Re Sirrah Pty Ltd (in prov liq)

[2021] NSWSC 413

Supreme Court

New South Wales

Medium Neutral Citation:

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

Hearing dates:

23, 25-26, 30-31 March, 1 April 2021

Date of orders:

23 April 2021

Decision date:

23 April 2021

Jurisdiction:

Equity - Corporations List

Before:

Black J

Decision:

Judgment for the First Defendant, in derivative proceedings brought by the Plaintiffs on its behalf, in respect of certain claims. First Defendant to be wound up on the just and equitable ground. Parties afforded an opportunity to make further submissions as to proposed orders.

Catchwords:

PROCEDURE — Application to have hearing dates vacated — whether principles in ss 56–58 of the Civil Procedure Act 2005 (NSW) support the vacation of hearing dates.

CORPORATIONS — Winding up on the just and equitable ground.

CORPORATIONS — Directors and officers — Directors’ duties — Duty of care and diligence — Duty to act in good faith in the best interests of company and for proper purpose — Director’s involvement in transactions with companies he controls.

EQUITY — Fiduciary duties — Conflict of interest and duty — Informed consent — Director’s involvement in transactions with companies he controls.

Legislation Cited:

- Civil Procedure Act 2005 (NSW), ss 56, 57, 58

- Corporations Act 2001 (Cth), ss 180, 181, 182, 233, 259B, 259F, 461, 1305, 1317E, 1317H, 1317K, 1318

- Evidence Act 1995 (Cth), s 136

- Limitation Act 1969 (NSW), ss 14, 15, 48

- Personal Property Securities Act 2009 (Cth)

Cases Cited:

- Accurate Financial Consultants Pty Ltd v Koko Black Pty Ltd (2008) 66 ACSR 325; [2008] VSCA 86

- Adler v Australian Securities and Investments Commission (ASIC) (2003) 46 ACSR 504; [2003] NSWCA 131

- Australian Careers Institute Pty Ltd v Australian Institute of Fitness Pty Ltd (2016) 340 ALR 580; (2016) 116 ACSR 566; [2016] NSWCA 347

- Australian Securities and Investments Commission v Adler (2002) 41 ACSR 72; [2002] NSWSC 171

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

- Australian Securities and Investments Commission v Macdonald (No 11) (2009) 256 ALR 199; (2009) 71 ACSR 368; [2009] NSWSC 287

- Australian Securities and Investments Commission v Vines (2005) 55 ACSR 617; [2005] NSWSC 738

- Australian Worldwide Pty Ltd (In Liq) v AW Exports Pty Ltd [2019] NSWSC 1475

- Barnes v Addy (1874) LR 9 Ch App 244

- Bathurst City Council v PWC Properties Pty Ltd (1998) 195 CLR 566; [1998] HCA 59

- BCI Finances Pty Ltd (In Liq) v Binetter (No 4) (2016) 348 ALR 227; (2016) 117 ACSR 18; [2016] FCA 1351

- Betfair Pty Ltd v Racing New South Wales (2010) 189 FCR 356

- Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373; (1975) 5 ALR 231

- Coope v LCM Litigation Fund Pty Ltd (2016) 333 ALR 524; [2016] NSWCA 37

- Diamond Hill Mining Pty Ltd v Huang Jin Mining Pty Ltd (2011) 84 ACSR 616; [2011] VSC 288

- EC Dawson Investments Pty Ltd v Crystal Finance Pty Ltd (No 3) [2013] WASC 183

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

- Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (2001) 37 ACSR 672; [2001] NSWCA 97

- Giumelli v Giumelli (1999) 196 CLR 101; [1999] HCA 10

- Gordon in His Capacity as Liquidator of Lyon Form Pty Ltd (in liq) v Leon Plant Hire Pty Ltd (in liq) [2015] NSWSC 397

- Grimaldi Chameleon Mining NL (No 2) (2012) 87 ACSR 260; [2012] FCAFC 6

- Hancock Family Memorial Foundation Ltd v Porteous (2000) 22 WAR 198; [2000] WASCA 29

- Hans Pet Constructions Pty Ltd v Cassar [2009] NSWCA 230

- Hasler v Singtel Optus Pty Ltd (2014) 87 NSWLR 609; (2014) 101 ACSR 167; [2014] NSWCA 266

- Hylepin Pty Ltd v Doshay Pty Ltd (2020) 148 ACSR 30; [2020] FCA 1370

- John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd; Walker Corp Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1; [2010] HCA 19

- JR Consulting & Drafting Pty Ltd v Cummings (2016) 329 ALR 625; [2016] FCAFC 20

- Kalls Enterprises Pty Ltd (in liq) v Baloglow (2006) 58 ACSR 63; (2006) 24 ACLC 920; [2006] NSWSC 617

- Kalls Enterprises Pty Ltd (in liq) v Baloglow (2007) 63 ACSR 557; [2007] NSWCA 191

- KQ International Trading Pty Ltd v Yang [2016] VSC 146

- Lewis Securities Ltd (in Liq) v Carter (2017) 120 ACSR 327; [2017] NSWSC 412

- Linton v Telnet Pty Ltd (1999) 30 ACSR 465; [1999] NSWCA 33

- Morley v Australian Securities and Investments Commission (ASIC) (2010) 274 ALR 205; (2010) 247 FLR 140; (2010) 81 ACSR 285; [2010] NSWCA 331

- Nassar v Innovative Precasters Group Pty Ltd (2009) 71 ACSR 343; [2009] NSWSC 342

- One.Tel Ltd (in liq) v Rich [2005] NSWSC 226

- Parker v Tucker (2010) 77 ACSR 525; [2010] FCA 263

- Paul A Davies (Aust) Pty Ltd (in liq) v Davies (No 2) [1983] 1 NSWLR 440

- Primacy Underwriting Agency Pty Ltd v Kilborn (2007) 25 ACLC 160; [2007] NSWSC 158

- Ramsay v BigTinCan Pty Ltd (2014) 101 ACSR 415; [2014] NSWCA 324; BC201407664

- Re AJ Roberts Removals & Storage Pty Ltd [2017] NSWSC 1054

- Re Bluemine Pty Ltd (In Liq) [2019] NSWSC 1807

- Re Central Management (NSW) Pty Ltd (in liq) [2017] NSWSC 1258

- Re Colorado Products Pty Ltd (in prov liq) (2014) 101 ACSR 233; [2014] NSWSC 789

- Re Elsmore Resources Ltd [2016] NSWSC 884

- Re FAL Healthy Beverages Pty Ltd and FAL Retail Pty Ltd [2017] NSWSC 476

- Re Felan's Fisheries Pty Ltd [2017] NSWSC 1502

- Re Kit Digital Australia Pty Ltd (in liq) [2014] NSWSC 1547

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

- Re Pure Nature Sydney Pty Ltd [2018] NSWSC 914

- Shot One Pty Ltd (in liq) v Yeo in his capacity as liquidator of Shot One Pty Ltd (in liq) [2017] VSC 741

- Taxa Australia Pty Ltd v Wang (2018) 130 ACSR 531; [2018] NSWSC 1412

- Thomson v STX Pan Ocean Co Ltd [2012] FCAFC 15

- Twigg v Twigg (No 4); Lambert v Twigg Investments Pty Ltd (No 3) (2020) 147 ACSR 389; [2020] NSWSC 1159

- UBS AG v Tyne (2018) 265 CLR 77; (2018) 360 ALR 184; [2018] HCA 45

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

- Watson v Foxman (1995) 49 NSWLR 315
- Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) (2012) 44 WAR 1; (2012) 89 ACSR 1; [2012] WASCA 157

Category:

Principal judgment

Parties:

Gregory Thomas Harris (First Plaintiff)
Monica Mary Brown (Second Plaintiff)
Sirrah Pty Limited (First Defendant)
William Francis Harris (Second Defendant)
Michelle Joy Harris (Third Defendant)
Harris Health Care Pty Limited (Fourth Defendant)

Representation:

Counsel:
S A Wells/J Anderson (Plaintiffs)
J S Tobin (First Defendant)
A F Fernon SC/E A Walker (Second - Fourth Defendants)

Solicitors:
Lloyd & Lloyd (Plaintiffs)
Watson Mangioni (First Defendant)
Yates Beaggi (Second - Fourth Defendants)

File Number(s):

2017/383731

Judgment

Nature of the application and background facts

1. By Amended Statement of Claim filed on 1 June 2020, the Plaintiffs, Mr Gregory Harris and others, brought a derivative claim on behalf of the First Defendant, Sirrah Pty Ltd (“Sirrah”) and also sought relief in their personal capacity. I return to the nature of the relief sought below. A number of matters are common ground between the parties and others are established by documentary evidence, so that there is ultimately no real dispute about them.

2. The Plaintiffs are the executors of the estate of the late Mrs Aileen Harris, and hold, in that capacity, approximately 47% of shares in Sirrah. The Second Defendant, Mr William Harris (“WH”) was appointed a director of Sirrah on 30 October 2002 and a challenge to the validity of that appointment is no longer pressed by the Plaintiffs. The Third Defendant, WH’s daughter, Ms Michelle Harris (“MH”), was appointed a director of Sirrah on 9 November 2017. The claim against her is no longer pressed by the Plaintiffs and was dismissed in the course of the hearing. The Fourth Defendant, Harris Health Care Pty Ltd (“HHC”), is the holder of the majority of shares in Sirrah and WH and MH are its directors.

3. Prior to 15 December 2017, Sirrah carried on business as a provider of aged care services from premises at Westmead in New South Wales (FASOC [26A], AD [26A]). On 16 November 2017, Sirrah entered a contract for the sale of its assets and undertaking to a third party (FASOC [26B], AD [26B]), which paid a deposit of $2,250,000 into the trust account of Sirrah’s solicitors at about the time of entry into that contract and Sirrah received that deposit on 18 December 2017. Completion of the contract took place on 15 December 2017 and Sirrah received, in addition to the deposit, net cash consideration in the amount of $25,065,478.30, after discharging its liabilities on the property (FASOC [26D], AD [26D]). Sirrah has had no ongoing trading operations since about 15 December 2017 (FASOC [26E], AD [26E]). I note that WH sought to contend to the contrary in his cross-examination.

4. At its highest point, Sirrah held unencumbered funds in excess of $27.6m in its bank accounts following the sale. From 15 December 2017 until a provisional liquidator was appointed to Sirrah on 14 October 2019, its funds held in those accounts were reduced by approximately $19 million to $8,519,664.71, which it held in cash in its operating account with the National Australia Bank (“NAB 6400 Account”). That reduction partly resulted from the payment of a tax liability of $5,272,271.40 as to which there is no contest in these proceedings. It also resulted from other transactions which are in issue in these proceedings, comprising payment of monthly “management fees” by Sirrah to HHC and further advances made to HHC quantified by the Plaintiffs as $6,556,623.16; further advances being made to WH of $745,000, which included payments by Sirrah including to purchase and renovate a villa in Bali, to purchase a motor vehicle in Bali and make a loan to a third party for a development in Fiji; and payments made in respect of a business credit card by WH (referred to in the proceedings as the “Disputed Expenses”) which the Plaintiffs quantify as at least $1,847,166.53, and which are now, other than for three transactions, conceded to have comprised WH’s personal expenses.

