KQ International Trading Pty Ltd v Yang
[2016] VSC 146
•15 April 2016
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
S CI 2012 4695
| KQ INTERNATIONAL TRADING PTY LTD (ACN 120 547 971) | Plaintiff |
| v | |
| JIA FU YANG (AKA KERRY JIA FU YANG) | Defendant |
---
JUDGE: | SIFRIS J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 22, 24, 25 February 2016, 1, 3, 24 March 2016 |
DATE OF JUDGMENT: | 15 April 2016 |
CASE MAY BE CITED AS: | KQ International Trading Pty Ltd v Yang |
MEDIUM NEUTRAL CITATION: | [2016] VSC 146 |
---
CORPORATIONS – Director engaged in conduct not in best interests of the company and not for proper corporate purposes – Breach of fiduciary duty – Breach of statutory duty – Compensation ordered – Sections 181, 182, 1317H Corporations Act 2001 (Cth).
EVIDENCE – Lack of documentary evidence – Failure to produce any relevant books, records or documents of company – Consequences.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | C E Shaw | McDonald Lawyers |
| For the Defendant | A Naidu | RTC Legal |
HIS HONOUR:
Introduction and background
This is a claim by the plaintiff against its former director, the defendant, for breach of fiduciary and statutory duty. The plaintiff alleges that the defendant, in breach of duty, misappropriated substantial funds from the plaintiff.
During the period July 2006 to December 2009,[1] the plaintiff, KQ International Trading Pty Ltd (“KQ”), carried on the business of importing garments from China and wholesaling them in Victoria.
[1]The dates are approximate. Precision is not required.
During the period that it traded, the directors of KQ were, the defendant (Yang), Qian Wu (Wu) and Fang Xie (Xie). Yang held 50% of the shares. Wu held 40% and Xie held 10%.
Wu and Xie are respectively the brother-in-law and sister-in-law of Guo Qiang Zhao (Zhao). Although there is some contest about this, Wu and Xie are clearly Zhao’s nominees.
Prior to the incorporation of KQ, Yang and Zhao were equal shareholders in Tongge Clothing International Pty Ltd (“Tongge”). Yang was its sole director and ran the business in Australia and Zhao sourced and provided the clothing in China.[2]
[2]There is a question as to whether KQ succeeded Tongge or was a new company operating in a different manner. In my view the question is of little relevance.
It was common ground that the global financial crisis had a profound effect on the business of KQ. During or about October 2009, it was decided (by Yang and Zhao) to cease trading.
Yang took steps to deregister KQ. It was deregistered on 30 September 2010. The reason given by Yang was that all the shareholders had resolved to deregister the company and it had no external debt.
Between October 2009 and 30 September 2010 Zhao endeavoured to obtain details of expenses incurred by KQ in order to finalise the accounts. They were not provided to him. After some correspondence, which Yang failed to respond to, Zhao requested the other directors to call a directors meeting. It was held on 26 July 2010. Yang was notified[3] but did not attend. At the meeting Yang was removed as a director of KQ and directed to deliver up all the books and records of KQ.
[3]Yang denies having received notice of the meeting.
At Zhao’s instigation, KQ was reinstated on 25 March 2011.
Following reinstatement, Zhao obtained a full set of bank statements from Westpac Banking Corporation (“Westpac”). Having analysed the bank statements, KQ alleges that Yang, in breach of duty, has misappropriated millions of dollars.
Although some further relevant facts are set out below, there is little point in rehearsing the detailed background facts and circumstances. They will be referred to if and where relevant. However, for the most part, they are irrelevant to the resolution of the issues in dispute in this proceeding.
Further, the lack of documentary evidence in relation to the critical substantive matters is lamentable and indeed remarkable. There were, simply, no financial documents of any significance discovered or put before the court. In a case like this they are, of course, of the first importance. Where financial transactions and breach of fiduciary duty are in issue, the evidential issues are best and almost always resolved by reference to the financial documents and information. The lack thereof makes the case more difficult for the court to decide. More about this later.
Although Zhao was not a director of the plaintiff at the time it was trading, he sourced all the garments for the plaintiff in China, as he did before in the Tongee business, and Yang was in charge of the day to day operations of KQ in Australia.
The evidence clearly establishes that Yang and Zhao played different roles in the plaintiff’s business. Yang was responsible for marketing sales and administration. Zhao engaged different factories to fulfil sales orders procured by Yang and pay them from funds remitted by KQ. I do not accept, and it is totally against the weight of the evidence, as more fully dealt with below, that Zhao was merely an agent or supplier to KQ, with no economic interest or influence in the business.
During the period between July 2006 and December 2008, Zhao had frequent and regular contact with Yang by telephone, and also face to face meetings in Melbourne and China.
On or about 4 August 2006, Yang opened a trading account with Westpac in the name of KQ bearing account number 33-5304 (the ”trading account”). On 6 September 2006, he opened another account with Westpac in the name of KQ bearing account number 33-5312 (the “interest account”). The interest account was intended to invest surplus funds from the trading account for a higher interest rate and from time to time re-transfer funds back to the trading account to meet KQ’s financial obligations in Australia and China.
In respect of the business expenses and income of KQ, Yang sent Zhao, by email, a spreadsheet of all the expenses in Melbourne at irregular intervals. Zhao’s in-house accountant then prepared a statement of consolidated profit and losses of the business in Australia and China.
All of KQ’s payments remitted and received by Zhao in China, were disbursed for payments of suppliers and the expenses incurred in China.
At the beginning of 2009, Yang did not send Zhao any details of the Australian expenses for the second half of 2008. Between January and May 2009, Zhao made numerous telephone calls to Yang requesting these details. On each of those occasions, Yang gave Zhao similar excuses that he was then busy, or he did not have all the details on him and would give them to Zhao later. Yang never refused to give Zhao those details.
On or about 10 May 2009, Yang and Zhao had their usual business meeting at the Guangzhou White Swan Hotel in China. At that meeting, it was agreed to:-
(a) Reduce the overheads of KQ both in Australia and China;
(b) Lay-off some of the staff in China; and
(c) Sell to Yang or his nominee the 50% interest in the factory at 10171 Strezlecki Avenue, West Sunshine Victoria, held by Zhao’s wife.
At that meeting, Zhao also reminded Yang to provide him with details of expenses and income of the second half of 2008. Yang said he would give them to Zhao once he got back to Melbourne in a week's time.
