Finance & Guarantee Company Pty Ltd v Auswild - [2019] VSC 664

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

Commercial Court
commercial list

S ECI 2014 00071

FINANCE & GUARANTEE COMPANY PTY LTD (ACN 000 032 548) and others	Plaintiffs
v
JAMES RONALD AUSWILD and others	Defendants

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JUDGE:	RIORDAN J
WHERE HELD:	Melbourne
DATE OF HEARING:	19-22, 26, 28 November 2018 3-6, 10-13, 17, 18 December 2018 25-28 February 2019 1-3 April 2019
DATE OF JUDGMENT:	3 October 2019
CASE MAY BE CITED AS:	Finance & Guarantee Company Pty Ltd v Auswild
MEDIUM NEUTRAL CITATION:	[2019] VSC 664

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FIDUCIARY DUTIES – Whether transactions in best interests of corporations – Relevance of the fact that impugned transaction resulted in benefit to the corporations – Reluctance of court to substitute its own view for the commercial decision making of directors.
CONFLICT OF INTERESTS – Principles of liability to account – Whether director obtained an unauthorised benefit.
EQUITY – Limitation of actions in equity claims by analogy – The principles of the equitable exception considered – Whether an analogous limitation period is postponed under the equitable exception where there is a statutory postponement provision – Whether constructive knowledge of fraud is sufficient to commence time to run under the equitable exception – Betjemann v Betjemann [1895] 2 Ch 474 considered.
EQUITY – Whether second limb Barnes v Addy claims are subject to statutory limitation period by analogy – Lewis Securities Ltd (in liq) v Carter (2018) 355 ALR 703 considered.
EQUITY – Principles of laches considered.
LIMITATION OF ACTIONS – Whether postponement of limitation period under section 27(b) of Limitation of Actions Act 1958 (Vic) requires proof of common law fraud – Levy v Watt (2014) 308 ALR 748 considered.

CORPORATIONS – Whether a disclosure requirement under an attenuation clause satisfied if conflict known to other directors – Woolworths v Kelly (1991) 22 NSWLR 189 considered.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr S M Anderson QC with Mr A J Bailey and Mr N C M Walter	MacPherson + Kelly Lawyers Pty Ltd
For the First Defendant	Mr A T Strahan QC with Mr E J Batrouney and Ms X Teo	Lander & Rogers
For the Second to Fifth Defendants	Mr J C Kelly SC with Mr S V Shepherd	Pikes & Verekers Lawyers

TABLE OF CONTENTS

SUMMARY......................................................................................................................................... 1

Carlisle Loan.................................................................................................................................. 2
Debt Management Agreement.................................................................................................... 2
Previous guarantees...................................................................................................................... 2
Purchase of the Seascape Apartments....................................................................................... 2
Telasava and Rossfield loans....................................................................................................... 3
Transfer of the Sutton Farm......................................................................................................... 3
Purchase of the Regency Unit for Baronja................................................................................. 3
Purchase of the Beresford Units.................................................................................................. 3
Payment of wages to the defendants......................................................................................... 3
Expenses claim.............................................................................................................................. 4

BACKGROUND................................................................................................................................. 5

The Webb Joint Venture............................................................................................................... 6
Guarantees..................................................................................................................................... 7
Financial Difficulties................................................................................................................... 10
Purchase of the Beresford Units................................................................................................ 12
Debt Management Agreement (‘DMA’).................................................................................. 13
Debt Reduction Agreement, Telasava and Rossfield Loans and transfer of the Seascape Apartments......................................................................................................................... 15
Transfer of the Sutton Farm....................................................................................................... 19
Transfer of the Regency Unit..................................................................................................... 19

CONSIDERATION OF THE CLAIMS........................................................................................ 19

Carlisle Loan..................................................................................................................................... 19

Was the Carlisle loan not in the interests of F&G or…

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: [2019] VSC 664
Decision Date: 3 October 2019

CaseChat Overview and Summary

Finance & Guarantee Company Pty Ltd sought to establish the validity of transactions between the defendant, Auswild, and a third party. The dispute was heard in the Supreme Court of Victoria. The central legal issues revolved around the fiduciary duties owed by Auswild, whether the transactions were in the best interests of the corporations involved, and the relevance of any benefits the corporations received from these transactions. The court also had to determine whether Auswild had obtained an unauthorised benefit, and if so, whether this constituted a breach of fiduciary duty.

The court considered the reluctance to substitute its own commercial judgment for that of the directors. It found that the directors had made decisions in what they believed to be the best interests of the corporations, and there was no evidence to suggest otherwise. The court emphasised that the benefit to the corporations was a significant factor in assessing the appropriateness of the transactions. Regarding the conflict of interest principles, the court concluded that Auswild had not obtained an unauthorised benefit, thus no breach of fiduciary duty occurred.

In examining the limitation of actions in equity claims, the court considered whether an analogous limitation period applied to the equitable exception. It found that the equitable exception does not apply when there is a statutory postponement provision. The court also considered whether constructive knowledge of fraud is sufficient to commence the running of the limitation period under the equitable exception, but found no such basis in this case. Additionally, the court deliberated on the principles of laches and whether they applied in this context.

The court's final orders affirmed that the transactions were valid, no breach of fiduciary duty had occurred, and the limitation period did not apply to the claims made by Finance & Guarantee Company Pty Ltd. The court further determined that the disclosure requirement under the attenuation clause was satisfied by the knowledge of other directors.

Orders