5. By way of derivative claims, the Plaintiffs now seek orders that an account be taken of any money received by WH and/or HHC pursuant to any management contract (or other arrangement between HHC and Sirrah) and that an account also be taken of any loans made by, or forgiven, as between Sirrah as lender and WH or HHC as borrowers. They also seek a declaration that any money paid by HHC under any management contract or other arrangement is held on constructive trust for Sirrah. They also seek declarations, on Sirrah’s behalf, under s 1317E of the Corporations Act 2001 (Cth) (“Act”) or the general law that, by engaging in specified conduct, WH and MH breached their duties owed to Sirrah and that any money paid to WH or HHC pursuant to any loan arrangements between them and Sirrah was held on constructive trust for Sirrah. The Plaintiffs seek an order that an account be taken of Disputed Expenses (as defined) and a declaration that WH is liable to account or make equitable compensation to Sirrah in respect of amounts found on the taking of an account of Disputed Expenses that are found not to be proper expenses of Sirrah. The Plaintiffs bring claims against HHC that are broadly in the nature of claims for accessorial liability for the transactions alleged against WH. The Plaintiffs also seek, in their personal capacity, an order that Sirrah be wound up on the just and equitable ground under s 461(1)(k) of the Corporations Act or alternatively for oppression under s 233 of the Act. Mr Fernon, who appeared for the Second and Fourth Defendants until the proceedings against the Third Defendant were dismissed, and then for the Second and Fourth Defendants, indicates that the application for a winding up order is now not contested.

6. These and associated proceedings have a long history. By Originating Process filed in July 2017 in proceedings 2017/205481, the Plaintiffs sought an order under s 247A of the Corporations Act authorising them, or their solicitor, to inspect books of Sirrah. They were successful in obtaining that order, after a contested hearing, for the reasons set out in my judgment delivered on 5 December 2017 ([2017] NSWSC 1683). On 21 December 2017, the Defendants, or some of them, gave an undertaking not to deplete the cash balance held by Sirrah below $13,341,794 without first giving the Plaintiffs seven days’ written notice of doing so. The Plaintiffs subsequently sought leave to bring derivative proceedings in the name of Sirrah which they obtained, again after a contested hearing, by my judgment delivered on 13 November 2018 ([2018] NSWSC 1802). On 14 October 2019, I made orders that Mr Hayes be appointed as provisional liquidator of Sirrah, where an undertaking to retain the cash balance held by Sirrah had been breached by many transactions over a long period, and that the cash which had previously been held by Sirrah had been paid out for WH’s and HHC’s benefit and replaced by liabilities of WH and HHC to Sirrah. In February 2021, the Plaintiffs also obtained leave to proceed on behalf of the Company in the inherent jurisdiction of the Court and to proceed against the Company in provisional liquidation under s 471B of the Corporations Act.

7. By an Interlocutory Process filed on 10 August 2020, the Second-Fourth Defendants sought orders granting leave to withdraw admissions in several paragraphs of their Defence, including paragraphs 45-47 of that Defence. They relied, inter alia, on affidavits of WH dated 9 August 2020, MH dated 13 August 2020 and Mr Madders dated 14 August 2020 in support of that application. They then consented to the dismissal of that application, while foreshadowing that they would or might bring a further application for leave to withdraw those admissions at a later stage. In my ex tempore judgment delivered on 17 August 2020 recording that outcome, I observed that any further application would need to be considered on its merits at a later stage, having regard to the stage which the proceedings had then reached and that:

“I should note that the approach now taken by the Second – Fourth Defendants appears to reflect a recognition by them of a difficulty in the form of the application, which is implicit in Mr Lipp's observation that further work would need to be done before the application was brought again. In particular, the Second – Fourth Defendants submit that they wish to establish that there were errors in respect of admissions earlier made, because there are or may be inaccuracies in the accounts of [HHC]. Obviously, that proposition faces some challenges, where [WH] was a director of that company, who is subject to a statutory duty, inter alia by reason of s 344 of the Corporations Act, to cause true and fair accounts of that company to be maintained, and by the company's accountant, who would need to impugn the accounts that he had prepared or reviewed in order to make it good.

There is, however, a further difficulty with the application in its present form, which was put, repeatedly, by Mr Lipp on the basis that the Second – Fourth Defendants sought to withdraw the admission in order to contest the Plaintiff's case as to the transactions recorded in [Sirrah’s] accounts and, in effect, put the true position before the Court. It is apparent the Second – Fourth Defendants’ proposed pleading would not have that result because their position is that they did not know what the true position of [Sirrah] was, or indeed, implicitly, whether it is any different from the position for which the Plaintiffs contend, but simply wish to investigate that matter because they believe it might be different from the position for which the Plaintiffs contend and which, apparently, [Sirrah’s] accounts recorded. Second, their proposed Defence did not, in fact, put any alternative position before the Court, reflecting any true position for which they contended, but simply did not admit, and put the Plaintiffs to proof, of the position for which the Plaintiffs contended and which the Second - Fourth Defendants had previously, relevantly, admitted.

I record these matters so that the background of the orders made today is clear. I express no view as to the merits of the application, which does not need to be decided today, and which may present differently if, in a future application, the Second to Fourth Defendants seek to withdraw factual admissions because they then have an identified basis for contending that the position for which the Plaintiffs contend is wrong, and some other position is correct.”

8. By a further judgment delivered on 22 October 2020, I made orders allowing the Second-Fourth Defendants a further eight weeks for their lay evidence, and a consequential extension for their expert evidence, and confirmed the hearing dates allocated for these proceedings commencing 23 March 2021. The hearing dates for the proceedings were also confirmed on 23 October 2020.

9. By a further Interlocutory Process filed on 17 February 2021, the Second-Fourth Defendants sought leave to rely on several affidavits which had been served out of time, leave to withdraw several admissions and an order that the hearing of the proceedings commencing 23 March 2021 be vacated. The Second-Fourth Defendants did not press their application to vacate the hearing date. By my ex tempore judgment delivered on that date ([2021] NSWSC 140), I granted leave to the Second-Fourth Defendants to rely on several affidavits which had been served out of time, excluding parts of those affidavits which they had indicated would not be read.

The Second-Fourth Defendants’ further application to vacate the hearing date

10. On 22 March 2021, the afternoon before the hearing of the proceedings were due to commence, the Second-Fourth Defendants filed an Interlocutory Process which sought orders that the hearing due to commence on 23 March 2021 be vacated to a date to be fixed, and that costs thrown away be paid by the provisional liquidator and not from Sirrah’s assets. The second of those orders was not pressed. Because of the lateness of that application, and because of difficulties with the admissibility of the evidence on which the Second-Fourth Defendants relied, it was adjourned to be heard on 26 March 2021. The affidavits in the substantive hearing were read in the interim, but cross-examination of witnesses was deferred, by the parties’ agreement, until after the application to vacate the hearing date was determined. I dismissed the application to vacate the hearing date, and indicated that I would set out my reasons for doing so in this judgment, and I now do so.

11. The Second-Fourth Defendants’ application to vacate the hearing date was partly directed to a foreshadowed future application to withdraw admissions made by them in respect of paragraphs 45-47 of the Further Amended Statement of Claim. Paragraph 45 pleads that, during the period from about 2012 to 2019, Sirrah lent monies to HHC and WH in particularised amounts, totalling over $11 million in respect of HHC and further amounts in respect of WH. Paragraph 46 pleads that WH caused Sirrah to lend those monies to HHC and himself in specified circumstances. Paragraph 46 of the Amended Defence not only admits that the specified loans from Sirrah to HHC and from Sirrah to WH were made in those circumstances, but adds an affirmative defence that:

“[T]he making of the Loans, and each of them, resulted in the discharge, forgiveness, extinguishment or other reduction of debts owed to Sirrah by either or both of [WH] and [HHC], in return for debts from either or both of [WH] and [HHC] which were unsecured and undocumented insofar as the terms of the Loans were documented in the financial reports and accounts of Sirrah”; and otherwise den[ies] the paragraph.”

Paragraph 47 pleads that the loans to HHC and WH have not been repaid, and the corresponding paragraph of the Defence admits that the loans have not been repaid, and otherwise denies the paragraph. The Application to vacate the hearing date also addressed to the Second-Fourth Defendants’ late discovery of the possibility that WH may be able to rely on professional indemnity insurance, a matter to which I return below.

Evidence in the further application to vacate the hearing date

12. The Second-Fourth Defendants relied, in support of the application to vacate the hearing date, on WH’s affidavit dated 9 August 2020. Significant parts of that affidavit and other affidavit evidence on which the Second-Fourth Defendants relied in the application were not admissible and were, predictably enough, not admitted over objection. WH there referred to the fact that he had engaged a previous firm of solicitors who had carriage of the proceedings, until his current solicitor, Mr Amirbeaggi of Yates Beaggi Lawyers, assumed carriage of the proceedings on 17 June 2020, nearly nine months before the commencement of the hearing.

13. By her affidavit dated 13 August 2020, read without objection, Ms Michelle Harris indicated that she was not provided with the pleadings in the proceedings by her former solicitors, and they were first provided to her after Mr Amirbeaggi was engaged, now some nine months ago. In the event, as I noted above, the proceedings have now been dismissed by consent as against MH, reserving the question of costs. By an affidavit dated 14 August 2020, Mr Madders, who is an accountant with a firm of accountants that had previously provided services to Sirrah, referred to an engagement of that firm to undertake certain work after the sale of Sirrah’s business and to the extent of work involved in that process. By a further affidavit dated 8 February 2021, Mr Madders referred to having continued attempts to properly characterise transaction records for Sirrah and HHC, but to difficulties resulting from a lack of information and access to records and to difficulties with access to records previously held on a cloud system operated by a third party on Sirrah’s behalf.

14. By an affidavit dated 12 February 2021, Mr Saccaro, who is assisting Mr Madders, referred to the circumstances of his inspection of a hard drive containing a copy of Sirrah’s server at the offices of the provisional liquidator on 11 February 2021. Mr Saccaro fairly accepts that there was over a week’s delay in his seeking to access Sirrah’s financial records, after an agreement was reached with the provisional liquidator for him to do so on or about 3 February 2021, which he attributes to pressures of work. I give little weight to that matter as an explanation for delay, where parties to proceedings which have been set down for hearing need to make appropriate arrangements to ensure that the experts they retain to provide assistance give sufficient priority to that work. Mr Saccaro refers to information he was then provided by the provisional liquidator’s staff as to the difficulties that had been experienced in obtaining live access to the server. Mr Saccaro’s evidence is that he opened the main file on the hard drive and noted that it contained a large number of sub-files which related to the period from 2000 to 2019 and he refers to the fact that the records previously contained on the server had been assembled in a structure which would have allowed documents more easily to be searched. Mr Saccaro also referred to the provisional liquidator’s advice to him, at that time, that he was dealing with a third party which maintained the cloud server and was trying to obtain access to that server for the Second-Fourth Defendants. Mr Saccaro’s evidence makes clear that, at least from 12 February 2021, the Second-Fourth Defendants have had access to the documentation comprising the accounting files of Sirrah, in substantial volume, although I recognise his evidence that that hard drive contained information in a less convenient form to navigate than server access. The Second-Fourth Defendants, then and later, appear to have made no serious attempt to access the documents held on the hard drive, whether by a sampling or other process.