On or about 31 October 2009, Zhao had another meeting with Yang at the Guangzhou White Swan Hotel in China. Zhao suggested to Yang that the KQ business should be closed down. Yang said he agreed with Zhao’s suggestion in principle, but would consider it further and come back to him. Zhao said if the defendant agreed to his suggestion, Yang should provide Zhao with all details of Australian expenses and income so that his accountant could prepare the final accounts. Yang said that he would provide them as soon as possible.
In November 2009, Zhao did not know whether Yang was still in China or had already returned to Melbourne. Nor did he receive any details of the Australian expenses and income. Zhao called Yang on all his telephone numbers in China and Australia. Yang did not answer those calls. Zhao requested mutual friends to pass to Yang the message that Zhao wanted to speak to him. Zhao was told by mutual friends that Yang would not talk to him.
On 8 December 2009, Zhao sent Yang a letter informing him that KQ should immediately cease operating. The letter was sent to three different addresses:-
(a) Yang’s home address in China (receipt of this letter was acknowledged by his then wife);
(b) Yang’s home address in Melbourne; and
(c) The business address of KQ in Melbourne.
On 2 June 2010, Zhao requested his solicitors to write to Yang and request him to provide all the books of accounts of KQ. Yang did not reply.
On 20 July 2010, as noted earlier, Zhao requested the other two directors of KQ to call a directors meeting for the purpose of removing Yang as a director and directing him to deliver up all the books of accounts of KQ in his possession.
On 26 July 2010, as noted earlier, a directors meeting was held and Yang did not attend. The attending directors resolved to remove Yang as a director and direct him to deliver up all the books and accounts of KQ. The notice of meeting and resolution was sent to Yang’s home address in Melbourne. Yang denies receipt of the notice.
In or about February 2011, Zhao’s lawyer informed him that Yang had applied for de-registration of KQ on 27 July 2010. KQ was deregistered on 30 September 2010 for the reasons that all the shareholders had resolved to deregister it and there was no external debt.
Zhao applied for the re-instating of KQ which was reinstated on 25 March 2011.
Having become suspicious of how Yang might have handled the affairs of KQ and managed its funds in the trading and interest accounts, Zhao, as noted earlier, obtained a full set of bank statements of the trading account and the interest account from Westpac.
Based on all the bank statements from Westpac, Zhao and his staff reconstructed all the transactions in those bank statements for the purpose of calculating the total receipts to and payments from the trading and interest accounts.
Zhao estimated there was about $3.8 million from the trading and interest accounts unaccounted for after deducting his estimation of the Australian expenses.
Trading Account
The total amount of funds received to the trading account was $23,291,421 comprising $10,657,650 re-transferred back from the interest account. Zhao estimated the sales and interest income of KQ between July 2006 and October 2010 was $12,633,771.
Zhao accepts that $7,433,637 was remitted to China for paying stocks and $5,200,134 was available to pay for other operation expenses of KQ.
Interest Account
The total amount of funds from the trading account and interest earned in the interest account was $10,979,842.15 comprising $10,823,350 from the trading account. This leaves, it was submitted, $156,492 to be accounted for by Yang.
For convenience it was submitted that the transactions between the trading and interest accounts may be summarised as follows:-
Trading account
Interest account
Total amounts to this account 23,291,421 10,979,842 Less from trading account 0 -10,823,350 Less from interest account -10,657,650 0 To pay for stocks from China -7,433,637 0 $5,200,134 $156,492
According to Zhao the total amount of funds to be accounted for by Yang is $5,356,566 (ie $5,200,134 plus $156,492) before the Australian expenses.
The claims
There are nine categories of claims made by KQ. The claims total $4,689,313. In relation to each claim it is alleged that the expenses were not authorised and were not incurred on behalf of KQ or for its benefit. Various breaches of duty are alleged. Each claim is set out below.
The first claim relates to an alleged investment by KQ in Aussie Clothes Wholesale Pty Ltd (“ACW”) in the sum of $1,114,559. Zhao denies any knowledge of the investment. ACW is in liquidation and there is no prospect of any return of the funds invested.
The second claim relates to three payments in the total sum of $200,000 made to Daikai Seafood, allegedly on account of and in respect of amounts owing to Zhao for goods supplied. According to Yang payment could not be made to the usual recipients because they had reached their limit in respect of the receipt of foreign currency for the trading year. Zhao denies that such payments were required.
The third claim relates to the sum of $150,000 in respect of the salary of Yang. Zhao denies that Yang was entitled to this salary.
The fourth claim relates to the cost of repairs to clothing sourced by Zhao and supplied to KQ. Yang asserts that costs in the sum of $185,650 were properly incurred and paid. Zhao disputes this.
The fifth claim relates to the total sum of $181,000 paid to Yang’s ex-wife Hua Tian in respect of her salary. Yang asserts that this expense was properly incurred and paid. Zhao disagrees.
The sixth claim relates to freight and import duties. Yang asserts that these costs were properly incurred. Zhao, while conceding that some costs were incurred in this regard, disputes the sum of $1,721,169.
The seventh claim relates to the purchase of $US in the sum of $492,186. Yang asserts that the business required American dollars to operate effectively. Zhao disputes this.
The eighth claim relates to office expenses in the sum of $58,013. Yang asserts that these expenses were properly incurred. Zhao disagrees.
The ninth claim relates to payments of the sum of $586,687 to the Australian Taxation Office over a period of time. Yang asserts that all payments were properly owing by KQ. Zhao disputes this and contends that part of the amount paid did not relate to the tax obligations of KQ.
Before assessing each claim separately it is necessary and desirable to say something about the evidence and credit of Yang.
The credit of the defendant
Yang was the only person able to shed light on and provide detailed explanations of the various transactions of the company that he controlled. The circumstances outlined by the plaintiff called for an explanation. Yang failed to provide any adequate explanation of the various transactions. However, it is not simply a question of his failure to give evidence of any weight or cogency.
The credit of Yang is also an important aspect of this case. KQ submitted that Yang was an entirely unsatisfactory witness. It was submitted that much of his evidence was plainly dishonest, self-serving and ought only be accepted to the extent that it is corroborated by Zhao’s evidence, the evidence of his accountant Mr Wong, or is harmful to his case. A number of matters, as set out below, were referred to.
For substantially the reasons given by KQ, as set out below, I agree that Yang was a most unsatisfactory witness. I will not accept his evidence unless it is supported by other credible evidence. For the most part it was not.
