K. & a Laird (N.S.W.) Pty Ltd (In Liquidation) v Aidzan Pty Ltd (In Liquidation) in its own capacity and in its capacity as trustee of the Peter Laird Trust, the Peter Alan Laird Property Trust (known as the Pal...

[2023] NSWSC 603

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

K. & A. LAIRD (N.S.W.) Pty Ltd (In Liquidation) v AIDZAN Pty Ltd (In Liquidation) in its own capacity and in its capacity as trustee of the Peter Laird Trust, the Peter Alan Laird Property Trust (known as the PAL Property Trust) and the Aidzan Superannuation Fund [2023] NSWSC 603

Hearing dates:

9-12 May, 17-19 May 2023

Date of orders:

7 June 2023

Decision date:

07 June 2023

Jurisdiction:

Equity - Corporations List

Before:

Black J

Decision:

Parties to bring in agreed minutes of order to give effect to judgment.

Catchwords:

EQUITY – fiduciary obligations – purchase of property by entity associated with director – where purchase funded by company and by borrowings – where property then leased to company - whether director of company breached no conflict and no profit duties – whether knowing receipt of trust property – whether remedial constructive trust is established – whether cause of action is time barred

TORTS – Negligence – where director caused the company to leave a large industrial property dormant – where director did not wind up the company and paid himself a salary and caused the company to continue to pay rent to a company associated with him while trading at a loss - whether director breached his general law duty of care and diligence – whether cause of action is time barred

PROCEDURE - fraudulent concealment – where Plaintiff relied on s 55 of the Limitation Act 1969 (Cth) to overcome limitation defences – whether knowledge of claims should be imputed to the corporate Plaintiff

CORPORATIONS – Directors’ duties – whether director should be relieved from liability under s 1318 of the Corporations Act 2001 (Cth)

Legislation Cited:

- Bankruptcy Act 1966 (Cth), Pt VI Div 3, ss 116(1)-(2), 128B-128C, 139ZU

- Companies Act 1981 (Cth), s 229

- Corporations Act 2001 (Cth), 180-183, 286, 1305, 1317H, 1317K, 1318

- Companies Act 1962 (SA), s 365

- Evidence Act 1995 (Cth), s 136

- Limitation Act 1969 (NSW), ss 11, 14-15, 47, 51, 23, 55, 63

Cases Cited:

- Adelaide Brighton Cement Ltd, Concrete Supply Pty Ltd v Concrete Supply Pty Ltd (Subject to Deed of Company Arrangement) (No 4) [2019] FCA 1846

- Anthony v Morton [2018] NSWSC 1884

- Armagas Ltd v Mundogas SA [1985] 1 Ll R 1

- Ashrafinia v Ashrafinia [2013] NSWSC 1442

- Australian Careers Institute Pty Ltd v Australian Institute of Fitness Pty Ltd (2016) 340 ALR 580; (2016) 116 ACSR 566; [2016] NSWCA 347

- Australian Securities and Investments Commission v Edwards (No 3) (2006) 57 ACSR 209; [2006] NSWSC 376

- Australian Securities and Investments Commission v Healey (No 2) (2011) 85 ACSR 654; [2011] FCA 1003

- Australian Securities and Investments Commission v MacDonald (No 12) (2009) 73 ACSR 638; [2009] NSWSC 714

- Australian Securities & Investments Commission v Vines (2005) 65 NSWLR 281

- Barnes v Addy (1874) LR 9 Ch App 244

- Beach Petroleum NL v Johnson [1993] FCA 392

- Black v S Freedman & Co (1910) 12 CLR 105

- Bluemine Pty Ltd (in liq) v AKA (Civil) Pty Ltd; Earth Civil Australia Pty Ltd (in liq) v AKA (Civil) Pty Ltd; Diamondwish Pty Ltd (in liq) v Ivana Cassaniti; Rackforce Pty Ltd (in liq) v Ivana Cassaniti; RCG CBD Pty Limited (in liq) v Borg Family Pty Ltd [2022] NSWCA 160

- Calverley v Green (1984) 155 CLR 242

- CellOS Software Ltd v Huber (2018) 132 ACSR 468; [2018] FCA 2069

- Coope v LCM Litigation Fund Pty Ltd (2016) 333 ALR 524; [2016] NSWCA 37

- Crawley v Short [2009] NSWCA 410

- Daniels (formerly practising as Deloitte Haskins & Sells) v Anderson (1995) 37 NSWLR 438; 118 FLR 248; 16 ACSR 607

- Electrical Enterprises Retail Pty Ltd v Rodgers (1988) 15 NSWLR 473

- ET-China.com International Holdings Ltd v Cheung (2021) 388 ALR 128; [2021] NSWCA 24

- Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22

- Farrow Finance Co Ltd (in liq) v Farrow Properties Pty Ltd (in liq) (1997) 26 ACSR 544

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

- Gerace v Auzhair Supplies Pty Ltd [2014] NSWCA 181

- Gordon in His Capacity as Liquidator of Lyon Form Pty Ltd (in liq) v Leon Plant Hire Pty Ltd (in liq) (2015) 16 ASTLR 185; [2015] NSWSC 397

- Great Southern Finance Pty Ltd (in liq) v Rhodes [2014] WASC 431

- Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; (2012) 87 ACSR 260; [2012] FCAFC 6

- Guinness PLC v Saunders [1990] 2 AC 663

- Hall v Poolman (2007) 215 FLR 243

- Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd (No 2) [2008] FCA 810

- HP Mercantile Pty Ltd v Dierickx (2013) 306 ALR 53; [2013] NSWCA 479

- Jones v Dunkel (1959) 101 CLR 298

- Kalls Enterprises Pty Ltd (in liq) v Baloglow (2007) 63 ACSR 557; [2007] NSWCA 191

- Lewis Securities (in liq) v Carter (2018) 355 ALR 703; 334 FLR 9; 128 ACSR 120; [2018] NSWCA 118

- Lindsay Petroleum Co v Hurd (1874) LR 5 PC 221

- Links Golf Tasmania Pty Ltd v Sattler (2012) 213 FCR 1; 292 ALR 382; 90 ACSR 288; [2012] FCA 634

- Maelor Jones Investments (Noarlunga) Pty Ltd v Heywood-Smith (1989) 54 SASR 285

- Morley v Australian Securities and Investments Commission (No 2) (2011) 83 ACSR 620; [2011] NSWCA 110

- Mudgee Dolomite & Lime Pty Ltd v Murdoch; Re Mudgee Dolomite & Lime Pty Ltd [2020] NSWSC 1510

- Murdoch v Mudgee Dolomite & Lime Pty Ltd (in liq) (2022) 398 ALR 658; [2022] NSWCA 12

- Natural Extracts Pty Ltd v Stotter (1997) 24 ACSR 110

- Ngurli Ltd v McCann (1953) 90 CLR 425

- No 1 Victoria Dragons Pty Ltd v AEN Developments Pty Ltd [2022] NSWSC 1345

- Re Atlas Advisors Australia Pty Ltd [2022] NSWSC 705

- Re Colorado Products Pty Ltd (in prov liq) (2014) 101 ACSR 233; [2014] NSWSC 789

- Re DCA Enterprises Pty Ltd [2023] NSWSC 11

- Re Duomatic Ltd [1969] 2 Ch 365

- Re Earth Civil Australia Pty Ltd, RCG CBD Pty Ltd, Bluemine Pty Ltd, Diamondwish Pty Ltd and Rackforce Pty Ltd (All In Liq) [2021] NSWSC 966

- Re SRD Property Pty Ltd [2023] NSWSC 441

- Re Swan Services Pty Ltd (in liq) [2016] NSWSC 1724

- Robins v Incentive Dynamics Pty Ltd(in liq) (2003) 175 FLR 286; 45 ACSR 244; [2003] NSWCA 71

- Saba v Plumb (2018) 97 NSWLR 278; 19 BPR 38,401; [2018] NSWCA 60

- SEA Food International Pty Ltd v Lam (1998) 16 ACLC 552

- Seymour v Seymour (1996) 40 NSWLR 358

- Sze Tu v Lowe (2014) 89 NSWLR 317; [2014] NSWCA 462

- The Hancock Family Memorial Foundation Ltd v Porteous (2000) 22 WAR 198

- Twigg v Twigg (No 4); Lambert v Twigg Investments Pty Ltd (No 3) (2020) 147 ACSR 389; [2020] NSWSC 1159

- - Twigg v Twigg (2022) 402 ALR 119; [2022] NSWCA 68

- Varma v Varma [2010] NSWSC 786

- Ventouris Enterprises Pty Ltd v Dib Group Pty Ltd [2010] NSWSC 963

- VL Finance Pty Ltd v Legudi (2003) 54 ATR 221

- Watson v Foxman (1995) 49 NSWLR 315

- Williams v Central Bank of Nigeria [2014] AC 1189; 2 All ER 489; UKSC 10

Texts Cited:

- Ford’s Principles of Corporations Law (17th ed, 2023),

- Jacobs’ Law of Trusts in Australia (8th ed, 2016)

- Law of Limitation (1st ed, 2016)

Category:

Principal judgment

Parties:

K. & A. LAIRD (N.S.W.) Pty Ltd (In Liquidation) (Plaintiff/First Cross-Defendant)
AIDZAN Pty Ltd (In Liquidation) in its own capacity and in its capacity as trustee of the Peter Laird Trust, the Peter Alan Laird Property Trust (known as the PAL Property Trust) and the Aidzan Superannuation Fund (First Defendant/First Cross-Claimant)
Nazdia Pty Ltd ACN 631 617 331 in its capacity as trustee of the Aidzan Superannuation Fund (Second Defendant)
Peter Alan Laird (Third Defendant/Second Cross-Claimant)
Michael Laird (Second Cross-Defendant)
David Laird (Third Cross-Defendant)
Debra Roberts (Fourth Cross-Defendant)
Christine Cook (Fifth Cross-Defendant)

Representation:

Counsel:
A Leopold SC/J Tobin (Plaintiff/Cross-Defendants)
D Studdy SC/J Nixon (Defendants/Cross-Claimants)

Solicitors:
Watson Mangioni (Plaintiff/Cross-Defendants)
Ashurst (Defendants/Cross-Claimants)

File Number(s):

2020/351691

Publication restriction:

N/A

Judgment

Nature of the proceedings

1. Broadly, these proceedings involve claims for breach of directors and other duties brought by K. & A. LAIRD (N.S.W.) Pty Ltd (“KAL”), by its liquidator, against the Third Defendant, Mr Peter Laird (“PL”) and associated entities. PL was responsible for the management of KAL during much of the period in which it conducted a steel merchant business and after it had substantially ceased business. KAL filed the final version of that claim, in its Further Amended Statement of Claim (“FASOC”) dated 19 May 2023 on the last day of the hearing, by leave granted by consent of the parties, and the Defendants subsequently filed a Further Amended Defence (“Defence”) dated 25 May 2023 and Amended Rejoinder to the Reply dated 25 May 2023 that narrowed the scope of the issues in the proceedings. The First Defendant (“Aidzan”) also brought a Cross-Claim against KAL, although its scope was also narrowed in the course of final submissions.

Background facts

2. I now set out several background facts, which are partly common ground, emerging from KAL’s chronology, the parties’ pleadings and the affidavit and documentary evidence. KAL was incorporated in April 1955 and has two shareholders, Winbourne Engineering Pty Ltd (“WE”) and Alan Laird (Holdings) Pty Ltd (“ALH”) (FASOC [1]-[2]; Defence [1]). ALH was owned by members of the Laird family (FASOC [7]; reformulated in Defence [7]). The late Mr Henry Alan Laird (known as Alan) (“AL”) was a director of KAL, ALH and WE until his death on 27 August 1987 and other family members were also directors of those companies (FASOC [8]; reformulated in Defence [8]). Each of KAL and its two corporate shareholders, WE and ALH are in members voluntary liquidation and Mr Alan Hayes was appointed as their liquidator on 24 August 2018.

3. From around the 1950s, KAL operated a steel wholesaling business in Australia, and there is a dispute as to whether WE traded which it is not necessary to decide (FASOC [11]-[12], Defence [11]-[12]). KAL purchased a property in Tattersall Road, Blacktown (“Tattersall Property”) in the late 1960s or 1970 (FASOC [18]; Defence [18]; Hayes 14.7.22 [35]; PL 13.10.22 [26]; Ex J1, 4523) and operated its steel wholesale business from the Tattersall Property from around the date of its acquisition of that property until it moved that business to the Sunnyholt Property in 1992 (FASOC [19]; Defence [19]; T184).

