Nilant v Shenton
[2001] WASCA 421
•20 DECEMBER 2001
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE FULL COURT (WA)
CITATION: NILANT -v- SHENTON [2001] WASCA 421
CORAM: STEYTLER J
PARKER J
MILLER J
HEARD: 9 APRIL 2001
DELIVERED : 20 DECEMBER 2001
FILE NO/S: FUL 18 of 2000
BETWEEN: CHARLES PHILIPPE LOUIS NILANT
Appellant
AND
RICHARD LAURENCE SHENTON
Respondent
FILE NO/S :FUL 19 of 2000
BETWEEN :RICHARD LAURENCE SHENTON
Applicant
AND
CHARLES PHILIPPE LOUIS NILANT
Respondent
FILE NO/S :CIV 1321 of 2000
BETWEEN :EDENBANK NOMINEES PTY LTD (IN LIQ)
First Plaintiff
DERBYSHIRE NORMINEES PTY LTD
Second PlaintiffAND
RICHARD LAURENCE SHENTON
Defendant
Catchwords:
Corporations - Winding up - Order for personal liability for debt of company - Managing company while an insolvent under administration - Liability limited to part of one debt - Appeals - Whether discretion to make order properly exercised
Legislation:
Corporations Law, s 588Z
Result:
FUL 18 of 2000 Appeal by liquidator dismissed
FUL 19 of 2000 Appeal allowed
CIV 1321 of 2000 Application dismissed
Category: A
Representation:
FUL 18 of 2000
Counsel:
Appellant: Mr P G Clifford
Respondent: In person
Solicitors:
Appellant: Paiker & Overmiere
Respondent: In person
FUL 19 of 2000
Counsel:
Applicant: In person
Respondent: Mr P G Clifford
Solicitors:
Applicant: In person
Respondent: Paiker & Overmiere
CIV 1321 of 2000
Counsel:
First Plaintiff : Mr P G Clifford
Second Plaintiff : Mr P G Clifford
Defendant: In person
Solicitors:
First Plaintiff : Paiker & Overmiere
Second Plaintiff : Paiker & Overmiere
Defendant: In person
Case(s) referred to in judgment(s):
Commissioner for Corporate Affairs v Bracht (1989) 7 ACLC 40
Poyser v Commissioner for Corporate Affairs (1985) 3 ACLC 584
R v Newth [1974] 2 NZLR 760
Case(s) also cited:
Holpitt Pty Ltd v Swaab & Ors (1992) 10 ACLC 64
Wily v Lo Presti (1998) 16 ACLC 82
STEYTLER J: I have had the advantage of reading, in draft, the reasons for decision of Parker J. I agree with them and with his Honour's conclusions. I have nothing to add.
PARKER J: On 1 February 2000 White J in Chambers delivered a decision in respect of an application by Mr Nilant, the liquidator of Edenbank Nominees Pty Ltd ("Edenbank"), pursuant to s 588Z of the Corporations Law (as it was at that date) for an order that Mr Shenton be personally liable for a specified part of the debts and liabilities of Edenbank. His Honour ordered that Mr Shenton be personally liable for so much of Edenbank's debts and liabilities as did not exceed $35,000.
The basis for the application of the liquidator was that Mr Shenton had contravened the then s 229 of the Corporations Law by managing Edenbank when he was an insolvent under administration. At the relevant time this was prohibited by s 229 which was then a provision specified in s 588Z(b)(i).
Both the liquidator and Mr Shenton have appealed. The liquidator contends that the amount specified as the limit of Mr Shenton's liability in the order should be $200,000 as had been sought in the application of the liquidator, rather than $35,000. Mr Shenton contends that no order should have been made in the proper exercise of discretion. He also contends that it should not have been found that he had managed Edenbank.
Also before this Court, having been listed as a matter of convenience, is an originating summons by which the liquidator seeks specific orders as to the payment by Mr Shenton of the amount the subject of the order. Obviously, this is consequential on the outcome of the appeals.
