FEDERAL COURT OF AUSTRALIA
Rogers v MHM Metals Ltd [2015] FCAFC 67
Citation: Rogers v MHM Metals Ltd [2015] FCAFC 67 Appeal from: MHM Metals Ltd v Rogers [2014] FCA 1006 Parties: FRANK ARTHUR ROGERS and ROGERS SOUTHERN PTY LTD (ACN 009 069 541) v MHM METALS LIMITED (ACN 124 212 175) File number: VID 589 of 2014 Judges: MIDDLETON, GILMOUR AND GLEESON JJ Date of judgment: 25 May 2015 Catchwords: CORPORATIONS – where director of respondent company proposed and board of respondent company approved acquisition of vessel – where director signed contract on behalf of board to have a vessel supplied – where respondent company expended money on supply and refit of worthless vessel owned by director’s family trust – whether title to vessel passed to respondent company – whether director’s company, which was trustee of his family trust, liable to respondent company by reason of having given knowing assistance to director with knowledge of dishonest and fraudulent design – whether finding that title did not pass inconsistent with primary judge’s other findings – where appellants did not plead sale of vessel from appellants to respondent company at trial – open to primary judge to conclude that title never passed – not necessary for a finding of knowledge of dishonest and fraudulent design on behalf of director’s company that director may not have intended that respondent company would not obtain title to vessel where he misappropriated respondent company’s funds through artifice of contract – appeal dismissed – Corporations Act 2001 (Cth), ss 181, 182, 183 Legislation: Corporations Act 2001 (Cth), ss 181, 182, 183, 1317H
Sale of Goods Act 1896 (Tas), ss 6, 23, 26Cases cited: Consul Development Pty Ltd v DPC Estates Pty Ltd [1975] HCA 8; (1975) 132 CLR 373
Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89Date of hearing: 2 March 2015 Place: Melbourne Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 77 Counsel for the Appellants: DJ Williams QC Solicitor for the Appellants: Griffits and Griffits Counsel for the Respondent: M Wheelahan QC and S Gladman Solicitor for the Respondent: Logie-Smith Lanyon
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
VID 589 of 2014
ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA
BETWEEN: FRANK ARTHUR ROGERS
First AppellantROGERS SOUTHERN PTY LTD (ACN 009 069 541)
Second AppellantAND: MHM METALS LIMITED (ACN 124 212 175)
Respondent
JUDGES:
MIDDLETON, GILMOUR AND GLEESON JJ
DATE OF ORDER:
25 MAY 2015
WHERE MADE:
MELBOURNE
THE COURT ORDERS THAT:
1.The appeal be dismissed with costs.
2.The notice of contention be dismissed.
3.Each party pay their own costs of the notice of contention.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
VID 589 of 2014
ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA
BETWEEN: FRANK ARTHUR ROGERS
First AppellantROGERS SOUTHERN PTY LTD (ACN 009…
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Details
- AGLC
- Rogers v MHM Metals Ltd [2015] FCAFC 67
- Case
- [2015] FCAFC 67
- Decision Date
CaseChat Overview and Summary
The appeal before the Court was brought by Mr Rogers and Rogers Southern against an order of the Federal Court of Australia. The appeal concerned the compensation payable by the appellants to MHM pursuant to section 1317H of the Corporations Act 2001 (Cth). The sum of $548,841.00 represented the amount MHM had spent on purchasing and refitting the yacht "Ocean Voyager" although, the primary judge found, property in the yacht never passed to MHM. The primary judge found that Mr Rogers was liable for contraventions of sections 181, 182 and 183 of the Act involving the misappropriation of MHM’s funds, and that Rogers Southern was liable as it was "knowingly concerned" in Mr Rogers' misconduct.
The primary legal issues before the Court were whether title to the vessel passed to MHM, whether Rogers Southern was liable to MHM by reason of having given knowing assistance to Mr Rogers with knowledge of his dishonest and fraudulent design, and whether the primary judge’s finding that title did not pass was inconsistent with other findings. The Court found that there was clear and cogent evidence of misappropriation by Mr Rogers. The Court concluded that it was open to the primary judge to conclude that title never passed to MHM and that it was not necessary for a finding of knowledge of dishonest and fraudulent design on behalf of Rogers Southern that Mr Rogers may not have intended that MHM would obtain title to the vessel where he misappropriated MHM’s funds through the artifice of the contract.
The Court found that the appeal should be dismissed with costs, the notice of contention be dismissed, and each party pay their own costs of the notice of contention.
The primary legal issues before the Court were whether title to the vessel passed to MHM, whether Rogers Southern was liable to MHM by reason of having given knowing assistance to Mr Rogers with knowledge of his dishonest and fraudulent design, and whether the primary judge’s finding that title did not pass was inconsistent with other findings. The Court found that there was clear and cogent evidence of misappropriation by Mr Rogers. The Court concluded that it was open to the primary judge to conclude that title never passed to MHM and that it was not necessary for a finding of knowledge of dishonest and fraudulent design on behalf of Rogers Southern that Mr Rogers may not have intended that MHM would obtain title to the vessel where he misappropriated MHM’s funds through the artifice of the contract.
The Court found that the appeal should be dismissed with costs, the notice of contention be dismissed, and each party pay their own costs of the notice of contention.
