Williams v Bearing Traders Pty Ltd

[2008] NSWSC 1358

CITATION:	Williams v Bearing Traders Pty Ltd [2008] NSWSC 1358
HEARING DATE(S):	26/11/08
JUDGMENT DATE :	19 December 2008
JURISDICTION:	Common Law Division
JUDGMENT OF:	Kirby J
DECISION:	(1) The appeal is dismissed. (2) The plaintiff to pay Bearing Traders' costs of the appeal. (3) In respect of the reserved costs on the Notice of Motion before Associate Justice Malpass, the plaintiff (Williams) should have 70% of the costs of the Motion.
CATCHWORDS:	Appeal against Magistrate's decision - person acting as Director when not appointed - incurring debts when company insolvent - liable for debts - questions of law - whether no evidence - whether mistake of fact infected reasoning - issues of mixed fact and law - presumption of continuance when acting as Director before and after period when debts incurred.
LEGISLATION CITED:	Corporations Act 2001 Local Courts Act 1982
CATEGORY:	Principal judgment
CASES CITED:	Re Valleys Rugby League Football Club Ltd [1997] 2 Qd R 645
PARTIES:	Gary Alexander Williams (Pl/App) Bearing Traders Pty Ltd (Def/Resp)
FILE NUMBER(S):	SC 2008/12456
COUNSEL:	K Morrissey (Pl/App) D A Allen (Def/Resp)
SOLICITORS:	Aitken Lawyers Pty Ltd (Pl/App) Catalyst Legal (Def/Resp)
LOWER COURT JURISDICTION:	Local Court
LOWER COURT JUDICIAL OFFICER :	S Freund LCM
LOWER COURT DATE OF DECISION:	6 May 2008

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

David Kirby J

Friday 19 December 2008

2008/12456 Gary Alexander WILLIAMS v BEARING TRADERS PTY LTD (ACN 000 975 191)

JUDGMENT

1 KIRBY J: Gary Alexander Williams (the plaintiff) applies to this Court by Amended Summons to set aside an order made in the Local Court on 6 May 2008 in favour of Bearing Traders Pty Ltd (“Bearing Traders”). Bearing Traders supplied certain goods to Minfox Pty Limited (“Minfox”) between 31 October 2002 and 15 January 2003 and was not paid. On 14 April 2003, on the application of the Australian Taxation Office (“ATO”), an order was made appointing administrators of Minfox. Bearing Traders, in these circumstances, sought recovery from Mr Williams personally. It was claimed that Mr Williams was liable for Minfox’s debt to Bearing Traders upon the following bases:

· First, Gary Williams was a “Director” of Minfox even though he purported to resign on 8 February 2002. In truth, he remained “a Director” within s 9 of the Corporations Act 2001 (“the Act”) in that, although not validly appointed as a Director (after 8.2.02), he acted “in the position of a director” (s 9(b)(i) of the Act).

· Secondly, it was further alleged that Gary Williams was aware, during the period 31.10.02 to 15.1.03, that there were grounds for suspecting Minfox was insolvent (s 588G(2) of the Act).

· Thirdly, Gary Williams breached his duty as a Director by allowing Minfox to trade whilst insolvent during that period (s 588G(1) of the Act).

2 The matter came before her Honour Magistrate Sharon Freund in the Local Court on 11 and 12 February 2008. Voluminous material was tendered and a number of witnesses were called. There were, however, no documents relating to Minfox’s operations between 31.10.02 and 15.1.03, that is, the relevant period. It was said that they were not available because “the liquidator lost them” (T 5: 11.2.08).

3 On 6 May 2008, her Honour gave judgment in favour of Bearing Traders. She found:

· First, that Gary Williams had, during the relevant period (October 2002 to January 2003), acted as a Director of Minfox (and another corporation within the Fox Group of companies, which is not relevant to this appeal).

· Secondly, that Gary Williams was aware, during the relevant period, that there were grounds for suspecting Minfox was insolvent.

· Thirdly, that Gary Williams had breached his duty as a Director in allowing Minfox to trade whilst insolvent.

4 The appeal to this Court is directed entirely to the first finding, that Mr Gary Williams acted as a Director of Minfox during the relevant period. That was the foundation for her Honour’s judgment. If she was wrong about that aspect, he cannot have been in breach of his duty.

5 There is an appeal as of right to this Court where the judgment of the Local Court is “erroneous in point of law” (Local Courts Act 1982, s 73(1)). The Amended Summons identified two errors of law, as follows:

· First, there was no evidence that the plaintiff had, within the meaning of s 9 of the Corporations Act, acted as a Director during the relevant period (31.10.02 to 15.1.03) (Amended Summons [11]; Magistrate’s decision [32]).

· Secondly, that her Honour erred in law in finding that Mr Gary Williams had executed a credit agreement between Minfox and Bearing Traders on 20 November 2001, since there was no evidence that he had (Amended Summons [13]).

