Finance & Guarantee Company Pty Ltd v Auswild

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 Fintee?................................................ 19
Plaintiffs’ submissions...................................................................................................... 19
Defendants’ submissions.................................................................................................. 20
Plaintiffs’ Reply Submissions.......................................................................................... 21

Consideration.............................................................................................................................. 21
Was F&G or Fintee liable under the 1981 Deed?.......................................................... 22
Was F&G or Fintee liable under the 1985 Deed?.......................................................... 24
Was F&G liable under the 1989 cross-guarantee?........................................................ 25
Was the loan made to Carlisle?....................................................................................... 25
Was the Carlisle Loan repaid?......................................................................................... 27
Conclusion on whether the Carlisle Loan was in the interests of F&G and Fintee. 29

Previous Guarantees................................................................................................................... 33
Did JRA obtain any and, if so, what unauthorised benefit as a result of any, and, if so, what breach of the Duties by JRA in relation to the Carlisle Loan?................................................. 34
Plaintiffs’ submissions...................................................................................................... 34
First defendant’s submissions......................................................................................... 35
Principles of the liability to account................................................................................ 35
Conclusion.......................................................................................................................... 37

Attenuation Clauses.................................................................................................................... 39
First defendant’s submissions......................................................................................... 39
Plaintiffs’ submissions...................................................................................................... 39
Conclusion.......................................................................................................................... 39

Ratification................................................................................................................................... 44

Debt Management Agreement...................................................................................................... 45

Was entering into the DMA not in the interests of F&G?..................................................... 45
Plaintiffs’ submissions...................................................................................................... 45
First defendant’s submissions......................................................................................... 46
Second to fifth defendants’ submissions........................................................................ 46
Conclusion.......................................................................................................................... 47

Did JRA and/or RWA obtain any and, if so, what unauthorised benefit as a result of any and, if so what, breach of the Duties by JRA in relation to entry into the DMA and the Previous Agreements?....................................................................................................................... 49
Plaintiffs’ submissions...................................................................................................... 49
First defendant’s submissions......................................................................................... 50
Second to fifth defendants’ submissions........................................................................ 50
Conclusion.......................................................................................................................... 51

Transfer of the Seascape Apartments.......................................................................................... 51

Was the transfer of the Seascape Apartments in the interests of F&G?.............................. 51
Plaintiffs’ submissions...................................................................................................... 51
First defendant’s submissions......................................................................................... 52
Second to fifth defendants’ submissions........................................................................ 52
Conclusion.......................................................................................................................... 53

Did JRA obtain any and, if so, what unauthorised benefit as a result of any and, if so, what breach of the Duties by JRA in relation to the transfer of the Seascape apartments?.......... 54

Telasava and Rossfield loans......................................................................................................... 54

Were the Telasava and Rossfield loans not in the interests of Preston Motors?............... 54
Plaintiffs’ submissions...................................................................................................... 54
First defendant’s submissions......................................................................................... 55
Second to fifth defendants’ submissions........................................................................ 56
Conclusion.......................................................................................................................... 56

Were the Telasava and Rossfield Loans repaid?.................................................................... 57
Conclusion.......................................................................................................................... 59

Did JRA obtain any, and, if so, what unauthorised benefit as a result of any and, if so, what breach of duty by JRA in relation to the making of the Telasava or Rossfield Loans?........ 60

The Plan Transactions..................................................................................................................... 61

Was JRA’s conduct in approving the Plan Transactions fraudulent?................................. 61
Plaintiffs’ submissions...................................................................................................... 61
First defendant’s submissions......................................................................................... 62
Conclusion.......................................................................................................................... 63

Knowing assistance with respect to the Plan Transactions.................................................. 65
Did RWA’s conduct in relation to each of these transactions involve transgressions of the ordinary standards of honest behaviour?.......................................................... 66
Did JRA have the requisite knowledge of the dishonest and fraudulent design?... 66

Transfer of Sutton Farm.................................................................................................................. 66

Was the transfer of Sutton Farm not in the interests of Auswild Securities?..................... 66
Plaintiffs’ submissions...................................................................................................... 66
First defendant’s submissions......................................................................................... 67
Second to fifth defendants’ submissions........................................................................ 67
Auswild Accounting Practice.......................................................................................... 68
Was Auswild Securities paid for the Sutton Farm?...................................................... 70
Conclusion.......................................................................................................................... 71

Was Joan Auswild liable as a volunteer to account for the value of Sutton Farm?.......... 72
Did JRA’s conduct in connection with Sutton Farm involve ‘transgressions of the ordinary standards of honest behaviour’?..................................................................................... 72
Plaintiffs’ submissions...................................................................................................... 72
First defendant’s submissions......................................................................................... 72
Conclusion.......................................................................................................................... 73

Are each of Barbara Auswild, James Auswild and Raymond Auswild liable to account for their interest in Sutton Farm as beneficiaries of the estate of Joan Auswild notwithstanding s 42 of the Real Property Act 1900 (NSW) or at all?................................................................ 73
Second to fifth defendants’ submissions........................................................................ 73
Plaintiffs’ submissions...................................................................................................... 74
Conclusion.......................................................................................................................... 74

Was JRA’s conduct in relation to the transfer of Sutton Farm in breach of the ‘no conflicts’ and ‘no profits’ fiduciary duties?.................................................................................................. 75
Plaintiffs’ submissions...................................................................................................... 75
Second to fifth defendants’ submissions........................................................................ 75
First defendant’s submissions......................................................................................... 76
Conclusion.......................................................................................................................... 77

Were the alleged breaches of the duties authorised by the attenuation clauses in the Articles of Association of Auswild Securities?................................................................................. 79
Plaintiffs’ submissions...................................................................................................... 79
First defendant’s submissions......................................................................................... 79
Conclusion.......................................................................................................................... 79

Purchase of Regency Unit by Baronja.......................................................................................... 82

Background.................................................................................................................................. 82
Was the loan of the Regency Amount not in the best interests of Preston Motors and/or F&G?.............................................................................................................................................. 83
Plaintiffs’ submissions...................................................................................................... 83
First defendant’s submissions......................................................................................... 84
Second to fifth defendants’ submissions........................................................................ 84
Did Baronja repay the Regency Amount?..................................................................... 85
Conclusion.......................................................................................................................... 86

If Baronja did not repay the Regency Amount:...................................................................... 86
(a).... is JRA liable to account or pay equitable compensation?............................................ 86
(b).... is Baronja liable to account for the Baronja Regency Units?....................................... 86

Purchase of Unit 5 of the Beresford property............................................................................. 87

Was the purchase of Unit 5 of the Beresford property in the best interests of F&G?....... 87
Background........................................................................................................................ 87
Plaintiffs’ submissions...................................................................................................... 88
Conclusion.......................................................................................................................... 88

Purchase of Unit 7 of the Beresford property............................................................................. 90

Was the purchase of Unit 7 of the Beresford property in the best interests of F&G?....... 90
Background........................................................................................................................ 90
Plaintiffs’ submissions...................................................................................................... 91
Conclusion.......................................................................................................................... 91

The Employment Payments........................................................................................................... 93

Were the payments of wages to Raymond Auswild, Barbara Auswild and Keith Kearns not in the interests of F&G, Preston Motors, Commonwealth Motors and/or Holdings (together, ‘the Payment Companies’)?..................................................................................................... 93
Plaintiffs’ submissions...................................................................................................... 93
First defendant’s submissions......................................................................................... 95
Second to fifth defendants’ submissions........................................................................ 96
Conclusion.......................................................................................................................... 96

Limitations of actions by analogy................................................................................................. 99

First defendant’s submissions......................................................................................... 99
Second to fifth defendants’ submissions...................................................................... 100
Plaintiffs’ submissions.................................................................................................... 102

The Equitable Exception.......................................................................................................... 103
Section 27 of the Limitation of Actions Act 1958 (‘LAA’)....................................................... 104
The Australian authorities.............................................................................................. 110
Conclusion........................................................................................................................ 111

Chronology of Post Transactions Conduct........................................................................... 115
Consideration............................................................................................................................ 152
From 2001, representatives of Sir James’ family were increasingly involved in the Preston Motors Group....................................................................................................... 153
There is no evidence of obstruction with respect to inquiries relating to the matters the subject of this proceeding, particularly not by the defendants..................... 155
Despite strong suspicions about the propriety of RWA and JRA in their historical conduct of the Preston Motors Group with respect to the matters the subject of this proceeding, no request for an explanation was ever made to RWA or JRA or any other defendant................................................................................................................................ 168
There was a deliberate decision to delay the communication of concerns and the filing of proceedings with respect to the matters the subject of this proceeding until the resolution of Project Statesman......................................................................... 170

Conclusion on Limitations Defence....................................................................................... 171
Attribution of knowledge to the company.................................................................. 173
Submissions of the defendants...................................................................................... 173
Submissions of the plaintiffs.......................................................................................... 174
Conclusion........................................................................................................................ 174

Laches............................................................................................................................................... 177

First defendant’s submissions....................................................................................... 177
Second to fifth defendants’ submissions...................................................................... 178
Plaintiffs’ submissions.................................................................................................... 178

Principles of laches.................................................................................................................... 180
General consideration of the laches defences....................................................................... 183
Laches on the individual claims............................................................................................. 186
Evaluation of the defence of laches with respect to the Carlisle Loan.................... 186
Evaluation of the defence of laches with respect to the Debt Management Agreement and the Previous Agreements................................................................................... 190
Evaluation of defence of laches with respect to the Seascape Apartments............ 190
Evaluation of the defence of laches with respect to the Telasava and Rossfield loans 191
Evaluation of the defence of laches with respect to the Sutton Farm...................... 192
Evaluation of the defence of laches with respect to the purchase of the Regency units by Baronja................................................................................................................... 192
Evaluation of the defence of laches with respect to the transfer of the Beresford units 193
Evaluation of the defence of laches with respect to the wages claims.................... 194
Conclusion........................................................................................................................ 194

Orders............................................................................................................................................... 195

HIS HONOUR:

By Originating Process filed 29 August 2014, the plaintiffs claim equitable compensation, damages, an account of profits, declarations and other relief from the defendants arising out of the management of certain corporations between 1985 and 2003.

