Kamanga Holdings Pty Ltd (the tenth defendant) and Winton Oil NL (the sixteenth defendant). She was a beneficiary of the Allan Endresz Unit Trust, the trustee of which was Kamanga Holdings Pty Limited.
In the proceedings referred to above (at [33]), she was prohibited from managing a corporation until 28 August 2012.
William Arthur Forge, the ninth defendant, to whom I refer in these reasons as “Mr Forge”, was also a company director. From 1985, he was, from time to time a director of thirteen companies.
Relevant to these proceedings, he was a director of CTC Resources from 9 September 1994, of Bisoya Pty Ltd (the fifteenth defendant), his family company, of Winton Oil NL (the sixteenth defendant), of TNG Ltd (the twenty-seventh defendant), of Hallmark Exploration NL and of Kanowna Lights NL. Ultimately, his directorship of TNG Ltd (he was originally appointed on 24 September 1998), was the subject of a legal challenge, in circumstances that need to be referred to below, and it was held that he was not validly appointed at the annual general meeting on 22 October 1998 and thereafter ceased to be a director: Australian Securities and Investments Commission v Hallmark NL.
In the proceedings referred to above (at [33]), Mr Forge was prohibited from managing a corporation until 28 August 2014.
Kamanga Holdings Pty Ltd, the tenth defendant, will be referred to in these reasons as “Kamanga”.
Incorporated on 12 June 1987, it was a family company of the Endresz family. Mr Allan Endresz was a director and secretary from 23 June 1987 to 11 July 1993. Mrs Dawn Endresz was a director from 11 June 1993 to 12 August 1996. Mr Jozsef Endresz was a director and secretary from 23 June 1987 to 7 January 2002 and was the sole director and secretary of the company from 12 August 1996 to 7 January 2002.
On 8 December 1994, Kamanga and Quancorp Pty Ltd (the seventeenth defendant), registered the business name Davis Samuel under which they conducted the Davis Samuel Partnership. The business name was deregistered on 23 June 1998.
Kamanga was, from 23 June 1987, the trustee of the Allan Endresz Family Trust, established by a Deed of Settlement on 18 January 1983. The beneficiaries of the trust included Mrs Joy Endresz, Mr Jozsef Endresz and Mrs Dawn Endresz, together with other relatives. This was its only activity.
On 15 November 2001 it was wound up by the Supreme Court of Western Australia and a liquidator appointed. On 14 March 2008, I gave the Commonwealth leave to proceed against Kamanga under s 471B of the Corporations Act 2001 (Cth).
The liquidator did not oppose the grant of leave and advised that he would take no part in the proceedings.
From time to time, Mr Cain purported to represent Kamanga and to make submissions on its behalf. It was clear that he had no authority from the liquidator to do so. I have ignored any such representation which I am satisfied was inadvertent.
Pellon Pty Ltd, the eleventh defendant, will be referred to as “Pellon” in these reasons.
It was incorporated as a shelf company on 22 April 1998 and purchased by Mr Michael McCann (the twelfth defendant) who became relevantly and remained the only director and secretary of the company. He had agreed with Mr Muir to act as director for one year or retire earlier if Mr Muir wished to replace him.
Pellon became trustee for the Pellon Unit Trust established on 24 April 1998. The Davis Samuel Partnership was appointed as investment advisers to the Pellon Unit Trust.
The Pellon Unit Trust was involved in share trading. Mr McCann’s evidence was that all such investments were made under direction from Mr Muir and with his agreement.
The Commonwealth has resolved any issues that it has with Pellon and does not seek relief against it. It is not an active party in the proceedings.
Michael McCann is the twelfth defendant. He holds tertiary qualifications in accounting and economics. He was a company director and a consultant to the Commonwealth in matters relating to energy, economics, environment and communications. He was also a share trader in his own right. He later became also a Product Adviser for two commercial banks in the development of novel financial investments and emerging investment sectors.
He was at the relevant time a director of a number of companies which are defendants in these proceedings: Amative Pty Ltd (the thirteenth defendant), ACT Organics Pty Ltd (the twenty-second defendant) and Graham McCann Pty Ltd (the twenty-third defendant).
He made some investments in CTC Resources and other relevant companies. He was quite friendly with Mr Muir and was involved in a number of dealings with him, though he considered that at one stage Mr Muir deceived him when he failed to pay over some profits to which Mr McCann considered he was entitled.
The Commonwealth has resolved the issues it had with Mr McCann and does not seek any relief against him at this time. He is not an active party in the trial. Insofar as it is necessary to refer to him in these reasons, I will do so as “Mr McCann”.
Amative Pty Ltd, the thirteenth defendant, was also a shelf company purchased by Mr McCann. I shall refer to it as “Amative”. It was incorporated on 22 April 1998 and Mr McCann was the only director and secretary after purchase. Again, Mr McCann agreed to remain a director for one year or until Mr Muir wished to take over earlier, but this did not happen.
Amative held a unit in the Pellon Unit Trust and held the only two shares in Pellon initially, but, at Mr Muir’s request, Mr McCann transferred the shares to his company, Graham McCann Pty Ltd, the twenty-third defendant.
An agreement was made for Pellon to pay Amative management fees. These were then paid to another of Mr McCann’s companies, ACT Organics Pty Ltd, the twenty-second defendant.
Mr McCann provided Mr Muir with a signed and stamped share transfer form for the shares he held in Amative, so that ownership of the company could be transferred at any time. He also provided him with the forms to effect removal of him as a director.
In dealings by the company, Mr McCann acted at the direction of Mr Muir.
The Commonwealth has resolved the issues it had with Amative and does not seek any orders against it at this time. It was not an active party in the trial.
Bisoya Pty Ltd, to whom I will refer as “Bisoya”, is the fifteenth defendant. It was incorporated as a company on 7 November 1985 and, about a month later, Mr Forge became a director and later its secretary. Lorraine Olive Forge (the twenty-fifth defendant) was also a director until 14 September 1998.
It appears that it was the family company of Mr Forge. Its 1993-98 Annual Returns described its “principal activities” as “Trustee of Family Trust – Motel”. It was said to have provided management services to CTC Resources, though what those were was not clearly explained on the evidence. A written agreement entered into on 20 April 1998 set out a detailed schedule of “Management Services”, requiring it, inter alia, to provide “[e]ffective and efficient management of the operational aspects of the activities of CTC [CTC Resources].” Amongst the specific matters were included those that might be expected of a general manager. Despite this, Mr Forge said in one of his affidavits that his “main responsibility [as a director of CTC Resources] is to look after the mining exploration activities in respect of leases owned by CTC.” He continued, despite reference in the management agreement to a requirement to “[m]anage the business functions of CTC, including financial, administrative and marketing aspects”, that “[t]he funding and financial side of CTC’s activities [was] looked after by ... Jozsef and Dawn Endresz and their son Allan”.
