OLI 1 Pty Ltd (in liq) v OLG 1 Pty Ltd (No 2)

[2022] NSWSC 1199

Supreme Court

New South Wales

Medium Neutral Citation:

OLI 1 Pty Ltd (in liq) v OLG 1 Pty Ltd (No 2) [2022] NSWSC 1199

Hearing dates:

12-14 July 2022

Date of orders:

7 September 2022

Decision date:

07 September 2022

Jurisdiction:

Common Law

Before:

Chen J

Decision:

(1) Direct that the parties confer with a view to agreeing upon proposed orders finalising the proceedings in accordance with these reasons (including costs), with agreed orders to be filed and served by 14 September 2022, 5pm.

(2) To the extent that agreement cannot be reached, direct that each party is to file and serve, by 14 September 2022, 5pm, the proposed orders it seeks with submissions explaining the basis for why those orders are sought limited to no more than 3 pages.

(3) Direct that any evidence in support of any contested orders be filed and served by 14 September 2022, 5pm.

(4) The matter will be listed for further argument, and the entry of further orders, on a date to be fixed.

Catchwords:

CONTRACTS — formation of contract — whether transfer of monies were pursuant to oral agreement — no direct evidence on whether oral agreement existed — whether oral agreement can be inferred from surrounding circumstances — inconsistent post-contractual conduct

CORPORATIONS — directors and officers — directors’ duties — duty of care and diligence — duty to act in good faith in the best interest of company and for proper purpose

CORPORATIONS — directors and officers — knowledge — rules of attribution — whether knowledge of officers or employees can be attributed to corporation — accessorial liability — accessorial liability of a corporation

EQUITY — fiduciary duties — fiduciary relationships — directors

EQUITY — fiduciary duties — breach — rule in Barnes v Addy

DEBT — simple debt — debt repayable on demand — cause of action commences instanter upon making of loan

LIMITATION OF ACTIONS — general — statute of limitation — Limitation Act 1969 (NSW) — debt — confirmation — acknowledgment in writing — authenticated signature fiction rule

LIMITATION OF ACTIONS — s 1317K of the Corporations Act 2001 (Cth)

REMEDIES — equitable compensation

Legislation Cited:

Acts Interpretation Act 1901 (Cth)

Corporations Act 2001 (Cth)

Limitation Act 1969 (NSW)

Cases Cited:

Adler v Australian Securities and Investments Commission (2003) 179 FLR 1; [2003] NSWCA 131

Australasian Annuities Pty Ltd (in liq) v Rowley Super Fund Pty Ltd (2015) 318 ALR 302; [2015] VSCA 9

Australia Kunqian International Energy Co Pty Ltd v Flash Lighting Company Ltd [2020] VSCA 239

Australian Competition and Consumer Commission v Giraffe World Australia Pty Ltd (No 2) (1999) 95 FCR 302; [1999] FCA 1161

Australian Medico Legal Group Pty Ltd v Claireleigh Mosman Pty Ltd [2017] NSWCA 218

Australian Securities and Investments Commission v ActiveSuper Pty Ltd (in liq) (2015) 235 FCR 181; [2015] FCA 342

Australian Securities and Investments Commission v Cassimatis (No 8) (2016) 336 ALR 209; [2016] FCA 1023

Australian Securities and Investments Commission v Maxwell (2006) 59 ACSR 373; [2006] NSWSC 1052

Australian Securities and Investments Commission v Rich (2009) 236 FLR 1; 2009 NSWSC1229

Barnes v Addy (1874) LR 9 Ch App 244

Beach Petroleum NL v Johnson (1993) 43 FCR 1

Bell Group Pty Ltd (in liq) v Westpac (No 9) (2008) 39 WAR 1; [2008] WASC 239

BH Australia Constructions Pty Ltd v Kapeller (2019) 100 NSWLR 367; [2019] NSWSC 1086

Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61

Bucknell v Commercial Banking Co of Sydney Ltd (1937) 58 CLR 155; [1937] HCA 35.

Cassegrain v Cassegrain [2016] NSWCA 71

Cassimatis v Australian Securities and Investments Commission [2020] FCAFC 52; (2020) 376 ALR 261

Chidiac v Maatouk [2010] NSWSC 386

Christian Youth Camps Ltd v Cobaw Community Health Service Ltd (2014) 50 VR 256; [2014] VSCA 75

Commonwealth Bank of Australia v Kojic (2016) 249 FCR 421; [2016] FCAFC 186

County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193

Director-General, Department of Education and Training v MT (2007) 67 NSWLR 237; [2006] NSWCA 270

Environment Protection Authority v Wollondilly Abattoirs Pty Limited & Davis [2019] NSWCCA 312

Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95; [2002] HCA 8

Faraday v Rappaport [2007] NSWSC 34

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

Filadelfia Projects Pty Ltd v Entirity Business Services Pty Ltd [2011] NSWSC 116

Fox v Percy (2003) 214 CLR 118; [2003] HCA 22

Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; [2009] NSWCA 407

General Credits Ltd v Wenham (1989) 18 NSWLR 570

Giacci v Giacci Holdings Pty Ltd [2010] WASCA 233

Good Challenger Navegante SA v Metalexportimport SA [2003] EWCA Civ 1668

Grimaldi Chameleon Mining NL (No. 2) (2012) 200 FCR 296; [2012] FCAFC 6

Haller v Ayre [2005] 2 Qd R 410; [2005] QCA 224

Hashman v Australian Medico Legal Group Pty Ltd [2016] NSWSC 1773

Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41; [1984] HCA 64

Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68; [1907] HCA 38

In the matter of Australian International Yacht Club Pty Ltd [2021] NSWSC 586

In the matter of Colorado Products Pty Ltd (in prov liq) (2014) 101 ACSR 233, [2014] NSWSC 789

In the matter of IW4U Pty Limited (in liq) (2021) 150 ACSR 146; [2021] NSWSC 40

In the matter of Sirrah Pty Ltd (in prov liq) [2021] NSWSC 413

Kalls Enterprises Pty Limited v Baloglow (2007) 63 ACSR 557; [2007] NSWCA 191

Kation Pty Ltd v Lamru Pty Ltd [2011] NSWSC 219

Lambeth London Borough Council v Bigden (2001) 33 HLR 43

Lawrence v Ciantar [2020] NSWCA 89

Lennard’s Carrying Company Limited v Asiatic Petroleum Co Ltd [1915] AC 705

Lifeplan Australia Friendly Society Ltd v Ancient Order of Foresters in Victoria Friendly Society Ltd (2017) 250 FCR 1; [2017] FCAFC 74

Lifeplan Australia Friendly Society Ltd v Woff (2016) 259 IR 384, [2016] FCA 248

Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500

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

Nurisvan Investment Ltd v Anyoption Holdings Ltd [2017] VSCA 141

O’Halloran v RT Thomas and Family Pty Ltd (1998) 45 NSWLR 262; [1998] NSWSC 596

Olgilvie v Adams [1981] VR 1041

Papas v Co [2018] NSWSC 1404

Pirt Biotechnologies Pty Limited v Pirtferm Ltd [2001] WASCA 96

Pullen v Gutteridge Haskins & Davey Pty Ltd [1993] 1 VR 27

Re FAL Healthy Beverages Pty Ltd [2017] NSWSC 476

Re Italasia Pty Ltd [2017] NSWSC 811

Re Mudgee Dolomite & Lime Pty Ltd [2020] NSWSC 1510

Segal v Fleming [2002] NSWCA 262

Seoud v Fortythird Garland Pty Ltd (2019) 57 VR 262; [2019] VSC 192

Simmons v NSW Trustee & Guardian [2014] NSWCA 405

Stewart v Spicer Thoroughbreds Pty Ltd [2022] NSWSC 558

Stuart v Hishon [2013] NSWSC 2013

Técnicas Reunidas SA v Andrew [2018] NSWCA 192

The Stage Club Ltd v Miller’s Hotels Pty Ltd (1981) 150 CLR 535; [1981] HCA 71

Toyota Motor Corp Aust Ltd v Ken Morgan Motors Pty Ltd [1994] 2 VR 106

VL Finance Pty Ltd v Legudi [2003] VSC 57

Vrisakis v Australian Securities Commission (1993) 9 WAR 395; 11 ACSR 162

Vroon BV v Foster’s Brewing Group Ltd [1994] 2 VR 32

Woo v Woo [2010] NSWSC 1216

Yorke v Lucas (1985) 158 CLR 661; [1985] HCA 65

Young v Queensland Trustees Ltd (1956) 99 CLR 560; [1956] HCA 51

Category:

Principal judgment

Parties:

OLI 1 Pty Ltd (Plaintiff)
OLG 1 Pty Ltd (First Defendant)
Nicholas James O’Day (Second Defendant)

Representation:

Counsel:
A J Macauley & F G Dilizia (Plaintiff)
N O’Day (Defendants)

Solicitors:
Bridges Lawyers (Plaintiff)

File Number(s):

2020/00141661

Publication restriction:

None

Judgment

Introduction

1. These proceedings relate to the transfer of $1,344,608.18 between OLI 1 Pty Ltd (‘OLI’ or ‘the plaintiff’), now in liquidation, and OLG 1 Pty Ltd (‘OLG’ or ‘the first defendant’) in the period June 2012 to June 2016.

2. The case for the plaintiff is put in various ways but, in substance, its case is that the monies were transferred by the plaintiff to the first defendant, with the authority and approval of the (common) directors of the plaintiff and first defendant, in breach of duties those directors owed OLI; and that, in the case of OLG, it knowingly received money flowing from those breaches such that it too is liable. (The case for the plaintiff is more extensive: this is merely a short summary, for introductory purposes). On the other hand, the defendants dispute their liability to the plaintiff, contending that, in substance, the transfer was pursuant to an agreement, entered into in July 2011, between the plaintiff and first defendant, and thus reflective of the performance of the terms of that agreement by OLG. Accordingly, on the case for the defendants, the receipt of money was in accordance with its legal entitlement to receive it. Further, the defendants argue that, at least in relation to some of the causes of action sued upon by the plaintiff, those causes of action are time-barred – with the consequence that, for those causes of action, only some of the monies claimed are recoverable by the plaintiff (assuming, of course, they are made out).

3. The claim by the plaintiff was originally against three defendants: OLG (as first defendant) as well as the two directors of the plaintiff, Nicholas O’Day (the second defendant) and Jeannene O’Day (the third defendant). Shortly before the commencement of the trial, however, the plaintiff settled its claim against the third defendant, such that the claim proceeded only against the first and second defendants. It is accepted by the parties that the terms of this settlement will need to be brought into account if the plaintiff succeeds in the present action.

4. These reasons deal with the claims that remain.

Summary of issues and their disposition

5. Although I have provided a short statement of the competing cases, a number of issues – with varying degrees of complexity – arise for determination.

6. The parties prepared a Joint Schedule of Issues dated 27 June 2022 (‘JSI’). Allowing for the fact that the plaintiff resolved its claims against the third defendant, the issues are:

1. Whether, as the defendants contend, the monies transferred by the plaintiff to the first defendant were pursuant to the services agreement formed between OLI and OLG in July 2011; and, if so, whether, pursuant to that agreement, OLG has provided services to, and paid for services received by, OLI equal to the sum claimed by the plaintiff ($1,344,608) (JSI at paras 1-2). This is the substantive issue in the case and, putting to one side the limitation defences raised, the sole basis of the defence to the claims by the defendants.

2. Resolution: I have concluded that there was no services agreement, as alleged by the defendants (see [40]-[123], below).

3. Whether, contrary to the above, OLG is indebted to OLI in the sum claimed by the plaintiff ($1,344,608) (JSI at para 3).

4. Resolution: I have concluded that OLG is indebted to OLI in the sum claimed by the plaintiff – namely, $1,344,608. That indebtedness arises because I have held that OLI has succeeded in its debt claim (see [130]-[132], below).