The dispute is in substance between two branches of the Auswild family. The branches emanate from two brothers, being Sir James Auswild and Ronald Auswild.

The relevant descendants of each branch of the Auswild family that are referred to in these reasons are:

(a)       Sir James Frederick John Auswild, CBE (‘Sir James’)(dec’d)    Husband
Ada Kathleen Margaret Auswild (‘Lady Auswild’)(dec’d)     Wife
(i)Margaret Parker (dec’d)  Daughter
(ii)Geraldine Bergmuller (dec’d)  Daughter

James Bergmuller Grandson

(b)Ronald Auswild (‘RWA’) (dec’d)   Husband
Joan Patricia Auswild (dec’d)  Wife
(i)James Ronald Auswild Senior (‘JRA’)  Son
(ii)Barbara Joan Auswild  Daughter
(iii)Ronald Raymond Auswild (‘Raymond Auswild’)        Son

SUMMARY

In summary, the central allegations of the plaintiffs are that JRA and RWA, as directors, caused entities in the Preston Motors Group to enter into the following transactions that were not in the interests of the respective relevant entities or otherwise in breach of their fiduciary and equitable duties:

Carlisle Loan

(a) In the financial year ending 30 June 1990, JRA and RWA caused:

(i) Fintee and/or F&G to borrow the sum of at least $7,800,000 from GMAC; and

(ii) F&G to on-lend the sum of $8,328,447.72 to Carlisle, which was not repaid.

Debt Management Agreement

(b) JRA and RWA caused F&G to enter into the Debt Management Agreement dated 14 April 1992 under which F&G became a guarantor for the Webb/Auswild Group.

Previous guarantees
(c)Alternatively to part (a) and/or part (b) above, if the Carlisle Loan and/or the DMA were in the best interests of F&G because it was already a guarantor of the liabilities of the Webb/Auswild Group to GMAC pursuant to:
(i) the 1985 Deed;
(ii) the cross-guarantees dated 25 October 1989; and/or

(iii) the Deed of Acknowledgement;

(together ‘the Prior Guarantees’)

JRA breached his fiduciary duties to F&G by causing it to enter into each of those deeds.

Purchase of the Seascape Apartments
(d)Between August and October 1994, JRA and RWA caused Preston Motors to purchase 22 Seascape Apartments at 53 Bay Street, Tweed Heads, New South Wales and 18 car parking spaces for a total consideration of $8,062,000 from the Webb/Auswild vendors.

Telasava and Rossfield loans
(e)JRA caused Preston Motors to loan:
(i)       $2.9 million to Telasava on or about 17 August 1993;
(ii)      $3,748,048 to Telasava between 8 June 1994 and 30 June 1994; and
(iii)     $5.1 million to Rossfield on or about 8 June 1994;
which were not repaid.

Transfer of the Sutton Farm
(f)On or about 26 October 1994, JRA and RWA caused Auswild Securities to transfer the Sutton Farm to Joan Auswild, being RWA’s wife and JRA’s mother for no consideration.

Purchase of the Regency Unit for Baronja
(g)In July 1998, JRA caused Preston Motors and/or F&G to pay $944,363.98 towards the purchase of the Regency Unit for Baronja Pty Ltd.

Purchase of the Beresford Units
(h)In about the period from February 1991 to June 1991, JRA caused F&G to pay:
(i)$222,289 for 6,000 E Group ordinary shares in Esplanade Properties which entitled Raymond Auswild to have exclusive possession of Unit 5 of the Beresford Road Property; and
(ii)$259,670.60 for 8,000 G Group ordinary shares in Esplanade Properties which entitled JRA to have exclusive possession of Unit 7 of the Beresford Road property.

Payment of wages to the defendants
(i)JRA and RWA caused F&G, Preston Motors, Commonwealth Motors and Preston Motors (Holdings) to pay wages to:
(i)Barbara Auswild for the period 1987 to July 2000;
(ii)Keith Kearns for the period 1988 to 2006; and
(iii)Raymond Auswild for the period 1985 to 2002.

Expenses claim
(j)During the period from March 1998 to the end of 2003, JRA caused Preston Motors and the fourth plaintiff, Parts Sales, to incur expenses for the benefit of him or his family.
This claim was not pressed in final submissions.

I have found that each of these claims should be dismissed because:

(a) to the extent that the claims were subject to limitation periods, applied in equity by analogy to statutory limitation periods, they were filed outside such periods; and the periods were not postponed by either s 27 of the Limitation of Actions Act 1958 (‘the LAA’) or the equitable exception; or alternatively

(b) the plaintiffs are prevented from bringing each of the claims by application of the doctrine of laches.

Further, I have found as follows:

(a) JRA breached his duty not to allow his interests to conflict with his duties as a director of Auswild Securities, F&G and Preston Motors by the transfer of Sutton Farm, the purchase of the Regency Unit by Baronja and the purchase of the Beresford Units respectively. However, I also found that the plaintiffs failed to prove that:

(i) Auswild Securities, F&G or Preston Motors suffered any loss; or

(ii) JRA obtained any unauthorised benefit;

from the relevant transactions as a result of the conflict.

(b) Except for (a), the plaintiffs failed to prove with respect to each of the transactions that the defendants breached their fiduciary and equitable duties, or knowingly assisted in such breaches.

BACKGROUND

Sir James commenced his practice as an accountant in 1928 in Temora, New South Wales. His younger brother, RWA, entered into partnership with Sir James in 1945.

After the Second World War, Sir James and RWA established very successful businesses principally in the motor industry, under the name of Preston Motors; and substantial investments in properties.

From 1945, businesses and assets of the Auswild family operated through a complicated network of corporations – a plan of which is Schedule A to these reasons (’the Preston Motors Group’).

Critically, the first plaintiff, Finance & Guarantee Company Pty Ltd (‘F&G’) was the corporation which substantially controlled the Preston Motors Group and the shareholding in that company was held:

(a)52.186% by Sir James’ branch of the family; and
(b)47.814% by RWA’s branch of the family.

On 29 May 1985, Sir James died. In summary, he left his estate including his controlling interest in the Preston Motors Group to his wife and two daughters.

As the executor of Sir James’ estate, RWA held Sir James’ shares on trust until they were transferred to Sir James’ daughters, Geraldine Bergmuller and Margaret Parker between 4 December 2003 and 6 November 2006.

The claims made in this proceeding substantially relate to the period in which RWA held Sir James’ shares between 1985 and 2006. During this time, RWA and his son JRA were directors of the companies in the Preston Motors Group.

The Webb Joint Venture

The Auswild family moved to Sydney in the early 1960s, and invested in hotels and motor vehicle dealerships. A number of the investments in Sydney were joint ventures between the Auswild family and Bernard Webb and his family (‘the Webb family’). The joint venture activities were conducted through a number of corporate entities including:

(a)Carlisle Investments Pty Ltd (‘Carlisle’);
(b)Beron Investments Pty Ltd (‘Beron’);
(c)Calabar Pty Ltd (‘Calabar’);
(d)Rossfield House Pty Ltd (‘Rossfield’); and
(e)Telasava Pty Ltd (‘Telasava’)

(together ‘the Webb/Auswild Group’).

As noted in Preston Motors 100: A Celebration of Life and Achievement:

As for the Auswilds’ automotive interests in Sydney, specifically Rossfield House, Boyded Holden (later Heartland Holden) and Boyded Parts, these were jointly owned by the Auswild and Webb families. The Auswilds had a 50 per cent share in these operations, with Ron Auswild and Sir James's family each accounting for 25 per cent. The portfolio also extended to country hotels and commercial properties.[1]

[1]Marcella Hunter, Preston Motors 100: A Celebration of Life and Achievement (Preston Motors Pty Ltd, 2012) 131. This book was published by Preston Motors Pty Ltd in 2012 to ‘commemorat[e] Preston Motors’ centenary’.

In the late 1970s, the Auswilds gained full control of Preston Motors.[2]
[2]Ibid 60.

By 1979, the business interests of the Auswild family had extended beyond ‘the highly regarded and remarkably successful professional firm of James FJ Auswild & Co, chartered accountants’ (‘Auswild & Co’) to extensive business interests including:

Real Estate, Shares in Finance & Guarantee Co. Pty. Limited (100%), Preston Motors (Holdings) Pty. Limited (98%), wholly owned Businesses, Statesman and Ambassador Hotels in Canberra, six Holden Dealerships, and Equities in Partnerships and Associated Companies.[3]

[3]‘Brief Facts about Background Information on the Auswild Organisation’ dated 31 August 1979.

In 1983, a joint property venture between the Auswilds and the Webbs completed a 24 storey condominium at Tweed Heads known as Seascape. The Preston Motors Group purchased several floors in the building for the use of family members and senior company executives.[4]
[4]Ibid 138.

On 15 February 1983, RWA’s son, JRA, became a director of F&G and the eighth plaintiff, Fintee Investments (Canberra) Pty Ltd (‘Fintee’). By October 1983, JRA had become a director of the second plaintiff (‘Preston Motors’), the fourth plaintiff (‘Parts Sales’), the fifth plaintiff (‘Commonwealth Motors’) and the sixth plaintiff (‘Preston Motors (Holdings)’).

In March 1984, Sir James had an incapacitating stroke and died on 29 May 1985.

Under Sir James’ will dated 18 February 1983, RWA was appointed as sole executor and trustee of his estate. The will directed that RWA would hold his estate upon trust to divide the same into three equal portions and:

(a)to hold one of such parts upon trust for his wife Lady Auswild for life and then to his daughters; and
(b)to hold the other two parts upon trust for his daughters Margaret Parker and Geraldine Bergmuller equally.

Guarantees

Between 1978 and 1990, a number of guarantees were entered into by Auswild companies, Webb companies and the joint venture companies as follows:

(a)By deed dated 28 August 1978, the indebtedness of Calabar to Industrial Acceptance Corporation Ltd was guaranteed by:
(i)Sir James and RWA;
(ii)Bernard Webb and John Down; and
(iii)numerous corporate entities including Carlisle (which was known as Fair Deal Car Sales (Merchandising) Pty Ltd until 27 September 1981).