6 Further, the plaintiff seeks leave under s 74(1) of the Local Courts Act to appeal against certain findings which are mixed questions of fact and law, namely:

· First, that her Honour was in error in making the findings in para 30(b) of her judgment that the plaintiff had admitted that he signed a number of documents on behalf of the Fox Group (including Minfox) during the period 31.10.02 and 15.1.03, when he made no such admission (Amended Summons para 14(a) and (b)).

· Secondly, that her Honour was in error in finding that the plaintiff had “signed documents and correspondence as a director” (of Minfox) between 8.2.02 and 15.1.03, despite his resignation (Amended Summons [14(c)]).

7 Before dealing with the suggested errors, let me summarise in a very broad way the cases which each party presented. Bearing Traders, of course, had the onus to prove its case on the balance of probabilities, as her Honour recognised.

The opposing cases.

8 The contest between Mr Williams and Bearing Traders arose in the context of a cross claim. The cross claim filed by Bearing Traders included the following assertion:

“3. At all material times the Second Cross Defendant was a defacto director of Minfox and its related entity, Fox Mc.
Particulars
The Second Cross Defendant performed the role and duties and acted in the role of a director of Minfox and Fox Mc.”

9 The defence of Mr Williams responded to that assertion as follows (referring also to a second corporation in the group, Fox McLanahan Pty Limited (Fox Mc), not relevant to this appeal):

“3. The second cross defendant denies paragraph 3 and says further:
(i) The second cross defendant resigned as a director of Minfox Pty Limited (Minfox) and Fox McLanahan Pty Limited (Fox Mc) on 8 February 2002;
(ii) In or about early 2001, the second cross defendant was diagnosed with multiple sclerosis.
(iii) In or about October 2001, the second cross defendant was unfit to work suffering a total disability during the period 23 October 2001 until 16 June 2002.”

10 The defence added:

“15. In answer to the whole of the cross claim the second cross defendant:
(a) denies that he was at any relevant time a director of either Minfox or Fox Mc;
(b) say[s] that, in any event, because of illness, he did not take part at any relevant time in the management of the company.”

11 Each party filed affidavits. Mr Williams’ affidavit of 31 March 2004 included these words:

“3. In early 2001 I was diagnosed with multiple sclerosis which is a chronic and progressive disease of the nervous system resulting in symptoms including paralysis.”

12 Mr Williams asserted that, in October 2001, his doctor told him that he required continuous medical care for about one year. He added:

“6. It was agreed with my doctor that during this time I would be unable to perform the normal duties of my usual occupation as a director and I was advised to not engage in any employment from around October 2001 until an appropriate return to work program could be provided for me – which I subsequently entered on 19 June 2002.”

13 Annexed to the affidavit was a document crucial to Mr Williams’ defence, his letter of resignation addressed to Minfox. The letter is signed by Mr Williams and witnessed by Karen Williams, his wife. It bears a date, 8th February 2002, and was in these terms:

“I hereby resign as a Director of Minfox Pty Limited ACN 096 244 281.
As you are aware and was duly notified in October of 2001, I have been experiencing severe health problems. My short term prognosis is such that I will not be able to undertake the responsibilities of a Director sufficient to full fill (sic) such obligations.
As I do not and have not participated in the running of this company since April 2001, with all responsibility, conformance of the company has solely been with the Managing Director, Jon Bentley. This includes financial management, funds management, statutory accounting and tax compliance, this further limits my effectiveness as a Director.”

14 Mr Williams said he returned to work on 19 June 2002. However, his duties were limited. In a further affidavit dated 8 June 2005, he said this:

“4. … my duties were limited and largely consisted of administrative functions.”

15 Mr Williams annexed to his original affidavit a letter of 13th June 2002 on the letterhead of Fox Industries Pty Limited (the holding company) addressed to Dr Trotter. The letter was sent by the Chief Executive Officer of the company, Mr J R Nichols. The letter included these words:

“From discussions with Gary Williams this day he is keen to undertake a rehabilitation programme to undertake limited duties.
Until September 2001 when Gary took ill he functioned in a full time capacity as Executive Director Operations in our business, contracting and equipment manufacture to the mining and materials handling industries in Australia and Internationally.
Until Gary receives a complete clearance such that Fox are not exposed in the workplace and our clients operations, his duties will be limited to administration functions at our Gateshead Office.”

16 Mr Williams gave evidence before her Honour and was cross examined. He asserted that he had not acted as a Director after his resignation on 8 February 2002. Indeed, he had severed his relationship with the Fox group of companies on that date (T 4, line 32; T 5, lines 30-31: 12.2.08). He ceased work in 2001 because he was disabled. Once he resumed work on 19 June 2002, he performed administrative duties only. He had not acted as a Director during the relevant period (31.10.02 to 15.1.03) when the debt to Bearing Traders was incurred by Minfox.

17 Bearing Traders handed up a folder of documents (Aff Deearn Kelly 5.8.08: Annex Q). The material was relevant to a number of issues:

· First, that Mr Williams did not have multiple sclerosis, and was not disabled. He had consulted a number of doctors in 2001/2002 who could find no physical explanation for the symptoms he described.