15. By a further affidavit dated 19 February 2021, WH refers to difficulties which he claims to have had in obtaining access to Sirrah’s server despite making requests to the provisional liquidator’s office for access since December 2019. There are several difficulties with that evidence. The first is that proceedings relating to this matter have been on foot, in various iterations, since at least 2017; for a significant part of that period, until a provisional liquidator was appointed in 2019, Sirrah was under WH’s control, and there is no suggestion that he did not have full and free access to its server and financial records throughout that period. The second is that his Amended Defence, in its present form, was filed by Mr Amirbeaggi’s firm in August 2020 and the lack of evidence to support a denial of paragraphs 45-47 of the Amended Statement of Claim has been apparent since at least that date. WH refers to communication with the provisional liquidator prior to that time, relating to the provisional liquidator’s requirement that he provide information in the provisional liquidation. However, it appears that WH did not instruct his new solicitor to seek access to Sirrah’s records for the purposes of these proceedings until mid-November 2020. WH’s evidence (WH 19.2.21 [13]) is that his solicitors were then given a drive containing copies of relevant documents on 20 November 2020, but that drive was not examined until several months later in January 2021. This is an extraordinary lack of expedition. WH does not explain why it is (or at least previously was) suggested that the provisional liquidator is at fault for any delay in providing access to Sirrah’s financial records in the form they were held on a cloud server, when that server was maintained by a third party provider and access to the documents held on it depended on the cooperation of that third party provider.

16. By an affidavit dated 5 March 2021, Mr Odgers, who is a solicitor acting for the Second–Fourth Defendants, referred to an application for leave for short service of a subpoena on the provisional liquidator, first made on that date, about three weeks before these proceedings were listed to commence.

17. By a further affidavit dated 22 March 2021, WH referred to evidence which had been led in respect of the earlier applications to withdraw admissions and again referred to correspondence with the provisional liquidator from mid-November 2020 and to the application to vacate the hearing dates filed in February 2021. WH referred to the fact that the application to vacate the hearing date had been withdrawn and attributed that decision to advice given by Senior Counsel, Mr Sirtes, then acting for the Second-Fourth Defendants, in evidence which was not in an admissible form and was not admitted, with leave granted to lead further evidence by affidavit in admissible form. WH also there referred to his discovery, in February 2021, several years after these proceedings had commenced and solicitors had been retained for the Second-Fourth Defendants, and eight months after Mr Amirbeaggi had commenced acting for the Second-Fourth Defendants, that the Defendants (or at least Sirrah) held a directors and officers liability policy. He exhibited the form of policy wording, an email dated 2 March 2021 comprising a claim under that policy, and a copy of the 2017 schedule and policy wording, to his affidavit. Neither WH nor his solicitors sought to give any explanation as to inquiries that had been made as to the existence of that policy prior to that date.

18. WH also referred to the service of a subpoena for production of financial records upon the provisional liquidator in early March 2021 and to subsequent steps in respect of that subpoena. WH observed, in evidence admitted with a limiting order under s 136 of the Evidence Act as a submission only and not as proof of the relevant facts that:

“Without access to the financial books and records of [Sirrah] and [HHC] I am not able to address the withdrawal of admissions and am bound to an admission to paragraph 45 of the Amended Statement of Claim that the payments made by [Sirrah] to various parties including me and [HHC] totalling approximately $12 mil are a loan account. Without being able to address that matter, the Plaintiff is entitled to judgment against me for the full sum pleaded.

The lack of access to financial books and records of [Sirrah] and [HHC] has prevented me from properly preparing for and defending the Plaintiffs’ claim.”

19. I pause to note that it is not clear why the appointment of a provisional liquidator to Sirrah has prevented WH obtaining access to the financial records of the Fourth Defendant, HHC; it may be suggested that those records were maintained in the same form as Sirrah’s financial records, but it is not apparent why it is the responsibility of Sirrah’s provisional liquidator to provide WH with access to financial records of HHC which is not under provisional liquidation and remains under WH’s control.

20. By a further affidavit dated 24 March 2021, Mr Saccaro referred to his having spent all of one hour in reviewing documents produced by the provisional liquidator on USB on that date; he noted that the folders contained on that USB appeared to respond to the categories of documents sought in the schedule to the subpoena issued by the Second-Fourth Defendants, but he could not determine the extent to which all documents sought had been provided in the time available to him; and the USB contained a substantial amount of data and permitted a search of file names only, or at least his firm only had the technical capacity to undertake a search based on text or characters contained in the document or file name, as distinct from a search of key words within the body of the document. Mr Saccaro there estimated that, without the benefit of a forensic search capacity (which, implicitly, his firm lacked), it would take several weeks to review the documents contained on the USB. That proposition highlighted, of course, the difficulties which arose from the Second-Fourth Defendants’ failure to undertake review of the documents while Sirrah was under WH’s control prior to the provisional liquidator’s appointment; or when a hard drive containing them was originally provided to WH in November 2020, and again in February 2021; the further delay in issuing a subpoena to the provisional liquidator, and the fact that the subpoena that was issued required production of a wide range of documents, rather than focussing more narrowly on the matters relevant to the paragraphs of the Defence which the Second-Fourth defendants wish to withdraw.

21. By a further affidavit dated 25 March 2021, Mr Madders referred to a letter dated 1 June 2016 from his firm to the provisional liquidator, which referred to the net asset value of Sirrah as at 30 June 2015 under the audited financial report and to management accounts for the period 1 July 2015 to 31 March 2016. The relevance of this evidence is unclear. By an affidavit dated 25 March 2021, Mr Saccaro noted that the subfiles to which he had referred in his earlier affidavit were ordered in folders according to document type, and he would have needed to open documents in order to identify their content, and that searches on the USB according to key search terms only identified files which contained the search terms in the file name.

22. By a further affidavit dated 25 March 2021, addressing difficulties in the admissibility of his earlier evidence, WH led evidence of a conversation with his former solicitors, at the time the Amended Defence was filed in February 2020, in which he agreed the amounts that had been paid out of Sirrah in 2018-2019; he says he does not recall whether he agreed that such amounts were paid as loans to HHC, in evidence that does not amount to a denial that he had previously agreed that matter; and he says that he had not “read the amendments made” to the Amended Defence at the time he signed the Amended Defence, and did not read or understand that paragraph 45 of the Amended Defence admitted to loans being made from Sirrah to HHC until 2019, or that paragraph 46 of the Amended Defence admitted to loans being made from Sirrah to HHC that totalled over $11 million; and did not become aware that the Amended Defence admitted that HHC was indebted to Sirrah for over that amount until he first retained Mr Amirbeaggi to represent him and became aware of that admission in July or August 2020. WH there contends that he did not give instructions to his former solicitor that the amount alleged in the Amended Statement of Claim constituted loans from Sirrah to HHC, although that contention is not wholly consistent with his evidence of his lack of recollection as to that matter, and that he understood that the Amended Defence only admitted that relevant payments were made to HHC by Sirrah. WH could not have had that understanding, had he read the Amended Defence before he verified it.

23. WH also referred to the manner in which Sirrah and HHC maintained a QuickBooks accounting system; to his having told Sirrah’s and HHC’s bookkeeper to make payments from Sirrah to HHC in the 2018-2020 financial years that represent the funds referred to in paragraph 45 of the Amended Statement of Claim; and to a practice of recording payments, where the bookkeeper did not know what they were for, against his loan account. This evidence could, subject to leave so far as it was not included in earlier evidence and to admissibility, be given by affidavit in the substantive proceedings. WH also referred to his review of documents on the server maintained by the third party for Sirrah with Mr Saccaro at the provisional liquidator’s premises on 24 February and 1 March 2021 and contended (in evidence admitted with a limiting order under s 136 of the Evidence Act) that those documents referred to Scooti Pty Ltd (“Scooti”) and Total Scooter Holdings Pty Ltd (“TSH”) as “subsidiaries” or “investments” of Sirrah. His evidence is that he does not now agree that all payments recorded in paragraph 45 of the Amended Statement of Claim for the 2018-2020 financial years are loans by Sirrah to HHC, and, to the extent that such payments were made as management fees, he denies that such payments were loans to him. WH also refers to a conversation with Mr Amirbeaggi on 22 February 2021, leading to the decision not to press the application to vacate the hearing date or the withdrawal of the admissions in paragraphs 45 and 46 of the Amended Defence on that date, in the light of arrangements which had then been made with the provisional liquidator for access to the server.

24. The Second-Fourth Defendants also tendered, on leave to reopen granted during their submissions, company searches of TSH and Scooti which indicated that there was only one issue of shares in those companies, when they were incorporated, and that no shares were subsequently issued to reflect any investment by Sirrah in those companies by way of equity. WH also relies on a letter dated 10 September 2019 from Scooti to the Australian Small Business and Family Enterprise Ombudsman, complaining of difficulties in Victoria and New South Wales in respect of the Scooti business and apparently contending that Scooti was one of the family’s businesses. This letter appears to be relied on to support a proposition that the Harris family had an interest in Scooti, but it does not indicate that Sirrah had that interest, rather than HHC and members of WH’s family (as distinct from the Plaintiffs) having that interest.

25. The provisional liquidator, Mr Hayes, in turn relies on his affidavit dated 5 February 2021 and the affidavit of his solicitor, Mr Mattiussi, dated 24 March 2021. Those affidavits respond to criticism of the provisional liquidator’s conduct which were implicit in the evidence on which the Second-Fourth Defendants relied, much of which was not admissible and not admitted, and were largely not pressed in submissions by Mr Fernon to support the application to vacate the hearing date. The only criticism which was advanced by Mr Fernon of the provisional liquidator’s conduct was a suggested delay in production between the issue of a subpoena directed to the provisional liquidator on 5 March 2021 and the production of the USB on 24 March 2021. There seems to me to be no substance in that criticism, given the attempts that were made by the provisional liquidator in the intervening period to resolve the difficulties as to the volume of documents that the Second-Fourth Defendants sought to have produced, to which the Second-Fourth Defendants did not respond in any, or any constructive manner. It is otherwise preferable that I do not address Mr Hayes’ and Mr Mattiussi’s evidence, where it is not necessary to do so to determine this application, but may be necessary to reach findings in respect of that evidence in order to address an application which has also been brought by the Second-Fourth Defendants to replace Mr Hayes as provisional liquidator of Sirrah.

