Re Ledir Enterprises Pty Ltd

[2013] NSWSC 1332

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of Ledir Enterprises Pty Limited [2013] NSWSC 1332
Hearing dates:	11-14 June, 18-21 June, 23, 26 July 2013
Decision date:	17 September 2013
Jurisdiction:	Equity Division - Corporations List
Before:	Black J
Decision:	Judgment that breaches of specified statutory directors' duties established and oppression established. Questions of relief to be determined after delivery of judgment.
Catchwords:	CORPORATIONS - share capital - shares - whether voting rights attached to relevant shares - whether valid votes were cast for removal of plaintiff as director - whether conversion of specified convertible preference shares occurred - whether representational or conventional estoppel prevents denial that shares were converted. CORPORATIONS - management and administration - duties and liabilities of officers of corporation - directors' duties - claim for breach of fiduciary duties and breach of directors' duties at general law - whether defendants as directors of second plaintiff owe a duty to the holding company of the second plaintiff. CORPORATIONS - management and administration - duties and liabilities of officers of corporation - claim for breach of ss 180(1) and 181(1) Corporations Act 2001 (Cth) - duty to act in good faith in the company's best interests - claim that payments were unauthorised - whether payments should be characterised as distributions or as loans - where in the context of a family group and family trust - whether resolution of directors occurred authorising payments - whether meeting of minds of directors occurred as to matters necessary to give rise to informal authorisation of payments - where alternate claim for unjust enrichment established - whether a demand for repayment had been made. CORPORATIONS - management and administration - duties and liabilities of officers of corporation - oppression - whether the affairs of the company were being conducted in a way contrary to the interests of the members as a whole - whether the first plaintiff was excluded from the management of the group - whether there was an expectation of participation in management - whether the first plaintiff was deprived of information - whether the court should exercise its discretion to deny relief to the first plaintiff on the basis that her conduct brought about the behaviour relied upon as oppression. CORPORATIONS - winding up - application for winding up on just and equitable ground - whether the companies can effectively function where personal relationships have broken down. EQUITY - general principles - equitable fraud - claim that defendants acted together to obtain control of companies and for other ends in equitable fraud against the first plaintiff - whether abuse and fraud on power of attorney - whether alleged scheme was an imposition or deceit and voidable on grounds of public policy.
Legislation Cited:	- Companies (NSW) Code s 320 - Corporations Act 2001 (Cth) ss 53, 53(a), 53(c), 53(f), 53(g), 180, 180(1), 181, 181(1), 187, 201M, 232, 232(d), 232(e), 233, 233(1)(a), 233(1)(d), 237, 247A, 249D, 260, 461(1)(k), 1274, 1322 - Corporations Law s 260 - Corporate Law Economic Reform Program Act 1999 (Cth) - Evidence Act 1995 (Cth) - Family Provision Act 1982 (NSW) - Income Tax Assessment Act 1997 (Cth) Div 7A - Powers of Attorney Act 2003 (NSW) s 11(1), Pt 4 Div 2 - Uniform Civil Procedure Rules 2005 (NSW) r 14.26
Cases Cited:	- Angas Law Services Pty Ltd (in liq) v Carabelas [2005] HCA 23; (2005) 226 CLR 507; (2005) 53 ACSR 208 - Australian Securities and Investments Commission v Rich [2009] NSWSC 1229; (2009) 75 ACSR 1 - Australian Securities and Investments Commission v Vines [2007] NSWCA 75; (2007) 73 NSWLR 451; (2007) 62 ACSR 1 - Banque Commerciale SA v Akhil Holdings Ltd [1990] HCA 11; (1990) 169 CLR 279 - Barnes v Addy (1874) LR 9 Ch App 244 - Beck v LW Furniture Consolidated (Aust) Pty Ltd [2011] NSWSC 235 - Bell Group Ltd (in liq) v Westpac Banking Corp (No 9) [2008] WASC 239; (2008) 39 WAR 1; (2008) 70 ACSR 1 - Birch v Cropper (1889) 14 App Cas 525 - Briginshaw v Bringinshaw (1938) 60 CLR 336 - Byrne v AJ Byrne Pty Ltd [2012] NSWSC 667 - Cambridge Electronics v McMaster [2005] NSWSC 198 - Campbell v Backoffice Investments Pty Ltd [2008] NSWCA 95; (2008) 66 ACSR 359 - Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304 - Chew v R (1991) 4 WAR 21; (1991) 5 ACSR 473 - Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337 - Commonwealth v Verwayen [1990] HCA 39; (1990) 170 CLR 394 - Commonwealth Bank of Australia v Hamilton [2012] NSWSC 242 - CSG Ltd v Fuji Xerox Australia Pty Ltd [2011] NSWCA 335 - Dare v Pulham [1982] HCA 70; (1982) 148 CLR 658 - David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 - Dynasty Pty Ltd v Coombs (1995) 59 FCR 122; (1995) 138 ALR 64 - Earl of Chesterfield v Janssen (1751) 2 Ves Sen 125; (1751) 28 ER 82 - Ebrahimi v Westbourne Galleries Ltd [1973] AC 360; [1973] 2 All ER 492 - Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [1998] NSWSC 413; (1998) 28 ACSR 688 - Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97; (2001) 37 ACSR 672 - Galea v Bagtrans Pty Ltd [2010] NSWCA 350 - Goozee v Graphic World Group Holdings Pty Ltd [2002] NSWSC 640; (2002) 42 ACSR 534 - Grant v John Grant & Sons Pty Ltd (1950) 82 CLR 1 - Gray v Gray [2004] NSWCA 408 - Harding Investments Pty Ltd v PMP Shareholdings Pty Ltd (No 2) [2011] FCA 567; (2011) 282 ALR 229 - Heydon v Perpetual Executors Trustees and Agency Co (WA) Ltd [1930] HCA 26; (1930) 45 CLR 111 - IceTV Pty Ltd v Ross & Ors [2008] NSWSC 1321 - Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd [2008] NSWCA 206; (2008) 73 NSWLR 653 - John J Starr (Real Estate) Pty Ltd v Robert R Andrew (A'Asia) Pty Ltd (1991) 6 ACSR 63 - Joint v Stephens [2008] VSCA 210; (2008) 26 ACLC 1467 - Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 - Krecichwost v R [2012] NSWCCA 101; (2012) 88 ACSR 339 - Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11; (2011) 243 CLR 361 - Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd [2006] FCAFC 144; (2006) 59 ACSR 444 - Liosatos v Kefalinian Brotherhood "O Kefalos" of NSW [2000] NSWSC 1138 - Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548 - Macleod v R [2003] HCA 24; (2003) 214 CLR 230 - McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; (2000) 203 CLR 579 - McGrath & Anor (in their capacity as liquidators of HIH Insurance Ltd) [2010] NSWSC 404; (2010) 78 ACSR 405 - McWilliam v LJR McWilliam Estates Pty Ltd (1990) 20 NSWLR 703; (1990) 2 ACSR 757 - Mancini v Mancini [1999] NSWSC 799 - Maronis Holdings Ltd v Nippon Credit Australia Pty Ltd [2001] NSWSC 448; (2001) 38 ACSR 404 - Mills v Mills (1938) 60 CLR 150 - Mopeke Pty Ltd v Airport Fine Foods [2007] NSWSC 153; (2007) 61 ACSR 395 - Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692 - Nasser v Innovative Precast Group Pty Ltd [2009] NSWSC 342; (2009) 71 ACSR 343 - New South Wales Rugby League Ltd v Wayde (1985) 1 NSWLR 86 - NM Superannuation Pty Ltd v Hughes (1992) 27 NSWLR 26; (1992) 7 ACSR 105 - Ogilvie v Adams [1981] VR 1041 - O'Neill v Phillips [1999] 2 All ER 961 - Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 - Permanent Building Society (in liq) v Wheeler (1994) 11 WAR 187; (1994) 14 ACSR 109 - Poliwka v Heven Holdings Pty Ltd (1992) 7 ACSR 85 - Re A Company (No 00709 of 1992) [1997] 2 BCLC 739 - Re Back 2 Bay 6 Pty Ltd (1994) 12 ACSR 614 - Re Colorbus Pty Ltd [2004] VSC 486; (2004) 51 ACSR 677 - Re Dernacourt Investments Pty Ltd (1990) 20 NSWLR 588; (1990) 2 ACSR 553 - Re DG Brims & Sons Pty Ltd [1995] QSC 53; (1995) 16 ACSR 559 - Re Driffield Gas Light Company [1898] 1 Ch 451 - Re HIH Insurance Ltd and HIH Casualty and General Insurance Ltd; Australian Securities and Investments Commission v Adler [2002] NSWSC 171; (2002) 41 ACSR 72 - Re Hollen Australia Pty Ltd [2009] VSC 95 - Re London School of Electronics Ltd [1985] 3 WLR 474 - Re Lowes Park Pty Ltd; Headlam v Lowes Park Pty Ltd (1994) 62 FCR 535 - Re Norvabron Pty Ltd (No 2) (1986) 11 ACLR 279 - Re Sullivans Cove IXL Nominees Pty Ltd [2011] TASSC 9; (2011) 82 ACSR 224 - Roden v International Gas Applications (1995) 125 FLR 396; (1995) 18 ACSR 454 - Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68; (2001) 208 CLR 516 - Royal Bank of Canada v The King [1913] AC 283 - Schmierer v Taouk [2004] NSWSC 345; (2004) 207 ALR 301 - Sheahan v Londish [2010] NSWCA 270, (2010) 80 ACSR 377 - Showa Shoji Australia Pty Ltd v Oceanic Life Ltd (1994) 34 NSWLR 548 - Shum Yip Properties Development Ltd v Chatswood Investment and Development Co Pty Ltd [2002] NSWSC 13; (2002) 166 FLR 451; (2002) 40 ACSR 619 - Summer Hill Business Estate Pty Ltd v Equititrust Ltd [2010] NSWSC 776 - Swiss Screens (Australia) Pty Ltd v Burgess (1987) 11 ACLR 756 - Temples Wholesale Flower Supplies Pty Ltd v Commissioner of Taxation (1991) 29 FCR 93 - Thomas v HW Thomas Ltd [1984] 1 NZLR 686; (1984) 2 ACLC 610 - Toll (FGCT) v Alphapharm [2004] HCA 52; (2004) 219 CLR 165 - Tomanovic v Argyle HQ Pty Ltd [2010] NSWSC 152 - Tomanovic v Global Mortgage Equity Corporation Pty Ltd [2011] NSWCA 104, (2011) 84 ACSR 121 - Turnbull & Ors v NRMA [2004] NSWSC 577; (2004) 50 ACSR 44 - Vigliaroni v CPS Investment Holdings Pty Ltd [2009] VSC 428; (2009) 74 ACSR 282 - Walker v Wimborne (1976) 1 CLR 1 - Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387 - Waterman v Gerling Australia Insurance Company Pty Ltd & Anor [2005] NSWSC 1066; (2005) 65 NSWLR 300 - Wayde v New South Wales Rugby League Ltd [1985] HCA 68; (1985) 180 CLR 459 - Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45; (2011) 282 ALR 604 - Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) [2012] WASCA 157; (2012) 89 ACSR 1 - Wilson HTM Investment Group Ltd v Pagliaro [2012] NSWSC 1068 - Winlyn Developments Pty Limited [2011] NSWSC 1218; (2011) 86 ACSR 197
Texts Cited:	- Austin Ford & Ramsay, Company Directors: Principles of Law and Corporate Governance, 2005 - Mason, Carter and Tolhurst, Mason & Carter's Restitution Law in Australia, 2nd ed
Category:	Principal judgment
Parties:	Rosemary Ellen Aboud (First Plaintiff) Ledir Investments Pty Limited (Second Plaintiff) Ledir Enterprises Pty Limited (First Defendant) David Louis Aboud (Second Defendant) Ian Samuel Aboud (Third Defendant) Ethel Aboud (Fourth Defendant) Mandala Pty Ltd (Fifth Defendant)
Representation:	Counsel: R. Brender, G.A. Elliott (First and Second Plaintiff) A.R. Zahra (First and Second Defendant) A. Fernon (Third and Fifth Defendants) Solicitors: Michael Michell & Associates (First and Second Plaintiffs) DLA Piper Australia (First and Second Defendant) Slater & Gordon (Third and Fifth Defendants)
File Number(s):	10/123392

Judgment

Parties and other relevant entities

1. These proceedings were commenced by Originating Process filed on 18 May 2010. The Fifth Amended Statement of Claim ("5FAS") was filed, by leave, on 14 June 2013. In the course of the hearing, and on the parties' request, I ordered that all questions of the Plaintiffs' entitlement to relief be determined prior to the determination of what relief was appropriate on terms that all evidence, including all cross-examination, on both matters was to be led - with the exception of valuation evidence as to a particular property - at the hearing and not be the subject of a separate hearing.