4. On 4 March 1980, the late Dorothy Laird (“DL”) and PL were appointed as directors of KAL (Ex J1, 4527). In around 1987, with the assistance of a firm of solicitors (“MSJ”), and particularly Mr Burges of that firm, AL took steps toward reclassifying the shareholdings in ALH to achieve, among other things, a reorganisation of rights to shares in ALH to give rights to his children (FASOC [13]-[14]; Defence [13]-[14]; PL 13.10.22 [104]ff; Ex J1, 348). A document dated 30 July 1987 prepared by Mr Burges titled “Rough Notes on procedure and objectives on Reorganisation of Shares” (Ex P1, 171) identifies the objectives of the share reorganisation, namely that:

“The objectives are to achieve the desired reorganisation of rights by reclassifying shares into the desired categories to give the required rights rather than achieving this through wills or transfer of shares.

Furthermore all the proposals relating to change of directors and the rights to be held during [AL’s] and [DL’s] lifetimes can be incorporated by changes in the Articles of Association, as can all the required flexibility in relation to distribution of dividends throughout the family in an appropriate pattern.”

5. Those notes refer to dividend rights in relation to the relevant shares and record that:

“It is provided that after the death of both [DL] and [AL] dividends have to be equal between the families, that is after allowing for the increased interest which [PL] will acquire if he continues to manage the company over the next 10 years and the company continues in the steel business or some substitute business acceptable to all the family.”

6. Those notes also record, under the heading “Ownership Rights” :

“Another objective which is now to be achieved through the class rights is the movement of an extra 15% of the shares to [PL] year by year so that if he continues to manage the company and the company stays in the steel business or an appropriate substitute business for 10 years he will finish up with 32% of the company and each of the other children will finish up with 17% of the company.

[DL] during her lifetime has a half share and on her death her shares become valueless so that the children then acquire the full interest. In other words during [DL’s] lifetime a 17% interest would only be actually an 8 ½% interest acquiring the full interest on [DL’s] death.”

7. AL died on 27 August 1987 (PL 13.10.22 [9]). After AL’s death, PL took the role of managing director of KAL, ALH and WE, or at least managed the relevant business; DL continued as a director of the companies; and the share restructure of ALH ultimately took place in August 1989 and ALH adopted new Articles of Association (FASOC [15]; qualified Defence [15]; Hayes 14.7.22 [10]; Ex J1, 463; T139-140). The Laird siblings had a limited involvement in the implementation of the restructure, which involved steps to transfer shares in ALH that were previously held beneficially on their behalf to them, and they signed documents stating that they had no objection to the modifications to the rights attaching to those shares (Ex J1, 376ff).

8. From about 1989, PL investigated a possible relocation of KAL’s steel business from the Tattersall Property to new premises, ultimately the Sunnyholt Property (FASOC [20]; the Defendants reformulate this proposition in Defence [20] and contend that KAL continued to store steel at the Tattersall property, which was plainly not the case in later years: PL 13.10.22 [139], T184-185, 235-236). Aidzan was incorporated on 26 October 1989; PL and DL were appointed as its directors on 16 January 1990; and PL was issued two shares in Aidzan and DL was issued one share in Aidzan, which she held on trust for PL, by a declaration of trust dated 16 January 1990 (FASOC [21]-[22]; Defence [21]-[22]; Ex J1, 875, 4539. A trust known as the Peter Laird Trust was also settled on 16 January 1990 (PL 13.10.22 [149]).

9. On 18 January 1990, Aidzan, as trustee for the Peter Laird Superannuation Fund, entered into a contract to acquire the Sunnyholt Property (FASOC [23]; Defence [23]; Hayes 14.7.22 [47]; Ex J1, 878, 881) and settlement of that contract occurred on 23 March 1990. Aidzan and KAL entered a credit facility with a third party lender, Michell NBD Pty Ltd (“Michell”) with a limit of $1.8 million (Ex J1, 928) (“Facility Agreement”). The Facility Agreement provided for a facility of $1.8 million in favour of Aidzan and identified Aidzan, KAL, ALH, WE and PL as guarantors and referred to the lease to be entered into by Aidzan as lessor and KAL as lessee of the Sunnyholt Property and to the trust deed establishing the Peter Laird Trust dated 16 January 1990. Clause 2 provided that Aidzan and KAL must use the proceeds of the facility exclusively to partially finance the acquisition by Aidzan of the Sunnyholt Property and for working capital. By cl 9.1, each of Aidzan and KAL were required to repay the advance made to it and cl 26 identified certain obligations, including the repayment obligation under cl 9.2, that were joint and several liabilities of KAL and Aidzan. PL and DL attested the application of the common seals of Aidzan and KAL to the facility agreement.

10. KAL also then entered a Deed of Assignment of Rentals dated 23 March 1990 (Ex J1, 994), by which Aidzan assigned all its rights to Rentals (as defined) in respect of the Sunnyholt Property to Michell, extending to all monies which may be payable to it for the lease of the Sunnyholt Property. PL and DL again attested the application of the common seal of Aidzan and KAL to that document. PL was cross examined at some length as to his understanding of that document, but it seems to me plain that it transferred the rental payable by KAL to Michell, so that rental directly repaid the amount due by Aidzan to Michell. PL, Aidzan, KAL, ALH and WE also executed a Deed of Guarantee and Indemnity dated 23 March 1990 in favour of Michell (Ex J1, 1007), and Aidzan also granted a mortgage over the property to Michell (Ex J1, 1039). KAL then made a payment of about $1,283,000 to Aidzan which was used to fund the deposit and payment of the balance due to purchase the property (FASOC [26]; Defence [26]; PL 13.10.22 [175). At that time, Aidzan had not traded and operated no business and had no assets (FASOC [25]).

11. On 24 March 1990,   Aidzan leased the Sunnyholt Property to DF Industries Pty Ltd (“DFI”) (which had a common director with the vendor of the property) until 24 December 1990, for a rent of $1 per year (PL 13.10.22 [184], Ex J1, 1139), apparently in consideration of a purported discount to the purchase price offered by the vendor, although it is now clear that property was purchased by Aidzan for much more than its then market value. DFI occupied about two thirds of the property until late 1990 (T238).

12. Nearly three months later and six months after Aidzan had contracted to acquire the Sunnyholt Property, on 19 June 1990, KAL entered a lease over the Sunnyholt Property from Aidzan (“Sunnyholt Lease”) for a term of 4 years commencing on 24 March 1990 and terminating on 23 March 1994, with an option for renewal, at a rent for $420,000 per annum (FASOC [27]-[28]; Hayes 14.7.22 [53]; Ex J1, 1146). It is now clear that rent was well above the then market rents for the property, reflecting the overvalue at which Aidzan had purchased the property. On 25 June 1990, PL and DL caused KAL to grant a mortgage of the Sunnyholt Lease to the lender (Hayes 14.7.22 [51], Ex J1, 1183).

13. In 1992, after DFI vacated the Sunnyholt Property (PL 13.10.22 [194]), KAL moved its business operations into that property (PL 13.10.22 [232]). KAL pleads (FASOC [34]) that, subsequent to the acquisition of the Sunnyholt Property by Aidzan on 23 March 1990, KAL’s steel wholesaling business was moved to the Sunnyholt Property; KAL paid rent to Aidzan pursuant to the Sunnyholt Lease; KAL paid rent to Aidzan beyond the term of the Sunnyholt Lease pursuant to undocumented arrangements that PL implemented; and the amount of rent that KAL paid to Aidzan in relation to these arrangements exceeded $8,000,000.

14. By a letter dated 29 April 1993 (Ex J1, 1288), Mr Barden, a financial adviser to PL, recommended that PL establish a new superannuation fund called the “Aidzan Superannuation Fund” of which Aidzan would be the trustee and PL would be the member; establish the “Laird Property Trust” (which later became the Peter Alan Laird Property Trust (“PAL Property Trust”)) of which Aidzan would be the trustee; transfer certain assets standing in his credit to another superannuation fund to the new superannuation fund and invest those assets in the PAL Property Trust; and use those assets, vendor financing and maintain the Michell facility to allow Aidzan as trustee of the new trusts to “purchase” the property that it already owned as trustee for the Peter Laird Superannuation Fund.

15. In late April or May 1993, Aidzan, which (as I noted above) had acquired the Sunnyholt Property as Trustee for the Peter Laird Superannuation Fund, was appointed as trustee of the newly established Aidzan Superannuation Fund on the terms of a trust deed (which was backdated to 1 January 1993), which contemplated that the Aidzan Superannuation Fund would provide retirement and other benefits for its members (PL 13.10.22 [222]; Ex J1, 1248). Unsigned minutes of a meeting of directors of Aidzan dated 1 January 1993 record a resolution that Aidzan act as trustee of the fund until further notice. It is plain that no meeting of directors of Aidzan passed that resolution on that date, since Mr Barden, as noted above, did not provide draft trust deeds for the Aidzan Superannuation Fund and the PAL Property Trust until late April 2023.

16. The Facility Agreement with Michell was amended on 7 May 1993 in connection with these arrangements (PL 13.10.22 [229]); Ex J1, 1313). On 26 May 1993, Aidzan was also appointed as the trustee of the PAL Property Trust (PL 13.10.22 [233]) and Aidzan as trustee of the PAL Property Trust acquired the Sunnyholt Property, subject to the mortgage, from Aidzan as trustee of the Peter Laird Trust (PL 13.10.22 [234]; Ex J1, 1290). Some attention was paid to these transactions in affidavit evidence and cross-examination but it is now common ground that they have no substantive impact on the claims in these proceedings, other than possibly as to the party to which orders should be directed. There is no suggestion that that transaction can have affected claims available by KAL against Aidzan in respect of the purchase of the Sunnyholt Property, where Aidzan as trustee of the new trusts knew everything that Aidzan already knew of the circumstances in which the property had been acquired.

7. A balance sheet dated 30 June 1993 (Ex J1, 1447) recorded that the PAL Property Trust (or, more precisely, Aidzan as its trustee) held non-current assets of $3,454,785.17 made up of the land and building, plant, machinery and fittings of the Sunnyholt Property and recorded the amount then owed to Michell on that property was $1,281,000; the amount owed to Aidzan was $1,663,730 and there was an outstanding interest liability of $17,600 to Aidzan. This valuation likely reflected the overvaluation at which the property was purchased to which I referred above.

8. The Sunnyholt Lease expired on 23 March 1994 (Hayes 14.7.22 [53]; Ex J1, 1162) and KAL continued to occupy the premises and pay rent at the rate provided in the lease until, in FY 1999, that rent was reduced to $300,000 per annum (PL 13.10.22 [308]).

9. In 2003, KAL investigated the sale of another property (“Valediction Road Property") and it appears to have been contemplated that the sale proceeds would be distributed to the Laird siblings (Ex J1, 1905). While that property was sold, that distribution did not occur. KAL retained the sale proceeds, largely as a bank deposit, and earned interest on them as its business and its earnings went into a long and ultimately terminal decline. It is common ground that the Tattersall Property was no longer used for storage of surplus steel by KAL from 2005 and did not generate income for KAL from that date (T149-151, T162).

10. PL had a series of significant health problems from 2004 (Ex J1, 2297) and did limited or no work in KAL’s business during periods in which he was ill or, likely, depressed in later years, although he caused KAL to continue to pay his full salary and later increased that salary and, with some interruptions, caused KAL to continue to pay rent on the Sunnyholt Property to Aidzan. As at 30 June 2005, KAL’s balance sheet (Ex J1, 1925) recorded that it had total assets of $6,709,909, which included the sales proceeds of the Valediction Road Property, and had incurred operating losses of $334,769 in the year ending 30 June 2004 and $378,855 in the year ended 30 June 2005, and net losses in those years of $234,245 and $75,907 after interest received on the sale proceeds of the Valediction Road Property. In the year ended 30 June 2006, KAL incurred a larger operating loss of $609,480 (Ex J1,1939), and a net loss of $326,975 after interest on the sale proceeds of the Valediction Road Property. In 2007, PL directed $1,000,000 to be paid from KAL’s funds into the Aidzan Superannuation Fund (FASOC [93]; Defence [93]; PL 13.10.22 [357]) (“PL Superannuation Payment”). In the year ended 30 June 2007, KAL incurred an operating loss of $1,379,934 (including that payment) and its net loss was $992,025, again reduced by interest on the sale proceeds of the Valediction Road Property (Ex J1, 1975). Unsurprisingly, given the PL Superannuation Payment and the operating losses that it was incurring, KAL’s total assets had by then been reduced to $4,655,332 (Ex J1, 1977). In the year ended 30 June 2008, KAL incurred another operating loss of $452,206, and its net loss was $134,063, again reduced by interest on the sale proceeds of the Valediction Road Property, although its total assets had increased somewhat to $5,222,320 (Ex J1, 2009).