Winton Oil NL, the sixteenth defendant, will be referred to as “Winton Oil”. It was incorporated on 25 March 1980 and changed its name to Winton Oil NL on 17 January 1986. It was a subsidiary of Kamanga.
The directors of Winton Oil, at relevant times, were Mr Jozsef Endresz, Mrs Dawn Endresz and Mr Forge. It was delisted by the ASX in 1991.
It was not at all clear on the evidence what business Winton Oil conducted. On 20 April 1998, it entered into a consultancy agreement with Kamanga for $245,000 per annum. The agreement required Kamanga to provide the services of Mr Allan Endresz to Winton Oil.
Quancorp Pty Ltd is the seventeenth defendant. I will refer to it in these reasons as “Quancorp”. It was incorporated on 26 April 1984 and Mr Cain was a director and, on 3 October 1996, appointed its secretary. His then wife, Anne Christine Cain, was a director and secretary between 26 April 1984 and 3 October 1996. They each held one of the two issued shares. Mr Cain has remained the sole director.
Quancorp was trustee of the P & A Cain Family Trust and of a trust called the P and A Cain Investment Trust. The beneficiaries of both trusts, at least at the date of the Deed of Settlement in each case, namely 10 October 1996 and 24 January 1995 respectively, were Mr Cain and Mrs Anne Cain.
Quancorp was a partner in the Davis Samuel Partnership, as noted above (at [13]). It was wound up on 15 November 2001 by the Supreme Court of Western Australia and a liquidator appointed to the company.
On 14 March 2008, I gave the Commonwealth leave to proceed against Quancorp under s 471B of the Corporations Act 2001 (Cth).
The liquidator did not oppose the grant of leave and advised that he would take no part in the proceedings.
From time to time, Mr Cain purported to represent Quancorp and to make submissions on its behalf. It was clear that he had no authority from the liquidator to do so. I have ignored any such representation which I am satisfied was inadvertent.
Border Basketball Association Inc is the eighteenth defendant. I shall refer to it as “Border Basketball” in these reasons. It is an unincorporated association and, as such, able to sue and be sued.
The Commonwealth has resolved the issues it had with Border Basketball and does not seek any relief against it. It was not an active party in the trial.
Rodney James Endresz, the nineteenth defendant, is the son of Mr Jozsef Endresz and Mrs Dawn Endresz. I shall refer to him as “Mr Rodney Endresz”. He is a private share trader. He married Sandra Endresz on 26 April 1998.
The Commonwealth has resolved the issues it had with Mr Rodney Endresz and does not seek any relief against him. He was not an active party in the trial.
Joy Beverley Endresz is the twentieth defendant and I shall refer to her as “Mrs Joy Endresz” in these reasons. She is the wife of Mr Allan Endresz.
Tresmonay Pty Ltd is the twenty-first defendant. I shall refer to it in these reasons as “Tresmonay”.
Tresmonay was incorporated on 4 March 1996. Mr Cain and Mr Jozsef Endresz were appointed directors on 28 November 1996, thus suggesting this was a shelf company. The shareholders were Kamanga and Quancorp, each holding two shares. It was described by Mr Cain as “a wholly owned subsidiary of Davis Samuel [Partnership]”.
On 28 August 2002, Mr Jozsef Endresz retired as a director from Tresmonay.
ACT Organics Pty Ltd, the twenty-second defendant, will be referred to in these reasons as “ACT Organics”. It was Mr McCann’s trading company which he had owned for about ten years. He is a director of the company. He used it to contract out his day-to-day activities. He also used it to provide management services to Pellon, Amative and the Pellon Unit Trust.
The Commonwealth has resolved the issues it had with ACT Organics and does not seek any relief against it. It was not an active party in the trial.
Graham McCann Pty Ltd is the twenty-third defendant and will be referred to in these reasons as “GMCC”.
It is the family trust company of Mr McCann and he is a director of it.
It was involved in a number of relevant transactions, including the purchase of shares in CTC Resources from Callform. Mr McCann also transferred the two shares that Amative held in the Pellon Unit Trust to GMCC.
The Commonwealth has resolved the issues it had with GMCC and does not seek any relief against it. It was not an active party in the trial.
Sandra Endresz is the twenty-fourth defendant and will be referred to as “Ms Sandra Endresz”. She is married to Mr Rodney Endresz.
The Commonwealth has resolved the issues it had with Ms Sandra Endresz and does not seek any relief against her. She was not an active party in the trial.
Lorraine Olive Forge is the twenty-fourth defendant and is now known as Lorraine Olive Scott. I shall refer to her in these reasons as “Ms Scott”.
Ms Scott was married to Mr Forge. She has paid $75,000 into the trust account of Ken Cush & Associates, Solicitors, and orders may need to be made in relation to that sum. The Commonwealth does not otherwise seek any relief against her.
TNG Ltd, formerly known as Hallmark Gold NL, is the twenty-seventh defendant and I shall refer to it in these reasons as “TNG”. It was incorporated on 15 September 1970 as a no liability public company and has been listed on the ASX. It has now changed its name to TNG Ltd, but that was well after these proceedings were commenced. On 23 May 2008, I ordered that the name of Hallmark Gold NL in these proceedings be changed to TNG Limited. The name Hallmark may appear in some letters and other documents, perhaps not infrequently, below.
It is central to the dispersal of the April Funds and the September Funds transferred from the Commonwealth by Mr Muir in 1998. That will be detailed below.
At the proceedings, it was represented separately from each of the other defendants. It has counter-claimed against the Commonwealth, Messrs Forge, Muir, Allan Endresz, Cain and Jozsef Endresz, Mrs Dawn Endresz, CTC Resources, Kamanga, Quancorp and Davis Samuel and the declarations sought will also affect the Commonwealth’s claim, as it seeks traceable proceedings in which the Commonwealth has an interest.
Darren Smailes is the twenty-eighth defendant and I shall refer to him as “Mr Darren Smailes”.
He is an accountant and was a contractor with the Department of Administrative Services in the corporate area since February 1994. He was introduced to Mr Muir in July 1997 and, though they had been at the same university and in the same residential college, he did not then know him but was introduced by a mutual friend.
He left the Department (then the Department of Finance and Administration) in May 1998, but maintained some contact with Mr Muir. He appears to have established a business under the name Axis Business Information in May 1998.
He facilitated the incorporation of a UK company, Citigate Management Pty Ltd, through his brother, then in London. He became a director and shareholder of that company, which was managed by his brother under instructions from him but which came through Mr Muir. The company was established, it appears, with money provided through the Pellon Unit Trust.
The Commonwealth has resolved the issues it had with Mr Darren Smailes and does not seek any relief against him. He was not an active party at the trial.
Shane Smailes, the twenty-ninth defendant, will be referred to in these reasons as “Mr Shane Smailes”. He is the brother of Mr Darren Smailes. He is a chartered accountant and worked for a time in London. He was, as noted above (at [107]), involved in the incorporation of Citigate Management Pty Ltd. He became a director and shareholder of the company.
The Commonwealth has resolved the issues it had with Mr Smailes and he was not an active party at the trial.