1. The First Plaintiff is Ms Rosemary Aboud (to whom I will refer, without disrespect, as "Rosemary"), who is the daughter of the late Louis Aboud (to whom I will refer, without disrespect, as "Louis") and Mrs Ethel Aboud and the sister of Mr David Aboud and Mr Ian Aboud. The Second Plaintiff is Ledir Investments Pty Limited ("Investments"), in whose name Rosemary brings derivative claims pursuant to leave previously granted under s 237 of the Corporations Act 2001 (Cth). The First Defendant is Ledir Enterprises Pty Limited ("Enterprises"). The Second and Third Defendants are Mr David Aboud (to whom I will refer, without disrespect, as "David") and Mr Ian Aboud (to whom I will refer, without disrespect, as "Ian") who are Rosemary's brothers. The Fourth Defendant is Mrs Ethel Aboud (to whom I will refer, without disrespect, as "Ethel") who is Louis' wife and David's, Ian's and Rosemary's mother. She is presently under a guardianship order made on 29 January 2010 and has filed a submitting appearance in the proceedings. The Fifth Defendant, Mandala Pty Limited ("Mandala"), is a company of which Ian is the sole shareholder and director.

1. The name "Ledir" stands for Louis, Ethel, David, Ian and Rosemary (Ian 8.11.2012 [22]). The shares in Investments are held by Enterprises as to 2 ordinary shares and 19 special shares, by Ledir General Insurance Pty Limited as to 10 redeemable preference shares and by a third party as to one special share. There is no evidence as to whether that third party holds that share beneficially or as nominee and, if so, for whom. Five A class and five B class shares in Enterprises are held by Ethel; forty-one B class shares in Enterprises are held by Comserv (No 1650) Pty Limited ("Comserv") (which is not party to the proceedings) as the trustee of the Ledir Trust, which is a discretionary trust settled pursuant to a deed of settlement dated 19 September 1983; forty E class shares in Enterprises are held by David; twenty F class shares held by Rosemary and there are several other classes of shares. A wholly-owned subsidiary of Enterprises, Pluteus (No 81) Pty Limited ("Pluteus") owns a rural property "Adair" on which David and his family lived. Other assets of the Aboud Family were, at relevant times, held in the LA Aboud Family Trust established in New Zealand ("New Zealand trust").

1. Rosemary is the daughter of Louis and Ethel and the sister of David and Ian. She was employed by an entity within the Ledir Group for about a year as manager of a children's newspaper in around 1982 and again as a manager in an affiliate's office in London between 1987 and 1995, while Louis and Ethel lived in London (David 12.11.12 [27]-[28]). Rosemary was also a director of Investments and Enterprises from December 1986 until her removal as a director in December 2006. She resided for several years with her parents and, after Louis' death, for a period with Ethel.

1. David also spent a substantial time working for the family businesses. He was the General Manager of General Publishers, the primary operating entity within the Ledir Group, between 1975 and 1981, was in charge of its New Zealand operations between 1993 and 1997 and was a director of other companies within the Ledir Group from 1973 (David 12.11.12 [8]-[9], [13]-[14], [20]). Until 2003, when he fell out with Louis in circumstances to which I will refer below, he was maintaining the business records of the Ledir Group and dealing with the company's accountants (David 12.11.12 [40]-[41]. On the other hand, Ian ceased to have involvement with the Ledir Group's businesses in about 1973, when he was about 24 years old, as a result of issues in relation to the then divorce between Louis and Ethel, although he was a director of General Publishers, one of the companies within the Ledir Group, for about 18 months commencing in 2001 before resigning (Ian 8.11.2012 [20]).

1. As I noted above, Comserv is not party to the proceedings. David submits that the Court may not make findings in respect of Comserv where it has not been joined as party to the proceedings. It does not seem to me that that is a correct analysis of the position; rather, any findings made in respect of Comserv do not bind it, where it has not been joined as party, and the Court should not grant relief against it (which is not sought) where it has not had an opportunity to be heard. It is, of course, commonplace for the Court to make findings as to events involving third parties, notwithstanding that they are not joined as party to the proceedings, although it will exercise caution in doing so where they have not had an opportunity to be heard.

Preliminary matter and witnesses

1. I should first address several preliminary matters. As will emerge below, Rosemary's pleading was complex and, in some respects, convoluted, with some allegations (for example, breach of directors' duties) pleaded in very wide terms; others (for example, oppression) cross-referenced to numerous paragraphs appearing elsewhere in the pleading; and factual allegations combined in different combinations to give rise to multiple alternative pleadings. The structure of Rosemary's case has given rise to some difficulty in structuring this judgment, since, for example, many of the matters relevant to dealing with the allegations of breach of directors' duties are also relevant to the allegations of oppression and of a fraudulent scheme liable to be set aside in equity. I have generally sought to cross-refer in this judgment to earlier findings in respect of later allegations to which they are relevant, but my findings and analysis in respect of each issue should generally be treated as relevant to each other issue.

1. Second, the parties provided detailed written submissions that addressed a wide range of factual matters, including some issues that ultimately did not need to be determined in order to decide the proceedings, and many factual disputes that were, at best, subsidiary or collateral to other factual disputes. I have had close regard to those submissions and to the parties' oral submissions, although I have sought to record my findings as to the matters that are significant for the determination of the issues in dispute in this judgment. Notwithstanding the length and detail of the parties' submissions, there was limited reference in them and in oral submissions to the relevant case law, and it has therefore been necessary for me to refer to cases that were not addressed in the parties' submissions. I could see no practical alternative to that course where it would not otherwise have been possible to identify the relevant legal principles in order to decide the case.

1. Third, I consider that the proper course is for me to determine these proceedings on the basis of the pleaded case, where Rosemary has not sought to amend the pleadings (beyond an amendment made early in the hearing) so as to raise several matter put in submissions. The role of pleadings is, of course, to define the issues in the proceedings and, importantly, to ensure the basic requirements of procedural fairness, namely that a party should have the opportunity to meet an identified case against him or her: Dare v Pulham [1982] HCA 70; (1982) 148 CLR 658 at 664; Banque Commerciale SA v Akhil Holdings Ltd [1990] HCA 11; (1990) 169 CLR 279 at 286, 296, 302-303. In Ingot Capital Investments Pty Limited v Macquarie Equity Capital Markets Limited [2008] NSWCA 206; (2008) 73 NSWLR 653, Ipp JA reviewed the case law and summarised the relevant principles as including (at [424]) that the rule that, in general, relief is confined to that available on the pleadings secures a party's right to a basic requirement of procedural fairness; and, apart from cases where the parties choose to disregard the pleadings and to fight the case on additional issues chosen at the trial, the relief that may be granted to a party must be founded on the pleadings. His Honour also noted that, in a clear case, mere acquiescence by one party in a course adopted by the other will be sufficient to ground an inference that the parties have chosen a different basis to the pleaded issues for the determination of their respective rights and liabilities, and acquiescence giving rise to a departure from the pleadings may arise from a failure to object to evidence that raises fresh issues. Nonetheless, his Honour noted:

"While cases are to be decided upon a basis that embraces the "real controversy" between the parties, the real controversy has to be determined in accordance with the principles stated."

1. The Defendants did not acquiesce in this case to a determination of the case other than on the pleadings, and made clear both in opening submissions (T66-67, 412) and in closing that they were defending the pleaded case. I do not consider that approach was unreasonable, where allegations of conduct amounting to contraventions of provisions in the Corporations Act subject to civil penalty provisions and equitable fraud was alleged against them. In my view, any attempt to decide the range of unpleaded matters raised, particularly in Rosemary's submissions, would not afford procedural fairness to the Defendants and would also not be consistent with the just resolution of the matters in dispute, where Rosemary's pleaded case was already very complex.

1. Although Rosemary was a key participant in the relevant events, she did not give evidence, although she was present in Court throughout the hearing (T335). Ian and David submit that I should drawn an inference that her evidence would not have assisted her case in accordance with the principle in Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298. That principle applies where a party is "required to explain or contradict" a matter and its basis is "plain commonsense": Jones v Dunkel per Windeyer J at 320-322. In Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11; (2011) 243 CLR 361 at [63], Heydon, Crennan and Bell JJ observed in their joint judgment that:

"The rule in Jones v Dunkel is that the unexplained failure by a party to call a witness may in appropriate circumstances support an inference that the uncalled evidence would not have assisted the party's case."

That principle does not compel the drawing of such an inference: Galea v Bagtrans Pty Ltd [2010] NSWCA 350 at [2]; CSG Ltd v Fuji Xerox Australia Pty Ltd [2011] NSWCA 335 at [82]; Commonwealth Bank of Australia v Hamilton [2012] NSWSC 242 at [204]. In my view, Rosemary's failure to give evidence in support of her case gives rise to an inference that her evidence would not have assisted her in respect of several significant matters in contest, and that inference is of some importance in the findings that I reach below.

1. David and Ian each gave evidence and were cross-examined at length. Each plainly felt strongly about the events in issue and their evidence was at least to some extent coloured by that matter. Rosemary submits that I should make adverse credit findings, particularly in respect of Ian. There were several unsatisfactory aspects of Ian's dealings with his mother's assets while he held her power of attorney which have been addressed in other proceedings, and Ian accepted in cross-examination in these proceedings that, from March 2007, he used his mother's power of attorney for his own purposes including paying himself money and paying money for the benefit of his wife, his children and legal fees (T326ff, T329). I have not found it necessary to make such credit findings in order to determine the proceedings. The majority of issues turn upon the legal characterisation of events and corporate actions that are not disputed and do not depend on David's and Ian's evidence.