11. DL died in 2009 and, from the time of her death until 2017 when Michael Laird (“ML”) became a director of KAL, PL was the sole director of KAL (Ex J1, 4226 at 4229; T139).

12. As at January 2012, KAL and PL had failed to lodge income tax returns for several years and their accountant was advised by an officer of the Australian Taxation Office that she was required to escalate the matter to prosecution, but would request of deferral of action if PL provided a letter from his doctor (Ex J1, 2296). By a letter dated 12 January 2012 (Ex J1, 2297), PL explained his “lack of attention to issues such as not completing tasks like tax returns for some number of years” by reference to health issues over several years leading to “ultimately the decline of a once successful family business”. He there observed that:

“A number of these issues required significant time to recover from and to this day require ongoing attention. This of course meant that I was not working for significant periods of time subsequent [to] 2004. During that period my senior employee (financial controller) was managing the business during my protracted absences. He was then found to be stealing from the business and employment was terminated...

This has all lead [sic] to my unsatisfactory state of mind and general lack of interest. I have endeavoured to keep up with GST payments and the like, as well as paying some number of fines over the period, however, got to the point of not knowing where to start with all other matters, particularly given no tax would be due and we were continuing to accumulate losses. The business has effectively ceased to trade although I do go in for a few hours a couple of days a week. I have since with the help of [the accountant] filed two years returns and intend to file subsequent years within a short period of time.”

23. There is no suggestion in this letter that there would soon be any improvement in KAL’s position and that letter holds out no prospect of reversal of the decline in the business that PL there acknowledges. There is also no evidence of any plan that PL then or ever developed to rehabilitate KAL’s business or recommence its operations or of anything more than a hope that his health might improve and, by steps that were neither planned nor identified, the business could then be restored.

24. PL contends that, on 29 June 2012, he paid $680,000 to KAL as a part repayment of the PL Superannuation Payment (PL 13.10.22 [426]). I will address that issue below. KAL ceased trading in 2013 (Hayes 14.7.22 [18]; PL 13.10.22 [499]).

25. On 10 February 2017, ML sent an email to PL (FASOC [102]-[103]; Defence [102]-[103]; Ex J1, 2782) attaching photographs of the Sunnyholt Property which showed a substantial part of the office building attached to the warehouse had collapsed and observed that:

“Whilst out Blacktown I also dropped in on Sunnyholt Rd.

Don’t [sic] when you were last out there – but the property is in a mess.

The front gates have been trashed open, concrete blocks moved.

*there are two dumped and gutted cars in the driveway.

*the office room has collapsed or been smashed in, but it is destroyed

*the shed is wide open had obviously seen better days.

*interestingly it looks like someone is currently storing tyres on site – they are too neat and tidy – looks recent and ongoing.

*a lot of steel still there – pipe mostly.”

26. ML also asked whether there was anything he could do, plainly by way of an offer of assistance. ML resent that email on 14 February 2017, without the photographs, apparently because PL’s email box was full, and PL responded by email dated 15 February 2017 (Ex J1, 2783):

“Yes I am aware of these issues and it is soul destroying to see what has been done. We have tried to stop them but to no avail. The tyres etc are from my neighbour who has been trying to help. The worst of all that they have done is crash through the roof of the office and steal the safe and all the records of the business etc. I was always comforted over the years knowing no matter what the thief and vandals got up to Dads safe would always make sure our records would be alright. I didn’t think it was possible to take it as it was impossible to move, ha!”

27. PL’s evidence in cross-examination was that he only became aware of the theft of the safe from the Sunnyholt Property by reason of ML’s email dated 10 February 2017. I do not accept that evidence, where ML’s email made no reference to the theft of the safe, which was first disclosed as a matter already known to PL in his response to ML’s email.

28. On 1 June 2017, ML was appointed a director of KAL and WE (Ex J1, 4527, 4575). The Tattersall Property was then sold by a contract dated 2 June 2017 (Ex J1, 2830) and a transfer was registered on 6 November 2017 (Ex J1, 4523). ML was later appointed as a director of ALH in 2018 (Ex J1, 4557).

29. Between 5 and 26 June 2018, unknown persons stole between 300 and 400 tonnes of steel from the Sunnyholt Property and (as the Defence admits) PL notified the NSW police of a break-in at the Sunnyholt Property on 30 June 2018 (Ex J1, 3065). The police event report in respect of the theft (Ex J1, 3065) recorded that the police were advised that the theft had occurred between 5 June 2018 and 26 June 2018; that the theft was reported at 9:05am on 30 June 2018; that between 300 and 400 tonnes of steel had been stolen; and that:

“Person reporting advised that the factory has no roller doors and anybody could walk in and take anything.

Person reporting is the [redacted] of the victim organisation.”

30. The police redacted the identity of the person reporting that theft on the copy of the report that was made available to KAL’s liquidator and tendered in these proceedings. I find that PL made that report, given the admission in his Defence and the fact that it is highly improbable that, if two members of the Laird family separately made such a report, the police only recorded one such report.

31. The Laird siblings, including PL, developed a proposal for KAL and the other Laird family companies to be placed in voluntary liquidation, as has now occurred. On 7 August 2018, two other Laird siblings, Ms Debra Roberts and Ms Christine Cook were appointed directors of KAL (Ex J1, 4527). On 24 August 2018, Mr Hayes was appointed liquidator of KAL, WE and ALH in a members voluntary winding up (FASOC [10]; Defence [10]; Ex J1, 4527, 4554, 4575). The Tattersall Property was sold by KAL at or around 31 August 2017 for $6,834,940.20 including GST (Hayes 14.7.22, [39]-[40]).

32. On 4 December 2018, Sydney Water Corporation filed a winding-up application in respect of Aidzan and Messrs Topp and Gleeson were appointed as liquidators of Aidzan on 4 February 2019 (Ex J1, 4539). Another company, Nazdia Pty Ltd (“Nazdia”) was incorporated on 13 February 2019 (Ex J1, 4549) and, on 18 February 2019, Nazdia replaced Aidzan as trustee of the Aidzan Superannuation Fund. On 6 March 2019, Messrs Topp and Gleeson were appointed as receivers and managers of the assets of the PAL Property Trust (Ex J1, 2981).

33. By an email dated 18 March 2019 to Ms Roberts (Ex J1, 2986), as to which ML was cross examined, ML raised the possibility of a distribution from the voluntary liquidation to the Laird siblings excluding PL, observing that ML did not “want [PL] to get a cent whilst all this gets sorted” and noting the position of two other siblings who appeared to be in financial need. It seems to me that it is understandable that this thought would have occurred to ML in the circumstances, and it also seems to me to provide no proper basis for PL’s attack on the Laird siblings or a now abandoned attack on Mr Hayes’ conduct of the liquidation. By an email dated 2 May 2019 from ML to Mr Hayes (Ex J1, 3035), ML raised questions as to the police event report in relation to the theft from the Sunnyholt Property, expressed a degree of scepticism as to the circumstances of that theft and again addressed the possibility of a cash distribution to shareholders and the other Laird siblings’ wish for distribution to occur to all except PL “on the basis that he owes the business in excess of $2mil (and likely a great deal more) and that he should not therefore get a distribution at this point”. It seems to me that that position, at least so far as the Laird siblings were concerned, was again an understandable one.

34. By letter dated 27 June 2019 (Ex J1, 4975), Mr Hayes wrote to Mr Topp in Mr Topp’s capacity as joint liquidator of Aidzan as trustee of the PAL Property Trust, and as one of the Joint Receivers and Managers of the PAL Property Trust as follows:

“I advise that the Companies have a significant claim against Aidzan Pty Ltd and the Property, I’m currently quantifying the specific sum. Accordingly, I request that other than the statutory sums attaching to the Property, you do not distribute any funds from the sale of the Property or from the liquidation of Aidzan Pty Ltd until this matter has been resolved. It is my intention to contact [PL] shortly to arrange a meeting to address the Company’s claim and hopefully resolve same. I expect any resolution will involve the Company’s other shareholders, being [PL’s] family.”

It seems to me that Mr Hayes’ letter was sufficient to give notice to Mr Topp of the prospect that a claim could be brought against the Sunnyholt Property, including potentially by bringing a claim for breach of director’s duties against PL, asserting the existence of a proprietary claim over the Sunnyholt Property.

35. By an email dated 1 July 2019 (Ex J1, 4976) Mr Topp responded that:

“I acknowledge receipt of your letter indicating that the 3 companies you are the liquidator of may have a claim against Aidzan.

Further, I note that last week you were trying to call [PL] to advise him of the claim. Please confirm if you have spoken to [PL]. In this regard I note he may be going away on holidays today or tomorrow.”

Mr Topp also sought confirmation that Mr Hayes had no objection to the exchange of contracts for the sale of the Sunnyholt Property.

36. By an email dated 1 July 2019 to PL (Ex J1, 4978), Mr Hayes also confirmed advice which had been provided to PL in the previous week. The email identified its subject matter as the companies including KAL and the Sunnyholt Property and continued:

“Thanks for calling me back on Friday, I herein confirm my advice during that call, that as liquidator of the companies I believe I have claim against Aidzan Pty Ltd and the Property. I’m currently quantifying the specific sum. Accordingly I have requested that other than the statutory sums attaching to the Property, Alan Topp as its joint Receiver & Manager/Joint Liquidator does not distribute any funds from the sale of the Property or from the liquidation of Aidzan Pty Ltd until this matter has been resolved. I have not sought in any way to prevent a sale, knowing that Mr Topp is an experienced and competent insolvency practitioner.

I note that you’ll be overseas for the next few weeks and we’ll meet upon your return to discuss the claim, and perhaps meet with other members of your family as necessary. Further, during the time you’re overseas, I’ll work on quantifying the claim.”

37. It seems to me that this letter provided sufficient notice to PL that Mr Hayes then considered that he had a claim against Aidzan as well as a claim against the Sunnyholt Property. That proposition implied that PL’s conduct would be under investigation, since Aidzan could only operate through its directors and any claim against it must relate to the conduct of PL and DL prior to DL’s death and PL’s conduct for the period after DL’s death. Even if PL did not subjectively appreciate that matter, that email provided sufficient notice of it that he had a fair opportunity to take legal advice as to his position, if he wished to do so.

38. By an email dated 2 July 2019 (Ex J1, 4980) to Mr Hayes, copied to Mr Topp, PL acknowledged Mr Hayes’ email and advised that no sale had yet been finalised and that a 90 day settlement would be set. He offered to meet Mr Hayes and Mr Topp at their convenience. It seems to me plain that, rightly or wrongly, PL then considered that the best response to a potential claim against Aidzan and the Sunnyholt Property was for him to offer further information to Mr Hayes, presumably in justification of his and Aidzan’s conduct.

39. On 12 September 2019, PL met with Mr Hayes in the offices of Mr Hayes’ firm [Hayes 14.7.22 [28]). On 23 October 2019, Aidzan completed a contract for sale of the Sunnyholt Property to a third party (Topp 9.2.22 [45]). KAL commenced these proceedings on 11 December 2020 and, on 28 April 2022, Williams J made freezing orders in respect of the remaining amount of the sale proceeds of the Sunnyholt Property.

Affidavit evidence

40. I now turn to the affidavit evidence and cross-examination. In addressing that evidence, I have regard to the fallibility of human memory which increases with the passage of time, particularly where disputes or litigation intervene: Watson v Foxman (1995) 49 NSWLR 315 at 318–319; Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd (No 2) [2008] FCA 810 at [41]; Varma v Varma [2010] NSWSC 786 at [424]–[425]. I also have regard to the fact that objective evidence, where available, is likely to be the most reliable basis for determining matters of credit that arise as to the affidavit evidence: Armagas Ltd v Mundogas SA [1985] 1 Ll R 1 at 57; Re Colorado Products Pty Ltd (in prov liq) (2014) 101 ACSR 233; [2014] NSWSC 789 (“Colorado”) at [10]. In considering the documentary evidence that is available in this case, I have recognised that, rightly or wrongly, proprietary companies, their directors and shareholders often conduct their affairs with a degree of informality: Electrical Enterprises Retail Pty Ltd v Rodgers (1988) 15 NSWLR 473 at 489; VL Finance Pty Ltd v Legudi (2003) 54 ATR 221 at 226-227.

