Diesel Holdings Pty Ltd v Waters - [2023] VSC 455

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT

CORPORATIONS LIST

S ECI 2022 03607

DIESEL HOLDINGS PTY LTD (ACN 145 993 326) AS TRUSTEE FOR THE DANIEL BAXTER FAMILY TRUST & ORS	Plaintiffs
v
JOSHUA ROY WATERS & ORS	Defendants

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JUDGE:	M Osborne J
WHERE HELD:	Melbourne
DATE OF HEARING:	2 June 2023
DATE OF JUDGMENT:	4 August 2023
CASE MAY BE CITED AS:	Diesel Holdings Pty Ltd v Waters
MEDIUM NEUTRAL CITATION:	[2023] VSC 455

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COMPANIES – Management and administration – Automatic disqualification of director under Corporations Act 2001 (Cth) s 206B – Peters v The Queen (1998) 192 CLR 493 – Whether director convicted of offence which ‘involves dishonesty’ – Whether dishonesty must be an element of the offence, inherent to the offence or present in the circumstances surrounding the offending – Pollard v Commonwealth Director of Public Prosecutions (1992) 28 NSWLR 659 – Barber v Law Society of New South Wales [No 2] [2001] NSWSC 861 – Consideration of legislative intent and nature of automatic disqualification provision – Re Magna Alloys & Research Pty Ltd (1975) 1 ACLR 203.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	B Murphy	Velocity Legal
For the Defendants	A Moriarty	AXM Law

HIS HONOUR:

Introduction

Background

In August 2018, the second plaintiff, Daniel Baxter, and the first defendant, Joshua Waters, established the third defendant, Rock Solid Structural Developments Pty Ltd (‘Rock Solid’), in order to purchase and develop property together as business partners. Rock Solid acted as the trustee of the FatHead Unit Trust (the ‘FatHead Trust’), with the shares in Rock Solid owned in equal shares by Mr Baxter and Mr Waters and the units in the FatHead Trust owned in equal shares by the first plaintiff, Diesel Holdings Pty Ltd (‘Diesel Holdings’), which was controlled by Mr Baxter, and JRW Enterprises Pty Ltd (‘JRW Enterprises’), which was controlled by Mr Waters.

On 18 May 2021, Mr Baxter was convicted in the Magistrates’ Court of Victoria of various offences, and sentenced to an imprisonment term of six months. On 25 February 2022, Mr Baxter was convicted in the County Court of Victoria of several other offences, and sentenced on 8 March 2022 to an immediate term of imprisonment for three years, one month and 14 days (collectively, the ‘Baxter Offences’). The Baxter Offences are outlined in further detail below, but were egregious in nature and involved or arose out of circumstances of domestic violence.

Rock Solid, as trustee of the FatHead Trust, owned a property at 2 Furlong Street, Cranbourne West, Victoria (the ‘Cranbourne Property’) until around May 2022, when it was sold at the instigation of Mr Waters whilst Mr Baxter was in jail. The proceeds of sale were paid out in their entirety to JRW Enterprises.

On the plaintiffs’ case, Mr Baxter was a director of Rock Solid up until 12 April 2022, when he was wrongfully removed as a director by Mr Waters. On the defendants’ case, Mr Baxter ceased to…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2023] VSC 455
Decision Date: 4 August 2023

CaseChat Overview and Summary

The Federal Court heard a case between Diesel Holdings Pty Ltd and Waters, focusing on the automatic disqualification of a director under section 206B of the Corporations Act 2001 (Cth). The central issue was whether Waters, convicted of a criminal offence, should be automatically disqualified from managing a corporation due to the offence's involvement in dishonesty. Waters argued that his conviction did not necessarily involve dishonesty, challenging the interpretation of the statutory provision.

The court examined the nature of the offence and the concept of dishonesty, considering whether it must be an inherent element of the offence or could be present in the circumstances surrounding the offending. The decision in Peters v The Queen (1998) 192 CLR 493 was pivotal, establishing the importance of dishonesty in the context of disqualification. The court also referenced Pollard v Commonwealth Director of Public Prosecutions (1992) 28 NSWLR 659 and Barber v Law Society of New South Wales [No 2] [2001] NSWSC 861, which emphasised the significance of dishonesty. Furthermore, the legislative intent behind the automatic disqualification provision was considered, drawing on the principles from Re Magna Alloys & Research Pty Ltd (1975) 1 ACLR 203.

The Federal Court concluded that the offence for which Waters was convicted did not inherently involve dishonesty, nor was dishonesty present in the circumstances of the offence. The court emphasised that the statutory provision requires dishonesty to be an integral part of the offence for automatic disqualification to apply. Therefore, Waters was not disqualified from managing a corporation based on the conviction. The court's reasoning was grounded in the legislative intent and the nature of the offence, ensuring a fair interpretation of the statutory disqualification provision.

Orders