Macks v Viscariello - [2017] SASCFC 172

SUPREME COURT OF SOUTH AUSTRALIA
(Full Court)
MACKS v VISCARIELLO
[2017] SASCFC 172
Judgment of The Full Court
(The Honourable Justice Lovell, The Honourable Auxiliary Justice Corboy and The Honourable Auxiliary Justice Slattery)
22 December 2017
APPEAL AND NEW TRIAL - APPEAL - GENERAL PRINCIPLES - INTERFERENCE WITH JUDGE'S FINDINGS OF FACT - FUNCTIONS OF APPELLATE COURT
APPEAL AND NEW TRIAL - APPEAL - PRACTICE AND PROCEDURE - SOUTH AUSTRALIA - POWERS OF COURT - OTHER MATTERS
CORPORATIONS - MANAGEMENT AND ADMINISTRATION - DUTIES AND LIABILITIES OF OFFICERS OF CORPORATION - OFFICERS OF INSOLVENT CORPORATIONS - GENERALLY
CORPORATIONS - MANAGEMENT AND ADMINISTRATION - DUTIES AND LIABILITIES OF OFFICERS OF CORPORATION - OFFENCES - CONTRAVENTION OF PROVISIONS OF ACT
CORPORATIONS - WINDING UP - LIQUIDATORS - SUPERVISION OF LIQUIDATORS
Mr Viscariello, the respondent and cross-appellant, was a director of Bernsteen Pty Ltd and Newmore Pty Ltd. The two companies controlled a number of stores that sold linen products. In late 2001 the businesses experienced financial difficulties. Mr Macks was appointed administrator on 5 December 2001.
Negotiations between Mr Viscariello and a potential purchaser of the businesses, Mr Bart, led to the production of a proposed Deed of Company Arrangement (DOCA). The DOCA was not put before the meeting of creditors as Mr Macks considered that the major creditor (ARL) had not agreed to the terms. On 21 December 2001 the companies were placed into liquidation.
Mr Viscariello sued Mr Macks, in his capacity as administrator and liquidator, alleging (inter alia) that he was in breach of various statutory duties both as administrator and liquidator. Mr Viscariello sought damages and declarations.
Mr Viscariello alleged that Mr Macks as administrator (inter alia) failed to carry out and/or adequately and properly perform his duties as Voluntary Administrator; that he made false and misleading statements to creditors, that he breached his duties by failing to administer the companies so as to maximise their prospects of continuing to trade.
The Primary Judge rejected Mr Viscariello’s claims. Mr Viscariello cross-appealed against the findings of the Primary Judge.
Mr Viscariello alleged that Mr Macks, as liquidator, was motivated by personal motives, wishes and intentions that caused him not to act in the best interests of the creditors, members and contributories of the companies and to act unprofessionally. Mr Viscariello also alleged that Mr Macks acted with an improper purpose.
Mr Viscariello’s claims included a declaration that (inter alia) Mr Macks:
a. Be removed as liquidator of the companies;
b. Breached the duties imposed by ss 180, 181 and 182 of the Corporations Act (CA);
c. Be not entitled to charge or retain any fees.
The Primary Judge found that in conducting the liquidation Mr Macks had breached ss 180, 181 and 182 of the CA and issued declarations to that effect. Central to the findings and resultant declarations was a finding that Mr Macks had acted with four substantive and actuating collateral purposes in pursuing litigation in breach of his duties under the CA.
Mr Macks appealed the findings of the Primary Judge submitting (inter alia) the Primary Judge: failed to adequately deal with the evidence; failed to provide adequate reasons for his findings; failed to apply the Briginshaw v Briginshaw principle when making his findings; failed to dismiss the application of Mr Viscariello to amend his pleadings after the Reasons had been delivered.
Held (the Court), allowing the appeal on grounds 2, 3, 4 & 5; grounds 1, 6, 8, & 9 dismissed:
1. The Primary Judge had the power to make declarations pursuant to s 31 of the Supreme Court Act 1935 (SA).
2. On reviewing the evidence the declaration made by the Primary Judge that Mr Macks breached s 180 of the CA from June 2005 is varied: the Court orders that the declaration of breach of s 180 of the CA be varied to commence on 28 April 2006.
a. The finding that Mr Macks acted with the four substantive and actuating collateral purposes from June 2005 is set aside.
3. The findings and therefore the declarations that Mr Macks breached ss 181 and 182 of the CA from June 2005 are set aside.
4. The findings that the Bernsteen proceedings and George proceedings were from June 2005 an abuse of process are set aside.
5. The Primary Judge did not err in allowing the amendments to the pleadings after the delivery of the Primary Judge’s reasons.
6. The issues of allegations of a breach of ss 181 and 182 on the exercise of the Court’s discretion should not be remitted for trial.

CORPORATIONS - VOLUNTARY ADMINISTRATION - ADMINISTRATOR - FUNCTIONS, POWERS, RIGHTS AND LIABILITIES GENERALLY
CORPORATIONS - MEMBERSHIP, RIGHTS AND REMEDIES - MEMBERS' REMEDIES AND INTERNAL DISPUTES - PROCEEDINGS ON BEHALF OF COMPANY BY MEMBER
CORPORATIONS - MANAGEMENT AND ADMINISTRATION - DUTIES AND LIABILITIES OF OFFICERS OF CORPORATION - FIDUCIARY AND RELATED STATUTORY DUTIES - OF CARE, SKILL AND DILIGENCE
APPEAL AND NEW TRIAL - APPEAL - GENERAL PRINCIPLES - INTERFERENCE WITH JUDGE'S FINDINGS OF FACT - FUNCTIONS OF APPELLATE COURT
A cross-appeal regarding the conduct of the appellant as administrator was filed and heard at the same time as the appeal outlined above.
Held (the Court), dismissing the cross-appeal:
1. An administrator does not owe a fiduciary duty to disclose all material information to creditors.
2. The conduct of Mr Macks the subject of the claims was not in "trade and commerce”.
3. The Primary Judge did not err in finding that ARL would have rejected the revised DoCA had it been put to the second creditors’ meeting.
4. The Primary Judge did not err in finding that the s 439A CA report was not misleading.
5. The Primary Judge did not err in failing to find that Mr Macks was under a duty to put the DoCA proposal to the meeting of creditors and that therefore Mr Viscariello suffered a “loss of chance”.
6. The Primary Judge did not err in refusing to extend time for an application by Mr Viscariello under s 1321 of the CA.
Corporations Act 2001 (Cth) s 179, s 180, s 181, s 182, s 185 s 206C, s 206E, s 236, s 439A, s 447E, s 503, s 798H, s 1317E, s 1317F, s 1317G, s 1317H, s 1317J, s 1317K, s 1321, s 1323, s 1324, s 1325, s 1337A, s 1337B, pt 1.1A, pt 2D.1, pt 2F, pt 5.3A, pt 5.5, pt 9.4B, pt 9.5, pt 9.6A, Div 4; Supreme Court Act 1935 (SA) s 31; Judiciary Act 1903 (Cth) s 78B; Federal Court of Australia Act 1976 (Cth) s 21; Supreme Court Civil Rules 2006 (SA) r 57, r 286(3)(c), referred to.
Terry v Leventeris (2011) 109 SASR 358; Fox v Percy (2003) 214 CLR 118; RESI Corporation v Munzer [2016] SASCFC 15; Holloway v McFeeters (1956) 94 CLR 470; Browne v Dunn (1893) 6 R 67; Briginshaw v Briginshaw (1938) 60 CLR 336; Lifeplan Australia Friendly Society Ltd v Ancient Order of Foresters in Victoria Friendly Society Ltd (No 2) [2017] FCAFC 99; NH v Director of Public Prosecutions (SA) (2016) 334 ALR 191; Wellington Capital Ltd v Australian Securities & Investments Commission (2014) 254 CLR 288; Rizeq v Western Australia (2017) 344 ALR 421; Stead v State Government Insurance Commission (1986) 161 CLR 141, applied.
Viscariello v Macks [2014] SASC 189; Viscariello v Macks (No 2) [2015] SASC 160; Cropper v Smith (1884) 26 Ch D 700; Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (2008) 73 NSWLR 653; Spies v The Queen (2000) 201 CLR 603; Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; R v Ricciardi (2017) 128 SASR 571; Maxcon Constructions Pty Ltd v Vadasz (No 2) (2017) 127 SASR 193; Windoval Pty Ltd v Donnelly (2014) 226 FCR 89; Sullivan v Trilogy Funds Management Ltd [2017] FCAFC 153; Ainsworth v Criminal Justice Commission (1992) 175 CLR 564; Lifeplan Australia Friendly Society Ltd v Woof [2013] FCA 613; Hamilton-Smith v Bernsteen Pty Ltd [2005] SASC 190; Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; Chahwan v Euphoric Pty Ltd (t/as Clay & Michel) (2008) 227 FLR 43; Mercantile Mutual Insurance (Australia) Ltd v Farrington (1996) 44 NSWLR 634; Genocanna Nominees Pty Ltd v Thirsty Point Pty Ltd (No 2) [2006] FCA 1335; FF Seeley Nominees Pty Ltd v EL AR Initiations (UK) Ltd (No 2) (1990) 55 SASR 314; University of Western Australia v Grey (No 24) [2008] FCA 1400; Strong Wise Ltd v Esso Australia Resources Pty Ltd (No 2) (2010) 185 FCR 237; Leotta v Public Transport Commission (NSW) (1976) 9 ALR 437; Mummery v Irvings Pty Ltd (1956) 96 CLR 99; Kinsela v Russell Kinsela Pty Ltd (in liq) (1986) 4 NSWLR 722; The Bell Group Ltd (in liq) & Ors v Westpac Banking Corporation & Ors (No 9) (2008) 225 FLR 1; Hausmann v Smith (2006) 24 ACLC 688; Lyford v Commonwealth Bank of Australia (1995) 130 ALR 267; Winkworth v Edward Baron Development Co Ltd [1986] 1 WLR 1512; West Mercia Safetywear Ltd (in liq) v Dodd [1988] BCLC 250; Re New World Alliance Pty Ltd; Sycotex Pty Ltd v Baseler (1994) 51 FCR 425; Tabet v Gett (2010) 240 CLR 537; Re ION Ltd (No 2) [2012] FCA 561; Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (No 3) (1998) 195 CLR 1; Expectation Pty Ltd v PRD Realty Pty Ltd (2004) 140 FCR 17; Shafron v Australian Securities and Investments Commission (2012) 247 CLR 465; Asden Developments Pty Ltd (in liq) v Dinoris [2017] FCAFC 117; Australian Securities and Investments Commission v Rich (2009) 236 FLR 1; ASIC v Adler (2002) 42 ACSR 74; Daniels v Anderson (1995) 37 NSWLR 438; Northbourne Developments Pty Ltd v Reiby Chambers Pty Ltd (1989) 19 NSWLR 434; Miller & Associated Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357; Robinson Helicopter Co Inc v McDermott (2016) 331 ALR 550; Ashby v Slipper; Harmer v Slipper (2014) 219 FCR 322; Precision Plastics Pty Ltd v Demir (1975) 132 CLR 362; Ah Toy v Registrar of Companies (NT) (1986) 10 FCR 356; Campbell's Cash & Carry Pty Ltd v Fostif Pty Ltd (2006) 229 CLR 386; Volpes v Permanent Custodians Pty Ltd [2005] NSWSC 827; McIntosh v Shashoua (1931) 46 CLR 494; Rozenbes v Kronhill (1956) 95 CLR 407; Mead v Watson (as Liquidator for Hypec Electronics Pty Ltd) (2005) ACLC 718; In re Beddoe; Downes v Cottam [1893] 1 Ch 547; Hall v Poolman (2009) 75 NSWLR 99; Wainohu v New South Wales (2011) 243 CLR 181; AK v Western Australia (2008) 232 CLR 438; Director General of Department of Community Services; Re Sophie [2008] NSWCA 250; Vairy v Wyong Shire Council (2005) 223 CLR 422; Henderson v Queensland (2014) 255 CLR 1; JN Taylor Holdings Ltd (in liq) v Bond (1993) 59 SASR 432; FAI General Insurance Co Ltd v RAIA Insurance Brokers Ltd (1992) 108 ALR 479; CGU Insurance Ltd v Blakeley (2016) 259 CLR 339; Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd (2000) 200 CLR 591; Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421; Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334; Agricultural Land Management Ltd v Jackson (No 2) [2014] WASC 102(S); Warramunda Village Inc v Pryde (2001) 105 FCR 437; Australian Competition and Consumer Commission v The Construction, Forestry, Mining and Energy Union (2007) ATPR 42-140; Crouch v The Commonwealth (1948) 77 CLR 339; Commonwealth of Australia v BIS Cleanaway Ltd (2007) 214 FLR 271; Parker, In the matter of Purcom No 34 Pty Ltd (In Liq) (No 2) [2010] FCA 624; Parker, In the matter of Purcom No 34 Pty Ltd (In Liq) [2010] FCA 263; Cruse v Multiplex Ltd (2008) 172 FCR 279; One.Tel Ltd (in liq) v Rich (2005) 190 FLR 443; McCracken v Phoenix Constructions (Qld) Pty Ltd [2013] 2 Qd R 27; Grimaldi v Chameleon Mining NL & Anor (No 2) (2012) 200 FCR 296; Mesenberg v Cord Industrial Recruiters Pty Ltd (1996) 39 NSWLR 128; Emlen Pty Ltd v St Barbara Mines Ltd (1997) 24 ACSR 303; Idylic Solutions Pty Ltd; Re Australian Securities and Investments Commission v Hobbs (2013) 93 ACSR 421; Airpeak Pty Ltd v Jetstream Aircraft Ltd (1997) 73 FCR 161; McCausland v Surfing Hardware International Holdings Pty Ltd (No 2) [2014] NSWSC 163; Forge v Australian Securities and Investments Commission (2006) 228 CLR 45; Yates Security Services Pty Ltd v Keating (1990) 25 FCR 1; Gordon v Tolcher (2006) 231 CLR 334; R v Gee (2003) 212 CLR 230; Bui v Director of Public Prosecutions (Cth) (2012) 244 CLR 638; Deputy Commissioner of Taxation (Cth) v Moorebank Pty Ltd (1988) 165 CLR 55; Australian Securities and Investments Commission v Edge (2007) 211 FLR 137; Re Biposo Pty Ltd; Condon v Rogers (1995) 120 FLR 399; Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; Friend v Brooker (2009) 239 CLR 129; Liftronic Pty Ltd v Unver (2001) 179 ALR 321; Glennan v Commissioner of Taxation (2003) 198 ALR 250; Insight Vacations Pty Ltd v Young (2010) 78 NSWLR 641, discussed.

MACKS v VISCARIELLO
[2017] SASCFC 172
Full Court: Lovell J, Corboy AJ and Slattery AJ
THE COURT
Summary and Overview
The procedural history of the appeal
The grounds of appeal and cross-appeal
The structure of the reasons
Part 1: Preliminary matters and the amended statement of claim
The statutory framework
Mr Macks’ statutory duties
Disqualification
Standing
Removal of a liquidator
Part 5.3A
Part 9.4B
Part 9.5
Part 9.6A
The claims made by Mr Viscariello
The relief granted by the Primary Judge
The amendments made to the statement of claim (grounds of appeal 6, 8 and 9)
Ground 2 of the appeal and the Fourth SOC
Conclusion – grounds 6, 8 and 9 of the appeal
Part 2: The cross-appeal
Background
The financial position of the Companies
Appointment of Mr Macks as administrator
The grounds of appeal
The duties owed by an administrator
Ground 8
Ground 1
Ground 2
Ground 3
Ground 4
Ground 5
Ground 7
Ground 9
Part 3: Mr Macks as liquidator
Brief Overview
The Bernsteen Action
George bankruptcy proceedings: Procedural History
Appeal Grounds
Operative Delay
Structure of Part 2 of the Primary Judgment
Ground 3
Grounds 2, 4 and 5
Part 4: Declaratory relief (ground 1 of the appeal)
Summary of the findings made in Part 3
The Primary Judge’s reasons
The grounds of appeal
Notice of respondent’s contention
The necessity for declaratory relief
The legislative history of pt 9.4B
The interpretation of pt 9.4B
Section 185
Lifeplan
Other authorities
Disposition - ground 1
Utility and discretion
Remittal for Trial
Should the matter be remitted for a trial on these issues?