1. Rosemary contends that a Jones v Dunkel inference should be drawn in respect of several witnesses. She contends that Mr Fergusson of BDO, a firm of accountants that advised the Ledir Group over the relevant period, was available to give evidence and David may recently have obtained some advice from him in December 2012 (T201). She also contends that David and Ian could have called Mr Motta, who is an accountant with BDO who appears to have been involved with changes to Enterprises' constitution made prior to Louis' death, to which I will refer below. She contends that Messrs Fergusson and Motta were in David's and Ian's "camp" and could have given relevant evidence as to the advice given by BDO, the Ledir Group's accounts, the estoppel case (to which I will refer below) and the arguments justifying Rosemary's removal as a director of Enterprises. I would not draw such an inference, since I do not consider that any evidence which is it suggested they could have given would have been of sufficient relevance to warrant drawing that inference.

Factual background - the earlier period

1. I should now set out a brief chronology of relevant events. The parties led substantial evidence of the relationship between family members and events surrounding various other proceedings between them. Rosemary alleged that David and Ian had acted inappropriately and unreasonably and David and Ian similarly alleged that Rosemary had acted inappropriately and unreasonably. David and Ian contended that Rosemary procured Ethel to commence proceedings under the Family Provision Act 1982 (NSW) at a time that Ethel's will had been changed in Rosemary's favour and sought to exclude Ian from any benefit from the family's wealth. Rosemary contended that, on an occasion when David and Ian removed corporate records of the Ledir Group from a property previously occupied by Ethel and Rosemary and then occupied by Rosemary, they also removed personal records of Rosemary. Each of David and Ian on the one hand and Rosemary on the other criticise the circumstances in which Rosemary and subsequently Ian obtained powers of attorney from Ethel. I largely admitted evidence dealing with these matters, leaving their ultimate relevance to be determined in this judgment. Some aspects of these disputes seem to me to be tangential to the matters in issue in the proceedings, although it will be necessary to address some of that evidence below.

1. Ian, David and Rosemary are the three children of Louis and Ethel. Ian was born in 1948, David in 1951 and Rosemary in 1953. Louis and Ethel lived at various times in England and New Zealand and from 2001 at a property, "Montoro", in Orange, New South Wales. Rosemary lived with her parents for parts of her adult life and, after Louis' death, with Ethel at Montoro until September 2006 when Ethel left to live with Ian in circumstances that I will set out below.

1. The Ledir Group acquired a company known as General Publishers in 1974 (David 12.11.12 [16]) and David started work with General Publishers in 1975 (David 12.11.12 [9]). Pluteus, a subsidiary of Enterprises, acquired a property known as "Adair" in 1984, and additional land was subsequently acquired, and David and his family lived and continue to live on that property (David 12.11.12 [12]-[13]). A conflict arose between Louis and David in June 2003, when Louis instructed David to dismiss his cousin as director of General Publishers and David declined to do so, properly, on the basis that a director of a listed company could only be removed by the company in general meeting. Louis then directed that monthly distributions cease to be paid from the Ledir Group to David and directed David to hand over the business records of the Ledir Group to Rosemary (David 12.11.12 [38]-[40]). Rosemary subsequently maintained those business records, with BDO's assistance, from June 2003 until October 2006 (David 12.11.12 [43]).

1. Louis obtained advice from BDO concerning proposed changes to the structure of the Ledir Group at various times, including in late 2003 (CB 29-30) (References in this form are to tabs contained in the Court Book). I will refer to that advice and the implementation of such charges in greater detail below.

1. Rosemary contends, and I accept, that she, David and Ian all received substantial assistance from the Ledir Group or Louis during his lifetime. Ethel's evidence in earlier proceedings was that all of the children received fair and substantial amounts (CB 66). Louis funded, in part or whole, the purchase of an apartment in London for Rosemary in 1989 (David 12.11.12 [29]). David, Ian and Rosemary each received $1 million from a New Zealand trust established by Louis in the year ended 31 March 2004 (T192). David and Ian also received other payments or help at other times from their father (David 12.11.12 [12]-[13], [22], [59]).

1. Louis died in April 2004 (David 12.11.12 [15], Ian 8.11.12 [21]). By his will dated 3 April 2002, admitted to probate in August 2005, Louis appointed Ethel, Rosemary and David as executors and left the whole of his estate to Ethel (CB 23). At the time of Louis' death, Ethel's will provided for her estate be left to Ian and Rosemary in approximately equal shares (David 12.11.12 [48]). Ethel, while living with Rosemary at Montoro, subsequently changed her will so that Rosemary would become the sole beneficiary of Ethel's estate (David 12.11.12 [46]-[48]) and also gave a power of attorney to Rosemary (CB 35, 35a).

1. In October 2005 Ethel commenced proceedings under the Family Provision Act ("FPA proceedings") in respect of, inter alia, assets of the New Zealand trust that would otherwise have been available to other family members who are beneficiaries of that trust (CB 49). These proceedings clearly contributed to a deterioration, or further deterioration, in the relationship between Rosemary on the one hand and Ian and David on the other and generated a significant amount of intemperate correspondence, both from Rosemary and from Ian. David gave evidence of matters relating to the conduct of the FPA proceedings (David 12.11.12 [52.1]-[52.6]) which was admitted as evidence of his understanding and subject to relevance.

1. There was a dispute between the parties as to whether Ethel or Rosemary was the primary driver of the FPA proceedings. David submits that the obvious intent of, or at least the result sought from, the FPA proceedings was that any additional assets acquired by means of those proceedings were likely to benefit Rosemary, so long as Rosemary was the sole beneficiary of Ethel's will. There is uncontested evidence that Rosemary advised David, after the commencement of the FPA proceedings, that they were intended to achieve "Zip for Ian, not one cent" (David 12.11.12 [50]). I understand that reference to indicate that those proceedings were intended to achieve the result that Ian would at least not receive any benefit from the New Zealand trust.

1. Mr Zahra, who appeared for David, undertook a detailed review in oral submissions of documents held in the file maintained by Ethel's solicitors in respect of the FPA proceedings which had subsequently been made available to Ian as Ethel's representative (CB 256). I do not consider it is necessary to review all the documents contained in this file to which the parties directed attention in submissions, with David typically contending that the relevant documents disclosed aggression on the part of Rosemary and Rosemary contending that they disclosed a reasonable approach to the FPA proceedings. I am satisfied that a number of file notes which refer to communications with "Aboud" record communications with Rosemary, a matter which emerges from the content of the communications, and it is clear that Rosemary was the primary source of instructions to Ethel's solicitors in those proceedings. The extent of Rosemary's involvement in these matters has some significance, not only because of Rosemary's reluctance, at least initially, to acknowledge it in submissions in these proceedings, but because it indicates that the solicitor who received a settlement proposal put by David and Ian (to which I will refer below) was, if not acting for Rosemary, nonetheless communicating regularly with her and receiving instructions from her. The communication of that proposal to that solicitor would therefore have brought it to Rosemary's attention.

1. The communications between Rosemary and the solicitor who later acted for Ethel in the FPA proceedings commenced in August 2004, more than a year before the FPA proceedings were commenced in Ethel's name (CB 256, p 1592). Consideration appears to have been given, in correspondence addressed both to Ethel and Rosemary, to a possible challenge to amendments made in 2002 to the articles of association of Enterprises (CB 256, p 1598) (to which I will refer below) although it appears the FPA proceedings were ultimately primarily directed to the position in respect of the New Zealand trust. In a conversation on 14 February 2005, Rosemary sought advice from that solicitor as to whether the (Australian) Ledir Trust "can be broken" and expressed the view that she did not wish to have David's wife to have "rights over Ethel" and was concerned about the trusts and companies if Ian was divorced (CB 256, p 1607). Rosemary subsequently took an active role in the conduct of the FPA proceedings, although she had filed a submitting appearance in them, including attending conferences with Ethel's legal representatives together with Ethel and giving instructions to Ethel's solicitors as to the basis on which "we" (which, in his context, could only refer to Rosemary and Ethel) would be prepared to settle the FPA proceedings (CB 96).

1. The fact that most communications with the solicitor acting in the FPA proceedings involved Rosemary meant that Ethel would have been dependent, at least to some extent, on information communicated by Rosemary for her understanding of those proceedings, although I have not neglected that there were other communications by the solicitor directly to and with Ethel. Rosemary has, of course, not given evidence of the extent of any such communication of information by her to Ethel. In these circumstances, the Court should be less ready to infer that the distress that Ethel later expressed as to the conduct of the FPA proceedings (CB 99) was not genuine or, as was implicit in Rosemary's case, was a position forced upon Ethel by Ian. These matters provide context for Ethel's subsequent role in Rosemary's removal as a director of companies within the Ledir Group, to which I will refer below.

1. On about 18 September 2006, Ian met with Ethel and Rosemary at Montoro. There is uncontradicted evidence that, at that meeting, Rosemary called Ethel "a liar"; Ian offered Ethel the opportunity to live with him and Rosemary told Ethel "I'll pack your bags and you can get out of the house" and then packed a bag for Ethel containing her clothing and told Ethel to "get out of the house, get out"; and Ethel then left Montoro and lived with Ian until 2009 when she moved to an aged care facility (Ian 8.11.12 [46]-[51]).

1. Shortly after Ethel left Montoro, she terminated the retainer of the solicitors acting for her in the FPA proceedings (CB 99), then sought to instruct David's solicitors to discontinue the proceedings (CB 101) and subsequently instructed other solicitors who attended to terminating the proceedings. By deed dated 28 September 2006, Ethel revoked the power of attorney that she had previously given to Rosemary (CB 105). By a handwritten note also dated September 2006, Ethel also authorised Ian to remove financial records and personal effects from Montoro (CB 108). David and Ian then entered Montoro, when Rosemary was absent, and removed company records and also personal records of Rosemary, which were (at least in substantial part) subsequently returned to her (David 12.11.12 [45], Ian 8.11.12 [69]-[71]). On 4 October 2006, Ethel signed a handwritten authority authorising the sale of Montoro (CB 107).

1. Also shortly after Ethel had left Montoro, David opened a new bank account in the name of Investments at a different bank, with the address of that account recorded as care of David at Adair. An amount of $1.65 million received on the sale of General Publishers was deposited in that account (CB 98). David did not then tell Rosemary about opening the new account or about his causing that amount to be deposited into that account and then being transferred to another account (T178). David accepted in cross-examination that these steps gave him complete control over $1.65 million of Investment's money without having to tell Rosemary (T178) and that Rosemary did not know about the existence of that account (T179).

1. On 24 October 2006, Ethel made a new will in favour of her grandchildren, Ian's and David's children (CB 111) and, in late October 2006, she gave a power of attorney to Ian (CB 112). The FPA proceedings were dismissed by consent on 26 October 2006 (CB 114, 167). On 29 November 2006, Ethel appointed Ian as her enduring guardian (CB 121). Mr Brender, who appears for Rosemary, made clear in his opening that Rosemary did not seek to establish that Ethel lacked capacity when she gave Ian the power of attorney and took other associated actions in September and October 2006 (T27), although her later submissions were not wholly consistent with that position.

1. Rosemary commenced proceedings in the Guardianship Tribunal in respect of her mother's affairs on 4 October 2006 (CB 109) which were unsuccessful, then brought proceedings in the Supreme Court Protective List which were also unsuccessful, largely because they sought to relitigate issues that had already been determined in the earlier Tribunal proceedings. Ethel by her tutor Ian brought proceedings against Rosemary in the Supreme Court for possession of Montoro, in the Local Court for recovery of a debt and in the District Court for recovery of furniture. In later proceedings in the Guardianship Tribunal proceedings, the Tribunal revoked the power of attorney that Ethel had granted to Ian and made a guardianship and financial management order, appointing the New South Wales Trustee in that capacity.