Underpinning Yang’s defence, as it unfolded, was a contention that Zhao did not invest in KQ,[4] had no position in KQ[5] and simply filled orders for KQ.[6] He said that the arrangements in respect of KQ were totally different from the arrangements that had existed in respect of Tongge.[7] His Counsel confirmed that Yang was contending that, in effect, Yang owned 100% of KQ.[8] This proposition was unconvincing and entirely against the weight of evidence. First, it was entirely inconsistent with what was pleaded on Yang’s behalf in the particulars under par 1(a) in Yang’s Defence.[9] Yang’s explanation for the discrepancy between his evidence and the pleading was nonsensical.[10] Secondly, it was entirely inconsistent with a witness outline filed on behalf of Yang not a week before the trial.[11] Again, his explanation for the discrepancy made no sense.[12] Thirdly, Yang contended that it was Zhao’s idea to close down Tongge and start KQ, in circumstances where Zhao, who had owned half of Tongge, did not own any of KQ.[13] Fourthly, Yang conceded that he and Zhao spoke daily about the business notwithstanding that he claimed they were not partners.[14] Fifthly, Yang’s witness statement provided that after the failure of the ACW business (as hereinafter referred to) he and Zhao were not close,[15] suggesting Zhao had an economic interest in KQ. However in cross-examination Yang said that this was because Zhao was being cut out of the business.[16] This is wholly inconsistent with the wording of the witness statement. Sixthly, the warehouse was bought by Yang and Zhao’s wives jointly,[17] which is again consistent with a ‘partnership’.
[4]T200, L25
[5]T201, L30
[6]T202, L1-11
[7]T204, L20-25
[8]T277, L1-4
[9]CB 16-17
[10]T270, L26 – T271 L28
[11]T271, L29 – T274, L7
[12]T275, L 19 -27
[13]T276, L11- 17
[14]T277, L21 – T278, 2
[15]T278, L21 – T280, L6
[16]T279, L3 – T280, L6
[17]T280, L7-10
Yang’s evidence about the repair costs evolved in such a way that it could only have been untruthful. First, Yang seemed to accept that all the repairs took place within the period April to December 2009, the period in which he said they were paid for.[18] Then he said that the work was done over a four year period.[19] He agreed that he needed cash to pay people to do repairs to garments.[20] When confronted with the fact that the amounts involved the transfer of money from KQ’s account to his own, he said that he had already paid the workers with his own money and this involved KQ paying him back.[21] When asked about the withdrawals from his account to show the payments, Yang said that he repaid the money out of his own pocket from other sources.[22] When confronted with a transfer from his account of $50,500 he said that some workers did not want a cheque from the company account so that money was transferred to them.[23] Then, when confronted with the fact that the money appeared to have moved through two of his accounts, he said that he wrote them a cheque so the money had to go into his cheque account.[24] Then, when asked why the money was not sent straight into his cheque account from the KQ account, he gave two alternative, implausible, answers.[25] He later said that workers did the work for cash, did not issue invoices and were content to wait two years to be paid.[26] Then he again gave evidence that he had already paid the workers and was reimbursing himself.[27]
[18]T227, L19 – T231, L19
[19]T231, L20 – 29
[20]T232, L2-4
[21]T233, L18-21
[22]T234, L2-6
[23]T238, L14 – T239, L5
[24]T241, L1 – L11
[25]T241, L12 - 23
[26]T243, L22 - 27
[27]T244, L22 - 31
Yang could not explain what he was personally getting for his investment in ACW.[28]
[28]T290, L2 - 12
Yang said he had not discussed closing the KQ business with Zhao in August 2009,[29] but then conceded he had when confronted with the contents of his witness outline.[30]
[29]T308, L3 - 6
[30]T308, L11 - 17
Yang gave evidence that both factories in China were sold in 2008, but it was plain from his witness statement that he had previously said that one had not been sold in 2009.[31]
[31]T320, L1 – T321, L8
It is clear that Yang filed tax returns which he knew to be false.[32] He then disavowed knowledge of accounting documents and placed the blame squarely on his accountant.[33] He made a nonsensical suggestion that money was paid to the ATO on behalf of KQ before a BAS was filed on behalf of KQ because he received a container.[34] He was unable to concede that tax returns which were plainly false, were, in fact, false.[35]
[32]T328, L7 – T331, L8
[33]T333, L24 – T334, L6
[34]T379, L3 – T380, L8
[35]T403, L3 – T406, L20
Yang gave preposterous evidence that he had shipped items to Israel because someone asked him to send old clothes for charity.[36] When asked why the list included automatic wristwatches with precious metal, he said they were donated by others and included in his container.[37] It is inconceivable that automatic wristwatches with precious metal were sent to a charity.
[36]T343, L8 - 20
[37]T343, L18 – T344, L9
Yang gave evidence that $5,000 was paid by KQ to China Energy SA Ltd to install a security alarm at the KQ premises.[38] He said he was introduced to China Energy in 2007.[39] The company was registered on 2 August 2007,[40] but Yang said he was told that the company ran for 10 years.[41] The company was an unlisted public company with its address in New South Wales and no directors in Victoria.[42] When asked if he knew the director Darrold Cordes, Yang said he did not remember.[43] He said he did not know the directors Athanasios Lekkas or Amelia Fuqua.[44] Yet, in the KQ bank accounts, which Yang controlled, there is a deposit on 11 April 2008 of $5,000 which is described as ‘Cordes Loan repayment’.[45]
[38]T346, L3-5
[39]T347, L6-7
[40]T347, L23
[41]T347, L26-27
[42]T348, L2-14
[43]T349, L13
[44]T349, L14-16
[45]CB 250
In the particulars document prepared by both parties by order of the Court, Yang explained that the reason money was paid to American Express was that Yang would purchase $US in advance when the exchange rate was favourable and leave the money with American Express for future payments.[46] In his affidavit of 3 December 2015, Yang said that where a payment was made to American Express, it was made for the purpose of purchasing $US to take advantage of favourable exchange rates.[47] In examination-in-chief Yang gave evidence that was incomprehensible,[48] but he agreed with the suggestion that what he was doing was like a hedge.[49] In cross-examination he seemed to agree that this was what he had been doing.[50] Then his evidence turned around entirely, and he said that he did not keep $US in the account, he kept $AUD in the account and then he would change them into $US as needed.[51] He confirmed that the situation was not as indicated in the particulars and in his evidence in chief.[52] When confronted with the contradiction, he first denied there was one[53] then he feigned that he could not understand the question,[54] and then he blamed his lawyers.[55]
[46]CB 29
[47]CB 58
[48]T210, L15-26
[49]T210, L27-29
[50]T350, L6-28
[51]T352, L23-29
[52]T353, L15-26
[53]T354 L4-5
[54]T355, L3-4
[55]T356, L13-20
Yang gave evidence that money was lent to KQ when it was short of money and repaid when KQ had plenty of money.[56] When confronted with the evidence in the bank statement that, in fact, when KQ repaid the loan it had very little money in the bank, Yang then said that the lender urgently needed money and was chasing him daily.[57]
[56]T374, L8-12
[57]T374, L18-26
Yang gave evidence that certain expenses were company expenses, even when he conceded that he had no idea what the expenses were for.[58]
[58]T374 L30 – T375, L11
Yang said he gave the information about his loans to the company to the accountant, but could not explain how the financial statements did not reflect that amount he said he lent to KQ.[59]
[59]T427, L1-29
In my opinion when viewed as a whole, Yang’s evidence was in most respects, as identified above, deliberately false. The consequences are severe.