41. The principles applicable to assessing evidence of conversations, in the context of claims for misleading and deceptive conduct, were helpfully summarised by Slattery J in Ventouris Enterprises Pty Ltd v Dib Group Pty Ltd [2010] NSWSC 963 at [87] as follows:

“The principal conduct of the defendants that [the plaintiff] alleges was misleading or deceptive was the speaking of words in the course of a series of conversations. Special considerations apply when assessing alleged misleading and deceptive conduct in such a context. It is necessary that the words spoken be proved with a degree of precision sufficient to enable the Court to be reasonably satisfied that they were in fact misleading in proved circumstances: Watson v Foxman (1995) 49 NSWLR 315 at 318 per McLelland CJ in Eq. In assessing whether spoken words were misleading the Court may have to examine relatively subtle nuances flowing from the use of one word, a phrase or a grammatical construction rather than another or the presence or absence of some qualifying word, phrase or condition: Watson v Foxman (1995) 49 NSWLR 315 at 31. The fallibility of human memory and the overlaying of memory with perceptions of self-interest leading to sub conscious reconstruction are all hazards of ordinary human experience to which a Court must be alert in assessing whether particular spoken words are misleading or deceptive: Watson v Foxman (1995) 49 NSWLR 315 at 319. Ultimately each element of the cause of action must be proved to the reasonable satisfaction of the Court which means that the Court “must feel an actual persuasion of its occurrence or existence”. Such satisfaction is “not obtained or established independently of the nature and consequences of the fact or facts to be proved”, including the “seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding”: Helton v Allen (1940) 63 CLR 691 at 712.”

42. I also bear in mind the observations of Bell P (as the Chief Justice then was, with whom Bathurst CJ agreed) in ET-China.com International Holdings Ltd v Cheung (2021) 388 ALR 128; [2021] NSWCA 24 at [27]-[28]:

“Whilst the quality and accuracy of oral recollection of actual conversations should be treated with care and caution given the fallibility of human memory (of which there has been a growing appreciation within the judiciary in recent decades), oral testimony may still be of value and importance, as was recognised in the nuanced observations of Leggatt J (as his Lordship then was) in Gestmin SGPS SA v Credit Suisse (UK) Ltd [2013] EWHC (Comm) 3560 at [22] (Gestmin):

“the best approach for a judge to adopt in the trial of a commercial case is, in my view, to place little if any reliance at all on witnesses' recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts. This does not mean that oral testimony serves no useful purpose – though its utility is often disproportionate to its length. But its value lies largely, as I see it, in the opportunity which cross-examination affords to subject the documentary record to critical scrutiny and to gauge the personality, motivations and working practices of a witness, rather than in testimony of what the witness recalls of particular conversations and events. Above all, it is important to avoid the fallacy of supposing that, because a witness has confidence in his or her recollection and is honest, evidence based on that recollection provides any reliable guide to the truth.” [emphasis added]

Documents and events have to be understood in their context, and evidence of context will often be furnished by witnesses in their oral evidence. Documents, moreover, will not always present a complete picture of events. Indeed it would be rare that they do. Nor do contemporaneous documents necessarily or invariably convey or record the background or context in which events took place. That background or context will be familiar to the actors at the time of those events but may not always emerge from documents.”

43. I have here drawn on my summary of the applicable principles in Re Atlas Advisors Australia Pty Ltd [2022] NSWSC 705 at [5], No 1 Victoria Dragons Pty Ltd v AEN Developments Pty Ltd [2022] NSWSC 1345 at [53]ff, Re DCA Enterprises Pty Ltd [2023] NSWSC 11 at [5]ff and Re SRD Property Pty Ltd [2023] NSWSC 441 at [8]ff.

44. KAL read the affidavit dated 14 July 2022 of Mr Hayes, the liquidator of KAL. Mr Hayes refers to the corporate structure of the Laird family companies, ALH, WE and KAL, and to the shareholders in those companies. His evidence (Hayes 14.7.22 [17]) is that KAL was the trading entity within the Laird family companies, and traded as a wholesale merchant of steel from premises in Blacktown from around the 1950s, and his investigations indicate that ALH and WE did not trade in their own right. His evidence is that KAL had probably ceased to trade by 30 June 2013. He refer to the share reorganisation of the companies which I addressed in outlining the chronology of events above. Mr Hayes also refers to the incomplete state of books and records of the Laird family companies and to information provided by PL to him on 12 September 2019 that the books and records of the companies were stored in a large safe in the companies’ office and that safe, together with a crane and 300-400 tonnes of steel were stolen from the property, and he reported the theft of the steel to the police in 2018, and that steel was of poor quality and probably worth about $50,000. Mr Hayes also refers to several income tax returns of KAL and balance sheets and profit and loss statements for KAL and to the conduct of private examinations of several persons in August 2020.

45. Mr Hayes also addresses the circumstances of the acquisition of the Tattersall Property and the Sunnyholt Property, to which I have referred in outlining the chronology of events above. Mr Hayes also refers to his receipt of a copy of the New South Wales Police event report relating to the theft of the steel from the Sunnyholt Property, to which I have also referred in the chronology above, and to matters relating to the impugned superannuation payment to Aidzan for the Peter Laird Superannuation Fund and the liabilities incurred by KAL, including paying rent to Aidzan, in the period it was trading at a loss from the 2007 financial year onwards.

46. By a second affidavit dated 10 March 2023, Mr Hayes refers to PL’s evidence of advice which Mr Burges, the solicitor advising in respect of the reconstruction, gave to him and indicates that KAL does not hold any documents containing or referring to instruction given to Mr Burges in respect of the purchase of the Sunnyholt Property. Mr Hayes also refers to the extent of available evidence concerning other matters raised in the proceedings.

47. Mr Hayes was cross examined at some length, partly to establish a proposition that was not pressed by the Defendants in closing submissions, that Mr Hayes had acted improperly by non-disclosure of discussions with the Laird siblings prior to his appointment as liquidator of KAL, or by non-disclosure to PL of the likelihood that PL’s actions would be investigated on a voluntary liquidation. I address that evidence briefly to the extent that it may be relied on by PL to establish any other prejudice in respect of the proceedings. Mr Hayes’ evidence was that the voluntary liquidation of KAL was, at least in part, adopted as a means of realising pre-capital gains tax assets of KAL and the other Laird companies in a tax effective manner (T6). His evidence, which I accept, was that he did not address any potential claims against PL prior to his appointment as voluntary liquidator, although he fairly accepted such claims were a possibility (T7). He accepted that, prior to his appointment as liquidator of KAL and the other Laird companies, he did not inform PL that he would be looking into the purchase of the Sunnyholt Property by Aidzan or investigating the lease of that property by Aidzan to KAL, where he lacked information as to the existence of such a lease. His evidence, which I also accept, was that he had told PL (and the other Laird siblings) that he would be investigating the company’s affairs (T7), but it seems to me that that was a disclosure of the obvious, where that is a necessary incident of a liquidator’s appointment. Mr Hayes was cross-examined as to correspondence before and after his appointment as voluntary liquidator of KAL, which I have addressed in outlining the chronology of events above.

48. Mr Hayes was also cross-examined as to the existence of a former solicitor-client relationship between PL and the firm that was then acting for the Laird siblings; a successor firm now acts for KAL in the proceedings. The Defendants did not seek to restrain that firm from acting for KAL in these proceedings, and its retainer does not advance the matters raised by the Defendants in the defence of the proceedings, including allegations of delay which I address below. Mr Hayes was also cross-examined as to the circumstances of a payment by PL to KAL made on 29 June 2012 which is relevant to one of the claims against PL that I address below (T23). He obviously had no personal knowledge as to the circumstances of that payment where it was made before his appointment as voluntary liquidator of KAL. Mr Hayes was also cross-examined as to whether he had given notice of potential claims against PL to PL, before PL was interviewed by Mr Hayes in September 2019 (T27). I have addressed the correspondence that resolves that question in the chronology of events above. Mr Hayes was also cross-examined about the Police event report as to the theft of steel from the Sunnyholt Property (T33), although he again had no personal knowledge of how that report was lodged where that also occurred before he was appointed as voluntary liquidator. Mr Hayes was a measured and careful witness and I accept his evidence. No matters emerging from that evidence provided any proper basis for criticism of his conduct of the liquidation of KAL.

49. KAL also read ML’s affidavit dated 14 July 2022. As I noted above, ML is one of the Laird siblings and currently a director of KAL and a shareholder in ALH. ML refers to his knowledge of the steel business conducted by the family companies and to his lack of involvement in the companies before AL’s death. ML’s evidence, admitted with a limiting order under s 136 of the Evidence Act 1995 (Cth) (“Evidence Act”) as his understanding, was that neither DL nor his siblings (other than PL) had any involvement in managing the family companies up to AL’s death. He outlines DL’s background and her role in caring for six children in the family. He also addresses the reorganisation of shareholdings in the family companies in 1987, prior to AL’s death, and PL’s role in managing the family companies after AL’s death. ML’s evidence is that he first received financial information as to the family companies from their accountants in 2018 and that he had offered PL assistance in the family business in about 1988 or 1989 and again in 2009 following his retirement, which PL had not taken up. ML also addresses the position in respect of the Sunnyholt Property and the theft of steel from that property. ML also refers to the lack of use of the Tattersall Property and to a conversation with PL in 2010, after he had retired, in which ML had indicated that the Tattersall Property was lying dormant and made suggestions as to how it could be used, which PL had rejected. This evidence makes clear that at least ML was aware of issues relating to the lack of use of the Tattersall Property since at least 2010. By a second affidavit dated 15 March 2023, ML responds to aspects of PL’s evidence.

50. ML was cross-examined, inter alia, as to the relationship between AL and Mr Burges and he acknowledged that he knew that MSJ was advising the Laird family companies with respect to their reorganisation in 1989 and as to his executing documents in relation to that reorganisation (T43ff). He was cross-examined as to what he would have done, had DL told him certain matters in 1990 (T49) although there is no suggestion that she did so. He did not accept he had no reason to question DL’s ability to understand KAL’s operations at that time (T49) and was cross-examined as to his knowledge of matters relating to the Tattersall Property (T52). I deal with the issue relating to that property below.

51. ML accepted that, by mid-2018, he and others were considering the appointment of a voluntary liquidator to KAL and he was concerned by PL’s conduct in respect of KAL at that time (T53). He accepted that he wanted a liquidator to be appointed to KAL and PL’s conduct to be investigated and he would have given consideration to the possibility that an investigation could lead to claims against PL (T54). He frankly acknowledged that he had not told PL, before KAL was placed in voluntary liquidation, that he wanted the liquidator to investigate relevant transactions. He accepted that, by June 2018, he was angry with PL’s conduct as a director of KAL and he again accepted that he did not tell PL that he wanted an investigation as to KAL’s affairs (T55). It is not apparent to me that this matter supports the defences I address below. ML was also cross-examined as to the possibility that, in 2009, the Laird siblings could have convened a meeting of shareholders to address any issues in respect of the family companies (T69). I note that the Laird siblings could only have directly convened such a meeting in respect of ALH, the holding company, and there is no evidence as to how that would have resolved the position in respect of KAL. In any event, it does not seem to me that that possibility provides any answer to the claims now brought by KAL that I address below. ML was also cross-examined, at one point, to raise the possibility that he had made a report of the theft of steel from the Sunnyholt Property to the police (T73); that cross-examination had the difficulty that PL had admitted, in paragraph 104 of his Defence, that he had made that report; and there seems to me to be no real prospect that both ML and PL had separately made that report but the Police had recorded only one such report. It seems to me that ML was doing his best to give honest answers to the questions asked and I prefer his evidence to PL’s evidence to the extent there was any conflict in their evidence.