· Secondly, the day before his resignation on 8 February 2002, he had executed a significant number of documents, restructuring the Fox Group. According to Bearing Traders, the documents were designed to quarantine debt so that if Minfox failed (as duly occurred) Mr Williams would be insulated from that failure.

· Thirdly, that Mr Williams did not cease work as a Director on the date of his resignation. Although documents demonstrating his involvement are limited, because so many are missing, there is a significant paper trail that demonstrates, according to Bearing Traders, that Mr Williams was still active in the Fox Group.

· Fourthly, in the period after 8 February 2002, Mr Williams remained a Director of nine other companies, including Fox Industries Pty Limited (the holding company of the group). His resignation on 8 February 2002, supposedly because of illness, was limited to:

Minfox Pty Limited

Fox McLanahan Pty Limited

Fox Corporate Services Pty Limited

· Finally, Mr Williams continued to be involved in the Fox Group in 2003, that is, after the relevant period. Importantly, he executed a charge which involved the assets of Minfox Pty Limited in February 2003, that is, very shortly after the period during which the debt to Bearing Traders was incurred.

18 There was, therefore, according to Bearing Traders, evidence capable of giving rise to an inference that, during the relevant period (October 2002 to January 2003), Mr Williams was acting as a Director of Minfox.

19 Turning to the case put on behalf of Mr Williams, counsel drew attention to the complete absence of direct evidence, either by document or by witness, that Mr Williams acted as a Director of Minfox in the period 31.10.02 to 15.1.03. Mr Williams gave sworn evidence that he did not act as a Director of Minfox after he submitted his resignation on 8 February 2002. Her Honour, according to the plaintiff on this appeal, made errors when describing the facts, wrongly assuming that there was direct evidence that Mr Williams had so acted.

Broad chronology.

20 Mr Williams is a Consulting Mining Engineer. On 31 January 2000, he was appointed a Director of Fox Materials Handling Pty Limited (“Fox Materials Handling”). In early 2001, three further companies were formed, which became part of the Fox Group. Mr Williams was appointed a Director of each:

Fox McLanahan Pty Limited (6.3.01)
Fox Mining Services (which later changed its name to Minfox Pty Limited) (19.3.01)
Fox Industries Pty Limited (19.3.01)

21 On 5 April 2001, Fox Materials Handling entered into voluntary administration (Aff Deearn Kelly 5.8.08: Annex Q, p 13). On 29 June 2001, the company entered into a Deed of Arrangement, including an asset sale transferring assets and certain employer liabilities to Minfox (Aff Deearn Kelly 5.8.08: Annex Q, p 14). Mr Williams had provided a guarantee to the NAB in respect of Fox Materials Handling. On 4 December 2001, he wrote to the bank concerning that guarantee, seeking certain information.

22 On 7 December 2001, Dr Crimmins, a Consultant Neurologist, wrote to Dr Trotter in Toronto concerning his consultation with Mr Williams on 22 November 2001 (Aff Deearn Kelly 5.8.08: Annex Q, p 15). Mr Williams had given Dr Crimmins a history of symptoms experienced for “about a month”, ie, October 2001. He had felt severe lethargy and had a non-specific gait disturbance. On 9 November 2001, Mr Williams had a CT brain scan which was normal. An MRI on 17 December 2001 was likewise normal, apart from exposing a sinus difficulty (Aff Deearn Kelly 5.8.08: Annex Q, p 27). However, on 29 January 2002, Dr Trotter completed a form where she said Mr Williams was “unable to perform any duties” (Aff Deearn Kelly 5.8.08: Annex Q, p 39), although she acknowledged the neurological diagnosis was unknown.

23 Meanwhile, Minfox needed credit for its operation. A Director of Bearing Traders, David James, swore an affidavit on 9 February 2006, setting out his involvement with Fox Materials Handling. When the company went into administration, it owed Bearing Traders $35,000. In November 2001, Mr Bentley, a Director of Minfox, sought to negotiate a further credit arrangement with Bearing Traders. Bearing Traders would only agree to give credit if there were a personal guarantee from the two Directors, Messrs Bentley and Williams. Mr Bentley signed, but the company required Mr Williams to sign as well. Later, a person presented at Bearing Traders office who said he was Gary Williams. Bearing Traders had not met Mr Williams. The person signed the guarantee. He also asked for a copy. When he left the company premises he did so taking the original document, leaving the copy.

24 It appeared to be common ground that the signature was not the usual signature of Mr Williams. There are many specimens of his signature amongst the documents. Originally, when Bearing Traders brought its claim, it relied upon the guarantee signed by Mr Williams, as well as the alternative case that he was liable for the debts of Bearing Traders because he had acted as a Director of that company when it traded whilst insolvent. Bearing Traders ultimately did not press the case based upon the guarantee before her Honour.