1. In November 2006, David's solicitors wrote to the solicitors acting for the trustee of the New Zealand trust stating that David and Ethel now sought to distribute the assets of that trust to appropriate beneficiaries (CB 116). On 14 December 2006, David and Ethel signed an authority for the trustee of the New Zealand trust to distribute in the income and capital of that trust (of about $NZ2.5 million) to Ian (CB 136, T182.27). That distribution was delayed for a substantial period since the trustee did not implement it over Rosemary's objection, and the distribution was ultimately made to several beneficiaries of the trust, including Rosemary, rather than only to Ian.

1. Ian's evidence is that, in late 2006, he and David decided to remove Rosemary as a director of the companies within the Ledir Group (Ian 8.11.12 [59]). David's evidence is that, in December 2006, he formed the belief that it was necessary to wind up the Ledir Group and distribute its assets between Ian, Rosemary and himself, to avoid wasted administration costs, loss on its share portfolio and because the company was no longer trading (David 12.11.12 [60]). The process that was subsequently implemented did not include any substantial distribution of assets to Rosemary as was contemplated by that approach.

1. On 4 December 2006, David made a payment of $360,000 to himself from Investments (5FAS [40]-[43]). It appears that that amount reflected the amount of distributions that had not been paid to David since Louis' decision to end such distributions to him in April 2002, as a result of the difference of opinion to which I referred above. David accepted in cross-examination that that payment was made without discussion with Rosemary (T180) and that he did not wait until Rosemary ceased to be a director of Enterprises in late December 2006 (in circumstances to which I will refer below) before making that payment (T182).

1. On 6 December 2006, notices of general meetings of Enterprises, Investments and other companies in the Ledir Group was sent to Rosemary and other shareholders indicating that it was proposed that Rosemary be removed as a director of the relevant companies (CB 126 - 130). By letter dated 18 December 2006, the solicitors acting for Rosemary objected to the proposed meetings (CB 138). On 22 December 2006, Ian was purportedly appointed a director of Enterprises by written resolution of its sole voting member, Ethel, pursuant to the power of attorney granted to him. Rosemary challenges the validity of that appointment on the basis that Ethel did not have voting rights (and, implicitly, no shareholder in Enterprises had such voting rights). Rosemary also contends that the use of the power of attorney amounted to equitable fraud. I will address those contentions below.

1. At a general meeting of the members of Enterprises held on 29 December 2006, Rosemary was removed as a director of Enterprises (David 12.11.12 [64]), CB 141, 146). That meeting was attended by David, by Ian and Ethel by telephone and by Mr Motum, then a partner with Phillips Fox, the firm of solicitors acting for David (Motum 12.11.12 [9]). David's evidence is that Ethel said that she understood the purpose of the meeting (David 12.11.12 [64]). Ian's evidence is that Ethel did not say anything during the meeting other than to confirm that she could hear David (Ian 8.11.12 [66]). Mr Motum's affidavit evidence in these proceedings was that Ethel was present by telephone at this meeting and that he recalled that "each of David, Ian and Ethel assented to each resolution as proposed" (Motum 12.11.12 [9.4]). However, Mr Motum had previously given evidence in other proceedings (Ex P2) that Ethel did not say anything in opposition to either resolution, and did not mention that she said anything else other than that she could hear David. Mr Motum acknowledged in cross-examination that his evidence in these proceedings may be incorrect (T123). I prefer Ian's evidence and Mr Motum's earlier evidence to David's and Mr Motum's more recent evidence, and find that Ethel did not orally approve but also did not voice any opposition to the use of the power of attorney to remove Rosemary as a director at that meeting.

1. The directors of Enterprises comprising David and Ian then resolved to appoint David as its corporate authorised representative for meetings of several companies within the Ledir Group to consider a resolution that Rosemary be removed as a director of those companies (David 12.11.12 [64], CB 148). David thereafter signed resolutions as corporate authorised representative removing Rosemary as a director of other companies within the Ledir Group, namely Investments, Pluteus and Ledir Estates (David 12.11.12 [64]-[65]), CB 148).

1. Ian was purportedly appointed as a director of Investments by written resolution of its directors signed by David on 25 January 2007 and by Ethel (by Ian as her attorney) on 29 January 2007, and was also purportedly appointed a director of Pluteus and Ledir Estates from the same date (David 12.11.12 [65], CB 152, 154). I will refer to a challenge to the validity of Ian's appointment as a director of Investments in paragraph 61 below.

1. The position of the Ledir Group was subsequently discussed at a meeting between its accountants, BDO, and David's solicitors on 29 January 2007, which noted that Ethel then had all the voting rights in Enterprises and on her death the voting rights would be shared 2/3 to David and 1/3 to Rosemary; that a resolution of Enterprises of 1 April 2002 provided that David and Rosemary would receive $9,000 per month each and the excess would be divided 70/30; that Ian was exercising his power of attorney, Rosemary had been removed as a director and David and Ian would now make all board decisions; that Louis had not indicated any desire to distribute any wealth out of Ledir Group to Ian but that David could gift after tax amounts out of his distribution; that the broad approach for the future would be interim dividends to David and Rosemary in the ratio of 2/3, 1/3; and that Adair could be transferred to David in exchange for a promissory note given by David and thereafter the Ledir Group companies could be placed in voluntary liquidation (CB 155). The observation in this meeting that Louis had not indicated any desire to distribute any wealth out of Ledir Group to Ian needs to be qualified by the fact that, as I will note below, Louis' intentions changed from time to time and he had indicated such an intention on at least two occasions. Distributions from the Ledir Group to David and Ian were not subsequently made in the proportions contemplated by that meeting, as will emerge below.

1. On 21 February 2007, BDO prepared a complex distribution strategy which contemplated that Investments would pay a cash dividend to Enterprises; Enterprises would pay a cash dividend to Comserv as trustee for the Ledir Trust and would also make a loan to the Ledir Trust; the Ledir Trust would make distributions and lend money to selected beneficiaries without indicating who would be selected; Enterprises would later declare a dividend that would be offset against the amounts owing by the Ledir Trust and the Ledir Trust would apply that offset against the loans owing by the beneficiaries; Investments would sell its listed shares and lend some of the proceeds to Enterprises which would in turn lend them to the Ledir Trust which would lend them to selected beneficiaries; Investments would declare a franked dividend in favour of Enterprises and offset it against its loan to Investments; Enterprises would declare a franked dividend and offset it against its loan to the Ledir Trust; the Ledir Trust would make a distribution and offset it against the loan owing by selected beneficiaries; and Adair would be transferred to David at valuation in exchange for a promissory note for the transfer price. The intended effect of this approach was that about $1.216m would be paid to selected beneficiaries of the Ledir Trust as a distribution from the Trust, about $1.56m would be lent to selected beneficiaries, a further $360,623 would be paid as a distribution from the Trust to selected beneficiaries and about $1.420m would be lent to selected beneficiaries and, on completion of liquidation, a final distribution could be made (CB 162). At least part of this approach was later implemented, with substantial distributions and loans being made to David and Ian but not to Rosemary.

1. In March 2007, agreement was reached between David and Ian that payments of about $2 million and $2.5 million would be made to Ian and David respectively (Ian 8.11.12 [100]) and, on 28 March 2007, Ian's solicitors advised David's solicitors that David had told Ian that a distribution of $2 million was to be made to Ian from the Ledir Trust (CB 182). By letter dated 5 June 2007, David's solicitors wrote to David calculating the total amount for distribution by franked and unfranked distributions and loans as $3,939,273 and seeking instructions as to the identity of the beneficiaries, and calculating that Rosemary would or could receive either 20/60th ($2,699.910) or 20/70th ($2,314.208.00) on such a distribution (CB 199). That calculation appears to reflect an assumption that such a distribution should be made by reference to Rosemary's entitlements on a winding up of Enterprises, to which I will refer below, rather than any assessment of what could or should be distributed by Comserv as the trustee of a discretionary trust. As I noted above, the distribution was ultimately not made on that basis.

1. A payment of $2,439,273 was made to David from the Ledir Trust on 27 June 2007, initially as a loan, which was later extinguished when Comserv made a trust distribution to David of $2,547,273 in 2008, comprising the previous loan amount and monthly distribution for that year totalling $108,000. Payments were made to Ian of $500,000 on or about 7 May 2007 and $1,500,000 on about 27 June 2007, initially as a loan, which were extinguished in the year ended 30 June 2008 when Comserv resolved to make a distribution of $2 million to Ian. I will refer further to these payments below. A further payment of $50,000 was made to Ian or Mandala on 24 September 2008 and $1 million was paid to Ian or Mandala about 23 December 2008. I will also refer further to these payments below.

1. On 4 September 2009, David and Ian met as directors of Comserv and ratified distributions made between 27 June 2007 and 23 December 2008, the loan of funds on 27 June 2007 to David in the sum of $2,439,273 interest fee and repayable on demand, and a loan to Ian in the amount of $560,861 also interest free and repayable on demand (CB 341). An issue arose in the course of the hearing as to whether Ian had properly been appointed as a director of Comserv in order to vote on that resolution. I will address that issue and any impact of that ratification below.

1. In late 2009, the trustee of the New Zealand trust determined to make a final distribution totalling $2.43 million to be paid one-third to Ethel, one-third to David and one-ninth to each of David, Ian and Rosemary and Ian, David and Ethel (by Ian as her attorney) agreed to that distribution (CB 331, 332, 342). It appears that distribution was subsequently made.

Allegation that Rosemary's removal as a director was unlawful

1. Rosemary pleads that her removal as a director of Enterprises was 29 December 2006 was "invalid and unlawful" (5FAS [47A]). This allegation is particularised on the basis that Ethel's B class converting preference shares had not been converted to B class shares, no other shares carried any entitlement to vote in Enterprises and no valid votes were cast for Rosemary's removal as a director

1. Rosemary contended in submissions that her removal as a director of Enterprises in December 2006 was unlawful because she was removed by the exercise of Ethel's vote as a "B" class shareholder in Enterprises and, she contended (and pleaded in 5FAS [16]) that Ethel had not converted her shares from B convertible preference shares to B class shares and did not have such a vote. This question seems to me to be of little practical significance, so far as Rosemary's removal as a director was concerned, since article 64 of Enterprises' articles of association (CB 2) provided that each director shall retire from office and be eligible for re-election at any ordinary general meeting of Enterprises. Rosemary did not contend that the general meeting of Enterprises held on 29 December 2006 was not an ordinary general meeting for the purposes of that article. I accept David's submission that Rosemary ceased to be a director of Enterprises by operation of that article at that general meeting and the resolution for her removal was not necessary to that result. (I should add that it is not necessary for me to address any possibility that David and Ian also ceased to be directors of Enterprises at that meeting for the same reason, leaving Enterprises without directors since December 2006, since Rosemary did not advance that submission. Even if that were the case, their acts as directors may well be validated by s 201M of the Corporations Act, to which I will refer below, or an application brought under s 1322 of the Corporations Act.)

