Sancho Bakery Pty Ltd (in Liquidation) v Durolek - [2024] WASC 81

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION:   SANCHO BAKERY PTY LTD (IN LIQUIDATION) -v- DUROLEK [2024] WASC 81
CORAM:   TOTTLE J
HEARD:   9 - 11 OCTOBER 2023
DELIVERED          :   22 MARCH 2024
FILE NO/S:   CIV 1873 of 2022
BETWEEN:   SANCHO BAKERY PTY LTD (IN LIQUIDATION)
First Plaintiff
TRAVIS KUKURA AND NEIL RAYMOND CRIBB AS JOINT AND SEVERAL LIQUIDATORS OF SANCHO BAKERY PTY LTD (IN LIQUIDATION)
Second Plaintiff
BUITENDAG HOLDINGS PTY LTD as trustee for BUITENDAG FAMILY TRUST
Third Plaintiff
AND
BELINDA DUROLEK
First Defendant
FRANCK DUROLEK
Second Defendant

Catchwords:

Corporations - Breaches of directors duties - Accessorial liability - Whether first defendant directly or indirectly concerned in breaches of duty by second defendant - Whether first defendant was an intentional participant in the breaches with knowledge of the essential elements of the contravening conduct - Intention and knowledge not established

Equity - Knowing assistance in dishonest and fraudulent breach of duty - No pleading of dishonest and fraudulent design - Knowledge of dishonest and fraudulent design not established

Contract - Where no express agreement - Whether existence of loan contact capable of being inferred from circumstances - Whether loan contract can be inferred from payment of funds by company controlled by second defendant into account in the joint names of defendants - No contract inferred

Restitution - Claim for money had and received - Whether second defendant received a benefit - No benefit received

Corporations - Voidable transactions - Whether first defendant a party to a transaction - Whether transaction an uncommercial transaction - Whether transaction an insolvent transaction - Whether transaction an insolvent transaction for the purpose of defeating creditors - Whether good faith defence open - Voidable transaction established - Good faith defence established - Nature of the power conferred by s 588FF

Legislation:

Acts Interpretation Act 1901 (Cth)
Corporations Act 2001 (Cth)

Result:

Action dismissed

Category: B

Representation:

Counsel:

First Plaintiff	:	K A Dundo
Second Plaintiff	:	K A Dundo
Third Plaintiff	:	K A Dundo
First Defendant	:	L A Warnick SC
Second Defendant	:	No appearance

Solicitors:

First Plaintiff	:	KD Legal (Perth)
Second Plaintiff	:	KD Legal (Perth)
Third Plaintiff	:	KD Legal (Perth)
First Defendant	:	Havilah Legal
Second Defendant	:	No appearance

Case(s) referred to in decision(s):

Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd [2018] HCA 43; (2018) 265 CLR 1
ASIC v ActiveSuper Pty Ltd (2015) 105 ACSR 116; [2015] FCA 342
Australian Securities and Investments Commission v Adler [2002] NSWSC 171; (2002) 168 FLR 253
Bryant, in the matter of Gunns Limited (in liq) (receivers and managers appointed) v Edenborn Pty Ltd [2020] FCA 715
Cashflow Finance Pty Ltd (in liq) v Westpac Banking Corp [1999] NSWSC 671
Cook's Constructions Pty Ltd v Brown [2004] NSWCA 105; (2004) 49 ACSR 62
Crowe-Maxwell v Frost [2016] NSWCA 46; (2016) 91 NSWLR 414
Cussen v Commissioner of Taxation [2003] NSWSC 841
Cussen v Commissioner of Taxation [2004] NSWCA 383
Durolek v Pier (WA) Pty Ltd [2018] WASCA 187
Durolek v Pier (WA) Pty Ltd [No 2] [2019] WASCA 138
Ford v Perpetual Trustees Victoria Limited [2009] NSWCA 186
Ives v Lim [2010] WASCA 136
Jones v Dunkel (1959) 101 CLR 298
National Commercial Banking Corporation of Australia Ltd v Batty (1986) 160 CLR 251
R v Byrnes & Hopwood (1995) 183 CLR 501
Re St George's Development Company Pty Ltd (in liq) [2022] VSC 295
Weaver v Harburn [2014] WASCA 227
Yeshiva Properties No 1 Pty Ltd v Marshall [2005] NSWCA 23; (2005) 219 ALR 112
Yorke v Lucas (1985) 158 CLR 661

TOTTLE J:

Buitendag Holdings Pty Ltd, the third plaintiff, (Buitendag), is a company controlled by Mr Isak Buitendag. It sues for the recovery of funds allegedly misappropriated by the defendants out of the bank account of the first plaintiff (Sancho Bakery). Sancho Bakery is in liquidation and its rights to sue the defendants in relation to the allegedly misappropriated funds (together with the rights of the liquidators) have been assigned to Buitendag.
The defendants are married but are now separated. The first defendant (Mrs Belinda Durolek) lives in Western Australia and, the second defendant (Mr Franck Durolek) lives overseas. In Mr Durolek's absence from the jurisdiction the action proceeded to trial against Mrs Durolek.
The facts upon which Buitendag's claims are based may be summarised as follows. Mr Durolek was a director of Sancho Bakery and Jean Maurice Pty Ltd. These companies owned and operated bakery businesses. In 2016 the businesses were sold to Pier (WA) Pty Ltd, a company also controlled by Mr Buitendag. The sale was settled on 26 August 2016 and the proceeds of sale ($1,604,950.10) were transferred into Sancho Bakery's bank account. Four days later the funds were transferred into a joint bank account in the names of the defendants. On 1 September 2016, Mrs Durolek, in accordance with instructions received from Mr Durolek, authorised the transfer of $1,580,071 to a bank account in France. In November 2016 the funds were used to purchase, in the defendants' joint names, six residential flats in England (the English properties). The English properties were sold in 2021. Sancho Bakery did not receive any benefit from the purchase and sale of the English properties and in June 2022 it was wound up.
In November 2016 Pier commenced proceedings in this court (the Pier proceedings) against Sancho Bakery, Jean Maurice and the defendants for damages and for the return of the price paid by it for the bakery businesses. On 10 October 2017 Pier obtained judgment against Sancho Bakery, Jean Maurice and the defendants for damages to be assessed. On 2 July 2018 damages and pre-judgment interest were assessed in the sum of $1,208,970.32. The judgment against Mrs Durolek was set aside on appeal.[1] The judgment against the other parties remains unsatisfied.
[1] Durolek v Pier (WA) Pty Ltd [No 2] [2019] WASCA 138.
Buitendag claims that:
(a)Mrs Durolek was a person directly or indirectly concerned in, or a party to, breaches by Mr Durolek of his duties as a director of Sancho Bakery and an order for compensation should be made against her under s 1317H of the Corporations Act 2001 (Cth);
(b)The funds transferred into the defendants' joint bank account constituted a loan from Sancho Bakery to the defendants repayable on demand and Mrs Durolek has failed to satisfy the demand made for repayment;
(c)The transfer of funds from Sancho Bakery's account into the defendants joint bank account was (i) an uncommercial transaction within the meaning of s 588FB of the Corporations Act (ii) an insolvent transaction within the meaning of s 588FC of the Corporations Act and (iii) was made for the purpose of defeating, delaying or interfering with the rights of Sancho Bakery's creditors on winding up and for those reasons was a voidable transaction under s 588FE(5) of the Corporations Act and an order should be made under s 588FF of the Corporations Act directing Mrs Durolek to repay the funds;
(d)Mrs Durolek is liable in restitution for monies had and received by her;
(e)Mrs Durolek knowingly assisted Mr Durolek in a breach of the duties owed by him as a director of Sancho Bakery.
In summary, in defence of the claims, Mrs Durolek says that her involvement in the events giving rise to the claims was limited to following Mr Durolek's instructions. She says that throughout her marriage to Mr Durolek she looked after the home and their children and Mr Durolek looked after his businesses. Her involvement with the bakery businesses was limited to helping in one of the shops. She says that there was no reason for her to suspect that there was anything improper about the transfer of Sancho Bakery's funds into the joint account and from that account to the French bank account. She says she was not involved in the purchase of the English properties. She says that the signatures on documents relating to the English properties that purport to be her signatures were forgeries. Finally, she says that she has received no benefit from the impugned transaction.
For the reasons developed below, Buitendag's claims will be dismissed.

The evidence

Buitendag's case was entirely documentary. Mrs Durolek gave evidence in support of her own case and she called a forensic document examiner, Mr Justin Watts.
The outcome of this action depends to a significant extent on an assessment of Mrs Durolek's credit and the reliability of her evidence. Mrs Durolek accepts that various statements made in affidavits sworn by her in the Pier proceedings were untrue. She says that the affidavits were prepared by Mr Durolek and she swore them without reading them and satisfying herself that the contents were true. Her senior counsel characterised her conduct in placing such trust in her husband as 'foolish and naïve'.[2] Understandably, counsel for Buitendag placed considerable reliance on the untrue statements in Mrs Durolek's affidavits as a basis for attacking her credit. When setting out my factual findings, I have addressed the most material attacks on Mrs Durolek's credit.
[2] ts 163.
When considering Mrs Durolek's evidence in these proceedings the admissions made by her about her affidavits in the Pier proceedings are matters to which significant weight must be accorded. My assessment, however, is that Mrs Durolek was a truthful witness. That assessment is informed by the following. First, Mrs Durolek gave her evidence in a frank and open manner. Although she was nervous, during a thorough cross-examination she was neither evasive nor argumentative when responding to questions. While she was concerned to stress at various points in her evidence that she played no role in Mr Durolek's businesses her evidence did not appear rehearsed. Secondly, the foundational proposition on which Mrs Durolek's defence rests, which is that Mr Durolek looked after his businesses and the family's finances and she looked after the home and the children, was plausible. Thirdly, her conduct in swearing affidavits prepared by Mr Durolek without reading them was undoubtedly 'foolish and naïve'. Viewed objectively, and with the benefit of hindsight, Mrs Durolek's reliance on Mr Durolek, especially in the period after November 2017, is surprising and excites a degree of scepticism. Viewed subjectively from Mrs Durolek's perspective, her reliance on Mr Durolek is best characterised as a dependence that reflected the way they had conducted their marriage, the level of trust she reposed in him, her inexperience in business and legal affairs generally and her lack of knowledge of, and involvement in, his business affairs. So viewed, Mrs Durolek's foolish and naïve conduct is more readily understandable. Fourthly, Mr Watts' opinion evidence that the signatures that purport to be her signatures on various business documents were 'simulations' corroborated material aspects of Mrs Durolek's evidence.
Before leaving Mrs Durolek's evidence, I observe that the credit issues raised by Buitendag focussed on matters that were largely collateral in nature and did not directly concern the central facts summarised in [3].
Mr Watts was an appropriately qualified forensic document examiner. There was no challenge to his expertise nor to the conclusions expressed by him in the report that he prepared for the proceedings.[3]
[3] Exhibit DR1.