There was a considerable body of evidence adduced below on the hearing of the application. Given the nature of the proceeding, affidavits had been filed in support and these were taken as the evidence-in-chief of those witnesses but they were the subject of cross‑examination. There was also quite an amount of documentary evidence adduced before his Honour. Mr Shenton also gave evidence, both on affidavit and orally.
As the case for the liquidator was presented before his Honour it focussed on, what on the evidence was found to be, a loan to Edenbank of $200,000 from Derbyshire Nominees Pty Ltd ("Derbyshire"), a company effectively controlled by a Walter Alfred Newman. This loan was repayable on demand. There was evidence that agreement was reached for the making of this loan on 15 November 1995 and the money was paid
over on that day. Both on that day, and during earlier negotiations and discussions that led to the loan, Derbyshire had been represented by Mr Newman and Edenbank by Mr Shenton and at times also by a Mr Cotesworth. Demand for repayment in full of the $200,000 was made by Derbyshire on 30 January 1996 but Edenbank failed to repay the loan or any part of it. On 13 January 1997 Derbyshire entered summary judgment against Edenbank in the District Court in the sum of $200,000 plus interest and costs in respect of the amount of this loan.
There was an issue before his Honour, which was echoed in submissions before us, that the $200,000 was not paid by way of loan but as what was described as "seed capital" for a viticulture endeavour which was in the contemplation of Mr Newman and Mr Shenton, although it seems to have involved other persons and corporate entities. His Honour concluded on the evidence that the $200,000 was by way of loan repayable on demand even though, in effect, it may have been contemplated that the money would or could be used by Edenbank in connection with the viticulture project. In fact, however, at least for the most part, the $200,000 was used to meet existing obligations and ongoing expenses incurred by Edenbank.
It is this loan of $200,000 which was the basis for the liquidator's application, and the liquidator's contention on appeal before this Court, that Mr Shenton should be the subject of personal liability for the full sum of $200,000.
A significant issue before White J was whether Mr Shenton had been managing Edenbank at the time of the loan on 15 November 1995. While the case for the liquidator, as it was presented below, focussed in particular on the management of Edenbank at the time of the loan of $200,000, the evidence led on this issue also extended much more generally. In respect of this, the principal contention of Mr Shenton, both below and before this Court, is that while he performed certain acts in relation to the affairs of Edenbank he acted at all times under the direction of and subject to Mr Cotesworth, whom he contends was managing Edenbank.
Mr Shenton had been declared bankrupt on 17 March 1995 and he was an insolvent under administration until the annulment of his bankruptcy which, as found by White J on the basis of the Annulment Notice in the Commonwealth of Australia Gazette, was on 27 June 1996. Mr Shenton urged that the effective date of the annulment ought to have been 30 March 1996 which was the date of a meeting of creditors, but the finding of White J was clearly correct on the evidence. This difference in dates in the end is not material for present purposes although the activities of Mr Shenton between 30 March 1996 and 27 June 1996 was the subject of a specific finding by his Honour.
His Honour was persuaded, on the evidence before him, that Mr Shenton had managed Edenbank while an insolvent under administration and, in particular, did so on 15 November 1995 and during the period leading up to that date in relation to the negotiation of the loan agreement between Edenbank and Derbyshire. His Honour was persuaded in consequence of this that s 588Z applied in the circumstances and that an order ought to be made subjecting Mr Shenton to personal liability in respect of the debts and liabilities of Edenbank. He was not persuaded, however, that the order should extend to the full extent of the loan from Derbyshire to Edenbank of $200,000 as had been sought by the liquidator. He limited the liability imposed by virtue of his order to an amount not exceeding $35,000 on a basis which will be discussed later in these reasons. It is his decision in this respect that is the main focus of the two appeals before this Court.