1. I should, however, indicate my findings as to the question of the voting rights attached to Ethel's shares, against the contingency that an appellate court were to take a different view as to the effect of article 64 of Enterprises' articles of association, and because that question is relevant to the validity of the appointment of Ian as a director of Enterprises on 22 December 2006 by written resolution of Ethel, executed by Ian in reliance on the power of attorney that Ethel had granted to him. The articles of association of Enterprises initially set out the rights attaching to B convertible preference shares in subparagraphs (f)(i)-(vi) of article 2(b)(3). Those paragraphs were replaced by an amendment to Enterprises' articles of association made by circulating resolution dated 1 April 2002 (David 12.11.12 [35.3], CB 20), with new provisions which provided, inter alia, that:

"the said "B" preference shares shall be entitled to 100% of the voting rights of the company after the death of Louis Alexander Aboud, but the said "B" preference shares shall cease to have voting rights in the company upon the death of Ethel Aboud."

1. David and Ian submitted that that circulating resolution either recognised an earlier conversion of Ethel's convertible preference shares to B class shares conferring the specified rights or alternatively implemented that conversion, and rely on the reference in those provisions to the shares as B preference shares rather than convertible preference shares and to correspondence prior to the passage of the resolution (to which I will refer below) which contemplated that the amendment would have that effect.

1. The principles applicable to the construction of commercial contracts apply, with qualification, to the construction of a company's constitution. Attention must be given to the language used by the parties and the purpose and object of the transaction and, at least where there is uncertainty or ambiguity in the text of the document, the Court may have regard to the surrounding circumstances known to the parties: Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337 at 350; McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; (2000) 203 CLR 579 at 589; Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 at [22]; Toll (FGCT) v Alphapharm (2004) 219 CLR 165 at 179; Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45; (2011) 282 ALR 604. The same principles are generally applicable in the construction of a company's constitution, albeit that caution is required in their application in that context: Lion Nathan Australia Pty Ltd v Coopers BreweryLtd [2006] FCAFC 144; (2006) 59 ACSR 444.

1. I do not consider that the amendment made in April 2002 can be construed as itself effecting a conversion of the "B" class convertible preference shares. The terms of the resolution expressly replaced subparagraphs (f)(1)(i)-(vi) of article 2b(3) of Enterprises' articles of association, and not the introductory words of that paragraph which dealt with the manner of conversion, and set out new rights attaching to B preference shares, where those rights had previously not been set out in Enterprises' constitution. That amendment does not itself necessitate or imply a conversion of those shares and would operate effectively and in accordance with its terms if read as defining the rights attaching to those shares once converted by a separate act of conversion. A reading of that amendment as itself effecting such a conversion would, as Rosemary points out, be inconsistent with the introductory words of the article which only permitted such conversion after Louis' death.

1. David and Ian alternatively submit that the circulating resolution dated 1 April 2002, as signed by Louis, satisfies the requirements of article 2b(3)(e) of Enterprises' articles of association which permitted Louis, during his lifetime, to amend the voting rights attached to the B convertible preference shares by notice in writing to the company. I cannot accept this submission, because the resolution, in its terms, provides for the rights attaching to the B preference shares (which would come into existence on conversion) rather than the rights attaching to the B convertible preference shares.

1. David and Ian also rely on a notice of the conversion of the B class shares on 1 April 2002 that was given to ASIC on 30 November 2006 (CB 137). The ASIC records of Enterprises also record Ethel as being a "B" class shareholder (CB 400, pp 2750-2752) and, by reason of s 1274 of the Corporations Act, those documents are prima facie evidence of the matters stated in them: Winlyn Developments Pty Ltd [2011] NSWSC 1218; (2011) 86 ACSR 197 at [37]. However, it seems to me that prima facie evidence is rebutted by the analysis of the effect of the amendments to which I have referred above, subject to the question of estoppel to which I now turn.

1. In paragraphs 16A-16B of his Defence to the Fifth Amended Statement of Claim, David pleads an estoppel, contending that Enterprises is estopped from denying that Ethel has converted her B convertible preference shares to B class shares and therefore had voting rights in Enterprises following Louis' death. The pleading extends to a conventional estoppel, by reason that Enterprises and Ethel have acted on an alleged common basis and common assumption that Ethel had converted those shares. Ian advances a corresponding defence in paragraphs 16A-16B of his Defence to the Fifth Amended Statement of Claim.

1. The pleading is put, first, as a representational estoppel. I should briefly identify the elements of such an estoppel, although the parties devoted little attention to this matter in submissions. In Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387, Brennan J observed that to establish an equitable estoppel the first thing it was necessary for the plaintiff to prove was that (at 428):

"... the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship."

In Commonwealth v Verwayen [1990] HCA 39; (1990) 170 CLR 394, Deane J observed (at 444) that the law does not permit an unconscientious departure by one party:

"from the subject matter of an assumption which has been adopted by the other party as the basis of some relationship, course of conduct, act or omission which would operate to that other party's detriment if the assumption be not adhered to for the purposes of the litigation."

In Summer Hill Business Estate Pty Ltd v Equititrust Ltd [2010] NSWSC 776 at [42]ff, Pembroke J identified three key elements of a representational estoppel as being that the defendant's words or conduct must be clear and unambiguous; the defendant's conduct in relying to its detriment on those words or conduct must be reasonable; and the defendant must know or intend that the plaintiff will act or abstain from acting in reliance on those words or that conduct or, in effect, have some reasonable expectation that its words or conduct will induce some detrimental reliance by the plaintiff.

1. In the present case, it seems to me that Enterprises made a representation to Ethel that she had converted and was entitled to vote the relevant shares by a letter dated 1 April 2002, signed by Louis, which indicated that its purpose was to inform Ethel that the rights attached to her shares in Enterprises had been varied and that the new rights were, relevantly, that the B preference shares were entitled to exercise all of the voting rights upon Louis' death. The fact that Ethel in fact held that understanding is demonstrated by a letter dated 28 July 2006 (CB 79) from her solicitors in the FPA proceedings (which may or may not have reflected instructions from Rosemary to those solicitors) to David's solicitors advising of her understanding that the conversion of the B preference shares had previously occurred. I would readily infer that Ethel's conduct in not taking further steps to convert her shares so as to allow her to receive the dividends she in fact received from Enterprises and confer voting rights after Louis' death took place on the basis of the advice she had been given by Enterprises that she already had such rights; her conduct in that regard was reasonable in the light of that advice; and Enterprises would have known that, by reason of that advice, Ethel was very likely to assume that her shares had been converted to B class shares on the basis of its advice to that effect and assume that no further conversion was necessary to secure her right to dividends or voting rights in respect of the B class shares. I consider an estoppel is therefore established as between Enterprises and Ethel, which is sufficient to support Ethel's exercise of voting rights at the December 2006 general meeting.

1. For completeness, I should add that David also gave evidence of matters which led him to hold an understanding that Ethel's "B" class shares entitled her to vote as a member of Enterprises, and to his having acted on that belief including in connection with the meetings of the companies in December 2006, in his third supplementary affidavit dated 14 June 2013. David was cross-examined as to that evidence, and Rosemary sought to rely on later correspondence in which BDO left open the question whether the B preference shares had been converted at some earlier time. I do not find it necessary to consider what understanding David had as to these matters, which does not seem to me to be relevant to whether an estoppel would prevent Enterprises denying the exercise of the relevant voting rights by Ethel (by her attorney Ian) rather than by David.

1. David and Ian also rely on a pleading of conventional estoppel. The elements of a conventional estoppel require that the party asserting that estoppel has adopted an assumption as to the terms of its legal relationship with the party to be estopped; that party has adopted the same assumption; the parties have conducted their relationship on the basis of the mutual assumption; each party knew or intended the other to act on that basis; and the departure from that assumption will occasion detriment to it: Waterman v Gerling Australia Insurance Company Pty Ltd & Anor [2005] NSWSC 1066; (2005) 65 NSWLR 300 at [83].

1. This claim for conventional estoppel is supported, as between Enterprises and Ethel, by the letter dated 1 April 2002 from Enterprises to Ethel to which I have referred above. Correspondence from the Ledir Group's accountants, BDO, to Louis, Ethel, Rosemary and David was to similar effect to that letter. A letter dated 30 April 2001 from BDO to Louis attached amending documents that were described as having the result that Ethel's B preference shares would, after Louis' death, have 100% voting rights (CB 15). A letter dated 19 September 2003 from BDO to Louis records the structure of Enterprises following the changes that were implemented on 1 April 2002, and describes the shares held by Ethel as 5 B preference shares (rather than as convertible preference shares) and also notes that, as part of the changes, the rights attached to the shares in Enterprises were amended so that, if Ethel survives Louis, she was entitled to 100% of the voting rights in Enterprises following his death. A letter dated 24 August 2004 from BDO to Ethel and Rosemary attached a diagram setting out the Ledir Group structure, reflecting information contained in the letter dated 21 November 2003 from BDO to Louis, and recorded the shares held by Ethel as 5 B class preference shares and that, on Louis's death, Ethel was entitled to 100% of the voting shares in Enterprises. By letter dated 18 April 2005, BDO provided information as to the structure of the Ledir Group to the solicitors representing Ethel in the FPA proceedings, and again recorded that Ethel held 5 B class preference shares and that Ethel was entitled 100% of voting rights in Enterprises following Louis' death (CB 36). Ethel also proceeded on the basis that she held 5 B class preference shares, rather than B class convertible preference shares, in her affidavit in the FPA proceedings (CB 66, [5]).

1. David also refers to advice given by BDO to him concerning the notification to ASIC of the conversion of the B convertible preference shares into B class preference shares, the notification given to ASIC on 30 November 2006 that Ethel held B preference shares and the preparation of a share register of Enterprises recording Ethel's holding of such shares. A conventional estoppel is also supported by Enterprises' conduct in paying dividends to Ethel pursuant to her rights as a holder of B class preference shares, in excess of the more limited dividends which she could have received as a holder of B class convertible preference shares, including dividends paid pursuant to a resolution passed by Rosemary and David as directors of Enterprises on 30 June 2005. If Ethel's shares had not been converted to B class preference shares, she would only have been entitled to a minimal dividend at a rate of 5% on the capital paid up on the shares of $10 each, rather than the dividend that she actually received for the years ending 30 June 2003 (CB 25) and thereafter.

1. I should add that Rosemary also appears to have previously understood, contrary to the position she now advances in these proceedings, both that Ethel had all the voting rights in Enterprises in general meeting and also that Ethel's right to receive a dividend of $5,000 per month from Enterprises arose from her holding B class preference shares in Enterprises. Her solicitors advised the New South Wales Trustee and Guardian of that matter by letter dated 9 March 2012, the relevant paragraphs of which were admitted as admissions against Rosemary's interests in the proceedings. Rosemary also understood, and her solicitors advised the New South Wales Trustee and Guardian by that letter, that Louis had intended to leave, and had in fact left, a situation where Ethel retained a controlling shareholding in Enterprises in her lifetime, and that statement was also admitted as an admission against Rosemary's interests in the proceedings.

1. In the present case, at least Ethel and Enterprises (but also Rosemary, David and Ian) had acted on the assumption that Ethel held B class preference shares (or, at least, shares having the rights conferred by the April 2002 amendments) and have conducted their mutual relationship on that basis and knew or intended that the other would act on that basis, and departure from that assumption would occasion detriment at least to Ethel so far as it would deprive her of the rights apparently conferred in April 2002, and to David and Ian so far as they have proceeded on that basis in respect of the meetings held in December 2006. I therefore find that a conventional estoppel is established.