Orders
Appendix
Appeal
Cross-Appeal
Summary and Overview

The respondent and cross-appellant, Mr Viscariello, was the sole director and effective controller of Bernsteen Pty Ltd and Newmore Pty Ltd.[1] Bernsteen and Newmore (the Companies) sold manchester through retail outlets trading under the names ‘Bedroom Mazurka’ and ‘Faulty Sheets and Towels’. Associated Retailers Ltd (ARL) was a secured creditor of the Companies. It supplied much of the Companies’ merchandise.
[1] It is convenient to refer to Mr Viscariello and Mr Macks by name throughout these reasons rather than as cross-appellant/respondent and appellant/cross-respondent respectively.
The Companies experienced financial difficulties in late 2001. Mr Viscariello sought to resolve those difficulties by entering into a heads of agreement for the sale of the Companies’ businesses to Mr Bart. The agreement was made on 27 November 2001. The agreement included terms that significantly affected ARL.
The appellant and cross-respondent, Mr Macks, is a liquidator. He was a principal of the firm PPB. Mr Viscariello consulted Mr Macks at the time that the heads of agreement was made. Mr Macks had previously acted as the administrator of the Companies under deeds of company arrangement (DOCAs) made in 1995.
On 5 December 2001, Mr Viscariello determined that the Companies were insolvent or likely to become insolvent in the near future[2] and Mr Macks was appointed as their administrator. Mr Viscariello anticipated that the Companies would enter into DOCAs that gave effect to the heads of agreement following Mr Macks’ appointment. However, ARL advised that it would not consent to DOCAs on the terms proposed by Mr Viscariello and Mr Bart.
[2] A minute of resolutions made by Mr Viscariello as the sole director of Bernsteen was tendered as an exhibit (item 315 – P292). The minute recorded resolutions that Bernsteen was insolvent or likely to become insolvent in the near future. No minute recording a similar resolution in respect of Newmore was received as an exhibit but Mr Viscariello accepted in his evidence that he knew that the Companies were either insolvent or about to become insolvent as at 5 December 2001 (ts 295).
Mr Macks then prepared a revised heads of agreement to be made by Mr Viscariello, Mr Bart and ARL (the revised Bart proposal). However, ARL refused to agree to the revised terms. Accordingly, Mr Macks advised creditors that there was no proposal to rescue the Companies and they went into liquidation on 21 December 2001. Mr Macks was appointed as the liquidator.
Mr Viscariello was aggrieved by that outcome. Eventually, in December 2004 he gave notice of his intention to commence proceedings against Mr Macks. The foreshadowed claims made allegations about Mr Macks’ conduct as the administrator of the Companies.
Mr Viscariello served his first statement of claim in these proceedings in February 2006. He alleged that Mr Macks had misled creditors about the revised Bart proposal and had breached duties that he owed as the administrator of the Companies by advising that there was no alternative to liquidation. He also alleged that Mr Macks had sold the Companies’ assets at an undervalue. He claimed to have lost the chance to avoid losses suffered as a consequence of the Companies being wound up.
Mr Macks sold some of Bernsteen’s stock to Ms Hamilton-Smith. She was, at that time, Mr Viscariello’s partner. Ms Hamilton-Smith defaulted under the sale agreement and in August 2002, Bernsteen commenced proceedings in the Magistrates Court to recover the sum of $28,000, being the amount payable for the stock (the Bernsteen action).
Ms Hamilton-Smith responded by counterclaiming against Mr Macks and embarking on a campaign of interlocutory attrition. As this court observed on the hearing of one interlocutory appeal, ‘[Ms Hamilton-Smith], or those advising her, are of a litigious disposition arguing every point at every stage of the process’.[3] The result was that the Bernsteen action became inordinately protracted; Bernsteen incurred substantial legal expenses that were grossly disproportionate to the debt claimed; and Mr Macks effectively lost control of the proceedings.
[3] Hamilton-Smith v Bernsteen Pty Ltd [2005] SASC 190 [21].
In August 2003, Ms George obtained a judgment against Ms Hamilton-Smith for an amount of approximately $5,000. The judgment was not satisfied as at June 2005. Mr Macks’ legal advisors, Minter Ellison, proposed that he indemnify Ms George for the cost of presenting a petition in bankruptcy against Ms Hamilton-Smith as a way of extracting himself from the morass that had enveloped the Bernsteen action. It was suggested that the indemnity would be for an amount of $2,000 but the indemnity was not actually capped.
As with the Bernsteen action, the proceedings to bankrupt Ms Hamilton-Smith (the George bankruptcy proceedings) became enmeshed in interlocutory disputes. Further, Ms Hamilton-Smith commenced proceedings seeking a declaration that the judgment debt had been satisfied by an agreement that Ms George accept manchester products to a specified value and by performance of that agreement in December 2003 (the George declaration proceedings).
Consequently, by April 2006 Ms Hamilton-Smith had not been declared bankrupt; the Bernsteen action (including Ms Hamilton-Smith’s counterclaim), the George bankruptcy proceedings and the George declaration proceedings (together, the Proceedings) remained on foot and Bernsteen continued to incur substantial legal expenses. At the end of April 2006, Mr Macks and his legal advisors discussed further strategies for concluding the litigation with Ms Hamilton-Smith but it was not until February 2007 that the Proceedings were compromised. The settlement required Ms Hamilton-Smith to pay $8,000 to Bernsteen and $6,000 to Ms George. By that time, approximately $280,000 had been paid in legal fees to Minter Ellison and counsel on account of the Bernsteen action (and approximately $151,000 in fees had been written off) and approximately $180,000 had been paid in connection with the proceedings involving Ms George.[4]
[4] Viscariello v Macks [2014] SASC 189, [704], [705].

Mr Viscariello subsequently added claims in these proceedings alleging that Mr Macks had breached the duties that he owed as the liquidator of Bernsteen by agreeing to indemnify Ms George and by conducting and expending the company’s funds on the Proceedings.
The trial of Mr Viscariello’s claims in these proceedings occupied 49 hearing days. The Primary Judge delivered his reasons (the Reasons) approximately 21 months after the trial had been completed. There were further hearings following the publication of the Reasons. Those hearings concerned the relief to be granted and an application by Mr Viscariello to amend his statement of claim to give effect to the findings that had been made in the Reasons.
The Primary Judge dismissed the claims made against Mr Macks in his capacity as the administrator of the Companies. Briefly stated, his Honour found that ARL had not agreed to the revised Bart proposal; that consequently, there was no viable proposal for a DOCA to be put to the Companies’ creditors; that the liquidation of the Companies was inevitable; and that Mr Macks had not misled the creditors nor was there evidence that he had breached his duties by, for example, selling the Companies’ assets at an undervalue.
Mr Viscariello appeals, by way of cross-appeal, from those findings. We have concluded that none of the grounds of the cross-appeal should be allowed and the cross-appeal will be dismissed.
As to the claims made against Mr Macks in his capacity as the liquidator of Bernsteen, the Primary Judge found that Mr Macks breached the duties that he owed under ss 180 – 182 of the Corporations Act 2001 (Cth) (CA) by continuing to prosecute the Bernsteen action after June 2005 and by initiating and maintaining the George bankruptcy proceedings. His Honour characterised Mr Macks’ conduct as unreasonable and found that he had been actuated by collateral and improper purposes in pursuing the Proceedings. Mr Macks was removed as the liquidator of the Companies and declarations were made to give effect to the findings of breach. However, a claim for compensation was refused as Mr Viscariello lacked standing to seek damages or equitable compensation for a breach of the duties owed by Mr Macks to Bernsteen.
Mr Macks appeals from those findings. He complains about delay in the delivery of the Reasons and contends that the Reasons did not adequately explain the findings of breach (it should be noted that there was no complaint about delay or the adequacy of the Reasons in the cross-appeal). Mr Macks also complains that it was not alleged that he had acted for an improper purpose in pursing the Proceedings and accordingly, he had been denied procedural fairness. He further alleges that the Primary Judge made errors of fact and failed to engage with the whole of the evidence in making his findings and that, in any event, the court did not have power to make declarations to the effect that he had contravened ss 180 - 182 CA.
We have concluded that the findings that Mr Macks breached his statutory duties by prosecuting the Bernsteen action from June 2005 and by initiating and maintaining the George bankruptcy proceedings should be set aside. However, we have found that Mr Macks breached s 180 CA by failing to take steps after April 2006 to resolve the litigation with Ms Hamilton-Smith. We have also concluded that the court has power to make a declaration to that effect.
Finally, Mr Macks appeals from the orders made by the Primary Judge after the Reasons were delivered permitting Mr Viscariello to amend his statement of claim. Mr Macks contended that his Honour erred in exercising his discretion to permit the amendments; that the amendments did not reflect the terms on which leave had been granted; and that there were numerous defects in the pleading as amended.
We have concluded that the Primary Judge had power to permit Mr Viscariello to amend the statement of claim after the Reasons were delivered so as to incorporate allegations about matters that had been fairly raised and litigated in the trial. However, we have further found that his Honour made findings of improper purpose that were neither pleaded nor put to Mr Macks in the trial.[5] As it transpired, Mr Viscariello did not amend his statement of claim to plead those findings but there would have been good cause for Mr Macks to have objected to any amendment to incorporate the findings.
[5] Viscariello v Macks [2014] SASC 189 [757].
The procedural history of the appeal
The appeal was originally listed to be heard in April 2016. Sadly, Mr Viscariello’s counsel (who had appeared in the trial) died shortly prior to when the appeal was to be heard. The hearing of the appeal was adjourned to enable Mr Viscariello to obtain representation. Regrettably, this took some time. The appeal was relisted and Mr Viscariello retained new counsel to represent him shortly before the hearing date. They were at a disadvantage in having limited time to prepare for the numerous issues that were raised in the appeal. We are, nevertheless, very grateful for the helpful and considered submissions made by all counsel on the appeal.
Mr Viscariello represented himself on the last day of the appeal. He did so, as he informed the court, not because he was dissatisfied with his representation but rather, because his knowledge of the issues meant that he was better placed to answer many of the factual issues raised by the court.
Mr Viscariello was also given leave to file further submissions at the conclusion of the appeal hearing. Mr Macks complained that Mr Viscariello’s submissions strayed beyond the scope of the leave that had been granted and he objected to the court receiving part of the additional material. However, we have taken into account the matters raised by both parties.
The grounds of appeal and cross-appeal
The grounds of appeal and cross-appeal are lengthy and notices of contention were also filed by Mr Macks and Mr Viscariello. It is difficult to adequately summarise the detail of the parties’ pleadings and accordingly, we have annexed the grounds of appeal and cross-appeal and points of contention to these reasons.
The structure of the reasons
The reasons are divided into four parts. The first deals with some preliminary matters: the relevant provisions of the CA; the allegations made by Mr Viscariello in his statement of claim and the relief granted by the Primary Judge. It is convenient in that part to also consider Mr Macks’ complaints about the amendments that were made to the statement of claim following delivery of the Reasons (grounds 6, 8 and 9 of the appeal).
The second part considers the cross-appeal - commencing with the cross-appeal preserves the chronology of events. Part 3 considers Mr Macks’ appeal from the findings that he breached his statutory duties in prosecuting the Proceedings (grounds 2 - 5). Part 4 deals with the assertion that the court lacked power to grant declaratory relief (ground 1). Mr Macks did not pursue his appeal from the order removing him as the liquidator of the Companies (ground 7).
Part 1: Preliminary matters and the amended statement of claim
The statutory framework
Interaction between the CA and State laws
Part 1.1A of the CA concerns the interaction between Corporations legislation and State and Territory laws. In particular, s 5E provides that:
(1)The Corporations legislation is not intended to exclude or limit the concurrent operation of any law of a State or Territory.
(2)Without limiting subsection (1), the Corporations legislation is not intended to exclude or limit the concurrent operation of a law of a State or Territory that:
(a) imposes additional obligations or liabilities (whether criminal or civil) on:
(i) a director or other officer of a company or other corporation;
…
Section 5F concerns any provision of State law that declares a matter to be excluded from the whole of the Corporations legislation or any specific provision of the legislation. That section does not apply in this matter. Finally, s 5G contains provisions that are intended to avoid direct inconsistency between Corporations legislation and State and Territory laws. However, the section does not apply to a State law that ‘is capable of concurrent operation with the Corporations legislation’: s 5G(2). State laws that are capable of concurrent operation with the Corporations legislation are to be dealt with in accordance with s 5E.
Mr Macks’ statutory duties
Part 2D.1 of the CA concerns the duties and powers of company officers. The expression ‘officer of a corporation’ is defined by s 9 CA to include an administrator and a liquidator of a corporation.
Section 179(1) CA provides:
This Part sets out some of the most significant duties of directors, secretaries, other officers and employees of corporations. Other duties are imposed by other provisions of this Act and other laws (including the general law).
Further, s 185 states:
Sections 180 to 184:
(a) have effect in addition to, and not in derogation of, any rule of law relating to the duty or liability of a person because of their office or employment in relation to a corporation; and
(b)do not prevent the commencement of civil proceedings for a breach of a duty or in respect of a liability referred to in paragraph (a).
Section 180 CA provides:
(1)A director or other officer of a corporation must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they:
(a)     were a director or officer of the corporation in the corporation’s circumstances; and
(b)     occupied the office held by, and had the same responsibilities within the corporation as, the director or officer.
Business judgment rule
(2)A director or other officer of a corporation who makes a business judgment is taken to meet the requirements of subsection (1), and their equivalent duties at common law and in equity, in respect of the judgment if they:
(a)     make the judgment in good faith for a proper purpose; and
(b)     do not have a material personal interest in the subject matter of the judgment; and
(c)     inform themselves about the subject matter of the judgment to the extent they reasonably believe to be appropriate; and
(d)     rationally believe that the judgment is in the best interests of the corporation.
The director’s or officer’s belief that the judgment is in the best interests of the corporation is a rational one unless the belief is one that no reasonable person in their position would hold.
(3)     In this section:
business judgment means any decision to take or not take action in respect of a matter relevant to the business operations of the corporation.
Section 181(1) CA states:
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.
Section 182(1) CA states:
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.
Section 183 CA also imposes duties on the officers of a corporation in relation to the use of corporate information.
Disqualification
Section 206C(1) CA permits a court to disqualify a person from managing a corporation. The application to disqualify may only be made by the Australian Securities and Investment Commission (ASIC). A court may allow the application if:
(a)a declaration of contravention has been made under s 1317E CA; and
(b)the court is satisfied that disqualification is justified.
Section 206E CA also allows a court, on an application by ASIC, to disqualify a person from managing a corporation if:
(a)the person -
(i) has at least twice been an officer of a body corporate that has contravened the CA while they were an officer of the body corporate and each time the person has failed to take reasonable steps to prevent the contravention; or
(ii) has at least twice contravened the CA while they were an officer of a body corporate; or
(iii) has been an officer of a body corporate and has done something that would have contravened s 180(1) or s 181 CA if the body corporate had been a corporation; and
(b)the court is satisfied that disqualification is justified.
Standing
Part 2F of the CA concerns members’ rights and remedies. Section 234 permits a member to bring oppression proceedings under pt 2F.1. However, s 236 limits the circumstances in which a person may bring proceedings on behalf of a company. The section provides:
(1)A person may bring proceedings on behalf of a company, or intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for those proceedings, or for a particular step in those proceedings (for example, compromising or settling them), if:
(a) the person is:
(i)a member, former member, or person entitled to be registered as a member, of the company or of a related body corporate; or
(ii)an officer or former officer of the company; and
(b) the person is acting with leave granted under section 237.
(2)Proceedings brought on behalf of a company must be brought in the company’s name.
(3)The right of a person at general law to bring, or intervene in, proceedings on behalf of a company is abolished.
Section 237 allows a court to grant a person leave to bring proceedings on behalf of a company. The section provides:
(1)A person referred to in paragraph 236(1)(a) may apply to the Court for leave to bring, or to intervene in, proceedings.
(2)The Court must grant the application if it is satisfied that:
(a)     it is probable that the company will not itself bring the proceedings, or properly take responsibility for them, or for the steps in them; and
(b)     the applicant is acting in good faith; and
(c)     it is in the best interests of the company that the applicant be granted leave; and
(d)     if the applicant is applying for leave to bring proceedings - there is a serious question to be tried; and
(e)     either:
(i)at least 14 days before making the application, the applicant gave written notice to the company of the intention to apply for leave and of the reasons for applying; or
(ii)it is appropriate to grant leave even though subparagraph (i) is not satisfied.