(b)F&G and R W Auswild (Holdings) Pty Ltd (‘RW Auswild Holdings’) may have been parties to ‘Principal Deeds’ dated 30 December 1981 (‘1981 Deed’) and 27 September 1985 (‘1985 Deed’), and related security and ancillary documentation. These documents cannot be located, and we only know of their existence because they are referred to in the following documents:
(i)The letter dated 1 June 1981 from General Motors Acceptance Corporation Australia (‘GMACA’) to Mr Webb of Rossfield, which:
A.refers to the required guarantees for the proposed facility from GMACA;

B. notes Fintee as being a borrower under the Inventory Loan; and
C.states that ‘each parent company … will enter a Global Guarantee relative to that group’s liability’.

(ii)The letter dated 2 January 1992 from Blake Dawson Waldron (the solicitors for General Motors Acceptance Corporation (‘GMAC’) being the USA parent company of GMACA) to Abbott Tout Russell Kennedy (the solicitors for ‘Rossfield House Group’), which refers to F&G and RW Auswild Holdings as parties to ‘the Principal Deeds dated 30 December 1981 and 27 September 1985 and related security and ancillary documentation’. Blake Dawson Waldron required ratification and confirmation by the relevant shareholders of each of F&G and RW Auswild Holdings of its execution of the 1981 and 1985 Deeds and related security and ancillary documentation.
(iii)The letter dated 9 October 1990 from Blake Dawson Waldron to GMACA, where the 1981 Deed is referred to as the ‘First Principal Deed’ and the 1985 Deed is referred to as the ‘Second Principal Deed’.
(iv)The Guarantee and Indemnity dated 30 April 1990 between RWA and GMACA, and the Notice of Extraordinary General Meeting dated 30 January 1992, where:
A. the 1981 Deed is referred to as the Old Deed; and
B. the 1985 Deed is referred to as the New Deed;
both between GMACA, Carlisle and ‘the other parties named therein’.
(v)The Cross-Guarantees of 25 October 1989 and the Deed of Acknowledgement of Indebtedness dated 10 December 1990 (‘Deed of Acknowledgement’), which are referred to below.

(c)By Cross Guarantee undated (but made on 25 October 1989 according to the letter dated 9 October 1990 from Blake Dawson Waldron to GMACA), numerous companies (but not F&G or RW Auswild Holdings) guaranteed the indebtedness of Calabar, Carlisle and Alkanna Pty Ltd (‘Alkanna’) among others with respect to (what was described as) Rossfield Property Advances, Bernley Property Advances and Carlisle Property Advances to GMACA in consideration of the continuance of certain advances under the 1981 Deed.
(d)By Cross Guarantee dated 25 October 1989, numerous companies (including F&G and RW Auswild Holdings) guaranteed the indebtedness of Calabar, Carlisle, Alkanna and Beron with respect to (what was described as) Rossfield Property Advances, Bernley Property Advances, Carlisle Property Advances and Beron Property Advances to GMACA in consideration of the continuance of certain advances under the 1985 Deed.
(e)On 26 October 1989, the directors of F&G approved the Cross Guarantee between F&G as a ‘Property Guarantor’ and other guarantors, and GMACA as the ‘Beneficiary’, as ‘further security for the continuance of certain advances and accommodation already provided and for the provision of further advances and accommodation under an Agreement dated 27 September, 1985 to various borrowers’.
(f)The Deed of Acknowledgement dated 10 December 1990 (‘the Deed of Acknowledgment’) records, in cl 2.3.1, that the parties included F&G as one of the ‘Property Guarantors’, which:
[A]cknowledges and agrees that it is liable to GMACA as guarantor on the terms in the Loan Documentation [defined as the 1981 Deed, the 1985 Deed and the 25 October 1989 Cross-Guarantees] in respect of the Development Loans and that, accordingly, as at the Effective Date it has a contingent liability to GMACA as guarantor in respect of the Development Loans of $201,623,575.83.

(g)By a Guarantee and Indemnity dated 30 April 1990, RWA guaranteed to GMACA what was described as ‘moneys which constitute New Property Advances and Existing Property Advances Interest from time to time’.

Financial Difficulties

By the late 1980s economic conditions resulted in financial issues for the Preston Motors Group and the Auswild/Webb Group. By letter dated 29 August 1989 to GMAC, Mr Webb confirmed that GMAC were uncomfortable with the ‘largeness of the advance required on Investment Properties’ but a ‘temporary limit of $200m has been approved’.

As a result of these concerns, it was proposed to assign a substantial amount of the debt owed offshore to GMAC. By letter dated 9 October 1990 to GMACA, Blake Dawson Waldron confirmed their instructions from GMAC to draw up documentation necessary to assign the amounts outstanding as Carlisle Property Advances and Beron Property Advances from GMACA to GMAC. It sought confirmation that the securities for these advances were as follows:

(i)A deed dated 30 December 1981 between Calabar, Alkanna, Fintee and Carlisle, as borrowers, and GMACA;
(ii)A deed dated 27 September 1985 between the parties set out in (i) above and Beron as borrowers, and GMACA;
(iii)A cross-guarantee dated 25 October 1989 executed in respect of the 1981 Deed;
(iv)A cross-guarantee dated 25 October 1989 executed in respect of the 1985 Deed;
(v)Deeds of amendment dated 22 December 1989 in respect of the cross-guarantees in (iii) and (iv) above;
(vi)Two guarantees by Beeu Pty Ltd to GMACA with respect to both Principal Deeds;
(vii)A guarantee by Dulcie Webb to GMACA of the borrowers under both Principal Deeds;
(viii)A guarantee by RWA to GMACA of Carlisle under both Principal Deeds;
(ix)A further guarantee by RWA to GMAC for amounts under either Principal Deed in excess of $150,000,000 that do not relate Automotive Advances; and
(x)Numerous registered mortgages.

By extraordinary general meetings on 6 December 1990, the holders of all of the issued shares in Fintee, Preston Motors, Preston Motors (Essendon) Pty Ltd, and Preston Motors (Wholesale) Pty Ltd, resolved to ratify the loan documentation (‘the Loan Documentation‘) listed in Annexure B to the respective extracts of minutes which consisted of the following documents:

(a)The Deed of 30 December 1981 (defined as ‘Old Deed’) between Calabar, Alkanna, Carlisle, Fintee, the Rossfield Guarantors, the Bernley Guarantors, the Carlisle Guarantors, the Fintee Guarantors, the Schedule M Mortgagors and GMACA.
(b)Cross-guarantee of 25 October 1989 in reference to the Old Deed between the property guarantors listed therein, the schedule M Mortgagors listed therein and GMAC.
(c)The Deed of Amendment of 22 December 1989 amending the above cross-guarantee.
(d)The Deed of 27 September 1985 (defined as ‘New Deed’) between Calabar, Alkanna, Carlisle, Fintee, the Rossfield Guarantors, the Bernley Guarantors, the Carlisle Guarantors, the Fintee Guarantors, the schedule M Mortgagors, Beron Investments and the Beron Guarantors and GMACA.
(e)Cross-guarantee of 25 October 1989 (or 22 December 1989) with respect to the New Deed.
(f)The Deed of Amendment of 22 December 1989 amending the above cross-guarantee.

By Deed of Acknowledgment dated 10 December 1990:

(a)Carlisle acknowledged a debt to GMACA of $188,046,391.72;
(b)Beron acknowledged a debt to GMACA of $13,577,184.78;
(c)Each of Calabar, Alkanna, Fintee, RWA and each of the Property Guarantors (which included F&G, Preston Motors and RW Auswild Holdings) acknowledged it was liable to GMACA as guarantors of $201,623,575.83 under the Loan Documentation.

By Deed of Assignment of Debts dated 10 December 1990, GMACA assigned to GMAC (with the consent of the guarantors including the Property Guarantors referred to in the Deed of Acknowledgement) the debts of Carlisle and Beron in consideration of the payment of $201,623,575.83.

Purchase of the Beresford Units

On 28 February 1991, 6,000 E class shares in Rose Bay Esplanade Properties Pty Ltd (‘Esplanade Properties’) were transferred to Raymond Auswild, which entitled him to exclusive possession of unit 5, 1A Beresford Road, Rose Bay (‘Unit 5’), in consideration of a payment of $222,289.

On 18 February 1992, 8,000 G group shares in Esplanade Properties were transferred to JRA, which entitled him to exclusive possession of unit 7, 1A Beresford Road, Rose Bay (‘Unit 7’), in consideration of a payment of $259,670.

Debt Management Agreement (‘DMA’)

By letter dated 2 January 1992 to Abbott Tout Russell Kennedy, Blake Dawson Waldron set out preconditions to the entry into the DMA which included the inclusion of attenuation clauses in the articles of association of corporations including F&G, RW Auswild Holdings and Parts Sales.

On 11 April 1992, at extraordinary general meetings of F&G, RW Auswild Holdings and Parts Sales, the holders of all issued shares in each company voted to amend the respective articles of association by the substitution of a new attenuation clause. The extraordinary general meeting of F&G also ratified the company’s execution of the Loan Documentation.

On 14 April 1992, the DMA was executed by Calabar, Alkanna, Carlisle, Beron, the Cross Guarantors listed in schedule 1 (including F&G), the Rossfield owners listed in schedule 3, the Preston Business Companies as defined and the Limited Guarantors listed in schedule 2 (together ‘the Obligors’), together with GMACA and GMAC. The DMA contained recitals and acknowledgements, in summary, as follows:

(a)Calabar, Alkanna, Carlisle and Beron (‘the Borrowers’) had borrowed money under the Loan Documentation for the purpose of on lending to the Cross Guarantors and various other parties.
(b)GMACA had assigned certain non-performing loans to GMAC.
(c)The Borrowers had defaulted under the terms of the Loan Documentation.
(d)Under the Loan Documentation:
(i)the Calabar Indebtedness to GMACA was $36,660,800;
(ii)the Alkanna Indebtedness to GMACA was $3,088,000; and
(iii)the Beron Indebtedness was $7,357,200.60.

(together ‘the On-Shore Indebtedness’)

(e)Under the Loan Documentation:
(iv)the Carlisle Development Loan indebtedness was $188,046,391.05; and
(v)the Beron Development Loan indebtedness was $13,577,184.78.