The parties’ submissions in the further application to vacate the hearing date

26. Mr Fernon, who appears for the Second-Fourth Defendants, submits that the basis for their again seeking to vacate the hearings is their “inability” to access financial and transactional documents held by the provisional liquidator relating to the financial affairs of Sirrah and HHC. That submission is imprecise, since relevant documents were originally provided to WH in November 2020, and again in February 2021, on a hard drive; those documents were also located on a server controlled by a third party, access to which was under WH’s control throughout the large part of the proceedings, until the provisional liquidator was appointed, and was again made available to him by the provisional liquidator from March 2021; access to documents was again made available on the USB produced in response to the subpoena on 24 March 2021; and HHC’s financial records are not under the provisional liquidator’s control. Mr Fernon submitted that these financial documents were sought to assist the Second-Fourth Defendants to establish defences to the claims made against them, “including a possible application to withdraw admissions made in their Defences concerning loans alleged to have been made by Sirrah to HHC and [WH]”. As matters developed, no aspect of those defences other than the foreshadowed further application to withdraw the admissions in paragraphs 45-47 of the Amended Defence was advanced.

27. Mr Fernon submitted that the issue of access to the server and Sirrah records was first raised by WH shortly after the provisional liquidator was appointed in 2019, although I have noted above that that occurred in respect of the provisional liquidator’s requirement that he provide information, not in respect of the proceedings; that WH raised the issue of access to documents in his affidavit of August 2020 and further requests for documents have been made since November 2020. I have referred above to the fact that Sirrah was under WH’s control for a substantial period prior to the provisional liquidator’s appointment, and he had full access to its cloud server in that period; there is no evidence that the provisional liquidator has not taken reasonable steps to seek to obtain access to that server since requests were made by WH, where that server is not under his control; and WH has had access to the relevant documents since at least February 2020, on a hard drive although in a form that his advisers regard as difficult to access, and although he and his representatives have not devoted any significant time to reviewing them.

28. Mr Fernon submitted that the Further Amended Statement of Claim brings claims against WH including for loans exceeding $12 million and alleging breaches of directors’ duties and accessorial liability. That, of course, has been the position since that Amended Statement of Claim was filed. Mr Fernon noted, correctly, that an application was made to withdraw the admissions in paragraphs 45-47 of the Amended Defence in August 2020, and was not pressed. Mr Fernon also referred to evidence originally led by WH that the admissions were not relevantly explained to him by his then solicitors and necessary instructions were not obtained from him; WH’s further evidence, to which I have referred above, indicates that the he did not read the amendments to the Amended Defence, before he verified them, and there seems to me to be no complexity in those amendments and his reading them would have made clear that, not only did the Amended Defence accept the position that loans were made by Sirrah to WH and HHC, but it also advanced an affirmative claim that those loans were to be set off against other loans made by WH to Sirrah. Importantly, WH had verified both that the allegations of fact as set out in the amendments to the Amended Defence were true; and that the allegations of fact as set out in those amendments that were denied were untrue and that, “after reasonable inquiry, he did not know whether or not allegations of fact that were not admitted were true”. I bear in mind that he had sought to qualify the verification of paragraphs 45-46, but not paragraph 47 of the Amended Defence, as being true, and indicated they would be “the subject of further application for leave to withdraw the pleading in the future conduct of the litigation”. I have pointed above to the absence of any evidence of any substantial further investigation of those matters by WH or his advisers in the period from 21 August 2020 when that statement was made, largely continuing up to the commencement of the hearing.

26. Mr Fernon referred to “unsuccessful attempts” by the Second-Fourth Defendants to obtain records to use in the preparation of evidence, but that proposition is also not supported by the evidence, where the records were available on hard disk to WH and his advisers from at least February 2021. It does not seem to me that it was then open to WH, or his advisers, simply to choose not to access those documents on the basis that he or his advisers hoped they could in future be made available in a more convenient form, where any reasonable litigant and his legal representatives would consider that steps at least ought to have been taken, at that time, to undertake at least a sampling-based review of the documents available on hard disk, in order to seek to identify evidence that might support the proposed application to withdraw the admissions and WH’s and HHC’s substantive defence.

27. Mr Fernon also referred to evidence, which was not in admissible form and was not admitted, that WH had observed records at the provisional liquidator’s office “relating to the relationship” between Sirrah, Scooti, TSH and HHC “that record the basis on which such payments were made”. When WH led evidence in admissible form, in the last of his affidavits, that amounted to no more than a suggestion that there were references to Scooti and TSH as “subsidiaries” or “investments” of HHC, which was not inconsistent with a characterisation of the transactions as loans, nor supported by the shareholdings in Scooti and TSH as notified to the Australian Securities & Investments Commission, which do not record the issue of further shares to reflect any investment in those companies, by HHC or Sirrah, beyond the initial issue of shares.

28. In any event, Mr Fernon went no further in submissions than to identify the possibility that, at some time in the future, an application might be made to withdraw the admissions and develop an affirmative defence as follows:

“If the documents sought support the contentions of [WH], then the Second-Fourth Defendants may be able to assert that the monies paid to Scooti and TSH or to HHC for those companies were paid pursuant to a resulting trust in favour of Sirrah and not pursuant to a loan arrangement.”

32. Mr Fernon also noted that the Second-Fourth Defendants’ Defence seeks to rely on ss 1317 and 1318 of the Corporations Act to excuse any breach found, and that establishing honesty on the part of WH and MH in their actions is an essential part of any reliance on those provisions. While that proposition is correct, the case law also establishes that, not surprisingly, the material facts relied on for such a defence must be pleaded, and neither WH’s evidence nor Mr Fernon’s submissions identify any pleaded material facts, or any potential further amendment of the Amended Defence, that depend upon further access to Sirrah’s financial records. The Second-Fourth Defendants identify no more than a hope that, if wider access to records of Sirrah and HHC may be obtained, after those records were under WH’s control for a long period, then something might turn up to assist WH in that respect.

33. Mr Fernon also submitted that the question of breach of duties, and in particular a breach of s 182 of the Act, is relevant to any claim which WH and HHC may have in respect of policies of directors and officers liability insurance, where liability arising from a breach of s 182 of the Act is excluded from cover under the terms of the policy. I give little weight to this matter. Mr Fernon did not seek to contend that the findings in these proceedings will bind WH or Sirrah or the directors and officers liability insurer, AIG, in any dispute in respect of the policies, where AIG is not party to these proceedings. There is also no reasonable explanation of the Second-Fourth Defendants’ failure to identify any potential claim under the policies during the several years in which these proceedings have been on foot, and it does not seem to me that the Court could accept any general proposition that proceedings involving a company or its directors should be vacated, at the latest possible date, because either or both of them have failed to remember or make inquiries as to the availability of their own directors and officers liability insurance at an earlier date.

34. Mr Fernon also submitted and I recognise that this application must be determined in accordance with the dictates of justice, having regard to the just, quick and cheap determination of the real issues in dispute in the proceedings, under s 56-58 of the Civil Procedure Act 2005 (NSW), and I will return to those principles below. Mr Fernon submitted that the dictates of justice cannot countenance the Second-Fourth Defendants being unable to assert defences because of their inability to obtain records, and that they have acted with due dispatch and have withdrawn earlier applications to vacate the hearing date in anticipation that documents would be produced, that has not occurred. I do not accept this submission, where it seems to me the Second-Fourth Defendants have not been unable to obtain such records, not least where Sirrah was under WH’s control and those records were in its possession for the substantial part of the period in which these proceedings have continued, prior to the appointment of the provisional liquidator; they have not acted with due dispatch; and the documents were in fact made available to them, at least on hard disk, from February 2021 and they have not made any reasonable efforts to review them in that form.

35. As I have noted above, Mr Fernon also referred to the adverse impact upon the Second-Fourth Defendants of declining to vacate the hearing date, so far as it will shut them out of a future application to withdraw the admission(s), and submits that will affect the Court's ability to undertake a just determination of the proceedings. I bear that in mind, although the existence of evidence to support that future application remains speculative, since only WH and not his legal advisers have undertaken even a brief review of the documents held on Sirrah’s server. I also bear in mind the several years which WH has previously had to address this issue, and the several months his present solicitors have had to do so.

36. In oral submissions, Mr Fernon again points to the significance of the claims brought against HHC and WH and to WH’s evidence as to the circumstances in which the Amended Defence was finalised. Mr Fernon directs attention to those matters, so far as the application to vacate the hearing date is supported by a contention that there are significant prospects of being permitted to withdraw the admission made by the Second-Fourth Defendants (T92-93). Mr Fernon draws attention to a potential claim that shares in Scooti were held on trust for Sirrah, because it was the source of the monies that were ultimately invested into Scooti. However, that claim is not a new development, where that allegation is already made in paragraph 59S of the Defence to Further Amended Statement of Claim filed in August 2020, nor does it support a characterisation of the relevant transactions as anything other than loans, where no further capital was issued by TSH or Scooti when monies were advanced, so that those advances were not treated as in the nature of a further equity investment by HHC or WH (whether in their own right or on trust for Sirrah) in TSH or Scooti.

37. Mr Fernon also draws attention, in oral submissions, to Sloss J’s observations in Shot One Pty Ltd (in liq) v Yeo in his capacity as liquidator of Shot One Pty Ltd (in liq) [2017] VSC 741 at [237]ff to the potential difficulties with reliance on entries in a company’s general ledger and financial accounts. I have had regard to those observations, but the question here is one of characterisation of the relevant transactions, and both the financial accounts of Sirrah and the shareholdings in THC and Scooti do not reflect such a further investment. In oral submissions, Mr Fernon identifies the ultimate argument that is to be put as being that WH made a further capital contribution to TSH and Scooti, implicitly on trust for Sirrah, rather than making loans to those entities, but that is again inconsistent with the share records of TSH and Scooti.

38. Mr Fernon also put a submission, which I found difficult to follow as I noted in the course of his oral submissions (T98-99), that:

“Simply put, the proposition, your Honour, that as a shareholder or as a beneficial owner of the company that the company made a beneficial payment; made a payment of capital, hence the capital account, is simply against the fact that he already owned 50% of the shares in relation to it and there’ll be an equalisation – will have to at some stage be an equalisation of the capital account with the other shareholder.”

I find it difficult to see how further payments in substantial amounts can have been made to TSH or Scooti on capital account, by way of equity investments as WH seeks to contend, without having been reflected in the issue of shares by either TSH or Scooti after the point of their initial incorporation.

39. I recognise that Mr Fernon retreated somewhat from that proposition, putting what may be an alternative argument (T99) as follows:

“I can’t put the proposition any further other than to say that the shares that [WH] owns he says he owns on trust for Sirrah, and that this was a payment being made by the shareholder – the beneficial shareholder into that company, and if there needs to be an equalisation of the capital accounts between that and the other shareholders, having regard to the fact that [WH] is already a principal shareholder in relation to that company, that what would need to happen, your Honour. I can’t put it in any other position.”