25 In approximately mid January 2002, the Fox Group moved premises. They were apparently allowed to occupy premises as Bulls Garden Road, Gateshead, as licensee. A formal lease was later executed on 1 August 2002, as I will shortly describe. On 29 January 2002, Minfox and Fox McLanahan each held meetings resolving to alter the registered office of these companies to the new address. On 8 March 2002, an email message was sent to various people providing the new address, giving the direct lines of the following executives: (Aff Deearn Kelly 5.8.08: Annex Q, p 98)

Gary Williams

Jon Bentley

John Nicholls

Karen Stewart

26 On 12 February 2002, the Australian Tax Office sent a statement recording an account balance owing by Minfox of $116,647.68, substantially made up of GST and other liabilities which were due on 19 November 2001 (Aff Deearn Kelly 5.8.08: Annex Q, p 91). It may be inferred that Mr Williams, as a Director, would have been well aware in November 2001, that the company had defaulted in respect of its significant tax liability. It may also be inferred that, in the months before November 2001, he was aware of the company’s inability to pay.

27 On 7 February 2002, the Fox Group of companies was restructured. A number of documents were executed. A document termed “Heads of Agreement” was signed by, amongst others, Mr Williams. It involved four parties, as follows:

Fox Industries Pty Limited
Harrington Group Limited
Gary Williams
Jon Bentley

28 The purpose of the document was identified in these words:

“A. The purpose of these Heads of Agreement are to facilitate the creation of the Fox Group of Companies with Fox Industries as the holding company for the purpose among other things of injecting capital into the group to pay out the Deed of Company Arrangement of Fox Materials Handling Pty Limited and to complete the purchase of certain assets being acquired by Minfox Pty Limited.”

29 It was agreed that Fox Industries would acquire the shares held by Messrs Bentley and Williams in Minfox (and in Fox McLanahan) in consideration of an allotment of shares in Fox Industries to each of them or their nominees. The Harrington Group was to loan Minfox $300,000. It would have the right to appoint two of its nominees to the board of Fox Industries. Clause 6 added:

“ … The other Board members will be Gary Williams and Jon Bentley. … “

30 Clause 11 was as follows:

“11. The existing employment contracts of both Gary Williams and Jon Bentley to be amended to reflect a remuneration package of $120,000 per annum each from the 7 January 2002 with the first monthly payment in arrears payable on or before 11th February 2002. Payment of the remuneration portion of $10,000 per month may be restructured. These contracts will be reviewed in respect of remuneration level on 7 August 2002.”

31 The document was executed by Mr Williams. On the same day, and as part of the same arrangement, Gary Williams and Jon Bentley each gave a personal guarantee in respect of the monies borrowed from the Harrington Group (Aff Deearn Kelly 5.8.08: Annex Q, p 64-67). In addition they executed, as Directors of Minfox, a Deed of Charge in favour of the Harrington Group over the assets of Minfox (Aff Deearn Kelly 5.8.08: Annex Q, p 78-86). There were companion documents charging the assets of Fox McLanahan which were also executed by the Directors of that company, including Mr Williams (Aff Deearn Kelly 5.8.08: Annex Q, p 77). Board meetings of each company were held, authorising the transfer of shares owed by Messrs Williams and Bentley to Fox Industries in accordance with the Heads of Agreement (Aff Deearn Kelly 5.8.08: Annex Q, p 44-50).

32 The next day, 8 February 2002, Mr Williams resigned from the following companies (cf Judgment Magistrate Freund [14]):

Minfox (Aff Deearn Kelly 5.8.08: Annex Q, p 88)
Fox McLanahan (Aff Deearn Kelly 5.8.08: Annex Q, p 87)
Fox Corporate Services (Aff Deearn Kelly 5.8.08: Annex Q, p 89)

33 Mr Williams’ letter of resignation in each case was in the same terms, suggesting that he had not participated in the running of the companies since April 2001. Her Honour ultimately rejected that letter as self serving, upon the basis that he had plainly acted as a Director of all companies in the period before 8 February 2002 (Judgment Magistrate Freund para 31(a)).

34 There is one other aspect, relevant, I believe, to the motivation of the Directors in restructuring the Fox Group in this way. An expert accountant, Mr Rod Sutherland, was called to give evidence. His evidence was directed to the issue of insolvency. He examined the Administrator’s report, and the accounts in respect of Minfox. He expressed the view, accepted by her Honour, that Minfox was trading whilst insolvent for the whole of the period 1 October 2002 to 31 January 2003. Mr Sutherland also said this:

“8.5 The administrator is of the opinion that Minfox Pty Limited may have been trading insolvently at least from February 2002.”

35 Dr Crimmins, neurologist, saw Mr Williams again on 25 February 2002. He reported to Dr Trotter on 1 March 2002. He could find nothing wrong with Mr Williams. He said this: (Aff Deearn Kelly 5.8.08: Annex Q, p 96)

“I am at a loss to explain the constellation of symptoms at present.”

36 On 20 March 2002, Mr Williams sent a fax relating to the Telstra account of Fox Materials Handling (Aff Deearn Kelly 5.8.08: Annex Q, p 105). The fax was on the letterhead of the Fox Group of Companies, listing amongst others in the group, Minfox, on the left hand side. Mr Williams was clearly at work. The fax was distributed widely, as set out in the Local Court judgment (Magistrate Freund para 28(b)).