52. KAL read the affidavit dated 14 July 2022 of Ms Debra Roberts, who is also one of the Laird siblings and a director and shareholder in ALH and now a director of KAL. She refers to the fact that she was given a cheque by AL in the mid-1980s and told her it was for being a director but that she had no involvement in running the family companies. Her evidence is that she became aware of the movement of the business from the Tattersall Property to the Sunnyholt Property when PL was living at her apartment in 1990 but he did not then tell her that the Sunnyholt Property was being purchased by an entity other than KAL and rented by that entity to KAL and she had assumed that KAL had purchased and owned that property. I accept that evidence and also accept her evidence that she did not learn that the Sunnyholt Property had been purchased by Aidzan until ML had told her of that matter in 2018. Ms Roberts also gives evidence of photographs that she took when she went to the Sunnyholt Property on 28 June 2018. By her second affidavit dated 28 February 2023, Ms Roberts responds to aspects of PL’s evidence and addresses the steps she would have taken had she been informed of matters relating to the purchase of the Sunnyholt Property by Aidzan. It seems to me that little turns on that matter where Ms Roberts was not in fact informed of those matters.

53. Ms Roberts was also cross-examined and appeared to me to be doing her best to give honest answers. Ms Roberts acknowledged in cross-examination that she was aware that Mr Burges and AL had worked on the reorganisation of the family companies in 1987 (T108). She accepted that PL had told her, in 1990, he was moving the steel business from the Tattersall Property to the Sunnyholt Property (T111). She was also cross-examined as to her having visited the Sunnyholt Property and taken photographs of the property in June 2018, at a time that there were discussions about putting KAL into voluntary liquidation (T111-112). She accepted that she also did not tell PL that his conduct in relation to the companies might be investigated but denied she wanted to withhold that information from him (T113). She accepted that she could have asked DL about the circumstances of the purchase of the Sunnyholt Property between 1990 and 2009 (T116); although it is not apparent that that advances the Defendants’ position, where there is no suggestion that she did so, or that any relevant information came to her attention. I also accept her evidence and prefer it to PL’s evidence in matters where there was a conflict of evidence.

54. KAL also read the affidavit dated 14 July 2022 of Ms Christine Cook, who is another Laird sibling and is now a director of KAL and shareholder in ALH. She also became aware that PL had moved the steel business from the Tattersall property to the Sunnyholt Property in about 1990 but had assumed that KAL had purchased the Sunnyholt Property and did not become aware that Aidzan rather than KAL owned that property until 2018. By her second affidavit dated 3 March 2023, Ms Cook responds to aspects of Mr Barden’s and PL’s evidence in the proceedings.

55. Ms Cook was cross-examined as to her knowledge that she held shares in a family company, which was in fact ALH, although her evidence was that she thought she was a shareholder in KAL (T78). She accepted that AL and Mr Burges were friends, but she did not know of meetings between AL and Mr Burges relating to the reorganisation of the company in 1987 (T79). She also accepted that she knew of the move of the steel business from the Tattersall Property to the Sunnyholt Property in around 1990 (T79). She accepted that AL appointed her as a director of ALH in the 1980s, although it is not apparent that she had any real understanding of the responsibilities attached to that role. She did not recall a meeting with Mr Barden in 1993, at which it was suggested that he told her that PL’s self-managed superannuation fund owned the Sunnyholt Property (T86). In the event, Mr Barden abandoned his evidence that he had told her of that matter in cross-examination. Ms Cook acknowledged that she understood that ML wanted a liquidator of KAL to investigate PL’s conduct in relation to the purchase of the Sunnyholt Property (T86) and that she had not told PL prior to the appointment of a voluntary liquidator that it was proposed (implicitly, by the Laird siblings) that a liquidator would investigate his conduct (T87). It is not apparent that ML’s wishes in that respect were a material matter, where it was plainly a matter for Mr Hayes, in the proper performance of his professional obligations, and not ML or the Laird siblings to determine the extent of investigations which should be conducted and the extent to which they were directed to PL’s conduct. It seems to me that Ms Cook was also doing her best to give honest answers to the questions asked.

56. KAL also read the affidavit dated 14 July 2022 of Mr David Laird who had had no involvement in the running of the steel business or the family companies and did not understand the Laird siblings other than PL to have had such an involvement. His evidence is that he was not involved in the reorganisation and received no legal advice from Mr Burges or anyone else as to the effect of the reorganisation. He witnessed a document executed by PL and DL on one occasion, and I accept his evidence that he did not read the document at the time, a course that was entirely appropriate where he was simply witnessing execution of the document by the parties to it. He also gives evidence of his surprise and disappointment when he became aware that the Sunnyholt Property was not owned by KAL but had been purchased by Aidzan. By his second affidavit dated 21 March 2023, he responds to PL’s evidence in the proceedings.

57. Mr David Laird was cross-examined and also acknowledged that AL and Mr Burges were good friends and he knew that Mr Burges was advising AL in relation to the reorganisation of the companies in 1987 and that AL trusted Mr Burges (T93-94). It does not appear that there is any dispute as to any aspect of the 1987 reorganisation in these proceedings, although it is relevant to how the Laird siblings became to be shareholders in ALH. His evidence was that he did not recall a suggestion that PL’s conduct in particular be investigated in the liquidation and that any investigation would be “more about what was happening with the business” (T101); he did not recall an investigation of the acquisition of the Sunnyholt Property in 1990 being mentioned, but added, sensibly enough, that:

“I would presume, obviously, the liquidator has got to know everything that goes on so he would investigate that.” (T101).

58. He accepted that he did not personally inform PL that there might be an investigation into his conduct as director before a voluntary liquidator was appointed, but added that he did not know what the liquidator would focus on because he did not know enough about the business and he did not think the focus of any investigation would be on PL’s conduct as a director of the companies (T101). I also consider that Mr David Laird was a witness of credit.

59. The Defendants read several affidavits of PL. By his first affidavit dated 13 October 2022, PL referred to the family history and his initial involvement with the steel business and to the use of the Tattersall Property to store steel in the early years of the business. He referred to a safe which was initially installed at the Tattersall Property in which KAL’s books and records were held. PL referred to AL’s use of Mr Burges, a partner at MSJ, to do legal work for KAH, WE and KAL and to PL’s appointment as a director of KAL and WE in March 1980. PL gave evidence of a conversation with AL in about 1985, about the need to find a warehouse so that KAL could source other steel products and store them under cover, AL’s agreement that at some point KAL would need undercover storage and AL’s view that it was not prudent to buy or build a warehouse in the current market. (PL 13.10.22 [95]) PL was insistent in cross-examination that he had a clear recollection of that conversation, notwithstanding that it took place nearly 40 years ago. PL also refers to the steps which were taken by AL to restructure the companies after he experienced health issues in 1986 and 1987 and refers to the note prepared by Mr Burges in respect of the restructuring, which I addressed in outlining the chronology of events above. PL also referred to the steps taken to complete the restructuring in about 1989. PL also referred to his attempt to buy his siblings’ shares in ALH after AL died and to his siblings not accepting that approach (PL 13.10.22 [137]-[138]).

60. PL refers to steps taken to identify an alternative warehouse or factory for KAL from 1989 and to his identification of the Sunnyholt Property (PL 13.10.22 [139]ff). PL’s evidence is that he originally intended that KAL would purchase the Sunnyholt Property but that Mr Burges advised (PL 13.10.22 [146]:

“Son, I know that your Dad previously bought properties in [KAL’s] name but it’s not the way business is done now. [KAL’s] properties are already exposed to creditors if it has any financial difficulties. You need to buy this property through another structure so that if [KAL] went bust this property would be outside the reach of creditors and you would still have somewhere to do your business. We will help you with this.”

61. Assuming, without deciding, that Mr Burges gave that advice, that does not provide support for the approach taken by PL in acquiring that property for a trust in which he had the sole economic interest, since that advice did not prevent the Sunnyholt Property being purchased by a company other than KAL or the trustee of a trust which replicated the existing economic interests in KAL. PL did not suggest, in his evidence on cross examination, that Mr Burges had given any advice that required the exclusion of his mother or his siblings from any economic interest in the entity holding the Sunnyholt Property and there is nothing in the surrounding circumstances that would have provided any basis for any such advice. PL’s evidence (PL 13.10.22 [148]-[149]) is that he relied upon the guidance and advice provided by Mr Burges in respect of the creation of Aidzan and the Peter Laird Trust. I do not accept that evidence if it is intended to imply that Mr Burges, rather than PL (possibly to DL’s knowledge) decided who were to hold the shares in Aidzan (namely PL) and who were to be the beneficiaries of the Peter Laird Trust (also PL).

62. PL also refers to the steps taken in respect of Aidzan’s purchase of the Sunnyholt Property, the Sunnyholt Lease and the finance obtained from Michell (PL13.10.2 [152]) and to the entry into a financing arrangement with Michell in respect of the transaction (PL 13.10.22 [161]ff). PL’s evidence is that, while KAL was named as a co-borrower under the Michell facility, he never regarded KAL as a borrower (PL 13.10.22 [164]) and I recognise that KAL’s financial accounts, to the extent they are available, did not record a liability under that facility. PL’s evidence of that understanding does not affect the objective content of the arrangement.

63. PL’s affidavit evidence (PL 13.10.22 [180]-[182]) also addressed his “practice” in explaining documents to DL, while she was a director of KAL, as follows:

“When I presented [DL] with documents to sign, my practice was to first explain to her what the purpose of the document was and why she was being asked to sign the document. For example, with the ‘Declaration of Trust over Share’ document dated 16 January 1990 I recall saying to [DL]:

“This is a Deed under which you agree to hold your share in Aidzan on trust for me. I have read the Deed and it looks ok to me. You will remember that Aidzan was the company we set up to own the new factory”…

If [DL] asked any questions before signing a document, my practice was to try to answer them or show her parts of the document at hand that would satisfy her questions. I never presented [DL] with documents to sign without first making sure that the documents were explained to her.

If [DL] was asked to sign a document by solicitor or adviser in my presence, such as [Mr Burges] or Mr Vumbaca, I usually only provided an additional explanation to that given by them. I provided an additional explanation to assist [DL] in understanding the purpose and effect of a document.”

That evidence was implausible so far as PL claimed to recall the explanation of a document that he gave over thirty years ago. In any event, it is notable that that explanation did not contain a disclosure that the trust structure adopted for holding the Sunnyholt Property would exclude PL’s siblings from any economic interest in that property. DL also seeks, in a somewhat conclusory fashion, to attribute a reasonably significant role in KAL’s management to DL after AL’s death in his affidavit evidence (PL 13.10.22 [500]) as follows:

“Whilst [DL] was not involved in the day to day running of [KAL], [DL] was involved in the decision making of [KAL] in her capacity as a director of [KAL] and the majority shareholder, including in respect of causing [KAL] to be party to the Michell Loan, the Corporate Guarantee, the Mortgage of Lease, the Assignment of Rentals, and the Sunnyholt Lease (together, the 1990 Transactions), as well as facilitating the transfer of the ownership of the Sunnyholt Property from Aidzan as trustee of the Peter Laird Trust to Aidzan as trustee of the PAL Property Trust ...”

I give limited weight to that evidence, to the extent that it extends beyond DL’s execution of transaction documents that I address below, given the view that I have formed as to the reliability of PL’s evidence as to matters that he perceived would assist his defence of the proceedings.

64. PL also gives evidence as to the basis on which he set the rent payable by KAL to Aidzan, and expresses his view that a yield of around 12% was less than the yields generally available in the marketplace and represented an attractive rate for KAL, equating to an annual rent of $420,000 for the Sunnyholt Lease (PL 13.10.22 [189]). It is not necessary to address whether that rental was an arm’s length rental, although the joint expert report concluded that it was well above the then market rate, where I find below that Aidzan’s acquisition of the Sunnyholt Property was in breach of PL’s duty to KAL and that the sale proceeds from that property are held subject to a constructive trust for KAL. PL also refers to the subsequent use of the Tattersall Property by KAL from 1990 to 2005 to store surplus steel such as steel pipe, scrap and second hand steel (PL.13.10.22 [196]ff).

65. PL also addresses the circumstances in which, in 1992, the Aidzan Superannuation Fund and the PAL Property Trust were established (PL 13.10.22 [210]ff). PL’s evidence is that Aidzan was appointed as trustee of the Aidzan Superannuation Fund and he was and still is its sole beneficiary (PL 13.10.22 [224]) and he also refers to the establishment of the PAL Property Trust on or about 26 May 1993 (PL 13.10.22 [233]). PL also addresses a series of health difficulties which affected him from at least October 1994 onwards (PL 13.10.22 [273]ff). He addresses the circumstances in which he caused KAL to make a superannuation contribution of $1 million into the Aidzan Superannuation Fund in 2007 (PL 13.10.22 [357]ff). His evidence discloses his focus upon the tax advantages of that transaction, although he appears to have misunderstood the financial advice that he was provided in that respect, and does not indicate that he gave any consideration to KAL’s interests in determining whether it should make that contribution.