5. Whether Nicholas O’Day, in causing or authorising OLI to advance money to OLG, breached the duties he owed OLI as a director pursuant to ss 180-182 of the Corporations Act 2001 (Cth), and at law and in equity – including the fiduciary duties he owed OLI as a director (JSI at para 4). I have not addressed the position “at law” because ultimately those claims were not pressed by the plaintiff.

6. Resolution: I have concluded that Mr O’Day was in breach of ss 180, 181 and 182 of the Corporations Act (see [161]-[181], below) and in breach of the fiduciary duties he owed OLI as a director (see [182]-[185], below).

7. Whether, assuming the plaintiff establishes breach of one or more of the duties, as identified, OLG is liable to pay equitable compensation to OLI as a knowing recipient within the first limb of Barnes v Addy (1874) LR 9 CH App 240, or to pay compensation pursuant to s 1317H of the Corporations Act (JSI at para 5).

8. Resolution: I have concluded that OLG is liable to pay equitable compensation (see [134]-[152], below) and compensation pursuant to s 1317H of the Corporations Act (see [153]-[159], below). In this last respect, I have held that OLI has succeeded in its claim that OLG was “involved” in breaches of director’s duties, but that claim is partly time-barred: thus, OLI is only entitled to recover $776,346.99 (see [223]-[226], below).

9. Whether Nicholas O’Day, in failing to recall the advance, or to take steps to recover the monies owing by OLG to OLI, breached the duties he owed OLI as a director pursuant to ss 180-182 of the Corporations Act and at law and in equity – including the fiduciary duties he owed OLI as a director (JSI at para 6).

10. Resolution: I have concluded that the substance of Mr O’Day’s conduct relates to the “causing or authorising” breaches, and not arising out of a failure to recall the loans, or otherwise take steps to recover the money (see [173]-[174]), below).

11. Whether any of the claims by OLI against OLG are time-barred (JSI at paras 7 and 8). And, in relation to the claims by OLI that are found to be time-barred, whether there has been confirmation of the cause of action under s 54(1) of the Limitation Act 1969 (NSW) (JSI at para 8).

12. Resolution: I have concluded that the claim in debt by OLI against OLG was confirmed, by operation of s 54 of the Limitation Act, such that that claim is not time-barred under s 14(1)(a) of the Limitation Act (see [186]-[206], below).

13. Whether any of the claims against OLG and Mr O’Day, for breach of duties under the Corporations Act, are partly time-barred (JSI at para 9).

14. Resolution: I have concluded that each of the claims for compensation under s 1317H of the Corporations Act are partly time-barred (see [215] - [217] below).

15. The ‘appropriate quantum and calculation of judgment sums’ (JSI at para 12).

16. Resolution: I have concluded that OLI is entitled to judgment against OLG in the amount of $1,344,608 for its claims in debt and for equitable compensation, and judgment against OLG in the amount of $776,346.99 for its claim that OLG was “involved” in breaches of ss 181 and 182 of the Corporations Act (see [218]-[226], below). In relation to Mr O’Day, I have concluded that OLI is entitled to judgment against him in the amount of $1,344,608 for its claim for breach of fiduciary duty, and judgment against Mr O’Day in the amount of $776,346.99 for breach of ss 180-182 of the Corporations Act (see [227]-[229]), below).

7. For completeness, in relation to the JSI, it should be noted that: (a) paragraph 10 of the JSI (which concerned an allegation that any claim in equity for breach of duty by Nicholas O’Day is ‘wholly or partly time-barred under the Doctrine of Laches’) was abandoned on the second day of the hearing; in fact no limitation defence was relied upon by the defendants to any claim for equitable compensation; and, (b) paragraph 11 of the JSI (which concerned whether, if liability arose in the third defendant, relief should be granted under s 1318 of the Corporations Act) does not arise for consideration in light of the settlement between the plaintiff and the third defendant.

Background

8. I will begin with some background, including explaining the parties, the nature of their business and the transfer of monies. These matters are largely uncontroversial, and what follows reflects my findings on them.

The parties

9. On 23 September 2009, the plaintiff was registered. It was then named Lyon Infrastructure Pty Limited. On 3 August 2016, its name changed to OLI 1 Pty Ltd. On 30 September 2016, the plaintiff was wound up by order of the Federal Court, and a liquidator appointed.

10. When OLI was registered, Nicholas O’Day and Jeannene O’Day were its directors. According to ASIC records, Jeannene O’Day ceased being a director of the plaintiff on 1 September 2015. Despite this, I am satisfied that she most likely continued in that role until at least mid-2016. Nothing directly relevant to the primary issues that I have to determine turns on the precise date when Jeannene O’Day ceased being a director of OLI. The plaintiff has, however, argued that the circumstances surrounding her removal reflect adversely on the credit of Nicholas O’Day. (I address Mr O’Day’s credit later in these reasons – and, as part of that assessment, this issue).

11. On 23 January 2003, the first defendant was registered. It was then named Lyon Group Pty Ltd. On 3 August 2016, its name changed to OLG 1 Pty Limited.

12. When OLG was registered, Nicholas O’Day and Jeannene O’Day were its directors. According to ASIC records, Jeannene O’Day ceased being a director of OLG on 1 September 2015. Despite this, I am satisfied that she most likely continued in that role until at least mid-2016. Again, nothing turns on the precise date when Jeannene O’Day ceased being a director of OLG – although the plaintiff makes the same “credit” point in connection with her removal that I referred to in [10], above.

The nature of OLI and OLG’s shareholding

13. Lyon Energy Pty Ltd was first registered on 15 January 2003. On 3 August 2016, it changed its name to OLE 1 Pty Ltd (‘OLE’). Nicholas O’Day and Jeannene O’Day were its directors.

14. OLE has at all times been the sole shareholder of OLI and OLG. It was, as Mr O’Day described in his evidence, the sole and common shareholder of each. Nevertheless, although OLE held the share issued in OLG, it held it in its capacity as trustee of the Lyon Trust. Mr and Mrs O’Day are the only beneficiaries of that trust.

The nature of the business of OLI and OLG

15. Mr O’Day has primary qualifications in law and commerce: he has a commerce degree (having graduated in 1983) and a law degree (having graduated in 1987). He practised initially as an articled clerk, and thereafter as a solicitor, for approximately eight years. He was successively employed by two large legal firms in that period, and practised in the areas of banking and finance and mergers and acquisitions.

16. The evidence did not cover what Mr O’Day did between 1995 and 2003. From that time, however, Mr O’Day performed corporate advisory work, next described, through various corporate structures that were incorporated by him. As Mr O’Day explained, OLI and OLG were incorporated in order to provide advisory services to corporations in the energy and infrastructure sectors, in the areas of mergers and acquisitions, capital raising and risk management in the Australian and Japanese energy and infrastructure markets.

17. OLG provided these advisory services – performed by Mr O’Day – from around 2003 until 2004. At that time Mr O’Day ceased providing these services through OLG: he commenced working full-time for one of OLG’s clients, which continued until late 2009. At that time, Mr O’Day recommenced providing infrastructure advisory services through OLG.

18. In the period when Mr O’Day worked full-time for one of OLG’s clients, OLG was not inactive. Rather, OLG was used by Mrs O’Day for her business: an online fashion and lifestyle business, and an investor relations business.

19. As noted above, it was around this time that OLI was incorporated and, following its incorporation, it too commenced providing infrastructure advisory services.

20. When Mr O’Day recommenced working through OLG in 2009, OLG entered into contracts with third parties for the purposes of conducting its business. These contracts included entering into an office lease, a utilities contract, and contracts for administrative staff.

21. In 2011, OLG’s advisory business was adversely impacted by the economic slowdown in Japan that followed the incident at the Fukushima nuclear reactor. After this, in around 2012, Mr O’Day began providing infrastructure advisory services “mainly” through OLI. According to Mr O’Day, the reason for this was to separate the services he provided from the fashion and lifestyle business conducted by Mrs O’Day. (Quite why this did not occur in 2009, when Mr O’Day recommenced doing advisory work and when OLI was registered, was not explored; hence it will be put to one side). A consequence of Mr O’Day providing the infrastructure advisory services through OLI, rather than OLG, meant that OLG’s income correspondingly declined.

15. There is no evidence, nor any suggestion, that any person other than Mr O’Day provided the infrastructure advisory services on behalf of OLG or OLI – although, on occasion, according to Mr O’Day, other advisors were called in to assist.

16. I pause here to note that it is around this time that the services agreement is alleged to have been entered into: it is said by the defendants to have been formed in July 2011. The existence of that agreement – and, if it exists, its terms – is contested by the plaintiff and dealt with as a separate issue: see [40]ff, below. It suffices to presently note that, on the defendants’ case, this agreement contained, relevantly two obligations upon OLG: first, to provide investment advisory services to OLI; and, secondly, (in short) to pay for services rendered to OLI by third parties. In return for the performance of these obligations, money was transferred by OLI to OLG.

Mr O’Day’s role in OLG

24. There does not appear to be any significant issue about Mr O’Day’s role in OLG. He was, of course, a director of it, and the infrastructure advisory work that OLG undertook was “personally performed” by him in his capacity as a director of it. The purpose of OLG’s incorporation was to provide these such services and, as I have earlier noted, the only person that provided them was Mr O’Day: see [22], above.

25. Although Mrs O’Day was a director of OLG, and a defendant to these proceedings until shortly prior to trial, her involvement in the business of OLG was not significantly explored during the hearing – either by evidence or submissions. I do not accept that she had any significant role in the day-to-day running of OLG other than in the confined way that I have earlier described – namely, Mrs O’Day conducted discrete parts of her own business (the fashion and lifestyle business) under the umbrella of OLG. I find that her involvement in OLG was minimal. Mr O’Day did not give any evidence, or make any submission, seeking to put a different complexion on that issue. I also find that was the position in relation to OLI.

26. Mr O’Day was the person who undertook all key decisions relating to OLG and was centrally concerned, and responsible for, its operations; in my view, he was its ‘directing mind and will’. I make those same findings with respect to Mr O’Day and OLI. Furthermore, bearing in mind Mr O’Day’s skill set and the nature of the services provided by OLI and OLG (in substance, the provision of infrastructure advisory services by Mr O’Day), I also find that each company was, in substance, his alter ego.

The transfer of the monies claimed by the plaintiff

27. In paragraph 14 of the statement of claim filed 12 May 2020, the plaintiff alleges that, between 30 June 2012 and 30 June 2016, the plaintiff paid the first defendant, in total, the sum of $1,344,608.18 (this being the amount of the plaintiff’s claim), and that those amounts were acknowledged in the financial statements of the first defendant for the years 2013, 2014, 2015 and 2016. The defendants admit, in their defence filed 15 March 2021, the matters so alleged.

28. In light of the admissions, there is no issue about the fact that the monies were advanced, nor the total of the advances: I find that the amount of $1,344,608.18 was transferred by the plaintiff to the first defendant, and that the fact, and quantum, of monies transferred were acknowledged in the financial statements of the first defendant for the years 2013, 2014, 2015 and 2016. Furthermore, I find that the transfers occurred after 30 June 2012.

29. In relation to this last finding, I should add that I was not invited by any party to make a more specific finding about precisely when the first transfer was made in that time period. I have not done so for that reason – and, so far as the limitation defences are concerned, nothing turns on the precise date of the initial transfer of money from OLI to OLG.

The treatment of the transfers in the financial records of OLI and OLG

30. Notwithstanding the admission made in the defence about the fact, and quantum, of monies transferred by OLI to OLG (and my findings on those matters, referred to above), it is necessary to say something about the existence of the sum claimed by OLI, and how it was treated in the financial records of OLI and OLG.

