FEDERAL COURT OF AUSTRALIA
Huber v CellOS Software Ltd (in liq) (No 2) [2023] FCA 459
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Details
- Case
- [2023] FCA 459
- Decision Date
CaseChat Overview and Summary
The case of Huber v CellOS Software Ltd (in liq) (No 2) involved an application by the appellant, Huber, to stay the liquidation of the respondent company, CellOS Software Ltd, until the determination of an appeal. Huber sought leave to continue the appeal against CellOS, which had been placed in liquidation during the appeal process. The appeal was grounded on a multitude of alleged errors by the trial judge, with Huber attempting to challenge nearly every adverse finding made at trial.
The court was required to decide whether Huber's application for leave to appeal and the stay of liquidation should be granted. The court considered the merits of the appeal, the conduct of the appellant in pursuing the appeal, and whether the appeal grounds were valid and consistent with the overarching purpose of civil practice and procedure. The court found that the appeal grounds were without merit, largely unintelligible, and inconsistent with the civil practice and procedure of the court.
Davies J concluded that the appeal grounds were without merit and that allowing the appeal would be contrary to the overarching purpose of the civil practice and procedure of the court. The court found that Huber had failed to provide any meaningful or intelligible grounds for appeal and that his numerous sub-grounds were largely a re-agitation of matters already considered at trial. The court also noted that Huber's conduct in pursuing the appeal was prolix and inconsistent with the overarching purpose of civil practice and procedure. Therefore, the application for leave to appeal and the application for a stay of liquidation were dismissed.
The court was required to decide whether Huber's application for leave to appeal and the stay of liquidation should be granted. The court considered the merits of the appeal, the conduct of the appellant in pursuing the appeal, and whether the appeal grounds were valid and consistent with the overarching purpose of civil practice and procedure. The court found that the appeal grounds were without merit, largely unintelligible, and inconsistent with the civil practice and procedure of the court.
Davies J concluded that the appeal grounds were without merit and that allowing the appeal would be contrary to the overarching purpose of the civil practice and procedure of the court. The court found that Huber had failed to provide any meaningful or intelligible grounds for appeal and that his numerous sub-grounds were largely a re-agitation of matters already considered at trial. The court also noted that Huber's conduct in pursuing the appeal was prolix and inconsistent with the overarching purpose of civil practice and procedure. Therefore, the application for leave to appeal and the application for a stay of liquidation were dismissed.
Orders
Orders of the court
1. The application for leave to proceed with the appeal in proceeding VID 338 of 2020 filed 8 August 2022 is dismissed.
2. The application for a stay of the liquidation of CellOS Ltd (in liq) filed 29 August 2022 is dismissed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
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Evidence
Evidence Before The Court
There is an index to this Chapter which proceeds by reference to 18 cross-referenced paragraphs that assert various forms of error. By way of further illustration, the second contended error is that his Honour: “failed to provide the necessary reconciliation” in the verdict and where, by way of further elaboration, the cross referenced paragraphs provide:2.The Judge failed to apply the Briginshaw standard in evaluating the evidence before him, given the especially serious allegations against the Appellant, rather he applied a subjective test despite objective accounting evidence being put before him. the Judge wrote: “Indeed I would say at this point in relation to evidence by Mr Huber that I have given it little weight except where it has been independently corroborated by other probative evidence or where it was adverse to his interest”. Para 39 of the verdict 2018.2.1. The Learned Judge erred by applying a subjective standard when only an objective standard in the assessment of the facts could have possibly resolved the competing arguments before him. When doing so The Learned Judge evaluated accounting evidence by assessing the credibility of the witnesses and the Appellant, and failed to provide the necessary “reconciliation” of the share sales of the original shares made by the Appellant for no personal benefit as opposed to the shares purchased and resold for personal profit by Harveen Narulla with Melvin Tan and Constance Peck , despite the admission by the Lawyers for the Respondent that the Appellant’s original shares were the basis for the funding of CellOS. Instead, the Judge said that the onus was on the Appellant to prove that he did not benefit from the secret share trading. See para 140 Verdict 2020. However:2.2. The Learned Judge failed to objectively consider that the Appellant DID provide the required reconciliation that proved that he did not participate in or benefit from the secret trading between the Conspirators. Furthermore, the evidence is that upon his discovery the Appellant appointed lawyers and took formal steps to block the secret trading. See Appendix 1 Affidavit 20 December 2019 Huber. The Appellant is a Qualified Fellow Certified Practicing Accountant with over 25years public accounting experience and who co-signed the 8 Unqualified Audited Financial Statements of CellOS with respect to the financial years between 2006 and 2013 inclusive. Davies J conducted a further case management hearing on 18 June 2021, at which time Mr Huber was legally represented. The order made on 17 May 2021 was not complied with and counsel offered an explanation as to why. An indulgence was requested, and ultimately granted, to the effect that the proposed amended notice of appeal was required to be filed by 23 July 2021. Mr Huber did not retain legal counsel for very long. On 23 July 2021, he authored and filed an amended proposed notice of appeal comprising 44 pages, once again with a multiplicity of sub-grounds. Davies J conducted another case management hearing on 30 July 2021. Counsel for the respondent objected to this document and foreshadowed an application to strike out the appeal. Her Honour adjourned the case management hearing to 13 August 2021.