The facts

The Durolek family

Save as otherwise indicated, the following account of the relationship between the defendants and their family background is derived from Mrs Durolek's unchallenged evidence-in-chief.[4] As mentioned, Mrs Durolek's evidence in relation to these matters was plausible. I accept it was reliable.
[4] ts 73 - 79.
Mr Durolek was born in France in 1968. Mrs Durolek was born in England in 1970. After completing her secondary education, Mrs Durolek obtained a Diploma in Child Care. She met Mr Durolek in England in 1987 and they married in 1996. They had three children who were born in 1997, 1999, and 2000 respectively.
Mr Durolek had many businesses during the marriage. When first married and living in England, Mr Durolek had a business importing wine from France. In addition, with the assistance of his Polish uncles, he bought and renovated a property. He then bought and ran a restaurant and wine bar. Mrs Durolek was not involved in any of these businesses.
In the late 1990s the family lived in France for a year before returning to live in England. In about 2000 the family moved to Australia for a year. Mr Durolek decided that the family should emigrate to Australia. While waiting for their permanent residency visas, the family lived in France and Mr Durolek purchased and renovated a property.
The family came to live in Australia permanently in 2003. Initially Mr Durolek was involved in renovating properties. He then became involved with others in the operation of the 'C' Restaurant in Perth but a dispute ended his involvement with this business. In about 2010, following an extended holiday in France, Mr Durolek decided to establish a French bread and patisserie business in Perth. Mrs Durolek understood the business traded under the name 'Jean Pierre Sancho'.
By 2010 all the children were in full time education and Mrs Durolek wanted to be involved in activities other than managing the home and childcare. At Mr Durolek's suggestion she undertook some charity work.
In about 2015 Sancho Bakery established a 'pop-up' shop in Whitfords, a northern Perth suburb, close to what was then the family home in the suburb of Kallaroo. Mrs Durolek worked in the shop for a couple of hours each weekday. The shop moved to Joondalup after which a permanent manager was appointed. Mrs Durolek's continued assistance was not required. In April 2016 the manager resigned and Mr Durolek asked Mrs Durolek whether she would 'keep an eye' on the shop. She worked in the shop for a couple of hours each weekday. Mrs Durolek's role did not involve any book-keeping or 'the conduct of financial affairs'.[5]
[5] ts 78.
In 2016, at Mr Durolek's instigation 'for financial reasons', the family moved from Kallaroo to Mandurah. Mrs Durolek was upset about the move because it disrupted her younger children's schooling.[6] Speaking about the period after the sale of the businesses Mrs Durolek's evidence was as follows: [7]
Okay. And being left with the two children, did that cause any difficulties for you?---I was very upset, actually. I had been moved to Mandurah with two very unhappy children because they had been taken out of their school with all their friends, and even then, Jamie was so unhappy he insisted on going back to his old school and he would travel from Mandurah every single day back to Hillarys on the train and it was just – I felt – for me as a mother, if my children are happy, I'm happy. If they're not happy, then I'm not happy.
All right. And did you have any ongoing involvement with the Joondalup shop?---I went on the train once a week just to check and, really, just to give the girls support if they needed anything.
And that was because the Joondalup shop had not been part of the sale. Is that right?---It had been left, yes. It hadn't been sold.
[6] ts 81.
[7] ts 84 - 85.
In her evidence-in-chief Mrs Durolek described how she and Mr Durolek divided their family responsibilities:[8]
So within your family, who was responsible for the conduct of financial affairs?---Franck.
Did you ever suggest to Franck that you should be involved in the business?---No. I actually didn't really want – you know, I never wanted to be. I was happy at home caring for the home and the children.
So bank statements coming through from the bank, for example, who would check those?---Franck.
Who was responsible for paying the mortgage?---Franck.
And how did you feel about Franck controlling the family's financial affairs?---I was quite happy. He wasn't ever mean with – you know, he never restricted me with money. He didn't – you know, her was very, you know, a very giving person. You know, he was never – I wasn't, like, in a position where I had to ask Franck for money or anything. He, you know, it's just how it was. He was in charge of the financials, I was in charge of the family. He had his side of the marriage and I had my side of the marriage.
[8] ts 78 - 79.
In cross-examination, Mrs Durolek's evidence was to the effect that Mr Durolek prepared all tax returns and, save for one occasion when she met 'Neil', she had no contact with accountants.[9]
[9] ts 142.
Based on the totality of Mrs Durolek's evidence about her work history and her marriage I find that she had no experience in business, financial, legal or taxation matters and in respect of those matters she was entirely dependent on Mr Durolek.
The Durolek marriage has broken down. Mrs Durolek understands that Mr Durolek is engaged to be married to someone else.[10] Mr Durolek does not provide any financial support for Mrs Durolek. She has a half interest in the equity in the former family home in Mandurah and a car.[11] She has been represented in these proceedings on a pro bono basis.[12]

The execution of business documents

[10] ts 100.

[11] ts 100.

[12] ts 164.

In her evidence-in-chief Mrs Durolek produced various documents that she had found in the business papers kept by Mr Durolek in his 'office' at the family home, when gathering materials for the purposes of her defence of this action. The documents appeared to bear Mrs Durolek's signature but her evidence was to the effect that she had not signed them. The documents were:
(a)A National Australia Bank Ltd (NAB) credit application form dated '20/01/11'.[13]
(b)A NAB form entitled 'Authority to Disclose Confidential Information to Guarantors and Proposed Guarantors' dated '8/09/12'.[14]
(c)A NAB form entitled 'International Telegraphic Transfer Application' dated '20/9/2012'. [15]
(d)A letter addressed to 'MLC PPP' dated 5/12/13.[16]
(e)A 'Lakeside Joondalup Booking Confirmation Form' dated 27 August 2015.[17]
(f)An execution clause for a 'Loan schedule and Goods Mortgage' dated 11 November 2014.[18]
(g)A commercial Credit Application to the Fremantle Chocolate Factory dated 14 November 2014.[19]
(h)A deed of restraint that formed part of the agreement for the sale of the bakery businesses.[20]
[13] Exhibit Q1.
[14] Exhibit Q2.
[15] Exhibit Q3.
[16] Exhibit Q4.
[17] Exhibit Q5.
[18] Exhibit Q6.
[19] Exhibit Q7.
[20] Exhibit Q8.
Mr Watts' evidence was that the signature purporting to be that of Mrs Durolek on each of the documents was a 'simulation' that is, it was not consistent with the naturally executed signature of the specimen writer (in this case Mrs Durolek) or put more succinctly, it was not Mrs Durolek's genuine signature.[21] I find that Mrs Durolek did not sign any of the documents listed in the preceding paragraph. In making that finding I rely on Mrs Durolek's evidence and I draw support from the corroborating effect of Mr Watts' evidence. I find that Mr Durolek simulated (forged) Mrs Durolek's signature on the documents. A powerful inference to the effect that it was Mr Durolek as opposed to anyone else who forged Mrs Durolek's signature arises from the facts that the documents relate to the affairs of the businesses managed by Mr Durolek and he was also a signatory to many of the documents. The finding that Mr Durolek forged Mrs Durolek's signature on these documents leads me to infer more readily that he forged her signature on other documents, particularly, as will be seen, those relating to the English properties.

The bakery businesses

[21] ts 159.

Sancho Bakery was registered on 20 October 2009. Mr Durolek was one of three directors appointed when the company was registered. By 19 November 2013 he was the sole director.[22] The share capital consisted of ten ordinary shares held jointly by the defendants in their capacities as the trustees of the Durolek Family Trust.[23]
[22] Exhibit A24.
[23] Exhibit A24, page 5.
Jean Maurice Pty Ltd was registered on 12 January 2012. Mr Durolek was a director of Jean Maurice between 12 January 2012 and 20 June 2021. Other directors were appointed in 2012 but they resigned in 2013. In the records maintained by the Australian Securities and Investment Commission Mrs Durolek was recorded as a director of Jean Maurice between 18 June 2012 and 8 March 2016.[24] Mrs Durolek's evidence was to the effect that she only became aware that she had been recorded as a director of Jean Maurice when the present proceedings were commenced.[25] Her evidence was that she was not involved with the affairs of Jean Maurice. In cross-examination Mrs Durolek rejected the proposition that 'it was a decision between you and Franck that you ceased to be a director of [Jean Maurice] because of the sale process'.[26] I find that although Mrs Durolek was recorded as being a director of Jean Maurice she had never consented to acting as a director and did not know that she had been purportedly appointed as one. Jean Maurice was wound up on 30 January 2018.[27] It is now deregistered.
[24] Exhibit A32.
[25] ts 79, 106.
[26] ts 106.
[27] Exhibit A32.
Sancho Bakery conducted a bakery business under the trading name Jean Pierre Sancho and Jean Maurice conducted a bakery business under the trading name Le Petit Pierre. My impression is that the two companies operated together but the evidence does not permit detailed findings as to how and to what extent this occurred.
The last set of financial statements prepared for Sancho Bakery were for the financial year ending 30 June 2015.[28]
[28] Exhibit A25.
On 27 August 2016 Sancho Bakery was indebted to the Australian Taxation Office in the sum of $62,067.64.[29] There is no evidence that Mrs Durolek was aware this debt was owed by Sancho Bakery. I find that she had no knowledge of it.
[29] Exhibit A31.
Save for her attendances at the Whitfords and Joondalup shops described earlier and the banking of the Joondalup shop's takings, Mrs Durolek was not involved in the running of the bakery businesses conducted by Sancho Bakery and Jean Maurice. She was not involved in and had no knowledge of, the corporate or financial affairs of either company. I find that Mrs Durolek thought of the bakery business simply as her husband's business. Having regard to all the evidence, I think it unlikely that Mrs Durolek had anything more than a vague understanding of how the businesses operated or who indeed were the legal owners of the businesses.