(together ‘the Off-Shore Indebtedness’).

The terms of the DMA provided in summary that:

(a)in consideration of:
(i)the payment of the proceeds of sale of all of the Rossfield Assets to GMACA and all proceeds of sale of the Development Properties (as defined) to GMAC (cl 4.1);
(ii)the payment of the profits from Rossfield businesses to GMACA (cl 6.1);
(iii)RWA paying his entitlement to the profits of Preston Business Companies being 27.9% of the aggregate operating profits (cl 8.1); and
(iv)RWA and Mr Webb limiting any fees, salary or distributions payable (cl 7);

(b)GMAC and GMACA will release the On-Shore Indebtedness and the Off-Shore Indebtedness (cl 16).

By Deed dated 14 April 1992, specified persons associated with the Webb Group, and specified persons associated with the Auswild Group and F&G agreed in substance that, arising out of the financing through GMACA and GMAC of the joint business enterprises and property development between the Auswild Group and the Webb Group, the Auswild Group and the Webb Group were morally but not legally obliged to repay $10,000,000 to F&G (‘the Moral Obligation Deed’).

Debt Reduction Agreement, Telasava and Rossfield Loans and transfer of the Seascape Apartments

By memo faxed on 22 May 1993, Mr Webb proposed a plan (‘the Plan’), to restructure the DMA. He refers to a proposed loan of $8 million from Hatmax Mortgage Management Ltd (‘Hatmax’) as being a component of the offer of $38 million to GMAC and the Commonwealth Bank of Australia (‘CBA’).

By letter dated 21 December 1993 to GMACA, Mr Webb explained his understanding of the Plan, in summary as follows:

(a)Rossfield pay GMACA $32,000,000.
(b)Rossfield procures the release of GMACA from its guarantee to CBA, which secured CBA’s advances to Rossfield.
(c)Mr Webb and RWA undertake to pay GMACA $7,000,000 by instalments.
(d)All Obligors, except Mr Webb and RWA, would be released from the DMA.
(e)All property securities would be released except for specified exceptions.

In the financial year 1993-94 Preston Motors:

(a)borrowed $5.1 million and $2.9 million from Hatmax and PT Ltd secured by Deed of Mortgage dated 16 August 1993 on units in the Seascape apartments; and
(b)made the following loans:
(i)       $2,900,000 to Telasava on or about 17 August 1993;
(ii)      $3,748,048 to Telasava between 8 June 1994 and 30 June 1994; and
(iii)     $5,100,000 to Rossfield on or about 8 June 1994.

On or about 23 December 1993, Mr Webb presented to RWA and Ms Nola Hancock a memorandum entitled ‘GMACA – Purchase of Businesses’, which noted in summary:

(a)Repayment of the moral debt as contemplated by the terms of the Moral Obligation Deed is unlikely to occur or ‘may take years to complete’, under the buy-out of GMACA ‘as it is now unfolding’.
(b)To ‘finalise the matter in one hit. It is proposed that the beneficial ownership in twenty-two condominiums at Seascape held by Rossfield and Webb companies be passed to F&G on the basis the units will be available to RWA/BGW for mortgage purposes (to allow borrowings of $5,000,000 thereon.) … The transfer of the units will allow F&G to recoup an amount approximately equal to the written off loans and thus restore its shareholder funds’.

On or about 23 December 1993, Mr Webb further presented to RWA and Ms Hancock a memorandum entitled ‘Finance of & Repayment of the “Plan”’, which proposed as follows:

(a)$35,500,000 required to finance the plan being $32,000,000 to GMAC and $3,500,000 to the CBA plus a contingency of $5,500,000.
(b)A further sum of $6,700,000 as GMAC security repayable at $60,000 per month by Webb.
(c)The security providers being:

GMAC Ongoing Debt $6,700,000 Webb

Preston Hatmax/Mela $2,900,000 Webb/Auswild

Preston Auswild $5,100,000 Auswild

Preston Webb $5,100,000 EXRHG

Bank $28,000,000 Webb/Auswild.

In a memorandum of 28 December 1993 presented to Ms Hancock entitled ‘Appreciation Needed’ (after meeting with RWA on 25 December 1993), Mr Webb noted as follows:

(a)Rossfield is owned 50% by the Auswild Family and 50% by the Webb Family.
(b)Therefore the $10,000,000 moral debt owed by Rossfield would be satisfied by a $5,000,000 payment by the Webb Family to the Auswild Family.
(c)Telasava’s equity in the three hotels is $6,000,000 and was held as to $3,520,000 by the Webb Family and $2,480,000 by the Auswild Family. As the hotel ownership is now 50/50, the Webb Family has transferred $520,000 to the Auswild Family.
(d)The Webb Family’s interests in the Seascape units are valued at $5,417,000.
(e)Accordingly, if the Webb Family’s interests in the Seascape units are transferred, together with the transfer of the hotel interest, the Auswild Family would receive $5,937,000 which ‘considerably exceeds the figure of $5,000,000 for any moral obligation under the deed … The debt between Webb Pty and Rossfield will be settled thereby with the residue bookwise handled by a capital distribution’.
(f)The Moral Obligation Deed released the inter-organisation loans but further provided that as businesses are disposed of under the DMA, $10,000,000 will be paid from the profits of any such businesses to F&G.
(g)As a result of the proposed buy-out of GMACA, there will be no businesses from which the $10,000,000 can be repaid. Therefore ‘[a]ny concession to F&G such as the transfer of the units at Seascape is done for moral not legal reasons’.

In a memorandum by Mr Webb dated 7 February 1994, he ‘expands on the benefits to F&G’, which he states were ‘obviously not completely understood or appreciated’.

On 20 May 1994, the directors of Preston Motors ratified the decision to borrow $2.9 million from PT Ltd; and on the same date the directors of Boyded Canberra (Wholesale) Pty Ltd ratified the decision to borrow a total amount of $8 million (being $2.9 million drawn on 16 August 1993 and $5.1 million to be drawn on a date soon to be arranged).

By deed dated 8 June 1994, Preston Motors agreed to advance $5.1 million to Rossfield House for a maximum period of 10 years at an interest rate of 8.6%, which was disbursed as follows:

(a)$4,000,000 to GMACA;
(b)$500,000 to Telasava;
(c)$548,008 to Preston Motors; and
(d)the balance of $51,992 to fees and duties.

By deed dated 8 June 1994, Preston Motors agreed to loan $2.9 million to Telasava which in effect indemnified Preston Motors under the deed of mortgage dated 16 August 1993.

By Debt Reduction Agreement dated 8 June 1994 (‘the DRA’), GMACA and GMAC agreed, in summary, to release the On-Shore Indebtedness (other than specified exceptions) and to release specified guarantors (including F&G) from any further liability under the DMA and the Loan Documentation – in consideration of:

(a)Calabar, Mr Webb and RWA agreeing to pay GMACA and GMAC the sum of $7 million;
(b)Rossfield procuring a release of GMACA’s guarantee to CBA; and
(c)Rossfield paying GMACA the sum of $30,731,640.99.

A document entitled “Documents Required by ‘The Plan’” dated 11 June 1994, included the following entries:

Entities Involved

Intent

Present Status

(a) Telasava – Preston

$2.9M Loan

Executed Canberra 8/6/94

(b) WEBB/Auswild Groups

F&G Amend APR ’92 Deed

Webb to execute when bank agree

(c) Rossfield-Preston

$5.1M Loan re above

Executed Canberra 8/6/94

(d) Preston-Hatmax

$5.1M re above

Executed Sydney 7/6/94

By transfers dated 31 August 1994 to Preston Motors; Rossfield House, BG Webb Pty Ltd and Resdev Pty Ltd respectively transferred a total of 22 Seascape units and 18 car parking spaces in consideration of the payment of $8,044,000 by way of three transfers of $3,470,000, $2,788,000 and $1,786,000 respectively.

By deed of release dated 5 January 1998 between Mr Webb, RWA, Calabar, GMACA and GMAC; GMACA and GMAC accepted a payment of $3,703,900 in satisfaction of all liabilities under the DMA.

Transfer of the Sutton Farm

By transfer dated 26 October 1994, Auswild Securities Pty Ltd (‘Auswild Securities’) transferred Sutton Farm to Joan Auswild in consideration of $540,000.

Transfer of the Regency Unit

By a faxed email of 3 July 1998 to JRA, Mr Farrelly gave instructions for a Preston Motors cheque payable to the National Australia Bank to be used to purchase the bank cheques required at the settlement of the purchase of unit 1702 and car park 161 at the Hyde Park Regency located at 281-283 Elizabeth St, Sydney being Lots 106 and 161 respectively in Strata Plan S5P55468 (‘the Regency Unit’). The precise sums referred to in the memo setting out the required cheques are recorded as being debited to the Preston Motors inter-company account in July 1998.

By transfer dated 6 July 1998, the Regency Unit was transferred to Baronja Investments Pty Ltd (‘Baronja’) for consideration of $1,000,000.

CONSIDERATION OF THE CLAIMS
Carlisle Loan
Was the Carlisle loan not in the interests of F&G or Fintee?
Plaintiffs’ submissions

Counsel for the plaintiffs submitted that the loan was not in the interests of F&G or Fintee for the following reasons:

(a)       Carlisle was in deep financial stress at the time the loan was made.
(b)F&G and Fintee were themselves obliged to borrow money to fund the Carlisle loan.
(c)The terms of the Carlisle loan were not favourable or commercial to F&G and/or Fintee in that:
(i)       there was no written loan agreement;
(ii)      it was unsecured;
(iii)     there was no provision for interest or security; and
(iv)it only gave rise to a ‘moral’ obligation to be repaid by the Rossfield group.

(d)The Auswild interests held only a 50% interest in Carlisle with the co-investors being the Webb family.

In substance the allegation was that the Carlisle loan was made to support the group in which the Auswild family held only a 50% interest.
Defendants’ submissions

Counsel for the first defendant and counsel for the second to fifth defendants submitted that the Carlisle loan was in the interests of F&G and Fintee for the following reasons:

(a)F&G was the ultimate holding company of the Auswild group and was the guarantor of debts in excess of $201 million owed to GMACA under:
(i)the 1981 Deed;
(ii)the 1985 Deed;
(iii)clause 2 of the 25 October 1989 cross-guarantee; and
(iv)the Deed of Acknowledgement.