Decision
Reasons for decision
However, as I explain in some detail, I am satisfied that the appeal grounds are without merit and to permit Mr Huber to pursue the appeal would be contrary to the overarching purpose of the civil practice and procedure of the Court at ss 37M and 37N of the FCA Act. These considerations substantially outweigh the other matters. In so concluding it is otiose to separately address the extension of time application.THE LIABILITY JUDGMENT The reasons of Beach J are comprehensive, detailed and meticulous. The proceeding involved 19 respondents, most of which, in addition to Mr Huber, were corporations that his Honour found were controlled by Mr Huber and which were incorporated in exotic locations such as Belize, the British Virgin Islands, Anguilla, Panama and Samoa. Other corporations featured in the case were beneficially owned or controlled by Mr Huber, but were not parties to the proceedings. Those corporations variously acted to purchase shares from CellOS investors or lent funds to CellOS. It is convenient to refer to all of these corporations as the Huber entities. Some respondents were not associated with Mr Huber: notably Mr and Mrs Peck and Mr Tan. Of the of the Huber entities, only Mr Huber and Blue Delorite Investments Pty Ltd (Blue Delorite) filed defences. CellOS contended that Mr Huber, while appointed as its Chief Executive Officer and as a director, between 2012 and 3 September 2015 engaged in a scheme to trade in the shares of CellOS by creating a grey market and in so doing deprived it of the opportunity of issuing shares to potential investors at a market price higher than the price at which Mr Huber caused its shares to be bought and sold. A further aspect of the scheme contended that LGA Energy Investments Ltd (LGA), an offshore company controlled by Mr Huber, lent money to CellOS and then exercised an option to convert the loan funds into shares at a price significantly less than the market value at the time. CellOS contended that the entire scheme was fraudulent and generated significant profit for Mr Huber. It founded its proceeding in breach of duty by Mr Huber as a director and officer contrary to ss 181, 182 and 183 of the Corporations Act together with breach of fiduciary duty. The trial before his Honour was conducted on various days in September 2017 and May and June 2018. For most of the trial, Mr Huber was self-represented. For reasons published in the liability judgment, his Honour dismissed the proceedings against Mr and Mrs Peck and Mr Tan and upheld the claims against Mr Huber and the Huber entities. Relevantly, his Honour ordered that CellOS, Mr Huber and Blue Delorite within 28 days file and serve short minutes of orders to give effect to the reasons and for the further conduct of the proceeding. The proceeding resumed before his Honour in October 2019. For reasons published in the relief judgment, his Honour declared that Mr Huber had breached his fiduciary duties as well as his statutory duties pursuant to the Corporations Act by procuring the purchase of a substantial number of shares in CellOS and the sale of those shares for profit “thereby diverting investors from taking up shares” in CellOS. Further Mr Huber breached his duties by causing CellOS to enter into a loan agreement with LGA and then by causing it to exercise the option to purchase a substantial number of shares in CellOS for SGD1.80 per share, when the market price for those shares was greater. His Honour ordered Mr Huber and the Huber entities to account to CellOS in the sum of $42 million and ordered that they pay CellOS’s costs of and incidental to the proceeding.
Ratio Decidendi
Legal Principle Established
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