Finally, Yang’s failure to produce the relevant books, records and documents of KQ (such as they were) is critical. I reject his evidence that they were left with KQ’s accountant. In any event I very much doubt that proper records were kept.
In CC Containers Pty Ltd v Lee (No 6),[60] the Court of Appeal said —
[60][2014] VSC 151 (citations omitted).
180There is of course a difference between the mere rejection of a person’s account of events and a conclusion that a person has falsely denied facts and provided a deliberately false account. See Smith v NSW Bar Association; Jack v Smail; Scott Fell v Lloyd; R v Chapman. Where a deliberately untruthful account is given by a party who is in a position to contradict another party’s evidence or to rebut an adverse inference arising from that evidence, the adverse inference may be drawn with greater confidence. The inference may also be drawn that the party recognises that the truth will not assist him or her but will advance the other party’s case Moriarty v London Chatham & Dover Railway Co ; John Henry Wigmore, Evidence in Trial at Common Law; Oran Park Motor Sport Pty Ltd v Fleissig; Salvation Army (South Australian Property Trust) v Rundle; Tobin v Ezekiel. See also J D Heydon, Cases and Materials on Evidence: ‘[I]nferences may be drawn from any lying, fraud, fabrication or suppression of evidence, flight or interference with the course of justice by a party. Such conduct is seen as an implied admission of the weakness of his case.’ Such reasoning rests in part upon the view that a party that gives a deliberately false account should not be in a better position than one who refrains from giving evidence at all. Oran Park Motor Sport Pty Ltd v Fleissig; Tobin v Ezekiel.
181The following are examples of judges at first instance drawing an inference from the fact that a party has given a deliberately false account, that the party recognised that truth would not assist his case and treating the false statements as enabling the other party’s contention to be more confidently accepted Bird v Bird [No 4]. In Mayall Australia Pty Ltd v Ciba-Geigy (Aust) Ltd, Byrne J did not doubt that, where one of the parties withheld evidence and adduced misleading and false evidence, it might be open to draw an inference of a consciousness that its case was unfounded. For the legitimacy of the inference contended for, reliance had been placed on passages from Wigmore on Evidence. John Henry Wigmore, A Treatise on the Anglo-American System of Evidence in Trials at Common Law (Little, Brown and Company, (‘Wigmore on Evidence’). His Honour accepted that the inference was essentially a logical one based on experience and that such reasoning, sometimes utilised in a criminal trial, could not only be applicable in a civil case but might be employed with less reluctance given the lower standard of proof and the absence of the court’s traditional concern for the rights of an accused. Similarly, Gillard J in Li v The Herald and Weekly Times found that where a party had deliberately given false evidence in relation to an important issue in a proceeding, it was cogent evidence of an admission by that litigant that the truth would not assist its cause and indeed would damage it.
…
184It has also been recognised at an intermediate appellate level that the fact that a witness has concealed or misrepresented the truth about some matter may indicate a consciousness that the truth in respect of that matter would not have assisted his or her case. As Meagher JA stated in Tobin v Ezekiel, ‘depending upon the subject matter of false or fabricated evidence and its significance in a case, such an inference may be available in relation to a specific fact’. Similarly in Palavi v Queensland Newspapers Pty Ltd, a case relating to the destruction of evidence, Beazley JA (with whom Tobias AJA agreed) said:
In Marsden v Amalgamated Television Services, an allegation was made that the plaintiff had attempted to suborn witnesses, including by attempting to induce them to give false evidence. Levine J referred to the following statement in Wigmore on Evidence:
It has always been understood — the inference, indeed, is one of the simplest in human experience — that a party’s falsehood or other fraud in the preparation and presentation of his cause, his fabrication or suppression of evidence by bribery or spoliation, and all similar conduct, is receivable against him as an indication of his consciousness that his case is a weak or unfounded one; and from that consciousness may be inferred the fact itself of the cause’s lack of truth and merit. The inference thus does not apply itself necessarily to any specific fact in the cause, but operates, indefinitely though strongly, against the whole mass of alleged facts constituting his cause. Ibid 530 [21] (emphasis in original).
In my opinion, upon an examination of the whole of the evidence, it is tolerably clear that Yang recognised that the truth would not assist him but would only advance the case of KQ.
Applicable law
Section 181(1) of the Corporations Act 2001 (Cwth) is in the following terms:
181(1) Good faith--directors and other officers. A director or other officer of a corporation must exercise their powers and discharge their duties:
(a)in good faith in the best interests of the corporation; and
(b)for a proper purpose.
Note 1: This subsection is a civil penalty provision (see section 1317E).
Most cases under s 181(1), which concerns the separate duties referred to in subparagraphs (a) and (b), involve an assessment of a positive act or decision made by a director or officer. The quality of the decision is then tested. The common law duties are equivalent.[61]
[61]Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) (2012) 89 ACSR 1 at [942] and [1979] (‘Bell’).
The requirement to act in good faith in the best interests of the company (subparagraph (a)) is critical and fundamental. The test is an objective one. It requires directors and officers to focus on and consider the company’s separate interests and not their own. The decision must be considered on its own facts including the constitution of the company, the nature, scope and extent of directors duties, the decision under consideration and other relevant circumstances. In many cases it is obvious and apparent that the interests of the company have been disregarded. Usually others benefit and the company is impoverished.