66. PL also addresses issues in respect of the management of the companies, and his health difficulties in that affidavit. His evidence (PL 13.10.22 [436]) is that:

“In 2013, I could not face going to the Sunnyholt Property. I also did not feel well enough to work. For months at a time I stayed away from the Sunnyholt property. I let the staff go, and shut the doors to most trading. After that I paid a storeman out of my own pocket to attend the Sunnyholt property. Eventually I let him go as well.”

67. PL acknowledges (PL 13.10.22 [453]) receipt of an email from ML in February 2017 relating to the state of the Sunnyholt Property and his response to that email and refers to his visiting the Sunnyholt Property in 2017 and seeing that the safe and filing cabinets in the office were missing; there was a hole in the roof; it appeared to him that one of the mobile cranes at the Sunnyholt Property had been used to lift the safe out through the roof; and that the office was open to the elements and had been ransacked and was in “shambles” and that other items had been removed from the office (PL 13.10.22 [454]). These matters are consistent with photographs attached to ML’s email of February 2017. PL does not address the further theft of the steel from the Sunnyholt Property in June 2017 in that affidavit.

68. PL also refers to advice given by his accountant, in early 2018, that the winding up of KAL would be a “simple liquidation” where the companies had no creditors, no tax due and “there were no shareholder issues” and that the accountant could organise a “friendly liquidator” to assist in winding up the affairs of the company (PL 13.10.22 [457]). The advice did not recognise the extent to which PL’s past conduct in respect of the companies warranted investigation and plainly also misunderstood the statutory obligations of a liquidator. There is no reason, however, to treat either Mr Hayes or the Laird siblings as responsible for those errors. PL’s evidence is also that neither Mr Hayes nor his staff provided him a declaration of relevant relationships or disclosed conversations with the solicitors acting for the other siblings leading up to his appointment (PL 13.10.22 [460]). It is not necessary to reach any finding as to that matter, where it provides no answer to the claim brought by KAL against PL in respect of his conduct from previous years, which is a matter to be determined on its merits in these proceedings. PL also refers to aspects of Mr Hayes’ first affidavit and the affidavits of the other Laird siblings in that affidavit.

69. By a second affidavit dated 20 December 2022, PL provided further information as to the purchase of the Sunnyholt Property and its suitability for KAL’s business. By a third affidavit dated 2 February 2023, PL gave evidence that the main work on which he engaged Mr Burges and MSJ after AL’s death was in connection with Aidzan’s acquisition of the Sunnyholt Property and associated transactions and the entry into the lease of that property and financing facility and that, after those transactions were implemented, neither KAL nor Aidzan needed to engage the legal services of Mr Burges or MSJ. He also referred to the advice provided by Mr Barden to him, as a financial advisor. His evidence was that he last spoke to Mr Burges at his mother’s funeral in late 2009.

70. By an affidavit dated 2 May 2023, PL referred to the information which he had provided to the Australian Taxation Office in January 2012 as to his health position, and addressed further health difficulties which he had suffered in 2013. By his further affidavit dated 11 May 2023, PL, by leave, gave evidence as to aspects of his earlier affidavits which had been rejected in form. Much of that affidavit was admitted, by agreement of Counsel, with limiting orders under s 136 of the Evidence Act as directed to his state of mind, rather than as proof of the fact.

71. PL was cross-examined at length, on 10, 11, 12 and 17 May 2023, in a sometimes disorganised and somewhat repetitive manner. PL was cross-examined as to the Tattersall Property (T142) and as to the approaches which he later received to rent the Tattersall Property (T146ff) and the extent of any need to use that property for overflow storage of steel and the fact that the property was not used for overflow storage of steel from 2005 (T150). He was also cross-examined as to the very limited inquiries he had made before setting the rent to be payable by KAL to Aidzan in respect of the Sunnyholt Property (T160). He was cross-examined as to the circumstances of the police event report made in respect of the theft of steel from the Sunnyholt Property (T164, 170ff) and as to the risk that thieves could enter that property and the steps which might have been taken to secure it (T166ff). He was cross-examined as to the prospect of building a warehouse on the Tattersall Property, presumably to advance the claim that it was not necessary for KAL to move to the Sunnyholt Property (T182ff). He was also cross-examined as to his evidence of a discussion with AL as to the possibility of acquiring alternative premises, which he claimed took place in the mid-1980s, and claimed to recall some 40 years later (T186).

72. PL was further cross-examined as to the steps which could have been taken to earn income from the Tattersall Property (T206ff) and as to the circumstances in which KAL was not wound up from 2010, although it had been incurring substantial losses in previous years and was not engaging in business activities from 2010 (T210). He was also cross-examined as to the purchase of the Sunnyholt Property by Aidzan and attributed the steps taken to acquire that property in that company to Mr Burges (T215). He was also cross-examined as to the liabilities which KAL incurred in respect of that purchase (T217ff) and the other structures that might have been adopted to acquire the Sunnyholt Property, including by a trust of which KAL was trustee or a structure which his siblings shared in the benefit of owing that property, but did not accept that that was possible, consistent with the advice given by Mr Burges (T252). I address that issue further below.

73. PL was also cross-examined, at some length, as to the rent payable by KAL to Aidzan in respect of that property, and accepted that he did not recall telling his siblings, other than Ms Roberts in 2018, about the acquisition of the Sunnyholt Property (T264). Little turns upon that, where the question of KAL’s knowledge of the circumstances of the acquisition did not depend upon the Laird siblings’ knowledge of those circumstances. PL was also cross-examined, again at length, as to other aspects of his dealings with KAL, including payment of his salary and an increase in that salary of $120,000 to $180,000 per annum in about 2008 (T276). He was also cross-examined as to the circumstances in which the PL Superannuation Payment later came to be recharacterised as a loan from KAL to PL in about 2012 (T291ff, 299ff) and to his claim to have made repayments against that loan, which I address below (T302ff).

74. PL was then further cross-examined as to the circumstances in which he had not caused KAL to be wound up in about 2007 (T327ff), and he accepted that, “knowing what I know now”, consideration should have been given to liquidation from that time, although he did not accept that that matter was then apparent without the benefit of hindsight. PL was then further cross-examined as to KAL’s payment of salary to PL and rent to Aidzan for the period from 2007 (T334ff) and to the application of monies sourced from the sale of the Valediction Road Property to the PL Superannuation Payment (T338ff). PL was also cross-examined as to the steps which he was able to take to address aspects of his personal affairs including the payment of his salary, the payment of rent to Aidzan and the distribution of his mother’s estate in the period in which he had suffered physical health issues, and on his account, depression (T339ff, T351ff).

75. PL was plainly aware of the matters that were in controversy in the proceedings, and he generally gave credible evidence and made concessions as to the limits of his recollection as to matters that were not adverse to his interests, but gave self-serving evidence and on occasion evidence that seems to me to have been false as to the matters that were in controversy, where he plainly recognised that a different answer would be adverse to his interests. I broadly accept his evidence as to matters that he did not perceive as controversial and approach his evidence with caution as to the issues that are in controversy between the parties.

76. The Defendants also read two affidavits dated 13 October 2022 and 13 February 2023 of Mr Alan Topp, who is one of the joint and several liquidators of Aidzan. In his affidavit dated 13 October 2022, Mr Topp gave evidence as to the books and records of the Laird family companies and Aidzan, which was plainly reliant on information provided to him by PL. Significant parts of the balance of that affidavit were not admissible and were not read and the remainder of that affidavit was of little assistance to resolution of the issues to be determined in the proceedings. In his second affidavit dated 13 February 2023, Mr Topp referred to the proceeds realised on the sale of the Sunnyholt Property and to deductions made from those proceeds. The balance of those proceeds, subject to those deductions, were the subject of a freezing order by Williams J in this Court.

77. Mr Topp was cross examined, including as to the notice that had been given to PL and to Mr Topp of KAL’s claims against the Sunnyholt Property, which was plainly relevant to allegations of misconduct that were then made by PL and Mr Topp, in his capacity as liquidator of Aidzan, against Mr Hayes, involving a contention that Mr Hayes had not given notice of possible claims against Mr Laird before interviewing him in September 2019. I have referred to correspondence sent by Mr Hayes in July 2019 in the chronology which appears above. These allegations were rightly abandoned by the Defendants in Counsel’s closing submissions at the hearing.

78. The Defendants also read an affidavit dated 29 September 2022 of Mr Ian Barden who, prior to his retirement on 13 September 2020, was a financial adviser specialising in self-managed superannuation funds. Mr Barden had been PL’s financial adviser since 1992 and was also the tax agent and accountant for the Aidzan Superannuation Fund and the PAL Property Trust. Mr Barden referred to an initial conversation with PL, in 1992, which led to a restructuring of the trust arrangement by which Aidzan held the Sunnyholt Property in order to seek or reduce the tax payable on rent paid by KAL to Aidzan.

79. Mr Barden gave evidence of a conversation with PL, DL and solicitors during December 1992 in which he recalled PL having referred to a “director’s loan from KAL” for the finance of the Sunnyholt Property and to Mr Barden confirming to DL that the new unit trust would be “owned by a superannuation fund, of which [PL was] the beneficiary”. The conversation would have been significant, had it occurred, as it would have established that DL had been informed that PL was the beneficiary of the new trust and, implicitly, that the other Laird siblings had been excluded from any economic benefit from ownership of the Sunnyholt Property. Mr Barden, in his affidavit, claimed to recall the substance of that conversation, notwithstanding that it occurred about 30 years ago, but abandoned his claim to remember it in cross-examination. That conversation is now of no assistance to the Defendants. Mr Barden also referred to the establishment of the Aidzan Superannuation Fund on 1 January 1993, although, in fact, that trust was not established on that date, and documents were backdated to that date after Mr Barden prepared them in April 1993, as noted above.

80. Mr Barden also gave evidence of a conversation with Ms Cook and her husband in his affidavit, in which he claimed to have informed her that PL’s unit trust and self-managed superannuation fund owned the Sunnyholt Property. That conversation would also have been significant had it occurred, because it would have contradicted Ms Cook’s evidence that she had no knowledge of that matter until 2018. However, Mr Barden accepted in cross-examination that he had no recollection of disclosing that matter to Ms Cook in that conversation and that it was unlikely that he would have done so, where it would not have been his practice to disclose PL’s confidential information to his sister without PL’s consent. It is also unlikely Mr Barden had any real recollection of that conversation, since he was unable to recall much more recent conversations in the course of his cross-examination. Mr Barden also referred to a number of financial records relating to the PAL Property Trust, although it appears he had no involvement with it for a significant period in which those records were prepared. Mr Barden was cross-examined, and significantly retreated from his affidavit evidence in that cross-examination.

81. Mr Leopold, with whom Mr Tobin for the Plaintiff and the Cross-Defendants, at points raised a submission that a Jones v Dunkel inference should be drawn from the Defendants not calling evidence from Mr Burges. If that submission is pressed, I do not accept it, where it is not apparent that there was any more reason for the Defendants than KAL to call Mr Burges, or that he could properly be described as in the Defendants’ “camp”, and his absence was sufficiently explained. By an email dated 16 March 2021 (Ex D8), Mr Barr, who was acting for the Defendants, followed up with a former partner of Mr Burges, Mr King, as to Mr Burges’ availability and observed that:

193. The Defendants contend (Defence [118]) that this claim is time barred under s 14 of the Limitation Act or in equity by analogy to ss 14-15 of the Limitation Act. In closing submissions, KAL accepted that this claim was prima facie out of time, either under s 14 of the Limitation Act or possibly by analogy under s 23 of the Limitation Act, and relied on s 55 of the Limitation Act and the concept of equitable concealed fraud to extend the limitation period, on the basis that the payments were only known to PL and not to anyone who could have done anything about them on behalf of KAL until 2018. The Defendants respond that the limitation period cannot be extended under s 55 of the Limitation Act or in equity under the doctrine of equitable concealment where the relevant knowledge can be imputed to KAL. In their “Schedule of Limitations Defences” in closing submissions, they contend that PL and DL knew that KAL was paying a salary to PL as its managing director, and knew that KAL was leasing the Sunnyholt Property from Aidzan; KAL obtained a benefit from paying salary by obtaining the use of PL’s services and tax deductions for salary; and KAL obtained a benefit from the impugned rental payments by a right to occupy the Sunnyholt Property and tax deductions for rental. As I noted above, Mr Leopold did not contend that the treatment of material tax deductions as a benefit to a company should be limited to the facts of Bluemine, although I recognise that a loss which is partly offset by a tax deduction would not be described as a benefit in ordinary usage.