The sale

On 28 May 2016 Sancho Bakery and Jean Maurice entered into an agreement to sell their businesses to Pier for the sum of $1,800,000.[30] The sale price was not apportioned between Sancho Bakery and Jean Maurice.
[30] Exhibit 23.
It was a term of the agreement that the defendants execute a 'deed of restraint' the effect of which was to restrain them from competing with Pier for the periods specified in the deed. The deed of restraint relied on by Buitendag as executed by Mrs Durolek is one of the documents referred to at [25]. As explained at [26] Mrs Durolek did not sign the deed of restraint. Mr Durolek forged her signature on the deed.
Settlement of the sale of the businesses took place on 26 August 2016 and the net proceeds of sale amounting to $1,604,731.26 were deposited into Sancho Bakery's account at the Bank of Queensland.[31] An email from the settlement agents confirmed that the deposit of the funds in Sancho Bakery's account was at the request of the 'sellers'.[32] I infer that Mr Durolek had given instructions for the sale proceeds to be deposited into Sancho Bakery's account.
[31] Exhibits A2, A5 and A19.
[32] Exhibit A19.
Not all of Sancho Bakery's assets were sold to Pier. It retained the bakery shop in Joondalup to which reference has been made. The shop traded under the name of Jean Pierre Sancho.[33]
[33] Exhibit BD12.
Mr Durolek told Mrs Durolek that he wanted to invest the proceeds of sale in property.[34]
[34] ts 82.
In cross-examination Mrs Durolek was asked whether she and Mr Durolek celebrated the occasion of the sale and whether there was any discussion about what he intended to do with the proceeds. The passage of cross-examination was as follows:[35]
Yes. And did you celebrate the occasion? - - - No. No. I was just finally happy that it was all over, and he had sold his business, because it had been going on for months and months and months. And I wasn't in a very happy state, because I wasn't happy in my life, being in Mandurah with the children, very unhappy. It was a bad time of my life actually. I was – I was just happy he had finally sold his business.
Okay. So you and Franck did not celebrate the occasion on 26 August, at all? - - - No.
And once he told you it had settled, did he tell you how much money (indistinct) received or give you any indication of how much money was received? - - - I did not understand it as that figure. I thought he had sold – he told me originally he had sold it for $1.8 million. Now, obviously there were fees taken out. I didn't – I was not aware of a final figure.
So did you have a discussion with Franck Durolek about what you were going to do with – well, what he intended to do with the proceeds of the sale?---It was his business. He had sold it. And as many businesses before for many, many years, Franck made the decisions and that's how it was. And he decided he wanted to invest the money rather than start another business.
Yes. Invest the money where? - - - In properties. It could have been France. It could have been England. It could have been Poland for all I know. It was up to him. He went back and he – he chose to do what he wanted to do, as he always has through the whole of my relationship with him.
[35] ts 115.
Relying on the evidence referred to in the preceding two paragraphs I find that Mrs Durolek played no part in decisions as to how the proceeds of sale were to be dealt with and that she did not know what Mr Durolek's intentions in respect of the proceeds of sale of the bakery business were.
On 30 August 2016 a cheque for $1,604,950.10 drawn on Sancho Bakery's account with the Bank of Queensland was deposited in the defendants' joint account with NAB (the NAB account).[36] Sancho Bakery's account with the Bank of Queensland was closed.[37] I infer the account was closed on instructions from Mr Durolek. There is no evidence that Mrs Durolek knew that Mr Durolek intended to close Sancho Bakery's account before it was closed or indeed that she knew that Sancho Bakery held a bank account at the Bank of Queensland. I find that not only did she not know that Mr Durolek intended to close the account but that she had no involvement in the process of closing the account.
[36] Exhibit A1.
[37] Exhibit A2.
Buitendag contended that Mr Durolek left Australia on 29 August 2016 to visit his parents in France and that consequently Mrs Durolek must have been the person who obtained the cheque from the Bank of Queensland and deposited it into the NAB account. In support of this contention Buitendag relied on an email from Mr Durolek to Mr Buitendag apparently sent on 29 August 2016 at 10.08 pm in which Mr Durolek addressed various concerns about the business that I infer had been raised by Mr Buitendag and wrote:[38]
Both my parents have had cancer and my dad is quite unwell, so I've had to rush back to France to see him.
[38] Exhibit A36.
Mrs Durolek's evidence was that she knew the business had been sold and that Mr Durolek was waiting in Mandurah to pick up a cheque.[39] She denied that she had access to Sancho Bakery's account at the Bank of Queensland and denied that she closed the account and deposited the cheque into the NAB account.[40] She said she was not aware that approximately $1.6 million had been paid into the NAB account on 30 August 2016 and she denied she deposited the cheque.[41]
[39] ts 82.
[40] ts 114, 117.
[41] ts 83.
Mrs Durolek accepted that Mr Durolek sent the email on 29 August 2016 but she was not prepared to accept that he left Australia that day as suggested by the email. She said that Mr Durolek's parents had suffered from cancer but his father was 'not quite unwell and there was not a mad rush'.[42]
[42] ts 114.
I am not persuaded that Mr Durolek's email establishes that he left Australia on 29 August 2016. It is entirely possible that Mr Durolek told Mr Buitendag that he left Australia to avoid engaging with him face to face in relation to matters Mr Buitendag had apparently raised with him about the businesses.
Further, there is no evidence to suggest that any authority was conferred on Mrs Durolek to collect or otherwise obtain a cheque from the Bank of Queensland so that she could pay it into the NAB account. I find that Mr Durolek obtained the cheque from the Bank of Queensland and paid it into the NAB account. If I am wrong in making this finding and it was Mrs Durolek who obtained the cheque and paid it into the NAB account, then I am confident that she would have done so in accordance with instructions given by Mr Durolek. In any event, whether Mr Durolek paid the cheque into the NAB account or whether this was done by Mrs Durolek, I find that Mrs Durolek played no part in the decision to deposit the cheque into the account. As Mrs Durolek explained in her evidence, the businesses and the family finances were managed by Mr Durolek.
On 30 August 2016 Mr Durolek sent Mrs Durolek an email, the material parts of which read as follows:[43]
[43] Exhibit D9.
So the account details are:
Account name Franck & Belinda Durolek
Bank name: Societe Generale
Bank address: 6, place du theatre
21000 Dijon France
Account number: [redacted]
BIC: SOGEFRPP
IBAN: [redacted] They need the 2 above numbers also
Send $1,600,000
But it must be sent in Australian Dollars
As this is an Australian dollar account
On 1 September 2016 the sum of $1,580,071 was transferred from the NAB account to an account at the Societe General Bank in France. There is no dispute that Mrs Durolek arranged the transfer. Documents produced by the NAB confirm that Mrs Durolek was identified by bank officers as the person giving instructions for the transfer,[44] and Mrs Durolek accepts that by 1 September 2016 Mr Durolek was in France.[45]
[44] Exhibit A26.
[45] ts 116 - 117.
Mrs Durolek was cross-examined as to why the amount transferred differed from the amount in the email she received from Mr Durolek. Her explanation was that Mr Durolek must have telephoned her and asked her to transfer a different amount. She said that she 'would not have just done that on my own back of just transferring money. I was instructed by my husband'.[46] I accept Mrs Durolek's evidence. I find that Mrs Durolek would not have departed from the instructions contained in Mr Durolek's email to her on her own initiative and without instruction from Mr Durolek.
[46] ts 118 - 119.
The evidence in relation to the account with the Societe Generale Bank to which the funds were transferred is exiguous. Mrs Durolek produced a bank statement apparently issued by Societe Generale in respect of the account into which the funds were transferred. She said it had been provided to her by Mr Durolek in the two weeks that preceded the trial.[47] The bank statement, which gives a French address for Mr Durolek, appears to record Mr Durolek as the client.[48] On the face of the bank statement the account was in Mr Durolek's sole name.
[47] ts 117.
[48] Exhibit D7.
Buitendag contends the Societe General Bank account was an account in the defendants' joint names. In support of that contention it relies on a document forming part of NAB's records entitled 'Overseas Customer Payments Telegraphic Transfers Archive Report' which, under a heading 'Beneficiary Details' sets out the account number of the Societe Generale account and the address of the branch at which the account was maintained and the following endorsement:[49]
Ben: Frank and Belinda Durolek
[49] Exhibit A26.
The endorsement in the Overseas Customer Payments Telegraphic Transfers Archive Report reflects the details in Mr Durolek's email to Mrs Durolek giving instructions for the transfer of the funds and thus its accuracy depends on information provided by Mr Durolek.
In cross-examination Mrs Durolek said that she assumed if Mr Durolek had said the account was an account in their joint names, then that was the position.[50] Of course, Mrs Durolek's understanding of who was the account holder of the French account and, who in fact held the French account, are different matters.
[50] ts 137.
Buitendag's counsel contended that I should be cautious about accepting the authenticity of any document that originated from Mr Durolek. I accept the necessity for caution. Indeed, I would extend the need for caution to the acceptance of both any information provided by Mr Durolek and any representations or statements derived from information provided by Mr Durolek, and this includes the contents of the affidavits sworn by Mrs Durolek in the Pier proceedings. Although my impression is that the Societe Generale account was a bank account in Mr Durolek's sole name, it is unnecessary to make a finding about in whose name the account was held and I will not do so.
The Societe Generale bank statement records a transfer of $246,000 into the account on 6 September 2016.[51] There is a corresponding debit entry in the bank statement for the NAB account.[52] In cross‑examination, Mrs Durolek accepted that she transferred the $246,000 to the French account.[53] The source of the majority of funds for this transfer was a funds transfer from another account in the defendants' names with the NAB.
[51] Exhibit D7.
[52] Exhibit A1.
[53] ts 118.
On 12 September 2016 Pier's solicitors served a notice of default on Sancho Bakery and Jean Maurice terminating the sale agreement and seeking repayment of the funds paid by Pier and compensation for other losses.[54] Pier also gave notice of the possibility that Pier would apply for freezing orders if it was required to commence proceedings to enforce its rights. Mrs Durolek's evidence, which I accept, was to the effect that she did not see the notice of default in 2016 and only saw the notice of default for the first time when she was preparing for the trial.[55]
[54] Exhibit 37.
[55] ts 144 - 145.
On 9 November 2016 Pier commenced proceedings in this court against Sancho Bakery, Jean Maurice and the defendants.[56] In those proceedings Pier alleged breach of contract against Sancho Bakery and Jean Maurice. It also alleged misleading or deceptive conduct and deceit against all the defendants in those proceedings.
[56] The proceedings were numbered CIV 2935 of 2016.
On 14 November 2016 K Martin J made freezing orders against the defendants in the Pier proceedings.
On 24 November 2016 Mr Buitendag served Mrs Durolek with the freezing order and other documents. I will now turn to a credit issue that arose in relation to Mrs Durolek's knowledge of the identity of the person who had served her.

Mrs Durolek's evidence concerning Mr Buitendag

In an affidavit sworn by her on 16 August 2018 for the purposes of her application for a suspension order in respect of the judgment against her, Mrs Durolek said that the first time she laid eyes on Mr Buitendag was when she was in Court giving evidence at a hearing before K Martin J on 7 May 2018.[57] At the hearing on 7 May 2018, in answer to a question about her knowledge of orders requiring her to lodge her passports with her solicitor, Mrs Durolek said:[58]
I was not aware of orders with [redacted]. I did not get involved with any of this at all. It was Franck's business. Franck sold the business. This is the first time I have ever set eyes on Mr Buitendag. I have never spoken to him before. I had nothing at all to do with that business. I was a stay-at-home mother.
[57] Exhibit BD15 [16].
[58] Exhibit A38, page 219.
In an affidavit of service Mr Buitendag deposed:[59]
From approximately 5.45 am on Thursday, 24 November [2016], I waited outside the house in a position where I could view the property. At approximately 8.15 am on 24 November 2024, [Mrs Durolek] came back from her walk (I had not seen her leave) and it appeared that she had noticed me as she began to run. [Mrs Durolek] continued to run towards her front door but tripped on the stairs.
[59] Exhibit A6.
At the trial of this action Mrs Durolek's evidence was as follows:[60]
Well, Franck had told me that he had employed a lawyer who had previously helped with the [C] restaurant dispute and he was going to accept service. So as far as I'm concerned, he was accepting service. And I always remember being with my dogs, walking towards my door, my back door of my house, and a man coming towards me, you know, walking very fast towards me so I started moving faster and I ran up the steps and my dogs ran and pulled me over and then the man caught up with me and he came actually on to my – up the steps on to my property, handed me documents. And I said, "this is nothing to do with me. Why are you giving them to me? I was quite upset. And he said, "you have to take them." So I took them and that was that.
[60] ts 86.
When the evidence contained in Mr Buitendag's affidavit of service was put to Mrs Durolek in cross-examination she said:[61]
I accept that he was running after me and I was running – well, I didn't. I ran up the steps with my dogs, who pulled me over. He was trying to catch up with me.
[61] ts 125.
Mrs Durolek accepted that the evidence in her affidavit sworn on 16 August 2018 contained a mistake. She explained:[62]
It was a mistake because when – I had no idea who served me was Mr Buitendag. I had no idea what he looked like. I had never met him before and I had never seen any documents about Mr Buitendag serving me because I had never seen any court documents. And for the past seven years this has been used against me. I should have put the second time I met eyes on Mr Buitendag.
. . .
Mr Buitendag served you and handed you documents. You saw his face, didn't you? - - - I had never ever met - - -
No, you saw the person's face who served you with the documents. - - - I saw a quick glimpse of someone who threw documents in my hand.
Did you see his face, Mrs Buitendag? I'm sorry, Mrs - - - Oh, my God.
Durolek. Did you see his face? - - - Yes, I saw the person and I do not recall the same person in court as the person who served me, to be totally honest.
[62] ts 126.
I do not draw any adverse inferences from the evidence concerning Mrs Durolek's mistake about not having 'laid eyes on' Mr Buitendag before the hearing on 7 May 2018. No doubt being served with court documents in the circumstances described by Mrs Durolek was stressful. She did not have an opportunity to study Mr Buitendag's appearance. It was not surprising that when she saw Mr Buitendag in court on 7 May 2018 she did not recognise him as the person who had served papers on her approximately 18 months earlier.

Purchase of the English properties

On 30 November 2016 the defendants were registered as the owners of six flats in a property in High Street, Worthing, West Sussex. Records from the Land Registry in the United Kingdom record that the consideration was £1,120,950.[63] A residential address in Lancing, West Sussex was given as the defendants' address. The address was the address of a property registered in the name of Mrs Durolek's mother.
[63] Exhibit BD20.
On 1 December 2016 Mrs Durolek and her children met Mr Durolek in Thailand where they remained on holiday until the end of January 2017. When Mrs Durolek arrived in Thailand, Mr Durolek told her that he had bought the English properties but he did not tell her that she was a joint proprietor.[64] In her evidence-in-chief, Mrs Durolek was asked whether she heard anything about the legal dispute while she was in Thailand. She said:[65]
No. Nothing was really – I mean, Franck really was just – I feel looking back, he was just brushing it off as if it wasn't anything, you know, really something that was going to come to anything or – and there was nothing I could do personally. I just trusted Franck would sort the situation out.
So did you have any involvement in dealing with the lawyers or legal documents? - - - No. No. No.
[64] ts 86 - 87.
[65] ts 87.

I find that Mrs Durolek was not involved in the purchase of the English properties. I find that the purchase was arranged and effected by Mr Durolek and that Mrs Durolek did not know of his intention to purchase the English properties before the purchase occurred. In making these findings I rely on Mrs Durolek's evidence as to when she learned of the purchase and on the following matters: first, Mrs Durolek did not leave Australia between 1 September and 30 November 2016 so the ability for her to participate in the purchase was limited by her geographical location; secondly, and more importantly, Mrs Durolek's unchallenged evidence was that Mr Durolek had managed both his businesses and the family's finances without involvement from her and there is no evidence that there was any change in that division of responsibility following the sale of the bakery businesses; and thirdly, there is no direct evidence that Mrs Durolek was involved in any way in the purchase of the English properties and any inference that might otherwise arise from the fact that the properties were registered in joint names is negated by a combination of the first and second matters and by my finding that Mr Durolek forged Mrs Durolek's signature on other documents. I infer that Mr Durolek forged Mrs Durolek's signature on documents relating to the purchase of the English properties. And, as will be seen, this is what Mr Durolek told Mrs Durolek in November 2017.
I also find that the purchase of the English properties was funded, at least in part, using Sancho Bakery's funds.
I accept Mrs Duroleks's evidence that she had no involvement with lawyers regarding the Pier proceedings.