31. In relation to OLI, the transfers were treated as a loan from OLI to OLG (usually referred to by its then name, Lyon Group):

1. The general ledger of OLI for the period 1 July 2012 to 30 September 2016 records: ‘Loan - Lyon Group’, with the ‘net movement’ being $1,344,608.18. This is the amount outstanding as at 30 June 2016. This ledger was contained on OLI’s Xero accounting program.

2. The document titled: ‘Loan – Lyon Group Summary Lyon Infrastructure Pty Ltd’ from 1 June 2013 to 30 September 2016 records the sum in the entries for June, July, August and September 2016 as $1,344,608.18. This document was also contained in OLI’s Xero accounting program.

3. The document titled ‘Account Transactions Lyon Infrastructure Pty Ltd’ for the period 1 July 2012 to 30 September 2016 has a specific section described as: ‘Loan – Lyon Group’ which describes at the end of that section: ‘Total Loan – Lyon Group’ and a closing balance of $1,344,608.18.

4. The ‘Lyon Infrastructure Pty Ltd – Balance Sheet’ as at 30 September 2016, albeit in draft, records as ‘Current Assets’: ‘Loan – Lyon Group’ of $1,344,608.18.

5. The OLI balance sheet from OLI’s Xero accounting system (as at 30 June 2017) records: ‘Loan – Lyon Group’ as $1,344,608.18 as at 30 June 2016 and 30 June 2017.

32. In relation to OLG, the financial report for the year ended 30 June 2016 contains the balance sheet as at that date. The balance sheet records, under ‘Non-Current Liabilities’ an entry for ‘Trade and Other Payables’ and the amount of $1,344,608. Note 5 (‘Trade and Other Payables’) to that entry records this debt as: ‘Loans – Related Parties’ Lyon Infrastructure Pty Limited, with the balance being $1,344,608 (in 2016) and $1,260,875 (in 2015).

33. I will later address, when dealing with the defendants’ contention that there existed a services agreement between OLI and OLG, the significance of the way these records have characterised the transfers of money, but presently it is sufficient to note that the financial records of OLI and OLG treat the transaction as a loan from OLI to OLG, and I so find.

The progressive advances of money from OLI to OLG

34. The financial records for both OLI and OLG record the transfers of money, and that the total of them increased over the period up to 2016.

35. The amounts are recorded in the financial statements of OLG as follows:

1. 2013: $489,258;

2. 2014: $831,909;

3. 2015: $1,260,875; and

4. 2016: $1,344,608.

36. In relation to these entries, they are recorded in the notes to the financial statements for those years as: ‘Loans - Related Parties’. (The significance of that characterisation – and the finding I made at [33], above, namely that the transfers of money were by way of loan – is that it undercuts the defendants’ contention that there was a separate agreement that entitled OLG to be, inter alia, remunerated by OLI in some way).

37. These amounts are also reflected in the financial records of OLI, albeit that there are some minor, and in my view insignificant, differences in the amounts in those records. For example, the OLI balance sheet from OLI’s Xero accounting system (as at 30 June 2017) records: ‘Loan – Lyon Group’ as $1,344,608.18 (30 June 2016 and 30 June 2017); $1,260,875.19 (30 June 2015); $760,888.20 (30 June 2014); and $489,321 (30 June 2013). These amounts are mirrored in the document titled: ‘Loan – Lyon Group Summary Lyon Infrastructure Pty Ltd’ from 1 June 2013 to 30 September 2016, to which reference has been made (see [31(2)], above).

38. It is evident from these records – in particular, the general ledger of OLI for the period 1 July 2012 to 30 September 2016 – that the transaction was not a single loan but a series of them: money was transferred by OLI to OLG over time and, occasionally, some repayments were made by OLG.

39. I will next address the substantive issue in the defendants’ case – namely, the existence of the services agreement between OLI and OLG.

The services agreement between OLI and OLG

Introduction: the 2011 services agreement

40. The case for the defendants is that the money transferred from OLI to OLG was done pursuant to an agreement between them made in July 2011, such that its receipt was in accordance with its legal entitlement to receive that money, and that it did perform what it was obliged to under that agreement – namely, provide (in short) investment advisory services to OLI and pay for services received by OLI.

41. In the JSI at para 1, the services agreement was framed in this way: “… An un-written agreement under which OLG was to use those monies to provide services to, and pay for services received by, OLI, with such expenditure and services to reduce the balance of monies owed by OLG to OLI”. The defence provides some further particulars of the alleged agreement. There are two relevant matters to note in this respect. First, OLG was to “provide services to [OLI] at least to the value of the payments”. Secondly, the services provided by OLG to OLI, and the payments made by OLG, were to cover five kinds of expenses: the rent of premises used by OLI; the accounting services received by OLI from RSM; the payment “for the staff who worked for” OLI; the payment of “other office and general administrative expenses, including work-related travel expenses” incurred by OLI; and the payment for consulting services provided by OLG to OLI.

42. The defendants’ explanation for this arrangement – its alleged rationale – involves a number of steps. First, OLI was incorporated in 2009 to provide infrastructure advisory services. Secondly, at that time, OLG had committed to a number of contracts with third parties – including entering into an office lease, and contracts for administrative staff. Thirdly, OLG’s advisory business suffered a downturn following the incident at the Fukushima nuclear reactor in 2011. Fourthly, Mr O’Day started providing the infrastructure advisory services through OLI – essentially to separate the provision of those services and the business being operated by Mrs O’Day through OLG – in around 2012, with the consequence that OLG’s income declined. Thus, if the income was to be derived by OLI then, on the defendants’ case, OLI, rather than OLG, should meet the expenses that permitted OLI to do so – albeit that OLG had the legal obligation to meet those outgoings.

43. Before moving to address the defendants’ case on the 2011 services agreement, a number of matters should be noted:

1. First, it was said, in written closing submissions filed by the defendants, that the services agreement had been formed at the then offices of OLI in Macquarie Street, Sydney, involving Mr O’Day and Mrs O’Day and the ‘input’ of Peter Hickson from RSM accountants (‘RSM’). However, neither Mrs O’Day nor Mr Hickson were called to give evidence. In any event, the evidence of Mr O’Day did not establish that either were present when the services agreement was alleged to have been formed. Further, although Mr O’Day deposed to receiving professional advice from RSM “about the arrangement”, the evidence is otherwise silent on the detail of that advice.

2. Secondly, the case for the defendants is that this agreement was ‘oral’. It is not necessary to dwell on whether that is the correct way to describe the formation of an agreement which seems to be, at least on the defendants’ case, a unilateral decision of a director of a company (Mr O’Day) to adopt a particular course. Its present importance lies in the fact that, because it is accepted (as part of the defendants’ case) that the agreement was not a written one, different principles of law apply to the determination of whether it was formed etc. (These are referred to in the next section of this judgment: see [47]ff).

3. Thirdly, there is, in fact, no direct evidence of the formation of the 2011 services agreement at all.

44. The difficulties in establishing that an agreement existed (not to mention the terms of any agreement found to exist), in those circumstances, many years after the event, are obvious. That said, the absence of evidence of that kind – that is oral or documentary evidence specifically directed to the existence and terms of the services agreement – is not, however, fatal to the defendants’ case on this issue: it remains to consider whether the evidence establishes the existence of this agreement, and its terms.

45. For the reasons that follow, I am entirely unpersuaded that the evidence supports a finding that the services agreement was formed as alleged – even if one only considers the matters that were argued by the defendants to support its existence. Once regard is had to a wider body of material – the contemporaneous material and other evidence – in my view (as I later explain) that evidence is entirely destructive of the existence of an agreement of the kind alleged by the defendants.

46. My analysis of this issue is divided into three parts: (a) an explanation of the relevant legal principles that apply to inferring the existence of a contract; (b) my assessment of the defendants’ case, and the evidence and arguments raised to support it; and, (c) my assessment of the entire body of other evidence relevant to the question about whether the services agreement was formed and, if so, its terms.

The principles: inferring the existence of the agreement

47. The case for the defendants is that the services agreement was ‘oral’ yet despite framing its case in this way, it adduced no evidence directed to proving that that was so. Against that background, the question that remains is whether an agreement of the kind alleged can be inferred. For present purposes, where no formal contract exists (and absent direct evidence about what was agreed in July 2011), that enquiry can only be undertaken by examining the surrounding circumstances, including both the pre-contractual and subsequent conduct of OLI and OLG – and of Mr O’Day (who was a director of both).

48. The principles, in the situation that I have described, are not in doubt, and may be summarised as follows.

49. First, the legal onus of establishing the existence of the agreement, and the intention to create legal relations, remains upon the party asserting it – here, the defendants: Toyota Motor Corp Aust Ltd v Ken Morgan Motors Pty Ltd [1994] 2 VR 106 at 177 (Tadgell J); Pirt Biotechnologies Pty Limited v Pirtferm Ltd [2001] WASCA 96 at [21] (Murray J, Ipp and Owen JJ agreeing); Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95; [2002] HCA 8 at [26] (Gaudron, McHugh, Hayne and Callinan JJ).

50. Secondly, the parties’ conduct can be a basis for inferring the existence of a contract: Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68 at 78; [1907] HCA 38 (Griffiths CJ); confirmed by Heydon JA in Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61 at [25]. A contract can be inferred notwithstanding the absence of clear offer and acceptance, but what must be established is “a manifestation of mutual assent…implied from the circumstances”: Vroon BV v Foster’s Brewing Group Ltd [1994] 2 VR 32 at 81 (Ormiston J); Técnicas Reunidas SA v Andrew [2018] NSWCA 192 at [50] (Leeming JA); Murdoch v Mudgee Dolomite & Lime Pty Ltd (in liq) (2022) 398 ALR 658; [2022] NSWCA 12 at [166] (Leeming JA).

51. Thirdly, post-contractual conduct can also be a basis for inferring not only the existence of a contract, but what the terms actually were: County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193 at [7]-[27] and [45] (Spigelman CJ); Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; [2009] NSWCA 407 at [325] (Campbell JA); Lawrence v Ciantar [2020] NSWCA 89 at [114] (Bathurst CJ, Meagher and Gleeson JJA agreeing).

52. Fourthly, the parties’ conduct can also be a basis for inferring the identities to that agreement: Filadelfia Projects Pty Ltd v Entirity Business Services Pty Ltd [2011] NSWSC 116 at [38] (Ball J); Nurisvan Investment Ltd v Anyoption Holdings Ltd [2017] VSCA 141 at [84] (Osborn, Santamaria and Kaye JJA); BH Australia Constructions Pty Ltd v Kapeller (2019) 100 NSWLR 367; [2019] NSWSC 1086 at [80]-[81] (Leeming JA).

53. These principles acknowledge that finding a contract in these circumstances will be rare: they give “limited recognition to the possibility of finding that contracts exist even though it is not easy to locate an offer or acceptance”: Brambles Holdings Ltd v Bathurst City Council at [74] (Heydon JA).

The existence of the services agreement: the defendants’ argument

54. For the purposes of the defendants’ argument, I will presently assume, favourable to the defendants, that the evidence is capable of supporting an inference that: (a) the parties to the agreement were OLI and OLG; (b) there has been a transfer of money (in line with the admission in the defence and the findings that I have made based upon that admission: see [27]-[28], above) from OLI to OLG; and, (c) that transfer represents a term of the agreement imposing an obligation upon OLI. The question that remains – again, I emphasise, considering only the evidence most favourable to the defendants on its own – then is: does the evidence support an inference that the other terms of the services agreement – that is, those terms requiring performance by OLG – exist? In my view, it does not.

55. During the course of final submissions, Mr O’Day drew attention to a number of tax invoices which, so he argued, were said to provide support for the existence of the services agreement. (It is arguable – although this was not argued in these precise terms – that they were possible evidence of a term of the services agreement). I do not agree.