Peter John Clark is the Third Party, joined by TNG. I shall refer to him in these reasons as “Mr Clark”.
As a result of dealings in TNG by other defendants, Mr Clark was appointed a director of that company on or about 23 October 1998 along with Mr Forge and Mr Muir. That directorship was the subject of a challenge as he had been purportedly appointed by Messrs Forge and Muir, whose positions as directors were also the subject of challenge. On 1 April 1999, the Federal Court held that Mr Clark had not been validly appointed as a director: Australian Securities and Investments Commission v Hallmark NL.
APPEARANCES AND REPRESENTATION
The parties who participated in the proceedings were: the Commonwealth, Davis Samuel, Mr Cain, Mr Allan Endresz, CTC Resources, Mr Jozsef Endresz, Mrs Dawn Endresz, Mr Forge, Bisoya, Winton Oil, Mrs Joy Endresz, Tresmonay, TNG and Mr Clark.
The Commonwealth was represented by Mr M Slattery QC and Mr J Hogan-Doran.
Mr Cain acted for himself and for Davis Samuel, CTC Resources, Bisoya, Winton Oil and Tresmonay.
Mr Allan Endresz acted for himself and, initially, I gave him leave to act for Mr Jozsef Endresz, Mrs Dawn Endresz, Mr Forge, Mrs Joy Endresz and Mr Clark: Commonwealth of Australia v Davis Samuel Pty Ltd at [1]. Formal written consents to that were tendered.
On 11 June 2008, Mr Forge appeared and thereafter represented himself.
On 20 June 2008, I requested Mr Jozsef Endresz and Mrs Dawn Endresz to appear before me on 30 June 2008 as a question arose as to whether they should continue to be represented by Mr Allan Endresz. On that day, Mr Jozsef Endresz and Mrs Dawn Endresz informed me that they would now be representing themselves and they did for the balance of the proceedings.
Mr N Hutley SC and Mr J Giles represented TNG.
As noted earlier, leave had been given for the proceedings to continue against Kamanga and Quancorp which were in liquidation, and the liquidators had advised that they did not propose to appear for the companies. They were not represented in the proceedings.
THE TRANSACTIONS
In order to understand the issues, it is desirable that the relevant transactions, including those that followed the transfer of funds from the Commonwealth by Mr Muir, be explained and identified. For convenience, they were each given a number preceded by the letter “T” for transaction in the proceedings. It is convenient to use that notation.
In broad terms, the transactions fall into two groups, those that followed the April payment of $6 m in April 1998 (the April Funds) and those that followed the September payment of $2.725m in September 1998 (the September Funds).
The fact of these transactions, though carefully and comprehensibly proved in the proceedings, was not subject to any significant challenge by the defendants. It is, therefore, not necessary for me to interrogate the substantial documentary evidence that was adduced to support them. I proceed, then, on the facts as set out below.
T1
This is the initial transfer of the April Funds, $6 m from the Commonwealth, by the April payment. The April Funds were paid to CTC Resources. It was effected by an electronic transfer of those funds from the BSTA to an account at the Commonwealth Bank in Albury held in the name of CTC Resources.
Mr Muir, as an employee of Callform, instigated the transfer without any authority from the Commonwealth, whose funds they were. The funds were paid directly to CTC Resources.
At the time the funds were received by the Commonwealth Bank into the CTC Resources account, that account stood in credit in the sum of $40,493.20.
There were, immediately upon receipt of those funds, a number of transactions that followed in dealing with the April Funds, many on 20 April 1998, a further number in April 1998 and some thereafter. A number of subsequent transactions are important for the claim that the Commonwealth makes to trace the proceeds.
I shall, to the extent comprehensible, deal with the transactions chronologically, though subsequent transactions which are appropriately associated will be dealt with together.
T2
On 20 April 1998, CTC Resources invested $2,499,614.77 from the April Funds with the Commonwealth Bank in bank bills (T 2.1). Between 26 May and 3 September 1998, CTC Resources then made a series of draw downs from those funds until the whole amount was withdrawn. Those draw downs were as follows:
(i) on 26 May 1998, $520,068.28 (T 2.2);
(ii) on 29 June 1998, $800,780.45 (T 2.3);
(iii) on 29 July 1998, $310,812.69 (T 2.4);
(iv) on 21 August 1998, $775,097.96, which was, by direction paid to Davis Samuel (T 2.5); and
(v) on 3 September 1998, $120,603.87 (T 2.6).
This depleted in full the amount in the Commonwealth Bank investment account of CTC Resources.
T3
On 20 April 1998, CTC Resources paid, from the April Funds, $328,271.14 to Winton Oil (T 3.3), comprised of the repayment of the principal of the loan from Winton Oil with $305,368.51 (T 3.1), and payment of interest on that loan with $22,902.63 (T 3.2).
T4
On 20 April 1998, CTC Resources paid $60,536.20 (T 4.1) from the April Funds to Kamanga said to be a repayment of an outstanding account.
In addition, after 26 May 1998, CTC Resources made a number of further advances to Kamanga, all traceable to the April Funds, and Kamanga made cash payments to CTC Resources, also traceable to the April Funds, as follows:
(a) Payments from CTC Resources to Kamanga:
(i) on 26 May 1998, $100,000 (T 4.2);
(ii) on 26 May 1998, $431.50, being an interest payment (T 4.3);
(iii) on 21 July 1998, $17,000 (T 4.4);
(iv) on 29 July 1998, $100,000 (T 4.5);
(v) on 4 September 1998, $20,000 (T 4.6);
(vi) on 11 September 1998, $60,000 (T 4.7);
(vii) on 6 October 1998, $10,000 (T 4.8);
(viii) on 7 October 1998, $14,000 (T 4.9);
(ix) on 28 October 1998, $250,000 (T 4.10);
(x) on 30 October 1998, $100,000 (T 4.11);
(xi) on 13 November 1998, $150,000 (T 4.12);
(xii) on 10 December 1998, $63,000 (T 4.13).
being a total of $944,536.20 (T 4.14) with interest payments of $431.50 (T 4.15).
(b) Payments from Kamanga to CTC Resources:
(i) on 21 April 1998, $100,000 (T 4.16);
(ii) on 30 October 1998, $104,000 (T 4.17);
(iii) on 30 October 1998, $1,055.18 (T 4.18), being an interest payment;
(iv) on 26 November 1998, $60,000 (T 4.19);
(v) on 26 November 1998, $24,500 (T 4.20), being an interest payment;
(vi) on 25 November 1998, $2,589.40 (T 4.21), being an interest payment;
(vii) on 17 December 1998, $5,000 (T 4.22);
(viii) on 22 December 1998, $20,000 (T 4.23);
(ix) on 22 December 1998, $50,000 (T 4.24).
being total receipts of $339,000.22 (T 4.25) and interest payments of $28,144.22, mistakenly written at T 4.26 as $27,644.22.