The affidavits in the Pier proceedings

On 20 February 2017 Mrs Durolek swore an affidavit in the Pier proceedings for the purposes of disclosing her assets in accordance with the requirements of the freezing orders.[66] At the trial of this action her evidence was that the affidavit was prepared by Mr Durolek and the solicitor who had been instructed by him to act on behalf of all the defendants in the Pier proceedings. Mrs Durolek's evidence was to the effect that she looked at the affidavit briefly and did not read it thoroughly. She said that she thought 'it must all be okay. They've prepared it'.[67] Mrs Durolek said she did not receive any advice separate from the advice the lawyer was giving Mr Durolek and that all emails and documents relating to the case were sent to Mr Durolek's email address.[68]
[66] Exhibit BD1.
[67] ts 87.
[68] ts 88.
Mrs Durolek said that she did not disclose the English properties in her affidavit because 'I wasn't aware of [the] ownership of the properties. I did not know I had to disclose them'.[69]
[69] ts 87.
In answer to the question why she had not disclosed the Societe Generale bank account, Mrs Durolek said:[70]
I had not prepared – obviously I hadn't prepared the asset disclosure myself and I was not aware of having any interest in that bank. I didn't have any bank accounts or receive any transactions. I didn't – I would have had no idea.
[70] ts 88.
In the affidavit sworn on 20 February 2017 Mrs Durolek deposed that she was the manager of the Joondalup shop and oversaw the day-to-day operations of the business including payment of staff wages and suppliers. She deposed that in the period between 26 August 2016 to 13 February 2017 she caused Jean Maurice to deposit $6,193.04 into an account in her name at Bankwest and she caused Sancho Bakery to deposit $53,202.65 into the Bankwest account.
Mrs Durolek's affidavit evidence about her role as manager of the Joondalup shop is inconsistent with the undisputed fact that she was overseas between the beginning of December 2016 and the end of January 2017. It is also inconsistent with her evidence at the trial to the effect that in 2016 the family moved from Kallaroo to Mandurah and that after the move 'she went on the train once a week [to Joondalup] to check and, really, just to give the girls support if they needed anything'.[71]
[71] ts 84.
Mrs Durolek was cross-examined about why takings from the Joondalup shop were being paid into her Bankwest bank account. The effect of her evidence was that the Bankwest account functioned as a business account for the Joondalup shop and she arranged for takings to be paid into the account and Mr Durolek, who also had access to the account, arranged for staff wages to be paid from the account.[72]
[72] ts 110 - 111.
In her 20 February 2017 affidavit, Mrs Durolek deposed that:[73]
Save as set out in this affidavit, I have not received payment of any amount from the First Defendant or the Second Defendant since 26 August 2016.
The qualification 'save as set out in this affidavit' related to the payment of the takings from the Joondalup shop into the Bankwest account. Mrs Durolek had not disclosed the receipt of the payment of $1,604,950.10 into the joint NAB account. Mrs Durolek readily accepted that the statement in her 20 February 2017 affidavit quoted above was not true.[74]
[73] Exhibit BD1 [23]
[74] ts 113.
On 24 April 2017 Mrs Durolek swore a further affidavit for the purposes of making disclosure of her assets.[75] Mrs Durolek's evidence-in-chief in relation to the preparation of this affidavit was as follows:[76]
All right. Do you recall signing another asset disclosure affidavit later in 2017?---Yes.
How did that come about?---I remember having to – I mean, I wouldn't have understood it as an asset disclosure back then. I remember having to go to his office to sign another document.
You say his office?---[redacted] office. With Franck. I distinctly remember it being at the end of the day and it was rushed. I remember going there. I was asked to sign, not asked to read anything, just – and I didn't even understand the implications of having to read anything or – I was just asked to sign. I signed and that was - - -
And you had played no part in the preparation of that - - - ? - - - No part in the preparation again, no.
[75] Exhibit BD14.
[76] ts 88.
In her affidavit sworn on 24 April 2017 Mrs Durolek deposed that she had read Mr Durolek's affidavit sworn on 20 February 2017 and an affidavit sworn by him on 24 April 2017. In her evidence-in-chief and in cross-examination she said that she had not read either her own affidavit of 24 April 2017 or Mr Durolek's affidavit of 20 February 2017.[77]
[77] ts 89, 124.
In Mr Durolek's affidavit sworn on 20 February 2017 he deposed that he used the proceeds of sale of the bakery business to purchase a quantity of gold lingots that were stored in a bank in France. It is common ground that Mr Durolek lied about the existence of the gold.
Mrs Durolek's conduct in relation to the affidavits, as described above, requires me to consider her evidence very carefully but having done so, for the reasons given earlier, I accept her evidence both in relation to the circumstances surrounding the making of the affidavits and in relation the critical facts upon which the pleaded claims are based.

Non-compliance with order for delivery up of passports

On 15 June 2017 the defendants were ordered to deliver their passports to their solicitor but on 20 June 2017 they travelled to Thailand on holiday. Mrs Durolek's evidence was that when they arrived in Thailand Mr Durolek explained to her that the court had ordered that they should 'hand in their passports'. She did not know about the order before she travelled and she said that she was very shocked and could not understand why they had been required to hand in their passports.[78] Her evidence was that while they were in Thailand Mr Durolek told her that the lawyer who had been acting for them had stopped acting. She also gave evidence to the effect that Mr Durolek told her he had told the court he had bought 'gold ingots' and this was her first knowledge of what he had said to the court about gold ingots (notwithstanding that she had deposed in her 24 April 2017 affidavit that she had read Mr Durolek's affidavit in which he deposed that he had purchased gold lingots with the proceeds of sale of the business).
[78] ts 89.
Mrs Durolek explained that Mr Durolek retained a new solicitor. Her explanation for not returning to Australia was as follows:[79]
I was really scared because Simon – Franck would – one time he had Simon on loudspeaker and he was talking to him and I could hear him tell him about a criminal lawyer – he would need a criminal lawyer. And even – (indistinct) mentioned I was just beside myself, to be honest. I just did not know what was happening or understand what was happening, and I – I was very upset and scared of the whole situation.
And did Franck discuss with you the prospect of returning to Australia or not returning to Australia?---I had no intention of not returning to Australia, but I did want to go and see my parents before I returned because my dad wasn't in great health. He was, I think – he would have been 97 years old then – 97 years old. And I really felt if – if I had to hand in my passport when I come back, I really want to see my parents.
[79] ts 90 - 91.
I accept Mrs Durolek's evidence that before she left Australia in July 2017 she was not aware of the court's order that she deliver up her passport.
Mrs Durolek travelled to England with Mr Durolek from Thailand on 15 September 2017. They spent time with her parents and a week later Mr Durolek went to France. In early October 2017 she joined Mr Durolek in France and he told her that judgment had been entered against them both.[80]
[80] ts 91 - 92.
Mrs Durolek's evidence was to the effect that Mr Durolek instructed new lawyers and in November 2017 he disclosed to the lawyers and the court that the proceeds of sale of the bakery business had been used to purchase the English properties. Mrs Durolek's evidence was that Mr Durolek told her she was an owner of the English properties and that he had signed her name on the documents.[81]
[81] ts 93.
On 9 April 2018 Mrs Durolek returned to Australia and surrendered her passport.

Application to set aside judgment and subsequent appeal

In April 2018 Mrs Durolek applied to K Martin J to set aside the judgment against her. On 7 May 2018 she attended the hearing to which reference has already been made and was cross-examined. In the course of her evidence she denied that she had any involvement in the purchase of the English properties.[82] She was cross-examined on the issue as follows:[83]
And you said nothing in any affidavit as to the existence of property you owned in the United Kingdom, did you?---I did not, because I was not aware of owning the properties.
You were not aware that you owned the properties?---I have never signed anything for the sale – for the buying of those properties. I have – I was not in the UK when those properties were bought. I was not aware my name was on those properties.
Notwithstanding that there's six flats in your name?---Yes. And I - - -
. . .
You also knew that the English properties were yours, notwithstanding that they were not, as you say, that you didn't understand them to be in your name?---I would not know they were in my name if I did not sign anything, and I wasn't in the UK at the sale – at the buying of the properties. I would not know. How can they be my properties when I did not sign anything or I was not in the United Kingdom at the time of buying the properties?
And - - ? I was not aware of my name being on those properties, because I never signed one document.
[82] Exhibit A38, page 217.
[83] A38, 217, 218 and see also 222.
In August 2018 Mrs Durolek applied for an order suspending enforcement of the judgment against her pending the determination of an appeal by her. On 19 October 2018 Mitchell JA granted an order suspending enforcement of the judgment.[84] For the purposes of her application for a suspension order the first defendant relied on an affidavit sworn by her on 16 August 2018. Mrs Durolek's evidence was that Mr Durolek prepared the affidavit for her and she produced an email sent by her to a member of her solicitor's staff on 25 July 2018 in which she recorded that Mr Durolek had prepared the affidavit.[85]
[84] Durolek v Pier (WA) Pty Ltd [2018] WASCA 187.
[85] Exhibit D1.
In the 16 August 2018 affidavit Mrs Durolek gave the following evidence about the English properties:[86]
66.My husband and I are joint owners of property in England, situated at 8 High Street, Worthing, West Sussex. Our property is comprised of six flats, Flat 2, Flat 5, Flat 6, Flat 8, Flat 9 and Flat 10. Five of the flats have two bedrooms and one bathroom and one flat has two bedrooms and two bathrooms. Annexed hereto and marked "BD9" are true copies of the documents of title for the flats.
67.In or about July 2018, my husband requested a market appraisal of the West Sussex properties. The realtor has estimated the value of the properties to be £900,000. Annexed to this affidavit and marked "BDl0" is a true copy of the market appraisal.
68.The West Sussex properties are encumbered by a mortgage in favour of Bridging Funding in the amount of £747,500. Annexed to this affidavit and marked "BD11" is a true copy of the mortgage on this property.
. . .
79.As the West Sussex properties were bought with the proceeds of the business sale that is the subject of this legal case, I do not seek a stay of execution in relation to my interest in those properties.
[86] Exhibit BD1.
Mrs Durolek was cross-examined as to why she had not included in her affidavit a statement that accorded with the evidence that she had given to this court, that is, a statement to the effect that she had not had anything to do with the purchase of the English properties. Mrs Durolek's response was to the effect that by August 2018 she knew that she was an owner of the English properties but she 'washed [her] hands of the properties so that [she] didn't have any involvement of stopping anyone going and selling up the properties or whatever'.[87]
[87] ts 132 - 134.
In closing submissions Mrs Durolek's senior counsel submitted that Mrs Durolek should not be criticised for not complaining in the 16 August 2018 affidavit of 'the fraud by her husband in the acquisition of [the English properties] for two reasons, first, because she had disclosed to the court when she gave evidence on 7 May 2018 that she had not signed any documents for the purchase of those properties and, secondly, because the purpose of the affidavit was to disclose the properties that were in her name and she had said that she did not press for a stay of execution in respect of those properties.[88]
[88] ts 164.
I accept the submissions made on Mrs Durolek's behalf as to the manner in which she dealt with the English properties in her affidavit of 16 August 2018. I am not prepared to draw any inferences adverse to Mrs Durolek from the evidence in her 16 August 2018 affidavit about the English properties and, in particular, from the fact that she did not say anything in that affidavit to the effect that she had not signed any documents relating to the purchase of the English properties.
In her 16 August 2018 affidavit Mrs Durolek deposed that she, 'had never been involved in the business'. It is clear from the context in which this statement was made that Mrs Durolek's reference to 'the business' was a reference to the bakery business being sold by Mr Durolek, rather than being a more limited reference to the Joondalup shop.[89] In cross-examination, Mrs Durolek was challenged about this evidence on the basis that she had been involved in the management of the Joondalup shop.[90] In my view Mrs Durolek's statement that she had never been involved 'in the running of the business' was substantially true. I have already recorded my acceptance of Mrs Durolek's account of the assistance she provided to the Joondalup shop. This did not amount to assistance in the 'running of the business'.