The principle is not easy to articulate but in many cases easy to identify because, simply put, it is clear that the director is doing the wrong thing and substantially or in many cases totally disregarding the interests of the company. Of course it is the best interests of the company as a whole, which includes the shareholders who have risked their capital.
The principles relating to whether directors have acted for an improper purpose (subparagraph (b)) were summarised by Ipp J in Wheeler.[62] His Honour said:
(1)fiduciary powers granted to directors are to be exercised for the purpose for which they were given, not collateral purposes;
(2)it must be shown that the substantial purpose of directors was improper or collateral to their duties as a director. The issue is not whether business decisions were good or bad; it is whether directors have acted in breach of their fiduciary duties;
(3)honest or altruistic behaviour does not prevent a finding of improper conduct if that conduct was carried out for an improper purpose although evidence as to the subjective intentions or beliefs of directors is nevertheless relevant. That determining whether there is a breach of the duty to act for a proper purpose is to be assessed according to an objective test has also been stated in Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3); Re Wan Ze Property Development (Aust) Pty Ltd; Australian Securities and Investments Commission v Somerville; Bell IXL Investments Ltd v Life Therapeutics Ltd and Re HIH Insurance Ltd (in prov liq); ASIC v Adler: Adler v ASIC and
(4)the court must determine whether, but for the improper or collateral purpose, the directors would have performed the act in dispute.[63]
[62]Permanent Building Society (in liq) v Wheeler 1994 11 WAR 187.
[63]Wheeler, 137 (Malcolm CJ and Seaman J agreeing) (citations omitted).
Again, each case needs to be considered in accordance with its peculiar facts and circumstances. It is often easy to identify the breach. Of course in many, if not most cases, a breach of the first of the two duties will axiomatically involve a breach of the second and indeed usually other statutory duties.
Section 182(1) of the Corporations Act is in the following terms:
182(1)Use of position--directors, other officers and employees. A director, secretary, other officer or employee of a corporation must not improperly use their position to:
(a)gain an advantage for themselves or someone else; or
(b)cause detriment to the corporation.
Note: This subsection is a civil penalty provision (see section 1317E).
Whether a director, officer or employee gains an advantage or causes detriment is a question of fact. Each case must be considered in accordance with its peculiar facts and circumstances. It may not be necessary to show advantage or detriment. The High Court held in Chew v R[64] that it is the purpose of the transaction that is important and not necessarily the consequences.
[64](1992) 173 CLR 626.
A classic example is the case of Jeffree v NCSC.[65] In Jeffree, a director of a corporate trustee authorised the sale of trust assets, albeit at full value, to a new corporate trustee to save those assets from an expected arbitration award and to gain an advantage for himself and his family. The Western Australian Full Court held that this was a breach of s 182(1). There are, of course, many other examples of the improper use of position.[66]
[65][1990] WAR 183 (Jeffree).
[66]See Ford at [9.282.12].
The test of impropriety is objective and it is not necessary to show dishonest or improper intent.[67] In Byrnes the High Court said that conflicts of interest may also give rise to the improper use of position. At page 517 the Court said:
But a director who takes part in a decision to enter into a transaction in which the director or a third party in whom the director has an interest or to whom the director owes a fiduciary duty stands to gain an advantage or benefit but who does not make an adequate disclosure of his interest acts improperly.
[67]R v Byrnes (1995) 183 CLR 501 (Byrnes). See also Ford at [9.282.9].
First Claim — Aussie Clothes Wholesale
KQ contends that the investment of $1,114,559 in ACW by Yang involved an exercise of his power as a director of KQ, not in good faith, not in the best interests of KQ and not for proper purposes. Further, KQ contends that Zhao was unaware of the investment and did not consent thereto. As a consequence it is contended that the investment was unauthorised. Yang denies these contentions. He contends that as the managing director he was entitled to make the decision which he considered, in the circumstances, was appropriate. Further he contends that the investment was discussed with Zhao and he was fully aware of the nature and extent of the investment.
Zhao gave evidence that he had never heard of ACW in the course of being, in effect, ‘partners’ with Yang and first heard of that company in 2012.[68] He said he never had a discussion with Yang about any investment in ACW and never met anyone from ACW.[69] In cross-examination Zhao’s evidence in this regard was not challenged. I accept his evidence.
[68]TT100, L 22-27.
[69]T101, L 14-18.
Yang gave evidence that ACW was a retail network with 13 shops around Victoria which KQ invested in.[70] He said KQ was going to invest $3 million over a three to five year timeframe to increase the number of ACW shops from 13 to 26.[71] He gave evidence that a handwritten agreement was prepared by ACW’s accountant and the arrangement was that if KQ put in the $3 million, it would take 50% of ACW.[72] Yang says he also bought shares in ACW personally in order to become a director and have some control of ACW.[73] He can no longer find the agreement and thinks it is in Wong’s office.[74] KQ invested $850,000 in ACW and Yang says he invested $280,000.[75]
[70]T218, L 1-25.
[71]T219, L 12-15.
[72]T219, L 20-30.
[73]T220, L 5-12.
[74]T220, L 20-29.
[75]T221, L 10-14.
Yang did not give coherent evidence about how he met the relevant people from ACW.[76] He said the one agreement covered his own investment in ACW as well as KQ’s.[77] The obligation was for KQ to invest $3 million over 3 to 5 years, in circumstances where the profit of KQ did not suggest remotely a capacity to make such an investment.[78] The gross profit of KQ from trading for 30 June 2007 was $216,639.70[79] and in 2008 it made a loss of $120,243.[80] At the time of the commitment to ACW, the global financial crisis was causing a reduction in KQ’s orders.[81] The nature of the agreement was that, should KQ come up with some but not all of the $3 million, it would lose the entire investment.[82] It appears that no legal advice was obtained by KQ.[83] The entire agreement was, on Yang’s evidence, four pages in length.[84] The entire investment in ACW was lost to KQ.[85] Yang admitted that he was too fast to invest a big lump sum.[86]
[76]T251, L 9-30.
[77]T252, L 5-6.
[78]CB 1001-1032 and CB 837-902.
[79]CB 848.
[80]CB 871.
[81]CB 53-54.
[82]T255, L 17-27.