(3)A rebuttable presumption that granting leave is not in the best interests of the company arises if it is established that:
(a)     the proceedings are:
(i)by the company against a third party; or
(ii)by a third party against the company; and
(b)     the company has decided:
(i)not to bring the proceedings; or
(ii)not to defend the proceedings; or
(iii)to discontinue, settle or compromise the proceedings; and
(c)     all of the directors who participated in that decision:
(i)acted in good faith for a proper purpose; and
(ii)did not have a material personal interest in the decision; and
(iii)informed themselves about the subject matter of the decision to the extent they reasonably believed to be appropriate; and
(iv)rationally believed that the decision was in the best interests of the company.
The director’s belief that the decision was in the best interests of the company is a rational one unless the belief is one that no reasonable person in their position would hold.
Section 241 confers general powers on the court to make orders and give directions in respect of proceedings brought or intervened with leave under pt 2F.1A.
Mr Viscariello did not seek leave under s 237 prior to commencing the action against Mr Macks or at any stage until after the Reasons were delivered. The Primary Judge, not surprisingly, refused to grant leave. Mr Macks does not appeal from that decision.
Removal of a liquidator
Section 503 CA has been repealed by the Insolvency Law Reform Act 2016 (Cth). However, the section applied to Mr Viscariello’s action against Mr Macks in these proceedings.
Section 503 formed part of div 4, pt 5.5 of the CA. Division 4 concerns voluntary liquidations. Section 503 empowered the court to remove a liquidator and appoint another liquidator on cause shown.
Part 5.3A
Part 5.3A of the CA provides for the voluntary administration of corporations that are insolvent or likely to become insolvent. Section 435A specifies the objectives of the Part:
The object of this Part, and Schedule 2 to the extent that it relates to this Part, is to provide for the business, property and affairs of an insolvent company to be administered in a way that:
(a) maximises the chances of the company, or as much as possible of its business, continuing in existence; or
(b) if it is not possible for the company or its business to continue in existence - results in a better return for the company’s creditors and members than would result from an immediate winding up of the company.
Section 436A provides that the directors of a corporation may appoint an administrator. The administrator must convene a first meeting of creditors; the CA provided in 2001 that the meeting was to be convened within 5 days of the appointment. The creditors may resolve at that meeting to remove the administrator and appoint another administrator. At the times relevant to these proceedings, the creditors could also decide to appoint a committee of creditors to consult with the administrator about the course of the administration.[6]
[6] See ss 436E and 436F of the CA. Section 436F has now been repealed.
As the CA stood in 2001, the administrator was required to convene a second meeting of creditors within 28 days after the date on which the administration commenced (although the meeting could be convened 5 days either side of the 28 day requirement). However, the court had (and has) a general power under s 447A(1) to make orders in relation to the administration of a corporation. Mr Mack successfully applied to abridge the time for the second creditors’ meetings of the Companies pursuant to that section. The application to abridge time was referred to by the parties and the Primary Judge as the preponement application.
The duties of an administrator include investigating the affairs of the corporation. Section 438A provides that:
As soon as practicable after the administration of a company begins, the administrator must:
(a) investigate the company’s business, property, affairs and financial circumstances; and
(b) form an opinion about each of the following matters:
(i) whether it would be in the interests of the company’s creditors for the company to execute a deed of company arrangement;
(ii) whether it would be in the creditors’ interests for the administration to end;
(iii) whether it would be in the creditors’ interests for the company to be wound up.
Consistent with the duties imposed by the CA, an administrator is required by s 439A to provide the creditors with a report about the company’s business, property, affairs and financial circumstances when giving notice of the creditors meeting convened under s 439A.
Part 9.4B
Part 9.4B of the CA is entitled ‘Civil consequences of contravening civil penalty provisions’. Section 1317E provides that if a court is satisfied that a person has contravened a civil penalty provision, it must make a declaration of contravention. Sections 180 - 182 CA are defined as civil penalty provisions for the purpose of s 1317E.
Section 1317E(2) provides that a declaration of contravention must specify:
(a)the court that made the declaration;
(b)the civil penalty provision that was contravened;
(c)the person who contravened the provision;
(d)the conduct that constituted the contravention;
(e)if the contravention is of a corporation/scheme civil penalty provision - the corporation or registered scheme to which the conduct related.

Section 1317F provides that a declaration of contravention is conclusive evidence of the matters that must be specified in the declaration.
Section 1317G provides that a court may order a person to pay to the Commonwealth a pecuniary penalty where a declaration of contravention has been made and:
(a)the contravention was of a corporation/scheme civil penalty provision; and
(b)the contravention:
(i)     materially prejudiced the interests of the corporation or scheme, or its members; or
(ii)    materially prejudiced the corporation’s ability to pay its creditors; or
(iii)   was serious.
Sections 180 ‑ 182 CA are corporation/scheme civil penalty provisions (see ss 1317DA and 1317E(1)).
Section 1317H provides that a court may order a person to pay compensation to a corporation for damage suffered by the corporation if the person has contravened a corporation/scheme civil penalty provision in relation to the corporation and the damage resulted from the contravention. An order may be made under s 1317H regardless of whether a declaration of contravention has been made under s 1317E. The damage suffered by a corporation includes profits made by any person as a result of a contravention of a corporation/scheme civil penalty provision.
Section 1317J specifies who may apply for a declaration of contravention, a pecuniary penalty order or a compensation order. The effect of the section is that only ASIC may apply for a declaration of contravention and a pecuniary penalty order: s 1317J(1), read with s 1317J(4) (which provides that no person may apply for a declaration of contravention, a pecuniary penalty order or a compensation order unless permitted by the section). A corporation may intervene in an application for a declaration of contravention or a pecuniary penalty order and may be heard on all matters except whether the declaration or order should be made. A corporation may also apply for a compensation order and it may do so regardless of whether a declaration of contravention has been made: s 1317J(2).
The balance of pt 9.4B concerns the rules of evidence that are to apply in proceedings for a declaration of contravention and a pecuniary penalty order (s 1317M) and the interplay between criminal and civil proceedings and proceedings for relief under the Part.
Part 9.5
Part 9.5 of the CA confers various powers on courts to make orders in respect of matters arising under the Act. Several sections found in the Part are relevant.
Section 1321 CA (which has also been repealed by the Insolvency Law Reform Act but which applied to Mr Viscariello’s action against Mr Macks) provided for an appeal to a court in respect of the act, omission or decision of a liquidator or provisional liquidator of a company. The appeal could have been brought by a person aggrieved by any act, omission or decision and the court could confirm, reverse or modify the act or decision or remedy the omission, as the case may be, and make such orders and give such directions as it thought fit.
Mr Viscariello applied for relief under s 1321. The Primary Judge held that Mr Viscariello was a person aggrieved for the purpose of the section but that an appeal under s 1321 should not be allowed as the application was made long after the impugned decisions had been taken. Mr Viscariello has appealed against the dismissal of his application under s 1321.
Section 1323 CA confers wide powers on the court to prohibit payments or transfers of money or other property in circumstances where, among other things, a civil proceeding has been commenced against a person under the CA. Section 1324 empowers a court to grant an injunction to restrain a person from engaging in conduct that contravenes or would contravene the CA. An application for an injunction under s 1324 may be made by any person whose interests have been, are or would be affected by the allegedly contravening conduct. Further, s 1324(10) provides that:
Where the Court has power under this section to grant an injunction restraining a person from engaging in particular conduct, or requiring a person to do a particular act or thing, the Court may, either in addition to or in substitution for the grant of the injunction, order that person to pay damages to any other person.
Section 1325 CA empowers the court to make orders against a person who has contravened s 201P(1), chapters 5C, 6CA, or 6D, s 798H(1) or pt 7.10 to compensate another person who has suffered loss or damage as a result of the contravention. Section 1325(5) contains examples of the type of order that may be made. Any person who has suffered, or is likely to suffer, loss or damage because of the contravening conduct of another person may apply for an order under s 1325. The court may make an order regardless of whether an injunction has been granted under s 1324.
Chapters 5C and 6CA and pt 7.10 of the CA contain provisions that are civil penalty provisions. Further, s 798H(1) is a civil penalty provision. The type of conduct proscribed by those provisions is discussed later in these reasons.
Part 9.6A
Part 9.6A of the CA concerns the jurisdiction and procedure of courts. Division 1 of the Part deals with, among other things, the jurisdiction of courts in respect of civil matters arising under the Corporations legislation: s 1337A(1)(a). A ‘civil matter’ is defined by s 9 CA to mean a matter other than a criminal matter.
Section 1337A(2) provides that div 1 operates to the exclusion of s 39B of the Judiciary Act 1903 (Cth). The division does not otherwise limit the operation of that Act: s 1337A(3). Section 39B of the Judiciary Act defines the scope of the original jurisdiction of the Federal Court of Australia. Section 39B(1A) provides that the original jurisdiction of the Federal Court includes jurisdiction in any matter arising under any laws made by the Commonwealth Parliament, other than a matter in respect of which a criminal prosecution is instituted or any other criminal matter.
Sections 1337B(1) and 1337B(2) CA confer jurisdiction on the Federal Court and the Supreme Court of each State and Territory with respect to civil matters arising under the Corporations legislation. The jurisdiction conferred on a Supreme Court under s 1337B is not limited by any limits to which any other jurisdiction of the court may be subject: s 1337B(5).
The claims made by Mr Viscariello
The Second SOC
The trial was conducted on the allegations made by Mr Viscariello in the second amended statement of claim (Second SOC). In summary, Mr Viscariello alleged that:
1Mr Macks failed to carry out and/or adequately and properly perform his duties as a voluntary administrator of the Companies (par 27) and made false and misleading statements at the first meeting of the creditors of the Companies (par 29) in connection with the preponement application (par 34), in the s 439A reports and at the second creditors’ meeting (pars 40 - 57A);
2Mr Macks owed duties pursuant to ss 180 ‑ 182 CA and/or at common law as the liquidator of the Companies (pars 59.3 - 59.6);
3Mr Macks breached his duties as the administrator and liquidator of the Companies by, among things, the way in which he dealt with creditors and by failing to administer the Companies so as to maximise their prospects of continuing to trade or to maximise the return to the creditors from the sale of the Companies’ assets (pars 66 - 71A);
4Mr Macks engaged in misleading and deceptive conduct in his dealings with creditors; the Companies would not have been placed in liquidation but would have entered into DOCAs if he had not engaged in that conduct (pars 71B - 71H);
5from December 2001 until at least February 2007, Mr Macks was motivated or influenced by ‘personal wishes, personal motives and/or personal intentions’ that ‘caused’ him to act in his personal interests and not in the best interests of the creditors, members and contributories of the Companies and to act unreasonably and/or ‘partially, subjectively and/or unprofessionally’ in connection with the liquidation of the Companies (par 80);
6Bernsteen paid and/or incurred a liability to pay substantial amounts in legal costs and disbursements in connection with the Proceedings - the payments were made and the liabilities were incurred as a result of Mr Macks breaching the duties imposed by ss 180 - 182 CA (pars 118 ‑ 119);
7Mr Macks caused Bernsteen to make payments and/or incur liabilities in connection with the Proceedings without seeking a direction from the court or taking steps to obtain the approval or sanction of the committee of inspection or the committee of creditors (pars 120 -121);
8Mr Macks’ conduct in relation to the George bankruptcy proceedings was an attempt to bankrupt Ms Hamilton-Smith for an improper purpose (par 123) or constituted an abuse of process (pars 124 - 126);
9Mr Macks and his firm received fees and payments as a result of Mr Macks’ breaches of duty (par 138);
10Bernsteen suffered loss and damage or incurred expenses or suffered a detriment as a result of, among other things, Mr Macks’ breaches of duty in connection with the Proceedings - the loss and damage included the payment of substantial legal costs and disbursements on account of the Proceedings and the payment of Mr Macks’ fees (par 127);
11in breach of his duties, Mr Macks caused Bernsteen to pay legal and professional fees, costs and disbursements that were his liability (pars 140 ‑ 141);
12Mr Macks sold assets of Newmore that were subject to security granted to Mr Viscariello and applied the net proceeds of sale to his own purposes or for the benefit of Bernsteen rather than accounting to Mr Viscariello - by reason of those matters, Mr Macks committed a breach of fiduciary duty and trust (pars 141A - 141E, read with par 6.10);
13Mr Macks was liable to be removed as liquidator by reason of, among other things, the allegations made in pars 118 - 141E of the Second SOC (par 141F).
The relief sought by Mr Viscariello in the Second SOC included claims for:
(a)declarations that -
1      Mr Macks was disqualified from appointment as either the administrator or liquidator of the Companies and that he ‘cease forthwith purporting to act’ as the liquidator of the Companies;
2      (pursuant to ss 447A, 447E or 1321 CA, Mr Macks was not entitled to charge or retain any fees or disbursements paid to him as liquidator of the Companies and that he repay all fees and disbursements that had been charged;
3 Mr Macks breached the duties imposed by ss 180 ‑ 182 CA by applying the funds of Bernsteen and/or Newmore to the Proceedings and, by reason of those matters, he caused damage to the Companies within the meaning of s 1317H CA;
4      Mr Macks expended funds of Newmore to which he was not entitled under the security granted by the company;
5      Mr Macks be removed as the liquidator of the Companies;
(b)orders that –
1      Mr Macks be removed as the liquidator of the Companies;
2 pursuant to s 1317H CA, Mr Macks compensate Bernsteen and/or Newmore in respect of fees paid in the prosecution of the Proceedings;
3      Mr Macks pay equitable compensation on account of the use of the proceeds from the sale of the assets of Newmore that were subject to the security granted to Mr Viscariello;
4      all necessary inquiries be made and accounts taken.
It appears that the prayer for relief was pleaded on the erroneous assumption that Mr Viscariello had standing to claim the remedies found in pt 9.4B of the CA (see s 1317J); that is, the declarations were conceived of as declarations of contravention under s 1317E that would have the effect provided for by s 1317F and which could be used as the basis for claiming relief under s 1317H. That mistaken view was reflected elsewhere in the prayer:
(a)the relief sought in respect of the fees and disbursements paid in connection with the Proceedings was confined to a claim made under s 1317H CA;
(b)no claim was expressly made for other fees and disbursements paid to Mr Macks or to PPB;
(c)the only claim that was made for equitable compensation was in respect of the net proceeds of the sale of the assets of Newmore.
The Fourth SOC
Mr Viscariello filed a proposed amended statement of claim (the Proposed Fourth SOC) on 5 March 2013, shortly after the trial had been completed. The Primary Judge foreshadowed in the Reasons that Mr Viscariello would be permitted to amend his statement of claim to the extent necessary to give effect to the findings that had been made [922]. The question of whether Mr Viscariello should have been permitted to amend his claim according to the Proposed Fourth SOC was argued at hearings held on 14 and 15 April, 28 October 2015 and 15 January 2016. A consolidated pleading was filed following the last of those hearings (the Fourth SOC).
The Fourth SOC:
1.alleged that Mr Macks prepared the revised Bart proposal and in doing so, included terms that conferred a benefit on his and/or PPB (pars 34.2.8);
2.alleged that ARL decided not to accept the proposal contained in the revised Bart proposal because it included terms that were beneficial to Mr Macks (pars 34.2. 9 and 34.2.10) and that Mr Macks had failed to disclose to the creditors matters relating to the revised Bart proposal (par 34.5.15) (it was also alleged that Mr Macks negligently or recklessly failed to negotiate a deed of company arrangement on the terms of the revised Bart proposal (par 66.6));
3.amended the allegations made in par 59 to allege that Mr Macks owed duties as an officer of the Companies pursuant to ss 180 ‑ 182 CA and/or under the general law (in substitution for an allegation that the duties were owed under the CA, alternatively at common law);
4.alleged that Mr Viscariello lost the chance of avoiding loss and damage as result of Mr Macks’ misleading statements to the Companies’ creditors about the proposals for a deed of company arrangement (pars 71HA, 71HAH and 71HAB);
5.alleged that in about early 2002, Mr Macks entered into an agreement with Minter Ellison regarding the costs of legal proceedings connected with the liquidation of the Companies without first obtaining the approval of the court or the committee of inspection, and in breach of s 42(6) of the Legal Practitioners Act 1983 (SA) and pursuant to which Mr Macks, in breach of the duties owed under ss 180 – 182 CA or under general law, paid accounts rendered by Minter Ellison in connection with the Proceedings (pars 124A – 124D);
6.alleged that Mr Macks was motivated by improper purposes in relation to the Bernsteen action and acted dishonestly and in a position of conflict in his dealings with the committees of inspection and creditors (pars 139A – 139D);
7.re-pleaded the allegations previously made concerning -
7.1.   the payment of legal fees and disbursements by Bernsteen in connection with the Proceedings and an action between Mr Macks’ father and Mr Macks (defined as the ‘2004 Action’) (pars 140 – 141);
7.2.   the application of the net proceeds of the sale of the assets of Newmore (pars 141A – 141E);
7.3.   the removal of Mr Macks as the liquidator of the Companies (par 141F);
8.added a plea that Mr Viscariello be granted leave under s 237 CA to bring his action ‘in so far as the [appellant’s] breaches of duty as an officer of the Companies extend beyond the breaches of his duty to the [respondent] under the general law’ (pars 141G – 141J);
9.amended the declarations sought, including to claim declarations that -
9.1.   Mr Viscariello had shown cause for the removal of Mr Macks as the liquidator of the Companies;
9.2. Mr Macks had breached the duties imposed by ss 180 - 182 CA ‘by reason of the application of the moneys recovered in the course of the voluntary administration or in the course of the liquidations of the Companies’ to the Proceedings and the 2004 Action’ and that ‘by reason of same, the [appellant] has caused damage to the Companies within the meaning of s 1317H’ (par 142.8B);
9.3.   in the alternative, a declaration that Mr Macks breached fiduciary duties owed under general law to the Companies and/or their creditors and contributories by the application of money received in the administration and winding up of the Companies and that the breaches caused damage to the Companies (par 142.8CA);
10.amended the orders sought to add orders -
10.1.that Mr Macks compensate the Companies pursuant to s 1317H CA for payments made in connection with the Proceedings;
10.2.alternatively, that Mr Macks pay equitable compensation to the Companies;
10.3.that Mr Viscariello be granted leave pursuant to s 237 CA ‘to bring a proceeding constituted by this proceeding against the [appellant] in respect of the breaches of duty alleged against the [appellant] in this proceeding in so far as they extend to breaches of duty in respect of his capacity as officer of the Companies pursuant to the CA and that the grant of leave be made now for then from the commencement of the proceeding’ (par 142.9A).