Mortgage and sale of the English properties

[89] Exhibit BD15 [17].

[90] ts 126 - 128.

On 30 April 2018 the English properties were mortgaged to Sigma 8 Ltd, a company incorporated in the Cayman Islands.[91] The deed of mortgage recorded Mr Durolek and Mrs Durolek as the mortgagors and recorded a property in France as their address. The mortgage deed bears a signature purportedly being that of Mrs Durolek and her signature was purportedly witnessed by a solicitor in England, a Mr Paul Miller. Mrs Durolek denied signing the mortgage and denied that she had ever met Mr Miller.[92] Her evidence was to the effect that she saw the mortgage for the first time in the weeks leading up to the trial.
[91] Exhibit AE7.
[92] ts 100 - 101.
Mr Watts' evidence in relation to the signature on the mortgage purporting to be that of Mrs Durolek was as follows:[93]
This formation varies from the master pattern as displayed in the specimen range. This signature displays evidence of some differences in structure when compared to the specimen signature range.
. . .
The quality of the reproduction was too poor to be able to undertake a comprehensive examination.
[93] Exhibit DR1, page 27 and 28.
I find that Mrs Durolek did not sign the mortgage of the English properties. I make this finding for the following reasons, first, I accept Mrs Durolek was a truthful witness, secondly, some support for Mrs Durolek's evidence is provided by Mr Watts' opinion and thirdly (although I recognise the possibility that the mortgage might have been signed by Mrs Durolek earlier than the date it bears) by 30 April 2018 she was back in Australia having returned on 9 April 2018.
Before leaving the issue of the mortgage of the English properties, I record that Mrs Durolek attached to her affidavit sworn on 16 August 2018 a document that she described in the body of an affidavit as a mortgage but which, in fact, was an approval in principle of a loan facility of £747,500 by 'Bridging Funding' dated 14 November 2017.[94] The loan facility approval required a first legal charge over the English properties as security for the loan. The Land Registry extracts in respect of the English properties do not record a charge that corresponds with a security of the nature contemplated by the Bridging Funding approval.[95] This was not a subject addressed at the trial either in evidence or submissions. I infer from the Land Registry extracts that no charge of the nature contemplated by the Bridging Funding approval was provided and that the offer of funding was not taken up.
[94] Exhibit BD15 [68] and attachment 'BD11'.
[95] Exhibit BD20.
On 26 November 2019 title to the English properties was transferred to Rayford LLP for £875,000. The instrument of transfer bears a signature that purports to be that of Mrs Durolek and the name and a signature of a witness to her signing the transfer, Mr Cedric Porcher. Mr Porcher is also recorded as the witness to Mr Durolek's signature.
It is common ground that Mr Porcher did not witness Mrs Durolek's signature and that his signature was forged. Mrs Durolek was cross-examined about her execution of the transfer:[96]
[96] ts 104 - 105.
Can the witness be shown AE8, and the first page, if I may. At the foot of that page, you will see the date of 26 November 2019. You were at West Sussex with your parents on that day?---Yes, correct.
You didn't leave England until the 29th, was it?---That's correct.
Or the 30^th? The 29^th ? - - - 29th
Three days later. So three days later, you left to come home. Can I take you to the last page. Can you inform his Honour as to who this person is who's identified as the witness for your signature and Franck's signature?---Cedric Porscha used to work for the bakery. He wasn't there for the full length of the bakery. I think he left a couple of years before it was sold.
So he left some time in 2014?---Yes.
And when was the last time you spoke to him?---Cedric?
Yes. To Cedric? - - - Due to seeing his signature there as a witness, I contacted Cedric.
And had you contacted Cedric prior to that?---No, I had not.
Had you ever contacted – well, just going back to that, he left in 2014. After 2014, did you ever contact Cedric and ask him to witness or be a part of a witnessing of documents?---No, I did not.

Buitendag contended that Mrs Durolek had signed the transfer and that it could be inferred from that fact that she and Mr Durolek were acting in concert in relation to the sale of the English properties.
I find that Mrs Durolek did not sign the transfer for the following reasons. First, that Mr Porcher's signature has been forged of itself casts doubt on the authenticity of Mrs Durolek's signature. Secondly, the transfer was signed at a time when the objective facts (in addition to Mrs Durolek's own evidence) point to her being present in England, in those circumstances it is inherently unlikely that her signature would not have been witnessed by a family member or someone based in England. Thirdly, it is unlikely that Mrs Durolek would have contacted Mr Porcher when, in the course of this litigation, she saw that he was recorded as the witness to her signature. If she knew that she had signed the transfer, it would follow that she knew that Mr Porcher did not witness her signature and not only would there be no reason for her to contact him but there would be every reason for her not to do so.
In cross-examination it was put to Mrs Durolek, in effect, that she had not taken any steps to address the situation that law firms in England had been purporting to act on her behalf without instructions from her. In particular, she was asked whether she had taken any steps to speak to Mr Miller who had purportedly witnessed her signature on the mortgage of the English properties. Mrs Durolek said that she had not contacted Mr Miller but said that she had spoken to a firm of lawyers (she could not remember the name) and received copies of some documents 'without signatures' being, I infer, drafts of some of the executed documents tendered at the trial.[97]
[97] ts 134 - 135.
It is not difficult to think of steps that may have been taken by Mrs Durolek to obtain an explanation of how solicitors had been purporting to act on her behalf when she had not instructed them to do so. For example, asking her present solicitors to raise the matter formally with the management of the relevant English law firms or referring the matter to the Law Society of England & Wales, are reasonably obvious steps. It is not surprising, however, that Mrs Durolek was not more proactive in this respect. As may be inferred from Mrs Durolek's remark in cross-examination that, 'My husband isn't the most truthful or honest person', she had very strong grounds for suspecting that Mr Durolek had deceived the solicitors and purported to instruct the solicitors on her behalf. Further, as her senior counsel put it in closing:[98]
She has little money, she's dependent on pro bono legal advice, she's fighting at least three actions brought against her by Buitendag entities. It's not reasonable to criticise her for not taking on a whistle blower role in relation to her husband's fraud.
[98] ts 164.
Buitendag's counsel contended that Mrs Durolek's 'unexplained failure' to call Mr Miller or other representatives of the English law firms gives rise to a Jones v Dunkel [99] inference. I do not accept that there was an unexplained failure to call witnesses based in England. Even if, as a matter of law, there is authority to issue a subpoena to be served on a person outside the jurisdiction, the court will be very slow to exercise its discretion to grant leave to issue.[100] In a practical sense, it would have been a very difficult exercise for Mrs Durolek to secure evidence from any of the solicitors based in England who were involved in the transactions concerning the English properties. Further, even if I were to accept that a Jones v Dunkel inference arose (and I do not) it would only be an inference and it does not displace the probative value of the evidence upon which I have relied to make the findings recorded above.
[99] Jones v Dunkel (1959) 101 CLR 298.
[100] Ives v Lim [2010] WASCA 136 [18].

Winding up of Sancho Bakery

On 22 June 2022 Sancho Bakery was wound up.
On 22 September 2022 Sancho Bakery and its liquidators executed a deed assigning the right to sue the defendants to Buitendag.[101] On 29 September 2022 an order was made by this court granting leave to the liquidators to assign the rights to sue to Buitendag.
[101] Exhibit A21.

Corporations Act - accessorial liability claim

The pleaded claim

Buitendag pleads that Mr Durolek owed duties to Sancho Bakery under s 180, s 181 and s 182 of the Corporations Act. Buitendag pleads the conduct of Mr Durolek on which it relies as follows:[102]
(a)closing Sancho Bakery's account at the Bank of Queensland and transferring the closing balance of $1,604,950.10 to the NAB account (in the further amended statement of claim the $1,604,950.10 is defined as 'Moneys');[103] and
(b)together with Mrs Durolek using the $1,604,950.10 to purchase the English properties.[104]
[102] Further amended statement of claim filed 7 September 2023 [9], [10], [11] and [18].
[103] Further amended statement of claim [9] and [10].
[104] Further amended statement of claim [11].
The particulars of the breaches of the duties alleged by it are sparse and formulaic. They are as follows:[105]
[105] Further amended statement of claim filed [18].
Particulars
The transfer of the Moneys away from the First Plaintiff without consideration:
(a)was not something a reasonable director would do in the Second Defendant's position;
(b)was detrimental to the First Plaintiff's best interests, and done without a proper purpose;
(c)was a misuse of the Second Defendant's position as controlling mind of the First Plaintiff;
(d)resulted in the gaining of a benefit for both the First and Second Defendants, the NAB Bank Account being jointly held by them.
Buitendag pleads that Mrs Durolek was involved in Mr Durolek's breaches of Corporations Act duties because she was knowingly concerned in, or a party to, those breaches within the meaning of s 79(c) of the Corporations Act. The particulars given in support of this plea are limited to (i) the incorporation by reference to certain paragraphs of the judgment of Mitchell JA in Durolek v Pier (WA) Pty Ltd (ii) a repetition of the pleaded allegations against Mr Durolek (iii) an allegation that [Mrs Durolek] took no steps to prevent or reverse the closure of the Bank of Queensland account and (iv) [Mrs Durolek] took no steps to prevent the application of the Moneys to her benefit for the purposes of the acquisition of the [English properties].[106]
[106] Further amended statement of claim [9], [10], [11], [12] and [18].
The paragraphs of the judgment in Durolek v Pier (WA) Pty Ltd referred to in the pleading and relied on by Buitendag read as follows:[107]
Mrs Durolek also deposes that she and Mr Durolek are owners of the following overseas properties:
(1)six flats in West Sussex valued at £900,000 and encumbered by a mortgage in the amount of £747,500; and
(2)a property in France with an estimated value of €170,000, encumbered by a mortgage to a financial institution in the amount of €145,000.
The title documents annexed to Mrs Durolek's affidavit of 16 August 2018 indicated that the West Sussex properties were acquired on 30 November 2016. Paragraph 79 of that affidavit concedes that those properties were purchased using the proceeds of the sale of the businesses to Pier. The copy of the certificate of title for the property in France is in French, but appears to be a certificate issued by a notary on 3 February 2003. This indicates that Mr and Mrs Durolek have owned the property in France since that time.
The failure of Mrs Durolek to disclose the existence of these overseas properties in her affidavit sworn on 20 February 2017 in the primary proceedings would appear, prima facie, to constitute a failure to comply with the ancillary order made on 19 January 2017 in a significant respect.
What Mrs Durolek describes as a mortgage of the West Sussex flats is an approval in principle of a loan facility of £747,500 by 'Bridging Funding' dated 14 November 2017. This indicates that a mortgage must have been granted after that date, which would be in contravention of the Freezing Order. (footnotes omitted)
[107] Durolek v Pier (WA) Pty Ltd [41] - [44].
In submissions Buitendag sought to expand its breach case against Mr Durolek by contending that the effect of transferring the proceeds of sale to the French account had the effect of defeating creditors of Sancho Bakery, those creditors being the Australian Taxation Officer and Pier.[108]

Relevant statutory provisions and principles

[108] Plaintiff's opening submissions filed 20 September 2023 [6] - [9].