It should be noted that it was an interesting, and as will appear material, feature of the case of the liquidator before White J that no evidence was led as to the financial position of Edenbank as revealed in the liquidation and as to whether there were creditors other than Derbyshire. Indeed, his Honour seems to have dealt with Edenbank's affairs on the assumption, which was clearly encouraged by the manner in which the liquidator's case was presented, that the only creditor of Edenbank in the liquidation was Derbyshire. This is now the subject of a ground of appeal by the liquidator. The liquidator objects that his Honour erred in this respect as there was no evidence before him which provided any adequate foundation for such an assumption or finding. A review of the evidence indicates that this is correct. The consequences of this will be considered later in these reasons.
Management of the company
It is convenient to deal immediately with the appeal by Mr Shenton against the finding that he managed Edenbank.
At the relevant time s 588Z was in the following terms:
"588ZWhere:
(a)a company is being wound up; and
(b)at or after the commencement of this Part and within 4 years before the relation-back day, a person contravened:
(i)section 229, 230, 599, 600 or 1317EF; or
(ii)a previous law corresponding to a section referred to in subparagraph (i);
by managing the company (as defined by section 91A);
the Court may, on the application of the company's liquidator, order that the person is personally liable for so much of the company's debts and liabilities as does not exceed an amount specified in the order."
Section 229(1) then provided:
"An insolvent under administration must not, without the leave of the Court, manage a corporation."
Section 91A(2) then provided:
"A person manages a local corporation if the person, in this jurisdiction or elsewhere, is a director or promoter of, or is in any way (whether directly or indirectly) concerned in or takes part in the management of, the corporation."
(These provisions have each been amended with effect from 13 March 2000 but are set out in the form which was in force at all times material to this application).
The definition in s 91A(2) of the concept in s 588Z(b) of "managing the company" involves terms quite well known in the context of legislation of this type. By virtue of the definition it is apparent that it is sufficient to constitute managing a company if a person in any way is concerned in its management, or takes part in its management, and this is so whether the person acts directly or indirectly. By s 91A(1) the statutory definition is applied not only to s 588Z but also to s 229.
His Honour directed himself with respect to this definition by reference to a number of authorities in the context of provisions mostly of similar effect to s 229. In my respectful view, his Honour was correct in doing so. It is sufficient to note passages from two of these for present purposes. In Commissioner for Corporate Affairs v Bracht (1989) 7 ACLC 40, Ormiston J was dealing with a matter which fell within s 227(1) of the Companies (Victoria) Code. His Honour said at 49:
"In the present section I would see the prohibition as covering a wide range of activities relating to the management of a corporation, each requiring an involvement of some kind in the decision-making processes of that corporation. That involvement must be more than passing, and certainly not of a kind where merely clerical or administrative acts are performed. It requires activities involving some responsibility, but not necessarily of an ultimate kind whereby control is exercised.
Advice given to management, participation in its decision making processes, and execution of its decisions going beyond the mere carrying out of directions as an employee, would suffice. If the respondent had been left to negotiate terms with bankers or providers of credit, although those terms had to be confirmed, there would have been sufficient participation, but not if those acts involved only communication or were merely casual. The negotiation of matters of financial importance, such as the rent of its principal premises, may well lead to an inference that a person is concerned in the management of a company, but not if that involved merely communication of instructions on a single occasion …."
In R v Newth [1974] 2 NZLR 760 Quilliam J considered the terms of s 188(1) of the Companies Act 1955 of New Zealand. Quilliam J said at 761:
"It must first be observed that the offence created by the section is a very wide one and is plainly intended to limit severely the activities of an undischarged bankrupt in the affairs of a company. I have no doubt that the object of the statutory provision is not the punishment of the bankrupt but the protection of the commercial community and I think it is this principle which points clearly the way in which the section is to be interpreted. It is not, of course, an offence for an undischarged bankrupt to be employed by a company in a minor capacity, for instance, as typist or clerk or on routine duties, but I think the section prohibits such a person from taking any hand in the real business affairs of the company and the expression 'concerned in the management' is, in my view, to be regarded in that way, that is, the inquiry should be whether, upon the evidence, the accused took a hand in the real business affairs of the company."