Orders
Orders of the court
1. The appeal be dismissed with costs.
2. The notice of contention be dismissed.
3. Each party pay their own costs of the notice of contention.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
This is an appeal from an order of a single judge of this Court by which the appellants were ordered to pay compensation to the respondent (“MHM”) pursuant to s 1317H of the Corporations Act 2001 (Cth) (“Act”) in the sum of $548,581.00: MHM Metals Ltd v Rogers [2014] FCA 1006. The sum of $548,841.00 comprises amounts spent by MHM to purchase and refit the yacht “Ocean Voyager” although, her Honour found, property in the yacht never passed to MHM. The primary judge found that the compensation was payable by the first appellant (“Mr Rogers”) for contraventions of ss 181, 182 and 183 of the Act involving the misappropriation of MHM’s funds, and by the second appellant (“Rogers Southern”) as it was “knowingly concerned” in Mr Rogers’ misconduct. BackgroundParties and witnesses MHM was formed in 2007 to conduct mining exploration and smelter waste extraction in Tasmania. The company was listed on the Australian Stock Exchange in December 2007. Mr Rogers was a director of MHM between April 2007 and August 2012 and its managing director from April 2007 to July 2012. The primary judge did not accept Mr Rogers as a witness of truth. Her Honour also found that Mr Rogers had not been candid to the board of MHM and had misled the board. Mr Rogers’ long term friend and business associate was Mr Joseph Psereckis (“Mr Psereckis”). The primary judge also did not accept Mr Psereckis as a witness of truth. Mr Psereckis’ accountant was Mr David Jones (“Mr Jones”), who operated a company called Tasmanian Adventure Cruises Pty Ltd (“TAC”). The primary judge found that the evidence of Mr Jones “on some key factual issues was implausible and unreliable”. Rogers Southern is a company owned and controlled at all relevant times by Mr Rogers. It was the trustee of Mr Rogers’ family trust (“family trust”), having been appointed in November 2004. The previous trustee was Mr Rogers’ brother, Graeme Rogers. Rogers Engineering Services Pty Ltd (“Rogers Engineering”) was established in 2004. Mr Rogers was a director of that company from 11 April 2007 until 3 October 2008. The other directors were Mr Psereckis (30 November 2004 until 4 March 2012) and Mark Rogers, Mr Rogers’ son (21 July 2008 until 19 April 2010). The shareholders in Rogers Engineering were Mr Psereckis with 25% of the shares and, from 2010, Rogers Southern with 75% of the shares (previously held by Mark Rogers).Sale and refit of the “Ocean Voyager” The “Ocean Voyager” was purchased by the family trust in about August 2003 for $50,000, for use as a pleasure craft. At that time, Graeme Rogers was the trustee of the family trust and, consequently, the vessel was registered in the Australian Register of Ships in Graeme Rogers’ name. Registration for a vessel of this kind is not compulsory and does not affect ownership of the vessel. From the time of its purchase by the family trust, the “Ocean Voyager” was kept at Coffs Harbour, in New South Wales. It was lifted out of the water and left at a boat yard between 2004 and 2007 where, occasionally, work was done on it by Mr Rogers, Mark Rogers and Mr Psereckis.
Evidence
Evidence Before The Court
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Decision
Reasons for decision
Her Honour concluded that there was “clear and cogent evidence of misappropriation” by Mr Rogers, saying:TAC was the ostensible vendor of the vessel but for the reasons given, I have rejected the [appellants’] case that the Ocean Voyager was owned by Mr Psereckis and that TAC was acting as Mr Psereckis’ agent on the sale of the vessel to MHM. I am satisfied that Mr Rogers, by his conduct, brought about the sale of a vessel owned by his family trust to MHM, without disclosure to the Board of his family trust’s ownership of the vessel or his interest in the transaction or that Rogers Engineering would be doing the refit. Mr Rogers, in procuring and committing MHM to purchase the Ocean Voyager, thereby improperly used his position as director of MHM to gain benefits for himself and entities with which he was associated. Having rejected the respondents’ case, it is open to infer and I find that TAC’s role was nothing more than an artifice to disguise Mr Rogers’ personal interest in the transaction and I find that Mr Rogers’ conduct, and the use of TAC as the contracting party, was deliberate to conceal the true facts from the MHM Board. Accordingly, I find that Mr Rogers’ conduct was in breach of his duties under s 181, 182 and 183 of the Act and that through the artifice of the TAC contract Mr Rogers misappropriated MHM’s funds.Primary judge’s conclusion on liability of Rogers Southern Her Honour found that, as Mr Rogers was the controlling mind of Rogers Southern, his knowledge of his own dishonest and fraudulent design was to be imputed to Rogers Southern.Primary judge’s reasons on remedy The primary judge summarised MHM’s primary case as being that its compensable damage was the whole of the amount that it spent on the “Ocean Voyager” and that Mr Rogers’ contravening conduct “brought about the situation that it spent that money on acquiring and refitting a vessel in the belief that ownership of the vessel passed to it under the TAC contract, when it has not”. At [111] of her Honour’s reasons, the primary judge concluded:I accept the submission that MHM has spent $548,581 on a boat that it does not own. Title in the vessel could not pass to MHM under the TAC contract because the vessel was owned by the trust and, in consequence, MHM did not receive what it contracted to acquire under the TAC agreement: to obtain ownership of the vessel. In consequence I accept the submission for MHM that there has been a total failure of consideration. …As the cases make clear, the mere fact that MHM may have considered itself to be the owner, and acted upon that basis, does not alter the circumstance that there has been a total failure of consideration. The notion of what constitutes a total failure of consideration looks to the benefit bargained for rather than any benefit which might have been obtained in fact… The primary judge accepted (at [113]) that the damage suffered by MHM that resulted from Mr Rogers’ contravening conduct includes “the entirety of what it spent on the boat as the presumed owner of the vessel that it never came to own”.
Ratio Decidendi
Legal Principle Established
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