(b)By 1990 there was a real risk that GMACA (or other creditors, such as the CBA or the Australian Guarantee Corporation (‘AGC’)) would take enforcement action under their securities.
(c)F&G and Fintee had an interest in supporting the viability of the Auswild/Webb Group because the ultimate shareholders of Fintee and F&G (ie both sides of the Auswild family) had a 50% interest in the Auswild/Webb Group.[5]
(d)The purpose of the Carlisle loan was to ‘buy time’ so that RWA and Mr Webb could work with GMAC and other creditors to avoid the risk of enforcement action being taken that would jeopardise the interests of Fintee and F&G.
(e)Although there is no formal loan agreement, the agreement was subsequently recorded in a deed dated 10 April 1992 in which the parties recognised a ‘moral obligation’ on the part of the Webb interests to repay $10 million to F&G; and in the events that followed, $8,062,000 was repaid to F&G in 1994 by way of the transfer of 22 Seascape Apartments to Preston Motors.
[5]The 50/50 interest was conceded by counsel for the plaintiff.

Plaintiffs’ Reply Submissions

The plaintiffs respond that, if F&G and/or Fintee were liable to GMAC under:

(a)the 1985 Deed;
(b)the 1989 cross-guarantees; and/or
(c)the 1990 Deed of Acknowledgment;

it was not in the interests of F&G and Fintee to enter into each of these agreements.
Consideration

The question of whether it was in the interests of F&G or Fintee to enter into the Carlisle loan requires determination of the following anterior questions:

(a) Was F&G or Fintee liable under the 1981 Deed?

(b) Was F&G or Fintee liable under the 1985 Deed?

(c) Was F&G or Fintee liable under the 1989 cross-guarantees?

(d) Was the loan made to Carlisle?

(e) Was the Carlisle loan repaid?

Was F&G or Fintee liable under the 1981 Deed?

The 1981 Deed is not available. It may be that the 1981 Deed substantially reflected the terms of the GMACA letter dated 1 June 1981 setting out the offer ‘should your proposed change of finance arrangements [from Industrial Acceptance Corporation Ltd] to GMAC come to fruition’. Relevantly, those terms included the following:

(a)A property loan with an initial limit of $30 million with security being ‘[r]eal estate properties of the group’ with unlimited guarantees from Rossfield and Bernley as the parent companies of Calabar and Alkanna together with:
All organisations in each group giving a charge over freehold (except those with outside shareholding), as well as each parent company, will enter a Global Guarantee relative to that group’s liability. However, I confirm the guarantee of natural persons is not required.

(b)An inventory loan with an initial limit of $18 million ‘to meet the group’s full stocking of new, used and demo requirements for all entities’. The borrowers would be the same as for the property loan with the addition of Fintee, with additional security being:
All organisations in each group giving a charge over vehicle stock, as well as each parent company, will enter a Global Guarantee relative to that group’s liability.

(c)A leasing loan totalling $8 million, being a liability of Rossfield to Citicorp will be taken over by GMAC.

The following evidence supports the proposition that F&G or Fintee was liable under the 1981 Deed:

(a) The 1 June 1981 letter of offer from GMACA to Mr Webb identifies Fintee as a guarantor of the inventory loan and that ‘additional security’ would be required from ‘parent companies’ in respect of the Property Loan and the Inventory Loan. F&G was the ultimate holding company of Fintee.

(b)The 1981 Deed was tabled by the Chairman at a meeting of directors of 6 December 1990 and was expressed to be between GMACA and certain parties including the Fintee Guarantors.
(c)By letter dated 2 January 1992 to Abbott Tout Russell Kennedy, Blake Dawson Waldron states that:
As Finance and Guarantee Company Pty Ltd and RW Auswild (Holdings) Pty Ltd are parties to the Principal Deeds dated 30 December 1981 and 27 September 1985 and related security and ancillary documentation (the “Security Documents”) we require ratification and confirmation by the relevant shareholders of the respective company’s execution of the Security Documents.

(c)The F&G balance sheet for the year ending 30 June 1984 records under ‘contingent liabilities’:
Joint guarantee for General Motors
Acceptance Corporation, Australia $10,605,050.

It is notable that at the end of the financial year 1986/87 this contingent liability had reduced to $4,188,000.
(d)The DMA included, in the definition of ‘Loan Documentation’:
[T]he Deed made 30th December 1981 between Calabar, Alkanna, Carlisle, Fintee, the Rossfield Guarantors, the Bernley Guarantors, the Carlisle Guarantors, the Fintee Guarantors (as therein defined) and GMACA as amended by various certificates of amendment in accordance with its terms pursuant to which GMAC agreed to provide certain financial accommodation to Calabar, Alkanna, Carlisle and Fintee.

A similar definition of ‘Loan Documentation’ was included in:
(i) the Deed of Acknowledgement;
(ii)the Notice of Extraordinary General Meeting of R W Auswild Holdings to be held on 30 January 1992; and
(iii)the Minutes of Extraordinary General Meeting of F&G held on 11 April 1992 (’11 April 1992 Minutes’).

(e)According to the 11 April 1992 Minutes, an extraordinary general meeting of F&G ratified the company’s execution of the Loan Documentation which specifically included the 1981 Deed.
(f)By letter dated 2 January 1992 to Abbott Tout Russell Kennedy, Blake Dawson Waldron stated that F&G and RW Auswild were parties to the 1981 Deed and the 1985 Deed.

The proposition that F&G was not a party to the 1981 Deed is supported by reference to the two 1989 cross-guarantees. The undated cross-guarantee lists corporations as guarantors of advances made by GMACA under the ‘Agreement’, which is defined as the 1981 Deed. None of F&G, Fintee or RW Auswild Holdings is a party to this cross-guarantee. This is to be contrasted with the cross-guarantee dated 25 October 1989, which includes F&G and RW Auswild Holdings as being guarantors of advances made by GMACA under the 1985 Deed.

In the absence of the 1981 Deed and the ‘various certificates of amendment’ (referred to in the definitions of ‘Loan Documentation’); and in the face of the contradictory evidence, I am unable to be satisfied that F&G or Fintee was not liable for at least some of the facilities of GMACA. I do not feel an ‘actual persuasion’ that F&G or Fintee was, or was not, liable under the 1981 Deed; and I do not consider it appropriate to speculate based on ‘mere mechanical comparison of probabilities independently of any belief in its reality’.[6]
[6]Briginshaw v Briginshaw (1938) 60 CLR 336, 361 (Dixon J).

Was F&G or Fintee liable under the 1985 Deed?

I find that F&G and Fintee were parties to the 1985 Deed. Although the 1985 Deed is also unavailable, in the documents referred to in paragraph [57](d) above, the 1985 Deed is described in identical terms to the 1981 Deed except for the addition of Beron and ‘Beron Guarantors’ as parties. A reference to the cross-guarantee dated 25 October 1989 confirms this finding.

Was F&G liable under the 1989 cross-guarantee?

I find that F&G was liable to GMACA under a cross-guarantee dated 25 October 1989. As noted above, in October 1989 two cross-guarantees were executed in favour of GMACA:

(a)one of which secured advances under the 1981 Deed; and
(b)one of which secured advances under the 1985 Deed.

The latter was signed by F&G.

By October 1989 the Australian economy was experiencing a downturn. The minutes of the meeting of F&G’s directors being RWA, Mr Dove and JRA on 26 October 1989 record that the purpose of the execution of the cross-guarantee was for:

… further security for the continuance of certain advances and accommodation already provided and for the provision of further advances and accommodation under an Agreement dated 27 September 1985 to various borrowers.

Was the loan made to Carlisle?

Mr Stone, the expert engaged by the plaintiffs, and Mr Silvia, the expert engaged by the second to fifth defendants, agree in the joint expert report that the relevant accounting entries show that the Carlisle transaction was effected as follows.

Between April and June 1990, the Fintee General Journal borrowed $7.8 million from GMAC which it received as follows:

(a)2 April 1990  $2 million;
(b)7 May 1990  $1.8 million;
(c)6 June 1990  $2 million;
(d)12 June 1990  $2 million.

The first three payments were paid by GMAC to Auswild & Co; but the recipient of the payment on 12 June 1990 is unknown.

Fintee on-lent these amounts to F&G, which on-lent $8,328,447.72 to Carlisle. After the addition of accrued interest, as at 30 June 1990, the liability of Carlisle to F&G was recorded at $8,547,485.61.

As noted above, Auswild & Co recorded receipt of $5.8 million of the GMAC advances to Fintee. Except for a payment of $200,000 to Carlisle, there was no payment direct to Carlisle; but journal entries record cash payments made on behalf of Carlisle to the following entities:

Payee

Amount ($)

GMAC

3,200,000

Commonwealth Bank

573,931

Australian Guarantee Corp

2,854,506

Total

$6,628,437

The source of the $528,448 balance of funds (being $8,328,447.72 minus $7.8 million) was the transfer of a debt, which was owed by Auswild & Co to Midlands Finance Co, to Carlisle.

Between April 1990 and September 2004, F&G and Fintee made the following payments to GMAC:

($000’s)

Finance & Guarantee ($)

Fintee ($)

Total ($)

Interest

297

4,956

5,253

Principal

2,340

1,015

3,355

Total

2,637

5,971

8,608

The GMAC advances were added to the existing single GMAC debt and were not attributed to any particular advance. The joint expert report states as follows:

The Experts agree that the GMAC advances to Fintee added to existing GMAC debt in which repayments were made against a single running balance rather than being attributable to a particular advance or existing debt.

Was the Carlisle Loan repaid?

I reject the plaintiffs’ submission that the Carlisle loan was not repaid. In my opinion, the following evidence establishes that the Carlisle loan was repaid by the transfer of 22 Seascape Apartments and 18 car spaces.