Having directed himself in accordance with these decisions there was before his Honour a great deal of evidence both as to Mr Shenton's role in the negotiation of the loan of the $200,000, and otherwise, which was clearly well capable of supporting the view which his Honour took of it that Mr Shenton had managed the company within the meaning of s 588Z and s 91A(2). Despite evidence to the contrary from Mr Shenton, there was evidence from both Mr Newman and Mr Cotesworth, which his Honour accepted, and which showed that Mr Shenton took the leading role in the process of persuading Mr Newman for Derbyshire to lend the $200,000 and to commit to other more extensive investments. This role, as the evidence was well capable of supporting, involved Mr Shenton having taking the initiative for Edenbank to involve Derbyshire, regarding himself as "the only person that could get the project up and running", conceiving and proposing terms on which Derbyshire might be involved, and agreeing to those terms. He did so, on the evidence, in a manner which gave the appearance that it was he that was directing Mr Cotesworth, rather than the reverse as Mr Shenton sought to suggest in his evidence and cross-examination of other witnesses.
With Mr Shenton, Mr Cotesworth was the other signatory to the bank account of the company. His evidence was to the effect that he acted at all material times on Mr Shenton's instructions and that the real management of the company was with Mr Shenton. It was Mr Cotesworth's evidence that while at times he would make out cheques and sign them, he did so on Mr Shenton's instructions even, at times, signing blank cheques and leaving them to Mr Shenton to complete.
In my view, there was clearly evidence on which it was well open to his Honour to conclude, as he did, that Mr Shenton did participate in and was concerned in the management of Edenbank. He did this after a review generally of the evidence and after adequately and correctly directing himself in law as has been indicated earlier in these reasons.
While there is no doubt that before his Honour, as now, Mr Shenton maintains the position that he had a merely subservient role, which did not constitute being concerned in or taking part in the management of Edenbank, the evidence presented to his Honour was well capable of supporting the conclusion he reached. I am not persuaded that there is any force to the contentions of Mr Shenton that his Honour's findings in this regard were in error. This ground of Mr Shenton's appeal fails.
Discretion
The issue of real substance in this appeal is the exercise of discretion under s 588Z. There are two points of focus for the discretion; whether to make an order at all and the limit placed by the order on the personal liability ordered. The researches of counsel have not identified any authorities on the application and operation of s 588Z or like provisions. Section 588Z itself makes no specific provision to directly guide the exercise of discretion.
The operation of s 588Z, in an appropriate case, is that a liquidator can secure an additional source of funds with which to meet, in whole or part, the debts and liabilities of a company in the process of winding up. Although not explicit, a clear implication of the provision is that there should be some relevant connection between the debts and liabilities of the company and the role of the person, who is made subject to an order for personal liability, in the management of the company. It would appear that the connection may be found in the incurring of one or more particular debts or liabilities, or in a more generalised level of debt or liability incurred in a course of management. The role of the person in the incurring of such particular debts or liabilities, or in allowing a more generalised level of indebtedness or liability to arise, will clearly be material to the exercise of discretion. The implication I would draw from the provision is that the conduct of the person in the management of the company, whether in respect of a particular transaction or of a more generalised nature, should disclose some element which makes it appropriate that the person should personally bear a financial responsibility for the consequences of his or her role in the management of the company. The precise nature of that element will no doubt vary considerably from case to case. Inevitably, the more complete understanding of its nature will be the product of a number of examples as individual cases fall to be decided.
Given the absence of explicit statutory guidance, it is necessary to have regard to the purposes to be served by the provision in the statutory scheme. It is clear that, relevantly, s 588Z serves to support and reinforce the effective operation of s 229(1) in so far as it precludes an insolvent under administration managing a corporation. Even so, this is not the sole or even the primary means of enforcement of s 229(1). The penal provisions of the Corporations Law have that role.