40. However, this contention has the difficulty that it implicitly accepts that no further capital contribution was in fact made by WH or Sirrah to Scooti or THC, with the implication that the payment would stand as a loan until capitalised; and the proposition that shares would be issued in the future faces the formidable difficulty that THC and Scooti are now in liquidation. Mr Fernon also points to WH’s evidence of his subjective intention that there not be a loan, and that the payments be made as a capital investment with him holding the shares on trust for Sirrah (T102). Plainly, WH can seek to give evidence of subjective intention, although it is not apparent to me that such evidence, or any corroboration of it, can assist where any such intention was not implemented by the issue of equity in THC or Scooti to capitalise any investment in them.

41. Mr Wells, with whom Mr Anderson appears for the Plaintiffs, responds by referring to the two previous applications made by the Second-Fourth Defendants to withdraw the admissions in paragraphs 45-47 of the Defence, by the Interlocutory Process which was dismissed by consent on 17 August 2020, and by the second Interlocutory Process filed on 9 February 2021, which was not pursued. Mr Wells notes that this application to vacate the hearing date is premised on the possibility of a third application to withdraw those admissions, and submits that possibility is itself speculative, referring to Mr Fernon’s submission, as I noted above, that “if” the documents support WH’s contention, then the Second-Fourth Defendants “may” be able to assert the relevant matters. Mr Wells also submits, and I accept, that, for the purposes of the factors specified in s 56-58 of the Civil Procedure Act, the Second-Fourth Defendants have not acted with the degree of expedition which might be expected of them.

42. Mr Wells submits that the evidence led by the provisional liquidator demonstrates that he has not been the cause of any delay, and it is apparent that he and his staff and solicitors have responded with expedition to the requests of the Second-Fourth Defendants. As I have observed above, Mr Fernon did not contend to the contrary, other than to refer to the delay between the issue of the subpoena on 5 March 2021 and the production of documents at the commencement of the hearing. Mr Wells also points out that, although access to records had been sought for the completion of the Second-Fourth Defendants’ expert evidence, no such evidence was led and an application to rely on an expert report was abandoned.

43. Mr Wells also submits that the vacation of the balance of the hearing would be against the public interest in the proper and efficient administration of justice, where other members of the community would be deprived of their opportunity to have matters heard on the dates allocated to these proceedings, referring to my judgment in Re Felan’s Fisheries Pty Ltd [2017] NSWSC 1502 at [25]. He also points out, and I accept, that the Plaintiffs would be prejudiced by increased costs and further delay by the loss of the hearing dates, and I note that there is no certainty that the Second-Fourth Defendants could pay the costs thrown away in that respect, in addition to any damages awarded against them if they are unsuccessful in their defence of the proceedings. Finally, Mr Wells points to the breadth of the subpoena issued by the Second-Fourth Defendants on 5 March 2021, to the lack of any obvious relationship between the categories of documents which it seeks and the matters as to which the Second-Fourth Defendants seek to withdraw admissions, and I referred above to the provisional liquidator’s sensible, but unsuccessful attempts to negotiate a narrowing of the subpoena in a manner that may have expedited production.

44. Mr Tobin, who appeared for the provisional liquidator, noted that the provisional liquidator was not a party to the proceedings and was not a respondent to this application; that the provisional liquidator took an impartial stance in the proceedings and neither pressed for nor resisted the application to vacate the hearing date, other than in relation to costs; and responded only to the complaints foreshadowed, but largely not pressed, in respect of the provisional liquidator’s conduct.

45. Mr Tobin pointed to the difficulties which the provisional liquidator had faced in obtaining access to Sirrah’s books and records, to the extent that they were held on a cloud server maintained by a third party. It is not necessary to address that matter, where Mr Fernon does not criticise the efforts made by the provisional liquidator in that respect. Mr Tobin refers to public examinations undertaken by the provisional liquidator to seek to obtain further information, but it is also not necessary to address that question, where no criticism is advanced of the provisional liquidator’s conduct in that respect. Mr Tobin refers to the provisional liquidator and Mr Mattiussi’s evidence as to the steps taken to subsequently develop an inspection regime, and no criticism is made of the provisional liquidator in that respect, other than for the suggested delay in production of documents after the subpoena was issued on 5 March 2021. Mr Tobin points out that the provisional liquidator, constructively, consented to short service of that subpoena; advised the Second-Fourth Defendants of the difficulties in responding to the subpoena by 10 March 2021, which were not surprising given its width; then identified difficulties which arose from the scope and wording of the subpoena, which he sought to address by identifying a range of documents (identified as the “initial documents”) which had been produced as most likely to assist the Second-Fourth Defendants; and to the fact that the Plaintiffs engaged, but the Second-Fourth Defendants did not, in respect of amendments to the subpoena which might have facilitated an earlier response to it. Mr Tobin also points out that, notwithstanding the criticisms that are now made of the provisional liquidator’s delay in responding to the subpoena, the Second-Fourth Defendants have never responded to the provisional liquidator’s attempt to resolve, by discussion, the difficulties with the form of that subpoena.

46. Mr Tobin submits, with substantial force, that:

“[The provisional liquidator] confronted a documentary situation not of his making in taking the appointment of provisional liquidator of Sirrah and discovering the poor state of the books and records, including the concomitant cloud server issue. He has sought to be impartial in his requests that the parties subpoena him for Sirrah’s records. He has been mindful of the concerns of the parties and of the Court in light of the hearing. With respect to the Subpoena, he offered alternatives as to how production could be given and sought the [Second-Fourth] Defendants’ engagement on the issue but this was not taken up. He was not asked to provide any part production, or to limit the scope of the documents sought, or anything else, in answer to his suggestions. Despite the [Second-Fourth] Defendants reluctance to engage, he has provided informal production of what he considers to be an expedient outcome – and this has been taken up by the [Second-Fourth] Defendants.”

47. Mr Tobin also, rightly, points out that it has always been open to the Second-Fourth Defendants to seek orders from the Court in respect of these issues, but they did not do so prior to the application for short service in respect of the subpoena, in early March. Mr Tobin also points to an aspect of WH’s evidence that may cast light on the Second-Fourth Defendants’ approach, namely that WH’s evidence is that, throughout the period in which the provisional liquidator was seeking to expedite the production of documents, WH was planning an application to vacate the hearing dates. In these circumstances, there may have been little perceived advantage to WH and his advisers in devoting significant efforts to expediting the production, or review, of the relevant documents.

The applicable principles and determination of the further application to vacate the hearing date

48. The manner in which this application was framed raised issues, first, as to the circumstances in which the Court would grant leave to the Second-Fourth Defendants to withdraw the admissions in paragraphs 45-47 of the Amended Defence, since the application was partly directed to seeking further time (beyond the several years the proceedings are on foot) for WH to locate evidence that might support a further application for that leave. It also raised issues as to the principles applicable to vacating a hearing date.

49. In my earlier ex tempore judgment dealing with the Second-Fourth Defendants’ earlier application to withdraw several admissions, which was ultimately not pressed, I referred to the summary of the applicable principles in my judgment in Re Bluemine Pty Ltd (in liq) [2019] NSWSC 1807 (at [4], [6]-[7]) as follows:

“In written submissions, [the relevant defendant] acknowledges that, by reason of r 12.6 of the Uniform Civil Procedure Rules 2005 (NSW), an admission made in a defence cannot be withdrawn except by consent or by leave of the Court. He also points to the fact that, unless and until leave is given to withdraw an admission, no evidence may be led which is contrary to the admission and no submissions can be made which are contrary to the admission: Nominal Defendant v Gabriel [2007] NSWCA 52 at [110]; (2007) 71 NSWLR 150. He acknowledges that a defendant, in seeking to withdraw an admission, must adduce clear evidence of how it was that the admission was made and why it should be permitted to be withdrawn: Rigato Farms Pty Ltd v Ridolfi [2000] QCA 292; [2001] 2 Qd R 455 at 459-460. [Counsel who appears for the relevant defendant] also submits that it may be appropriate to grant leave to withdraw an admission where it was made in circumstances where it was contrary to the actual facts or without due consideration of the relevant matters, and refers to the decision in Drabsch v Switzerland General Insurance Co Ltd (unreported, Supreme Court of New South Wales, Santow J, 16 October 1996) to which I will refer further below. He emphasises that the Court will have regard to all the relevant circumstances, with the overall question being the need for each party to receive a fair trial. …

In submissions in response, the Plaintiffs in turn refer to the case law applicable to the withdrawal of an admission. The relevant principles are set out in the judgment of Santow J in Drabsch v Switzerland General Insurance Co Ltd above, to which reference has been made in many of the subsequent cases. Those principles were in turn applied by Brereton J in Re Dymocks Book Arcade Pty Limited [2013] NSWSC 298, which quoted those principles at length, and noted the several cases which subsequently applied them. Those principles in turn have been summarised by White J (as his Honour then was) in SLE Worldwide Australia Pty Limited v Wyatt Gallagher Bassett Pty Limited [2005] NSWSC 816 at [56], where his Honour observed that:

“It is legitimate and it may be necessary to consider whether the party making the admission did so deliberately, or whether he did so in error, whether the significance of the admission has changed since it was made, for example by reason of other amendments … or whether new evidence has come to light. … Where a party, who is legally advised and does not suffer any disability, deliberately and without mistake, admits liability in whole or in part, and there are no relevant changes of circumstance, prima facie, justice or fairness to both parties does not require it be allowed to change its mind. That is why admissions made with deliberateness and formality are not ordinarily permitted to be withdrawn.” [citation omitted]

In that case, his Honour also held that the existence of the reasonable argument against liability, in that case, did not provide sufficient basis to permit withdrawal of the admission. Equally, as the Full Court of the Federal Court observed in Jeans v Commonwealth Bank of Australia Limited (2003) 204 ALR 327 at [18] … the question is one of the attainment of justice rather than trying to apply an artificial approach and, as the case law has also noted, the Court is “after the truth” so that, in principle, an erroneous admission should be able to be withdrawn unless other factors outweigh that factor.”

50. Mr Sirtes, who appeared for the Second-Fourth Defendants in that application, did not contest the accuracy of that summary. I also there observed, citing Bluemine (at [10]), that:

“… there exists a prejudice to the public interest, where a serious admission is made as to a significant matter, namely the appointment of a liquidator; that admission is verified, on oath, by affidavit; and it is then sought to be withdrawn, with the only justification given that the party who made it did not, on his solicitor’s account, pay any particular attention to the proceedings at the time the admission was made. That approach, it seems to me, would fundamentally undermine the requirement for verification of Defences, if it were generally used to explain an admission wrongly made by reason of a lack of attention to the Defence at the time it was verified.”