37 On 26 March 2002, Mr Williams saw a further neurologist, Dr Elizabeth Reyneke. Page 1 of the report was included in the bundle tendered before the Magistrate. The remainder of the report was not tendered. Nonetheless, the document included a history provided by Mr Williams that “his problems probably started in October of last year [2001]” (Aff Deearn Kelly 5.8.08: Annex Q, p 111), which was consistent with the history given to Dr Crimmins. It will be remembered that the letter of resignation of 8 February 2002 suggested that Mr Williams had not participated in the running of the company since April 2001. When characterising that letter as self serving, her Honour, one infers, regarded the letter as an attempt on the part of Mr Williams to insulate himself from the accumulating debts of these companies, including to the Australian Tax Office.

38 On 27 March 2002, the Australian Tax Office sent Mr Williams a penalty notice in respect of the tax debt of Minfox. The opening paragraph of that letter was as follows: (Aff Deearn Kelly 5.8.08: Annex Q, p 112)

“Please find enclosed a notice of your liability to pay a penalty equal to the amount(s) unpaid to the Commissioner by the company Minfox Pty Ltd, ACN 096 244 281 of which you were a director at relevant times as referred to in Section 222AOC and/or section 222AOD of the Income Tax Assessment Act 1936 (‘the ITAA36’). You automatically became liable to the penalty when the company failed to remit the amount(s) set out in the notice by the due date(s).”

39 On 28 March 2002, on the letterhead of Minfox, a fax was sent for the purchase of equipment by the company from Advance Conveyers (Aff Deearn Kelly 5.8.08: Annex Q, p 121). The equipment was expensive and the letter refers a credit note being raised. The letter is signed by Mr Williams and under his signature appears the words “Director”. This is an important letter. It was inconsistent with the evidence of Mr Williams that he had severed his ties with the Fox Group once he resigned. The letter also demonstrated that he was not so disabled that he could not work. He plainly was making decisions in the running of the company.

40 The material tendered included a number of accounts from the solicitors, Tress Cocks and Maddox, who acted for the group in respect of Fox Materials Handling. The accounts were itemised. They included a number of references to Mr Williams who had sent faxes and given instructions. Again, it would appear that he was on the job (Aff Deearn Kelly 5.8.08: Annex Q, p 123, 136).

41 On 5 April 2002, Mr Williams represented himself in proceedings before an Arbitrator in the District Court. Bearing Traders, in argument, relied upon that appearance as yet another demonstration that he was not as disabled as he had suggested in his affidavit (Magistrate’s decision para 28(d)).

42 On 20 May 2002, there was a meeting of Fox Industries Pty Limited, the holding company of the Fox group of companies. Mr Williams, who is described in the document as a “Director”, signed the minutes as Chairman. The meeting, taking up one aspect of the Heads of Agreement of 7 February 2002, allotted 500,000 shares to the Harrington Group.

43 On 14 May 2002, Dr Crimmins again wrote that he was at a loss to explain Mr Williams’ symptoms. He added that their “intermittent nature made it somewhat difficult to be sure of what could be happening” (Aff Deearn Kelly 5.8.08: Annex Q, p 158).

44 On 22 May 2002, Dr Joffe, consultant neurologist, reported on a consultation with Mr Williams. He, likewise, had a history of symptoms commencing in October 2001 (Aff Deearn Kelly 5.8.08: Annex Q, p 159). He could find no physical signs of disability. Mr Williams did not have multiple sclerosis. He added: (Aff Deearn Kelly 5.8.08: Annex Q, p 161)

“I believe he is fit to return to work. I could find no reason why he could not return to the workforce. He claimed that he was extremely tired and lacking in drive. I could find no neurological basis for this claim.”

45 Yet, on 31 May 2002, in the context of a claim by Mr Williams under an insurance policy for income protection, Dr Trotter completed a form in which he said that Mr Williams was “unable to perform any duties”. She acknowledged the absence of a diagnosis, stating that investigations were continuing (Aff Deearn Kelly 5.8.08: Annex Q, p 152-157).

46 On 5 June 2002, the accountants for Minfox sent ASIC a notification of Mr Williams’ resignation from that company, noting that he had ceased duties on 8 February 2002. The notice annexed a copy of his letter of resignation (Aff Deearn Kelly 5.8.08: Annex Q, p 164/5).

47 Mr Williams returned to work on 19 June 2002, performing, according to his evidence, administrative work only. Fox Industries, in a letter referred to above, wrote to Dr Trotter shortly beforehand (13 June 2002) stating that his duties would be limited to administration (Aff Deearn Kelly 5.8.08: Annex Q, p 166).

48 On 26 June 2002, the Fox Group of companies made application to the Australian Tax Office on behalf of Minfox and Fox Corporate Services to pay the outstanding tax by instalments (Aff Deearn Kelly 5.8.08: Annex Q, p167-176). The applications were signed by Mr Jon Bentley, a Director.