1. David and Ian also submit that the effect of article 58 of Table A to the Companies Ordinance 1962 (in respect of Enterprises) and article 88 of Table A to the Companies Ordinance 1936 (in respect of Investments) would prevent any objection now being taken by Rosemary to Ethel's entitlement to vote for the appointment of any director. The former provision provides that:

"58. No objection shall be raised to the qualification of any voter except at the meeting or adjourned meeting at which the vote objected to is given or tendered, and every vote not disallowed at such meeting shall be valid for all purposes. Any such objection made in due time shall be referred to the chairman of the meeting, whose decision shall be final and conclusive."

I do not consider it necessary to determine this further submission, which was not the subject of substantive submissions by any party, where I have held that representational and conventional estoppels would support the exercise of voting rights at that meeting.

1. It also does not seem to me that Rosemary was successful in an attack on the exercise of the power of attorney given by Ethel to Ian, to the extent that underpinned the exercise of Ethel's vote at the general meeting of Enterprises on 29 December in support of Rosemary's removal as a director. I noted above that Rosemary had previously obtained a corresponding power of attorney from Ethel and thereby placed herself in a position to use it if she wished to do so. Rosemary accepted in opening that she could not establish that Ethel lacked capacity at the time the power of attorney was granted in favour of Ian; she did not plead that Ian exercised any undue influence or otherwise acted unlawfully in obtaining that power of attorney; she did not establish that the grant of the power of attorney did not in fact reflect Ethel's wishes; and she did not establish that her removal as a director was inconsistent with Ethel's wishes.

1. Rosemary also pleads that, since December 2006, she has been wrongfully excluded from the deliberations of persons acting as directors of Enterprises (5FAS [48B]). That allegation is also not established since Rosemary ceased to be a director of Enterprises in December 2006 by reason of article 64 of its articles of association and, alternatively, was validly removed as a director of Enterprises for the reasons noted above.

1. Rosemary also pleads that her removal as a director of Investments and other companies and the appointment of Ian as a director of Investments and other companies was "unlawful" (and, implictly, also legally ineffective) (5FAS [48A]). That allegation is particularised by the fact that Rosemary's removal depended on the deliberations of David and Ian, to the exclusion of Rosemary who remained a director of Enterprises, that Rosemary did not receive notice of any such meetings, and would have opposed such decisions had she received notice, when Ethel was not acting or was not capable of acting as a director of Enterprises. This allegation is not established. First, Rosemary's removal as a director of Investments and the other companies was effected by David's acts as corporate representative appointed by Enterprises in respect of Investments and those companies. Those appointments were not ineffective by reason of the matters particularised, where I have accepted David's submission that she ceased to be a director of Enterprises at the meeting in December 2006 under article 64 of Enterprises' articles of association; she did not contend that David or Ian had similarly ceased to be directors and their actions would potentially be validated by s 201M of the Corporations Act in any event; and I have held that Ethel was entitled, at least by reason of an estoppel, to vote (as she did, by Ian, as her attorney) at the meeting of Enterprises. Rosemary did not identify any basis for an entitlement to notice of any meeting of Investments or the other companies, arising under their articles of association or otherwise; she was not a shareholder of those companies and has identified no basis on which she could have effectively "opposed" that removal, when it was effected by the corporate representative of the holder of their voting shares; and it was not necessary for Ethel to act as a director of Enterprises either at its general meeting, where she was acting as holder of B class shares, or in respect of Investments, where Enterprises rather than Ethel held the relevant shares.

1. Rosemary also submitted that Ian's appointment as a director of Investments, by written resolution of the directors of the company with effect from 29 January 2007, was invalid, because it relied on the use of Ethel's power of attorney in respect of the exercise of her powers as a director rather than a shareholder. David and Ian in turn rely on the fact that Enterprises (being the shareholder in Investments) ratified that appointment on 13 June 2013 (David 14.6.13, [7] and Annexure K). The parties, as often occurred in this case, did not advance substantive submissions in respect of the applicable legal principles and I must address the issue without the assistance of such submissions. It does not seem to me that this challenge can have any impact on the outcome of the proceedings, since it is plain that there was a purported appointment of Ian as a director of Investments. If that appointment were invalid by reason of a non-compliance with the company's constitution or the Corporations Act (because, if Rosemary were correct, the necessary resolution to make it was not effectively passed), the acts taken by Ian in his capacity as a director of Investments were nonetheless effective, so far as Investments' internal affairs including the payment of dividends were concerned, by reason of s 201M of the Corporations Act: Grant v John Grant & Sons Pty Ltd (1950) 82 CLR 1; Re Colorbus Pty Ltd [2004] VSC 486; (2004) 51 ACSR 677. This is not a case, by contrast with Sheahan v Londish [2010] NSWCA 270, (2010) 80 ACSR 377, where no such purported appointment was made. It is not necessary to determine several other matters arising in respect of this contention, including whether it was sufficiently pleaded or particularised to permit Rosemary to advance it; whether, as Rosemary contend, David and Ian could not then rely on the subsequent ratification of that appointment, which they had also not pleaded; whether the limits to a directors' ability to perform his or her duties by an attorney (to which I refer below) extend to the act of signature of a written resolution of directors; and whether that ratification was otherwise effective.

Derivative claims - The pleaded breaches of fiduciary and statutory duties and the applicable legal principles

1. Rosemary brings derivative claims by Enterprises and Investments for breach of fiduciary duty and directors' duties at general law. The relevant pleadings are somewhat complex. I will first address Rosemary's pleaded case and the applicable legal principles and then deal with the several transactions that Rosemary seeks to attack, each on several grounds.

1. Rosemary first pleads that:

63. "By reason that:

a. Ledir Investments was solvent; and

b. Ian Aboud and David Aboud were directors of Ledir Investments by reason of Ledir Enterprises' control and ownership of Ledir Investments;

Ian and David's actions as directors of Ledir Investments were at all relevant times actually or substantially subject to their fiduciary duties as directors of Ledir Enterprises and are to be treated on the same basis as though they were actions as directors of Ledir Enterprises."

1. It is, of course, well-established that a director owes certain fiduciary duties to the company of which he or she is a director. For example, in Mills v Mills (1938) 60 CLR 150 at 195, Dixon J observed that "[d]irectors of a company are fiduciary agents, and a power conferred upon them cannot be exercised in order to obtain some private advantage or for any purpose foreign to the power". Traditionally, the fiduciary duties of directors include at least a duty to avoid situations where there is a conflict between the interest of the director and the interest of the company; and, probably, a duty to act in good faith and to exercise powers conferred on a director as a result of his or her office for proper purposes. In Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) [2012] WASCA 157; (2012) 89 ACSR 1, the majority held that the duties owed by company directors to act in good faith in the company's best interests and to exercise their powers for a proper purpose were also fiduciary in character (per Lee AJA at [918]-[933], per Drummond AJA at [1956]-[1978]), and Carr AJA also observed that he was not prepared to hold, on the present state of authority, that those duties were not fiduciary duties (per Carr AJA at [2733]).

1. However, the fiduciary duties pleaded by Rosemary in 5FAS [63] do not appear to be duties of that orthodox character, which do not depend on a company's solvency or its control of another company. Rosemary does not here plead that David and Ian owed fiduciary duties in their capacity as directors of Investments to Investments, or in their capacity as directors of Enterprises to Enterprises, although those propositions would plainly be correct. She instead pleads that, because David and Ian owed their control of Investments to Enterprises' control of Investments, their conduct as directors of Investments was subject to their fiduciary duties to Enterprises or, as she puts it, that their actions as directors of Investments are subject to the same duties owed to Enterprises as would be owed in respect of their duties as directors of Enterprises. I should add that, although the parties did not draw my attention to the particulars (CB 9), David's legal representatives appears to have understood the allegation in this way since, by letter dated 29 October 2010, they requested particulars of the facts matters and circumstances relied upon in alleging that David's and Ian's conduct respectively "as a director of Ledir Investments gave rise to fiduciary duties owed to Ledir Enterprises". Rosemary's solicitors responded by letter dated 16 November 2010 (CB 9) by reference to the matters pleaded in paragraphs 63(a) and (b) of the Statement of Claim, to which I have referred, and paragraphs 10, 11 and 48 of the Statement of Claim and the particulars to those paragraphs. Paragraphs 10 and 11 of the Statement of Claim referred to Enterprises' ownership of shares in Investments and its entitlement to vote at a general meeting of Investments and paragraph 48 referred the exercise of the voting power of Enterprises as a shareholder of other companies in the Ledir Group to bring about Rosemary's removal as directors of those companies.

1. Rosemary's written submissions did no more than assert the existence of a duty of the kind pleaded, without identifying any reasoning process that would support it. It does not seem to me that the pleaded duty is established, so as to cause David and Ian in their capacity as directors of Investments to owe a fiduciary duty to Enterprises, the holding company of Investments, or to be subject in acting as directors of Investments to the duties which they would owe to Enterprises in acting as directors of Enterprises. My attention was not drawn to any authority to suggest that a director of a subsidiary is treated in acting in that capacity as though he or she were in fact acting as director of its holding company or that he or she, at least in the ordinary course, owes fiduciary duties to its holding company while acting in that capacity. There is a significant difficulty with those propositions, namely that, in acting as directors of Investments, Ian and David were in the ordinary course required to act in the interests of that entity rather than solely in the interests of its holding company: see, for example, Walker v Wimborne (1976) 137 CLR 1 at 6-7; Maronis Holdings Ltd v Nippon Credit Australia Pty Ltd [2001] NSWSC 448; (2001) 38 ACSR 404; McGrath & Anor (in their capacity as liquidators of HIH Insurance Ltd) [2010] NSWSC 404; (2010) 78 ACSR 405 at [39]. The constitution of Investments was not amended in accordance with s 187 of the Corporations Act so as to permit its directors to act in the interests of its holding company, and it seems that such an amendment would not have been effective where Enterprises did not hold all the shares in Investments. There would be no reason to impose upon David and Ian duties, as directors of Investments, requiring them to act in the interests of Enterprises or not contrary to the interests of Enterprises or as though they were directors of Enterprises where such duties would potentially conflict with their duties to act in the interests of Investments. I do not find that the pleaded fiduciary duty owed by David and Ian is established.

1. Rosemary in turn alleges that Ian and David breached their fiduciary duties owed to Enterprises pleaded in 5FAS [63] (which I have not held to be established) and to Investments (which are not pleaded) in taking certain pleaded actions (5FAS [64]). Rosemary pleads that:

"64. In causing Ledir Investments or Ledir Enterprises to make:

a. The David Aboud Payments;

b. The Ian Aboud Payments; and

c. Lawyers Payments

and in causing Ledir Enterprises to appropriate franking credits to dividends as pleaded in paragraph 61A which were ultimately received by them as pleaded in paragraph 61B, David Aboud and Ian Aboud acted:

d. In their own interests;

e. To prefer their own interests to the interests of Ledir Enterprises and that company as a whole;

f. Contrary to the interests of the members of Ledir Enterprises as a whole and the plaintiff in particular; and

g. In breach of their fiduciary duties to Ledir Enterprises; or

h. In breach of their fiduciary duties to Ledir Enterprises and Ledir Investments."