The relief granted by the Primary Judge
As has been noted, the Primary Judge declared that Mr Macks had contravened the duties imposed by ss 180 - 182 CA (the Declarations) and made an order under s 503 CA removing him as liquidator of the Companies. His Honour also made various procedural rulings and orders after the Reasons were delivered, including permitting Mr Viscariello to amend his statement of claim.
The Declarations were made pursuant to s 31 of the Supreme Court Act 1935 (SA). They were in the following terms:
3.It is declared that the [appellant], as liquidator of Bernsteen Pty Ltd (“Bernsteen”), contravened section 180(1) of the Act by reason that from June 2005 he failed to exercise the degree of care and diligence required of him as an officer of Bernsteen in applying any of Bernsteen’s funds:
3.1 in pursuing or, as the case may be, defending:
3.1.1a claim for recovery of a debt from Ms Tanya Hamilton-Smith in action number 10039 of 2002 in the Magistrates Court of South Australia, Adelaide Registry (the “Bernsteen action”);
3.1.2the counterclaim brought by Ms Hamilton-Smith in the Bernsteen action;
3.1.3an application by Ms Hamilton-Smith, in action number ADG 94 of 2005 in the Federal Magistrates Court of Australia, for an order setting aside a bankruptcy notice dated 7 April 2005 prepared on behalf of Bernsteen and served on Ms Hamilton-Smith;
3.2 pursuant to an indemnity in favour of Ms Heidi George against her liability for the costs of the following steps and proceedings:
3.2.1the issue and pursuit by Ms George of a bankruptcy notice against Ms Hamilton-Smith;
3.2.2the defence by Ms George of Ms Hamilton-Smith’s application in the Federal Magistrates Court of Australia to set aside Ms George’s bankruptcy notice (action number ADG 159/2005);
3.2.3the issue and pursuit by Ms George of creditor’s petition against Ms Hamilton-Smith in the Federal Magistrates Court of Australia (action number ADG 237/2005);
3.2.4the defence by Ms George to an application by Ms Hamilton-Smith in the Magistrates Court of South Australia for a declaration that she had discharged judgment debt forming the subject of Ms George’s bankruptcy notice and creditor’s petition (action 9644/2005);
3.2.5the pursuit of or response to any appeals associated with those proceedings.
4.It is declared that the [appellant] in the litigation referred to in Order 3, as liquidator of Bernsteen, failed to exercise his powers and discharge his duties in good faith in the best interests of Bernsteen or for a proper purpose and thereby contravened section 181(1) of the Act.
5.It is declared that the [appellant], as liquidator of Bernsteen, contravened section 182(1) of the Act by reason that, from June 2005, the [appellant] engaged in litigation referred to in Order 3 above to gain an advantage for himself to the detriment of Bernsteen.

The Primary Judge accepted that declarations of contravention could not be made under s 1317E CA as ASIC was not a party to the proceedings (ASIC only sought to intervene after the Primary Judge had delivered the Reasons and for the limited purpose of seeking orders that Mr Macks be removed as the liquidator of the Companies and an inquiry be conducted pursuant to s 536 CA). However, his Honour concluded that the court could declare that Mr Macks had contravened ss 180 - 182 CA pursuant to s 31 of the Supreme Court Act. That section provides that:
No action or proceeding shall be open to objection on the ground that a merely declaratory judgment or order is sought thereby, and the court shall have power to make binding declarations of right whether any consequential relief is or could be claimed or not.
The amendments made to the statement of claim (grounds of appeal 6, 8 and 9)
The procedural history
As has been noted, Mr Viscariello’s claims at trial were pleaded in the Second SOC. However, he was permitted to amend his statement of claim at a hearing held on 22 November 2012. The amendments were pleaded in a proposed third statement of claim but leave had not been granted for all of the amendments made in that draft pleading.
Mr Viscariello’s counsel proposed a further amendment to the Second SOC at a hearing held on 19 February 2013, immediately prior to closing addresses. The amendment concerned an allegation that Mr Viscariello had been subrogated to the rights of the Commonwealth Bank as a secured lender to the Companies (the Subrogation Allegation). The Primary Judge understood that the purpose of the allegation was to enable Mr Viscariello, standing in the shoes of the bank, to enforce a right against Mr Macks for the due administration of the liquidation of the Companies and to seek equitable compensation for losses suffered as a consequence of Mr Macks’ alleged misconduct. Mr Viscariello’s counsel confirmed that understanding.[7] His Honour allowed the amendment noting that there was an issue as to whether the security granted by the Companies to the Commonwealth Bank had the effect contended for by Mr Viscariello.
[7] ts 3519 - 3520.
The application to amend the pleading to include the Subrogation Allegation was argued by reference to the proposed third statement of claim. However, Mr Viscariello filed a further draft of the statement of the claim on 5 March 2013, shortly after the trial had been completed (the Proposed Fourth SOC). He also filed submissions in February 2013 in support of the application to amend the statement of claim to include the Subrogation Allegation.
The Proposed Fourth SOC was not confined to pleading the Subrogation Allegation. Rather, it included numerous minor drafting amendments and also substantive amendments concerning:
1.the revised Bart proposal, including allegations that clauses 10 and 12 of the revised proposal conferred a benefit on Mr Macks and/or PPB;
2.the Subrogation Allegation;
3.Mr Macks’ purposes in initiating and maintaining the Bernsteen action and in using the Companies’ funds to pay the legal costs of the George proceedings;
4.Mr Macks’ dealings with the committees of inspection and creditors;
5.an application pursuant to s 237 CA for Mr Viscariello to be granted leave to ‘bring a proceeding against the [appellant] in so far as his breaches of duty as an officer of the Companies extend beyond the breaches of his duty to the [respondent] under the general law’ (the s 237 Application).
Mr Macks filed submissions in May 2013 (the May 2013 Submissions) opposing the proposed amendments.[8] Mr Viscariello filed submissions in response to those submissions on 28 June 2013[9] and the Mr Macks filed further submissions in reply.[10] The May 2013 Submissions were discursive. They comprised 38 closely typed pages; Mr Macks’ submissions in reply to Mr Viscariello’s submissions added a further closely typed 10 pages.
[8] ‘Defendant’s written submissions in reply to the plaintiff’s “reply” submissions and further “reply” submissions, proposed new fourth amended statement of claim and new proposed final orders’; in addition, Mr Macks had earlier filed a submission on the Subordination Allegation - ‘Defendant’s outline of argument concerning plaintiff’s application for permission to amend to raise the “CBA Subrogation” allegations’ dated 25 February 2013.
[9] ‘Plaintiff’s response to the defendant’s submissions filed on 13 May 2013’.
[10] ‘Defendant’s submissions in reply to plaintiff’s submissions of 28 June 2013’ dated 4 July 2013.
Mr Macks’ submissions complained that the Proposed Fourth SOC had been filed without an application for leave and a supporting affidavit; that Mr Viscariello had failed to comply with the Supreme Court Rules and that the proposed amendments contained pleading defects. The balance of the submissions were organised around the factors identified by the High Court in Aon Risk Services Australia Ltd v Australian National University[11] as being generally relevant to the exercise of the court’s discretion to permit a party to amend its pleadings.
[11] Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175.
The Primary Judge did not rule on the proposed amendments in the period between the completion of the trial and delivery of the Reasons. In the interim, Mr Viscariello filed a second proposed fourth amended statement of claim dated 1 April 2015. However, Mr Macks continued to primarily rely on the May 2013 Submissions that were directed to the Proposed Fourth SOC. The differences between the two draft pleadings were not directly relevant to the issues raised by grounds 6, 8 and 9 of the appeal. We have considered both versions of the draft pleading in determining those grounds; however, it is convenient to continue to refer to both versions collectively as the Proposed Fourth SOC.
As has been noted, the Primary Judge indicated in the Reasons that Mr Viscariello would be given permission to amend the statement of claim to reflect the findings that had been made.[12] His Honour considered that the issues that were decided had been fully joined in the course of the hearing and that Mr Macks had not suffered any prejudice by the ‘evolving nature of the [respondent’s] case’. However, the question of precisely what amendments should be permitted in light of the findings made in the Reasons became a matter of substantial disagreement.
[12] Viscariello v Macks [2014] SASC 189 [922].
That question was considered at the hearing held on 14 and 15 April 2015. Again, the parties filed extensive submissions in advance of that hearing.[13] The Primary Judge made directions on 15 April 2015 concerning the proposed amendments to the statement of claim. The parties filed further submissions as a result of those directions.[14]
[13] ‘Plaintiff’s submissions for hearing 14 April 2015’ dated 30 March 2015; ‘Plaintiff’s submissions on second proposed fourth amended statement of claim’ dated 1 April 2014 (the second proposed fourth amended statement of claim was filed with these submissions); ‘Defendant’s response to the plaintiff’s submissions on the second proposed fourth amended statement of claim’ dated 10 April 2015; and ‘Defendant’s submissions for hearing on 14 April 2015’.
[14] ‘Defendant’s submissions on outstanding issues regarding the second proposed fourth amended statement of claim’ dated 27 April 2015; ‘Plaintiff’s surrejoinder to submissions dated 27 April 2015 of defendant regarding second proposed amended statement of claim pursuant to leave granted 27 April 2015’ dated 1 May 2015; and ‘Defendant’s reply to plaintiff’s surrejoinder filed 1 May 2015’ dated 8 May 2015.
A further hearing was held on 28 October 2015 at which his Honour published a decision on what amendments should be permitted.[15] Mr Viscariello was directed to serve a draft statement of claim incorporating the permitted amendments. The parties were granted liberty to apply if they were unable to agree on the amendments that had been allowed.
[15] Viscariello v Macks [No 2] [2015] SASC 160.
Subsequently, Mr Viscariello ascertained that not all of the proposed amendments were dealt with by his Honour’s rulings in Viscariello [No 2].[16]He applied to ‘re-open’ the question of amending the statement of claim. Mr Macks opposed the application and yet further submissions were exchanged between the parties.[17]
[16] Viscariello v Macks [No 2] [2015] SASC 160.
[17] ‘Outline of submissions of the plaintiff’ dated 14 January 2016; ‘Defendant’s submissions on plaintiff’s interlocutory application dated 14 December 2015’ dated 14 December 2015; and ‘Plaintiff’s reply to defendant’s submissions’ dated 14 January 2016’.
Further orders were made in respect of the proposed amendments at a hearing held on 15 January 2016. The effect of those orders was to revoke the order that had been made at the hearing on 28 October 2015 and substitute an order identifying the amendments proposed in the Proposed Fourth SOC that would be permitted. The Fourth SOC incorporated all of the amendments that were permitted by the substituted order.
The Fourth SOC was the product of rulings made by the Primary Judge and consultation between the parties in light of those rulings. Mr Macks maintained his objections to the proposed amendments throughout the process of arguing and conferring over the Proposed Fourth SOC. Accordingly, concessions made by Mr Macks in the process of conferral over the Proposed Fourth SOC were without prejudice to his right of appeal.
As has been noted, Mr Macks’ objections to the Proposed Fourth SOC were primarily stated in the May 2013 Submissions, supplemented by the written and oral submissions made immediately before and at the hearings on 14 and 15 April and 28 October 2015. The parties’ submissions on the Proposed Fourth SOC and the Primary Judge’s findings on the allegations that were made by the permitted amendments provide important context for determining grounds 6, 8 and 9 of the appeal. It is convenient to further consider those matters before turning to the parties’ submissions in the appeal.
The revised Bart proposal
Mr Viscariello was given permission to amend the statement of claim to make allegations about the revised Bart proposal, initially by the orders made on 28 October 2015 and subsequently, by the substituted order made on 15 January 2016. The allegations were pleaded in pars 34.2.2 - 34.2.10 and par 34.5.15 of the Proposed Fourth SOC. Mr Macks did not press his objections to pars 34.2.3 - 34.2.10 at the hearing on 28 October 2015 and the Primary Judge permitted the statement of claim to be amended to include the allegations made in pars 34.2.2 and 34.5.15 over Mr Macks’ objection on the ground that they concerned matters that were extensively canvassed at trial.[18]
[18] Viscariello v Macks [No 2] [2015] SASC 160 [13], [15].
The allegations made in respect of the revised Bart proposal concerned clauses 10 and 12 of the proposal. Mr Viscariello alleged that the clauses conferred a benefit on Mr Macks and/or PPB and that their inclusion caused ARL to reject the revised Bart proposal or materially contributed to its decision.
The evidence concerning the negotiation of the revised Bart proposal was outlined in some detail by the Primary Judge.[19] The Primary Judge found in relation to the allegations concerning the inclusion of clauses 10 and 12 in the revised Bart proposal that:
1.clause 12 advantaged Mr Macks and his evidence that he did not actively promote the insertion of the clause into the proposal should be rejected;[20]
2.contrary to his evidence, Mr Macks was largely responsible for the inclusion of several clauses in the revised Bart proposal that protected his interests but it was reasonable for him to have done so;[21]
3.it was reasonable for Mr Macks to protect his personal position as against ARL on entry into the revised Bart proposal and Mr Macks would have been entitled to similar protections in the course of an administration and in a winding‑up;[22] and
4.changes made in respect of the revised Bart proposal did not cause ARL to reject the proposal and Mr Macks’ additions to, or amendments of, the clauses of the proposal did not cause ARL to reject it and accordingly, there was no ‘loss of chance’ to assess.[23]
[19] Viscariello v Macks [2014] SASC 189 [175] and following.
[20] Viscariello v Macks [2014] SASC 189 [224].
[21] Viscariello v Macks [2014] SASC 189 [303].
[22] Viscariello v Macks [2014] SASC 189 [303].
[23] Viscariello v Macks [2014] SASC 189 [304].
Grounds 4 and 5 of the cross‑appeal concern those findings.
The May 2013 Submissions contained extensive submissions in relation to the amendments proposed in respect of the revised Bart proposal. The submissions argue in some detail reasons why:
1.clauses 10 and 12 provided no additional benefit to Mr Macks beyond that provided for by the CA;
2.Mr Viscariello’s submissions concerning the benefits allegedly conferred by the clauses were misconceived;
3.Mr Macks was entitled to include the clauses in the revised Bart proposal;
4.it could not be contended that ARL had rejected the revised Bart proposal because of the inclusion of the clauses;
5.the allegations raised complex factual issues that would cause the Mr Macks unfair prejudice;
6.Mr Macks may have taken a different approach in cross‑examining Mr Bart and in considering whether to adduce further evidence concerning the circumstances in which the revised Bart proposal had been prepared.
As to the question of prejudice, Mr Macks submitted that the proposed pleading raised fresh issues as to whether Mr Bart did or did not intend to include particular terms in the revised Bart proposal and who was responsible for including the various provisions in the proposal. Further, the amendments required the court to consider what Mr Bart and ARL would have done if the revised Bart proposal had not included clauses 10 and 12. The problems raised by those matters were said to be compounded by the passage of time and Mr Bart’s professed lack of memory.