T5
On 21 April 1998, CTC Resources paid Kamanga $2,205,000 (T 5.1) from the April Funds, said to be for past management fees. It also paid Kamanga, on that day, $240,000 (T 5.2), also from the April Funds, said to be royalties.
CTC Resources, after that, paid further sums traceable to the April Funds to Kamanga, as follows:
(i) on 26 May 1998, $40,833.00 (T 5.3), purportedly for professional services under management agreement;
(ii) on 2 July 1998, $20,416.67 (T 5.4), for which Kamanga provided on 1 August 1998 an invoice in respect of a “Consultancy Agreement”;
(iii) on 4 August 1998, $20,416.67 (T 5.5);
(iv) on 25 August 1998, two payments each of $20,416.67 (T 5.6) for which on 1 September 1998, Kamanga provided an invoice in respect of the “Consultancy Agreement” with payments terms stated to be “payable forthwith”;
(v) on 30 October 1998, $20,416.67 (T 5.7) for which Kamanga provided on 1 October 1998 an invoice in respect of the “Consultancy Agreement”;
(vi) on 9 December 1998, $20,416.67 (T 5.8);
(vii) on 15 February 1999, $40,833.34 (T 5.9) for which Kamanga provided on 1 January and 1 February 1999, two invoices in respect of the “Consultancy Agreement”;
(viii) on 14 May 1999, $29,750.01 (T 5.10); and
(ix) on 28 May 1999, $71,416.67 (T 5.11).
These consultancy fees from 26 May 1998 to 28 May 1999 totalled $305,333.04.
T6
On 20 April 1998, CTC Resources paid from the April Funds $168,014.00 to Callform (T 6.1), said to be a return of the funds subscribed by it for Series 3 and 4 bonds earlier made, and Kamanga paid to Callform $40,323.36 (T 6.2), described as “profits on subscription funds”.
T7
On 20 April 1998, CTC Resources paid the Davis Samuel Partnership from the April Funds $334,427.50 (T 7.1-T 7.3).
On 28 May 1998, CTC Resources paid the Davis Samuel Partnership $12,000 traceable to the April Funds (T 7.4) for what was said to be a monthly retainer in respect of the litigation CTC Resources had with the ASX. It was paid following a letter from the Davis Samuel Partnership dated 22 March 1998 which noted that CTC Resources “will shortly be in funds” and noting the agreement to sell back to CTC Resources 30% of the interest in that litigation for $300,000 and on terms including payment to the Davis Samuel Partnership of a monthly retainer of $6,000 for the duration of the litigation for its “supervisory and co-ordination role”. CTC Resources agreed to this from 1 May 1998.
On 2 July 1998, CTC Resources paid $6,000 (T 7.5) traceable to the April Funds to the Davis Samuel Partnership (whose bank account had continued to be maintained in that name, including the reference to the partners, Kamanga and Quancorp, despite the deregistration of that business name by this time and the incorporation of Davis Samuel) for the monthly retainer.
Further payments were made in respect of the retainer as follows:
(i) on 4 August 1998, $6,000 (T 7.6);
(ii) on 25 August 1998; $6,000 (T 7.7);
(iii) on 9 November 1998, $12,000 (T 7.8).
All these sums are traceable to the April Funds.
Under this transaction, there are other relevant payments. In particular, CTC Resources paid Michell Sillar McPhee, lawyers in Perth, Western Australia, legal fees for the litigation against the ASX, $2,360.40 on 24 July 1998 (T 7.9), $2,520.70 on 12 June 1998 (T 7.10), $10,913.00 on 29 September 1998 (T 7.11) and $11,362.10 on 9 November 1998 (T 7.12) in respect of legal fees for the litigation with the ASX, the three amounts being traceable to the April Funds.
On 4 February 1999, Kamanga paid Michell Sillar McPhee $8,686.45 (T 7.13) in respect of the monthly retainer for the litigation. This amount is traceable to the April Funds.
T8
On 22 April 1998, CTC Resources paid from the April Funds $260,000 to Bisoya (T 8.1) said to be for “past management fees and entry into a Management Agreement between the two companies rendering CTC Resources liable for further ‘management fees’”. On 28 May 1998, a further amount of $10,833.34 was paid from the April Funds by CTC Resources to Bisoya (T 8.2).
On 2 July 1998, CTC Resources paid Bisoya, also from the April Funds, $5,416.67 (T 8.3) for management fees in apparent response to an invoice dated 1 July 1998, though directed to Winton Oil. The invoice bears an annotation “CHQ No 541667 (154)” and in the Commonwealth Bank account of CTC Resources a payment of $5,416.67 by cheque No 154 is debited to that account on 2 July 1998.
Further payments said to be of management fees were paid by CTC Resources traceable to the April Funds to Bisoya as follows:
(i) on 4 August 1998, $5,416.67 (T 8.4);
(ii) on 26 August 1998, $5,416.67 (T 8.5);
(iii) on 29 October 1998, $10,833.34 (T 8.6);
(iv) on 17 December 1998, $5,416.67.
The payments to Bisoya total $303,333.36.
T9
This transaction involves a series of payments between CTC Resources and Border Basketball under a sponsorship agreement. This agreement is referred to in an agreement between Border Basketball (though in it referred to as “Border Basketball Club Inc” and defined as “the Bandits”), and the Davis Samuel Partnership for which, inter alia, the Davis Samuel Partnership is “to use its best endeavours to enable the Bandits to repay the Sponsorship Amount to CTC Resources in the required time”. The agreement with CTC is referred to in a recital in the following terms:
CTC Resources NL ... (“CTC”) has agreed to sponsor the Bandits for the 3 year from the Commencement Date with a payment of $250,000 each year pursuant to a Sponsorship Agreement made between CTC and the Bandits of even date with this agreement (“Sponsorship Agreement”).
The records of CTC Resources show that on 28 May 1998, $250,000.00 traceable to the April Funds was paid by CTC Resources to Border Basketball (T 9.1).
Subsequent payments made by CTC Resources of funds traceable to the April Funds to Border Basketball, referred to as “sponsorship”, despite the amount already paid, were as follows:
(i) on 27 August 1998, $40,000 (T 9.2);
(ii) on 26 October 1998, $4,796 (T 9.3);
(iii) on 30 October 1998, $100,000 (T 9.4);
(iv) on 30 October 1998, $1,096 (T 9.6);
(v) on 30 October 1998, $674.50 (T 9.6);
(vi) on 30 October 1998, $175.00 (T 9.6);
(vii) on 6 November 1998, $715.00 (T 9.7);
(viii) on 15 December 1998, $1,519.36 (T 9.8).
On 30 October 1998, Border Basketball paid to CTC Resources $40,000 (T 9.5) said to be “repayment of loan”.
T10
A series of payments were also made between Border Basketball and Kamanga, presumably under the agreement referred to above in connection with T9, described as a Loan and Profit Share Agreement. That Agreement provided for a loan to the Davis Samuel Partnership from Border Basketball of $150,000 and further sums of $150,000 on the first and second anniversaries of the date of the Agreement. The Davis Samuel Partnership was to invest these funds, and that those funds, with any profits accruing on them, “shall at all times be the absolute beneficial property of Davis Samuel”.
