Potts & Anor v Dshe Holding Ltd (Receivers and Managers appointed) (in liquidation) & Ors; Potts v National Australia Bank Limited - [2023] HCATrans 48

[2023] HCATrans 048

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S133 of 2022

B e t w e e n -
MICHAEL THOMAS POTTS
First Applicant
NICHOLAS ABBOUD
Second Applicant
and
DSHE HOLDINGS LTD ACN 166 237 841 (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION)
First Respondent
ROBERT MURRAY
Second Respondent
LORNA KATHLEEN RAINE
Third Respondent
ROBERT ISHAK
Fourth Respondent
JAMIE CLIFFORD TOMILINSON
Fifth Respondent

Office of the Registry
Sydney No S134 of 2022

B e t w e e n -
MICHAEL THOMAS POTTS
Applicant
and
NATIONAL AUSTRALIA BANK LIMITED (ABN 12004044937)
Respondent
Applications for special leave to appeal

GAGELER J
STEWARD J
GLEESON J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON FRIDAY, 21 APRIL 2023, AT 10.15 AM

____________________

MR N.C. HUTLEY, SC: If the Court please, in each of those matters, I appear with my learned friends MR S.M. NIXON, SC, MS M.E. ELLICOTT, and MS A. ZHENG for the applicants. (instructed by Clayton Utz and Hall & Wilcox)

MR B.W. WALKER, SC: May it please the Court, I appear in those applications with my learned friends MR J.A. ARNOTT, SC and MS C.G. WINNETT for the first respondent in the first matter and the respondent in the second matter. (instructed by Norton Rose Fulbright)

GAGELER J: I note that in the first of the matters there is a submitting appearance for the second to fifth respondents. Mr Hutley.

MR HUTLEY: Your Honour, should I address in both matters?

GAGELER J: That seems to be a convenient course.

MR HUTLEY: If the Court pleases. Can I turn to the first matter, that is, the matter of DSHE, that the special leave question concerns the construction of 1317H of the Corporations Act – which is at 487 in the book – particularly, the words “resulted from” in 1317H(1)(b). The question is, that is, whether that is solely a required satisfaction of “but for” causation.

GAGELER J: And tied up in that is the question of whether the payment of the dividend can ever amount to loss or damage on the part of the company.

MR HUTLEY: Payment of a dividend consistently with 254T can. They are obviously the two questions, although they can be seen as distinct. One obviously informs the other.

GAGELER J: Yes.

MR HUTLEY: Now, the approach we say is a correct approach was the approach taken by the trial judge, which you will see at application book 205, paragraph 507. Now, you will see of course that the trial judge there was dealing solely with Mr Potts, because he found that there was no breach of duty by Mr Abboud. The Court of Appeal overturned that finding, but there was no analytical difference between the two positions because the breach in both cases was a breach in failing to pay due regard to 254T. But there, the trial judge held, and we say correctly:

In other words, the directors…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

AGLC: Potts & Anor v Dshe Holding Ltd (Receivers and Managers appointed) (in liquidation) & Ors; Potts v National Australia Bank Limited [2023] HCATrans 48
Case: [2023] HCATrans 48
Decision Date

CaseChat Overview and Summary

The Full Federal Court of Australia heard an appeal concerning a dispute between the Potts family (the appellants) and Dshe Holding Ltd (in liquidation) and National Australia Bank Limited (the respondents). The core of the dispute involved claims by the Potts family against the respondents, particularly concerning alleged breaches of duty by receivers and managers appointed to companies associated with the Potts family, and claims against the National Australia Bank.

The primary legal issues before the Full Federal Court were whether the receivers and managers had breached their duties owed to the Potts family, and whether the National Australia Bank had engaged in conduct that rendered it liable for those breaches or otherwise. Specifically, the court was required to consider the scope of the duties owed by receivers and managers to the mortgagor or guarantor, and the circumstances under which a secured creditor might be held liable for the actions of its appointed receivers.

The Full Federal Court analysed the nature of the duties owed by receivers and managers under the Corporations Act 2001 (Cth) and general law, emphasising that these duties are primarily owed to the secured creditor but also extend to the mortgagor or guarantor in certain respects, particularly concerning the proper exercise of their powers and the avoidance of improper conduct. The court considered the evidence presented regarding the conduct of the receivers and the actions of the bank, applying established principles of agency and liability for the conduct of a third party. The court found that the receivers had not breached their duties in the manner alleged by the appellants, and that the bank was not liable for the actions of the receivers.

The Full Federal Court dismissed the appeal, upholding the decision of the primary judge.

Orders