51. I now turn to the principles applicable to a late application to vacate a hearing date, and I have drawn on my observations in Re Elsmore Resources Ltd [2016] NSWSC 884 and Re Felan's Fisheries Pty Ltd above in this regard. The Court must act in accordance with ss 56–58 of the Civil Procedure Act 2005 (NSW). Section 56 of the Civil Procedure Act provides that the overriding purpose of the Civil Procedure Act and the rules of Court, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in dispute in the proceedings. The Court is required to give effect to that overriding purpose when it exercises any power given by the Civil Procedure Act which would include, in this case, making an order to vacate the hearing date. Section 57 requires the Court to manage proceedings having regard to specified objects, including the just determination of the proceedings, the efficient disposal of the business of the Court, the efficient use of available judicial and administrative resources, and the timely disposal of the proceedings and all other proceedings in the Court at a cost affordable by the respective parties.

52. The Court must, in dealing with this application, also have regard to the efficient disposal of the business of the Court and the efficient use of judicial and administrative resources. Plainly, the Court will not be able to use the dates lost to this case, even in a busy list. As I observed in Re Felan's Fisheries Pty Ltd above:

“… however busy a list may be, and however many parties are in fact waiting for hearing dates, few of them are able to be ready for hearing when told, shortly before, that a hearing date has just become available. That is, of course, why the Court’s usual practice is to allocate hearing dates in advance so that parties may arrange their affairs accordingly.”

53. Section 57 also refers to the timely disposal of the proceedings, and all other proceedings in the Court, at a cost affordable by the respective parties. I will refer to the significance of that matter below. Section 58 in turn refers to other matters that are relevant, requiring the Court to have regard to the provisions of ss 56–57, and indicating that the Court may have regard to other matters to the extent to which it considers them relevant. I proceed on the basis that the case has a degree of difficulty or complexity. The Civil Procedure Act also draws attention to the relevance of the degree of expedition with which the parties have approached the proceedings, including the degree to which they have been timely in their interlocutory activities, and the degree and the use which a party has made of any opportunity made available to it in the course of the proceedings. There were plainly steps available to the Second-Fourth Defendants, including earlier preparation work while documents were under WH’s control and the issue of an earlier or narrower subpoena to the provisional liquidator of Sirrah that, if they had been taken, would likely have avoided the difficulties they now face.

54. The Civil Procedure Act also requires me to have regard to the degree of injustice that would be suffered by the respective parties as a consequence of any order or direction, and I have regard, on the one hand, to the probability that the Second-Fourth defendants will be shut out of a further opportunity to seek to withdraw the relevant admissions if the hearing is not vacated and on the other, the injustice which the Plaintiffs will suffer, if the hearing of a matter which has already taken some time to reach a hearing is now vacated, and the risk that there would now be a substantial deferral of that hearing. I also have regard to the Court of Appeal’s important judgment in Hans Pet Constructions Pty Ltd v Cassar [2009] NSWCA 230 (at [36]), where Allsop ACJ observed that the provisions of the Civil Procedure Act to which I have referred above are intended to bring about:

“[A] new statutory balance among various factors in litigation including court and party efficiency and delivery of individual justice. Delay and case backlog are not merely factors affecting the public cost of delivering just, they corrode the ability of the courts to provide individual justice...The reforms that have taken place under the Civil Procedure Act...can thus be seen not really to reflect worthy governmental and judicial efforts for efficiency, but also to be vital for the provision of timely individual justice. To these salutary ends significant powers of case management have been placed in the hands of judicial officers which, if exercised, can often be seen to have sharp, and sometimes detrimental effects on the claims of parties.”

55. In UBS AG v Tyne (as trustee of the Argot Trust) (2018) 265 CLR 77; (2018) 360 ALR 184; [2018] HCA 45, in dealing with a question of overlapping successive proceedings, a plurality of the High Court again referred to Aon and noted (at [38]) that its effect was that:

“The timely, cost effective and efficient conduct of modern civil litigation takes into account wider public interests than those of the parties to the dispute. These wider interests are reflected in s 37M(2) of the F[ederal] C[ourt] A[ct] [corresponding to s 56 of the Civil Procedure Act]. As the joint reasons in Aon explain, the “just resolution” of a dispute is to be understood in light of the purposes and objectives of provisions such as s 37M of the F[ederal] C[ourt] A[ct]. Integral to a “just resolution” is the minimisation of delay and expense. These considerations inform the rejection in Aon of the claimed “right” of a party to amend its pleading at a late stage in the litigation in order to raise an arguable claim. The point is made that a party has a right to bring proceedings but that choices are made respecting what claims are made and how they are framed. Their Honours speak of the just resolution of the dispute in terms of the parties having a sufficient opportunity to identify the issues that they seek to agitate.”

56. In Re Elsmore Resources Ltd above at [13], I in turn noted that one of the matters to which s 57 referred was the efficient disposal of the Court's business and the efficient use of available judicial and administrative resources, and the timely disposal of the proceedings and all proceedings in the Court at a cost affordable by the respective parties. I do not, in that respect, treat the Court's convenience, for the Court's sake, as a matter of any significance. It is, however, of great significance, as I noted in Re Elsmore Resources Ltd above at [13] and again in Re Felan's Fisheries Pty Ltd above at [25], that “the community both funds the justice system and depends upon access to the justice system” and that vacating a hearing of some length, shortly before it is due to commence, and where the practical likelihood is that other litigants could not be ready for hearing in sufficient time to have their cases listed over that period, “would be significantly disadvantageous to the public interest in the proper administration of justice.” Here, the hearing time that would be lost would be the several days that remain to complete the hearing, but the lateness of the application would exacerbate the detriment arising from that loss.

57. For these reasons, I was satisfied that the Second-Fourth Defendants have not established that the hearing date should be vacated, against the contingency that there might in future emerge grounds to support a withdrawal of the admissions.

Affidavit evidence and credit in the substantive proceedings

58. I now turn to the affidavit evidence in the substantive proceedings. I bear in mind the fallibility of human memory, particularly when disputes intervene, in assessing the affidavit evidence led in the proceedings: Watson v Foxman (1995) 49 NSWLR 315 at 319. I summarised the applicable principles in Re Kit Digital Australia Pty Ltd (in liq) [2014] NSWSC 1547 at [7], as follows:

“It is important in this context to have regard to the fallibility of human memory which increases with the passage of time, particularly where disputes or litigation intervene: Watson v Foxman (1995) 49 NSWLR 315 at 318-319 per McLelland CJ in Eq; Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd (No 2) [2008] FCA 810 at [41] per Rares J; Varma v Varma [2010] NSWSC 786 at [424]-[425] per Ward J. To the extent that credit issues need to be determined in respect of particular conversations, I have also had regard to the fact that objective evidence is likely to be the most reliable basis for determining them. I summarised the relevant principles in Re Colorado Products Pty Ltd (in prov liq) [2014] NSWSC 789 at [10], where I noted that the credibility of a witness and his or her veracity may be tested by reference to the objective facts proved independently of the testimony given, in particular by reference to the documents in the case, by paying particular regard to the witness’s motives and the overall probabilities: Armagas Ltd v Mundogas SA [1985] 1 Ll R 1 at 57; Camden v McKenzie [2007] QCA 136; [2008] 1 Qd R 39 at [34]; Craig v Silverbrook [2013] NSWSC 1687 at [141]; State of New South Wales v Hunt [2014] NSWCA 47 at [56].”

59. The Plaintiffs rely on an affidavit dated 14 March 2018 of their solicitor, Mr See, which referred to an undertaking given by WH not to reduce the cash assets of the Plaintiffs below $13,341,794, which was breached prior to the appointment of the provisional liquidator to Sirrah. The Plaintiffs rely on the affidavit of Ms Monica Brown dated 6 August 2018 which responds to WH’s earlier affidavit of WH dated 18 June 2018. Significant parts of that affidavit were not relevant, or were not in proper form and were not admitted.

60. The Plaintiffs also rely on several affidavits of Mr Gregory Harris. In his affidavit dated 31 July 2018, significant parts of which were also not read or were rejected, Mr Gregory Harris refers to the transfer of shares to HHC which are no longer in issue and to loans made by Sirrah to HHC. In his affidavit dated 8 March 2019, Mr Gregory Harris set out the history of Sirrah, referred to correspondence between the parties anterior to the commencement of these proceedings, and exhibited copies of the financial reports of Sirrah for the financial years ending 30 June 2012 – 30 June 2017. By a further affidavit dated 27 September 2019, Mr Gregory Harris exhibited a bundle of documents produced by the Defendants. Significant parts of that affidavit dealt with matters which are not in issue in the proceedings and were not read or not admitted. Mr Gregory Harris also there referred to the expenditure of funds received by Sirrah following the sale of the Cabrini nursing home in December 2017, including in loans relating to WH’s purchase of a Bali property, which I address below, and travel expenses incurred by WH which WH now concedes were in the nature of personal expenses. By his further affidavit dated 10 October 2019, Mr Gregory Harris again referred to the undertaking provided by WH to retain the specified amount in Sirrah, and to issues as to production of bank records of Sirrah. By his affidavit dated 22 September 2020, Mr Gregory Harris exhibited further documents including bank records of Sirrah, financial reports, tax returns and Sirrah’s general ledger, on which the Plaintiffs rely to establish expenditures made by Sirrah under WH’s control.

61. By her affidavit dated 17 March 2020, Ms Robyn Reid responded to WH’s affidavit dated 21 January 2021. Significant parts of that affidavit were not relevant and were not read, and other parts were not admissible by reason of their form. Ms Reid also led some evidence relating to WH’s role in the management of the Cabrini facility. The Plaintiffs also read the affidavit dated 19 March 2021 of Mr James Harris, which exhibited posts by WH on his Facebook page, between 2011 and 2020. That evidence was directed to the significant amount of travel undertaken by WH during that period, but it is not necessary to address that evidence where WH now accepts that the Disputed Expenses to which I refer below were personal expenses. The Plaintiffs also relied on the expert report dated October 2020 of Ms Lockyer, which I address below in dealing with the Plaintiffs’ claims in respect of management fees paid by Sirrah to HHC. None of the witnesses called by the Plaintiffs were cross-examined, and the Plaintiffs are correct in characterising their case as essentially a documentary case.

62. I now turn to the evidence on which WH relied, noting that the claim against MH was not pressed and was dismissed in the course of the hearing. WH relied on his affidavit dated 18 June 2018, as to which several paragraphs were not read. WH there refers to Sirrah’s history and to the directors and shareholdings in Sirrah, to the circumstances in which he became a director of Sirrah in 2002, a matter which is no longer contested, and to the issue of shares to HHC in 2003 and the transfer of further shares to HHC in 2009. WH’s evidence (WH 18.6.18 [58]) is that:

“I took over the management of Sirrah in about 2002 or 2003 after agreeing on a succession plan with my parents and after [HHC] entered a management agreement with Sirrah. I have provided management services to Sirrah under that agreement, and [HHC] has charged Sirrah for those services under that agreement. My parents had agreed to this arrangement in 2002 or 2003, and they knew that I would provide those services to Sirrah through [HHC].”