49 I should at this point refer to a document which clearly had some prominence in her Honour’s thinking (Magistrate’s decision para 31(c)). It was termed “an Information Memorandum” bearing date 1 July 2002 (and printed, according to an annotation, on 11 January 2003) (Aff Peter Hicks 30.01.08: Annex F, p 31). The title sheet carried the name of the holding company of the Fox Group, Fox Industries Pty Limited. On page 6, the following appeared:

“Parties wishing to arrange to conduct due diligence enquiries in relation to Fox, or require additional information, should contact:

Jon Bentley
Director
Fox Industries Pty Ltd

or

Gary Williams
Director
Fox Industries Pty Ltd”

50 Under the heading “Corporate Management Structure”, the following was said: (Annexure F, p 11)

“3.4 CORPORATE AND MANAGEMENT STRUCTURE
All the business entities comprising the Fox Group of Companies are consolidated under the incorporated Fox Industries Pty Limited and are wholly owned subsidiaries.

51 The document continued:

“The Board will take responsibility for the determination and continuing review of the company’s strategic objectives.
The Board has appointed Mr Jon Bentley to the position of Managing Director of Group Operations and Mr Gary Williams to the position of Executive Director to the Fox Industries Board.”

52 The purpose of the document was to raise capital. On page 21 there was the following heading:

“4.2 DIRECTORS’ AND OFFICERS’ PROFILES”

53 The profiles began with Jon Bentley – “Jon Bentley – Managing Director, Fox Group of Companies”. In the copy annexed to the affidavit of Mr Hicks the following pages (pp 22/23) were omitted. The document then included the remaining pages (pp 24-31). The missing pages, one would infer, were the pages where you would expect to see a profile of Mr Gary Williams. Mr Hicks identified Mr Williams as the source of the document. He gave the following evidence: (T 35: 12.2.08)

“Q. So you have spoken to Mr Williams about the preparation of this report?
A. In terms of trying to get some source documents because I did recall that there was some capital raising and there was nothing in evidence that I could find and I just asked him whether he could think of anybody that might have a copy.
Q. Mr Williams did, in fact, provide you with a copy did he?
A. Yes he did. Yes.
Q. He did so in a relatively short period of time?
A. My recollection is that he had a look in his garage and that he had – it had occurred to him that he might still have some documents in his garage and I said ‘Well I’ve been down to one storeroom and I thought I might have had something somewhere but I couldn’t find anything and would you mind having a look’. He rang back and said ‘Look, I’ve found … (not transcribable) …’ because obviously I have a duty to try and put as much information in as I can.”

54 A Notice To Produce the original Information Memorandum (and specifically pages 22 and 23) was issued, however nothing was produced. The issue was pursued in cross examination. Mr Williams gave contradictory answers. He acknowledged on the one hand, that he was a Director of Fox Industries as at 1 June 2002 (T 8, line 40: 12.2.08). Yet, he gave the following evidence: (T 9: 12.2.08)

“Q. Can you see in the paragraph under the diagram it says:
‘The board has appointed Mr Jon Bentley to the position of managing director of Group Operations and Mr Gary Williams to the position of Executive Director to the Fox Industries board.’
What that document says is true isn’t it?
A. No, it’s not and the same with the people down the bottom. It never happened. This was a document that Fox Industries, Jon Bentley and John Niggles (sic), prepared to my understanding. I had no involvement with it. It was never effected, it never happened. The same applies to the people down the bottom.”

55 As to the missing pages, Mr Williams said this: (T 9)

“Q. According to you, is it a full version of the document contain(ing) pages 22 and 23?
A. I would expect so.
Q. Those pages include your profile?
A. No, they wouldn’t include my profile with any permission nor would they include the other people nominated there because we gave them no rights with .. (not transcribable) … we just helped them. I suggest that’s why they were removed.”

56 Somewhat earlier in the cross examination, Mr Williams had repeatedly said that he “severed (his) relationship with Fox on 8 February 2002”, the date of his letter of resignation (T 4: 12.2.08). One would infer, however, that the missing pages did identify Mr Williams as a Director of the Fox Group and that the pages had been removed to conceal that fact.

57 On 1 August 2002, a formal five year lease on the Gateshead premises was executed. It will be remembered that the Group had occupied the premises since January that year. The document is important. It was signed by Mr Williams as a Director of Fox Corporate Services (Aff Deearn Kelly 5.8.08: Annex Q, p 226). Yet, Fox Corporate Services was one of the companies from which Mr Williams had resigned on 8 February 2008 (along with Minfox and Fox McLanahan) (supra [17]).

58 On 7 August 2002, Assoc Professor John Morris, the head of neurology at Westmead Hospital, wrote to Dr Trotter. He could find no neurological disability. He believed that such symptoms as Mr Williams had were “psychogenic” (Aff Deearn Kelly 5.8.08: Annex Q, p 230/1).

59 One then comes to what has been termed “the relevant period”, the period during which goods were purchased by Minfox from Bearing Traders for which no payment was made. It is the period 31 October 2002 to 15 January 2003. There is no direct evidence concerning Mr Williams’ actions during that period. The assertion by Bearing Traders that he acted as a Director relies upon inference. It was common ground that he was at work at Gateshead during that period. The issue is whether he was acting as a Director.