[83]T256, L 14-24.
[84]T256, L 25-26.
[85]T260, L 21-28.
[86]T260, L 29-31.
In my opinion, and in these circumstances, the decision by Yang to invest in ACW in the way that he did was self-evidently a clear failure by Yang to use his powers and discharge his duties in good faith, in the best interest of KQ, and for a proper purpose. In particular:
(a) The investment involved committing KQ to invest $3 million in circumstances where there was no reasonable basis to think that KQ could come up with that money in the required timeframe, where, were it not to do so, the entire amount invested would be lost, as indeed it was.
(b) KQ obtained no legal advice in relation to the transaction.
(c) KQ, and Yang personally, invested in ACW with the same advice and by way of the same agreement.
(d) KQ had no security for the investment.
(e) Yang has retained no paperwork of any description for such a substantial investment.
The conduct of Yang involves many other breaches[87] and renders him liable to make compensation to KQ.
[87]Failure to act with care and skill. Breach of fiduciary duty.
It is simply no answer to say that Yang was the directing mind and will of KQ and able to make the decision and that KQ has not established breach. Yang was obliged to make a proper decision and he did not. The evidence is out of his own mouth.
It follows that it is not necessary to deal with the issue as to whether, given the nature of the investment, and on the assumption that Yang and Zhao were partners, Zhao’s authority was required.
Finally it is not necessary to distinguish between Yang’s personal investment and the amount he contended was invested on behalf of KQ. The funding of his personal investment using the funds of KQ, without explanation or justification, clearly and self-evidently constitute a breach of fiduciary and statutory duty.[88]
[88]Again there is no documentation. The basis of the payment by KQ on behalf of Yang is not explained in any way at all.
Second claim — Daikai Seafood
Yang gave evidence that he transferred funds to Dakai Seafood because all the personal accounts of Zhao and his staff had reached a foreign currency ‘ceiling’ and Zhao had told him that he needed money urgently, so he sent the money to his friend at Dakai Seafood because they would accept $US, convert it to RMB (Chinese currency) and remit the funds to Zhao.[89] Zhao gave evidence that money was never paid to him via Dakai Seafood.[90]
[89]T212. L 14-25.
[90]T106, L 9 – T109, L 19.
KQ submitted that Zhao’s evidence in relation to this claim should be accepted and Yang’s evidence should be rejected. Yang’s evidence, it was submitted, ‘was simply preposterous’ for the following reasons:
(a) He said that Zhao asked for the money because the export company and all the personal accounts had reached their limit and his friend had capacity to receive foreign currency.[91]
[91]T304, L 24 – T305, L 2.
(b) He then said that ‘the company no limit, depend how your business going, what store’s business’.[92]
[92]T305, L 19-20.
(c) Then he said that Zhao had told him that Foshan Trading Company ‘cannot risk any more, its already reach the limit, and also my staff reach the limit also, but I need the urgent money, can anybody help me’.[93]
[93]T305, L 28-31.
(d) He then said Zhao needed the money for a part goods payment.[94]
(e) And that $200,000 in RMB was given to Zhao in cash.[95]
(f) He said he did not ask his friend at Dakai Seafood what happened to the money ‘but I think maybe the person or accountant firm maybe whatever, they would discuss it together’.[96]
[94]T306, L 5-8.
[95]T306, L 17-19.
[96]T306, L 25-28.
In my opinion the evidence of Yang in this regard (and indeed more generally) should not be accepted. Yang first suggested that companies are not subject to limits, but then said that Forshan Trading Company was. He gave evidence that he sent $200,000 knowing no more than that it was for partial goods payment. He said that a huge sum of money was provided to Zhao in cash and he never confirmed with Dakai Seafood what happened to the money. Against this, Zhao says that this never happened and he never received money from Dakai Seafood. Yang’s version is improbable, fanciful and entirely unsupported by any other evidence, whether documentary or oral and whether contemporaneous or not. It is rejected.
As a consequence, that payment is self-evidently in breach of his duty as a director of KQ and Yang is liable to make compensation.
It is no answer to submit that KQ has failed to establish breach in this regard. Yang, as the directing mind and will of KQ has failed to give a credible explanation for the transaction. The court is permitted to infer, and does infer, that there is not one.
Third claim — Defendant’s salary
Yang contends that a payment of $150,000 that he made to himself on 21 April 2008 was in fact his salary at KQ. When asked what his salary was at KQ, Yang said: ‘My salary I figure out, I decide my own, I think 100 grand for me is reasonable’.[97] Zhao’s unchallenged evidence was that there was an agreement between him and Yang that Yang was not to be paid during 2008[98] and that in 2007, Yang’s wage was to be $800 per week.
[97]T215, l 1-3.
[98]T115, L 25-27.
Additionally, KQ’s tax return for the year ended 30 June 2008 showed that total wages were $104,050[99] and accordingly it cannot, it was submitted, have paid $150,000 in wages to Yang.
[99]CB 854.
Further, Yang gave evidence that his salary was $100,000, but he didn’t take it in some years and hence took $150,000 in April 2008[100]. As pointed out Zhao’s unchallenged evidence was that for 2007, Yang’s salary was $800 per week, which is some $40,000 per year. That is potentially consistent with the wages bill of KQ for the 2007 tax year being $65,800[101] and wages for the 2009 tax year being $76,398.[102]
[100]T327, L 24 – T328, L 2.
[101]CB 842, 844.
[102]CB 865, 871.
Again, I do not accept Yang’s evidence. It is not credible and is not supported by any evidence. On Yang’s evidence, all of his tax returns were fraudulent as were the BAS and tax returns of KQ. It is plain that he used the KQ bank accounts as his private moneys, depositing and withdrawing as he saw fit, keeping no proper records.[103] There is simply no basis to accept, in the light of Zhao’s unchallenged evidence and the financial statements, that the $150,000 withdrawn on 21 April 2008 was a withdrawal for his wages.
[103]T338, L 1 – T 340, L 2.
The payment or withdrawal, without justification, or any explicable basis or record, is again self-evidently in breach of duty as a director of KQ. A director cannot simply take funds as and when he pleases. Yang is liable to pay compensation to KQ.
Again, for the reasons given it is no answer to submit that KQ has failed to establish breach in this regard.
Fourth claim — Cost of repairs
Yang claims that $185,650 of KQ’s money was spent on the cost of repairs to garments. KQ submits that Yang’s evidence about this expenditure should not be accepted.