In submissions Buitendag's counsel acknowledged that the Corporations Act did not contain provisions capable of imposing accessorial liability on third parties who may have been involved in, or been parties to, breaches of s 180. Consequently, it did not press its accessorial liability claim against Mrs Durolek in respect of the alleged breach by Mr Durolek of the duty owed by him under s 180. No further reference to that section need be made.
Section 181 of the Corporations Act provides:
(1)A director or other officer of a corporation must exercise their powers and discharge their duties:
(a)in good faith in the best interests of the corporation; and
(b)for a proper purpose.
(2)A person who is involved in a contravention of subsection (1) contravenes this subsection.
Section 182 of the Corporations Act provides that:
(1)A director, secretary, other officer or employee of a corporation must not improperly use their position to:
(a)gain an advantage for themselves or someone else; or
(b)cause detriment to the corporation.
(2)A person who is involved in a contravention of subsection (1) contravenes this subsection.
Impropriety for the purposes of s 182 involves a breach of the standards of conduct that would be expected of a person in the position of the defendant by reasonable persons with knowledge of the duties, powers, and authority of the position and the circumstances of the case.[109] Impropriety is to be determined objectively; it does not depend upon the director's, officer's or employee's consciousness of impropriety.
[109] R v Byrnes & Hopwood (1995) 183 CLR 501, 514 - 515 (Brennan, Deane, Toohey & Gaudron JJ).
Section 79 of the Corporations Act specifies when a person is involved in a contravention and, relevantly s 79(c) provides that a person is involved in a contravention if that person has been in any way, by act or omission, directly or indirectly, knowingly concerned in, or party to, the contravention.
A person is a party to a contravention if the person is an intentional participant, the necessary intent being based on knowledge of the essential elements of the contravention.[110] That is to say, both intention and knowledge of the essential elements of the contravention are necessary for accessorial liability.
[110] Yorke v Lucas (1985) 158 CLR 661, 670 (Mason ACJ, Wilson, Deane and Dawson JJ).
In Australian Securities and Investments Commission v Adler,[111] Santow J said that the knowledge required by s 79(c) is:[112]
… knowledge not merely of some potential occurrence, constituting the offence, but of the actual events, though only the essential ones, which constitute that offence. That knowledge must embrace all essential material factual ingredients of a contravention … Knowledge may be inferred from the fact of exposure to the obvious, though that does not obviate the need for actual knowledge of the essential facts constituting the contravention.
[111] Australian Securities and Investments Commission v Adler [2002] NSWSC 171; (2002) 168 FLR 253 (Santow J); ASIC v ActiveSuper Pty Ltd (2015) 105 ACSR 116; [2015] FCA 342 [398] - [434] (White J).
[112] Australian Securities and Investments Commission v Adler [209].
Relevantly, s 1317H provides:
Compensation for damages suffered.
(1)A Court may order a person to compensate a corporation or registered scheme for damage suffered by the corporation or scheme if:
(a)the person has contravened a corporation/scheme civil penalty provision in relation to the corporation or scheme; and
(b)the damage resulted from the contravention.
The order must specify the amount of the compensation.
Damage includes proﬁts.
(2)In determining the damage suffered by the corporation or scheme for the purposes of making a compensation order, include proﬁts made by any person resulting from the contravention or the offence.
…
Recovery of damage.
(5)A compensation order may be enforced as if it were a judgment of the Court.
Sections 181 and 182 are civil penalty provisions.[113]

Consideration and disposition

[113] Corporations Act 2001 (Cth) s 1317DE, s 1317E.

For the limited purpose of considering Mrs Durolek's accessorial liability I will assume, without deciding, that Mr Durolek's conduct in transferring the proceeds of sale of the bakery businesses to the joint NAB account and then instructing Mrs Durolek to make the funds transfer from the NAB account to the French account and thereafter using the funds to purchase the English properties constituted breaches of the duties owed by him under s 181 and s 182 of the Corporations Act.
On the facts as I have found them Mrs Durolek was not knowingly concerned in, or a party to, those breaches. She neither knew that Mr Durolek proposed closing Sancho Bakery's Bank of Queensland account nor did she have any involvement in the decision to close the account and pay the closing balance into the NAB account. Further, as Buitendag pleads Mr Durolek was the controlling mind of Sancho Bakery.[114] Buitendag also pleads Mr Durolek directed closure of the Bank of Queensland account and transfer of the closing balance to the NAB account. Even if she had known of Mr Durolek's intentions in relation to the Bank of Queensland account and the disposition of the funds in it, she had no power or authority to 'prevent or reverse' the process.
[114] Further amended statement of claim filed 7 September 2023 [18] (particular (c)).
Mrs Durolek attended the NAB and gave instructions for the transfer of the funds to the French bank account, in so doing, she was acting in accordance with instructions from Mr Durolek. Mrs Durolek had not been involved in any of Mr Durolek's businesses. She had not been involved in the running of Sancho Bakery's business. Apart from her limited work at the Joondalup shop, which is immaterial for the purposes of considering her potential accessorial liability, she was not involved in Sancho Bakery's business. There is no basis for concluding that Mrs Durolek was aware of any suspicious circumstances or that she had closed her eyes to the obvious. She did not know about Sancho Bakery's debt to the Australian Tax Office, being the only outstanding debt at the time of the transfer. She did not know about the notice of default served by Pier on 12 September 2016.
Finally, Mrs Durolek was not involved in the acquisition of the English properties. She did not know that Mr Durolek had purchased them until after the purchase had been settled and she did not know that she was a registered owner until November 2017.
Mrs Durolek had no accessorial liability for any breach by Mr Durolek of the duties owed by him as a director of Sancho Bakery.

The knowing assistance claim

Although not pleaded in this order it is convenient to consider Buitendag's knowing assistance claim before addressing the other claims.

The pleaded claim

Buitendag's claim is pleaded as follows:[115]
[115] Further amended statement of claim filed 7 September 2023 [37].
37The First Defendant was put on notice or ought to have known that the transfer of the Moneys was an improper use of the Second Defendant's position as sole director of the First Plaintiff and a breach of his duties as pleaded in paragraph 18 above.
Particulars
A.Durolek v Pier (WA) Pty Ltd [2018] WASCA 187 at [41] to [44].
B.The First Plaintiff repeats paragraphs 10, 11 and 12 above.
C.Further and better particulars will be provided following the completion of discovery.
38.By reason of the conduct pleaded in paragraph 37 above, the First Defendant knowingly assisted the Second Defendant breach his duties.
39.The Defendants used the Moneys to acquire the England Properties.
40.By reason of the conduct pleaded in paragraphs 10, 11, 12, 18 and 37 and 38 above, the Defendants hold their interest in the England Properties upon constructive trust for the First Plaintiff to the extent of the Moneys.
Buitendag originally sought relief in the form of a declaration that the English properties were held on constructive trust for Sancho Bakery to the extent to which its funds were applied in the acquisition.[116] The claim for this relief was not pressed. Buitendag did not claim equitable compensation or an account of profits.
[116] Further amended statement of claim filed 7 September 2023 [41(d)].
For the reasons explained below, Buitendag's pleading of the allegation that Mrs Durolek knowingly assisted Mr Durolek's breaches of fiduciary duty are inadequate.

Principles applicable to second limb Barnes v Addy claims

The elements of a claim based on the second limb of Barnes v Addy are as follows: the existence of a fiduciary duty owed by the fiduciary; a dishonest and fraudulent design on the part of the fiduciary; assistance by the third party in that design; and knowledge on the part of the third party of the circumstances constituting that design.[117]
[117] Farah Construction Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 [160].
For the purpose of the second limb of Barnes v Addy a dishonest and fraudulent design can include not only breaches of trust but also breaches of ﬁduciary duty but any breach of trust or breach of ﬁduciary duty relied on must be dishonest and fraudulent.[118]
[118] Farah Construction Pty Ltd v Say-Dee Pty Ltd [179].
In Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd,[119] Gageler J (as his Honour then was) explained:[120]
Knowing participation by a non-ﬁduciary in a dishonest and fraudulent breach of ﬁduciary duty is conduct which is regarded in equity as itself unconscionable and as attracting equitable remedies against the knowing participant of the same kind as those available against the errant ﬁduciary. Knowing participation in a dishonest and fraudulent breach of ﬁduciary duty includes knowingly assisting the ﬁduciary in the execution of a "dishonest and fraudulent design" on the part of the ﬁduciary to engage in the conduct that is in breach of ﬁduciary duty. The requisite element of dishonesty and fraud on the part of the ﬁduciary is met where the conduct which constitutes the breach transgresses ordinary standards of honest behaviour. Correspondingly, the requisite element of knowledge on the part of the participant is met where the participant has knowledge of circumstances which would indicate the fact of the dishonesty on the part of the ﬁduciary to an honest and reasonable person. (footnotes omitted)
[119] Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd [2018] HCA 43; (2018) 265 CLR 1.
[120] Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd [71].
Allegations of participation in a dishonest and fraudulent design is a serious allegation that must be specifically pleaded and particularised. In Yeshiva Properties No 1 Pty Ltd v Marshall,[121] the Court of Appeal in New South Wales (Mason P, Beazley and Bryson JJA) stated:[122]
Where an equitable claim is based on alleged dishonesty, or otherwise on Barnes v Addy (1874) LR 9 Ch App 244, it is inappropriate that there should be anything less than a fully distinct statement in the pleading of what it is in substance that is charged against the alleged accessary.

Mrs Durolek did not choose to receive the benefit of the funds paid into the joint account. They were paid into the account by Mr Durolek and in a practical sense she had no control over the funds. Buitendag pleads that the closure of the Bank of Queensland account and the transfer of funds into the NAB account were 'directed' by Mr Durolek. Not for a moment would Mrs Durolek have thought that the funds paid into the NAB account were funds over which she had power or control. Consistently with that position, her only dealing in relation to the funds was authorising the transfer of the funds to the French account in accordance with the directions received from Mr Durolek. She was no more than his cipher. She played no decision-making role. Thus, the conclusion that follows from evaluating the substance of the transaction rather than its form is that not only did Mrs Durolek not choose to receive the benefit of the funds, in fact she obtained no benefit from receipt of the funds. And, it follows from what I have said that no question arises of Mrs Durolek retaining any benefit in circumstances in which it would be unjust for her to do so.
The claim for money had and received fails.

The voidable transaction claim

The pleaded claim

Buitendag's claim is pleaded as follows:
9.On 30 August 2016, the BOQ Bank Account was closed and the balance of the BOQ Bank Account being $1,604,950.10 (Moneys) was transferred to a National Australia Bank Account BSB 086-006 Account Number 861969390 (NAB Bank Account) in the joint names of the First Defendant and the Second Defendant (the Transaction).
…
25.The 'Relation-Back Day' within the meaning of section 91 of the Act for the purposes of the winding up of the First Plaintiff is 22 June 2022.
26.The Transaction comprised a transaction within the definition of 'transaction' within section 9 of the Act and which transaction was entered into, or an act done was for the purpose of giving effect to the Transaction, during the 10 years ending on the Relation-Back Day.
27.The Transaction was an uncommercial transaction within the meaning of section 588FB of the Act in that it may be expected that a reasonable person in the First Plaintiff's circumstances would not have entered into the transaction, having regard to:
(a)the absence of any benefit to the First Plaintiff of entering into the Transaction, there being no valuable consideration flowing for the payment of the Moneys to the First Defendant and Second Defendant;
(b)the detriment to the First Plaintiff of entering the Transaction, including but not limited to the inability to pay its creditors and meet all of its liabilities then or into the future; and
(c)the benefit to the First and Second Defendant in receiving the Moneys which enabled them to acquire the England Properties registered in their names.
28.The First Plaintiff was insolvent from 30 June 2015.
Particulars
A.The First Plaintiff failed to keep financial records or retain financial records in relation to the period from 1 July 2015 as required by section 286(1) and section 286(2) of the Act.
B.As at 30 June 2015, the First Plaintiff had a working capital deficiency of $80,754.10.
C.As at 30 August 2016 (the date of the Transaction), the First Plaintiff had a running balance account debt with the Australian Taxation Office in the amount of $62,067.64. This debt still remains unpaid as at the date of liquidation.
D.Further and better particulars will be provided following the completion of discovery.
29.The Transaction was an insolvent transaction within the meaning of section 588FC of the Act, it being an uncommercial transaction of the First Plaintiff as pleaded in paragraph 28 above, and:
(a)the Transaction was entered into or an act was done, or omission made for the purposes of giving effect to the Transaction at a time when the First Plaintiff was insolvent; or
(b)the Transaction caused the First Plaintiff to become insolvent because of entry into the Transaction or the First and/or Second Defendants doing an act, making an omission, for the purposes of giving effect to the Transaction.
Particulars of acts and omissions
The Second Plaintiff repeats paragraphs 8, 9, 10 , 11 and 12 above.
30Further, the Transaction was effected for the purpose, or for purposes including the purpose of, defeating, delaying or interfering with the rights of any or all of the First Plaintiff's creditors on a winding up of the First Plaintiff.
Particulars
A.CIV 2935 of 2016 commenced against the First Plaintiff and others on 9 November 2016.
B.Durolek v Pier (WA) Pty Ltd [2018] WASCA 187 at [41] to [44].
C.As at 30 June 2015, the First Plaintiff had a working capital deficiency of $80,754.10.
Further and better particulars will be provided following the completion of discovery.
31The Transaction is voidable pursuant to section 588FE(5) of the Act and the Second Plaintiff is entitled to seek to recover from the First and Second Defendants the payment of the Moneys pursuant to section 588FF of the Act.