60 On 28 February 2003, that is six weeks after the relevant period, Mr Williams executed a Deed of Charge as a Director of Fox Industries (as did Mr Bentley). The charge was between that company (as chargor) and T L Consulting Pty Limited (as chargee). Collateral security was provided by Deed of Charge between Minfox and T L Consulting (Exhibit 9A, p 47). Mr Williams, having said in his evidence that he had severed his relationship with Fox on 8 February 2002, the date he submitted his resignation, was shown his signature on the deed. The cross examination was as follows: (T 5: 12.2.08)

“Q. So as at 28 February 2003 you were a director of Fox Industries Pty Ltd?
A. That’s correct.
Q. It’s not true to say is it, Mr Williams, as you did say that you severed your relationship with the Fox Group in February of 2002?
A. That is correct.”

61 Shortly after, Mr Williams was shown certain ASIC records. They related to various companies in the Fox Group. His attention was drawn to the fact that ASIC had not been notified that he and Mr Bentley were Directors once the Fox Group purchased the company (changing its name to Fox Industries Pty Limited). Surprisingly, and not withstanding his earlier evidence, Mr Williams repeated the evidence he gave at the outset. He said this: (T 5)

“Q. Looking through the document, can you see that after 6 February 2002 ASIC has no record of their being any directors of that corporation at all?
A. Yes.
Q. Can you give any explanation for that?
A. No, only that again I had no involvement with any of the Fox companies after 8 February 2002.”

The Judgment of the Lower Court.

62 Her Honour set out much of this material under the heading “Background Facts”. She summarised the argument of counsel for Bearing Traders, where he identified conduct on the part of Mr Williams from which an inference should be drawn that he was acting as a defacto Director during the relevant period. Counsel referred to the following: (cf Judgment [28])

“(a) The Heads of Agreement creating the Fox Group in which it was envisaged that Mr Williams would be a Director, which he duly did.
(b) The Fox Group facts of 20 March 2002.
(c) The letter sent by Minfox on 26 March 2002, signed by Mr Williams as a Director, which was completely inconsistent with his letter of resignation and his evidence that he severed his ties with the Fox Group.
(d) That on 5 April 2002, Mr Williams was well enough to represent himself in the District Court.
(e) That, between 27 February 2002 and 5 April 2002, Mr Williams instructed Tress Cocks and Maddox solicitors.
(f) That, on or about 11 January 2003, the Information Memorandum was produced for Fox Industries, referring to the companies in the group, including Minfox.
(g) On 28 February 2003, Mr Williams executed a Deed of Charge as a Director of Fox Industries (which provided, amongst other things, collateral security in the form of a charge over Minfox’s assets).”

63 Her Honour then referred to the arguments of counsel for Mr Williams, that there were no documents and no direct evidence that, during the relevant period (October 2002 to January 2003), Mr Williams was acting as a Director of Minfox (Judgment [29]).

64 Her Honour thereafter dealt with Mr Williams’ version of events. She referred to his denial of involvement, relevantly, in Minfox, after 8 February 2003 (Judgment [30]). She then made the following comment, which is one of the matters subject to application for leave, where I believe leave should be given. She said: [30]

“… (b) he admitted that he signed a number of documents on behalf of the Fox Group of companies (including either Minfox or Fox McLanahan) during the period 31 October 2002 and 15 January 2003 but he could not recall doing so or the reason why he had done so …”

65 Counsel for Mr Williams said that there was no such admission. Certainly, the cross examination, Mr Williams did not make an admission in those terms. Her Honour, I believe, had the following passage in mind, which was included by Mr Williams in his third affidavit: (8.6.05)

“3. In the transition period after resigning in February 2002 from the companies, there was some correspondence that I signed where I was described as a ‘Director’ and, on occasion, signed on my behalf by someone else where I was described as a ‘Director’. I believe this happened only a few times through inadvertence.”

66 However the affidavit, in the following paragraph, referred to Mr Williams’ return to work on 19 June 2002. Even though Paragraph 3 is expressed in general terms, I believe it is clear, in context, that Mr Williams was referring to the period before his return (and therefore before the relevant period).

67 Nonetheless, it seems to me the inclusion by her Honour of a reference to the relevant period in Paragraph 30(b) was a slip. Her Honour, later in her judgment, provided brief reasons for concluding that Mr Williams did act as a Director during the relevant period ([31]). She did not rely upon any admission by Mr Williams that he signed documents on behalf of the relevant corporations during that period. I believe she well knew that there was no direct evidence that he had done so (for the relevant period) and that the case for Bearing Traders depended upon inference.

The suggested errors of law.