On 28 May 1998, $150,000 was paid by Border Basketball to the Davis Samuel Partnership (T 10.1). This was followed by payments from Kamanga to Border Basketball as follows:
(i) on 21 July 1998, $10,000 (T 10.2);
(ii) on 27 October 1998, $20,000 (T 10.4).
Funds were also transferred from Border Basketball to Kamanga as follows:
(i) on 27 August 1998, $10,000 (T 10.3);
(ii) on 30 October 1998, $40,000 (T 10.5).
These funds were all traceable to the April Funds.
T11
A number of related transactions involved payments between CTC Resources, Quancorp, Kamanga and Tresmonay and transfers of CTC Resources preference shares in exchange for mining licences. Those transactions involved the use of April Funds in circular and uncommercial transactions.
On 23 July 1998, CTC Resources paid Kamanga $20,000 (T 11.2) and on 29 July 1998, $100,000 (T 11.3) said to be 4% royalty on the issue of 3 million shares in the CTC Capital Bonds Series 2.
On 30 June 1998, CTC Resources resolved to issue two million $1.50 preference shares in exchange for a total of eleven mining licences, six to be purchased from Quancorp and Kamanga as the Davis Samuel Partnership and five licences from Tresmonay, said to be valued at a total of $3 m (T 11.1). In addition, CTC Resources agreed to pay $50,000 to Tresmonay and $70,000 to Quancorp and Kamanga as the Davis Samuel Partnership on account of the Bonds held in respect of the mining licences with the NSW Department of Mineral Resources.
In fact, CTC Resources paid $120,000 to Kamanga and Quancorp as the Davis Samuel Partnership on 30 July 1998 as referred of those Bonds (T 11.4).
On the same day, CTC Resources wrote off $1m from the value of those licences.
The licences were then transferred on 8 December 1998 by CTC Resources back to Tresmonay (five licences) and Quancorp and Kamanga as the Davis Samuel Partnership (six licences) for no consideration (T 11.5). In May 1999, CTC Resources paid most of those funds back to Kamanga, in two payments ($29,750.01 and $71,416.67) and to the Davis Samuel Partnership. These payments appear to breach orders of this Court restraining the parties from dealing in the April Funds.
T12
The payments in this transaction are related to T3. Having received the payment from CTC Resources, Winton Oil then made payments from those funds, which were, of course, traceable to the April Funds, to Kamanga and to the Davis Samuel Partnership as follows:
(i) on 22 April 1998, Winton Oil paid to Kamanga $8,900 (T 12.1);
(ii) on 4 June 1998, Winton Oil then paid Kamanga a further $40,833.34 (T 12.2);
(iii) on 17 December 1998, Winton Oil paid a further $7,500 to Kamanga (T 12.4);
(iv) on 9 June 1998, Winton Oil paid $270,000 to the Davis Samuel Partnership (T 12.3).
T13
This transaction is not directly involved in the Commonwealth’s claim for relief, but it is relevant to the proceedings. It involved payments from funds traceable to the April Funds by Kamanga between 20 April 1998 and 28 January 1999 of a total of $407,000 to Mark Endresz (T 13.1, T 13.2, T 13.3 and T 13.4).
T14
Similarly, this transaction is not directly involved in the Commonwealth’s claim for relief, but is also relevant to the proceedings. It involved payments again from funds traceable to the April Funds by Kamanga to or on behalf of Mr Rodney Endresz of a total of $160,000.
On 20 April 1998, Kamanga transferred $60,000 (T 14.1) to Mr Rodney Endresz. He engaged in some share trading with these funds and also used part of them to purchase some land. He obtained the balance of the funds needed to purchase the block of land from Bisoya which made a loan to him on 16 June 1998 of $50,000 (T 14.2). On 6 November 1998, Kamanga repaid that $50,000 (T 14.3) to Bisoya on behalf of Mr Rodney Endresz.
T15
On 21 April 1998, Kamanga transferred from the funds traceable to the April Funds $210,000 to Quancorp (T 15.1).
9.Equitable compensation.
10.An order for restitution.
11.Interest.
12.Costs.
In the light of my findings, it seems to me that the first declaration sought is one that I should inevitably make. As long ago as 1859, Pollock, CP pointed out the interestingly named corporation in National Guaranteed Manure Company (Limited) v Donald (1859) 4 Hurl & N 8 at 16; 157 ER 737 at 741, the consequences of acting ultra vires is that whatever is done is void. See, more recently, In re Lee Behnens & Co Ltd [1932] 2 Ch 46.
I have no doubt that the April Funds transaction (T 1) and the September Funds transaction (T 50), were illegal as ultra vires, in breach of the principles in Auckland Harbour v The King, and void.
My findings, also, that the two transactions were made in breach of the fiduciary duties that Mr Muir and Callform owed to the Commonwealth and that the defendants were relevantly knowing recipients of some or some part of the April Funds or the September Funds or both or traceable proceeds of those Funds results in the imposition of a constructive trust in respect of any such funds (or assets into which they have been traceably converted) and such a declaration should be made.
As to those who were knowing accessories to the April Funds transaction (T 1) or the September Funds transaction (T 50) or both, they are liable to pay equitable compensation under the principles in cases such as McKenzie v McDonald [1927] VLR 134. For a more recent discussion of the principles, see Nicholls v Michael Wilson & Partners Ltd [2012] NSWCA 383.
Issues of quantum and interest are complex, however, and dependent, in part, on matters such as the election I have required of the Commonwealth.
Indeed, senior counsel for the Commonwealth submitted it was appropriate for me to reserve for a supplementary judgment on issues arising from the fundamental orders which I should make. That seems to me to be eminently sensible.
I am prepared, therefore, to make orders that flow directly from the finding I have made, reserve for submissions on any other orders that can and should be made from my findingts and then hear the parties as to other relief that should be given.
APPENDIX
In their submissions the Counter-Claimants added an appendix which made serious assertions of misconduct and other miscellaneous claims against the Commonwealth and its lawyers in the conduct of these proceedings. While it is not strictly necessary to deal with all of them, it is appropriate, in the light of what is said there, to make the following comments:
Misleading the Court
It was asserted that the Commonwealth “made a serious effort on a number of occasions, to mislead the court ... [which] appeared to influence the thinking of His Honour”.
No specific examples were given other than complaints that Mr Allan Endresz said at various points that the Commonwealth had “a tendency to shift the ground”, “[to] make up another proposition” and “to try and drag inferences that what we said didn’t happen”.
Both counsel for the Commonwealth and for TNG did submit – and put to witnesses – that what they said was not true and that facts occurred in a way that was different from what was asserted in evidence. This is, of course, proper cross-examination and, indeed, may be required by rules of practice such as those set out in Browne v Dunn (1893) 6 R 67.