56. These tax invoices had been sent by Mr O’Day to Mr Goyal on 21 October 2016, in response to Mr Goyal’s request, on 5 October 2016, that, in effect, Mr O’Day produce, on behalf of OLI, copies of the financial records of OLI. In all, there were 11 invoices sent to Mr Goyal by Mr O’Day at that time (during submissions, the defendants only made reference to a limited number of them) and they cover the period 30 August 2011 to 24 June 2012. They are:

1. 30 August 2011: this was a tax invoice issued by ‘Lyon Group’ to ‘Aus China Energy Pty Ltd’. The ABN on that invoice (41103658) is similar to OLG’s ABN (41103489658). The bank account details, provided in order to receive payment, were OLI’s.

2. 15 September 2011: this was a tax invoice issued by ‘Lyon Group’ to ‘Capella Capital Pty Ltd’. The ABN on that invoice was OLI’s, as were the bank account details provided in order to receive payment.

3. 26 September 2011: this was a tax invoice issued by ‘Lyon Group’ to ‘Aus China Energy Pty Ltd’. The ABN on that invoice was OLI’s, as were the bank account details provided in order to receive payment.

4. 12 October 2011: this was a tax invoice issued by ‘Lyon Group’ to ‘Aus China Energy Pty Ltd’. The ABN on that invoice was OLI’s, as were the bank account details provided in order to receive payment.

5. 25 October 2011: this was a tax invoice issued by ‘Lyon Group’ to ‘Aus China Energy Pty Ltd’. The ABN on that invoice was OLI’s, as were the bank account details provided in order to receive payment.

6. 8 November 2011: this was a tax invoice issued by ‘Lyon Group’ to ‘Aus China Energy Pty Ltd’. The ABN on that invoice was OLI’s, as were the bank account details provided in order to receive payment.

7. 5 December 2011: this was a tax invoice issued by ‘Lyon Group’ to ‘Aus China Energy Pty Ltd’. The ABN on that invoice was OLI’s, as were the bank account details provided in order to receive payment.

8. 8 December 2011: this was a tax invoice issued by ‘Lyon Group’ to ‘eco-Kinetics’. The ABN on that invoice was OLI’s, as were the bank account details provided in order to receive payment.

1. 8 December 2011: this was a tax invoice issued by ‘Lyon Group’ to ‘eco-Kinetics’. The ABN on that invoice was OLI’s, as were the bank account details provided in order to receive payment.

2. 5 June 2012: this was a tax invoice issued by ‘Lyon Group’ to ‘CBD Energy Ltd’. The ABN on that invoice was OLI’s, as were the bank account details provided in order to receive payment.

3. 24 June 2012: this was a tax invoice issued by ‘Lyon Group’ to ‘CBD Energy Ltd’. The ABN on that invoice was OLI’s, as were the bank account details provided in order to receive payment.

57. Based upon these documents, the work being performed – the infrastructure advisory services – was by OLI, and not OLG. That is, the evidence shows OLI undertaking the work, and rendering invoices for them doing so. Whilst I recognise, of course, that the underlying arrangements might possibly have been different (viz., that OLG was doing the work), and therefore consistent with what the defendants allege, there are no other documents which put a different complexion on the invoices to which reference has been made. (It should be noted that no attempt was made by Mr O’Day – either in his affidavit or in oral evidence – to advance any explanation about the invoices referred to in [56], above, and how they were supportive of the arrangement).

58. Thus, I do not accept, as was argued, that these invoices show OLI receiving the income for work in fact performed by OLG: to be clear, I do not accept, as was argued, that these invoices establish that OLI derived income as a consequence of work performed by OLG (and, therefore, consistent with the existence, and a term, of the services agreement). If that were so, then one would expect to see, at a minimum, at least a document that might tend to support that arrangement. But there are none. For example, there are no tax invoices from OLG to OLI recording the work that it allegedly performed in any of the above transactions. On the face of it, therefore, these documents do not of themselves support the existence of the services agreement, or any particular term of it, as alleged by the defendants: they simply record OLI rendering invoices to third parties for work performed.

59. To sum up: I do not accept that, without more, any of the terms of the services agreement (particularly as they relate to the obligations placed upon OLG) can be inferred from the content of the tax invoices, or by reason of their creation or by a combination of these matters.

60. There were in evidence, I should mention, a number of other tax invoices that were similar to the ones to which reference has just been made – although I was not taken to these documents during oral, or written, submissions by either party. Those invoices cover the period 3 July 2015 to 2 February 2016. One of those invoices – the invoice dated 15 July 2015 – was in identical form to the invoices referred to in [55], above.

61. However, in relation to the other invoices, two matters should be noted about them. First, the balance of them had one important difference: each of them specifically identified that the invoice was issued by Lyon Infrastructure Pty Ltd – that is, they were specifically issued by OLI. Secondly, some of the invoices rendered sought payment for what was described as ‘out-of-pocket expenses’: see the invoices, by way of example, dated 6 August 2015 addressed to QIC Private Capital Pty Ltd and 21 September 2015 also addressed to QIC Private Capital Pty Ltd. In both instances OLI was claiming recoupment for its expenses from a third party and not from OLG – a fact that, in my view, rests uneasily with the defendants’ contention that the services agreement contained a term that OLG would reimburse OLI for expenses: see [41], above. I do not need to pursue this issue further other than to note that there was not, in evidence, any corresponding tax invoice created by OLG to OLI recording that it had incurred these expenses.

62. As with the other tax invoices, to which reference has just been made (see [56]ff, above), I do not consider that any of the terms of the services agreement (again, particularly as they relate to the obligations placed upon OLG) can be inferred from the content of the tax invoices, or by reason of their creation or by a combination of these matters.

63. In my view, even examining the documentary and other evidence identified by the defendant – in isolation – I do not consider that that evidence supports an inference that OLI and OLG had agreed to enter into the services agreement in July 2011. Furthermore, in my view, once the assessment of the ‘arrangement’ is undertaken with all of the evidence, the position is clear: the transfers between OLI and OLG were a loan and treated as such by both of them. I now turn to explain why I have made that last finding.

The other evidence: there was no services agreement

64. Put simply, I do not accept that the services agreement existed for the following reasons:

1. First, although the agreement is alleged to be ‘oral’ (this being the characterisation given to it by the defendants), there is no contemporaneous evidence supportive of the existence of the agreement.

2. Secondly, OLI and OLG treated the transfer of monies from OLI to OLG as a loan.

3. Thirdly, the conduct of Mr O’Day in the period from July 2011 is inconsistent with the existence of such agreement.

4. Fourthly, contrary to what the defendants have argued – viz., that the documentary evidence (being the financial records of OLI and OLG) is inaccurate to a significant degree in that it fails to correctly record the payments that support the existence, and some of the terms, of the agreement – I am satisfied that the records do accurately record the financial affairs of OLI and OLG.

5. Finally, I do not accept Mr O’Day’s evidence unless it amounts to an admission against interest or I have made a specific finding that I accept what he has said or what he has done.

65. I expand upon these reasons in what follows.

The absence of contemporaneous or other evidence

66. A striking feature of the case for the defendants is the complete absence of any evidence supportive of the existence of an agreement of the kind alleged. To be clear, even if I were to accept (which I do not) that there was an ‘oral’ agreement of the kind alleged, at no point from its alleged formation in July 2011 were the terms of that agreement ever reduced to writing or its existence even referred to. Whilst that fact does not inevitably mean that an agreement does not – or could not – exist, it does, in my view, tend to stand against the probabilities as a matter of ordinary experience and logic: Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 at [31] (Gleeson CJ, Gummow and Kirby JJ).

67. So too do other matters, which should here be noted. First, as mentioned below, and inconsistent with this case, an agreement of an entirely different kind had been propounded by the defendants to have been in existence between OLI and OLG rather than the 2011 services agreement – namely, the one that was referred to in Mr O’Day’s affidavit, sworn in support of OLG’s application to set aside the statutory demand served upon it, dated 18 August 2017(see [99]ff, below). Secondly, the services agreement itself was only propounded by the defendants at some point after this: the evidence did not establish the date that the services agreement was first mentioned, but it is clearly at some point after 18 August 2017, and, I infer, was most likely connected to the present proceedings. I consider the existence of the services agreement to be a recent invention, and a reconstruction by Mr O’Day in order to avoid exposing OLG and himself to any liability to repay it.

OLI and OLG treated the transfer as a loan

68. I have earlier made reference to the way in which the monies transferred by OLI to OLG were treated in the financial records of each: see [30]-[33], above. There I found that, in relation to OLI, the transfers were treated as a loan; and, in relation to OLG they had also been described in that way.

69. In my view the characterisation of the transaction in the financial records accurately reflects the nature of the arrangement. Further, and independently of my finding, the characterisation in the financial records is inconsistent with the existence of the services agreement.

The conduct and statements of Mr O’Day following the appointment of the liquidator to OLI

70. There are, as the plaintiff argued, a number of instances where the conduct of, or statements by, Mr O’Day were inconsistent with the existence of the services agreement. It is important to bear in mind that Mr O’Day, in the review of his conduct that follows, was acting in different capacities: in some situations he was acting as the director and secretary of OLI; in other situations he was acting as the director and secretary of OLG. To the extent that he was acting in his capacity as director and secretary of OLI, then any statement or conduct made by him is simply evidence of that fact; to the extent that he was acting in his capacity as director and secretary of OLG, then any statement or conduct is similarly evidence of that fact – albeit that particular evidence may constitute an admission against interest.

71. On 30 September 2016, the Federal Court ordered that OLI be wound up, and a liquidator was appointed. At that time, David Winterbottom and Rahul Goyal were appointed liquidators. On 31 August 2017, Mr Winterbottom was replaced as a liquidator by Jennifer Nettleton.

72. The winding up occurred based on a creditor’s petition, dated 22 June 2016, from the Deputy Commissioner of Taxation.

73. Following the Federal Court orders, on 4 October 2016 arrangements were made, by email, for Mr O’Day to meet with the liquidators at their offices on 6 October 2016. Further, by way of letter sent to Mr O’Day dated 5 October 2016, the liquidators, in effect, requested that he produce the financial records of OLI and complete a Report as to Affairs (‘the RATA’) and a ‘Questionnaire for Directors and Officers’ (‘the questionnaire’).

74. On 6 October 2016, Mr O’Day met with Rahul Goyal at Mr Goyal’s office. During the course of that meeting, Mr Goyal’s evidence was that, relevantly, he had the following discussion with Mr O’Day:

15.   On 6 October 2016, I had a meeting with Nicholas O’Day at the offices of KordaMentha. During that meeting words were said to the following effect:

Me:   “You will need to complete the Report as to the Affairs and provide me with all of the books and records of the Company. Does the company have any debtors?”

Mr O’Day:    “There is an intercompany loan and a small amount owed by the directors”.

Me:   “Can you give me more details of the intercompany loan?”

Mr O’Day: “A related entity called OLG Pty Ltd, formerly Lyon Group Pty Ltd, owes the company about $1.3 million. I will include it in my Report as to Affairs.”

75. Mr Goyal’s evidence was admitted, subject to some objections (which, to be clear, did not cover this paragraph), and he was not required for cross-examination. I accept this evidence and, in particular, the statements made by Mr O’Day: that the monies transferred from OLI to OLG were a loan and that the amount of that loan was around $1.3 million. Those admissions, I add, are entirely consistent with the treatment of the transfer in the records of OLI (see [31], above) and OLG (see [32], above). Further, even if it be accepted (for the moment) that the defendants argue that the “loan” was to be repaid through services, and OLG incurring expenses on behalf of OLI, this conversation is also inconsistent with that contention: it is evidence that no services have been provided by OLG nor any expenses incurred that entitled OLG to claim recoupment from OLI.