194. I accept the Defendants’ submission that knowledge of the payment of PL’s salary and rent to Aidzan was known to PL and can be attributed to KAL. I recognise that PL and KAL did not have access, in 2008 to 2010, to financial reports recording the detail of KAL’s operating losses, net losses and asset position as later recorded in its accounts for those years, where PL did not cause those accounts to be prepared until 2012. However, PL must then have also known that KAL was incurring material losses and a material erosion of its assets, where he knew that that he was spending little time in the business so as to generate sales or income and must have known the other matters later recorded in his letter dated 12 January 2012 to the Australian Taxation Office; he knew of KAL’s outgoings by payment of his salary and rent to Aidzan since he caused them to be paid; and the erosion of KAL’s financial position was the necessary and obvious consequence of those matters.

195. With hesitation, and where I am bound by appellate authority, including the Court of Appeal’s decision in Bluemine, I must treat at least the tax deductions received by KAL for rent and salary as a benefit to KAL, and that requires that PL’s knowledge of the payment of rent and salary, the limited business activities that generated those tax deductions and the losses that necessarily resulted from them be attributed to KAL. PL’s limitations defence to this claim succeeds and this claim therefore fails in respect of the period for which the claim was pressed.

Affirmative Defences

197. The Defendants also relied on a defence of actual authority relying on provisions of KAL’s constitution (Defence [120]-[123]) in addressing the challenged transactions. Mr Studdy refers to the scope of the directors’ powers under KAL’s memorandum of association and its articles. This does not assist PL where the fact that directors have broad powers does not advance a determination where they are exercised in breach of duty in a particular case.

198. Mr Studdy also relies on article 78 of KAL’s articles of association (Ex J1, 96) which provides that a director of KAL will be entitled to contract with KAL, without being disqualified from office, or enter into contract or arrangements on behalf of KAL with a company in which the director is a member, or otherwise interested, without that contract being avoided, and is not required to account to KAL for any profit realised on such contract. Article 78 also permits a director to vote in respect any such contract or arrangement, provided that the nature of his or her interest is disclosed at the meeting of directors at which the question of entering into the contract or arrangement is first taken into consideration. On that basis, Mr Studdy submits that:

“[DL] and [PL] were authorised to enter into the various contracts and arrangements by which the Sunnyholt Property was acquired and subsequently leased to KAL. In these circumstances there can be no breach of duty to avoid conflicts of interest and not to make a financial gain.”

199. Mr Leopold responds that article 78 of KAL’s articles of association is drafted in the usual format for the general attenuation of directors’ duties for proprietary companies, that is, as to a director being permitted to take a profit and act although in conflict with the interests of the company, subject to due disclosure of their interest to the other directors. He submits that an article of this kind must be read strictly (Guinness PLC v Saunders [1990] 2 AC 663 at 692); that article 78 only applies to contracts that KAL makes with an interested director or an entity associated with an interested director; and that KAL’s articles do not expressly permit a director to divert a corporate opportunity of KAL’s to a director or an entity associated with that director. He also submits that a company’s constitution cannot diminish a director’s primary fiduciary duty to act bona fide in the best interests of the company as a whole (Ngurli Ltd v McCann (1953) 90 CLR 425 at 438-439) and draws attention to the observation of the authors of Ford’s Principles of Corporations Law (17th ed., 2023) at [9.120], with which I agree, that:

“A contract by which a business opportunity belonging to the company is diverted to some other firm controlled by a director would not be authorised by a constitutional provision [that generally permits directors to act in conflict with their company or take a profit against their company]”.

200. On this basis, he submits that article 78 did not permit PL (or DL) to divert the opportunity for the acquisition of the Sunnyholt Property to entities which they controlled and that, although PL later caused KAL to enter into contracts with Aidzan, in particular the Sunnyholt Lease, the entry into those contracts was not in the best interests of KAL. It seems to me that these standard form constitutional provisions are not sufficient to abrogate the rule against conflict of interest, or its application to diversion of corporate opportunities, to the extent that would be necessary to permit Aidzan’s acquisition of the Sunnyholt Property in a manner that excluded the shareholders in KAL including ALH, and through them the other Laird siblings, from any economic interest in the property. It seems to me that this article does not protect the payment of the PL Superannuation Payment to Aidzan for the same reasons. It has no potential application to the claims against PL in respect of the Tattersall Property, the theft of steel or liabilities arising from KAL’s trading at a loss, which do not attack a contract or arrangement between PL or any associated entity and KAL which could be supported by the relevant constitutional provisions.

201. The Defendants initially pleaded a defence relying on the Duomatic principle (Defence [124]ff) and KAL joined issue with that defence in reply. The Defendants abandoned that defence in closing submissions and I need not address it further.

202. The Defendants also plead (Defence [129]ff) a defence of delay. KAL joins issue with that defence in their Reply. In their Rejoinder to the Reply, the Defendants raise allegations of conflict of interest affecting KAL’s solicitors and allegations of impropriety against Mr Hayes as liquidator of KAL. The allegations against Mr Hayes were rightly abandoned by Mr Studdy in closing submissions and, although the other allegations were not abandoned, Mr Studdy did not seek to elaborate upon them.

203. In closing submissions, Mr Studdy referred to the opinion of Lord Selbourne LC in Lindsay Petroleum Co v Hurd (1874) LR 5 PC 221 and to Young JA’s identification of the elements of a defence of laches in Crawley v Short [2009] NSWCA 410 at [163] as “(i) knowledge of the wrong; (ii) delay; and (iii) unconscionable prejudice caused to the opponent by the delay” and his observation (at [164]) that:

“The key element is whether, in all the circumstances, “it would be practically unjust to give a remedy” (per Lord Selborne LC in The Lindsay Petroleum Company v Hurd (1874) LR 5 PC 221 at 239-240). Normally, that means that the defendant must show both delay and detriment suffered by the delay, Fisher v Brooker [2009] 1 WLR 1764 at 1781 [64] per Lord Neuberger with whom Lord Hope, Lord Walker, Baroness Hale and Lord Mance agreed.”

That observation was cited with approval by Gleeson JA (with Meagher and Barrett JJA agreeing) in Sze Tu at [415].

204. Mr Studdy then repeats the Defendants’ submission that DL’s and PL’s knowledge will be imputed to KAL as the relevant actions were not undertaken in “total fraud” of KAL and that KAL therefore had knowledge of each of the relevant alleged wrongs at the time they occurred. I have not accepted this submission, for the reasons set out above, in respect of KAL’s claim as to Aidzan’s acquisition of the Sunnyholt Property for PL’s benefit and the PL Superannuation Payment. It is not necessary to address this submission in respect of other claims which have failed for the reasons set out above, or only succeeded within applicable limitation periods.

205. The Defendants point to prejudice in respect of the loss of evidence, including evidence of Mr Burges and DL, and the loss of documents stolen from the Sunnyholt Premises when the safe was stolen. While I accept the possibility of that prejudice, it is not unconscionable nor such as to make it practically unjust to give a remedy, where it resulted from PL’s failure to disclose the transactions at the time they occurred to KAL’s shareholders and the Laird siblings, as shareholders in KAL’s holding company who had a substantial indirect economic interest in KAL.

206. The Defendants also point to the possibility of a lost claim for indemnity or contribution from DL’s estate, and to prejudice suffered by the Defendants being unable to make that claim. Mr Studdy submits that:

“Finally, and most importantly, in support of its claims [KAL] pleads that [DL] also breached her duties as a director. If [DL] were alive she would presumably be a joint-defendant in these proceedings. If [PL] is liable for breaching his duties as a director (which, is denied) then it follows that [DL] would also be jointly liable. [DL’s] estate has in all material respects been fully administered, with Peter and each of his siblings receiving a 20% share in her estate.”

207. However, the Defendants make no real attempt to establish that a claim for indemnity or contribution from DL’s estate had any substantial prospect of success, on its merits, and that is plainly not self-evident where PL was operating the business on a day to day business to DL’s exclusion; PL rather than DL benefited from Aidzan’s purchase of the Sunnyholt Property and the PL Superannuation Payment, and several of the claims against PL relate to events after DL’s death. It does not seem to me that the loss of an opportunity to bring a claim for indemnity or contribution, that has not been shown to have any real prospect of success, amounts to material prejudice.

208. The defence of delay is otherwise not established where it parallels the limitations defences which have not been established on the basis that KAL, acting with reasonable diligence, could only have discovered the relevant breaches in 2018 and brought proceedings promptly after it did so.

Claim for relief under s 1318 of the CorporationsAct

209. The Defendants seek (Defence [142]) relief under s 1318 of the CorporationsAct and KAL joins issue with that defence in reply. Section 1318 allows a court to relieve, relevantly, an officer of a corporation from liability in civil proceedings for negligence, default, breach of duty or breach of trust, if that person establishes that they acted honestly, and that they ought fairly to be excused for the negligence, default, breach of duty or breach of trust having regard to all of the circumstances of the case including those connected with their appointment.

210. Mr Studdy refers to Maelor Jones Investments (Noarlunga) Pty Ltd v Heywood-Smith (1989) 54 SASR 285 at 295, where Olsson J considered the approach that the Court should take to the application of the exoneration power in s 365(1) of the then Companies Act 1962 (SA) and observed that:

“… the jurisdiction is, from its very width, one which must be exercised with great caution, but the court, in balancing the competing interests which, necessarily, are ventilated before it, ought not to shrink from giving effect to its sense of fairness and justice. It should not hesitate, in a proper case, to relieve a person from what, having regard to particular facts and circumstances – particularly where the person concerned has acted honourably, fairly, in good faith and in a commonsense manner as judged by the standards of others of a similar professional background - from what might otherwise be seen to be a harsh and oppressive consequence of the strict application of the law, if applied in absence of the considerations identified by the section.”

Those observations were cited with apparent approval by Austin J in Australian Securities & Investments Commission v Vines (2005) 65 NSWLR 281.

211. In Daniels at 525, Clarke and Sheller JJA observed that a corresponding section allows the Court:

“to excuse company officers from liability in situations where it would be unjust and oppressive not to do so, recognising that such officers are businessmen and women who act in an environment involving risk in commercial decision-making.”

212. In Hall v Poolman (2007) 215 FLR 243, Palmer J observed (at 318) that:

“In my view, when considering whether a person has acted honestly for the purposes of a defence under the [Corporations Act], s 1317S(2)(b)(i) or s 1318, the Court should be concerned only with the question whether the person has acted honestly in the ordinary meaning of that term, ie whether the person has acted without deceit or conscious impropriety, without intent to gain improper benefit or advantage for himself, herself or for another, and without carelessness or imprudence to such a degree as to demonstrate that no genuine attempt at all has been to carry out the duties and obligations of his or her office imposed by the [Corporations Act] or the general law.”

His Honour also there noted (at 318) that the concept of “honesty” in this context means “without moral turpitude”.

213. Matters relevant to relief under these sections include whether the defendant acted honestly; a value judgment whether, having regard to all the circumstances of the case, the defendant ought fairly to be excused for the contravention; and whether, as a matter of discretion, the court should exercise its power to relieve the defendant from any liability: Australian Securities and Investments Commission v Edwards (No 3) (2006) 57 ACSR 209; [2006] NSWSC 376 at [10]; Australian Securities and Investments Commission v Healey (No 2) (2011) 85 ACSR 654; [2011] FCA 1003 at [83]–[84]; Great Southern Finance Pty Ltd (in liq) v Rhodes [2014] WASC 431 at [60]; Re Swan Services Pty Ltd (in liq) [2016] NSWSC 1724 at [236]-[237]. There are three stages in an inquiry under s 1318 of the CorporationsAct, namely whether the applicant for relief has demonstrated that he or she acted honestly; whether, having regard to all the circumstances of the case, that person ought fairly be excused; and whether relief from liability should be ordered wholly or partly and, if partly, to what extent: Australian Securities and Investments Commission v Healey (No 2) (2011) 85 ACSR 654; [2011] FCA 1003 at [84].