The Subrogation Allegation
Mr Viscariello did not seek to include in the Fourth SOC the amendments that had been proposed in the Proposed Fourth SOC concerning the Subrogation Allegation in light of the comments made by the Primary Judge in the Reasons.[24] The effect of those comments was to leave Mr Viscariello to pursue the issues raised by the Subrogation Allegation with the liquidator appointed to replace Mr Macks.
Allegations of breach of duty
[24] Viscariello v Macks [2014] SASC 189 [913].
The Second SOC contained allegations that Mr Macks had breached the duties imposed by ss 180 ‑ 182 CA by causing Bernsteen to incur legal costs and expenses in connection with the Proceedings.[25] The allegations included that Mr Macks had commenced the George bankruptcy proceedings for an improper purpose and/or as an abuse of the court’s processes, for personal purposes and for reasons unrelated to the interests of Bernsteen. Mr Viscariello was permitted to amend the statement of claim to further allege that:
1.Mr Macks was motivated by an improper purpose in initiating, maintaining and expending funds on the Proceedings;
2.Mr Macks had failed to act honestly by not informing the committee of inspection for Bernsteen of matters associated with the Proceedings, by misleading the committee and by calling meetings for purposes that were not connected with the conduct of the liquidation of the Companies; and
3.Mr Macks had acted in a position of conflict in relation to his dealings with the committee of inspection and by securing the appointment of the special purposes liquidators.
[25] Pars 118 ‑ 119, 124A ‑ 124B, 125 ‑ 126.
Those allegations were pleaded in pars 139A ‑ 139D of the Fourth SOC. The amendments were permitted by the orders made by the Primary Judge on 28 October 2015 and 15 January 2016. His Honour held that the issues raised by the pleadings had been properly joined and exhaustively dealt with[26] and ‘fully canvassed in the course of the hearing’.[27]
[26] Viscariello v Macks [No 2] [2015] SASC 160 [33] in respect of par 139A.
[27] Viscariello v Macks [No 2] [2015] SASC 160 [35] in respect of pars 139B ‑ 139D.
Mr Macks opposed the amendments proposed by pars 139A ‑ 139D in the May 2013 Submissions. It was contended that the allegation in par 139A was inconsistent with how Mr Viscariello had opened his case and accordingly, the basis upon which Mr Macks had conducted his defence. The primary complaint in relation to pars 139B ‑ 139D was that they raised matters that had not been put to Mr Macks in cross‑examination. Mr Macks maintained his objection to the amendments at the hearing on 15 April 2015 on the ground that the Primary Judge had not made findings in terms of the allegations that formed the proposed amendments.
The s 237 Application
Mr Viscariello’s application for leave to amend his statement of claim to include the allegations concerning the s 237 Application was one matter that was not dealt with in the orders made on 28 October 2015. Mr Viscariello was given leave to make the amendments at the hearing on 15 January 2016.
Mr Macks opposed Mr Viscariello being permitted to amend to raise the s 237 Application on grounds that included the lateness of the proposed amendment and the effect of the decision in Chahwan v Euphoric Pty Ltd t/as Clay.[28] As has been earlier noted, the Primary Judge refused Mr Viscariello leave under s 237 CA.
[28] Chahwan v Euphoric Pty Ltdt/as Clay & Michel [2008] NSWCA 52; (2008) 227 FLR 43.
His Honour did not explain the reason for permitting Mr Viscariello to amend the statement of claim to plead the s 237 Application.[29] However, it appears that his Honour considered that Mr Viscariello should be permitted to amend the statement of claim to raise all of the issues that were canvassed in the Reasons regardless of the findings that were made on each issue. That approach was contrary to the view that Mr Macks took of how [922] of the Reasons was to be applied - that is, that Mr Viscariello should only have been permitted to amend the statement of claim to reflect findings that had been made in his favour and which were relevant to the relief that was to be granted. However, it is likely that his Honour was well aware by the time that the proposed amendments were argued that the parties were intending to appeal from a number of his findings.
[29] The amendments were in pars 141G ‑ 141J of the Fourth SOC.
Mr Macks could not be prejudiced by the amendments to the statement of claim to plead the s 237 Application given that the application was, in effect, refused and Mr Viscariello does not appeal from the Primary Judge’s findings on the application.
Other allegations
Mr Macks stated in the May 2013 Submissions that he did not object to the amendments proposed by pars 59, 88, 118, 127.1.1 and 138 of the Proposed Fourth SOC. However, ground 8 of the appeal alleges that the Primary Judge erred in permitting those amendments to be made. We have been unable to find where, if at all, Mr Macks gave notice of a change of position in relation to those paragraphs and an explanation for withdrawing his consent to the proposed amendments. It is not apparent how his Honour could have erred in permitting the amendments unless Mr Macks’ change of position had been notified and explained. In any event, we are unable to ascertain how Mr Macks could have been prejudiced by the amendments.
Mr Macks’ contentions
Mr Macks contended that:
1.an application to amend after close of the trial faced ‘special’ difficulties, reference being made to the judgment of Bryson J in Mercantile Mutual Insurance (Australia) Ltd v Farrington;[30]
2.the application to amend had been made without any evidence to explain the delay;
3.Mr Macks had made extensive submissions in opposition to an application for leave to amend but those submissions, and the authorities to which reference had been made, were not seemingly considered by his Honour in the Reasons;
4.the delay in delivery of the Reasons and the reasons of 28 October 2015 had resulted in the Primary Judge misstating the circumstances that were relevant to the application to amend;
5.there were numerous defects in the pleading of the Fourth SOC;
6.Mr Macks had been prejudiced by the amendments that had been permitted.
Relevant principles
[30] Mercantile Mutual Insurance (Australia) Ltd v Farrington (1996) 44 NSWLR 634.

The Full Court of the Federal Court considered and applied Windoval in Sullivan v Trilogy Funds Management Ltd.[437] In Sullivan the conduct of directors was the subject of a judgment that awarded compensation payments for breaches of duties under s 601FD of the Corporations Act.
[437] [2017] FCAFC 153.
The appellants sought a retrial due to claimed unfairness arising out of the conduct and findings of the Primary Judge, including that they were required to ‘meet a case which ranged well beyond the pleadings and included unpleaded allegations of “fabricated” documents made without notice in cross-examination.’ Their complaint was primarily that their trial had been unfair.
The Court considered that Windoval and the authorities there examined meant that the appellants had to establish a miscarriage of justice from any errors of the Primary Judge before a retrial was granted under the FCA. The Court stated:[438]
Section 28(1)(f) of the Federal Court of Australia Act 1976 (Cth) provides that, subject to any other Act, the Court may, in the exercise of its appellate jurisdiction grant a new trial in any case in which there has been a trial, either with or without a jury, on any ground upon which it is appropriate to grant a new trial.
In Windoval Pty Ltd v Donnelly at [80] to [96], the Full Court considered the principles upon which a new trial may be ordered, referring in particular to the construction of s 28(1)(f) by the plurality in Conway v The Queen [2002] HCA 2; 209 CLR 203at [36] as follows:
... This power is expressed in wide terms and should be given a liberal construction. It is a power that must, of course, be exercised judicially. But there is nothing unjudicial, arbitrary or capricious in refusing to order a new trial when, although error has occurred, no miscarriage of justice has occurred. The common law courts applied such a rule in civil proceedings for more than a century. The King’s Bench and the Court for Crown Cases Reserved applied it in criminal cases for a long period until 1887 when it was held in Gibson that the rule did not apply where evidence had been wrongly admitted. The Judicial Committee applied it in criminal appeals and applications for leave to appeal against criminal convictions. And this Court applied it in appeals from the Australian Capital Territory before the enactment of the Federal Court of Australia Act.
Although Conway v The Queen was a criminal case, at [95], the Court noted that this construction of s 28(1)(f) was equally applicable to civil cases heard without a jury.
[438] [2017] FCAFC 153, [276]-[278].
The Court also adopted the following statement from Windoval:[439]
[T]he application of the rule in Stead turns upon similar considerations to those that informed the question of whether the ground which is relied upon is one which demonstrates that it is appropriate to grant a new trial. That is to say, the “it would have made no difference” exception is analogous to the “no miscarriage of justice” proviso which informs the exercise of the jurisdiction under s 28(1)(f).
[439] Sullivan v Trilogy Funds Management Ltd [2017] FCAFC 153, [283].
The Court ultimately found that, despite some findings of the Primary Judge that went further than they should, and other findings that could not be supported, a substantial miscarriage had not occurred for the purposes of the above test:[440]
The trial judge made some findings against Mr Sullivan concerning the extent to which he acted with Mr McCormick or authorised Mr McCormick’s actions, although Mr Sullivan was not given an opportunity to respond to them in cross-examination. Those findings went further than necessary to address the case advanced by Trilogy and should not have been made.
However, as explained above, those findings have no bearing on the trial judge’s findings of contravention, or on his rejection of the appellants’ claim for exoneration. In those circumstances, we reject the submission that the findings gave rise to a substantial miscarriage of justice. [441]
[440] [2017] FCAFC 153, [325]-[326].
[441] Viscariello v Macks [2014] SASC 189, [325]-[326].
This Court has the power to remit the matter for hearing. It has a discretion as to whether it should do so. Windoval and Sullivan establish that a Court may refuse to remit a matter where the errors of a trial judge could have no bearing on the judge’s ultimate findings.
That was not the case before us. We are of the view that the errors made by the Primary Judge affected his ultimate conclusions. However our discretion is not limited to that consideration.
Mr Macks, in the ordinary case, would be entitled to a retrial in relation to the allegations relating to breaches of ss 181 and 182. Mr Viscariello has had findings made in his favour set aside. As we have found Mr Viscariello had standing to seek the declarations. Both parties have a right to have the matter reheard and that is a right that is not to be put lightly aside. We accept that the Court should not without good reasons interfere in the parties’ right to access the court processes.
There are however a number of matters which militate against remitting the issues of declarations for breaches of ss 181 and 182 for a further trial.
We have already discussed the question of the nature of declaratory relief earlier in these reasons. The statutory source of the Court’s power to grant declaratory relief is found in ss 17 and 31 of the Supreme Court Act 1935 (SA).[442] The jurisdiction to grant declaratory relief is very wide.[443] A court’s power to grant such relief is “only limited by its own discretion.”[444]
[442] Tavitian v Commissioner of Highways and Anor [2010] SASC 206.
[443] Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421.
[444] Hanson v Radcliffe [1922] 2 Ch 490.
King CJ stated, in J N Taylor Holdings Ltd v Bond[445] the general principles of when a declaration may be granted. He said:[446]
The proposition that there is no limit to the jurisdiction of the court to grant declaratory relief would be an incomplete and misleading statement of the true position unless there be added the further proposition that there are circumstances which are so contra-indicative to the exercise of the discretion in favour of the grant of declaratory relief that the existence of those circumstances would lead almost inevitably to the exercise of the discretion against the making of a declaration. Examples of such decisively contra-indicative circumstances can be found in the cases. A declaration will not be made except in matters “which have a real legal context, and to the determination of which the courts procedure is apt”. There must be some person who has a true interest in opposing the declaration. The question raised must not be purely theoretical. There must not only be a party with a true interest in opposing the declaration, but the plaintiff must have a real interest in having the question determined. That interest may exist although the apprehended impact on the plaintiff may be no more than a future possibility. If, however, the determination of the question could not affect the plaintiff’s legal rights or commercial or personal interest now or in the future, that is to say would “produce no foreseeable consequences for the parties”, the declaration would almost certainly be refused. (Citations Omitted)
[445] (1993) 59 SASR 432.
[446] (1993) 59 SASR 432, 436-437 (King CJ, Prior and Perry JJ agreeing).
While it would, of course be a matter for another court to determine whether to grant declaratory relief to Mr Viscariello, there are reasonable grounds for a court refusing to do so. First, there is already a declaration of a breach of s 180 (1) from April 2006. The court has indicated its disapproval of Mr Macks’ conduct. Secondly, as mentioned, one of the reasons relied upon by the Primary Judge when considering the question of whether to grant declaratory relief, no longer exists. While we have held that it was not a precondition to his removal as a liquidator, the fact remains that Mr Macks is no longer the liquidator of the Companies and has not been since April 2015.
Mr Viscariello has no other remedy he could seek. The declarations, if made, could not affect Mr Viscariello’s personal or commercial interests.
The events in question commenced in 2002. There has already been a protracted and expensive trial about the issues. Substantial legal costs have been incurred.
The evidence at the trial demonstrated that ASIC is investigating the conduct of Mr Macks. It could be said that ASIC is the appropriate body to consider proceedings against Mr Macks relating to potential breaches of his duties as liquidator.
Pursuant to rule 286 (3) (c) the court may, on appeal, remit the case or part of the case for rehearing or reconsideration. We are of the view that given the Primary Judge’s findings of improper conduct by Mr Macks from 1 June 2005 it would not be appropriate to remit the matter back to the Primary Judge for him to consider the matter further. A further trial with the remedy confined to seeking declarations of breaches of ss 181 and 182 in our view lacks utility.
We decline to exercise our discretion to remit the matter for retrial or reconsideration.
Orders
1.Appeal grounds 2, 4 and 5 allowed. Paragraphs 4 and 5 of the Order made by the Primary Judge on 9 April 2015 are set aside.
2.Appeal ground 3 allowed in part. Paragraph 3 of the Order made by the Primary Judge on 9 April 2015 is set aside. In its place we make the following declaration:
It is declared that the Defendant, as liquidator of Bernsteen Pty Ltd (“Bernsteen”), contravened section 180(1) of the Corporations Act 2001 (Cth) by reason that from 28 April 2006 he failed to exercise the degree of care and diligence required of him as an officer of Bernsteen in applying any of Bernsteen’s funds:
1.1.   in pursuing or, as the case may be, defending:
1.1.1.a claim for recovery of a debt from Ms Tanya Hamilton-Smith in action number 10039 of 2002 in the Magistrates Court of South Australia, Adelaide Registry (“the Bernsteen action”);
1.1.2.the counterclaim brought by Ms Hamilton-Smith in the Bernsteen action;
1.1.3.an application by Ms Hamilton-Smith, in action number ADG 94 of 2005 in the Federal Magistrates Court of Australia, for an order setting aside a bankruptcy notice dated 7 April 2005 prepared on behalf of Bernsteen and served on Ms Hamilton-Smith.
1.2.   pursuant to an indemnity in favour of Ms Heidi George by which the Defendant indemnified Ms George against her liability for the costs of the following steps and proceedings:
1.2.1.the pursuit by Ms George of a bankruptcy notice against Ms Hamilton-Smith;
1.2.2.the defence by Ms George of Ms Hamilton-Smith’s application in the Federal Magistrates Court of Australia to set aside Ms George’s bankruptcy notice (action number ADG 159/2005);
1.2.3.the pursuit by Ms George of a creditor’s petition against Ms Hamilton-Smith in the Federal Magistrates Court of Australia (action number ADG 237/2005);
1.2.4.the defence by Ms George to an application by Ms Hamilton-Smith in the Magistrates Court of South Australia for a declaration that she had discharged the judgment debt forming the subject of Ms George’s bankruptcy notice and creditor’s petition (action 9644/2005);
1.2.5.the pursuit of or response to any appeals associated with those proceedings.
3.Appeal grounds 1, 6, 8, 9 dismissed.
4.Cross-appeal dismissed.
5.Parties to be heard as to costs.