In Poyser v Commissioner for Corporate Affairs (1985) 3 ACLC 584, the question of the mental element involved in offences alleging a breach of s 227(1) of the Companies Code (Vic) were considered by the Supreme Court. Murphy J saw the legislative purpose of s 227(1), the equivalent of s 229(1), in the following terms at 589:
"Here it may, I think, be accepted that the purpose of the statute in prohibiting a bankrupt from acting as a director of a corporation or taking part in its management is not to punish him but to protect the public from imprudent actions on his part which could cause the public to suffer financial loss. See Re Altim Pty Ltd (1968) 2 NSWR 762 per Street J, as he then was, at p 764; Re Magna Alloys & Research Pty Ltd & Ors (1975-1976) CLC 40-227 at p 28,354; (1975) 1 ACLR 203 per Bowen CJ, at p 205; and Re Van Reesema (1975-1976) CLC 40-209 at pp 28,255-28,256; (1975) 11 SASR 322 per Zelling J at pp 331-332."
These observations of Murphy J echo the view of Quilliam J in R v Newth (supra) which is quoted earlier in these reasons viz "… the object of the statutory provisions is not the punishment of the bankrupt but the protection of the commercial community …". I would respectfully consider it appropriate to be guided by those understandings of the purpose which s 229(1) seeks to serve in the Corporations Law, and thereby relevantly the purpose of s 588Z, when dealing with the present application.
In the reasons of his Honour it is apparent that he, too, viewed the purpose behind the section to be reflected in the words of Murphy J. This led his Honour to observe, in the absence of direct authority as to the exercise of the discretion, that:
"In my opinion, such an order is properly to be made when there is a clear nexus between the activity of the person concerned and the incurring of the debt."
It is apparent from this passage and the reasoning which followed as his Honour sought to apply that statement to the facts of this case, that his Honour's attention was directed solely or principally to the debt of Edenbank incurred when it borrowed the $200,000 from Derbyshire. There being a clear nexus between the activities of Mr Shenton in the management of the company and the incurring of that debt, it seems to have followed, in his Honour's view, that an order should be made. As far as the reasons disclose no other matter was considered by his Honour. While Mr Shenton's role in the incurring of this one debt by Edenbank is clearly relevant and provides a connection between Mr Shenton's role in the management of Edenbank and its debts and liabilities to the extent of $200,000, his Honour's reasons do not seek to explore beyond that bare connection why it was appropriate in this case for an order for personal liability to be made. In particular, it has not been identified or explained on what basis his Honour saw the purposes of the statute being furthered by an order against Mr Shenton in this case. If the protection of the public, especially the commercial community, is the relevant statutory purpose – and not the punishment of Mr Shenton – it is not made clear whether his Honour was persuaded that an order should be made to protect Derbyshire's interests, or the public generally, or both, and if so on what basis. In my respectful view in the absence of some further exploration of these issues in the reasons we cannot be satisfied that the discretion was exercised having regard only to proper considerations and after giving them due weight.
His Honour then turned in his reasons to consider the evidence and submissions concerning two properties which Derbyshire had acquired, apparently as a consequence of its involvement, by Mr Newman, with Mr Shenton and Edenbank. The connecting link seems to have been the viticulture project, the two properties being thought to be suitable for that purpose. As far as appears Edenbank was not a party in the transactions by which Derbyshire came to acquire the two properties, although Mr Shenton apparently had a material role in persuading Mr Newman that Derbyshire should do so. Whether the viticulture project was an idea of Mr Shenton in which he involved Edenbank, or a scheme of Edenbank, is not the subject of any findings. Each view is open. As far as the evidence reveals Derbyshire acquired the two properties for some $1.8 million. Derbyshire has since sold one of the properties, and in doing so realised a profit of some $160,000. It appears that the other property, for which the purchase price paid by Derbyshire was $1.028 million, is in the hands of selling agents. Derbyshire is asking some $2.4 million for that property.