Statutory provisions

Part 5.7B of the Corporations Act governs the recovery of property or compensation for the benefit of creditors of an insolvent company. The provisions that are relevant to this claim are s 588FE(1) (that specifies transactions that may be voidable), s 588FE(5) (that identifies an insolvent transaction for the purposes of defeating creditors as a voidable transaction), s 588FB (that specifies what constitutes an 'uncommercial transaction'), s 588FC (that specifies what constitutes an 'insolvent transaction' and s 588FF(i) (that sets out the powers of the court on being satisfied that a transaction is a voidable transaction) and s 588FG (that provides for 'good faith' defences).
Section 588FE provides:
Voidable transactions
(1)If a company is being wound up:
(a)a transaction of the company may be voidable because of any one or more of subsections (2) to (6) if the transaction was entered into on or after 23 June 1993; and
(b)a transaction of the company may be voidable because of subsection (6A) if the transaction was entered into on or after the commencement of the Corporations Amendment (Repayment of Directors' Bonuses) Act 2003.
Section 588FE(5) provides:
(1)The transaction is voidable if:
(a)it is an insolvent transaction of the company; and
(b)the company became a party to the transaction for the purpose, or for the purposes including the purpose, of defeating, delaying, or interfering with, the rights of any or all of its creditors on a winding up of the company; and
(c)the transaction was entered into, or an act done was for the purpose of giving effect to the transaction during the 10 years ending on the relation-back day.
Section 588FB provides:
A transaction of a company is an uncommercial transaction of the company if, and only if, it may be expected that a reasonable person in the company's circumstances would not have entered into the transaction, having regard to:
(a)the benefits (if any) to the company of entering into the transaction; and
(b)the detriment to the company of entering into the transaction; and
(c)the respective benefits to other parties to the transaction of entering into it; and
(d)any other relevant matter.
(2)A transaction may be an uncommercial transaction of a company because of subsection (1):
(a)whether not a creditor of the company is a party to the transaction; and
(b)even if the transaction is given effect to, or is required to be given effect to, because of an order of an Australian court or a direction by an agency.
Section 588FC provides:
A transaction of a company is an insolvent transaction of the company if, and only if, it is an unfair preference given by the company, or an uncommercial transaction of the company, and:
(a)Any of the following happens at a time when the company is insolvent:
(i)the transaction is entered into; or
(ii)an act is done, or an omission is made for the purpose of giving effect to the transaction; or
(b)the company becomes insolvent because of, or because of matters including:
(i)entering into the transaction;
(ii)a person doing an act, or making an omission for the purpose of giving effect to the transaction.
Section 588FF(1) relevantly provides:
(1)Where, on the application of a company's liquidator, a court is satisfied that a transaction of the company is voidable because of section 588FE, the court may make one or more of the following orders:
(a)an order directing a person to pay to the company an amount equal to some or all of the money that the company has paid under the transaction;
(b). . .
(c)an order requiring a person to pay to the company an amount, that, in the court's opinion fairly represents some or all of the benefits that the person has received because of the transaction.
Section 588FG(2) provides:
A court is not to make under section 588FF an order materially prejudicing a right or interest of a person if the transaction is not an unfair loan to the company, or an unreasonable director-related transaction of the company, and it is proved that:
(a)the person became a party to the transaction in good faith; and
(b)at the time when the person became such a party:
(i)the person had no reasonable grounds for suspecting that the company was insolvent at that time or would become insolvent as mentioned in paragraph 588FC(b); and
(ii)a reasonable person in the person's circumstances would have had no such grounds for so suspecting; and
(c)the person has provided valuable consideration under the transaction or has changed his, her or its position in reliance on the transaction.

Consideration and disposition

Transaction and party

There was no dispute that the payment of Sancho Bakery's funds into the NAB account was a transaction for the purposes of pt 5.7B of the Corporations Act. For the purposes of the voidable transaction claim, however, it is important to bear in mind that the transaction pleaded and relied on by Buitendag is confined to the closure of the Bank of Queensland account and the payment of the closing balance into the NAB account.[131]
[131] Further amended statement of claim [9].
In Buitendag's opening written submissions it characterised Mrs Durolek as a non-party to the transaction. In oral submissions Buitendag's counsel seemed to move away from that characterisation and argued that Mrs Durolek was a party to the transaction.[132]
[132] ts 21.
Senior counsel for Mrs Durolek contended that Mrs Durolek was not a party to the transaction because she was not involved in the transfer of funds out of Sancho Bakery's account and into the NAB account and she did not know about the transfer until it had taken place.[133] In support of this contention senior counsel referred to the judgment of McLure P (with whom Buss and Murphy JJA agreed) in Weaver v Harburn, [134] but the passages referred to by counsel do not assist Mrs Durolek.[135]
[133] ts 170.
[134] Weaver v Harburn [2014] WASCA 227.
[135] Weaver v Harburn [113] - [120].
There is no requirement of knowledge or consent or voluntary participation in the concept of being a party to a transaction - as Einstein J said in Cashflow Finance Pty Ltd (in liq) v Westpac Banking Corp,[136] a defendant becomes a party to litigation by being named as such, regardless of whether he knows about it or consents to it. By parity of reasoning a party may be a party to a transaction even though they were unaware of the transaction.
[136] Cashflow Finance Pty Ltd (in liq) v Westpac Banking Corp [1999] NSWSC 671 [519].
I find that Mrs Durolek was a party to the transaction.

An uncommercial transaction

In Crowe-Maxwell v Frost,[137] Beazley P (with whom Macfarlan and Gleeson JJA agreed) observed:
[89]A common thread in the uncommercial transaction cases is that, where there is limited evidence of the nature or purpose of a transaction, but the surrounding circumstances show it to be a departure from normal commercial practice and to raise inferences as to a lack of benefit to the company, detriment caused to the company, or benefit accruing to other parties, absent some commercial explanation, courts may infer the transaction was uncommercial, without requiring the liquidator to prove its precise uncommercial nature. The same may be said with respect to the identification of unreasonable director-related transactions.
[90]In those limited circumstances, for practical purposes, a defendant may be said to bear an 'onus', sometimes referred to as an evidentiary onus, of raising some commercial explanation for the transaction. Thus, in Hawksford v Hawksford [2005] NSWSC 463; 191 FLR 173 Campbell J explained, at [54]:
The distinction between an onus of proof and an onus of adducing evidence is of particular relevance in the present situation. Where party A has the legal onus of proving a negative proposition, and relevant facts are peculiarly in the knowledge of party B or where party B has the greater means to produce evidence relating to those facts, then provided party A establishes sufficient evidence from which the negative proposition may be inferred, party B then comes under an evidential burden, or an onus of adducing evidence. (citations omitted)
[137] Crowe-Maxwell v Frost [2016] NSWCA 46; (2016) 91 NSWLR 414.
The closure of Sancho Bakery's account with the Bank of Queensland and the payment of the closing balance into the NAB account was a departure from normal commercial practice. Quite understandably, Mrs Durolek was not in a position to provide a satisfactory commercial explanation. There is no evidence of a commercial benefit accruing to Sancho Bakery by reason of the transfer and I find that the transaction was an uncommercial transaction.

Insolvent transaction

Buitendag relies primarily on two matters to contend that the transaction was an insolvent transaction.
First, it relies on the statutory presumption of insolvency that, with certain presently irrelevant exceptions, applies in a 'recovery proceeding' when a company has failed to keep financial records in relation to a period as required by s 286(1) of the Corporations Act, (s 588FE(4)) and points to the fact that Sancho Bakery's failure to keep financial records in relation to any of the financial years between the transaction and the relation back day.
Secondly, Buitendag contends that Sancho Bakery became insolvent by entering into the transaction because it disposed of the funds required to pay its debt due to the Australian Taxation Office.
Mrs Durolek did not advance any positive arguments in relation to the insolvent transaction issue and essentially put Buitendag to proof.
This action is a recovery proceeding within the meaning of s 588E(1) of the Corporations Act and by reason of Sancho Bakery's failure to keep financial records the presumption of insolvency arises. There is no evidence to rebut the presumption and I find that Sancho Bakery was insolvent when the transaction occurred.
Had I not found that Sancho Bakery was insolvent in reliance on the statutory presumption, I would have found that it became insolvent by entering into the transaction because the transaction deprived it of the ability to pay its tax debt.
As I have already found that the transaction was an uncommercial transaction, it follows from the findings made in the immediately preceding paragraphs that the transaction was an insolvent transaction within the meaning of s 588FC of the Corporations Act.

Insolvent transaction for the purposes of defeating creditors

Buitendag must establish that Sancho Bakery became a party to the transaction for the purpose of, or for purposes including the purpose of, defeating, delaying, or interfering with, the rights of any or all its creditors on a winding up of the company.
Buitendag contends that the court should infer that the purpose of the transaction was to defeat, delay or interfere with the rights of creditors on a winding up of Sancho Bakery from the steps Mr Durolek and Mrs Durolek took at or around the time of the transaction specifically:[138]
(i)Franck Durolek's decision to close the BOQ Bank Account;
(ii)Franck Durolek leaving Australia and not returning to Australia; and
(iii)Belinda Durolek failing to disclose that she had caused the transfer of the moneys form the NAB Bank Account to the French Account, failing to disclose the French Account and using the moneys to purchase the England Properties[.]
[138] Plaintiff's opening submissions filed 20 September 2023 [43].
In light of the findings I have made about Mrs Durolek's lack of knowledge of Mr Durolek's business affairs generally and her lack of knowledge of the affairs of Sancho Bakery, I am not persuaded that any aspect of her conduct gives rise to the inference for which Buitendag contends.
The analysis in respect of Mr Durolek's conduct is more complicated. It is the events that are closest in time to the transaction from which inferences may be most reliably drawn. That is not to say that conduct removed in time from the transaction is incapable of shining light on Mr Durolek's intentions at the time of the transaction. In assessing the assistance that may be derived from later conduct care must be taken to evaluate the extent to which the relevant conduct is a reaction to intervening events as opposed to part of a continuum. For example, it cannot be inferred from the fact that Mr Durolek now lives overseas and has not lived in the jurisdiction since June 2017 that when he left Australia in August 2016 he did not intend to return to live in Australia on a permanent basis.
The following observations may be made.
(a)Sancho Bakery's only creditor was the Australian Taxation Office and in relative terms the debt was not substantial. Unlike the situation that prevails in many corporate insolvencies Sancho Bakery was not indebted to a number of creditors who were pressing for payment. The usual indicia of insolvency were not present.
(b)I am not persuaded that in August 2016 Mr Durolek intended to leave Australia and live overseas. His family, including two school age children, lived in Western Australia and he and Mrs Durolek owned property here. It is reasonable to infer that his intention was to continue living in Australia for the foreseeable future. Looked at from a slightly different perspective my impression of Mr Durolek's circumstances in August 2016 was not that he was winding up his business affairs in Australia with no intention of being involved in business in this country again. His circumstances were not such that he had no incentive to discharge his responsibilities properly.
(c)There is no evidence that Mr Durolek had a history of involvement in 'phoenix' companies.
(d)Closing Sancho Bakery's Bank of Queensland account does provide some support for inferring that Mr Durolek's intention was to wind up the affairs of the company but of itself it does not give rise to an inference that Mr Durolek (as Sancho Bakery's controlling mind) did not intend to pay the tax debt. That said, Mr Durolek must have known about the existence of the tax debt. The sale of the businesses realised more than enough funds to cover the debt. It is difficult to think of any justification for not discharging the debt immediately.
(e)Sancho Bakery's retention of the Joondalup shop suggests Mr Durolek did not intend to wind up the affairs of Sancho Bakery.
(f)That the tax debt was not in fact paid combined with the closure of the Bank of Queensland account and the transfer of the funds to the French account provides some support for inferring that on 30 August 2016 Mr Durolek had an intention not to pay the tax debt.