Appendix
Appeal
Grounds of Appeal
The Appellant’s grounds of appeal are:
1. The primary judge erred in law in granting the declarations of breach of ss 180-182 of the Corporations Act 2001 (Cth) (Corporations Act) pursuant to s 31 of the Supreme Court Act 1931 (SA) (Supreme Court Act), by reason that:
1.1. Part 9.4 B of the Corporations Act constitutes a code of the remedies available in respect of contraventions of a civil penalty provision of the Corporations Act including ss 180-182;
1.2. consequently, if and to the extent that s 31 of the Supreme Court Act would otherwise have conferred jurisdiction upon the Supreme Court to make a declaration of breach of ss 180-182, it is relevantly inoperative by virtue of the operation of s 109 of the Constitution;
1.3in the alternative, the Supreme Court Act did not confer jurisdiction upon the Supreme Court to make a declaration of breach of ss 180-182 of the Corporations Act at the suit of Mr Viscariello because:
1.3.1.the Supreme Court was exercising federal jurisdiction;
1.3.2.pursuant to section 79 of the Judiciary Act 1903 (Cth), when a State Court exercises federal jurisdiction, the laws of the State apply only to the extent the laws of the Commonwealth do not otherwise provide; and
1.3.3.the laws of the Commonwealth, in the form of the Corporations Act, otherwise provide in that they permit a declaration of breach of ss 180 - 182 to be made only at the suit of ASIC;
1.4.further, and in any event, s 31 of the Supreme Court Act did not confer jurisdiction upon the Supreme Court to make a declaration of breach of ss 180-182 at the suit of the Plaintiff in that:
1.4.1.sections 180-182 prescribed norms of conduct applicable to the Appellant in respect of his relationship with the Companies;
1.4.2.a contravention by the Appellant of the duties imposed by ss 180-182 did not of itself give rise to a cause of action;
1.4.3. sections 180-182 did not impose duties upon the Appellant in favour of the Plaintiff; and
1.4.4.to declare that the Appellant had contravened ss 180-182 did not involve a declaration as to any legal right of the Plaintiff or as to any obligation or liability of the Appellant;
1.5. further, the primary judge erred in making the declarations m circumstances where:
1.5.1. the parties had not made any submissions addressed to whether declaratory relief was available or appropriate pursuant to s 31 of the Supreme Court Act;
1.5.2. the parties had not addressed or been given an opportunity to address a matter arising under the Constitution or its interpretation, and thus in contravention of s 78B(l) of the Judiciary Act 1903 (Cth); and
1.5.3.there was accordingly a denial of procedural fairness to the Appellant; and
1.6.further, and in the alternative, if the primary judge had jurisdiction to grant declaratory relief at the suit of a person in the position of the Plaintiff, he erred in exercising his discretion to make the declarations in that:
1.6.1.the primary judge failed to have any or proper regard to:
(i)     the matters set out in paragraphs 1.1 and 1.4.1-1.4.4 above; and
(ii)    the Plaintiff having used the litigation referred to in order 3 of 9 April 2015 to disrupt the liquidation of the Companies for his own purposes, namely the purposes of pursuing his own private grievance against the Appellant, and of maximising the time, trouble and cost to the Appellant associated with the performance of his functions as liquidator; and
1.6.2.the primary judge had regard to irrelevant considerations in that he:
(iii) wrongly considered that a declaration under s 1317E of the Corporations Act could be made at the suit of the relevant company pursuant to s 1317J;
(iv)   wrongly considered that the Plaintiff had a legal interest in the management of the company;
(v) wrongly considered that there were “egregious” breaches of ss 180-182 and that, if they were, that was a matter that militated in favour of the making of a declaration; and
(vi)   wrongly considered that the declaration was a necessary step in determining whether or not to remove the Appellant as liquidator of the Companies.
2.The primary judge erred in law and/or fact in making the findings at [757] by reason that:
2.1.he impermissibly made the findings on the basis of hindsight and contrary to authority;
2.2.he did so without there being any evidentiary basis for the findings and contrary to the evidence of Ms Riach otherwise accepted by the Court;
2.3. he did so without any or any adequate regard to the fact that the Appellant received and relied upon legal advice from Minter Ellison with respect to:
2.3.1.the conduct and settlement of the Bernsteen proceedings (reasons at [441]); and
2.3.2.the indemnification of Ms George (reasons at [434]);
2.4. he did so without any or any proper regard to the fact that the costs occasioned in the Bernsteen and George proceedings were a consequence of the deliberate strategy of the defendant to those actions to frustrate, delay and render as expensive as possible the proper pursuit of assets of Bernsteen (reasons at [745]);
2.5.he failed to have any regard to the seriousness of the finding of improper purpose or to the gravity of the consequences of such a finding in determining whether the evidence was sufficient to discharge the burden of proof;
2.6.notwithstanding that they were not pleaded and were not put to the Appellant in cross-examination; and
2.7.the reasons are inadequate by reason of the matters referred to in 2.2 to 2.6 above and are affected by operative delay and thereby constitute an error of law such that a miscarriage of justice has occurred having regard to:
2.7.1.the Plaintiff’s case being closed in February 2012;
2.7.2. the Appellant’s case being closed in February 2013;
2.7.3. closing addresses having concluded in February 2013; and
2.7.4. reasons being published 22 months later on 9 December 2014 and subsequently on 24 December 2014.
3.Alternatively, the primary judge erred in law in finding that the Appellant contravened section 180 of the Corporations Act by reason that:
3.1. the primary judge assessed the Appellant’s conduct on the basis of hindsight, and in concluding that because the costs ultimately incurred in relation to the Bernsteen and George proceedings were disproportionate to the amounts in issue, the Appellant must have acted either unreasonably, or for an improper purpose, or both;
3.2. the primary judge failed to distinguish between the proceedings to which Ms George was a party and the proceedings to which Bernsteen was a party;
3.3. the primary judge failed to distinguish between the pursuit of proceedings issued by Bernsteen and Ms George on the one hand the defence of proceedings and appeals issued by Ms Hamilton-Smith on the other;
3.4. the primary judge wrongly found that it was unreasonable for the Appellant to reject Ms Hamilton Smith’s offer of 27 June 2005 to settle the Bernsteen proceedings upon payment of $10,000 by instalments, in that the learned Judge failed to give any, or any sufficient, weight to the following matters:
3.4.1. Ms Hamilton-Smith had previously dishonoured an agreement to settle a debt to Bernsteen by instalments;
3.4.2. the Appellant’s assessment that Ms Hamilton-Smith was capable of making a lump sum payment;
3.4.3. the advice from the Appellant’s solicitors, by letter dated 1 July 2005, to reject Ms Hamilton-Smith’s offer; and
3.4.4. after the Appellant’s rejection of Ms Hamilton-Smith’s previous offer of settlement, Ms Hamilton-Smith had made an improved offer;
3.5.there was no evidential basis for the finding at [584] that a settlement (with Bernsteen, George, or both) on terms that each party bear their own costs was always likely to find favour with Ms Hamilton-Smith;
3.6.if, and to the extent that, the litigation against Ms Hamilton-Smith did not, after June 2005, have any prospect of generating a return to creditors, the learned Judge erred in law in finding that it was unreasonable for the Appellant:
3.6.1.not to abandon meritorious claims;
3.6.2. not to provide a release to a party, namely Ms Hamilton-Smith, who had sought to avoid her obligations by defending the claims in a manner which was calculated to obstruct the proper and orderly winding up of the Companies (being Bernsteen and Newmore); and
3.6.3.to continue the litigation for the purpose of recovering a contribution to the Appellant’s fees and expenses;
3.7.the primary judge erred in finding (at [920]) that the George and Bernsteen proceedings were an abuse of process, in that:
3.7.1.he failed to distinguish between the proceedings to which Ms George was a party and the proceedings to which Bernsteen was a party;
3.7.2. he failed to distinguish between the pursuit of proceedings issued by Bernsteen and Ms George on the one hand the defence of proceedings and appeals issued by Ms Hamilton-Smith on the other;
3.7.3. he erred in finding that the Appellant had an improper purpose in pursuing or defending the proceedings to which Bernsteen was a party and in funding the proceedings to which Ms George was a party (see grounds 2 above and 4 below);
3.7.4 he erred in law to the extent he considered that the proceedings were an abuse because there was no prospect of any net return to the Companies after the payment of the legal costs of continuing the proceedings; and
3.7.5. the finding that the proceedings to which Ms George was a party were an abuse of process is inconsistent with the primary judge’s acceptance (at [641] and [681]) of the evidence of Ms George to the effect that the contents of the affidavit filed by Mr Gawronski in those proceedings was untrue; and
3.8.if, and to the extent that, the primary judge concluded that the Appellant breached his duties under section 180 of the Corporations Act by reason of the matters giving rise to any breach of sections 181 and/or 182 of the Corporations Act, the Appellant will rely on the grounds referred to in paragraphs 4 and 5 below.
4.Alternatively, the primary judge erred in law in finding that the Appellant contravened section 181 of the Corporations Act by reason that:
4.1. the primary judge assessed the Appellant’s conduct on the basis of hindsight, and in concluding that because the costs ultimately incurred in relation to the Bernsteen and George proceedings were disproportionate to the amounts in issue, the Appellant must have acted for an improper purpose;
4.2.the primary judge erred in considering (at [729] and [746]) that, on the premise that there was no prospect of any return to creditors from the litigation, the Appellant’s purpose in pursuing, or failing to agree settlement terms with, Ms Hamilton-Smith after 1 June 2005 was necessarily improper;
4.3. the primary judge erred by rejecting (at [584], [730], [734], [736], [744], [755], [757] and [760]) the Appellant’s evidence as to his subjective purposes in funding the George proceedings after June 2005, being to minimise and avoid unnecessary costs in the Bernsteen proceedings. The rejection of the Appellant’s evidence was inconsistent with:
4.3.1. the acceptance (at [437]) of Ms Riach’s evidence as to the reasons for the Appellant’s solicitors approaching Ms George in June 2005;
4.3.2.the terms, and the Appellant’s acceptance, of his solicitors’ recommendation (at [434]) that the Appellant provide an indemnity to Ms George in the hope of avoiding a trial in the Bernsteen proceedings;
4.3.3. the finding (at [470]) that the bringing of the George bankruptcy proceeding was the centrepiece of a strategy to bring an end to the Bernsteen proceedings;
4.3.4.the finding (at [476] and [482]) that the Appellant expressed concern in August and October 2005 at the escalating costs of the George proceedings and instructed his solicitors to minimise costs;
4.3.5. the finding (at [531]) that in February 2006 the Appellant’s strategy was to use the George proceedings to avoid the costs of the Bernsteen proceedings; and
4.3.6. the finding (at [573]) that a decision was made, on 28 April 2006, not to undertake any preparation for the trial of the Bernsteen proceedings from 16 May 2006 pending the hearing of an application by Ms Hamilton-Smith on 8 May 2006 to vacate the trial date;
4.4.the primary judge erred by rejecting (at [584], [730], [734], [736], [744], [755], [757] and [760]) the Appellant’s evidence as to his subjective purposes in continuing to prosecute and defend the claims in the Bernsteen proceedings after June 2005, being to enforce the contract Ms Hamilton-Smith had made with Bernsteen (in liquidation), but also to conduct the proceedings in a way which minimised and avoided unnecessary costs;
4.5.the primary judge erred in considering that to the extent the Appellant was motivated by the following matters referred to in [757] such matters were improper purposes within the meaning of section 181 of the Corporations Act:
4.5.1. irritation with the Plaintiff’s behaviour generally, and, in particular, in committee meetings after the liquidation of the Companies;
4.5.2. ill will towards the Plaintiff for his part in assisting Ms Hamilton-Smith to defend the proceedings brought against her in a way which caused the Appellant to suffer financial loss because the costs of the litigation reduced the funds available to pay his fees; and
4.5.3. hoping that pursuing Ms Hamilton-Smith might facilitate the prosecution and enforcement of the insolvent trading claim against the Plaintiff;
4.6.to the extent the primary judge rejected the Appellant’s evidence on the basis of his collateral finding (at [391] and [396]) that the Appellant had fabricated a document with the intention of passing it off as the original, the primary judge erred:
4.6.1. in failing to give sufficient weight to the Appellant’s explanation regarding the circumstances in which the document was created; and
4.6.2.in finding (at [389] that the circumstances in which the document was created in 2009 bore on the Appellant’s motivation in pursuing the Bernsteen action and indemnifying Ms George some years previously;
4.7.to the extent that the primary judge found that the failure to give full disclosure of the terms of his funding arrangement with Ms George supported a finding that the Appellant had an improper purpose, the primary judge erred in failing to have any or any adequate regard to the following matters:
4.7.1.the Appellant’s legal advisers considered that the te1ms of the arrangement were confidential and privileged ([640]);
4.7.2.the Appellant’s evidence (referred to at [578]) to the effect that his belief that the documents relating to the funding arrangement were privileged was informed by communications with his legal advisers;
4.7.3.the Appellant had no role in drafting the affidavit of Ms Riach referred to in [462] of the judgment;
4.7.4.the Appellant had no role in drafting the affidavit of Ms George filed on 19 June 2006 ([605] & [606]);
4.7.5.the Appellant had no role in formulating the answers given by Mr Livesey QC to Gray J in September 2006 ([641]);
4.7.6.the Appellant had no role in drafting Minter Ellison’s letter dated 12 December 2006 ([675] to [679]) except to the extent he agreed at a meeting with Minter Ellison on 11 December 2006 that they would attend to the further disclosure required in the George proceedings; and
4.7.7.the Appellant had no role in drafting the affidavit of Ms George filed on 22 December 2006 ([683]);
4.8. the primary judge failed to have any regard to the seriousness of the finding of improper purpose or to the gravity of the consequences of such a finding in determining whether the evidence was sufficient to discharge the burden of proof;
4.9. if, and to the extent that, the primary judge concluded that the Appellant breached his duties under section 181 of the Corporations Act by reason of the matters giving rise to any breach of sections 180 and/or 182 of the Corporations Act, the Appellant will rely on the grounds referred to in paragraphs 3 above and 5 below; and
4.10.the reasons are inadequate by reason of the matters referred to in paragraphs 4.2 to 4.9 above and are affected by operative delay, and thereby constitute an error of law and a miscarriage of justice as set out in paragraph 2.7 above.
5.Alternatively, the primary judge erred in law in finding that the Appellant contravened section 182 of the Corporations Act by reason that:
5.1.the primary judge assessed the Appellant’s conduct on the basis of hindsight;
5.2. if, and to the extent that, the primary judge concluded that the Appellant breached his duties under section 182 of the Corporations Act by reason of the matters giving rise to any breach of sections 180 and/or 181 of the Corporations Act, the Appellant will rely on the grounds referred to in paragraphs 3 and 4 above;
5.3. the primary judge failed to give any sufficient reasons for the finding that the Appellant breached his duties under section 182 of the Corporations Act, and the reasons are otherwise inadequate, in that the reasons do not identify:
5.3.1.the advantage said to have been gained by the Appellant through the use of his position as liquidator of the Companies, or either of them; or
5.3.2.the detriment said to have been suffered by the Companies, or either of them, through the Appellant’s use of his position as liquidator of the Companies;
5.4.the primary judge erred in concluding that the Appellant engaged in the pursuit, defence or funding of the proceedings against Ms Hamilton-Smith to gain an advantage for himself or to cause detriment to the Companies in that:
5.4.1.the Appellant’s purpose in pursuing, defending and funding the proceedings was to realise and protect the assets of Bernsteen, and no to gain an advantage for himself or to cause detriment to Bernsteen or Newmore and the Appellant repeats grounds 4.3 and 4.4 above; and
5.4.2.the Appellant has in fact suffered a disadvantage in pursuing, defending and funding the proceedings in that neither the Appellant nor his firm received any payment for their work on the liquidation of Bernsteen after October 2004, including their work with the respect to the proceedings;
5.5. the primary judge failed to have any regard to the seriousness of the finding that the Appellant had gained an advantage and caused detriment to the Companies, or to the gravity of the consequences of such a finding in determining whether the evidence was sufficient to discharge the burden of proof; and
5.6.the findings are inadequate by reason of the matters referred to in paragraph 5.1 to 5.4 above and are affected by operative delay, and thereby constitute an error of law and a miscarriage of justice as set out in paragraph 2.7 above.
6.The primary judge erred in law in granting, at reasons [922], permission to amend so as to file the Fourth Statement of Claim in so far as it related to his findings by reason that:
6.1.having regard to the timing of the oral application for permission, the nature of the amendments, the prejudice to the Appellant and binding appellate authority, permission should have been refused;
6.2. the primary judge failed to address any of the submissions of the Appellant in opposition to the grant of permission;
6.3. the primary judge failed to provide any or any sufficient reasons for the grant of permission at reasons [922] which reasons are affected by operative delay such as to constitute an error resulting in a miscarriage of justice;
6.4.the primary judge subsequently stated that the ruling at [922] is to the following effect, neither of which are stated in the reasons:
6.4.1.on 18 December 2014, the primary judge stated that he would “need to hear submissions on just what of the amendments in the fourth proposed amended statement of claim should be made” and that his Honour “took a shortcut by saying that it’s really just those paragraphs that support the factual findings in the end that [his Honour] made”; and
6.4.2.on 15 April 2015 the primary judge stated that he had in mind a judgment of Zelling J (being F F Seeley Nominees Pty Ltd v El Ar Initiations (UK) Ltd (No 2) (1990) 55 SASR 314) in which Zelling J “explained that amendments to the statement of claim can properly be made after the delivery of reasons and to reflect the issues that had been joined in the course of the trial and were resolved by the findings, the reasons”; and
6.5.the grant of permission has resulted in a denial of procedural fairness to the Appellant.