In or about late December 1993, it was specifically proposed that 22 Seascape units be transferred to F&G by the Rossfield and Webb companies as part of an arrangement to satisfy ‘the moral obligation’ to recompense F&G for a debt of approximately $10 million. This proposal was part of the ‘Plan’ put forward by Mr Webb; and ‘[a]ny concession to F&G such as the transfer of the units at Seascape is done for moral not legal reasons’. The fact that it was part of ‘the Plan’ is confirmed by a spreadsheet produced from business records entitled ‘Documents required by “the Plan”’, which included the following entry:

Ross/Resdev/Webb–Preston

Transfer 22 Units Seascape

Process Hold Pending Settlement of the Plan

According to F&G journal entries, Carlisle satisfied the principal, and accrued interest of $553,552.28, when its loan was discharged on the transfer of the 22 Seascape Apartments to Preston Motors.

With respect to other interest sums, the experts agreed as follows:

(a) A sum of $481,887.50 being interest received by Fintee was not paid by F&G and ‘might relate to payments of interest from Carlisle’.

(b) They could not determine who paid accrued interest; but F&G did not pay that interest and it might have been Carlisle making those payments.

With respect to the repayment of the Carlisle loan, the experts agreed that:

1.        The balance of the Carlisle debt due to Finance & Guarantee is recorded as having been reduced by $1 million in the Balance Sheets of Carlisle and Finance & Guarantee in FY91 and FY92 respectively. Source documents explaining that reduction have not been available for the Experts' review.
2.        The Carlisle Loan Provision raised in FY92 was reversed in FY95, resulting in the reinstatement of the Loan Receivable from Carlisle in Finance & Guarantee’s Balance Sheet and reversal of the bad debt expense previously recognized and posted to Finance & Guarantee’s Profit and Loss Appropriation Account.[7]
3.        The Carlisle Loan was discharged with the Seascape Apartments listed in the 11 August 1994 Board Minutes used as consideration.

[7]Carlisle recorded its liability to F&G throughout the period of financial years 1992 to 1995.

The conclusion of the experts that Carlisle repaid the loan and accrued interest by the transfer of the 22 Seascape Apartments and 18 car spaces is supported by the following entries in F&G’s general ledger of 31 May 1995:

(a)       debit Preston Motors with $8,062,000;
(b)      credit Cooma Investments Pty Ltd with $180,000;
(c)       credit interest earning with $553,552.28; and
(d)      credit loan to Carlisle Investments Pty Ltd with $7,328,447.72.
The entry crediting $7,328,447.72 to ‘loan to Carlisle Investments Pty Ltd’ includes a notation which reads:
Satisfaction of loans by issue of Seascape units to Preston Motors Pty Ltd.

Minutes of meeting of directors at Preston Motors on 11 August 1994 record the execution of contracts for the sale and transfer of the Seascape Apartments to the value of $8,062,000 made up as follows:

(a)       Rossfield House Pty Ltd   $3,470,000
(b)      BG Webb Pty Ltd  $2,788,000
(c)       Resdev Pty Ltd   $1,786,000
(d)      Rossfield House (car parks)  $18,000.

No expert was able to identify any payment by Preston Motors or F&G by way of cash consideration for the Seascape Apartments.

The Preston Motors balance sheet for financial year 1995 reflects the acquisition of the 22 Seascape Apartments and 18 car spaces for the sum of $8,062,000.

The fact that the consideration for the purchase of the Seascape Apartments was the release of the liability for the Carlisle loan is consistent with the following statement in the Preston Motors 100: A Celebration of Life and Achievement book, which was published in 2012:

Preston Motors … ended up with most of the other units [in Seascape] when one of the developers handed over his stake in the property as a way of resolving business debts on another project.[8]
[8]Marcella Hunter, Preston Motors 100: A Celebration of Life and Achievement (Preston Motors Pty Ltd, 2012) 138.

Conclusion on whether the Carlisle Loan was in the interests of F&G and Fintee

I am not satisfied that the Carlisle loan was not in the interests of Fintee or F&G for the following reasons:

(a)At the relevant time, the borrowings of the Webb/Auswild Group were substantial. The report from Deloitte Ross Tohmatsu of 6 March 1991 estimated the total debt, as at 31 December 1990, at $440,000,000 which included the following major debts:
(i)$21,000,000 to the CBA.
(ii)$97,000,000 to AGC.
(iii)$201,600,000 to GMAC.

(b)The fact that these creditors were considering enforcement action is demonstrated by the following:
(i)A letter of demand from AGC to RWA dated 17 September 1990.
(ii)The minutes of meeting of 30 October 1990 between representatives of AGC, Mr Pritchard of Zenith, RWA and Mr Webb. The minutes record that there were discussions with GMAC and CBA regarding a moratorium. AGC notes that GMAC was far better secured than AGC and discussed the prospect of precipitous action ‘against the natural person guarantor resulting in publicity and … the unravelling of the entire group’.
(iii)On 30 November 1990, Mr Webb sent a copy of the minutes to GMAC which discussed repayment proposals and asked that GMAC ‘treat the memo details as a request from us for this further assistance pending discussions between the group when your man arrives in Australia’.
(iv)GMAC’s ‘man’ was Mr Nelson who was transferred to Sydney in January 1991 by GMAC to negotiate an orderly realisation of assets and maximise the return on GMAC’s debt which was around $250 million. Mr Nelson gave evidence that it was crucial for an orderly negotiation that GMAC secured the co-operation of CBA and AGC; and the DMA would not have been signed without an agreement with the CBA and AGC.
(v)Within six months of the Carlisle loan, F&G would acknowledge its liability for $201 million as a guarantor of the GMAC facility in the Deed of Acknowledgement.

(c)Fintee, which was ultimately wholly owned by F&G, was liable for some or all of these amounts under the 1981 Deed, the 1985 Deed and the two 1989 cross-guarantees.
(d)F&G was liable for some or all of these amounts pursuant to at least the 25 October 1989 cross-guarantee and the 1985 Deed. As stated above, I am unable to find that F&G was not also liable under the 1981 Deed.
(e)The recitals to the Deed of Acknowledgment and the DMA both include reference to the fact that the borrowers from GMAC had on-lent moneys to other companies within the group. This presumably would have resulted in intercompany liability by companies in the Preston Motors Group to the borrowing entities.

Of course prima facie, there is at least some force in the submission about the uncommerciality of lending nearly $8 million to an insolvent company without documentation or security; and apparently with the promise for it to be repaid by others only being a ‘moral obligation’.

However, the bona fide assessment of directors of a company after taking into account:

(a)the prospect of the financial ruin of a company and its subsidiaries;
(b)the futility of obtaining security from other companies in the group; and
(c)the character and trustworthiness of the person undertaking the moral obligation;

may result in the directors considering that it is in the best interests of the company to enter into an unusual transaction such as this.

Generally courts are reluctant to substitute their own views for the commercial decision making of directors.[9] In my opinion, any such reluctance becomes more advisable when the Court is not satisfied that it is fully aware of all the material considerations that bore on the decision under scrutiny. Of course, sometimes inferences may be drawn by a party’s failure to lead evidence of the material considerations. This is not such a case. The relevant events happened nearly 30 years ago and many key witnesses have since died. Under these circumstances, I am not prepared to criticise any party for the failure to bring forward missing documentation nor am I prepared to criticise JRA for his limited memory of material facts.
[9]Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) (2008) 39 WAR 1, 542-3 [4429]-[4430], 578-9 [4599], 580 [4608] (Owen J).

Neither can any inference be drawn from subsequent events. As events unfolded, the Carlisle loan was repaid and following the DMA and the DRA the assets held by the ultimate subsidiaries of F&G were substantially retained. However, the issue of whether the directors breached their fiduciary duty by failing to act bona fide and in the interests of the company must be determined at the time the action was taken and not with hindsight. As Austin J said in ASIC v Vines:

The statutory standard, like the general law, permits the court to take into account the circumstances of the particular case, and requires the standard to be applied to those circumstances as they existed at the relevant time, without the benefit of hindsight.[10]

[10](2005) 55 ACSR 617, 861 [1077]. See also Permakraft (NZ) Ltd (in liq) v Nicholson (1982) 1 ACLC 488, 509 (White J).

This caution is normally applied to courts considering whether directors have breached their fiduciary duties in circumstances where the impugned action has caused detriment to the corporation. That is not this case. The impugned action under consideration resulted in no loss because the loan was repaid with interest; and ultimately played a part in the execution of ‘the Plan’ which resulted in Preston Motors and others in the Preston Motors Group avoiding substantial liabilities to external lenders.

However, as the plaintiffs submit, the fact that the impugned action resulted in a benefit to the company does not, of itself, determine the question of whether the directors in undertaking such action breached their fiduciary duties to the corporation. Plainly, a director placing a $1 million bet on a horse race with company funds may be in breach of his or her fiduciary duties even if the racehorse was to win. Nonetheless, where the impugned action has resulted in a benefit to the corporation, the Court should be even more reluctant to infer too readily that the directors undertook the action otherwise than in good faith and in the interests of the company.

The Court does not have evidence of all the material facts, which if it did, would enable it to second guess the directors’ decision, even if it were otherwise appropriate to do so. Certainly, I am not satisfied that the directors of F&G and Fintee entered into the Carlisle loan otherwise than on a bona fide basis believing it to be in the best interests of the companies and for a proper purpose. On the basis of the above findings, the allegations of breaches on the grounds of improper purpose and failure to accord due diligence must also fail.

Previous Guarantees
If F&G had pre-existing liability for the Webb/Auswild GMAC debt pursuant to:
(a)       the 1985 Deed;
(b)      the cross-guarantees dated 25 October 1989; and
(c)       the Deed of Acknowledgement dated 10 December 1990;
(together the ‘Previous Agreements’) was it not in the best interests of F&G to enter into the Previous Agreements?

For similar reasons, I am unable to conclude that the directors, in entering into the 1985 Deed, acted other than in good faith in the best interests of F&G. This conclusion is based on the following:

(a)The evidence does not disclose the purpose of the 1985 Deed and not even its terms are available, much less whether it was part of a broader transaction or what material events may have borne on the directors in making a decision.
(b)As noted above, F&G may already have been liable to GMAC under the 1981 Deed.