It was the submission for Mr Shenton that his Honour should not exercise his discretion to make an order for personal liability in this case as it is clear that, by virtue of the overall relationship between Mr Shenton and Derbyshire and Mr Newman, despite the unpaid loan of $200,000, Derbyshire stood to make a very substantial profit and would do so even if it came to sell the second property at very much below the asking price of $2.4 million. The same submissions are maintained by Mr Shenton before us. For the liquidator it was submitted, both below and to this Court, that while the transactions may have been motivated by some interrelated objective, the loan of $200,000 was a distinct transaction, and one which involved different parties from either of the acquisitions of property by Derbyshire. Hence, it was submitted, it should have no bearing whatever on the exercise of the discretion.
In the event, while his Honour made no specific findings as to the relationship, whether as to subject matter, object or parties, as between the three transactions, he was persuaded that, as Derbyshire had made a profit of $160,000 on the sale of one of the two properties it had acquired, that profit should be taken into account in the exercise of his discretion. The reasons for decision do not explain why this should be so.
There was also evidence that in the course of the liquidation Mr Cotesworth had paid $30,000 to the liquidator. He did so, so far as the evidence reveals, because he felt a sense of moral obligation to do so. The $30,000 was a sum that had been paid to him by Edenbank following a beneficial settlement in June 1996 of litigation by Edenbank against a Mr Evans. Neither Mr Evans nor the subject matter of the dispute between him and Edenbank appears to have had any relevant connection with Derbyshire and Mr Newman. Well before November 1995 Edenbank had secured an option from Mr Evans over land at Busselton and Mr Evans later refused to proceed with the sale. Nevertheless, on a basis which is not altogether clear, it appears that his Honour was persuaded that some part of the $30,000 would no doubt become available by way of dividend in the liquidation and he appears to have ascribed to that possibility the prospect that $5,000 might by that means find its way to Derbyshire in the liquidation.
So far as his Honour's reasons reveal, his Honour reached the figure of $35,000, as the limit of the order for Mr Shenton's personal liability, by deducting from the amount of the $200,000 debt incurred by Edenbank in the course of Mr Shenton's management, the $160,000 profit of Derbyshire on the sale of one of the two pieces of land it purchased, and $5,000 being apparently an allowance against a possible dividend in the liquidation by virtue of the unrelated repayment by Mr Cotesworth of $30,000 to the liquidator. In my respectful view, the evidence does not disclose any basis on which either the $160,000 or the $5,000 had any, or any sufficient, legal or factual connection to the $200,000 debt of Edenbank to Derbyshire, to make those two sums relevant to the proper exercise of the discretion pursuant to s 588Z.
It is my respectful view that the decision to make an order and to limit the personal liability to $35,000 must be set aside for the reasons given with the consequence that the discretion must again be considered. In this regard, the parties are in agreement that the factors relevant to the exercise of the discretion, so far as they can be identified in the evidence, are as well able to be assessed by this Court as they were at first instance and they join in asking that the discretion should be exercised afresh at this stage rather than the matter being remitted.
The exercise of discretion
It is convenient at this point to note three further factual matters. First, it is clear from the evidence and the findings of his Honour, and it is accepted by both parties before us, that in his dealings with Mr Newman, Mr Shenton made no secret of his bankruptcy. Indeed, it was the finding of his Honour, well supported by the evidence, that Mr Shenton "took pains to inform all relevant people that he was an undischarged bankrupt and that he was aware that that fact precluded him from lawfully managing the company". In further confirmation of this, it was the evidence of Mr Newman in cross-examination that he was aware of Mr Shenton's bankruptcy before Derbyshire entered into the loan transaction for the $200,000. In this case, therefore, neither Derbyshire nor Mr Newman were deceived or misled in any way or acted in ignorance of the bankruptcy. The eyes of Mr Newman, and through him of Derbyshire, were well open to the fact of the bankruptcy at all relevant times. They dealt with Mr Shenton and Edenbank even though aware of Mr Shenton's bankruptcy and even though it was the view of Mr Newman, as made clear in his evidence, that Mr Shenton was in truth managing Edenbank.