The term "David Aboud Payments" is in turn defined as the amount of $204,000 of the December 2006 payments; a first monthly payment of $9,000 to David and subsequently monthly payments so far as they exceeded $4,000 per month, a reimbursement of costs previously paid by David to his solicitors in respect of the FPA proceedings, and the amount of $2,439,273 paid to David on or about June 2007. The term "Ian Aboud Payments" is defined as the amounts of $500,000 paid to Mandala on 7 May 2007, $1.5 million paid to Mandala on 27 June 2007; $50,000 paid to Ian on or about 24 September 2008 and $1 million paid to Mandala on or about 23 December 2008. The term "Lawyers Payments" is defined as payments to David's, and on one occasion Ian's, legal advisers. I will address these transactions below.

1. Rosemary then adds a further breach of a fiduciary duty owed to Enterprises in 5FAS [65], after a pleading of breach of statutory duties to which I refer below, namely that David and Ian, in undertaking the same conduct:

1. David also contends that the last of the substantial payments made to David and Ian was made on 23 December 2008 and the proceedings were not commenced until 18 May 2010 and contends that relief would generally be inappropriate as a matter of discretion if there is no ongoing oppression: Tomanovic v Argyle HQ Pty Ltd above at [39]; Byrne v AJ Byrne Pty Ltd above at [49]. In Campbell v Backoffice Investments above, the plurality observed at [182], without needing to reach a final decision, that:

"Because the current form of the oppression provisions in Pt 2F.1 was introduced with a view to making it clear that the Court may make orders even if the act, omission or conduct complained of has yet to occur or has ceased, it may very well be the fact that there was no continuing oppression when this case came to trial does not entail that the Court had no power to make any of the orders for which s 233 provides."

1. To the extent that these matters involve past conduct (although it could have readily been pleaded that aspects of that conduct was continuing), that matter should be treated as relevant to the exercise of discretion and not as depriving the court of jurisdiction to make orders in respect of that conduct. In the present case, notwithstanding that the payments to Ian - which I have found, inter alia, support a claim for oppression - occurred in 2008, they have a continuing effect upon the assets available to Enterprises and this is a matter which may support the grant of relief for oppression. There is also no reason to think that the position will change in respect of the limits to the information that Rosemary receives in respect of the affairs of Enterprises and there is no suggestion that the failure to hold meetings has ceased.

1. Rosemary has been unsuccessful in several aspects of her oppression claim. Nonetheless, I have ultimately formed the view, for the reasons set out above, that oppression is established in all the circumstances, albeit on narrower grounds than those for which Rosemary contended. The Court would therefore have power to grant relief under s 233 of the Corporations Act. Whether such relief is ultimately justified and the nature of such relief is matter to be addressed at the second stage of the proceedings.

The alleged scheme

1. Rosemary pleads that David and Ian "acted together" to obtain control of Enterprises and other Ledir Group companies, remove her as a director of Enterprises and other Ledir Group companies, exclude her from the management of Enterprises and other Ledir Group companies, and deprive her of reasonable information concerning the affairs of Enterprises and other Ledir Group companies (5FAS [44]). Rosemary also contends that David and Ian "acted together" to obtain the distribution to themselves of a substantial proportion of the assets of the Ledir Group in circumstances that amounted to a partial or preliminary winding up of Enterprises and without regard to Rosemary's entitlement in a winding up of Enterprises and to the prejudice of that entitlement (5FAS [45]). Rosemary also relies on the appointment of Ian and removal of Rosemary as directors of the companies, by means of the power of attorney given by Ethel to Ian and Ethel's actual or purported voting power as a B class shareholder in Enterprises (5FAS [46]-[48A]) and pleads that she has since wrongly been excluded from the deliberations of directors or purported directors of companies with the Group (5FAS [48B]).

1. Rosemary pleads that, in acting together to make the payments pursuant to the purposes pleaded in 5FAS [28] and [44]-[45], David and Ian gave effect to a scheme, the effect of which was to make dispositions of the External Assets of the Ledir Group to David and Ian, the proceeds of which otherwise were available solely as dividends or distribution of the surplus assets of Enterprises (5FAS [70]-[71]). Rosemary contends that that "scheme" could not have been carried out but "for the use, including tacit use by not acting to the contrary" by Ian of the power of attorney given to him by Ethel, Ethel's voting power (as defined) and her power to appoint or remove the directors of Comserv (5FAS [73]). She pleads that the Payments (as defined) were, in substance, gifts to Ian and David by means of the power of attorney and were not in Ethel's interests, were contrary to Ethel's interests, were a use of the power of attorney beyond its terms, an abuse of the power of attorney and a fraud on the power of attorney (5FAS [75]). She also pleads that the "scheme" was variously, a fraudulent and dishonest design within the meaning of Barnes v Addy (1874) LR 9 Ch App 244, an imposition within the terms of the fourth limb of Earl of Chesterfield v Janssen (1751) 2 Ves Sen 125; (1751) 28 ER 82 and to the prejudice of Ethel, Rosemary and Enterprises (5FAS [78]-[79]). Rosemary also pleads that, by reason that the "scheme" was an imposition or deceit, the payments were void or voidable on grounds of public policy and the scheme and the payments amount to an equitable fraud against Rosemary (5FAS [80]-[81]).

1. Rosemary submits that the alleged scheme:

"relied on use and abuse of the power of attorney granted by Ethel to Ian to make what were in substance gifts to Ian and David ... when the power of attorney proscribed gifts, that this was an abuse of and fraud on the power of attorney which Ian and David concealed as best they could."

Rosemary further submits that:

"... the scheme was an imposition and deceit upon Ethel, as the donee of the power, and Ledir Enterprises and Rosemary as parties likely to be affected by the misuse and abuse of the power. This entitles Ledir Enterprises in particular, (and, mutatis mutandis, Ledir Investments) to relief from the actions taken in furtherance of and by means of the imposition and deceit, so that the Payments should be set aside. It also should be taken into account in considering whether the affairs of the company have been conducted unfairly, and as inconsistent with the actions of Ian and David as directors constituting a bona fide exercise of their powers."

1. Rosemary submits that the steps taken by Ian and David, as part of the wider chronology from the commencement of the FPA proceedings by Ethel until the end of 2006:

"demonstrate a concerted plan or scheme for them to take control of the Ledir Group and seek to exercise their powers in a way which would lead to and did lead to them securing the lion's share of the Ledir Group assets (as well as the New Zealand assets and their mother's future estate)."

Rosemary places particular weight on a challenge to Ian's conduct in obtaining Ethel's power of attorney and his "using it to control the general meeting and the board of directors of the companies" and upon the fact that David and Ian "clearly acted together".

1. In her submissions in reply, Rosemary contends that the relevant breach of public policy is the use and abuse of Ethel's power of attorney, independent of questions of Ethel's capacity. Rosemary also relies on a claimed admission by David and Enterprises of an allegation that, by 14 February 2006, Ian was acting on the basis that Ethel was incapable (5ASC [39]) under Uniform Civil Procedure Rules 2005 (NSW) r 14.26, where David and Enterprises did not plead to that paragraph of the Statement of Claim. I do not consider that such an admission is established, where that allegation was made in respect of Ian's conduct, not that of David and Enterprises, and, in any event, Rosemary opened her case on the basis that she did not seek to establish Ethel's lack of capacity.

1. Rosemary relies on the decision in Earl of Chesterfield v Janssen above at 100 where Lord Hardwicke LC referred the fourth type of equitable fraud, which

"may be collected or inferred in the consideration of this court from the nature and circumstances of the transaction, as being an imposition and deceit on the other persons not parties to the fraudulent agreement. It may sound odd, that an agreement may be infected by being a deceit on others not parties; but such there are, against such there has been relief."

His Lordship also observed that:

"These cases shew what courts of equity mean, when they profess to go on reasons drawn from public utility....Particular persons in contracts shall not only transact bona fide between themselves, but shall not transact mala fide in respect of other persons, who stand in such a relation to either as to be affected by the contract or the consequences of it; and as the rest of mankind beside the parties contracting are concerned, it is properly said to be governed by public utility."

1. This category of equitable fraud was recently considered by the Court of Appeal of the Supreme Court of Western Australia in Westpac Banking Corporation v The Bell Group Ltd (in liq) (No 3) above, where Lee AJA observed (at [762]) that the common features of transactions that were treated as equitable fraud were that they were contrary to public policy and that the formation of the transactions involved underhand or improper conduct so as to justify the intervention of equity to make remedial orders and restore, if possible, the transacting parties to their original positions and remove disadvantages imposed on third parties. His Honour also noted (at [765]) that conduct contrary to public policy had continued to be treated as equitable fraud notwithstanding that express jurisdiction to grant corrective orders may be provided by legislation for such conduct.

1. Drummond AJA there observed (at [2594]) that the essential elements of equitable fraud, as summarised in Earl of Chesterfieldv Janssen above, involved a transaction in bad faith in respect of other persons who stand in such a relation to the parties to the transaction as to be effected by the contract or the consequences of it, with the effect of the transaction on third parties to be judged by reference to standards of "public utility". His Honour noted (at [2597]) that fraud or deceit was not an essential element of a case falling within the fourth head of fraud in that decision, but that conflict with some identifiable public policy was essential, and again emphasised (at [2598]) that an essential feature of all elements caught by that head was that they "infringed some head of public policy". His Honour summarised the position at [2601] as that:

"The elements that must be established to bring a case within the fourth head of equitable fraud are first, there must be an agreement that works and imposition or deceit on persons not parties to the agreement but who are in such a relationship with one or other of the parties that they will be affected by the agreement. There being no need to prove an actual intention to deceive, it is the impact of the contract upon third parties who are in that kind of relationship with the contracting parties that constitutes transacting mala fide in respect of third parties. It follows from this, I think, that it is not necessary to show that the fraudulent agreement has been kept secret from the third parties affected by it. The second and additional element is that the agreement must infringe some head of public policy so as to require equitable intervention".

1. I accept that, as David contends, the Briginshaw standard must be applied in respect of the "scheme" pleaded in 5FAS [70]-[81]. Turning now to the elements of the pleaded "scheme", Rosemary pleads that David and Ian had the purpose of securing distributions to themselves inconsistent with and to the prejudice of Rosemary's entitlement in a winding up of Enterprises (5FAS [45], [70]) and that the effect of the "scheme" was to deplete the assets of the Ledir Group in a manner prejudicial to, relevantly, Rosemary as a shareholder entitled to a shares of the surplus assets on the winding up of the Ledir Group (5FAS [72]). Plainly, the distributions reduced the assets of the Ledir Group. The allegation in 5FAS [73] that Ethel's power of attorney and voting power was used to appoint or remove directors of Comserv is not established, where it appears that Ian was appointed as a director of Comserv in 2009 by the exercise of David's powers as a director after Ethel no longer had capacity to act as a director of that entity.

