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Re FAL Healthy Beverages Pty Ltd

Re FAL Healthy Beverages Pty Ltd

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Case Copied 27 April 2017 84 min read

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Supreme Court

New South Wales

Amendment notes

Medium Neutral Citation: In the matter of FAL Healthy Beverages Pty Ltd and FAL Retail Pty Ltd [2017] NSWSC 476
Hearing dates: 22 February – 24 February 2017; 28 February 2017; 3 March 2017.
Decision date: 27 April 2017
Jurisdiction: Equity - Corporations List
Before: Black J
Decision:
The Defendant breached his statutory and general law directors’ and officers’ duties in respect of the transactions identified in the Plaintiffs’ Further Amended Statement of Claim (with the exception of transactions 6, 10 and 25 to Schedule B). The Defendant’s liability in respect of those transactions is not reduced by reason of the Plaintiffs’ settlement with other parties. It has not been established that the Defendant breached his directors’ or officers’ duties in respect of the alleged misapplication of funding provided for equipment and factories in Saudi Arabia and Malaysia, and the evidence would not allow the Court to make an award of damages in respect of the latter claim.

Catchwords:
CORPORATIONS – Management and administration – Duties and liabilities of officers of corporation – where Defendant was director and officer of Plaintiff companies – whether Defendant procured, made or permitted payments by companies to Defendant and entities controlled by him – whether Defendant permitted companies to incur fines – whether Defendant failed to apply certain funds of the companies for their intended purpose – whether Defendant breached directors’ duties.

EVIDENCE – Burden of proof, presumptions, and weight and sufficiency of evidence – where relevant facts are peculiarly within the knowledge of the Defendant or where the Defendant has greater means to produce evidence

DAMAGES – General principles – Difficulty of assessing damages – where evidence does not allow the Court to form a rational view as to the amount of loss suffered by the Plaintiffs – where evidence does not address potential duplication of claims for damages – whether Court should quantify the Plaintiffs’ loss
DAMAGES – where Plaintiffs settled claims against other parties – where Defendant jointly and severally liable to some of those claims – whether Defendant entitled to set off settlement sum against his own liability to pay damages
Legislation Cited: - Bankruptcy Act 1966 (Cth), ss 73, 77A, 153B
- Corporations Act 2001 (Cth), Pts 2.1D, 2M.2, ss 9, 180–182, 206B, 286(1), 344(1), 1317H
- Evidence Act 1995 (NSW), ss 128, 136, 140
Cases Cited: - - Adler v Australian Securities and Investments Commission [2003] NSWCA 131; (2003) 179 FLR 1; 46 ACSR 504
- Agricultural Land Management Ltd v Jackson (No 2) [2014] WASC 102; (2014) 48 WAR 1; 98 ACSR 615
- Angas Law Services Pty Ltd (in liq) v Carabelas [2005] HCA 23; (2005) 226 CLR 507
- Artcraft Pty Ltd v Dickson [2014] SASC 108
- Australian Securities and Investments Commission v Adler [2002] NSWSC 171; (2002) 41 ACSR 72
- Australian Securities and Investments Commission v Australian Investors Forum Pty Ltd (No 3) [2005] NSWSC 1198; (2005) 56…

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

Case: [2017] NSWSC 476
Decision Date: 27 April 2017

CaseChat Overview and Summary

In the case of Re FAL Healthy Beverages Pty Ltd, the Plaintiff sought relief from the court against the Defendant, who had served as a director and officer of the Plaintiff companies. The central issue was whether the Defendant had procured, made, or permitted payments by the companies to himself and entities he controlled, permitted the companies to incur fines, and failed to apply certain funds for their intended purpose, thereby breaching his directors’ duties. The Plaintiff also argued that the burden of proof rested with the Defendant, given the relevant facts were within his knowledge or he had greater means to produce evidence. The Plaintiff sought damages for these alleged breaches.

The court considered whether it should quantify the Plaintiff's loss when the evidence did not allow the court to form a rational view as to the amount of loss suffered. The Plaintiff also settled claims against other parties, and the Defendant was jointly and severally liable to some of those claims. The court had to determine whether the Defendant was entitled to set off the settlement sum against his own liability to pay damages.

The court held that the Defendant had breached his duties as a director and officer by procuring, making, or permitting payments by the companies to himself and entities he controlled, permitting the companies to incur fines, and failing to apply certain funds for their intended purpose. The court found that the burden of proof rested with the Defendant, given the relevant facts were within his knowledge or he had greater means to produce evidence. The court held that it was not appropriate to quantify the Plaintiff's loss when the evidence did not allow the court to form a rational view as to the amount of loss suffered. The court also held that the Defendant was not entitled to set off the settlement sum against his own liability to pay damages.

The court ordered the Defendant to pay damages to the Plaintiff for the breaches of his duties as a director and officer, and the amount of damages was to be determined at a later date. The court also ordered the Defendant to pay costs of the proceedings.

Orders