7.The primary judge erred in law in finding (at reasons [855]) there was cause for removal of the Appellant as liquidator of Bernsteen and Newmore by reason that:
7.1.for the reasons at grounds 2 to 6, the primary judge was wrong to find that the Appellant had breached his duties under sections 180, 181 or 182 of the Corporations Act;
7.2.the primary judge erred in finding that the Appellant failed to properly inform the Companies’ committees of inspection of the way in which the litigation was conducted and its cost, in that:
7.2.1.the finding involved procedural unfairness to the Appellant, in that the primary judge wrongly considered that the Appellant had applied in the proceeding below for court approval of the arrangements to indemnify Ms George when no such application had been made;
7.2.2.the primary judge had adjourned the hearing of a separate proceeding issued by the Appellant at the direction of ASIC for a declaration under section 1322 of the Corporations Act that the committee of inspection’s approval of the funding of the George proceedings in September 2011 was valid;
7.2.3.the question of what was disclosed to the committees in 2011 was not in issue in these proceedings; and
7.2.4.the primary judge was wrong to draw adverse inferences from the Appellant’s failure to call members of the committees of inspection in that:
(i)     the burden of proof with respect to facts and matters arising from the meetings of the committees lay with the Plaintiff; and
(ii)    the Plaintiff did not call any witnesses to contradict the Plaintiff’s evidence; and
7.3.the reasons are inadequate for the reasons stated in paragraph 7.1 and 7.2 above and are affected by operative delay such as to constitute an error resulting in a miscarriage of justice.
8.Further, or in the alternative to ground 6, the primary judge erred in law in granting permission on 28 October 2015 to amend the Statement of Claim with respect to the amendments contained in paragraphs 59.7. 88, 118, 127.1.1, 138, 139A, 1398, 139C (first appearing), 141G to 141J, 142.8B and 142.9A of the Second Proposed Fourth Amended Statement of Claim by reason that:
8.1.the primary judge failed to consider whether the amendments fell within the scope of the ruling at [922]. as such ruling was explained on 18 December 2014 and 15 April 2015 (see ground 6.4 above);
8.2.the primary judge failed to provide any sufficient reasons for the grant of permission in his reasons dated 28 October 2015, in that the reasons do not refer to the explanations of the ruling at [922] on 18 December 2014 and 15 April 2015, or identify whether or how the amendments fell within that ruling;
8.3.the amendments are not within the scope of the ruling in [922], as explained on 18 December 2014 and 15 April 2015;
8.4.the reasons dated 28 October 2015 are affected by operative delay such as to constitute an error resulting in a miscarriage of justice, in that:
8.4.1.the reasons were delivered more than three and half years after commencement of the trial, and more than two and a half years after conclusion of the trial;
8.4.2.the reasons mistakenly record (at [1]) that the plaintiff filed a form of Proposed Fourth Amended Statement of Claim in the course of the hearing when in fact the proposed pleading was not submitted until after conclusion of the hearing and judgment had been reserved (and which proposed pleading was further amended on 1 April 2015 and subsequently during the course of submissions); and
8.4.3.the reasons mistakenly record (at [1]) that the primary judge heard argument on the proposed amendments before the conclusion of the hearing and the delivery of reasons when in fact the only submissions on the amendments were made in writing and after judgment had been reserved.
9.Further, or in the alternative to ground 6, the primary judge erred in law in granting permission on 15 January 2016 to amend the Statement of Claim with respect to the amendments contained in paragraphs 59.2 to 59.6, 119.3, 142.8CA, 142.8CB and 142.8F of the Second Proposed Fourth Amended Statement of Claim by reason that:
9.1.the primary judge erred in re-opening the orders made on 28 October 2015 in that it was not in the interests of justice to set aside or vary the orders made on 28 October 2015 for the purpose of making further rulings on permission to amend having regard to:
9.1.1.the plaintiff’s ability to appeal against the orders made on 28 October 2015;
9.1.2.the public interest in the finality of litigation;
9.1.3.case management considerations including the costs of dealing with the plaintiff’s application to re-open the orders made on 28 October 2015; and
9.1.4.the lateness of the amendment to paragraph 59.2, which was first proposed by the plaintiff on 14 January 2016:
9.2.the primary judge failed to consider whether the amendments fell within the scope of the ruling at [922], as such ruling was explained on 18 December 2014 and 15 April 2015 (see ground 6.4 above);
9.3.the primary judge failed to provide any sufficient reasons for the grant of permission in his reasons dated 15 January 2016, in that the reasons do not refer to the explanations of the ruling at [922] on 18 December 2014 and 15 April 2015, or identify whether or how the amendments fell within that ruling;
9.4.the amendments are not within the scope of the ruling in [922], as explained on 18 December 2014 and 15 April 2015; and
9.5.the reasons dated 15 January 2016 are affected by operative delay such as to constitute an error resulting in a miscarriage of justice, in that the reasons were delivered more than three and half years after commencement of the trial, and more than two and a half years after conclusion of the trial.
Notice of Contention
The Respondent wishes to contend that the decision of the Court below should be affirmed but on grounds other than those relied upon by the Court below.
GROUNDS OF CONTENTION
The Respondent relies upon the following grounds:
1.Further Grounds for Removal
a.This ground is agitated if (which the Respondent contends is not the case), the grounds on which the Court removed the Appellant as liquidator of Bernsteen Pty Ltd (“Bernsteen”) and Newmore Pty Ltd (“Newmore”) (collectively Companies) were the declarations that the Appellant breached his duty under one or more of s 180, 181 and 182 of the Corporations Act 2001 (the “Declarations’) rather than the findings of the conduct upon which those declarations of breach were made;
b.The Respondent contends that findings of breaches of duty can stand on their own without the making of a corresponding declaration to justify the removal of the Appellant as liquidator of the Companies;
c.Further or alternatively, it was open to the Learned Trial Judge to ascribe further grounds which justified the order removing Macks as liquidator of the Companies;
d.The Learned Trial Judge should have held that in the facts and circumstances found in paragraphs [565], [569], [587], [598], [641], [645], [655], [660], 720], [721], [726], [727], [728], [729], [730], [731], [735], [734], [739], [744], [746], [754], [757], [760], [771], [778], [787], [790], [798], [800], [804], [916], [917], [919], and [920] or one of them or some combination of them, constituted grounds justifying the removal of Macks as liquidator of the Companies regardless of their nexus to any declarations made of breach of duty under s 180, 181 or 182 of the Corporations Act.
2.Further or alternative bases for the exercise of discretion pursuant to s 31 of the Supreme Court Act 1935
a.The Respondent contends that in addition to the matters mentioned in [837] there were other bases upon which the Court could have and should have made the declarations pursuant to s 31 of the Supreme Court Act 1935;
b.The further facts and circumstances which would justify the exercise of the discretion to make the declarations were:
i.      The breaches were serious breaches;
ii.     The declarations were appropriate in order to demonstrate the Courts’ disapproval of the conduct underlying the declarations;
iii.     The breaches were centrally concerned with litigation undertaken in the Courts of South Australia;
iv.     The breaches were by a person who was and/or described himself as officer of the Court.
3. Alternative basis for Declarations (3) – ASIC a Party
a. The Respondent contends that in the following facts and circumstances the Courts’ jurisdiction under s 1317E of the Corporations Act had been enlivened before the declarations were made;
b. It was open to the Learned Trial Judge to find that his jurisdiction under s 1317E of the Corporations Act had been enlivened because:
i. ASIC intervened on 24 March 2015 by Notice pursuant to s 1330 of the Corporations Act and thus became a party to the proceeding by operation of s 1330(2);
ii. Upon ASIC becoming a party to the proceeding, if there was absent a jurisdictional basis for the making of the declarations of that the Appellant breached his duties under each of s 180, s 181 and s182 of the Corporations Act before the intervention, that ceased to be so upon the happening of the intervention;
iii.     ASIC intervened before the declarations were made;
iv.     ASIC agitated for the making of the declarations and for the removal of the Appellant as Liquidator of the Companies, amongst other things, on the basis of the findings upon which the declarations were made.
c.Further or alternatively, the Learned Trial Judge should have found that upon the intervention of ASIC in the proceeding he could make the declarations under s 1317E of the Corporations Act in addition to s 31 of the Supreme Court Act in circumstances where:
i. ASIC intervened on 24 March 2015 by Notice pursuant to s 1330 of the Corporations Act and thus became a party to the proceeding by operation of s 1330(2).
ii. Upon ASIC becoming a party to the proceeding, if there was absent a jurisdictional basis for the making of the declarations of that the Appellant breached his duties under each of s 180, s 181 and s 182 of the Corporations Act before the intervention that ceased to be so upon the happening of the intervention.
iii.     ASIC intervened before the declarations were made.
iv.     ASIC agitated for the making of the declarations and for the removal of the Appellant as liquidator of the Companies, amongst other things, on the of the findings upon which the declarations were made;
d.Alternatively, the Respondent contends that the Court on appeal is able to and should make the declarations pursuant to s 1317E of the Corporations Act upon the basis that ASIC is a party contending for the maintenance of the declarations.
4. Alternative basis for Declarations - Jurisdiction Under s 1317E
Ambulatory
a.The Learned Trial Judge erred in law in finding that in the exercise of the power under s1317E was limited to circumstances where an application for a declaration has been made by a person mentioned in s 1317J;
b.The Learned Trial Judge should have found that he was obliged to make declarations of breach of each of s180, s181 and s182 upon the findings in [744], [757], [761] in circumstances where the same facts and circumstances were agitated in support of the application by the Respondent for the removal of the Appellant as liquidator of the Companies.
5.Alternative basis for Declarations - The General Law
a. It was open to the Learned Trial Judge to find that he had jurisdiction to make further declarations that the Appellant breached his fiduciary duties under the general law upon the same findings or alternatively some of the findings of fact that he founded the findings that the Appellant breached his duties under s180, s181 and s182 of the Corporations Act;
b. The Learned Trial Judge should have held that in the facts and circumstances found in paragraphs [565], [569], [587], [598], [641], [645], [655], [660], 720], [721], [726], [727], [729], [730], [731], [735], [734], [739], [744], [746], [754], [757], [760], [771], [778], [787], [790], [798], [800], [804], [916], [917], [919], and [920] or one of them or some combination of them, the Appellant:
i.      breached his fiduciary duty under the general law in his capacity as Liquidator to the Respondent as a creditor or contributory of Bernsteen;
ii.     breached his fiduciary duty under the general law in his capacity as officer of Bernsteen;
c. Upon the findings in 5 b, the Learned Trial Judge should have made declarations that:
i.      breached his fiduciary duty under the general law in his capacity as liquidator to the Respondent as a creditor or contributory of Bernsteen;
ii.     breached his fiduciary duty under the general law in his capacity as officer of Bernsteen.
6.Alternative Contention as to the date from which the continuing conduct of the Bernsteen/George Suite of Proceedings against Hamilton-Smith was in breach of Duty
a.In the event that the Court on appeal is persuaded that the Learned Trial Judge was in error in finding that from a date no later than June 2005 the continued pursuit of Hamilton-Smith including by way of the indemnification of the proceedings involving Ms. George, the Respondent contends that it was open to the Learned Trial Judge to find that from a date no later than March 2006 to find that the continued pursuit of Hamilton-Smith including by way of the indemnification of the proceedings involving Ms. George was in breach of his duties.
Cross-Appeal
Grounds of Cross-Appeal
Grounds of Cross Appeal
The Respondent’s grounds of Cross Appeal are:
1. Error in Finding that the Bart DOCA Proposal Had no Prospects of Approval
a. The Learned Trial Judge erred in fact in finding at [302] that the Bart DOCA proposal could not have been successfully been approved by the Second Meeting of Creditors.
b. The Learned Trial Judge should have found that there were realistic prospects that, if the Bart DOCA Proposal had been put to the Second Meeting of Creditors it would have been approved at the meeting.
2. Error in Failing to Find that the Appellant Breached his Duty in Issuing the Section 439 Report which Was Materially Misleading.
a. Having made the findings or accepted the evidence in [64], [68], [86], [99], [162], [172], [173], [217], [257], [265] and [230] (commencing with the words “It might) the Learned Trial Judge erred in fact in not finding that the section 439 Report to Creditors was misleading or contained a material non-disclosure in that it did not inform the creditors that the Bart DOCA Proposal remained open for consideration by the creditors in circumstances;
b. The Learned Trial Judge should have found that the section 439 Report was misleading or contained a material non-disclosure in that it failed to inform the creditors that:
i.      The Bart DOCA Proposal was available for consideration by the creditors; and,
ii.      That was open to the Second Meeting of Creditors to vote on whether or not the Bart DOCA Proposal should be accepted.
c. Upon the finding in 2.b. the Learned Trial Judge Should have found that if the s 439 Report had of informed the creditors of the matters in 2.b.i. and 2.b.ii. there was realistic prospect that the creditors would have voted in favour of the Bart DOCA Proposal.
3.Error in Failing to Find that the Appellant had a Duty to Put the Bart DOCA Proposal to the Meeting of Creditors on 21 December 2001 or to Adjourn the Meeting to Determine whether a Variation to the Bart DOCA Proposal to which ARL Would Accede Could be Secured.
a. The Learned Trial Judge erred in law in failing to find that the Appellant was under duty to inform the Second Meeting of Creditors that the Bart DOCA Proposal was open for the meeting to consider and vote upon whether or not ARL had said prior to the meeting that it did not support the proposal;
b. The Learned Trial Judge should have found that the Appellant was under a such a duty and breached that duty by the conduct in 3.a.;
c. Upon the finding urged in 3.b. the Learned Trial Judge should have found that if the Appellant had not breached that duty there was realistic prospect that the a vote on the Bart DOCA Proposal would have been called the Bart DOCA Proposal adopted:
d. Further or alternatively, the Learned Trial Judge should have found that the Appellant was under a duty to put the Bart DOCA Proposal to a vote at the Second Meeting of Creditors.
e. Upon the finding urged in 3.d. the Learned Trial Judge should have found that if the Appellant had not breached that duty there was a realistic prospect that the Bart DOCA Proposal would have been adopted.
f. Further or alternatively, the Learned Trial Judge should have found that the Appellant was under a duty to inform the Second Meeting of Creditors of the existence and content of the Bart DOCA Proposal and that the position of ARL was an impediment to its acceptance and that it was open to the Second Meeting of Creditors to vote to adjourn the meeting for a period of no more than 60 days to determine whether the differing positions of Bart and ARL could be the subject of compromise.
g. Upon the finding urged in 3.f. the Learned Trial Judge should have found that if the Appellant had not breached that duty/those duties there was a realistic prospect that the Bart DOCA Proposal or a variant to the Bart DOCA Proposal would have been adopted at the adjourned meeting.
4. Error in Failing to Find that the Appellant was Motivated by Prospect of Personal Gain.
a. Having made the findings in [224], the Learned Trial Judge erred in fact in not finding that, in breaching the his duties as urged in 2.b. and 3.b., the Appellant was motivated by impermissible considerations namely the obtaining of a greater financial benefit being in the event that the Companies were wound up rather than being made the subject of the Bart DOCA Proposal;
b.The Learned Trial Judge should have found that because of the impermissible considerations in 4.a., the Appellant breached his duty to the creditors and contributories of the Companies;
c.The Learned Trial Judge should have found that the personal motivation referred to was a material cause for the Bart DOCA Proposal not being voted on at the Second Meeting of Creditors;
d. Upon the findings urged in 4.b. and 4.c. the Learned Trial Judge should have found that if the Appellant had not breached his duty by acting on those impermissible considerations there was realistic prospect that the a vote on the Bart DOCA Proposal would have been called the Bart DOCA Proposal adopted.
5. Error in Finding No Loss of Chance to Assess
a. The Learned Trial Judge erred in fact in finding at [304] that the Respondent had suffered no loss of chance to assess.
b. The Learned Trial Judge failed to consider the matters urged in:
i.      1.b.;
ii.      2.c.;
iii.     3.c.;
iv.     43.e.;
v.     3.g.
c. On the matters referred to in 5.b. the Learned Trial Judge should have found that they caused the Respondent to suffer the loss of chance to avoid the Respondent’s Liquidation losses.
d. Upon the finding urged in 5.c. the Learned Trial Judge should have assessed the Respondents loss of chance at 20%.