In view of unreliability of Yang’s evidence (on this topic and generally), the complete lack of documentary evidence supporting the claim that that amount was spent on repairs, the unchallenged evidence of Zhao that Yang never discussed repairs with him between April and December 2009[104] and the matters referred to in paragraph 53, I am satisfied that the amount paid by KQ to Yang, which Yang claims was on account of repairs to garments, was not in fact paid for that purpose.
[104]T111, L3-10
Again, the payment was self-evidently not a proper expense for KQ’s purposes and therefore was paid by Yang in breach of his director’s duties. Accordingly, Yang is liable to pay compensation to KQ.
Again, for the reasons given, it is no answer to submit that KQ has failed to establish breach in this regard.
Fifth claim — Salary of Hua Tian (defendant’s ex-wife)
KQ claims that the $181,000 paid to Yang’s former wife Hua Tian, allegedly on account of outstanding wages, was not an amount properly paid on account of outstanding wages, accordingly was not a proper expense of KQ, and was paid in breach of Yang’s director’s duties.
Yang says that $81,000 paid to him from KQ on 6 November 2009 was on account of wages for his former wife, Hua Tian. Further, he says that $100,000 paid to her on 4 May 2009 was likewise on account of her wages. Zhao’s evidence was that Ms Tian was not receiving a salary from KQ in 2009 and that there was no reason why those amounts of money would have been paid to her.[105] Zhao’s evidence on this was not challenged.
[105]T117, L25 – T118, L8
Yang gave evidence in chief that he decided on $50,000 per year for his wife’s salary.[106] No documentation was produced in respect of that, such as an employment agreement or any memorandum to indicate what her salary was. Ms Tian also gave evidence that her salary at KQ was $50,000 annually.[107] She said it was paid in two instalments: one of $100,000 and one of $80,000ish.[108] Again, she produced no documentation in relation to this.
[106]T216, L19-20
[107]T430, L10-11
[108]T430, L12-17
This precise recall by Ms Tian was curious. The payments were made over six years ago. She is divorced from Yang.[109] She gave evidence that she was ‘not sensitive to numbers’,[110] by which she appeared to mean she was not good with numbers. She went on to say that her mind was full of her two children, so she can’t think of much detail now.[111] Further, whilst giving evidence that she was currently residing in shared accommodation, Ms Tian was unable to say how many people she lives with or what their names are.[112] Yet she purported to recall that she was paid these two sums of money on account of her wage at KQ of $50,000 per year, where she worked while married to Yang.
[109]T428, L28
[110]T432, L22-23
[111]T432, L25-27
[112]T441, L20 – T442, L10
In addition, her income tax return, which she signed, for the year ended 30 June 2009, showed a total income to her of $17,800.[113] When this was pointed out to her in cross-examination, she immediately simply blamed Yang, notwithstanding that she had signed the document.[114]
[113]CB 829
[114]T436, L21-23
In these circumstances, KQ submitted that because of the complete lack of material suggesting that Ms Tian was entitled to a salary while working in her husband and Zhao’s business, the unreliability of the evidence of both Yang and Ms Tian, and the state of Ms Tian’s income tax return for the year ended 30 June 2009, the Court should accept that the payment of $181,000 to Ms Tian was not on account of her salary, but rather was simply an ex gratia payment by Yang to her, and therefore was not a proper expenditure of KQ’s money and was a payment made in breach of Yang’s director’s duties. I accept the submission.
The payment of $181,000 without explanation or justification is self-evidently in breach of duty and Yang is liable to pay compensation to KQ.
Again, for the reasons given, it is no answer to submit that KQ has failed to establish breach in this regard.
Sixth claim — Freight and Import Duties
Yang claims to have spent $1,721,169 of KQ’s money on freight and import duties. He has not however produced documents showing payment of these moneys and how the expense related to KQ. His explanation for this (as for all the absent documents) as noted (and rejected) is that all of those documents were provided to KQ’s accountant Wong. His evidence about this should, it was submitted, be rejected. Wong was an independent witness. His evidence was clear. He did the BASs, financial statements and tax returns for KQ from 2007 to 2010.[115] The financial information was provided on handwritten pieces of paper[116] and he was not provided with receipts or other information.[117] He specifically said he was not provided with any other information.[118] He said no records were provided to him at the end of KQ’s life.[119]
[115]T175, L4-8
[116]T176, L1-7
[117]T176, L8-20
[118]T177, L6-24
[119]T177, L25-30
When asked in cross-examination whether Yang could have left all his documents with Ms Tran of his firm, Wong said that that would not have happened as they do not want documents left with them.[120] He also confirmed that he would review the file and sign off.[121] Ultimately, Wong was recalled and produced his file[122] and confirmed that it was all that he had.[123] There was nothing of any relevance.
[120]T180, L11-19
[121]T181, L30 – T181, L4
[122]CB 801-1000I
[123]T369, L9 – T370, L7
Thus KQ submitted that in the light of that evidence, and the general unreliability of Yang’s evidence, the Court should accept that Yang has failed to produce the documents showing the freight and import duties receipts and that this is not because he gave those documents to Wong. Accordingly, it was submitted the Court ought be bold in drawing an inference that those documents would not have assisted Yang’s case that those expenses were bona fide expenses of KQ.
Further, there is no support (whether documentary or otherwise), it was submitted, for Yang’s contention that the money he claims was spent on freight and export duties was all for freight and export duties paid on behalf of KQ.
In addition, it is clear, it was submitted, that Yang was exporting goods to Israel, in circumstances where, for the reasons set out in para 58 above, the Court ought not accept that the goods were for charity. Thus there is sufficient evidence, it was submitted, for the Court to be satisfied, on the balance of probabilities, that the freight and export duty which Yang claims was all part of the usual business of KQ and thus a proper expense of KQ was not, and therefore was money paid in breach of Yang’s director’s duties.
I accept this submission. Although some expense may fairly be attributed to KQ, Yang must pay the price for totally inadequate record keeping and failing dismally in leading any acceptable evidence about this aspect of the case. No attempt whatsoever was made to justify any expense, whether by way of evidence or submission. I infer that none was available. For reasons already given Yang is liable to pay compensation for breach of duty.
Seventh claim — American Express
Yang’s evidence that the payments to American Express were to remit money to Zhao in China ought, it was submitted, be rejected.