63. WH also refers to the entry into a new management agreement with Sirrah on 1 December 2016 (“2016 Service Agreement”). His evidence (WH 8.6.18 [60]) is that he continued to provide management services to Sirrah under the 2016 Service Agreement and HHC continued to charge Sirrah for the provision of those services pursuant to that 2016 Service Agreement. WH also refers to HHC’s debt to Sirrah under loan arrangements which he contends were made between HHC and Sirrah in about 2014 or 2015, as part of arrangements in respect of his divorce (WH 18.6.18 [63]-[64]). WH also refers to the circumstances of the sale of Sirrah’s business of operating the Cabrini nursing home in 2017 and acknowledges having given an undertaking not to pay the amount of $13,341,794 out of Sirrah’s account, being the amount calculated by a valuer as their entitlement out of the proceeds of the sale of Sirrah’s business and assets (WH 18.6.18 [81]-[82]). As I will observe below, WH sought to resile from that evidence in cross-examination, and to treat the giving of that undertaking as a matter undertaken by his former solicitors without his instructions. WH also referred to the circumstances of the commencement of proceedings by the Plaintiffs, in 2017, initially seeking access to several categories of Sirrah’s books under s 247A of the Act.

64. WH also relied on his further affidavit dated 21 January 2021, although significant parts of that affidavit were not relevant and were not read. WH there led evidence, generally by way of assertion and admitted subject to relevance, as to the steps he took in respect of the management of the Cabrini nursing home from at least 2000 and 2001, and to the work involved in obtaining development consent for and expanding the nursing home to a 120 bed nursing home. He also referred to the circumstances in which shares in Sirrah were transferred to HHC, a matter that is no longer in dispute. He also referred to statements that he made at various times as to his commitment to developing a family business (WH 21.1.21 [203]) and to his use of consultants to provide advisory services in respect of the Cabrini nursing home and steps taken to establish a “proper and professional management system and team” and to ensure “consistent delivery of services” and growth (WH 21.1.21 [217]). WH also referred to steps taken to investigate opportunities for Sirrah to expand the Cabrini facility, including at locations other than Westmead, although it appears that no other facilities were ultimately developed.

65. WH refers to his decision made in 2016 that he would sell the business, in the context of conflict within the wider family (WH 21.1.21 [257]). He also refers to the entry into the 2016 Service Agreement in December 2016, apparently well after he had made his decision to sell the nursing home business (WH 21.1.21 [275]) and I will note below the significance of the fact that, on WH’s case, the obligation to pay substantial service fees to HHC under that Agreement would continue even after the business was sold. He also refers to negotiations to buy out his siblings from Sirrah (WH 21.1.21 [277]) although it is apparent, not least from the fact of these proceedings, that those negotiations were not successful. He also refers, in evidence admitted, by reason of difficulties with its form, with a limiting order under s 136 of the Evidence Act 1995 (Cth) as submission only and not as proof of the fact, to works undertaken in respect of aspects of the sale of the business, which he claims continued through to the end of 2019, and to his pursuit of investments in Scooti and other opportunities, which he characterises as investments of Sirrah although Sirrah had no equity interest in them (WH 21.1.21 [303]). WH also claims, in evidence also admitted, again by reason of difficulties with its form, with a limiting order under s 136 of the Evidence Act so that it was not proof of the fact, that he was engaged on a full-time basis addressing those matters and had engaged other persons to do so who were paid out of HHC.

150. In Grimaldi v Chameleon Mining NL (No 2) above at [242]-[243], the Full Court of the Federal Court of Australia also dealt with the issue which arise here, of the imposition of liability on a company that is an alter ego of a director, as follows:

“It is accepted in this country that Lord Selborne’s ex tempore observations in Barnes v Addy did not provide an exhaustive statement of the circumstances in which, and the bases on which, a third party’s participation in another’s breach of fiduciary duty or breach of trust, could render that person accountable in equity as a “constructive trustee” (to use the commonly adopted but often unhelpful formula): Farah Constructions, at [161].

The fact findings made in this case reveal, potentially, four quite different manifestations of such participation. Each type warrants present note. The first, is where the third party is the corporate creature, vehicle, or alter ego of wrongdoing fiduciaries who use it to secure the profits of, or to inflict the losses by, their breach of fiduciary duty: see eg Cook v Deeks [1916] AC 554 (“Cook”) at 565; Queensland Mines Ltd v Hudson (1975–1976) ACLC 28 at 658 at 27,709, revsd on other grounds (1978) 18 ALR 1; Timber Engineering Co Pty Ltd v Anderson [1980] 2 NSWLR 488 (Timber Engineering) at (11); Green & Clara Pty Ltd v Bestobell Industries Pty Ltd (No 2) [1984] WAR 32 (Green v Bestobell); Gencor ACP Ltd v Dalby [2000] 2 BCLC 734 at [26]; CMS Dolphin Ltd v Simonet [2001] 2 BCLC 704 (“CMS Dolphin”) at [97]–[105]. In these cases the corporate vehicle is fully liable for the profits made from, and the losses inflicted by, the fiduciary’s wrong. The liability itself is explained commonly on the basis that “company had full knowledge of all of the facts”: Cook, at 565; it is the alter ego of the fiduciary with a “transmitted fiduciary obligation”: Timber Engineering, at (11); or that it “jointly participated” in the breach: CMS Dolphin at [103]. Liability does not turn on the need to show “dishonesty”, although it often provides the reason for the interposition of the company. Proof of a breach of fiduciary duty will suffice; Green v Bestobell, at 40. And, as was said in CMS Dolphin (at [104]), it is “rather artificial” to use Barnes v Addy to explain this liability.”

154. The authorities have also been reviewed by Beech J in EC Dawson Investments Pty Ltd v Crystal Finance Pty Ltd (No 3) [2013] WASC 183 at [406]ff. The observations in Grimaldi v Chameleon Mining NL (No 2) above were also applied by the Court of Appeal in Australian Careers Institute Pty Ltd v Australian Institute of Fitness Pty Ltd (2016) ACSR 566; (2020) 147 ACSR 389; [2016] NSWCA 347 at [178], by Ball J in Twigg v Twigg (No 4); Lambert v Twigg Investments Pty Ltd (No 3) [2020] NSWSC 1159 at [138] and in my judgment in Re Mudgee Dolomite & Lime Pty Ltd [2020] NSWSC 1510 at [162]ff.

155. I am satisfied that, here, HHC is liable for the monies it has received on the basis of knowing assistance and knowing receipt principles, and would also be held liable on the basis that it is WH’s alter ego and, in the language quoted in Grimaldi, it had full knowledge of all of the facts of WH’s breach of duty from which it profited and has a “transmitted fiduciary obligation” as WH’s alter ego. I did not understand Mr Fernon to contend to the contrary, if the breaches of duty alleged against WH were established. It is not necessary to determine whether HHC could also be held liable for knowing involvement in a breach of statutory duty for the purposes of s 79 of the Corporations Act, where that would add nothing to the relief to which Sirrah is entitled at general law. I address the amount of the judgment to be ordered against HHC below.

The relief sought in respect of the derivative claims

156. The Plaintiffs originally sought, on Sirrah’s behalf, orders for an accounting in several respects. It is not necessary to make such orders where the evidence has sufficiently identified the relevant transactions, and it is not necessary to decide whether the Court would have had power to make them.

157. The Plaintiffs sought an order that monies paid to HHC under a management contract or other arrangement and to WH or HHC under any loan arrangement are held on constructive trust for Sirrah. A constructive trust would not ordinarily be imposed where a relationship of creditor and debtor is already in place and any loan agreement has not been rescinded. A constructive trust is also not necessarily imposed as a remedy for breach of fiduciary duty, and the court will generally only impose a constructive trust if no other appropriate remedy is available which is capable of doing full justice: Bathurst City Council v PWC Properties Pty Ltd (1998) 195 CLR 566; [1998] HCA 59 at [42]; Giumelli v Giumelli (1999) 196 CLR 101; [1999] HCA 10 at [10]. In John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1; [2010] HCA 19 at [128]–[129], in a case of alleged breach of fiduciary duty, the High Court observed that a constructive trust “ought not to be imposed if there are other orders capable of doing full justice“ and that:

“[I]t is not a complete answer to … reliance on Giumelli that remedies other than a constructive trust may lack practical utility because of the impecuniosity of those against whom they are sought. One point made in the Giumelli line of cases is that care must be taken to avoid granting equitable relief which goes beyond the necessities of the case. Another point in those cases is that third party interests must be borne in mind in deciding whether a constructive trust should be granted …”

I am not persuaded that, assuming that a breach of fiduciary duty by WH and accessorial liability on the part of HHC were established, it would have been appropriate to make that order where it would have had the result that Sirrah would stand in priority to other third party creditors of HHC, which will have had no opportunity to be heard as to that result.

158. The Plaintiffs seek declarations under s 1317E of the Corporations Act and the general law that WH breached his duties to Sirrah in specified respects. No declaration of a contravention should be made under s 1317E of the Act, since the balance of authority indicates that that section only applies to proceedings in which relief is sought by the Australian Securities and Investments Commission: One.Tel Ltd (in liq) v Rich (2005) 190 FLR 443; 53 ACSR 623; [2005] NSWSC 226 at [69]–[70]; Primacy Underwriting Agency Pty Ltd v Kilborn (2007) 25 ACLC 160; [2007] NSWSC 158 at [6]–[8]. I do not consider that such a declaration should be made in respect of any breach of fiduciary duty where it would be merely anterior to the other relief that I have ordered.

159. The Plaintiffs seek judgment against WH and HHC in respect of unpaid loan balances owed to Sirrah. The Plaintiffs also seek damages, equitable compensation and compensation for loss and damage under s 1317H of the Act, which allows the Court to order a person to compensate a corporation for damage suffered by it, if that person has contravened a civil penalty provision in relation to the corporation and the damage resulted from the contravention. The words “resulted from” in this section refer to damage which, as a matter of fact, was caused by the contravention and require a causal connection between the damage and the contravening conduct. There is no suggestion that the amounts ordered would differ on these bases. The Plaintiffs seek an order for compound interest or alternatively interest. They made no submissions to support the former and the latter follows from the orders that I will make below.

160. The Plaintiffs also sought an order that WH and HHC restore, or transfer, to Sirrah properties referred to in paragraphs 46(g) and (h) of the Further Amended Statement of Claim. The former claim relates to a loan made by WH or HHC to a third party to develop a shopping centre in Fiji and WH and HHC has no interest in that property to transfer to Sirrah. The latter claim relates to a property in Bali where WH holds a sublease, which he now denies is held on trust for Sirrah as I noted above. Mr Fernon submits that the Plaintiffs did not plead a claim for an equitable interest in the Bali or Fiji properties, and the only pleaded claim in respect of the loan funds is that a constructive trust (FASOC [70]) exists in respect of those monies in the hands of HHC, and there is no basis to now claim such an interest. He also submits, rightly, that there is no evidence that a relevant interest in a Fiji property exists. He submits that the monies advanced in respect of the Fiji Shopping Centre and the Bali property are also the subject of the claim made in respect of the loans made to HHC and WH and that, as loan funds, no basis exists to make an equitable claim in respect of such monies or assets acquired by WH and/or HHC with such monies.