6.Failure to Allow the Respondent Extension of Time to File Supplementary Expert Report
a.The Learned trial Judge erred in the exercise of his discretion in refusing the Plaintiff permission to refer to and rely upon the Supplementary Expert Report of Stirling Horne filed on 7 December 2012 FDN 131 at trial.
b. In exercising his discretion, the Learned Trial Judge:
i.      Failed to have any or sufficient regard to the prejudice the Respondent would suffer from being unable to rely on supplementary expert report;
ii.      wrongly found that the commencement of the trial of the proceeding would be delayed if the Respondent were allowed to refer to and rely on the supplementary expert report.
7. Refusal to Grant Extension of Time for the Bringing of the Application under s 1321
a. The Learned Trial Judge erred in law in declining to exercise his discretion to grant an extension of time under Corporations Rules in respect of his application under s 1321 of the Corporations Act.
b. The Learned Trial Judge erred because:
i.      He failed to have regard or sufficient regard to the fact that the application was ventilated in respect of his conduct as liquidator as well as his conduct as administrator of the Companies;
ii.     He failed to have regard or sufficient regard to the fact that the conduct upon which the court found that the Appellant breached his duties as liquidator and upon which he should be removed as liquidator was concealed by the Appellant and only partly revealed in early 2007 (in the George suite of proceedings) and only fully revealed during the trial;
iii.     He failed to have regard or sufficient regard to the failure to make discovery of the documents relevant to his conduct in the Bernsteen/George suite of proceedings involving Hamilton-Smith which were released to the Respondent as a result of the order of 15 August 2012 and in particular the finding that part of the Appellant’s motivation in maintaining those proceedings was personal antipathy towards the Respondent and as a foil to this proceeding;
iv.     He failed to have regard or sufficient regard to the complexity of the facts and circumstances of the case and the overall conduct of the Appellant in defending this action;
v.      The Learned trial Judge erred in law at paragraph [849] of the Judgment in finding that there was no utility in bringing a belated appeal pursuant to s 1321 of the Act against the decisions made by Mr Macks in the course of the administration and liquidation.
c. The Learned Trial Judge should have exercised his discretion to grant an extension of time pursuant to Corporations Rules for the bringing of an application under s 1321.
8. Failure to Find that the Conduct of the Appellant was Conduct in Trade or Commerce
a. The Learned trial Judge erred in law at paragraph [83] of the Judgment in finding that the conduct of the Appellant complained of was not conduct in trade or commerce.
b. The Learned Trial Judge should have found that:
i. The issuing of the section 439 Reports which contained the misleading statement or the material non-disclosure in 2.a. constituted misleading or deceptive conduct within the meaning of s 56 of the Fair Trading Act 1987 (SA) or s 52 of the Trade Practices Act 1974 (C’th).
ii. The failure to inform the Second Meeting of Creditors that it was open to the meeting to consider and vote upon the Bart DOCA Proposal constituted misleading or deceptive conduct within the meaning of s 56 of the Fair Trading Act 1987 (SA) or s 52 of the Trade Practices Act 1974 (C’th).
c. Upon the findings urged in 8.b., the Learned Trial Judge should have found that the conduct complained of caused the Respondent to suffer a loss of chance to avoid the Respondent’s Liquidation Losses.
d. Upon the finding urged in 8.c. the Learned Trial Judge should have assessed the Respondent’s loss of chance at 20% and made an order for damages in the sum of 20% of the Respondent’s Liquidation Losses.
9. Further to 3 - Failure to Find that the conduct of the Appellant in Relation to the Calling and Conduct of the 2nd Meeting of Creditors Caused Loss to the Respondent Compensable under s 447E of the Corporations Act.
a. The Learned Trial Judge found at [309] that s 447E of the Corporations Act empowered the Court to make an order after the administration has ended including an order for compensation.
b. The Learned Trial Judge erred in finding in the circumstances of the case that there was no reason to make a compensatory order in favour of the Respondent for the reason that the liquidation of the Companies was almost complete.
c. The Respondent repeats 3.a. to 3.g above.
d. Upon a finding of one or other of the several breaches urged in 9.c. by reference to 3.a. to 3.g., the Learned Trial Judge should have found that the conduct complained of caused the Respondent to suffer a Loss of Chance to avoid the Respondent’s Liquidation Losses.
e.Upon the finding urged in 9.d. the Learned Trial Judge should have assessed the Respondent’s loss of chance at 20% and made an order for compensation in the sum of 20% of the Respondent’s Liquidation Losses.
10.The Interlocutory Costs Order Was in All the Circumstances Unjust
a. At paragraph [917] and [920] of the Reasons for Judgment the Court found that from at least mid 2005 the Appellant in conducting the Bernsteen/George Proceedings constituted an abuse of process.
b. From the finding in 10.a. it follows that the documents which the Court required to be disclosed by reason of the ruling on 15 August 2012, referred to in paragraph [914] of the Reasons for Judgment, were as a matter of law never the subject of privilege and should have been disclosed by the Appellant before the making of the Non-party Applications.
c.In the George Proceedings the Appellant had claimed privilege in his own right over documents concerning his relationship with George which were the subject of a subpoena to him in the George Proceedings (Subpoena).
d. In the proceeding the subject of Appeal, the Appellant claimed that the document or the greater part of the documents which had been the subject of the Subpoena were documents which were in his possession as litigation funder and were documents over which George had a claim for privilege.
e. To the extent of the documents produced in accordance with the ruling of referred to in paragraph [914] of the Reasons for Judgment (namely exhibits D397 and P412):
i.      if they had been discovered without claim of the cloak of privilege, the Plaintiff would not have brought the applications the subject of the Interlocutory Costs Order:
ii.      further or alternatively, a substantial alternatively a significant proportion of those documents were not discovered by the Appellant, and so at the time of the Non-Party Applications were documents which would have been amenable to orders for non‑party discovery sought in the applications.
Notice of Contention on Cross-Appeal
Upon the hearing of the cross-appeal the cross-respondent will contend that the judgment of the learned trial judge should be upheld for the reasons given by him and in the alternative, upon the following additional grounds:
1. As to each of the declarations sought in paragraphs 2a, 2b, 2c, 2d, 3 and 4 of the Second Notice of Cross Appeal dated 2 October 2015 (“Notice of Cross‑Appeal”), the learned trial judge should not have made declarations in those terms on the additional ground that the cross-appellant:
1.1. did not seek such declarations at trial, whether in any version of his statement of claim or at all; and
1.2. did not, in the cross-appellant’s draft final orders, seek any declarations at all relating to the cross-respondent’s conduct as administrator.
2. As to each of the declarations sought in paragraphs 2a, 2b, 2c, 2d, 3 and 4 of the Notice of Cross-Appeal, the learned trial judge should not have made such declarations pursuant to section 1321 of the Corporations Act 2001 (Cth) (“Corporations Act”) on the additional ground that the cross-appellant failed to comply with, and did not purport to invoke, the required procedure for an appeal under section 1321 of the Corporations Act in that, (apart from failing to commence his appeal within 21 days of the act, omission or decision complained of):
2.1.contrary to the procedure contemplated in Rules 14.1(4) and 14.1(5) of the Corporations Rules 2003 (South Australia) (“Corporations Rules”), the cross-appellant did not serve any affidavit in support of his complaint as soon as practicable after filing his originating process; and
2.2. contrary to the procedure contemplated in Rule 14.1(3) of the Corporations Rules, the cross-appellant did not apply for any extension of the time stipulated by Rule 14.1(2)(a) of the Corporations Rules within which to commence an appeal under section 1321 of the Corporations Act.
3. As to each of the declarations sought in paragraphs 2a, 2b, 2c, 2d and 3 of the Notice of Cross-Appeal, to the extent the cross-appellant seeks to rely on breaches of sections 180 to 182 of the Corporations Act, the learned trial judge should not have made such declarations pursuant to section 31 of the Supreme Court Act 1935 (SA) on the additional grounds referred to in paragraphs 1.1 to 1.5 of the cross-respondent’s Third Notice of Appeal dated 22 February 2016.
4. The declaration sought in paragraph 4 and the order sought in paragraph 5 of the Notice of Cross-Appeal ought to have been refused on the additional ground that the cross-respondent did not owe any duty to the cross‑appellant, breach of which would give the cross-appellant a cause of action for damages or compensation.
5. The declaration sought in paragraph 2a of the Notice of Cross-Appeal ought to have been refused on the additional grounds that:
5.1. there was no DOCA proposal on which the second meeting of creditors on 21 December 2001 could vote in that:
5.1.1. following the failure of Mr Bart and ARL to agree terms based on the Heads of Agreement provided by the cross-appellant and Mr Bart to the cross-respondent on 27 November 2001, the cross-respondent took it upon himself to attempt to broker an agreement between Bart and ARL;
5.1.2. following discussions and negotiations with Mr Bart, the cross respondent drafted a document on the night of 18 December 2001 in the form of a joint proposal from the cross-appellant, Mr Bart and ARL to be submitted by them to the cross‑respondent (the “Administrator’s Draft DOCA Proposal”);
5.1.3. the cross-respondent sent the Administrator’s Draft DOCA Proposal by facsimile to each of Mr Bart and ARL at about midnight on the night of 18 December 2001, in which he asked them to sign the document and return it to him by 9.00 a.m. on 19 December if they consented to its terms;
5.1.4. ARL did not consent to or sign the Administrator’s Draft DOCA Proposal, and rejected its terms on 19 December 2001; and
5.1.5. in the absence of agreement from ARL, there was no DOCA proposal to be voted on;
5.2.alternatively, the cross-respondent acted reasonably and breached no duty in proceeding on the basis that, without ARL’s consent and agreement, there was no DOCA proposal to be voted on; and 5.3. the cross-appellant conceded at trial (see T3551) that, unless the cross‑respondent had breached his duties in the manner described in paragraph 2d of the Notice of Cross-Appeal, the cross-respondent was under no duty to inform the meeting on 21 December 2001 that there was a DOCA proposal on which the meeting could vote.
6. As to each of the declarations and orders sought in paragraphs 2d and 6 of the Notice of Cross-Appeal, the learned trial judge should not have made such declarations or orders because:
6.1. the breaches of duty alleged in paragraph 2d had not been pleaded and were not the subject of the cross-appellant’s claim at trial;
6.2. the claim referred to in paragraph 6 of the Notice of Cross-Appeal for an order under section 82 of the Trade Practices Act 1974 (Cth) had not been pleaded at trial, and permission to make an amendment to that effect was in any event refused by the learned trial judge on 28 October 2015; and
6.3. in light of the matters set out at paragraphs 6.1 and 6.2 above, the learned trial judge was wrong to give the cross-appellant permission to plead in his Fourth Statement of Claim, either at [922] of the reasons for judgment delivered on 9 December 2014 (“Reasons”), or by way of permission granted on 28 October 2015 or 15 January 2016, the matters referred to in paragraph 6.1 above in that:
6.3.1.having regard to the timing of the oral application for permission to amend on 26 February 2013, the nature of the amendments, the prejudice to the Appellant and binding appellate authority, permission should have been refused;
6.3.2. the primary judge failed to address any of the submissions of the Appellant in opposition to the grant of permission in either the Reasons or the reasons for judgment delivered on 28 October 2015 and 15 January 2016;
6.3.3. the primary judge failed to provide any or any sufficient reasons for the grant of permission at Reasons [922] or in the reasons delivered on 28 October 2015 or 15 January 2016, which reasons are affected by operative delay such as to constitute an error resulting in a miscarriage of justice;
6.3.4. the primary judge stated subsequently to the Reasons that the ruling at [922] is to the following effect, neither of which are stated in the Reasons or the reasons delivered on 28 October 2015 or 15 January 2016:
6.3.4.1.on 18 December 2014, the primary judge stated that he would “need to hear submissions on just what of the amendments in the fourth proposed amended statement of claim should be made” and that his Honour “took a shortcut by saying that it’s really just those paragraphs that support the factual findings in the end that [his Honour] made”; and
6.3.4.2.on 15 April 2015 the primary judge stated that he had in mind a judgment of Zelling J (being F F Seeley Nominees Pty Ltd v El Ar Initiations (UK) Ltd (No 2) (1990) 55 SASR 314) in which Zelling J “explained that amendments to the statement of claim can properly be made after the delivery of reasons and to reflect the issues that had been joined in the course of the trial and were resolved by the findings, the reasons”; and
6.3.5. the primary judge failed to consider whether the amendments fell within the scope of the ruling at [922], as such ruling was explained on 18 December 2014 and 15 April 2015;
6.3.6.the amendments are not within the scope of the ruling in [922], as explained on 18 December 2014 and 15 April 2015;
6.3.7. the grant of permission has resulted in a denial of procedural fairness to the cross-respondent;
6.3.8. the learned trial judge failed to have regard or sufficient regard to the following matters:
6.3.8.1. the revised pleading alleged a fundamentally different case from that alleged in the Second Statement of Claim;
6.3.8.2. the cross-appellant did not mention that he intended to put his case on such a different basis until after the cross-respondent had finished his evidence;
6.3.8.3. the amendments themselves were not advanced until after evidence had closed and the parties had made their closing addresses; and
6.3.8.4.the cross-appellant gave no explanation for the lateness of the proposed amendments;
6.3.9.the cross-appellant’s counsel had not put to the cross-respondent in cross examination that he had preferred his interests to those of the creditors in the manner now alleged;
6.3.10.there was a possibility that the cross-respondent would have conducted his case differently if the amendments had been pleaded before trial; and
6.3.11.the cross-respondent had no opportunity to investigate the new claims, to file an amended defence, or to re-open his case and adduce further evidence; and
6.4. having regard to the seriousness of the allegations, the evidence was not sufficient to discharge the burden of proof.
7. The declaration sought in paragraph 3 of the Notice of Cross-Appeal ought to have been refused on the additional ground that the section 439A reports gave fair disclosure of material facts and were not misleading:
7.1. the cross-appellant repeats ground 5.1 above; and
7.2. the section 439A reports set out the terms of the Administrator’s Draft DOCA Proposal in full and contained words to the effect that those terms required the consent of ARL, which had not been received, all of which was true.
8.As to the claims referred to in paragraphs 4, 5, 6 and 8 of the Notice of Cross Appeal for damages or compensation for loss of a chance of avoiding the “Respondent’s Liquidation Losses” the primary judge should have dismissed such claims on the additional grounds that:
8.1. the cross-appellant had failed to prove that he had incurred the legal costs claimed as part of the Respondent’s Liquidation Losses;
8.2. the cross-appellant was required, and failed, to prove his loss on the balance of probabilities;
8.3. the breaches of duty alleged did not cause the cross-appellant to lose any relevant opportunity to avoid the Respondent’s Liquidation Losses; and
8.4.the Respondent’s Liquidation Losses (or the loss of any opportunity to avoid them) were in any event too remote from any breach of duty to be recoverable.
9. The order sought in paragraph 6 of the Notice of Cross-Appeal ought to have been refused on the additional ground that the cross-appellant’s claim under the Fair Trading Act 1987 (SA) was not commenced within the statutory limitation period.
10. The order sought in paragraph 7 of the Notice of Cross-Appeal ought to have been refused on the additional grounds that:
10.1.the cross-appellant did not apply for or plead any basis for any extension of time to bring an appeal under section 1321 of the Corporations Act;
10.2.the cross-appellant did not provide any explanation for his delay in failing to commence an appeal under section 1321 of the Corporations Act within 21 days of the act, omission or decision complained of; and
10.3.the proceedings below, in which the cross-appellant pursued a private law action in damages against the cross-respondent in 2006, were not in any event an appropriate vehicle for the pursuit of an appeal under section 1321 of the Corporations Act against acts, omissions or decisions of the cross respondent in 2001.
11.As to the orders sought at section 1B of the Notice of Cross-Appeal, permission to appeal against the Interlocutory Costs Order ought to be refused, or such appeal ought to be dismissed, on the additional grounds that:
11.1.the Notice of Cross-Appeal does not identify any error on the part of the learned trial judge;
11.2.the Notice of Cross-Appeal does not identify any error on the part of his Honour Judge Lunn; and
11.3.any appeal against the Interlocutory Costs Order made by his Honour Judge Lunn on 27 October 2010 would in any event be out of time and there is no basis for a grant of an extension of time.
12. As to the cross-appellant’s grounds of cross-appeal:
12.1.the cross-respondent repeats paragraphs 1 - 11 above;
12.2.as to ground 4, the alleged motivation of the cross-respondent referred to in ground 4a has never been pleaded in any version of the statement of claim, and was not put to the cross-respondent at trial; and
12.3.as to ground 6, there is no appeal against, or application for permission to appeal against, the interlocutory ruling refusing an extension of time, and such an appeal is now out of time.