Zhao’s evidence was clear: he was not aware that Yang was converting money into $US with American Express,[124] Yang never discussed it with him[125] and he never received $US from American Express in China on behalf of KQ.[126] His evidence about this was not challenged. The only documents produced by American Express on subpoena do not demonstrate that KQ or Yang ever opened an account with American Express and show transactions which are unconnected to the ones Yang claims were payments to American Express on behalf of KQ.[127]
[124]T123, L7-8
[125]T123, L9
[126]T123, L10-11
[127]CB 1247 – 1248, T 362, L29 – T367, L22
In these circumstances, KQ submits that the Court ought be satisfied on the balance of probabilities that the amounts paid by KQ were not paid for its proper purposes and were therefore paid in breach of Yang’s directors duties. The Court ought not accept, it was submitted, that they were payments of $US to China for payments for KQ purposes by Zhao. Zhao denied that and was not challenged on it. Yang’s evidence about this in the witness box had changed dramatically from prior to trial. He produced no documents supporting his version of events and when subpoenaed, American Express produced no documents supporting his version of events. Rather, what was produced was a document which seemed not to support his version. Again, Yang’s version is inherently improbable, unrealistic and unsupported.
I accept the submissions made on behalf of KQ. I reject Yang’s evidence. As the directing mind and will of KQ he has given no acceptable explanation of the transactions. Again it is no answer to say that KQ has not established any breach. It has and it is out of the mouth of its own director who is in breach of duty and liable to pay compensation.
Eighth claim — Office Expenses
Not all of the spending designated ‘Office Expenses’ by Yang are challenged.
Plainly the Court should be satisfied, it was submitted, that the amount of $5,000 paid to China Energy SA Ltd was not a proper expense of KQ. I agree.
Yang claims that a $9,000 expense on 15 January 2008 was a proper expense of KQ,[128] yet he could not say what it was for. His subsequent explanation was absurd, namely that it was money lent to KQ when it was low on funds, which was subsequently repaid when KQ had more funds. But the evidence was that when it was repaid only $1,218.57 was left in KQ’s bank account.[129] The Court ought accept, it was submitted, that that was not a proper expense of KQ. I agree.
[128]CB 35
[129]T372, L14 – T374, L29
On 29 September 2008, Yang spent $1,492.52, but he could not recall what that money was spent on.[130] In those circumstances the Court ought accept, it was submitted, that that was not a proper expenditure of KQ’s funds. I agree.
[130]CB 37, T374, L30- T 375, L11
Yang spent $39,728 on a Citibank credit card between March and July 2009[131]. This was during the period when Yang and Zhao were discussing closing the KQ business. No other payments appear to have been made to Citibank. Yang said that he did not have a personal credit card[132] and all of these expenses were business expenses and the card was a business card for KQ.[133]
[131]T375, L16-21
[132]T375, L24-25
[133]T375, L29-31
It was submitted that that evidence should not be accepted. First, because of Yang’s unreliability as a witness, and secondly because of its inherent improbability given Yang could not recall what the work expenses were, ostensibly because it was too long ago[134] and he no longer has the credit card accounts or any invoices in relation to these expenses.[135] I agree.
[134]T376, L15
[135]T376, L16-26
On 16 June 2009 there was an expense of $2,223 and the only identifier was PW.[136] Yang said that that was for a travel agent to arrange a flight to China.[137] Again, no documentary support was offered. The Court ought not, it was submitted, be satisfied that that was a proper expense of KQ. I agree. The amount is an exact figure and is unlikely to be a donation. It may well have been for a proper purpose but there is no evidence to such effect.
[136]CB 39
[137]T377, L4-13
On 9 November 2009, Yang paid $563.55 to the City Hall Appeal[138] which he explained was a corporate donation, to make ‘City Hall’ think favourably of KQ.[139] Plainly that is not, it was submitted, a proper expense of KQ. I agree.
[138]CB 40
[139]T377, L22-27
Ninth claim — Australian Tax Office
KQ’s tax liability during the period it traded was as follows:
$6,343 refund[140]
[140]CB 1002
$38,351[141]
[141]CB 1004
$68,175[142]
[142]CB 1006
$70,916[143]
[143]CB 1008
$70,003[144]
[144]CB 1010
$66,087[145]
$14,699[146]
$17,965[147]
$30,145[148]
$64,767[149]
$32,832[150]
$24,598[151]
$22,730[152]
$8,564[153]
[145]CB 1012
[146]CB 1014
[147]CB 1016
[148]CB 1018
[149]CB 1020
[150]CB 1022
[151]CB 1024
[152]CB 1026
[153]CB 1028
This is a total of $523,489.
KQ made the following payments to the ATO:
$54,621
$68,175
$38,351
$10,224.11
$70,916
$212
$70,005
$66,087
$14,699
$20,760.60
$876.65
$13,098
$4,867
$30,145
$64,767
$32,832
$24,598
$824
$841[154]
[154]CB 49-50
This is a total of $586,899.36. Thus KQ paid the ATO $63,410.36 more than it was legally obliged to pay in tax. Accordingly, to that extent, those payments were not proper payments for KQ’s purposes and were therefore made, it was submitted, in breach of Yang’s director’s duties. I agree.
Disposition and orders
For the reasons given, I am satisfied that the plaintiff has established its claim. All of the transactions called for an explanation. The very person able to give the explanation failed miserably at all levels. He did not produce any relevant document, itself a startling feature of the case and in particular a case of this kind. Further, his recollection and oral evidence lacked coherence and credibility. Finally, and regrettably, the defendant’s submissions lacked detail and coherence and were in many respects, given the nature of the case, of marginal relevance.
It is not the task of the court, nor was I requested to estimate, those payments, withdrawals or expenses that may well have been for business purposes. Indeed there was simply no adequate evidential basis on which any such analysis could be undertaken.
The defendant, in essence had two points. First, he was effectively the sole shareholder and director of KQ and as the guiding mind and will, he did not need Zhang’s authority and had the freedom effectively to do what he wanted. Obviously, he could not, as he was required to discharge his duties as a director. Secondly, the defendant in effect put the plaintiff to the proof of its claim. The fact that the claim was proved because of the defendant’s evidence and appropriate inferences that may be (and were) drawn, does not detract from the coherence and quality of the proof. However, bearing the ultimate burden, the plaintiff has established its case.
There will be judgment for the plaintiff. I will hear from the parties as to the precise form of order and costs.
3
3
0