Secondly, the evidence discloses that Mr Newman took advice whether or not Derbyshire should enter into the loan transaction or to acquire the two properties before decisions were made to do those things. He had the advice of his solicitor, his accountant and his wife. It appears that no one of these supported the involvement of Derbyshire in any of these matters. There was in fact clear opposition. The decision of Mr Newman and of Derbyshire to advance the $200,000 to Edenbank was taken notwithstanding this advice. Further, inadequate consideration appears to have been given to ensuring that intended securities were in place before the $200,000 was advanced.
The third additional factual matter is the evidence that it was Mr Newman that has financed the liquidation of Edenbank. He did indicate that, in his knowledge of the liquidation, moneys had been recovered from sources other than Mr Shenton but he did not give any details of the sources or the amounts recovered in his evidence. No doubt it is as a consequence of this that the strong submission to this Court, by the liquidator, is that an order for personal liability for the full amount of the $200,000 loan should be made. This is put on the frankly avowed basis that there is an arrangement in place between the liquidator and Mr Newman that the proceeds of any order made pursuant to s 588Z on this application will in fact be made available in reduction of the debt of Edenbank to Derbyshire.
It appears to have been of some significance to the manner in which this case has been conducted, both below and on appeal, that there was a clear objective of enabling one creditor in the liquidation, Derbyshire, to recover from Mr Shenton in full, the amount of its $200,000 loan to Edenbank.
It is shown by the evidence, of course, that Mr Shenton played a material role in negotiating the loan to Edenbank and in that regard he acted in its management. The evidence does not reveal, however, whether this was the only involvement of Mr Shenton in Edenbank's management which led to the incurring of debt by Edenbank while he was an insolvent under administration.
In so far as the evidence below and the findings of his Honour reveal the $200,000 was used by Edenbank to meet existing liabilities and to meet ongoing expenses, but it is not clear on the evidence to what extent if any Edenbank then had or anticipated other sources of income or funding, and what its prospects of repayment of the $200,000 might have been. In the absence of necessary evidence and findings, a satisfactory view of the effect on the affairs of Edenbank of this debt, incurred under Mr Shenton's influence, cannot be formed. It has not been shown that Mr Shenton's management, in this respect, necessarily caused the public or Derbyshire to suffer financial loss; see Poyser v Commissioner for Corporate Affairs (supra).
The liquidator has chosen deliberately not to place before the Court more adequate evidence as to the affairs of Edenbank as disclosed in the liquidation. There is nothing to disclose the extent or nature of Edenbank's creditors. While the application is pursued by the liquidator, he does so on the avowed basis that the proceeds will not be available generally in the liquidation but will be available only to the one creditor, Derbyshire, which relevantly dealt in full knowledge with Edenbank and Mr Shenton.
Given the confined basis upon which the application was brought and supported, it has not been demonstrated, and it is not otherwise apparent, in my view, that the public interest as identified earlier in these reasons would be advanced in any significant way by the making of an order. As I have indicated, s 588Z is not a primary means in the statutory scheme for ensuring the observance of s 229(1). The private interests of Derbyshire, and Mr Newman, hardly require or justify an order for personal liability as they dealt with Mr Shenton with full knowledge of the facts which constituted the breach of s 229(1) and which provide the statutory foundation for any such liability.
Each case for the exercise of the discretion under s 588Z must clearly be determined on its particular facts. There are aspects of the present case, which I have sought to explore in these reasons, which in my view in the end tell against the exercise of discretion to make an order for personal liability against Mr Shenton.
For these reasons I would allow Mr Shenton's appeal and set aside the order for personal liability. I would dismiss the liquidator's appeal.
By virtue of the outcome of the appeals no consideration of the originating summons is called for. It, too, should be dismissed.
MILLER J: I have had the opportunity of reading in draft the reasons of Parker J. I agree with those reasons and the conclusions reached by his Honour. I have nothing that I wish to add.
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