76. Mr O’Day did not, in his affidavit sworn 29 July 2021, contest the occurrence of this conversation nor its terms, as deposed to by Mr Goyal. Mr O’Day, in his affidavit, did seek to explain why he made a number of other “statements” about the “payments” that OLI made to OLG – that evidence is dealt with below – but it did not cover or seek to deal with the conversation that occurred on 6 October 2016. To the extent his evidence – either in his affidavit or whilst being cross-examined – might be taken to do so, I do not accept it.

77. By letter dated 14 October 2016, sent by email, Mr O’Day returned the questionnaire to Rahul Goyal. In that letter, Mr O’Day, pending “finalisation of the accounts as at 30 September 2016”, submitted a proposal to settle “all claims and finalise the liquidation”. The proposal (relevantly) included repayment of the principal amount of the debt owed to the Deputy Commissioner of Taxation, as well as the following (RG-1 pp 87-89):

“As a director of OLG 1 Pty Limited, I will procure that OLG 1 Pty Ltd repays the outstanding debt owed to the Company within 6 months of the date of the winding up order.”

78. The significance of this statement, in the context of the issues that arise in the present proceedings, is that it is entirely inconsistent with the existence of the 2011 services agreement. Mr O’Day, when cross-examined about this, sought to qualify what was there written – suggesting, in effect that “they don’t necessarily mean what they say on their face” (T 89.30) and somehow he did not know about the debt or its extent. I do not accept that evidence: it is entirely implausible that a person in Mr O’Day’s position would not be aware of the true position but even if, somehow, that were so, it is equally implausible that they would simply offer to repay $1.3 million without knowing whether there was an obligation that required this step to be taken.

79. In my view, the statement is clear and amounts to an acceptance as to the indebtedness (a matter that was ultimately not disputed by Mr O’Day when cross-examined). The statement also, in effect, undercuts the suggestion that there was a services agreement. In my view it is inconceivable that, if the services agreement in fact existed, it would not have been brought to the attention of the liquidator to contest the indebtedness of OLG to OLI. The fact it was not, in my view, tells against its existence.

80. It is also important to make reference to some matters contained within the questionnaire that Mr O’Day returned to Mr Goyal on 14 October 2016, as follows:

“Q2   What are the company’s present assets and liabilities?

A   The company has cash at bank of $156.81 and an intercompany loan. Liability to the D.C.T.

…

Q26   What steps did you take to ensure that the books and records were properly kept?

A   Regular updating with support of RSM.

…

Q34   How often were balance sheets and profit and loss accounts prepared for the company?

A   At least annually.

Q35   Who compiled them?

A   RSM.

Q36   Do you have copies?

A   Yes.

Q37   What did they show to be the profit and loss?

A   Please see accounts.

Q38:   What steps did you take to satisfy yourself that the balance sheets and profit and loss accounts were correct?

A   Interactive process with RSM through the preparation.”

81. This questionnaire was completed by Mr O’Day in his capacity as director and secretary of OLI. The answer to question 2 again supports the characterisation of the transfer of money from OLI to OLG as a loan and an “asset” of OLI – a characterisation that was agreed to by Mr O’Day when cross-examined. The other answers provided by Mr O’Day also establish, and I find, that the financial records of OLI were prepared by RSM, with Mr O’Day’s ongoing assistance, and that those records kept an accurate record of the financial position of OLI.

82. On 21 October 2016, Mr O’Day sent by email to Mr Goyal the following records relating to OLI: the financial statements (for the period 30 June 2011 to 30 June 2016 – albeit that the 2016 statements were noted to be draft ones); the income tax returns (for the period 30 June 2010 to 30 June 2016 – albeit that the 2016 return was noted to be a draft one) and company minutes (for the period 30 June 2011 to 30 June 2015); Company Division 7A minutes (for the period 30 June 2013 and 30 June 2014); business activity statements (covering the period October 2009 to June 2016); and what was described as the “Balance Sheet & Profit and Loss” for the period 1 July 2016 to 30 September 2016 (albeit a draft).

83. In the covering email, Mr O’Day advised that other “than the 2016 documents marked draft, these are true copies held by RSM of the original signed documents”.

84. Later, by a separate email that Mr O’Day sent to Mr Goyal on 21 October 2016, Mr O’Day provided additional financial records – being bank statements and some invoices. There were 11 invoices attached and they cover the period 30 August 2011 to 24 June 2012.

85. On around 28 October 2016, Mr O’Day returned the RATA to Mr Goyal. Before setting out some of the responses provided by Mr O’Day, it is important to note that when this was provided to Mr O’Day, by way of letter from Mr Goyal dated 5 October 2016, a considerable amount of information was also provided to Mr O’Day about how to complete that form: for example, provided to Mr O’Day was a document titled: “How to complete Form 507 – Report as to Affairs”. Furthermore, as ultimately conceded by Mr O’Day, in order to provide the information within this form, Mr O’Day looked at the books and the records of the companies in his possession to determine the indebtedness of OLG to OLI. Both these matters objectively support the accuracy of the information contained in that form, in my view.

86. The RATA was signed by Mr O’Day and dated 28 October 2016 and it was verified by him as being “true to the best of [his] knowledge and belief”. It was prepared and completed by him in his capacity as the director and secretary of OLI.

87. Section 2 of that form relates to “Assets and liabilities” of OLI. Section 2.2 of that RATA identified “Total Assets” as: $1,355,444.98.

88. Later, in “Schedule B - Sundry Debtors (Including loan debtors)”, that asset was identified as made up of amounts:

Name and address of debtor	Amount owing	Amount realisable
NICHOLAS & JEANNENE O’DAY 25 BRENTWOOD AVE WARRAWEE NSW 2074	10,836.80	10,836.80
OLG 1 PTY LTD 2/370 QUEEN STREET BRISBANE QLD 4000	1,344,608.18	1,344,608.18

89. I accept the evidence – namely, that OLG was identified by OLI as owing that amount identified in the RATA (which is the amount claimed in these proceedings). Mr O’Day sought to qualify these answers by suggesting, in his affidavit evidence, that he had “not conducted a detailed review of OLI and OLG’s bank account statements”. I do not accept that evidence. As that evidence (in his affidavit) deals with a number of situations – where Mr O’Day seeks to qualify statements he had earlier made to the liquidator or in documents – I have dealt with this as a separate issue: see [106]ff, below.

90. On 25 January 2017, Mr Goyal sent a letter of demand to OLG requesting repayment of $1,344,608.18. That letter said (relevantly): “The Company’s records evidence a related party loan account owed by the Lyon Group, with an amount of $1,344,608.18 outstanding as at 30 September 2016”.

91. Following this demand, a meeting occurred between Mr O’Day and Mr Goyal, at Mr Goyal’s office, on 6 February 2017. Mr Goyal, in paragraph 30 of his affidavit, described a conversation that occurred between himself and Mr O’Day on that occasion:

“30.   On 6 February 2017, I had a meeting with Nicholas O’Day at the offices of KordaMentha. During that meeting, words were said to the following effect:

Mr O’Day: “I’m almost ready to provide a new proposal to settle all claims including the OLG debt. Is there anything you think that I should keep in mind?”

Me: “If there is any element of compromise then I will need to get creditor or Court approval. You have added in a couple of new creditors in your RATA compared to your earlier questionnaire including a related party, but the largest debt still appears to be to the ATO. The longer this drags on the more the costs of the liquidation will increase, so you need to get this proposal to me as soon as possible. I’m not making any promises that any proposal will be accepted as it is a matter for the creditors or the Court.”

Mr O’Day: “OK thank you. I will get everything to you shortly.”

92. I accept that this conversation occurred in the way described by Mr Goyal. In particular, I accept that Mr O’Day, once again, accepted the existence of OLG’s debt to OLI: he was attending this meeting in his capacity as director and secretary of OLI. (I accept that the capacity in which Mr O’Day was discussing resolving the claims is somewhat blurred bearing in mind Mr O’Day was a director and secretary of both OLI and OLG and, as I have earlier found, the ‘directing mind and will’ of both).

93. On 9 February 2017, Mr O’Day sent a letter, by email, to Mr Goyal setting out “a revised draft proposal to settle all claims and finalise the liquidation”. That proposal relevantly included the following:

“1.   OLG 1 Pty Ltd makes an initial payment to the Company of $40,000 representing a partial payment of the related party (Payment 1);

…

3.   OLG 1 Pty Ltd makes further payment to the Company of $295,000 representing a further and final payment of the related party loan (Payment 2);

…

7.   The Company forgives the Director’s loan and Lyon Trust forgives the debts owed by the Company to Lyon Trust;”

94. This letter, it should be noted, was signed by Mr O’Day in his capacity as director of OLI. Notwithstanding, the letter purported to make an offer on behalf of OLG: see points 1 and 3 of the proposal. In my view, bearing in mind that Mr O’Day was the director and secretary of OLG, I consider that in so offering to repay money by way of settlement, that also constitutes an admission that there was no services agreement and, separately, negates any suggestion that OLG was indebted to OLI in any way. It also clearly refers to a ‘loan’, which is the characterisation of the transaction that I have earlier found existed.

95. The offer by OLG to OLI, contained in the letter dated 9 February 2017, was formally rejected in a letter dated 11 July 2017 sent to OLG (but emailed to Mr O’Day) by the solicitors representing the liquidator. By this letter, the liquidator made a further demand for repayment of $1,344,608.18.

96. Following receipt of this further demand by the liquidator, Mr O’Day retained Oliveri Lawyers to act for him.

97. By letter dated 19 July 2017, Oliveri Lawyers wrote to the Liquidator. In that letter, it was said: “Our client has provided instructions that third parties are willing to make arrangements to pay the debts of the Company including all creditors and your fees…”; and, later in that same letter, Oliveri Lawyers acknowledged that a debtor to OLI was “OLG1 Pty Ltd -$1,344,608.18”. Although the solicitors indicated that they acted for Mr O’Day – as opposed to OLI or OLG – Mr O’Day’s involvement in the liquidation, and claim for repayment of the amount identified, was as a consequence of him being the sole director and secretary of each. In that context, the importance of the matters referred to in the solicitor’s letter relates to the acceptance that a debtor of OLI was OLG, and that the indebtedness was $1,344,608.18.

98. The lawyers for the liquidator further wrote to Mr O’Day’s lawyers by letter dated 27 July 2017. They also served, by that letter, a statutory demand, dated 27 July 2017, for the payment of that debt.

99. On 18 August 2017, OLG filed an application to set aside the statutory demand. In support of that application, Mr O’Day swore an affidavit dated 18 August 2017 in his capacity as a director of OLG.

100. There are a number of important matters that emerge from this affidavit, which I will set out:

1. Mr O’Day acknowledged “that OLI has advanced loans to OLG in a total amount of $1,344,608.18”: affidavit at para 5.

2. Mr O’Day said that the loans were advanced pursuant to resolutions passed by the directors of OLI, with the first resolution occurring on 31 October 2013: affidavit at paras 6-7.

3. Mr O’Day said that, following the above resolution, a “Loan Agreement” was drafted – albeit that it remained unsigned – which “accurately reflects the terms contemplated by OLI and OLG at the time that the Resolution of Directors was passed”: affidavit at paras 8-9.

101. It will be necessary to make reference to some of the terms of the “Loan Agreement”, but it is important to observe that this is not the agreement – the services agreement – that is propounded as a defence to the claim made by OLI in the current proceedings, but a completely different one.

102. Putting to one side that patent inconsistency between what was advocated in the affidavit and what is advocated in the current proceedings on behalf of the defendants, the key terms of the “Loan Agreement” are: the term for each advance was for a maximum term of 10 years (clause 2.1(c)); and, no interest was payable upon the loan (clause 2.3). The importance of the term of the loan, in the context of a statutory demand having been served upon OLG, was because it established that the loan – if it existed – was not repayable by OLG at that time.