In the absence of more precise instances of claimed impropriety, it is difficult, if not impossible, to respond sensibly. I have, of course, heard all the evidence and, in the course of preparing these reasons, had to read the whole of the transcript and, indeed, re-read many parts a number of times. I am not able to identify any occasions where there was any misleading of the Court.
The Commonwealth and, indeed, TNG, make a very different case to that presented by the Counter-Claimants; they were entitled to do so and to do so robustly and strenuously. In my judgment, no party nor their counsel did so beyond the bounds of professional propriety.
It was suggested that the Court accepted assertions made because it was senior counsel for the Commonwealth that made them. That is simply incorrect. Indeed, the court took pains to ensure that the position was clear. At one point the Court pointed out:
During the last 2 days Mr Slattery who appears with Mr Hogan-Doran for the plaintiff, has opened for the plaintiff in detailed submissions based on volumes of written submissions which set out clearly the case which the plaintiff seeks to make on the evidence it will later adduce. As I’ve had occasion to observe, such submissions are not evidence, and unless the evidence supports the submissions and proves them to the requisite standard, mainly on the balance of probabilities, they are mere allegations on which I could not base a decision to order that any verdict in the proceedings could be made.
It was also made clear that allegations put to witnesses in cross-examination were just that, when the court said:
So while I understand the point that you’re making, they are only – they are only allegations being put to you, which you can deny, which you have, and it’s only your denial that is evidence. The questions are not evidence in themselves, they can only be the mechanism by which the evidence, which are your answers, can be disclosed to the court. So I won’t rely on those questions as evidence.
The only inferences that have been drawn in these reasons are based on the evidence placed before the court or the failure to adduce evidence that could have been expected to be adduced, where appropriate.
There is nothing in this complaint as made.
ASIC Share Allotment Form
The form completed by Mr Allan Endresz for signature by Mr Jozsef Endresz for submission to ASIC to record the issue of shares to the Commonwealth had a space for details of the allottee.
That space was not completed. The Commonwealth asked questions of Mr Allan Endresz suggesting that the failure to complete it was because he was trying to hide the payment from the Commonwealth.
In fact, because CTC Resources was a public company, the space in the form was not required to be completed. That was only appreciated after the cross-examination had proceeded some distance.
The attempt to use the failure to complete this part of the form as evidence of an attempt to hide the putative investments by the Commonwealth did not succeed. It would clearly have been sensible if the cross-examination had not proceeded on what may be regarded as a flawed assumption, but that happens from time to time. It clearly makes the cross-examination less helpful, if not quite ineffective, but that is not indicative of impropriety.
The cross-examination was put robustly and on incorrect assumptions. That does not make it improper. Indeed, it appears that Mr Allan Endresz was well able to correct the flawed assumptions.
Request for a Royal Commission
The evidence showed that Mr Jozsef Endresz and Mrs Dawn Endresz wrote to many, if not all, members of the Federal Parliament calling on them to establish a Royal Commission.
The first set of letters tendered in evidence consisted of the responses from various parliamentarians which were sent in 1994, well before the events with which these proceedings are concerned. It appears they relate to court proceedings between CTC Resources and the Federal Commissioner of Taxation. The subject matter is irrelevant to these proceedings.
The second bundle of letters tendered, consisting of twelve letters from eleven correspondents, appears, from a copy of the letter dated 19 November 1998 sent to one of the Members of Parliament, to refer to the difficulties between CTC Resources, Davis Samuel, Mr Allan Endresz and Mr Cain on the one hand, and ASIC and the ASX on the other. It called for “a full Senate Inquiry and/or Royal Commission.”
The submission was that:
It is inconceivable that the Commonwealth would suggest that the defendants were attempting to “cover up” the transactions when they had possession of hundreds of letters to Members of Parliament.
I did not see “hundreds of letters to Members of Parliament”. I did not even see one hundred letters from Members of Parliament.
None of the transactions, the subject of these proceedings, were mentioned in any of the correspondence; indeed, it seems strange that they were not mentioned in the second bundle, having regard to the substance of the letters. Indeed, the Commonwealth properly relied on that as evidence that the Primary Defendants were not at all keen for the Commonwealth to be told of either the April Funds transaction (T 1) or the September Funds transaction (T 50).
It is also noteworthy that at about this time, namely on 23 November 1998, Mr Cain was telling the ASIC Inquiry that Davis Samuel paid for the shares it purchased in TNG from its own resources without any mention of a Commonwealth investment. That is to say his evidence was:
The purchase of the [TNG] shares, the 7.4 million which would have cost $2.2 million, has that been paid? -Privilege. As I understand it, yes.
Do you know how that 2.2 million was funded? -Privilege. What to you mean, how it was funded?
Well, which parties provided the funds to purchase the shares? -Privilege. Do you mean whether Davis Samuel paid for it?
Yes, well, whether Davis Samuel paid for it or Quancorp or Kamanga. Who actually ...? -Privilege. Davis Samuel Pty Ltd paid for ...
And did Davis Samuel have those funds available or had to seek loan funds to provide that? -Privilege. Davis Samuel Pty Ltd obtained those funds internally, as I understand it.
That lie seems to me to support an inference that at least Mr Cain was not willing to acknowledge the receipt of funds from the Commonwealth at that time.
Indeed, the inference to be drawn, and that I do draw, is that as a fact, the Primary Defendants were not at all keen to acknowledge receipt of funds from the Commonwealth, they seemed positively to hide it.
The non-commerciality of CTC and the transactions
The Primary Defendants submitted that independent evidence provided “irrefutable evidence of the commerciality of CTC Resources”. Reference was also made to the Profin Report and to the evidence of the auditor of CTC Resources and of Mr McCann.
The Counter-Claimants also refer to some cash flow projections and a letter from Ernst & Young.
There is no basis on which these documents can be said to show that in April 1998 CTC Resources was an ongoing viable or sustainable commercial entity in its then form and with its then resources.
The Profin Report is dated 24 January 2005. It was prepared for the specific purposes of litigation with the ASX as an expert report “which quantifies the losses suffered by ... CTC Resources ... as a consequence of” the ASX delisting CTC Resources. That delisting occurred on 18 December 1990. The Report can have no relevance to the actual position of CTC Resources as at April 1998.
Indeed, while it showed, despite the listing, considerable marketing of the CTC Resources, it showed no actual income from that marketing.
The Report is quite irrelevant to the commercial position of CTC Resources as at April 1998.
Neither Mr Walsh nor Mr McCann in their affidavit or oral evidence gave any evidence as to the commerciality of CTC Resources or, indeed, of the April Funds Transaction (T 1) or the September Funds Transaction (T 50). Indeed, Mr Walsh gave a very heavily qualified audit opinion, in which he was unable to express an opinion as to whether the financial reports of CTC Resources gave a true and fair view of the company’s financial position. The accounts prepared immediately prior to these two transactions stated that preparation of the accounts of CTC Resources on an ongoing basis was:
[D]ependent on the support of related company, Kamanga Holdings Pty Ltd, to provide ongoing finance to meet current and future obligations. The Directors are of the opinion that Kamanga Holdings Pty Ltd is capable of, and will, provide the ongoing financial support and that the company will continue to be able to pay its debts as and when they fall due.