A finding that Mr Durolek closed the Bank of Queensland account and paid the closing balance into the NAB account for the purpose or for purposes that included defeating, delaying, or interfering with, the rights of any or all Sancho Bakery's creditors on a winding up is a finding of dishonesty or at least sharp practice. That is a conclusion that should only be reached after very close consideration of the evidence and if I feel an actual persuasion that Mr Durolek had that intention. Taking all the matters that I have referred to into account I have concluded that Sancho Bakery became a party to the transaction for the purpose of, or for purposes including the purpose, of defeating, delaying, or interfering with, the rights of any or all its creditors on a winding up of the company. The matter upon which I place particular weight is that Sancho Bakery had the funds in August 2016 to pay the tax debt and Mr Durolek's failure to cause the debt to be paid is inexplicable.

Good faith defence

Mrs Durolek did not plead any positive defences but in opening written submissions she relied on s 588FG(1) alternatively, s 588FG(2) to argue that no s 588FF order should be made against her. Buitendag did not object to Mrs Durolek relying on these provisions and, in any event, consideration of the defences does not involve a consideration of any facts falling outside the ambit of the facts considered for the purposes of the claims.
Sections 588FG(1) and 588FG(2) provide that the court is not to make orders under s 588FF against two broad classes of persons. The first class are those persons 'other than a party to the transaction' (s 588FG(1)). The second class are parties to an insolvent transaction (s 588FG(2)).
I have found that Mrs Durolek was a party to the transaction and thus s 588FG(1) cannot be invoked by her. That said, on the findings I have made earlier and the findings I make below in relation to the elements of the s 588FG(2) defence, but for the fact that Mrs Durolek was a party to the transaction, she would have been able to avail herself of the defence under s 588FG(1). I will return to the significance I attach to this later.
Section 588FG(2) provides:
A court is not to make under section 588FF an order materially prejudicing a right or interest of a person if the transaction is not an unfair loan to the company, or an unreasonable director-related transaction of the company, and it is proved that:
(a)the person became a party to the transaction in good faith; and
(b)at the time when the person became such a party:
(i)the person had no reasonable grounds for suspecting that the company was insolvent at that time or would become insolvent as mentioned in paragraph 588FC(b); and
(ii)a reasonable person in the person's circumstances would have had no such grounds for so suspecting; and
(c)the person has provided valuable consideration under the transaction or has changed his, her or its position in reliance on the transaction.
Relevantly, in the context of this case, there are four matters that must be established by Mrs Durolek and they are:
(a)she became a party to the transaction in good faith: s 588FG(2)(a);
(b)she had no reasonable grounds for suspecting that Sancho Bakery was insolvent on 30 August 2016, or would become insolvent: s 588FG(2)(b)(i);
(c)a reasonable person in Mrs Durolek circumstances would have had no such grounds for suspecting insolvency: s 588FG(2)(b)(ii); and
(d)she changed her position in reliance on the transaction (it being clear that Mrs Durolek did not provide valuable consideration under the transaction).
These matters are cumulative and in order to succeed in a defence under s 588FG(2) Mrs Durolek must establish all of them. It has been observed that the onus on the person seeking to establish the defence is a demanding one because s 588FG(2)(b) requires the defendant to prove two negative propositions.[139] In the paragraphs that follow I address each of the matters that must be established by Mrs Durolek.

Good faith

[139] Voidable Transactions in Company Insolvency Assaf, Shields and Kincaid [8.43] and the authorities there cited.

The factual findings I have made about Mrs Durolek's limited knowledge of the Sancho Bakery business and of the transaction support the conclusion that she became a party to the transaction in good faith.

Mrs Durolek had no reasonable grounds for suspecting that Sancho Bakery was insolvent

In respect of this element I acknowledge that s 588FG(2)(b)(i) possesses a hybrid character as explained by Santow JA in Cook's Constructions Pty Ltd v Brown:[140]
Confusion derives from the reference to "subjective" in relation to the first hurdle, where it is contrasted with the "objective" second hurdle. The "subjective" test in truth has something of a hybrid character. Thus the person referred to in s 588FG(2)(b)(i) has to have "no reasonable grounds" for suspecting insolvency at the relevant time. The requirement of "no reasonable grounds" is clearly objective.
That is why it is possible to envisage a circumstance in which a person may receive payment honestly and in that sense in good faith. Yet on an objective consideration, that person may have had reasonable grounds for suspecting insolvency. Despite good faith, the defence fails. But the requirement of good faith and the subjective test coalesce where the person has both acted in good faith in ignorance of insolvency and had no reasonable grounds for suspecting it.
[140] Cook's Constructions Pty Ltd v Brown [2004] NSWCA 105; (2004) 49 ACSR 62 [45] - [46].
The factual findings I have made about Mrs Durolek's limited knowledge of the Sancho Bakery business and of the transaction support the conclusion that not only did she become a party to the transaction in good faith but she had no reasonable grounds for suspecting that Sancho Bakery was insolvent.

A reasonable person in Mrs Durolek's circumstances would have had no grounds for suspecting that Sancho Bakery was insolvent

The words 'a reasonable person in the person's circumstances' in s 588FG(2)(b)(ii) require the application of an objective reasonable business person test and do not require the court to take into account the acumen, perspicacity and resources of the person seeking to invoke the defence.[141] The concept of the reasonable business person was explained (the explanation was subsequently approved on appeal) by Palmer J in Cussen v Commissioner of Taxation:[142]
As has been emphasised by Austin J in Dean-Willcocks v Commonwealth Bank of Australia (2003) 45 ACSR 564, at 572 (paras.33-35), the objective test imposed by s.588FG(2)(b)(ii) does not require an examination whether the particular creditor, acting reasonably, would have had reasonable grounds for suspecting insolvency, with the consequence that if the creditor happens to be a bank (or a tax collecting authority) one asks whether a reasonable bank (or a reasonable tax collecting authority) would reasonably have had such a suspicion. Rather, whether or not the creditor would have reasonably had a suspicion is determined according to the presumed perception of "the ordinary person on the Bondi bus": per Young J in Harkness v Commonwealth Bank of Australia Ltd (1993) 32 NSWLR 543, at 545-6. That pithy phrase simply denotes that an objective test is to be applied and the standard of measurement is that of a hypothetical person who is assumed to have the knowledge and experience of the "average business person", but certainly not the skills and experience of an expert financial analyst or someone with legal training or any other kind of tertiary education: ibid.
[141] Cussen v Commissioner of Taxation [2004] NSWCA 383 [31], [125] and [126] (Spigelman CJ, Handley and Tobias JJ).
[142] Cussen v Commissioner of Taxation [2003] NSWSC 841 at 64.
As Spigelman CJ explained in Cussen v Commissioner of Taxation,[143] the phrase 'a reasonable person in the person's circumstances' refers to the actual circumstances of the party to the transaction seeking to invoke the defence as those circumstances existed at the date of the transaction. The circumstances do not encompass information that is not in fact available but which a reasonable person would have sought and would have received had inquiries been made.
[143] Cussen v Commissioner of Taxation [2004] NSWCA 383, [113] and [120].
I consider that the hypothetical reasonable business person assumed to have the knowledge and experience of the 'average business person', if they found themselves placed in Mrs Durolek's actual circumstances, would have had no grounds for suspecting Sancho Bakery was insolvent on 30 August 2016. Essentially, this is because there was nothing within Mrs Durolek's knowledge, which if attributed to the hypothetical average business person would ground any suspicion of insolvency.
Mrs Durolek did not know that the payment had been made into the NAB account. She had no knowledge of Sancho Bakery's financial position. She knew that Sancho Bakery had sold its business and that Mr Durolek had been waiting for a cheque for the proceeds but, if that fact suggests anything, it suggests that the company was more likely to be solvent. As Spigelman CJ explained in Cussen it is not possible to expand the scope of Mrs Durolek's knowledge by including what may have been learned had inquiries about Sancho Bakery's financial position been made.
Further, even if I were to assume that Mrs Durolek collected the cheque for the closing balance in the Bank of Queensland account, this would not have the effect of expanding her knowledge to include anything that could form the basis of a suspicion that Sancho Bakery was insolvent.
In my judgment, Mrs Durolek has established the two negative propositions contained in s 588FG(b)(i) and (ii)

Change of position in reliance on the transaction

Mrs Durolek changed her position in reliance on the transaction by acting on the instructions of Mr Durolek to transfer the funds to the French bank account. Had the funds not been paid into the NAB account it would not have been possible for those transfers to have taken place because there were insufficient funds to cover the amounts transferred. Accordingly, this element of the defence is made out.
Mrs Durolek has established all the matters listed in [183] and I find that Mrs Durolek has successfully established the defence in s 588FG(2) and consequently no order under s 588FF should be made.

The discretion to make an order under s 588FF should not be exercised

A further defence raised on Mrs Durolek's behalf involved the following propositions, first, s 588FF confers a discretion and, secondly, that the discretion should not be exercised in this case because Mrs Durolek received no benefit under the transaction.
The question of whether s 588FF confers a discretion or a jurisdiction has been the subject of conflicting authority. In Bryant, in the matter of Gunns Limited (in liq) (receivers and managers appointed) v Edenborn Pty Ltd [2020] FCA 715,[144] Davies J referred to the differing views expressed in the authorities and placing reliance on s 33(2A) of the Acts Interpretation Act 1901 (Cth) that provides:
Where an Act assented to after the commencement of this subsection provides that a person, court or body may do a particular act or thing, and the word may is used, the act or thing may be done at the discretion of the person, court or body.
concluded that the power of the court to make an order under s 588FF(1) where a creditor receives an unfair preference is a discretionary power that must be exercised judicially in light of the purpose and object of the preference provisions in pt 5.7B of the Corporations Act. Although, her Honour's views were expressed in relation to the exercise of the powers under s 588FF(1) in respect of unfair preferences under s 588FA, her Honour's reasoning applies with equal force to other forms of voidable transaction. I respectfully adopt her Honour's reasoning.
[144] Bryant, in the matter of Gunns Limited (in liq) (receivers and managers appointed) v Edenborn Pty Ltd [2020] FCA 715.
In light of the conclusion I have reached on Mrs Durolek's s 588FG(2) defence it is unnecessary for me to decide whether the court should exercise the discretion to make an order under s 588FF in this case. Had it been necessary for me to make a decision I would have exercised the discretion in favour of not making an order against Mrs Durolek for the reasons developed below.
(a)I have referred earlier to the defence provided by s 588FG(1). For the purpose of this analysis it is necessary to set out the full text of the subsection. It is as follows:
(1)A court is not to make under section 588FF an order materially prejudicing a right or interest of a person other than a party to the transaction if it is proved that:
(a)the person received no benefit because of the transaction; or
(b)in relation to each benefit that the person received because of the transaction:
(i)the person received the benefit in good faith; and
(ii)at the time when the person received the benefit:
(A)the person had no reasonable grounds for suspecting that the company was insolvent at that time or would become insolvent as mentioned in paragraph 588FC(b); and
(B)a reasonable person in the person's circumstances would have had no such grounds for so suspecting.
(b)Mrs Durolek was a party to the transaction without any knowledge of it or any participation in bringing it about. The only reason she was a party to the transaction was because she was married to Mr Durolek and they had a joint bank account. From Mrs Durolek's perspective there is nothing she could have done to avoid being a party to the transaction.
(c)In the context of the unjust enrichment claim I have found that Mrs Durolek did not receive any benefit because of the transaction.
(d)If my conclusion is wrong and Mrs Durolek did receive a benefit from the transaction then (for the reasons given when dealing with the s 588FG(2) defence) she would have been able to satisfy the negative propositions in s 588FG(1)(b)(ii)(A) and (B).
(e)Accordingly, but for the fact that she was a party to the transaction, which as I have emphasised was unavoidable from her perspective, I am satisfied that s 588FG(1) would have afforded Mrs Durolek a defence.
(f)It would be unjust to exercise the power conferred by s 588FF to impose a liability on a person when (i) they were unaware that they were a party to a transaction (ii) they did nothing to bring the transaction about (iii) they either obtained no benefit from the transaction or if they received a benefit they received it in good faith and (iv) viewed both subjectively and objectively, they had no reasonable grounds for suspecting insolvency.

Conclusion in relation to the voidable transaction claim

Buitendag has established the existence of a voidable transaction. Mrs Durolek has, however, established a defence under s 588FG(2) and accordingly, Buitendag is not entitled to relief under s 588FF.

Conclusion

Buitendag's claims fail. I will hear the parties in relation to costs.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
MH
Associate to the Honourable Justice Tottle
22 MARCH 2024