103. In these proceedings, Mr O’Day was cross-examined about the contents of this affidavit. That cross-examination established a number of matters including: that at the time of swearing the affidavit, Mr O’Day knew that that was the time to raise any argument about OLG’s indebtedness to OLI; that the “Loan agreement” referred to in the 2017 affidavit of Mr O’Day was never tabled at any meeting that was said to have occurred on 31 October 2013, contrary to a resolution that was signed by Mr O’Day on that day and purported to record that this occurred; that the “Loan agreement” referred to in the affidavit was not prepared “anywhere around the time of October 2013”, evident by the fact that “the document refers to companies that were not even in existence as at 2013”; there was no “Loan agreement” of any kind in existence at the date of this meeting; and, critically, Mr O’Day accepted that there was no reference at all in his affidavit “about OLG having borne expenses in reduction of its liability to OLI”.

104. I regard the fact that Mr O’Day advocated, through this affidavit, the existence of this other agreement – rather than the one propounded in this case (or to even mention it) – to be telling, and to reflect adversely on his credibility. It was, to put it bluntly, untrue. In my view, it is destructive of any suggestion of the existence of the services agreement and strongly suggestive of the fact that it is a recent invention – which, as I have already stated, I find it is. To the extent that Mr O’Day sought to explain the inconsistency between the position asserted in the affidavit, and the one that is sought to be maintained in the present proceedings – to the effect that the affidavit was prepared carelessly by him in that he failed to check the financial records of OLG and OLI – I do not accept it at all: his evidence was evasive when cross-examined on this issue and, separately, it borders on the unbelievable to think that, particularly when it is remembered that lawyers had been retained by him, the preparation of this affidavit would not have been the subject of careful deliberation by him and those that represented him. I have no doubt that, consistent with this, had there been a services agreement, it would have been referred to in this affidavit as the basis for setting aside the statutory demand.

105. Further, it should be emphasised, that there has never been a clear statement as to the existence, and terms of, the services agreement until some unknown time after that affidavit was sworn. Again, whilst, in a given case, that may not tell against a finding supportive of the existence, and terms, of a particular agreement, I do not think that is the situation here: not only was there never a clear statement by, or on behalf of, the defendants as to the existence of the services agreement but, as I have explained, the defendants advocated the existence of a different agreement prior to fixing on the services agreement.

106. It is appropriate at this point to say something about, and to deal with, the explanations that have been proffered by Mr O’Day in relation to at least some of the previous statements that he has made in relation to the existence of the indebtedness of OLG to OLI. The explanations can be sourced to Mr O’Day’s affidavit, notably at paragraphs 54-58, as well as his evidence when cross-examined.

107. Mr O’Day, in his affidavit sworn 29 July 2021, sought to explain why he made a number of “statements” about the nature and extent of the “payments” that OLI made to OLG – notably in the information in the RATA dated 28 October 2016; in the letter from Oliveri Lawyers dated 11 July 2017; and the affidavit he swore on 18 August 2017 in order to set aside the statutory demand filed 27 July 2017. That explanation was, in effect, that they were made when he had “not conducted a detailed review of OLI and OLG’s bank account statements”. I do not accept that explanation, and I consider that the advancement of it reflects adversely upon the credibility of Mr O’Day. My reasons for rejecting that evidence are as follows.

108. First, the explanation assumes that the “bank account statements” in relation to OLI and OLG support a different complexion of the transaction. No attempt was made, during submissions (or at any time during the hearing), to identify by reference to those bank statements why this is said to follow. I do not accept that they do. Secondly, closely analysed, this evidence was only suggested to be relevant to the quantification of the indebtedness, rather than the fact that it existed. That is, the purpose of this evidence was to cast doubt upon the amount of the transfers from OLI to OLG, and to prove that it was approximately $300,000 lower than the amount claimed by the plaintiff. As it happens, during the hearing, the defendants specifically accepted that the quantum of the amount claimed was not contested. It follows, therefore, that Mr O’Day’s affidavit does not, in any event and in fact, provide any evidence to otherwise qualify that which was contained (and admitted) in the RATA, the letter from Oliveri Lawyers dated 11 July 2017, and in his affidavit sworn 18 August 2017.

109. Mr O’Day sought, repeatedly, to explain his conduct by reference to the fact that: (a) he simply did not turn his mind to whether in truth OLG was indebted to OLI; and, (b) that he did not turn his mind to or conduct a review of the accounts of each to determine whether they were accurate and regular.

110. In my view, those explanations are implausible, and I do not accept them. First, because Mr O’Day was far from an unsophisticated businessman: he has degrees in law and commerce (and had practised as a law clerk and then as a solicitor for eight years, including in areas such as mergers and acquisitions and banking and finance) and on his evidence has, since 2003 conducted his own infrastructure advisory business since that time – albeit there were periods when he was employed by clients of that business. I cannot accept that a person in Mr O’Day’s position would be ignorant of these matters, and I do not accept that he was. Secondly, it is clear from Mr O’Day’s evidence that he was a person who was responsible, admittedly with assistance from the accountants that had been retained, for the day-to-day financial management of OLI and OLG (I have elsewhere made findings about this). That fact, as well, tends to undermine any suggestion that Mr O’Day’s role was “hands-off” – and, by extension, that he was ignorant of the matters alleged. Thirdly, it is inconceivable that, irrespective of whether or not the financial records were kept in an accurate and up-to-date manner, Mr O’Day would not have asserted, promptly and early following the appointment of the liquidator, that OLG was not indebted to OLI at all – by reason of the existence of the services agreement.

No inconsistency in the financial records of OLI and OLG

111. In order to support the case for the defendants that there was a services agreement entered into, it was argued that the financial records of OLI and OLG were inaccurate. I am not satisfied, as the defendants have argued, that there are any material inaccuracies in the records of OLI or OLG; in fact, I consider them to accurately record the true position which, for relevant purposes, evidences the loan from OLI to OLG in the amount claimed in the present proceedings.

112. In my view, the following matters support that finding. First, the financial records of each are prima face the evidence of the matters stated in them: ss 1305(1) and 1306(5) of the Corporations Act; Australian Securities and Investments Commission v Rich (2009) 236 FLR 1; [2009] NSWSC 1229. Secondly, the only person from OLI or OLG who had any significant involvement in the preparation and finalisation of the financial records, was Mr O’Day; hence, the defendants’ argument involves the contention that his record keeping – and management of financial records for both companies – was inaccurate over an extended period of time. I am unable to accept that this is so – this is particularly where no attempt was made to perform a reconciliation of the financial records in order to support the defendants’ contention. Thirdly, OLI and OLG (in effect Mr O’Day) retained accountants, RSM, to assist in the preparation of those records – which, in my view, is against the wholesale inaccuracies that Mr O’Day has alleged exist in order to make good the defendants’ argument. Fourthly, in the course of the preparation of the accounts and financial position of OLI prior to the liquidation, Mr O’Day considered that they were correct and accurate, a fact noted in the questionnaire Mr O’Day returned to Mr Goyal on 14 October 2016 (see [81], above and the finding there made). Thus, he is now taking, in these proceedings, an inconsistent position to the one he had earlier adopted. The adoption of such a position may well be justified if there was evidence available to support a different complexion being placed upon the accounts – such as through tendering primary records or undertaking a forensic accounting exercise. No such evidence exists in the present case. Fifthly, when sending the financial records to the liquidator, at no point did Mr O’Day suggest that there were any inaccuracies in them at all – again, an inconsistent position to the one now taken.

113. The defendants did seek to argue – in a global and non-specific way – that the agreement existed (and was performed), but that the financial records did not, provide a true reflection of what had occurred: put simply, the defendants sought to argue that there were some $1.3 million in expenses not correctly allocated. I do not accept this argument.

114. The defendants’ argument was as follows. By virtue of the services agreement, OLG in fact expended sums of money, or rendered services to OLI, that exceeded the amount that is claimed by OLI in the current proceedings. That is, during the course of 2011 – 2016, OLI transferred the money to OLG and, in return (so it was argued), OLG provided services to OLI, and paid for services OLI received, in performance of the services agreement. However, the financial records of OLI and those of OLG do not support the arrangement as propounded by the defendants. Put another way, if the service agreement in fact existed, then it would be not unreasonable to expect that the financial records of each would reflect what, fundamentally, was a fairly simple arrangement: on the part of OLI there would be transfers of money recorded, as well as the creation of tax invoices to record the incurring of expenses; and, on the part of OLG, there would be records recording the receipt of money, as well as the creation of tax invoices to be rendered for the services that it provided to OLI, and for the expenses that it paid on its behalf.

115. But that is not the position here; in fact, the defendants argued that, in effect, the records were wholly inaccurate in that they failed to record the services performed, and the expenses incurred, by OLG under the services agreement.

116. The argument of the defendants can be illustrated by reference to the general ledger for OLI – that part described as ‘Loan-Lyon Group’. There, as Mr O’Day accepted, this part of the ledger records the amounts that have been advanced by OLI to OLG or that OLG has repaid OLI. Mr O’Day accepted, by way of example, that an entry on 30 June 2014 constituted a credit to the loan account; that is, a reduction. (It is not clear why, if the arrangement is as propounded by the defendants, there would be any credit to that account: the money would simply be paid by OLI to OLG for the services provided or to cover for the expenses that were incurred on its behalf. It is unnecessary to pursue this issue further).

117. The general ledger for OLI for the period 1 July 2012 to 30 September 2016 was printed from an accounting program that was used by OLI to record its financial expenditure and matters of that kind. Within that ledger is a specific entry recording the loan to OLG: it was described as ‘Loan-Lyon Group’. Despite what is recorded there – an outstanding balance owed to OLI by OLG of $1,344,608.18 – Mr O’Day sought to contend that, in fact, the ledger was inaccurate in that the records there (and for all other records of OLI and OLG) failed to record expenses totalling, or possibly exceeding, this amount over a four or more year period, and despite the fact that there were some credit entries in that ledger.

118. If that were even to be accepted as a theoretical possibility, then, at a minimum, I would expect to see evidence such as tax invoices from OLG to OLI, a reconciliation of the financial statements that reflected what the true position was argued to be and like matters. There was no such evidence. Indeed, Mr O’Day accepted that there was not a single tax invoice raised or issued by OLG to OLI for services that it allegedly provided to OLI.

119. There were other inconsistencies in the case for the defendants that were not explained in the evidence, or by way of submission. For example, it was specifically pleaded that during the period 2011 to 2016, part of the expenses related to the rent of premises used by OLI, as well as the payment “for the staff who worked for” OLI: see the summary of the defendants’ case in [41], above.

120. I was not taken to any evidence by the defendants that supported the payment of these expenses at any particular point in time during the period of the alleged services agreement. However, Mr O’Day conceded, when cross-examined, that, for the financial periods ending 30 June 2015 and 30 June 2016, OLG did not rent premises or employ staff. Further, in relation to rent, for the financial periods ending 30 June 2013 and 30 June 2014, the only rent that was incurred was in the financial year ending 30 June 2013, and that was in the amount of $17,402 – an amount which Mr O’Day conceded was not solely referable to OLI. Indeed, for the 2013 financial year, the total expenses for OLG were $147,241 – which, again as Mr O’Day conceded, was an amount that was not solely referable to work that OLG (allegedly) performed for OLI (or expenses incurred by them in order to do so).

121. Thus, to the extent that any attempt was made in evidence to reconcile actual expenses recorded with the defendants’ claim, it did not support it.

The evidence of Mr O’Day

122. I do not accept the evidence of Mr O’Day unless I have made a specific finding about it or it amounts to an admission against interest.