The other documents do not evidence the commerciality of CTC Resources or of the April Funds Transaction (T 1) or the September Funds Transaction (T 50). The letter from Ernst & Young dated 2 December 1992 is merely an offer to provide services, the fee for which was a flat sum plus a percentage of net receipts from certain transactions. It cannot bolster any view of the commerciality of what happened years later.
Licence Agreement between CTC Resources and Kamanga
Complaint was made that senior counsel for the Commonwealth put to Mr Cain that there was no licence agreement between CTC Resources and Kamanga providing for royalties for use of Article 2A (Regulation 2A) regulating the concept of the Premium Bonds. Mr Cain’s evidence was that he had been told there was one and he accepted that. He agreed that probably if there was one he is likely to have been the person to draft it.
There was, in fact, such a licence agreement. A copy was annexed to an affidavit of Mr Jozsef Endresz sworn 19 March 1999.
To put to a witness that a document does not exist when, in fact, it does exist is not improper unless, of course, the advocate consciously knows that. Given the amount of material in this case, with which I have been struggling to absorb and assimilate, I do not consider that such cross-examination comes anywhere near to the kind of conduct proscribed in the rules of the various professional associations or in cases such as NIML Ltd v MAN Financial Australia Ltd (No 2) [2004] VSC 510 at [6].
The Davis Samuel Rollover Letters
The Counter-Claimants further complain that it was submitted on behalf of the Commonwealth that the two rollover letters from Davis Samuel said to have been sent to the Commonwealth on 21 September and 1 October 1998 were created in January 1999.
I have dealt with this issue above (at [1127]-[1191]). I do not need to repeat it.
As noted above (at [1191]), I carefully considered all the evidence and found that I could not be satisfied that the letter dated 21 September 1998 was created and sent on that day or that the letter dated 1 October 1998 existed in that form prior to January 1999. I did not make a positive finding as it was not necessary for the decision.
The consequence is that the suggested impropriety in the Commonwealth’s conduct of the proceedings cannot be accepted in any sense. Indeed, even were I to find the evidence to have been as the Counter-Claimants suggested, I would not have found any impropriety or misleading in the approach of the Commonwealth. It was a robust approach to the presentation of its case which is perfectly proper. There was ample evidence on which the approach could properly be based. No impropriety is shown.
The lack of my satisfaction about those letters, however, is also relevant to support my finding that Mr Allan Endresz and Mr Cain were aware that Mr Muir and Callform in effecting the September Funds Transaction (T 50), were breaching the fiduciary duties that they owed to the Commonwealth.
Dealings in Mining Licences
The Commonwealth relied on dealings between CTC Resources and Tresmonay (T 11) to show the uncommercial and circular nature of the use to which the Primary Defendants put the April Funds.
On 30 June 1998, Quancorp and Kamanga, presumably and the Davis Samuel Partnership, sold six mining exploration licences in respect of land in New South Wales to CTC Resources. The consideration provided for the licences was a purchase price of $1,680,000 to be payable by the issue of 1.12 million preference shares in CTC Resources, issued at a price of $1.50 each.
On the same day, Tresmonay sold five mining exploration licences in respect of land in New South Wales to CTC Resources. The consideration was a purchase price of $1,320,000 to be payable by the issue of 880,000 preference shares in CTC Resources, issued at a price of $1.50 each.
The directors of CTC Resources resolved at a board meeting held at 10.00am on 30 June 1998 to execute the agreements for the purchase of these licences. The meeting also resolved to pay funds on account of the bonds as noted below.
The decision of CTC Resources to issue these shares was made at a meeting of the directors held at 2.00 pm on 30 June 1998. Interestingly, the issue of the shares by resolution recorded that the shares were to be issued at $0.01 par value and $1.49 premium.
Each sale agreement referred to the bonds in respect of each of the licences which had been lodged with the NSW Department of Mineral Resources. The Commonwealth Bank held security over the licences for a bank guarantee in favour of the Department in respect of bond deposits which were required as a condition of the grant of the licences. The agreement provided that the seller in each case was, in effect, to transfer the bond deposit to CTC Resources.
The bond for the five licences sold by Tresmonay was $50,000 and for the six licences sold by Quancorp and Kamanga was $70,000. Interestingly, this was done by a payment of those sums to Tresmonay and to Quancorp and Kamanga respectively (T 11.4).
The sellers had, on 19 June 1998, obtained a valuation of the licences. For Quancorp and Kamanga, the value was said to be $720,000 (low) to $1.36 million (high) with the “most likely” value $1.04 million. Thus, the licences were sold for $320,000 more than the high valuation.
For Tresmonay, the value was said to be $720,000 (low) to $1.32 million (high) with “most likely” value $1.020 million. In this case the licences were sold for the high value.
Despite these valuations and the prices paid, the draft accounts for CTC Resources disclose that, despite having paid consideration effectively of $3,120,000 in respect of the licences, their value was, in those accounts for the year ending 30 June 1998 (that is the day of purchase), written down by $1,000,000 . That is to say, the value was written down on the day of purchase by nearly one third of the amount paid.
The final accounts for financial year ending 30 June 1998, though heavily qualified, and signed on 25 March 2003, showed a provision for diminution in value of the licences of the full amount of their purchase price, namely $3 million.
On 8 December 1998, CTC Resources transferred the five licences it had purchased from Tresmonay back to Tresmonay for no consideration. On the same day, CTC Resources transferred the six licences it had purchased from Quancorp and Kamanga back to Quancorp and Kamanga also for no consideration.
In evidence, Mr Jozsef Endresz had relied on these licences as assets of CTC Resources to ensure that, in due course, CTC Resources would be able to repay the April Funds. He suggested that the licences were worth $6 million. Not even the aggregate of the high value in the valuations obtained by the sellers added to half that amount! In any event, at the date of the April Funds Transaction (T 1), CTC Resources did not own the licences. His evidence, given in the dismissive, aggressive and unhelpful fashion that he mostly used in evidence, was:
But they were in Tresmonay; they weren’t in CTC? --- I didn’t know that CTC ... (indistinct) ... to purchase those and transfer – Tresmonay was ready to transfer everything into CTC and become CTC.
But you hadn’t got a valuation showing these tenements were worth $6 million? --- Mr Slattery, whatever there is I really don’t care, at that time the valuation on that was past the $6 million worth. That’s all I know. And I’ve got no more problem – go back to the archives and look around ...
Whose valuation was that? --- I don’t know, Mr Slattery. At this point I can’t recall.
Despite this strenuously asserted evidence, Mr Jozsef Endresz could not recall the transfer back for no consideration and that the licences were thought at that stage not to be particularly valuable. He thought that Mr Forge was negotiating with other parties (which would make the no consideration re-transfer at least odd) and that there was interest in them and royalties payable to CTC Resources (making the no consideration transfer even odder).