In the absence of any real evidence about the surrounding circumstances, the proposition that, by entering into the 1985 Deed, F&G:

(a)assumed obligations to GMAC beyond its existing obligations; and
(b)received no consideration or corresponding benefit under the 1985 Deed or its associated transaction;

amounts to no more than pure speculation. In the circumstances, I cannot feel ‘an actual persuasion’ of the occurrence of a breach of fiduciary duty by the directors in entering into the 1985 Deed, even disregarding matters such as the seriousness of the allegations, the inherent unlikelihood of the occurrence of such a breach and the gravity of the consequences of a positive finding.[11]

traditional notions of equity and good conscience require that the plaintiffs should be refused relief in respect of each of the claims.
Orders

There will be judgment for the defendants and I will order that the plaintiffs’ claims be dismissed.

---

SCHEDULE B
FINANCE & GUARANTEE PTY LTD (FIRST PLAINTIFF)
Prior to 11 April 1992	Clause 96		From 11 April 1992	Clause 96
	(a)	“No Director shall be disqualified by his office from holding any office or place of profit under the Company or under any company in which this Company is a shareholder or otherwise interested or from contracting with the Company either as vendor purchaser or otherwise nor shall any such contract or any contract or arrangement entered into by or on behalf of the Company in which any Director is in any way directly or indirectly interested be avoided nor shall any Director be liable to account to the Company for any profit arising from any such office or place of profit or realised by any such contract or arrangement by reason only of such Director holding that office or of the fiduciary relations thereby established.”		(a)	“A Director shall not be disqualified by reason only of his being a Director from holding any office or place of profit under the Company or any Company in which this Company is a shareholder or otherwise interested or from contracting with the Company either as a vendor purchaser or otherwise nor shall any such contract or any contract or arrangement entered into by or on behalf of the Company in which any Director shall be in any way interested be avoided nor shall any Director be liable to account to the Company for any profit arising from such office or place of profit or realised by any such contract or arrangements by reason only of such Director holding that office or of the fiduciary relation thereby established.”
	(b)	“No Director shall as a Director vote in respect of any contract or arrangement in which he is so interested as aforesaid and if he do so vote his vote shall not be counted but this prohibition may at any time or times be relaxed or suspended to any extent by a general meeting and it shall not apply to any contract or arrangement by or on behalf of the Company to give to the Directors or any of them any security for advances or by way of indemnity to any contract or arrangement (including any transaction involving a guarantee or indemnity) between this Company and any other public company or any subsidiary of a public company in which any such Director is interested only as a shareholder or Director and shareholder or to any contract or arrangement with or concerning any subsidiary company of this Company or in which a subsidiary company of this Company is interested.”		(b)	“A Director may vote in respect of any contract or arrangement in which he is interested as aforesaid but it shall be his duty to declare the nature of his interest in the manner required by Section 231 of the Corporations Law and it shall also be the duty of a Director who holds any office or possesses any property whereby whether directly or indirectly duties or interests might be created in conflict with his duties or interests as a Director of the Company to declare the nature character and extent of the conflict in accordance with Section 231 of the Corporations Law.”
	(c)	“It shall be the duty of a Director who is in any way directly interested in any contract or arrangement or proposed contract or arrangement with the Company to declare the nature of his interest at the meeting of the Directors at which the contract or arrangement is first taken into consideration if his interest then exists or in any other case at the first meeting of the Directors held after the acquisition of his interest provided that a general notice by a Director that he is a member of any specified company or firm and is to be regarded as interested in any contract which may after the date of such notice be made with or concern that company or firm shall be deemed to be a sufficient declaration of interest in relation to any contract so made and provided further that a Director shall not be deemed to be interested or to have been at any time interested in any contract or arrangement or proposed contract or arrangement relating to any loan to the Company merely by reason of the fact that he has guaranteed or joined in guaranteeing the repayment of such loan or any part of such loan.”		(c)	“A Director may attest the affixing of any Seal of the Company to any instrument relating to any matter in which he is interested.”
	(d)	“It shall also be the duty of a Director who holds any office or possesses any property the holding of which office or the possession of which property might whether directly or indirectly create duties or interests in conflict with his duties or interests as a Director of the Company to declare at the first meeting of the Directors held after he becomes a Director or (if he is already a Director) at the first meeting of the Directors held after he commences to hold any office or possess any property as aforesaid the fact of his holding such office or his possession of such property and the nature character and extent of the conflict.”		(d)	“It shall be the duty of the Secretary to record in the Minutes of the Meeting any declarations made or notice given by a Director as aforesaid.”
	(e)	“Notwithstanding anything herein contained no Director shall as a Director vote in respect of any matter in which he has a material personal interest.”		(e)	“It shall be the duty of each Director to comply with Sections 232 and 236 of the Corporations Law at all times.”
	(f)	“It shall be the duty of the Secretary to record in minutes of the meeting any declaration made or notices given by a Director as aforesaid.”
PRESTON MOTORS PTY LTD (SECOND PLAINTIFF)
At all times	Clause 77
“No Director shall be disqualified by his office from contracting or entering into any arrangement with the Company either as vendor purchaser or otherwise nor shall any such contract or arrangement entered into by or on behalf of the Company in which any Director shall be in any way interested be avoided nor shall any Director so contracting or being so interested be liable to account to the Company for any profit realised by any such contract or arrangement by reason of such Director holding that office or of the fiduciary relation thereby established provided that the nature of his interest where it does not appear on the face of the contract or arrangement must be disclosed by him or on his behalf at the meeting of Directors at which the contract or arrangement is determined on if his interest then exists or in any other case at the first meeting of the Directors after the acquisition of his interest. A general notice that a Director is a member of any specified firm or company and is to be regarded as interested in any subsequent transaction with such firm or company shall be sufficient disclosure under this clause and after such general notice it shall not be necessary to give any special notice relating to any particular transaction with such firm or company Provided that the necessity of a Director disclosing the nature of his interest shall not apply to any contract by or on behalf of the Company to give to the Directors or any of them any security by way of indemnity.”
Prior to 6 December 1990	Clause 78		From 6 December 1990	Clause 78
	“No Director shall vote in respect of any contract or arrangement in which he is so interested as aforesaid and if he do so vote his vote shall not be counted but this prohibition shall not apply to any contract by or on behalf of the Company to give to the Directors or any of them any security by way of indemnity or to any contract or dealing with a corporation of which the Directors of this Company or any of them may be Directors or members.”			(1)	“Neither the holding of office as a director (or the fact that a director was a promoter of the Company) nor the fiduciary relationship resulting therefrom shall: a) disqualify any director from holding any office or place of profit (other than that of Auditor) in the Company or in any corporation in which the Company owns shares or is in any way interested or which owns shares in the Company or with which the Company has or may have dealings or in any corporation which would be deemed under the Companies (Victoria) Code and for the purposes of the Companies (Victoria) Code to be related to such corporation; b) disqualify any director from entering into any arrangement or contract or dealing with the Company or any corporation as referred to in (a) above in any capacity; c) avoid or vitiate any arrangement contract or dealing between the Company or any corporation as referred to in (a) above and any director or any corporation of which a director is an officer or member or in any way interested or any partnership of which a director is a member or in any way interested; d) render any director or any corporation as secondly referred to in (c) above or any partnership as referred to in (c) above liable to account for any profit arising out of any office or place of profit as referred to in (a) above or any arrangement contract or dealing as referred to in (c) above.”
				(2)	“A director who is in any way interested in any arrangement contract or dealing as referred to in paragraph 1(c) above (whether existing or proposed) may vote in respect thereof at a meeting of the directors and shall be counted in a quorum present at such meeting.”
				(3)	“A director may affix or attest the affixation of the seal to any instrument notwithstanding any interest which such director has in the subject matter of that instrument or any other office or place of profit held by such director.”
PRESTON MOTORS (PROPERTIES) PTY LTD (THIRD PLAINTIFF)
Prior to 6 December 1990	Clause 89		From 6 December 1990	Clause 89
	“No Director alternate Director or Managing Director shall be disqualified by his office from holding any office or place of profit (other than that of auditor) under the Company or under any company in which this Company shall be a shareholder or otherwise interested or from contracting or arranging with the Company either as vendor purchaser broker solicitor accountant or otherwise nor shall any such contract or any contract or arrangement entered or to be entered into by or on behalf of the Company in which any Director alternate Director or Managing Director so contracting or being so interested be liable to account to the Company for any profit arising from such office or place of profit or realised by any such contract or arrangement by reason only of such Director alternate Director or Managing Director holding that office or of the fiduciary relation thereby established but it is declared that the nature of his interest must be disclosed by him at or before the meeting of the Directors at which the contract or arrangement is under consideration if his interest then exists or in any other case at the first meeting of the Directors after the acquisition of the interest. If a Director becomes interested in a contract or arrangement after it is made or entered into the disclosure of his interest shall be made at the first meeting of the Directors held after he becomes so interested. No Director alternate Director or Managing Director shall as a Director vote in respect of any contract or arrangement in which he is so interested as aforesaid and if he do so vote his vote shall not be counted. Provided nevertheless that this prohibition shall not apply to any contract by or on behalf of the Company to give any Director alternate Director or Managing Director or any of them any security for advances or by way of indemnity or to any allotment of shares to any Director upon any application for shares by such Director or to any modification thereof or any supplemental or substituted agreement or any matter arising thereout or to contracts or arrangements between this Company and any other public or incorporated company in which any such Director alternate Director or Managing Director is interested only as a shareholder Director or liquidator nor to prevent the Directors alternate Directors or Managing Director or any of them from lending money to the Company at interest or guaranteeing underwriting or placing any debentures stock or shares of this Company or any company promoted by it and receiving remuneration for so doing. Such prohibition may at any time or times be suspended or relaxed to any extent and either prospectively or retrospectively by a general meeting. Any Director being a solicitor or any firm of solicitors of which such Director is a member shall be entitled to receive all such usual professional charges and remuneration as he or they would have been entitled to receive had such a solicitor not been a Director. A general notice that a Director alternate Director or Managing Director is a member of or interested in any specified firm or company with whom any contract is proposed to be entered into in relation to the affairs of this Company and is to be regarded as interested in all transactions with such firm or company shall be sufficient disclosure under this clause as regards such Director and the said transactions and after such general notice it shall not be necessary for such Director to give any special notice relating to any particular transaction with such firm or company.”		