214. I accept that whether a person is acting honestly will depend on whether he or she acted without moral turpitude, deceit or conscious impropriety, or without an intent to gain an improper benefit or advantage: Australian Securities and Investments Commission v MacDonald (No 12) (2009) 73 ACSR 638; [2009] NSWSC 714 at [22]. The case law establishes that person may fail to act honestly within the meaning of this section although they did not have a subjective intention to deceive: Australian Securities and Investments Commission v MacDonald (No 12) above at [18]-[19]; Australian Securities and Investments Commission v Healey (No 2) above at [88]. Whether relief from liability should be granted under these sections depends not only on subjective honesty but also on the degree to which the relevant conduct fell short of the required standard, the seriousness of the contravention and its actual or potential consequences, any element of impropriety such as deception and personal gain and any contrition of the applicant and the need for general deterrence is also relevant: Morley v Australian Securities and Investments Commission (No 2) above; Ashrafinia v Ashrafinia [2013] NSWSC 1442 at [252].

215. Mr Studdy submits, in closing submissions, that:

“[PL] acted honestly, openly, and not with deceit or conscious impropriety. It cannot be said that [PL] has acted with the intention to obtain improper benefit or advantage for himself, as in pursuing the course of conduct complained of in these proceedings, Peter was not conscious that any personal advantage he obtained was relevantly improper. In causing KAL to participate in the transactions complained of in the current proceedings, [PL] acted in reliance on the advice he was given from time to time … and in the exercise of his practical business judgment obtained from working in the relevant business since high school ... In all the circumstances, Peter has acted in fairly and in good faith as judged by the standards of other persons with his background. He is without “moral turpitude””.

216. In support of the claim for relief under this section, the Defendants rely, first, on PL’s ill health. I accept that PL suffered recurrent physical health difficulties in the period, and may have been depressed in consequence. That does not support relief against the claims that I have held are established against him, where there is no suggestion that he was inhibited by health at the time of Aidzan’s acquisition of the Sunnyholt Property, and he was sufficiently well to implement that transaction for Aidzan’s benefit at that time. It also does not support relief in respect of his payment of salary and rent in the period from 2007, where he could readily have resigned as a director of KAL if he was unable to perform that role for health reasons and invited his siblings to place KAL in members’ voluntary liquidation, as ultimately occurred, and avoided the losses that KAL suffered in that way.

217. Second, the Defendants rely on the alleged absence of any assistance with the affairs of KAL from PL’s siblings, despite each being a shareholder of the ultimate holding company, ALH. That also does not support the relief sought, where that is irrelevant to his conflict of interest involved in Aidzan’s acquisition of the Sunnyholt Property; PL did not fairly and fully disclose his health difficulties or KAL’s financial position to them or seek such assistance; and, when ML offered such assistance, PL declined it in respect of KAL’s operations, at a time that it had largely or entirely ceased operations in any event.

218. Third, PL relies, until DL’s death in 2009, on the old age of DL and her health issues, who was consequently unable to attend to physical tasks associated with the conduct and carriage of KAL’s business operations. This also does not assist, where that is again irrelevant to his conflict of interest involved in Aidzan’s acquisition of the Sunnyholt Property, and DL had died at the time he allowed KAL to continue to pay his salary and rent while KAL was suffering continuous operating losses and he had no plan to address its difficulties. PL also relies on an alleged lack of reliable and truthful staff to assist in maintaining KAL’s business, but that does not assist the Defendants where that is again irrelevant to his conflict of interest involved in Aidzan’s acquisition of the Sunnyholt Property, and would provide reason to have ceased operation of KAL’s business at an earlier time rather than an explanation for not doing so.

216. In oral submissions, Mr Studdy referred to a number of matters which might support relief under s 1318 of the Corporations Act in respect of PL, including his commencing work with KAL in his early or mid-20s and devoting his working life to that company, and to the significant health issues which he suffered and the possibility that he was over-optimistic as to his capacity to recover from those health issues and to return to running the business (T520).

217. So far as the matters I am required to decide under s 1318 of the Corporations Act are concerned, I do not accept that PL acted honestly in the relevant sense in either causing Aidzan to acquire the Sunnyholt Property for his benefit or paying the Surplus Rent to Aidzan or making the PL Superannuation Payment, where each decision was made in a position of material conflict of interest. I am not persuaded he acted without an intent to gain an improper benefit or advantage in that regard and that is sufficient to exclude relief under this section. I am also not persuaded that, having regard to all the circumstances of the case, PL ought fairly be excused; and the question whether any relief from liability should be ordered wholly or partly and, if partly, to what extent does not arise. PL has demonstrated no element of contrition and no attempt has been made to compensate KAL for its loss; to the contrary, PL responded to the claims against him, inter alia, by the now abandoned attack on Mr Hayes’ professional conduct and a continuing attack on his siblings, for a suggested failure to inform him that his conduct might (I interpolate, rightly) come under scrutiny. It does not seem to me that the basis for relief of PL from liability has been established.

The Defendants’ set-off claims

221. The Defendants also claim (Defence [143]ff) in respect of alleged outstanding loans and set-offs. KAL also joins issue with that defence in reply.

222. First, the Defendants plead (Defence [143]) that, if PL is ordered to pay any amount to KAL in respect of the PL Superannuation Payment, he is entitled to a set-off for unpaid long service leave and other entitlements, which is also the subject of a Cross-Claim. Mr Studdy submits that, by reason of s 286 and s 1305 of the Corporations Act, the reference to those amounts in the Declaration of Solvency is prima facie evidence of the matters stated in it. Plainly, that proposition would also apply to the $900,000 debt recorded in that document as owing by him to KAL. He submits, and I accept, that an equitable set-off of this claim would not be prevented by application of a limitation period if it would be unconscionable in the circumstances to deprive Peter of entitlements he had not sought to recover due to his close relationship with KAL as its sole director: Twigg v Twigg (NSWCA) at [172]. However, this claim is not established, because this calculation depends on the continuance of PL’s employment beyond the period of KAL’s operating and net losses which I have addressed above. While I have held that KAL cannot recover the salary and rent that KAL paid out in that period by reason of a limitations bar, it does not follow that PL can rely on the continuance of that business in that period to establish a claim against KAL. PL made no attempt to establish this claim on any alternative and lesser basis and it must fail. The set-off claimed by Aidzan for unpaid rent (Defence [144]-[146]) must fail on the same basis.

223. The Defendants also plead (Defence [147]-[169]) that, from 1994, superannuation contributions paid by KAL to Aidzan as trustee of the PAL Property Trust were used to pay down the amount of $1,283,000 which PL procured from KAL for the benefit of Aidzan and the debt of $1,800,000 to Michell. In cross examination, PL referred to a suggested contribution of the superannuation fund to funding the purchase of the Sunnyholt Property. His evidence was obscure and unsupported by contemporaneous documents and I do not accept it. Mr Studdy (or possibly Mr Nixon or their instructing solicitors) also undertook a very complex calculation of those amounts in submissions, unsupported by contemporaneous or expert evidence. I am not persuaded to accept that calculation, without such evidence.

224. Mr Studdy then submits that:

“it would be unconscionable for KAL to take the entire interest in the Sunnyholt Property (and hence the sale proceeds of that property) on the basis that its funds have indirectly been used to pay the acquisition cost of that property, where in the circumstances the funds of Aidzan have similarly indirectly been used to pay the acquisition cost of that property. KAL would take the benefit of the contribution of Aidzan and be unjustly enriched to that extent. The Defendants further submit that in the current case there is sufficient mutuality between the claim of KAL and the off-setting interest claimed by Aidzan. The claims arise in respect of interests in the same property ... There is sufficient closeness of the connection between the two claims.”

225. Mr Studdy develops this submission in closing submission as follows:

“[Aidzan’s] interest arises by reason of superannuation contributions made to the A[idzan] S[uperannuation] F[und] on behalf of P[L] being used to acquire units in the PAL Property Trust. In this way, P[L]’s superannuation contributions represented funds available to the PAL Property Trust to pay down the debt associated with the acquisition of the Sunnyholt Property (i.e. the Michell Loan and KAL-PAL Loan)” [emphasis added].

226. I cannot accept this submission. First, its evidentiary basis is not established. Second, it is not apparent to me why a change in the beneficiary of the trust, or how PL acquired interests in the PAL Property Trust, could give rise to a set-off affecting the imposition of a constructive trust upon the legal interest in the property held by Aidzan, which had been acquired by it well before the PAL Property Trust was established. Third, the careful phrasing of the submission makes clear that it is no more than speculation, since the fact that funds were “available” to the PAL Property Trust and might have been used to pay down debt does not establish that they were used to pay down debt. Fourth, my attention was not drawn to any evidence that any of PL’s superannuation funds were applied to repay the principal amount made available by KAL to Aidzan to acquire the Sunnyholt Property (which it has not been established was a loan), and there is little evidence (to which I referred above) even of payment of interest on that loan and none that it was sourced from PL’s superannuation contributions. Fifth, if (which is also not established) PL in fact made contributions to the funding of Aidzan’s acquisition of the Sunnyholt Property in this way, well after it was acquired by Aidzan, he did so knowing of the circumstances giving rise to KAL’s claim for a constructive trust against that property and it is not apparent why his claim should not be postponed to KAL’s claim to that property, or why any mixing of funds to which KAL is entitled with PL’s funds should operate to KAL’s disadvantage.

227. I also see real force in, although it is not necessary to determine, Mr Leopold’s submission that a set-off is not established because this claim does not, in the language used by Emmett JA (with whom Beazley P and Meagher JA agreed) in HP Mercantile Pty Ltd v Dierickx (2013) 306 ALR 53; [2013] NSWCA 479 at [136], “impeach the title” of KAL, and that Aidzan’s cross-claim for such contributions, even if its quantum was established, does not provide “some ground for equitable intervention beyond the mere existence of a cross-claim, such that it can be said that the equity of the defendant impeaches the claimant’s title to the legal demand being enforced”. The Defendants’ claim for set-off on this basis therefore fails.

Aidzan’s Cross-Claim

228. By a Cross-Claim filed on 11 April 2023, Aidzan claimed damages for unpaid rent against KAL in the amount of $720,000 and interest up to judgment. KAL denies liability for these claims in a relatively complex Defence. The claim for rent is not established where I have found that the Sunnyholt Property is held on constructive trust for KAL. In closing submissions, Mr Studdy indicated that PL did not press a claim for $288,347 against KAL on account of outstanding employee entitlements or a claim, which was inconsistent with his position in the primary proceedings, for judgment for two payments alleged to have been made by mistake to KAL in the amounts of $100,000 and $680,000.

Summary and orders

229. In summary, KAL has succeeded in its claim for a remedial constructive trust in respect of the proceeds of sale of the Sunnyholt Property, although a remaining issue as to the quantification of that claim will need to be addressed in formulating orders. KAL has succeeded, in part, in respect of its claim as to the Sunnyholt Surplus Rent, but only as to rent paid after 11 December 2008. The parties will need to calculate the amount recoverable under this claim since that date in preparing orders. Several other claims cannot succeed or were not pressed where KAL has succeeded or partly succeeded in these claims.

230. KAL has succeeded in its claim in respect of PL’s failure, as a director of KAL, to take, or to cause to be taken, steps to recover any rent from the Tattersall Property or any other monies in relation to the commercialisation of that property, but only for the for the 6 year period before the Statement of Claim was filed, that is, from 11 December 2014, in the amount of $628,000 plus interest. KAL has also succeeded in respect of its claim to the PL Superannuation Payment, in the amount of $900,000 and any applicable interest. KAL’s claims as to the theft of steel from the Sunnyholt Property and for certain liabilities incurred while KAL was trading at a loss have failed.

231. The Defendants have failed to establish the affirmative defences on which they relied and their claim for set off, PL has failed to establish his claim for relief under s 1318 of the Corporations Act and Aidzan has failed to establish that part of its Cross-Claim that it pressed in closing submissions.

232. I direct the parties to bring in agreed short minutes to give effect to this judgment and as to interest and costs within 14 days or, if there is no agreement between them, their respective short minutes of order and short submissions as to any differences between them.

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Amendments

06 July 2023 - Typographical error corrected on cover page.

Decision last updated: 06 July 2023