1. Rosemary also pleads that the distributions made to David and Ian were "in substance" gifts by means of the power of attorney (5FAS [74]). Rosemary relies on Part 4 Div 2 of the Powers of Attorney Act 2003 (NSW) and particularly s 11(1) of that Act, which she submits expresses the general law which is based on considerations of public policy. She submits that the "scheme" circumvented the operation of law because "by the use of the power of attorney, Ian and David gave themselves what were in substance gifts". I do not consider that this claim is established, so far as the 2007 payments were dividends made by a company or distributions made by a trust, consequential upon the shareholder's interest in the company or the beneficiary's status as a beneficiary of the trust, and the 2008 payments were unauthorised payments by Investments. As David points out, the concept of "gift", so far as the power of attorney was concerned, appears to contemplate a gift of property of Ethel and dividends paid by Investments and Enterprises (or, indeed, unauthorised payments by Investments) or distributions from the Ledir Trust were derived from those entities' property, not from Ethel's property. The use of a power of attorney by a shareholder to exercise votes in a general meeting to elect or remove directors to a company does not, in my view, constitute every subsequent distribution from or payment by that company approved by those directors, or every distribution from a trust that is funded by a dividend or loan made by the company, a "gift" made by means of the power of attorney. This submission also seems to me inappropriately to aggregate steps that could properly be taken by the exercise of Ethel's voting power under the power of attorney, namely the removal of Rosemary as a director of Enterprises (which was of lesser significance for the reasons I have noted above) and the appointment of Ian as a director, and other steps which were taken, not contemporaneously, in the exercise or purported exercise of the powers of directors of Investments, Enterprises and Comserv as trustee of the Ledir Trust.

1. Rosemary also pleads that Ian's use of Ethel's power of attorney was not in, or contrary to, Ethel's interests or an abuse of or fraud upon the power of attorney (5FAS [75]). So far as the power of attorney was used to remove Rosemary as a director, it does not seem to me to be to have been established that removal was contrary to Ethel's interests, or that Ethel did not acquiesce in it, for the reasons noted above. In any event, as I have noted above, that removal was of limited impact because Rosemary in fact ceased to be a director in accordance with article 64 of Enterprises' articles of association in December 2006. Rosemary also contends that that the appointment of Ian as a director of Comserv involved what is described as a "tacit use" of the power of attorney given by Ethel to Ian. I also cannot accept that proposition, because, as I noted above, any appointment of Ian is a director of Comserv was made in the exercise of David's power, as a director of that company, to appoint a director to fill a casual vacancy in circumstances of Ethel's incapacity, not in the exercise of Ethel's voting power.

1. The allegation in 5FAS [78]-[79] that Ethel was deceived was not supported by evidence of Ethel, given her incapacity, but was also not supported by any evidence which Rosemary might have, but did not, give. It is also difficult to see how Ethel could have been deceived as to the use of her power of attorney, when she attended the meeting on 29 December 2006 at which it was used and did not dissent from its use.

1. I do not consider that the pleaded allegations in respect of the "scheme" are established. In these circumstances, and given the findings which I have reached in respect of other aspects of Rosemary's claim, it is not necessary to determine whether, if the factual basis of this claim had been established, it would have amounted to equitable fraud under the applicable principles.

Claim against Mandala

1. Rosemary also brings a claim (5FAS [82]-[85]) against Mandala, described as follows in her written submissions:

"If it is found that there was a breach of fiduciary duties or of statutory duties of directors, Mandala is liable as a knowing assistant or recipient. So far as the constructive trust claim is pleaded, Mandala may be liable as a recipient. All the Ian Aboud payments were paid to Mandala's bank account. Ian Aboud maintains a loan account with Mandala which is in credit. To the extent that that account is in credit, it is held by Ian Aboud on constructive trust and Mandala should correspondingly be enjoined from paying it to Ian Aboud. These go to questions of remedy."

1. The claim for knowing assistance in a breach of fiduciary duty or knowing receipt based on such a duty cannot succeed, since I have not found the single pleaded fiduciary duty to be established, and therefore have not found any breach of that duty or any such trust to be established. Principles of knowing receipt and knowing assistance are not applicable in respect of the breach of statutory duties under ss 180 and 181 of the Corporations Act that I have found to be established.

Ian's superannuation entitlement

1. A claim in respect of this matter (5FAS [86]-[89], is no longer pressed.

Claim to winding up on just and equitable ground

1. Rosemary also brings a claim to wind up Enterprises on the just and equitable ground (5FAS [98]-[105]). That claim is also pleaded in a somewhat complex manner, as follows:

"98. The share structure of Ledir Enterprises and the structuring of the manner in which external assets were held by companies in the Ledir Group were established by Louis Aboud or, in the alternative, Louis Aboud and Ethel Aboud, as a means of holding those of the Aboud Family Assets which were owned by the Ledir Group and to give effect to Louis' or Louis' and Ethel's intentions concerning the transmission of those assets to their children and further descendants.

99. In relation to Ledir Enterprises and the Ledir Group, the elements of that structure were that, following the death of Louis Aboud:

a. The External Assets of the Ledir Group were to be preserved, subject to the control of Ledir Enterprises by Ethel Aboud or directors who could be appointed or removed by her;

b. That, subject to Ethel Aboud's discretion to make payments to herself or to cause monthly payments to David Aboud and Rosemary Aboud out of income derived from those External Assets, David Aboud and Rosemary Aboud were respectively entitled to two thirds and one thirds of the proceeds of surplus assets of Ledir Enterprises, being the External Assets of the Ledir Group or their proceeds or value less or after payment of the External Liabilities of the Ledir Group;

c. That Ethel Aboud would exercise her powers of control over the Group consistent with the respective entitlements of David and Rosemary Aboud pleaded above;

d. That Ethel Aboud would exercise her powers in her lifetime personally;

e. That during Ethel Aboud's lifetime, the directors of Ledir Enterprises would not exercise their powers inconsistently with the respective entitlements of David and Rosemary Aboud pleaded above;

f. That following the death of Ethel Aboud, the directors and shareholders of Ledir Enterprises would not exercise their powers inconsistently with the respective entitlements of David and Rosemary Aboud pleaded above; or

g. In the alternative to (b) above, the entitlement of Rosemary Aboud was not less than:

i. thirty percent; or

ii. Two sevenths

of the proceeds of the surplus assets of Ledir Enterprises, being the External Assets of the Ledir Group or their proceeds or value less or after payment of the External Liabilities of the Ledir Group.

100. Rosemary Aboud had and has a reasonable expectation that the elements of the structure pleaded above would be respected, and observed and adhered to.

101. By reason of the incapacity of Ethel Aboud, she is no longer able to exercise her powers personally.

102. The conduct of the affairs of the company and the conduct of David Aboud and Ian Aboud in making the Payments and executing the Scheme have

a. subverted;

c.frustrated; and

c. prevented the achievement of the purposes

the purposes for which the structure referred to at paragraph 99 was established and Rosemary Aboud's reasonable expectations.

103. By reason of her incapacity, Ethel Aboud:

a. is no longer capable of acting as a director of Ledir Enterprises; and

b. is no longer a director of Ledir Enterprises.

104. By reason of the matters aforesaid in connexion [sic] with the conduct of the affairs of the Ledir Enterprises [sic] and by reason of the other matters complained of herein in respect of the conduct of Ian Aboud and David Aboud in connexion [sic] with the affairs of the Ledir Group and the Power of Attorney, the Payments and the Schemes, the plaintiff has justifiably lost confidence in the directors of Ledir Enterprises or in the director, David Aboud, and Ian Aboud acting as a director.

105. In the premises, Ledir Enterprises should be wound up on the just and equitable ground."

In the factual circumstances of this case, it might well have been possible to plead a more straightforward claim for a winding up on the just and equitable ground.

1. The Court may make an order for winding up under the just and equitable ground under, inter alia, s 461(1)(k) of the Corporations Act by reason of mismanagement, misconduct or lack of confidence in the conduct and management of the company's affairs. An order for winding up may also be made on the just and equitable ground if a company was based on an association formed on the basis of a personal relationship involving mutual confidence, and that confidence has broken down or where a shareholder has been denied access to information or excluded from major decisions: Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd above; Nassar v Innovative Precasters Group Pty Ltd above at [322]. The reference to "just and equitable" in this section permits the Court to have regard to considerations "of a personal character arising between one individual and another, which make it unjust, or inequitable, to insist on legal rights, or to exercise them in a particular way": Ebrahimi v Westbourne Galleries Ltd above; Thomas v HW Thomas Ltd above at ACLC 617.

1. It seems to me that a number of the elements of the pleaded claim are not established. First, the claim that the External Assets of the Ledir Group were to be preserved is qualified, as it must be, by a recognition of the powers of directors appointed to Enterprises. Second, the claim that David and Rosemary were entitled to two-thirds and one-thirds of the proceeds of surplus assets of Enterprises (or the alternative proportions pleaded in paragraph 99(g)) is directed to the position on a winding up, but does not have regard to the fact that, as I noted above, the structure of the Ledir Group permitted dividends to be paid to Conserve as the trustee of a discretionary trust and distributions to be made from that trust. The proposition that Ethel would exercise her powers of control over the Ledir Group on that basis is inconsistent with her rights as the only voting shareholder in a general meeting of Enterprises, to the extent that the estoppel that I have held to be established would prevent Enterprises denying those rights. No basis has been established for the proposition that Ethel would exercise her powers in her lifetime personally, where a shareholder may appoint an attorney or proxy to vote on their behalf in general meeting. The proposition that the directors of Enterprises would not exercise their powers inconsistently with the asserted entitlements of David and Rosemary fails to distinguish between, on the one hand, the position while Enterprises was ongoing, when distributions could be made to the Ledir Trust and through it to beneficiaries of the trust and the position on a winding up.

1. On the other hand, as I noted above, David accepted in cross-examination that directors' meetings have not taken place since 2009 and he has not taken any steps together with Ian to produce accounts, although the accountants have prepared minutes of meetings that he has been asked to sign and he has signed them (T191). David was not satisfied with Ian's conduct in respect of Ethel's affairs and has not since 2009 made any attempt to contact Ian and has attempted to avoid contact with him. As I noted above, Ian's evidence was that he left it to David to run the companies and he was a "passive" director (T296), and he accepted in cross-examination that to the best of his recollection he did not do anything else in the affairs of the companies in his capacity as a director in the financial year ended 30 June 2007, other than facilitating the payments made to himself, David, Rosemary and Ethel (T297). Ian also accepted that, other than facilitating payments to those persons, he did not do anything else in the period 1 July 2007 to the end of 2008 in his capacity as a director (T298). He assumed that anything that was done in the name of the companies was done with an appropriate level of care by his brother, lawyers, accountants or other persons responsible (T314).

1. Rosemary contends, and I accept, that these matters, and the other matters to which I have referred in respect of the oppression claim may well support a finding that the companies cannot effectively function and an order for their winding up on the just and equitable basis. That is a matter to be addressed in the relief stage of the proceedings.

Relief

1. The parties agreed that questions of relief should be determined after the delivery of this judgment. David has foreshadowed, in his submissions, that he is amenable to the winding up of the Ledir Group and the Ledir Trust "on a fair and equitable basis" and raises the possibility that orders may be made for the purchase of Rosemary's shares in Enterprises. Rosemary raises the possibility that the shares of other parties in Enterprises should be transferred to her for no consideration. As I have noted, subject to hearing from the parties and absent any agreement between the parties as to other more appropriate orders, it may be that the breakdown of the relationship between the parties will in any event warrant an order that Enterprises be wound up on just and equitable grounds.

1. I will hear the parties as to the relief that should be granted and as to costs once they have had the opportunity to consider this judgment.

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Decision last updated: 25 September 2013