123. I have, in earlier parts of these reasons directed to resolving whether the July 2011 services agreement existed, addressed a number of matters that stood against the case propounded by the defendants. Some of them reflected adversely upon credibility and reliability of Mr O’Day, including the following:

1. First, in relation to the 2017 affidavit that Mr O’Day swore in support of the application to set aside the statutory demand (see [99]-[104], above), there was no reference whatsoever to the existence of the 2011 services agreement. I regard that omission to be a significant one: there is no good reason why, if it existed, Mr O’Day would not have mentioned that agreement on behalf of OLG. Furthermore, not only was there no mention of the services agreement, but Mr O’Day falsely propounded the existence of a different one. When cross-examined about this, as I have earlier found, Mr O’Day was quite evasive in offering up multiple (unsatisfactory) excuses for why he swore the affidavit in those terms

182. Furthermore, Mr O’Day did so in circumstances when he was in a situation of clear conflict: he was a director of OLI and OLG and, in reality, once the money was transferred from OLI to OLG, he personally was to be advantaged – and was advantaged – by the receipt of money by the director’s “loans” that were made from OLG to him. That conduct is clearly in breach of the duty to avoid conflicts of interest.

The limitation defences

186. To recap, slightly, limitation issues arise in relation to the following causes of action:

1. first, in relation to OLI’s debt claim against OLG: here, there is a defence under s 14(1)(a) of the Limitation Act;

2. secondly, in relation to OLI’s claims against OLG and Mr O’Day for breach of the Corporations Act: here, there is a defence under s 1317K of the Corporations Act.

187. Before dealing with the limitation defences, a number of matters should be noted. First, a defendant pleading a limitation defence carries the legal onus of proving that defence: Pullen v Gutteridge Haskins & Davey Pty Ltd [1993] 1 VR 27 at 72 (Brooking, Tadgell and Hayne JJ); Segal v Fleming [2002] NSWCA 262 at [27] (Hodgson JA, Handley JA and Young CJ in Eq agreeing). Secondly, despite the defendants carrying the legal onus, the defendants did not make any submissions – orally or in writing – directed to establishing the defence. Thirdly, the plaintiff submits that, to the extent that any defence available under s 14(1)(a) of the Limitation Act applies to its claim, there has been confirmation under s 54 of the Limitation Act – with the consequence that the plaintiff is entitled to judgment in the full amount. Fourthly, OLI argued that, even if the defence under the Limitation Act is made out, it would still be entitled to judgment in the sum of $776,346.99 – this being said to be the amount that was advanced on and from 12 May 2014; that is, the amount that was advanced within the six years prior to the plaintiff’s commencement of proceedings.

Section 14(1)(a) of the Limitation Act

Introduction

188. As I have earlier noted, OLG has pleaded that the debt claim by OLI is time-barred. In my view, subject to the issue of confirmation, the claim in debt is, at least in part, time-barred by reason of s 14(1)(a) of the Limitation Act. So much was accepted by the plaintiff.

189. The issue that remains, however, is whether OLG has confirmed the cause of action for the purposes of s 54 of the Limitation Act, with the consequence that, if that has occurred, it “postpones the reckoning of the limitation period where a person against whom a cause of action lies confirms the cause of action”: Kation Pty Ltd v Lamru Pty Ltd [2011] NSWSC 291 at [11] (White J).

190. Put simply, if confirmation has occurred in the six years after money was first transferred, then OLI’s claim is not time-barred, and it would be entitled to judgment in the full amount claimed.

191. In order for there to be confirmation of a cause of action, four matters must be established: first, the confirmation of a cause of action must occur after the limitation period commences to run but “before the expiration of the limitation period” for that cause of action (s 54(1)); secondly, the person must acknowledge the cause of action to the person having the cause of action (s 54(2)(a)(i)); thirdly, the acknowledgement “must be in writing and signed by the maker” (s 54(4)); and, fourthly there is only confirmation if “the confirmation is made to the person or to a person through whom the person claims” (s 54(5)).

192. Although the confirmation argument was put expansively in written submissions, during oral submissions the plaintiff confined argument on confirmation as having occurred in two ways. Its first argument was that OLG, through its director Mr O’Day, confirmed the cause of action through the email that he sent to Mr Goyal on 31 March 2017. On that occasion, Mr O’Day attached a number of financial statements and income tax returns for OLG to that email – which he “signed off” – and, accordingly, so it is argued, there has been a confirmation. Its second argument was that confirmation occurred by reference to the letter dated 14 October 2016. The argument for the plaintiff, in effect, was that despite this being a letter from OLI, within it contained a promise that OLG would repay the debt within 6 months.

193. I will now deal with the two confirmation arguments advanced.

Confirmation: the 31 March 2017 email

194. In relation to the 31 March 2017 email, the key points made by the plaintiff to support findings leading to a conclusion that there had been confirmation were as follows:

1. the email was sent from Mr O’Day and signed off as: “Kind regards Nicholas O’Day”, albeit that it was sent from an email address that, on the face of it, related to the plaintiff – namely: “[email protected]”.

2. The email attached financial statements and income tax returns, for the years 2014, 2015 and 2016, for OLG.

3. The 2016 financial report for OLG identified the loan between OLI and OLG, in the amount of OLI’s claim, as I have earlier found: see [32]-[33], above.

4. Although Mr O’Day’s signature did not appear on that financial report, his name, and his position as a director, did appear and those matters – together with the covering email – amount to, for present purposes, a “signature” by Mr O’Day.

195. I turn now to consider whether these matters amount to a confirmation within s 54 of the Limitation Act.

196. It is clear that any confirmation based upon the 31 March 2017 email – assuming for present purposes that it occurred – occurred after the limitation period for the debt claim commenced to run but before the expiration of the limitation period. That is because time commenced to run, for limitation purposes, at the moment the money was transferred; in other words, as I have earlier explained (see [130]-[132], above), the money was repayable instanter. I have also earlier found, consistent with what was admitted on the pleadings by the defendants, that the first transfer occurred after 30 June 2012 (see [27]-[28], above). As the limitation period for any transfer that occurred on 30 June 2012 would expire “6 years running from the date on which the cause of action first accrues”, a confirmation that occurred on 30 March 2017 would clearly, for the purposes of s 54(1) of the Limitation Act, have occurred prior to the expiration of the limitation period.

197. The second requirement is to establish an acknowledgement of the cause of action (here, the debt). This has been understood as involving an admission of indebtedness which is “sufficiently clear or distinct upon the fair construction of the language used, read as a whole and in light of the surrounding circumstances”: Giacci v Giacci Holdings Pty Ltd [2010] WASCA 233 at [60] (Murphy JA) – see also [36] (Newnes JA); Bucknell v Commercial Banking Co of Sydney Ltd (1937) 58 CLR 155 at 163-165 (Dixon J); [1937] HCA 35.

198. In this case, the plaintiff argued – and I accept – that the existence of the loan from OLI to OLG was contained within OLG’s 2016 financial report and that this constitutes an acknowledgement in the sense discussed. That is because an entry of this kind has been recognised as constituting an admission and, thus, an acknowledgement of indebtedness: The Stage Club Ltd v Miller’s Hotels Pty Ltd (1981) 150 CLR 535 at 543 (Gibbs CJ); [1981] HCA 71; Hashman v Australian Medico Legal Group Pty Ltd [2016] NSWSC 1773 at [21] (Brereton J) – and on appeal no argument was advanced against that conclusion: Australian Medico Legal Group Pty Ltd v Claireleigh Mosman Pty Ltd [2017] NSWCA 218 at [1] (Basten JA), [14] (Leeming JA) and [43] (White JA); Seoud v Fortythird Garland Pty Ltd (2019) 57 VR 262; [2019] VSC 192 at [66] (McMillan J).

199. Pausing here. The plaintiff also argued that, as the account was a “running account” – in the sense that there is a single balance in the accounts, which is the product of all dealings between the parties – that that, of itself, amounted to an acknowledgement for the purposes of s 54 of the Limitation Act. I do not accept that submission: the clear language of s 54 of the Limitation Act is against its acceptance. That is, for there to be an acknowledgement, as I have earlier explained, there must be, amongst other matters, an admission in writing that is also “signed by the maker”: s 54(4) of the Limitation Act. In this case the mere presence of such an account, absent a signature, would not, in my view satisfy that requirement.

200. Returning now to the plaintiff’s primary argument, the acknowledgement by the ‘debtor’ is required to be made to the person having the cause of action: here, that is OLI (ss 54(2)(a)(i) and 54(5) of the Limitation Act). In fact, because a liquidator was appointed on 30 September 2016, the creditor was the liquidator. An acknowledgement made to a liquidator is sufficient to satisfy the requirement that the acknowledgement must be made “to a person having…the cause of action” within s 54(2)(a)(i) of the Limitation Act: General Credits Ltd v Wenham (1989) 18 NSWLR 570 at 576 (Meagher JA, Kirby P and Mathews AJA agreeing); Woo v Woo [2010] NSWSC 1216 at [95] (Bryson AJ). In my view, as the email was sent to the liquidator of OLI, this element is satisfied.

201. The final requirement, for there to be an acknowledgement, is for that acknowledgement to be in writing and signed by the maker.

202. It is clear that the acknowledgement was in writing, but a difficulty here is that the 2016 financial report for OLG was not signed, and nor was the email that attached it. The plaintiff argues that, notwithstanding that the 2016 financial report for OLG was not signed, this element has been established by reason of the “authenticated signature fiction” principle. By that principle, a person’s name printed on a document may be treated as that person’s signature if the person – expressly or impliedly – represented that the name can be treated as a signature: Kation Pty Ltd v Lamru Pty Ltd [2011] NSWSC 219 at [34] (White J); Stuart v Hishon [2013] NSWSC 2013 at [17] (Harrison J).

203. Two points should here be made. The first is that the “authenticated signature fiction” rule may be seen to reflect the basic idea that the “essential attributes of a signature are recognition and approval of the contents of the document”: Good Challenger Navegante SA v Metalexportimport SA [2003] EWCA Civ 1668 at [23] (Clarke LJ) (“Good Challenger”). The second is that the requirement in s 54(4) of the Limitation Act for the acknowledgement to be in writing and signed “is to be sure that that the person said to be acknowledging the debt has in truth done so”: Good Challenger at [27].

204. In my view, by “signing off” the email in the manner that he did, Mr O’Day was attesting the authorship of the document and, by reference to what was included, acknowledging the existence of the debt to the liquidator that was recorded in the 2016 financial report for OLG. Put simply, his name was an implicit endorsement of the contents of the email, and the documents which were attached to it. In my view that is the only sensible inference to draw from the email.

205. Further, to the extent that extrinsic evidence is available to determine the intent of Mr O’Day (see VL Finance Pty Ltd v Legudi [2003] VSC 57 at [60] (Nettle J); Stuart v Hishon [2013] NSWSC 766 at [27]-[29] and the authorities in [209]-[210], below), then it supports the same outcome: that is because the entire sequence of dealings between Mr O’Day and the liquidator was: (a) to determine the debtors of OLI, one of which was OLG; and, (b) to resolve, adopting Mr O’Day’s words, “all claims” in the liquidation. This is apparent when the course of written communications leading up to the 31 March 2017 email is considered:

1. 9 February 2017: Mr O’Day wrote to the liquidator and made a proposal to settle “all claims” in the liquidation contained his letter.

2. 9 March 2017: the liquidator wrote to Mr O’Day and sought financial information in order for him to assess the offers that Mr O’Day had made. The request for information included Mr O’Day’s personal financial information (a personal assets and liabilities statement, as well as copies of the last 3 tax returns) as well as the “last 3 years financial statements of OLG 1 Pty Ltd”.

3. 31 March 2017: Mr O’Day sent an email to the liquidator providing the personal information requested, as well the “last 3 years financial statements of OLG 1 Pty Ltd” – to be clear, it included the 2016 financial report for OLG.