When it became clear that the valuations of the licences were less than half the value he placed and they were transferred back on 8 December 1998 for no consideration, he had no answer. The evidence was:
Well, I suggest to you that firstly they were only worth half of the $6 million, secondly they were written off, probably they were worth a lot less than half, and thirdly they were transferred out of CTC’s possession. All of those factors are inconsistent with you having some plan for these licences to be used as a source of value to repay the Commonwealth? ... (Indistinct) ... Mr Slattery. I had every intention to repay the Commonwealth, no matter which may or how. It’s a debt to me and that is payable. Now, what happened with all these transfers of licences here, I’ve got no proper recollection of ... (indistinct) ... and exactly how that transpired.
The Primary Defendants suggested that the Commonwealth had misled the court by asserting that the leases were of no value. It is true that counsel submitted at one stage that they had been written down to zero value on 30 June 1998. That was strictly not correct, though, by 8 December 1998, they were shown by the actions of CTC Resources to have been considered to have had no value.
Mr Allan Endresz submitted, not quite accurately, that the valuations showed them to be worth $3 million; it was, in fact, $2.68 million at the high valuation and much less at the low valuation or even the most likely valuation. No explanation was given as to why the value was then written down in the accounts and why they were transferred for no consideration.
Mr Allan Endresz suggested that, as the licences had expired, though the evidence does not show when they actually expired, they could no longer be shown in the accounts at any value. I do not see the logic of that, if the expiry post-dated the relevant date for the purpose of the accounts, whenever they were signed, but that may be required by accounting standards.
The note to the accounts, however, is revealing. It is in the following terms:
Subsequent to 30 June 1998 the transfer of the 11 exploration licences from the Davis Samuel Partnership and Tresmonay Pty Ltd to the Company did not occur. The Company decided that it would withdraw the transfer applications and that the Davis Samuel Partnership and Tresmonay Pty Ltd would, in the alternative, surrender the 11 exploration licences to allow the Company the opportunity of making fresh applications over the same ground but with significantly lower exploration expenditure commitments. However, the NSW Department of Minerals and Energy refused the new licence applications and the 11 exploration licences subsequently lapsed due to the Company’s inability to meet the exploration expenditure commitments after injunctions were imposed by the ACT Supreme Court in the Commonwealth government proceedings.
It appears from this that CTC Resources never actually had full value of the licence and they were not actually transferred (despite the sale) and was not able to have them issued to them.
In the light of this evidence, I cannot see that the submission of the Commonwealth was improper; indeed, it seems to me that it was correct.
Discovery
Complaint was made about discovery, suggesting that the Commonwealth had not properly discovered the documents it was obliged to disclose.
Ultimately, it appears, the allegedly undiscovered documents became part of a volume of the Agreed Bundle of Documents. Most seem to be part of an allegation that the Department of Administrative Services suffered from difficulties that led to investigations. I cannot see that any were within the ordinary requirements of discovery in these proceedings at the time discovery was required or until the proceedings began when, of course, they were produced.
No complaint against the Commonwealth can be justified in this regard.
Mr Muir and Pellon
Complaint was made that the evidence of Mr Muir’s ownership or control over Pellon was asserted by the Commonwealth but was contrary to the evidence.
The true case of the Commonwealth was that Mr Muir was the beneficiary of much of the funds in the Pellon Unit Trust. I have dealt with this above (at [881]-[897]).
While Mr Allan Endresz may have been the ultimate beneficial owner of the shares that controlled the Pellon Unit Trust, the fact is that Mr Muir received funds from the Trust in circumstances which justify the Commonwealth’s allegations.
Neither Mr Allan Endresz nor Mr Jozsef Endresz exercised any realistic control over Mr McCann’s activities and, in any event, most directions came through Mr Muir.
There is no substance in the complaint made by the Counter-Claimants.
CONCLUSION AND ORDERS
Having carefully considered all of the evidence and made the findings I have, I can summarise my findings as follows:
1. There must be judgment for the Commonwealth in respect of its claims based on the equitable claims that the Primary Defendants were, as the case may be, knowing accessories of the breaches of fiduciary duties that Mr Muir and Callform owed to the Commonwealth in effecting the April Funds transaction (T 1) and the September Funds transaction (T 50), or knowing recipients of the April Funds or the September Funds, or both knowing accessories or recipients.
2. The April Funds transaction (T 1) and the September Funds transaction (T 50) were both made by the Commonwealth under an operative or fundamental mistake, and the April Funds and the September Funds may be recovered as money had and received.
3. The April Funds transaction (T 1) and the September Funds transaction (T 50) were both void as ultra vires, and the April Funds and the September Funds are recoverable from the persons who received them.
4. CTC Resources, Kamanga, Quancorp and Davis Samuel are liable under ss 52 and 84 of the Trade Practices Act to pay damages to the Commonwealth for the misleading and deceptive conduct in which Mr Muir and Callform engaged in by effecting the April Funds transaction (T 1) and the September Funds transaction (T 50).
5. The Commonwealth is entitled to trace to the relevant Primary Defendants the April Funds and the September Funds, as set out in the transactions referred to in these proceedings, and to recover the property.
6. In order to respond to these findings, orders for damages, equitable compensation, restitution and interest should be made.
7. TNG and the Commonwealth must have leave to make submissions as to the effect of the election made by the Commonwealth so far as the funds traceable to the April Funds and the Kanowna Lights shares are concerned.
8. Subject to that, TNG may be required to deliver up to the Commonwealth some or all of the Kanowna Lights shares.
9. There shall be judgment for TNG in its counter-claim against the Counter-Claim Defendants for a sum that depends on the election to be made by the Commonwealth.
10. The claims by the Commonwealth and by TNG to the traceable proceeds of the sale to TNG of Kanowna Lights shares are each accepted and shall be met reasonably between them.
11. There must be judgment for the Commonwealth in respect of the counter-claim made by the Counter-Claimants.
I shall make appropriate orders to give effect to these matters.
I certify that the preceding two thousand three hundred and ninety-four (2394) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice Refshauge.
Associate:
Date: 1 August 2013
Counsel for the plaintiff: Mr M Slattery QC and Mr J Hogan-Doran
Solicitor for the plaintiff: Australian Government Solicitor
Counsel for the 1st, 6th, 15th
21st Defendants: Mr P Cain
Solicitor for the 1st, 6th, 15th
and 21st Defendants Mr P Cain
Fourth Defendant In person
Fifth Defendant In person
Representative by leave for the 7th,
8th and 20th Defendants and the
Third Party Mr A Endresz
Ninth Defendant In person
Counsel for the 27th Defendant Mr N Hutley QC and Mr J Giles
Solicitors for the 27th Defendant Snedden Hall & Gallop
Date of hearing: 10-30 June, 1 July, 26-9 August,
1-30 September, 1-3 October 2008
Date of judgment: 1 August 2013
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