161. There is a degree of complexity in the legal principles that apply where a loan is made or received in breach of duty and a constructive trust is claimed while that loan subsists. The relevant issues were helpfully summarised by O’Bryan J in Hylepin Pty Ltd v Doshay Pty Ltd (2020) 148 ACSR 30; [2020] FCA 1370 at [41] as follows:

“In reliance on Paul A Davies (Aust) Pty Ltd (in liq) v Davies [1983] 1 NSWLR 440; (1982) 8 ACLR 1 (Davies), Hylepin advanced a broader contention that, where a director has used company monies in breach of fiduciary duty, the monies so used are held on a constructive trust in favour of the company. Ultimately, it has not become necessary to determine whether that contention is correct or is stated too broadly. However, it appears to be in conflict with the decision of the High Court in Daly v Sydney Stock Exchange Ltd (1986) 160 CLR 371; 65 ALR 193 (Daly), where the majority concluded that monies received as a loan in circumstances of a breach of fiduciary duty (by failing to make full disclosure) were not the subject of a constructive trust and the recipient was bound to repay the monies as a debt. In Hancock Family Memorial Foundation Ltd v Porteous (2000) 22 WAR 198; [2000] WASCA 29, the Court of Appeal of the Supreme Court of Western Australia observed (at [204]) that, in Davies, it was not clear from the trial judge’s findings whether the directors had obtained the company’s money by way of contracts of loan (in which case, the High Court’s decision in Daly applied) or had misappropriated the money (in which case the monies belonged to the company).”

162. I doubt that the relief claimed by the Plaintiffs is available, where it is here common ground that WH had obtained Sirrah’s money which was applied to acquire the interest in the Bali property by way of a contract of loan, and I should follow the appellate authority of Daly and Hancock Family Memorial Foundation Ltd v Porteous (2002) 22 WAR 198; [2000] WASCA 29 in treating such relief as not available where that loan subsists. It is not necessary to reach a final conclusion as to that matter, since I am not persuaded that the order sought by the Plaintiffs should be made, even if it were available in law, where no factual basis for that order was pleaded; WH’s evidence in cross-examination was that a foreign company could not hold a trust interest over Indonesia property under Indonesian law and that evidence was not rebutted by any evidence led by the Plaintiffs; and the form of order sought would allow the Plaintiffs priority over other creditors of WH, so far as that asset would otherwise be available to meet their claims.

163. In supplementary submissions as to orders, the Plaintiffs sought an order that WH “take all steps as may be reasonably required to preserve and sell, at market value” his interest in the Bali property, and remit the proceeds of sale to the liquidator of the First Defendant in satisfaction or part satisfaction of the judgments in respect of the loan accounts. Mr Fernon responds that:

“… the Plaintiffs now seek an order that the Bali property be sold by Mr Harris and he remit the proceeds (not even the net proceeds) of sale to the liquidator of the [Company]. This order is not sought in the Further Amended Statement of Claim. The Plaintiffs do not identify the basis for this order, other than it is to satisfy in whole or in part, proposed orders [as to the loan amounts due by WH and HHC to the Company].

This suggested justification infers the order is sought as security to enforce the potential judgment orders. It does not suggest that the Plaintiffs maintain a claim that [the Company] has an interest in the Bali property. As outlined in the Closing Submissions, the Further Amended Statement of Claim did not assert an interest in the Bali Property but nevertheless sought to have the property transferred to the [Company].

There is no basis to now seek [this order]. It is not part of the Plaintiffs’ claim. The Plaintiffs are not otherwise entitled to security for other orders they seek. They are not entitled to override the interests of others (including security holders) in the Bali property.”

164. I accept Mr Fernon’s submissions in part. It does not seem to me that the Court can or should make such an order, outside any bankruptcy of WH, where it would not be consistent with the relationship of creditor and debtor between the Company and WH and would again prefer the Company to WH’s other creditors, including a third party identified in the course of the hearing who claims to have a security interest over the Bali property. The Court has accepted WH’s undertaking given to the Court not to deal with that property without further order, and might well make a freezing order over that property pending the satisfaction or enforcement of this judgment if asked to do so. It would, of course, be necessary to allow an opportunity to be heard to third parties, including any secured creditor, which may be affected by such an order.

Winding up application

165. Finally, the Plaintiffs bring claims in respect of oppression and relief is sought by way of an order to wind up the Company. Mr Fernon submits that , where WH consents to the winding up of Sirrah, no findings of oppression are required and such findings should not be made

166. At least where a company was established on the basis of relationships of mutual confidence, a winding up order may be made on the just and equitable basis under s 461(1)(k) of the Corporations Act where irreconcilable differences emerge between its members, and the Court may make a winding up order on that basis in circumstances that do not amount to oppression: Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (2001) 37 ACSR 672; [2001] NSWCA 97 at [89]; Nassar v Innovative Precasters Group Pty Ltd (2009) 71 ACSR 343; [2009] NSWSC 342 at [96]–[98], [117]. I summarised the applicable principles in Re AJ Roberts Removals and Storage Pty Ltd [2017] NSWSC 1054 and Re Pure Nature Sydney Pty Ltd [2018] NSWSC 914. There is no absolute rule that the Court will not wind up a solvent company, while accepting that winding up is a last resort: Accurate Financial Consultants Pty Ltd v Koko Black Pty Ltd (2008) 66 ACSR 325; [2008] VSCA 86 at [119]; Re Pure Nature Sydney Pty Ltd above at [76].

167. On the first day of the hearing, the Defendants indicated that they consent to Sirrah being wound up. The Plaintiffs submit that the Court would be comfortably satisfied that, in all the circumstances, a winding up order should be made, and Mr Hayes appointed as Sirrah’s liquidator under s 461(1)(k) of the Corporations Act, notwithstanding the extant application to remove and replace him as provisional liquidator made by the Second, Third and Fourth Defendants. The matters set out above, and the history of litigation between the parties, are sufficient to warrant a winding up order on the just and equitable grounds. Mr Hayes should be appointed liquidator, given his familiarity with Sirrah’s affairs and the additional costs which would arise from now appointing a different liquidator, and where no findings have been made at this point that are adverse to his conduct of the provisional liquidation. The Second-Fourth Defendants may, of course, amend and pursue their application for his removal, to address his position as liquidator rather than provisional liquidator, if so advised.

Orders and costs

168. After I had reserved judgment, I requested further submissions as to the orders that the Plaintiffs sought, if they were successful in whole or in part, and as to the basis on which any money amounts contained in those orders are calculated.  I have had regard to the Plaintiffs’ proposed orders and the parties’ further submissions in formulating proposed orders as set out below.

169. I should first address several issues that arise in respect of those orders. As I noted above, it is now common ground that a winding up order should be made, and I will appoint the existing provisional liquidator as Sirrah’s liquidator. In doing so, I recognise that the Second and Fourth Defendants have brought an application to replace him as provisional liquidator, but they have not complied with the directions made to progress that application and it has not been determined. I do not propose to make declarations in the form sought by the Plaintiffs in orders 7, 9, 11-12, 14, 16 and 18 for the reasons noted in paragraph 158 above.

170. The Plaintiffs’ proposed orders, and in particular orders 3, 8, 13, 15 and 19 against WH and orders 5, 10 and 17 against HHC include overlapping money judgments against WH in respect of the separate heads of liability, for example, in respect of loan balances and disputed expenses, and seek to address that overlap by a qualification that the amount payable would not exceed the total amount of the liability of WH and HHC in respect of the loan balances. I do not consider that is an appropriate form of order, where it would leave at least WH to engage in further calculations to seek to work out what he had to pay to meet any judgment, and it does not expose or resolve any dispute between the parties in that respect. I have reformulated the orders that I propose to make to quantify the total amounts payable by each of WH and HHC, in respect of all heads of liability, and I will allow the parties the opportunity to make further submissions as to that matter. The judgment against WH comprises the amount of his loan account ($1,014,244); the amount of HHC’s loan account ($11,044,660.24) where I have found that loan was made in breach of his fiduciary duty; a portion of the management fees paid to HHC ($3,754,902.58), which I have held was paid in breach of that duty; and the amount of the “reimbursement” to HHC ($875,173) which I have held was also paid in breach of that duty. The judgment against HHC comprises the amount of its loan account ($11,044,660.24), that part of the management fees which it received ($3,754,902.58) and the “reimbursement” to it ($875,173). The judgments against WH and HHC do not include any additional amount in respect of the “disputed expenses” where it appears they are already reflected, wholly or partly, in WH’s loan account and the Plaintiffs have not quantified the amount of any overlap. The Plaintiffs rightly accept that they cannot recover more than their total loss against WH (under paragraphs 3 and 4) and HHC (under paragraphs 5 and 6) under these judgments.

171. There was no dispute between the parties as to the quantification of pre-judgment interest in respect of the loan amounts, but the Plaintiffs did not calculate interest in respect of the other heads of claim and will need to do so and address any overlap in that respect if they seek interest in respect of those claims, in the further submissions which they will have the opportunity to make. I have not made any additional order in respect of Bali property where the loan in respect of that property is included in the loan account and for the reasons noted above.

172. In the ordinary course, costs would follow the event, and my preliminary view is that WH and HHC should be ordered to pay the Plaintiffs’ costs of and incidental to the proceedings against them, but not the claim against Ms Harris which was not pressed and as to which costs have been reserved.

168. On that basis, the orders that I propose to make, subject to the opportunity for further submissions reserved below, are that:

1. Pursuant to section 461(1)(k) of the Corporations Act 2001 (Cth), the First Defendant, Sirrah Pty Ltd (in prov liq) be wound up.

2. Alan John Hayes be appointed as liquidator of the First Defendant.

3. Judgment for the First Defendant against the Second Defendant in the sum of $16,699,979.82.

4. The Second Defendant pay pre-judgment interest on the sum of $1,014,244.00 for the period 25 January 2019 to 13 April 2021 in the amount of $108,199.03 and pre-judgment interest on the sum of $11,044,660.24 for the period 30 September 2019 to 13 April 2021 in the amount of $772,385.28 and continuing thereafter up until judgment.

5. Judgment for the First Defendant against the Fourth Defendant in the sum of $15,674,735.82.

6. The Fourth Defendant pay pre-judgment interest on the sum of $11,044,660.24 for the period 30 September 2019 to 13 April 2021 in the amount of $772,385.28 and continuing thereafter up until judgment.

   174. I direct the parties to make any further submissions within 7 days as to the form of orders that I propose to give effect to this judgment, and as to costs, not exceeding 10 pages in one and a half spacing.

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Decision last updated: 23 April 2021