206. In my view, OLG confirmed the cause of action on 31 March 2017, for the purposes of s 54(1) of the Limitation Act. Accordingly, that confirmation operates to exclude the running of time on the debt claim until that date. As the proceedings were commenced within six years following that confirmation, the debt claim is not time-barred.

Confirmation: the letter dated 14 October 2016

207. The plaintiff also submits that confirmation has occurred through the letter sent to the liquidator on 14 October 2016. The relevant part relied upon by the plaintiff relates to the proposal by Mr O’Day “to creditors to settle all claims and finalise the liquidation: As a director of OLG 1 Pty Ltd, I will procure that OLG 1 Pty Ltd repays the outstanding debt owed to [OLI] within 6 months of the date of the winding up order”.

208. In my view, what is contained in this letter amounts to an acknowledgement: there is a clear admission by Mr O’Day, in his capacity as a director of OLG, that there is an outstanding debt owed to OLI. However, this letter does not identify, in terms, the amount of the outstanding debt nor did the questionnaire that Mr O’Day completed: the response to question 2 indicates that the reference to the debt was merely noted as: “an intercompany loan”. The issue presented is whether the acknowledgement needs to specify the amount of the debt and, if it does not, how it is to be ascertained.

209. In Giacci v Giacci Holdings Pty Ltd [2010] WASCA 233 (“Giacci”), Newnes JA (Martin CJ agreeing), when dealing with the s 44(3) of the Limitation Act 1935 (WA), set out the relevant principles of law relating to acknowledgments, at [36]:

“The relevant principles can be stated quite shortly. In order to take a debt out of the operation of s 38 of the Act, it is necessary that there be a promise by the debtor to pay the debt. A promise need not be express and a promise to pay will be implied from an unconditional acknowledgement of the debt: Hepburn v McDonnell [1918] HCA 43; (1918) 25 CLR 199, 210; Bucknell v Commercial Banking Co of Sydney Ltd (1937) 58 CLR 155 at 163–165. In order to constitute such an acknowledgement there must, upon the fair construction of the words read in the light of the surrounding circumstances, be an admission that the debt is owed: Hepburn v McDonnell (210). But it is not necessary that the acknowledgement specify the precise amount of the debt so long as it is ascertainable from extrinsic evidence: Jones v Bellgrove Properties Ltd [1949] 2 KB 700 at 704; Dungate v Dungate [1965] 1 WLR 1477 at 1487. Nor need the acknowledgement be contained in a single document but a number of documents can be combined to make up an acknowledgement: McGuffie v Burleigh (1898) 78 LT 264; VL Finance Pty Ltd v Legudi [2003] VSC 57; (2003) 54 ATR 221 [60]. (Emphasis added)

210. This summation of the relevant principles has been cited with approval in this Court by Hallen J in Papas v Co [2018] NSWSC 1404 at [415].

211. It is clear, based upon the above authorities, that it is permissible to determine whether there has been an acknowledgement, and identification of the amount of the debt, by having regard to multiple documents: VL Finance Pty Ltd v Legudi [2003] VSC 57 at [60] (Nettle J). I would observe, by way of illustration, that that was the approach adopted by Harrison J in Stuart v Hishon [2013] NSWSC 766 at [27]-[29].

212. Although the plaintiff argued that the extrinsic evidence, or surrounding circumstances, available to ascertain the amount of the debt extended to what was said by the parties – as opposed to what was written – I cannot accept that submission. The authorities do not, in my view, go that far. Rather, the extrinsic evidence is confined to a consideration of a number of instruments, where necessary, in order to establish the acknowledgement, and the quantum of the debt said to have been admitted. Confining the extrinsic evidence in this way conforms, in my view, to the statutory objectives evident in the text of s 54 itself (notably s 54(4): the “acknowledgment…must be in writing…”), and ensures that the Court will “be astute not thereby to reintroduce the risk of ‘fraud, mistake or failure of memory’ which the rule is designed to avoid”: Lambeth London Borough Council v Bigden (2001) 33 HLR 43 at [60] (Simon Brown LJ).

213. Thus, although it would be permissible, in order to ascertain the amount of the debt, to have regard to the other letters and documents that are referred to in the first paragraph of the 14 October 2016 letter, none of them (namely, the liquidator’s letters dated 5 and 11 October 2016) identify the sum owed. Of course, it was discussed during the meeting that they had on 6 October 2016: the unchallenged evidence of Mr Goyal, as I have earlier found (see [74], above), was that Mr O’Day admitted at that meeting that OLG owed OLI “about $1.3 million”. But that evidence is not “extrinsic evidence” of the kind that I can have regard to, noting the authorities that I have just mentioned.

214. In my view, therefore, the letter dated 14 October 2016 did not confirm the debt and, thus, the cause of action, for the purposes of s 54 of the Limitation Act.

Section 1317K of the Corporations Act

215. In relation to the claims for compensation under s 1317H of the Corporations Act, the defendants have also raised a limitation defence under s 1317K of the Corporations Act. That section, relevantly, provides that proceedings for a compensation order “may be started no later than 6 years after the contravention”.

216. This defence arises, in the claim against OLG, in connection with a claim that OLG was “involved in” Mr O’Day’s breaches of ss 181 and 182 of the Corporations Act. In the claim against Mr O’Day, this defence arises in connection with the claims that Mr O’Day breached ss 180-182 of the Corporations Act.

217. The plaintiff accepted (and the defendants did not dispute – subject to a finding of primary liability) that these claims were partly time-barred, limiting recovery to $776,346.99.

Damages

The claims against OLG

218. I have already concluded that the plaintiff has succeeded in the debt claim (and there is no limitation defence available). There are no damages, or quantification, issues to consider in relation to this cause of action bearing in mind the admissions, and findings, that I have made.

219. Accordingly, OLI is entitled to judgment against OLG in the amount of $1,344,608.18.

220. In relation to the claim for equitable compensation by reason of OLG having actual knowledge of the existence of the fiduciary duty and the transfer of property pursuant to a breach of it, OLI’s submissions on this issue was simply that “OLG’s liability is to pay equitable compensation for the value of the corporate property received and unaccounted for (i.e. $1,344,608.18)”. I agree. Having regard to the finding that I have made on the Barnes v Addy claim, there can be no question about the entitlement to recover this amount as equitable compensation.

221. This award would put OLI in the position had there not been a breach of fiduciary duty, and had OLG not been knowingly concerned in such a breach.

222. Accordingly, on this cause of action, OLI is entitled to judgment against OLG in the amount of $1,344,608.18.

223. In relation to the claim that OLG was “involved” in Mr O’Day’s breach of ss 181 and 182 of the Corporations Act, these sections are civil penalty provisions: s 1317E of the Corporations Act.

224. Section 1317H(1) allows the court to order compensation to be paid “for damage suffered by the corporation “if there has been a contravention of a civil penalty provision (s 1317H(1)(a)) and “damage resulted from the contravention” (s 1317H(1)(b)). The phrase “damage resulted from” has been said to require a “causal connection between the damage and the contravening conduct” and that “only the damage which as a matter of fact was caused by the contravention can be the subject of an order for compensation”: Adler v Australian Securities and Investments Commission (2003) 179 FLR 1; [2003] NSWCA 131 at [709] (Giles JA, Mason P and Beazley JA agreeing); In the matter of IW4U Pty Limited (in liq) (2021) 150 ACSR 146; [2021] NSWSC 40 at [47] (Gleeson J).

218. In my view, there is no serious question about the loss and damage that resulted from the contraventions of the Corporations Act. The transfer of money from OLI to OLG, in breach of the duties Mr O’Day owed as a director, caused the loss claimed – being the amount of $1,344,608.18. That is because the transaction should not have occurred at all or, if it did, only when there were proper commercial terms (including those dealing with interest, with the term of the loan and the manner and timing of repayment) and, critically, the transfer of money through such a loan facility only with proper security – to ensure that the money was recoverable in the event of default by OLG. The breaches of the director’s duties were continuing ones, and OLG was likewise “involved” on a continuing basis: its conduct caused the loss claimed.

219. There is a partial limitation defence that is available to the defendants under s 1317K of the Corporations Act (see [215]-[217], above). Accordingly, on this cause of action, OLI is entitled to judgment against OLG in the amount of $776,346.99.

The claims against Mr O’Day

227. I have found that Mr O’Day was in breach of ss 180-182 of the Corporations Act. These sections are civil penalty provisions: s 1317E of the Corporations Act.

228. In my view, as I explained in [225], above, there is no serious question about the loss and damage that resulted from the contraventions of the Corporations Act. The transfer of money from OLI to OLG, in breach of the duties Mr O’Day owed as a director, caused the loss claimed – being the amount of $1,344,608.18. There is also a partial limitation defence that is available to the defendants under s 1317K of the Corporations Act: see [215]-[217], above. Accordingly, on this cause of action, OLI is entitled to judgment against Mr O’Day in the amount of $776,346.99.

229. In relation to the claim for breach of fiduciary duty, where the loss suffered is the misapplication of company money, the obligation is on the defaulting fiduciary to pay to the company compensation for such loss and the specific causation question is whether the loss would have occurred if there had been no breach of duty: O’Halloran v RT Thomas and Family Pty Ltd (1998) 45 NSWLR 262 at 276-277; [1998] NSWSC 596. Here too the loss is $1,344,608.18, for the same reasons set out in [225], above. Accordingly, on this cause of action, OLI is entitled to judgment against Mr O’Day in this amount.

The claimed set-off

230. The defendants argued their entitlement to a set off by way of defence. This set off, so it was argued, arose by reason of the “value of the Support Services” provided by OLG to OLI. These submissions were not developed orally at the conclusion of the proceedings, and it appears, from the written submissions, that this is a reference to payments that OLG may have made for services rendered to OLI by third parties.

231. In my view, this claim does not arise. That is because it was premised on a positive (that is, a favourable) finding about the existence of the July 2011 services agreement. In respect of that “claim”, I have concluded that there was no such agreement. To the extent that this claim is a freestanding one, I do not consider that it is open for the defendants to argue it (it was not identified as an issue and the plaintiff did not deal with it) and, in any event, no attempt was made to prove any part of this claim; indeed, my earlier findings about the accuracy of the financial records of OLI and OLG (see [111]ff, above) preclude its acceptance.

Summary of damages awarded

232. In relation to OLG:

1. OLI is entitled to judgment on its debt claim against OLG in the amount of $1,344,608.18, plus interest.

2. OLI is entitled to judgment on its claim for equitable compensation against OLG in the amount of $1,344,608.18, plus interest.

3. OLI is entitled to judgment on its claim for accessorial liability under ss 181(2) and 182(2) of the Corporations Act in the amount of $776,346.99 plus interest.

233. In relation to Mr O’Day:

1. OLI is entitled to judgment on its claim for equitable compensation against Mr O’Day in the amount of $1,344,608.18, plus interest.

2. OLI is entitled to judgment on its claim for breach of ss 180-182 of the Corporations Act in the amount of $776,346.99 plus interest.

Orders

234. In light of the fact that there has been a separate settlement with the third defendant that is required to be brought into account before judgments can be entered, I make the following orders:

1. Direct that the parties confer with a view to agreeing upon proposed orders finalising the proceedings in accordance with these reasons (including costs), with agreed orders to be filed and served by 14 September 2022, 5pm.

2. To the extent that agreement cannot be reached, direct that each party is to file and serve, by 14 September 2022, 5 pm, the proposed orders it seeks with submissions explaining the basis for why those orders are sought limited to no more than 3 pages.

3. Direct that any evidence in support of any contested orders be filed and served by 14 September 2022, 5pm.

4. The matter will be listed for further argument, and the entry of further orders, on a date to be fixed.

**********

Decision last updated: 07 September 2022