(1)	“Neither the holding of office as a director (or the fact that a director was a promoter of the Company) nor the fiduciary relationship resulting therefrom shall: a) disqualify any director from holding any office or place of profit (other than that of Auditor) in the Company or in any corporation in which the Company owns shares or is in any way interested or which owns shares in the Company or with which the Company has or may have dealings or in any corporation which would be deemed under the Companies Act 1981 (C'th) and for the purposes of the Companies Act 1981 (C'th) to be related to such corporation; b) disqualify any director from entering into any arrangement or contract or dealing with the Company or any corporation as referred to in (a) above in any capacity; c) avoid or vitiate any arrangement contract or dealing between the Company or any corporation as referred to in (a) above and any director or any corporation of which a director is an officer or member or in any way interested or any partnership of which a director is a member or in any way interested; d) render any director or any corporation as secondly referred to in (c) above or any partnership as referred to in (c) above liable to account for any profit arising out of any office or place of profit as referred to in (a) above or any arrangement contract or dealing as referred to in (c) above.”
			(2)	“A director who is in any way interested in any arrangement contract or dealing as referred to in paragraph 1(c) above (whether existing or proposed) may vote in respect thereof at a meeting of the directors and shall be counted in a quorum present at such meeting.”
			(3)	“A director may affix or attest the affixation of the seal to any instrument notwithstanding any interest which such director has in the subject matter of that instrument or any other office or place of profit held by such director.”
PRESTON MOTORS (PART SALES) PTY LTD (FOURTH PLAINTIFF)
Prior to 11 April 1992	Clause 38		From 11 April 1992	Clause 38
	“No Director shall be disqualified by his office from contracting with the Company either as vendor purchaser or otherwise, nor shall any such contract or any contract or arrangement entered into by or on behalf of the Company in which any Director shall be in any way interested be avoided, nor shall any Director be liable to account to the Company for any profit realised by any such contract or arrangement by reason only of such Director holding that office, or of the fiduciary relations thereby established but every director shall observe the provisions of Section 123 of the Act relating to the disclosure of the interests of the Directors in contracts or proposed contracts with the Company or of any office or property held by the Directors which might create duties or interests in conflict with their duties or interest as Directors. No Director shall, as a Director, vote in respect of any contract or arrangement between the Company and himself personally or between the Company and any firm in which he is a partner, and if he do so vote his vote shall not be counted but subject thereto a Director may vote in respect of any contract or arrangement in which he is interested.”			(a)	“A Director shall not be disqualified by reason only of his being a Director from holding any office or place of profit under the Company or any Company in which this Company is a shareholder or otherwise interested or from contracting with the Company either as a vendor purchaser or otherwise nor shall any such contract or any contract or arrangement entered into by or on behalf of the Company in which any Director shall be in any way interested be avoided nor shall any Director be liable to account to the Company for any profit arising from such office or place of profit or realised by any such contract or arrangements by reason only of such Director holding that office or of the fiduciary relation thereby established.”
				(b)	“A Director may vote in respect of any contract or arrangement in which he is interested as aforesaid but it shall be his duty to declare the nature of his interest in the manner required by Section 231 of the Corporations Law and it shall also be the duty of a Director who holds any office or possesses any property whereby whether directly or indirectly duties or interests might be created in conflict with his duties or interests as a Director of the Company to declare the nature character and extent of the conflict in accordance with Section 231 of the Corporations Law.”
				(c)	“A Director may attest the affixing of any Seal of the Company to any instrument relating to any matter in which he is interested.”
				(d)	“It shall be the duty of the Secretary to record in the Minutes of the Meeting any declarations made or notice given by a Director as aforesaid.”
				(e)	“It shall be the duty of each Director to comply with Sections 232 and 236 of the Corporations Law at all times.”
COMMONWEALTH MOTORS PTY LTD (FIFTH PLAINTIFF)
It is likely that the articles of association for Commonwealth Motors were amended on 17 December 1990 consistently with the amendments made to the articles of association of Preston Motors and Properties on that date	Clause 91
	“Notwithstanding any rule of law or equity to the contrary a Director of the Company shall not be disqualified by his office from contracting with the Company either as vendor, purchaser or otherwise, nor shall any such contract or any contract transaction or arrangement entered into by or on behalf of the Company in which any Director shall be in any way interested be avoided or rendered voidable nor shall any Director so contracting or being so interested be liable to account to the Company for any profit realised by any such contract, transaction or arrangement by reason of such Director holding that office or by reason of the fiduciary relationship thereby established and any such Director may as a Director help to constitute a quorum at any meeting of Directors dealing with and vote in respect of and take part in the Company actually entering into and/or affixing the common seal to or in respect of any such contract transaction or arrangement notwithstanding his interestedness and/or such fiduciary relationship but disclosure of such interestedness shall be made and recorded. Failure to make and/or to record such disclosure as aforesaid shall not operate to avoid or render voidable any such contract transaction or arrangement.”
PRESTON MOTORS (HOLDINGS) PTY LTD (SIXTH PLAINTIFF)
Prior to 11 April 1992	Clause 93		From 11 April 1992	Clause 93
	“Provided disclosure has been made in accordance with the provisions of Section 123 of the Companies Act no Director shall be disqualified by his office from contracting with the Company either as vendor purchaser or otherwise nor shall any such contract or any contract or arrangement entered into by or on behalf of the Company in which any Director shall be in any way interested be avoided nor shall any Director so contracting or being so interested be liable to account to the Company for any profit realised by any such contract or arrangement by reason of such Director holding that office or of the fiduciary relation thereby established but it is declared that no Director shall as a Director vote in respect of any contract or arrangement in which he is so interested as aforesaid or in which he has directly or indirectly a personal material interest but this prohibition may at any time or times be suspended or relaxed to any extent by a General Meeting.”			(a)	“A Director shall not be disqualified by reason only of his being a Director from holding any office or place of profit under the Company or any Company in which this Company is a shareholder or otherwise interested or from contracting with the Company either as a vendor purchaser or otherwise nor shall any such contract or any contract or arrangement entered into by or on behalf of the Company in which any Director shall be in any way interested be avoided nor shall any Director be liable to account to the Company for any profit arising from such office or place of profit or realised by any such contract or arrangements by reason only of such Director holding that office or of the fiduciary relation thereby established.”
				(b)	“A Director may vote in respect of any contract or arrangement in which he is interested as aforesaid but it shall be his duty to declare the nature of his interest in the manner required by Section 231 of the Corporations Law and it shall also be the duty of a Director who holds any office or possesses any property whereby whether directly or indirectly duties or interests might be created in conflict with his duties or interests as a Director of the Company to declare the nature character and extent of the conflict in accordance with Section 231 of the Corporations Law.”
				(c)	“A Director may attest the affixing of any Seal of the Company to any instrument relating to any matter in which he is interested.”
				(d)	“It shall be the duty of the Secretary to record in the Minutes of the Meeting any declarations made or notice given by a Director as aforesaid.”
				(e)	“It shall be the duty of each Director to comply with Sections232 and 236 of the Corporations Law at all times.”
AUSWILD SECURITIES PTY LTD (SEVENTH PLAINTIFF)
At all times	Clause 100
“Notwithstanding any rule of law or equity to the contrary no Director shall become disqualified by his office from contracting with the Company either as vendor purchaser or otherwise or from being employed or acting in any capacity professional or otherwise by or on behalf of the Company nor shall any such contract or any contract or any arrangement entered into by or on behalf of the Company with any company corporation or partnership of or in which any Director shall be a Director member partner or otherwise interested be liable to be impeached affected or avoided by reason of such Director being a party thereto or interested therein nor shall such Director be liable to account to the Company for any profit realised by or in respect of such contract or arrangement but he shall be bound to disclose the nature of his interest as required by Section 123 of the Companies Act. A Director may vote in respect of any contract or arrangement in which he is interested as aforesaid.”
FINTEE INVESTMENTS PTY LTD (EIGHT PLAINTIFF)
At all times	Clause 87
“No Director shall be disqualified by his office from holding any office or place of profit (other than Auditor) under the Company or under any company promoted by this Company or in which this Company shall be a shareholder or otherwise interested and notwithstanding any rule of Law or Equity to the contrary a Director of the Company shall not be disqualified by his Office from contracting with the Company either as vendor purchaser or otherwise nor shall any such contract or any contract transaction or arrangement entered into by or on behalf of the Company in which any Director shall be in any way interested by avoided or rendered voidable nor shall any Director so contracting or being so interested be liable to account to the Company for any profit realised by any such contract transaction or arrangement by reason of such Director holding that office or by reason of the fiduciary relationship thereby established and any such Director may as a Director help to constitute a quorum at any meeting of Directors dealing with and voting in respect of and take part in the Company actually entering into and/or affixing the Common Seal to or in respect of any such contract transaction or arrangement notwithstanding his interestedness and/or fiduciary relationship but disclosure of such interestedness shall be made and recorded as contemplated by Section 123 of the Ordinance. Failure to make and/or to record such disclosure as aforesaid shall not operate to avoid or render voidable any such contract transaction or arrangement. A General Notice that a Director is a member or Director of any specified firm or company shall be sufficient disclosure of such fact for all time for which such Director shall remain a member or Director of such firm or company.”

Entities Involved	Intent	Present Status
(a) Telasava – Preston	$2.9M Loan	Executed Canberra 8/6/94
(b) WEBB/Auswild Groups	F&G Amend APR ’92 Deed	Webb to execute when bank agree
(c) Rossfield-Preston	$5.1M Loan re above	Executed Canberra 8/6/94
(d) Preston-Hatmax	$5.1M re above	Executed Sydney 7/6/94

Payee	Amount ($)
GMAC	3,200,000
Commonwealth Bank	573,931
Australian Guarantee Corp	2,854,506
Total	$6,628,437

($000’s)	Finance & Guarantee ($)	Fintee ($)	Total ($)
Interest	297	4,956	5,253
Principal	2,340	1,015	3,355
Total	2,637	5,971	8,608

[2019] VSC 664

3 October 2019