68 Having set out the background facts, the arguments of Bearing Traders and the version of Mr Williams, her Honour then identified a number of reasons for rejecting Mr Williams’ version. She said this:

“[31] Despite Mr Williams’ assertions that he did not perform the duties of a director of either Minfox or Fox McLanahan after 8 February 2002 I do not accept his evidence for the following reasons:
a. Firstly, his letter of resignation with respect to both Minfox and Fox McLanahan clearly stated that
‘As I do not and have not participated in the running of this company since April 2001, with all the responsibility, conformance of the company has solely been with the Managing Director, Jon Bentley. This includes financial management, funds management, statutory accounting and tax compliance, this further limits my effectiveness as a director.’
However, there is clear documentary evidence that he did have involvement in relation to both companies between April 2001 and 7 February 2002 including:
(i) Executing a number of documents the day prior to his resignation, which in my view involved a complex commercial transaction which formed the Fox Group of Companies;
(ii) Executed the Credit Agreement with Bearing Traders;
(iii) Chaired and attended directors meetings;
(iv) Executed a lease on behalf of Fox Corp Pty Limited with respect to the property at 1766 Bullsgarden Road, Gateshead which was the registered office and principal place of business of both Minfox and Fox McLanahan;

Accordingly, I am of the view on balance that Mr Williams’ letter of resignation dated 8 Februry 2002 was nothing more than self-serving. He clearly, despite his illness, still carried out the duties of a director of both Minfox and Fox McLanahan up until 8 February 2002;
b. That he signed documents and correspondence as a director of one or both companies between 8 February 2002 and 15 January 2003 despite his resignation, including:
i. Facsimile dated 20 March 2002 from the Fox Group of Companies;
ii. Deed of Charge dated 28 February 2003;
iii. Lease for the property that became the registered office and principal place of business for both Minfox and Fox McLanahan;
and could provide no adequate explanation, in my view, for doing so.
c. Finally, in the Information Memorandum published on behalf of Fox Industries Pty Limited he was represented as a director of that Company. Furthermore, the Information Memorandum describes Fox Industries Pty Limited as incorporating a number of companies including Minfox and Fox McLanahan.”
(emphasis in original)

69 Counsel for Mr Williams asserted that there had been error by her Honour in a number of respects. First, the Credit Agreement with Bearing Traders of 20 November 2001, which was signed by a person unknown who had identified himself as Mr Gary Williams, contained a signature which was plainly different from that of Mr Williams. Bearing Traders did not press the argument that it was his signature. Secondly, the period nominated by her Honour (April 2001 to 7 February 2002) was not the relevant period. It was a period significantly before the relevant period.

70 However, her Honour was clearly dealing with Mr Williams’ assertion that he was medically disabled, indeed had multiple sclerosis, and hence was obliged to resign. Her Honour was alluding to a number of clear difficulties with that explanation. First, he swore that he had MS and had been told that he had MS. It was clear that he did not have MS. It is unlikely that he had ever been told that he had MS, although he may have been told that MS was a possible diagnosis and that he needed to undergo tests. Secondly, there was a mismatch in the dates. When he consulted doctors in November 2001, he described symptoms which he said began the month before, ie, October 2001. Yet his letter of resignation suggested that he had not acted as a Director for the company (including Minfox) since April 2001. It was plain that he had acted as a Director for the company, at least until his letter of resignation on 8 February 2002. Thirdly, although he had purported to resign from Minfox, Fox McLanahan and Fox Corporate Services, and to have done so for medical reasons, he continued to be a Director of nine other companies including Fox Industries, the holding company of the Fox Group.

71 Her Honour, in Paragraph 31(a), gave a number of examples of his involvement in these companies. One of the examples, which was erroneous, was the Credit Agreement of 20 November 2001, to which reference has been made. This was the document, it will be remembered, that had originally been relied upon by Bearing Traders as the alternative basis for its claim against Mr Williams, that is, that he had signed a guarantee. Bearing Traders announced to her Honour, at the beginning of the case, that it did not press that aspect of its case. I believe that the inclusion of that document was, again, a slip. But it was not crucial to the conclusion her Honour reached. It was one of a number of illustrations, but one that could not be sheeted home to Mr Williams. Counsel for Mr Williams suggested that the error had infected her Honour’s reasoning. However, I am not persuaded. I do not believe that the conclusion embodied in Paragraph 31(a) can be said to have been an error of law.

72 The further issue of mixed fact and law in respect of which leave is sought on behalf of Mr Williams was expressed in these terms: (Amended Summons)

“14. The Plaintiff seeks leave to appeal against the following findings of mixed law and fact in the Decision:
…
(c) That the Plaintiff signed documents and correspondence as a director of one or both companies between 8 February 2002 and 15 January 2003 despite his resignation, including:
(i) Facsimile dated 20 March 2002
(ii) Deed of Charge dated 28 February 2003
(iii) Lease for the property that became the registered office and principle (sic) place of business for both Minfox and Fox McLanahan (paragraph 31(b) Decision) when there was no evidence he signed these documents as a director of Minfox or Fox McLanahan.”

73 Again, counsel for Mr Williams pointed out that all the documents relied upon by her Honour were outside the relevant period, 31.10.02 to 15.1.03.

74 Whilst that is so, it was not a mistake by her Honour. Rather, it was an aspect of her reasoning where she was relying upon inference rather than direct evidence. The main argument on this appeal on behalf of Mr Williams, in support of the assertion that there was no evidence, was that there was no direct evidence and that it was impermissible, or at the very least unsatisfactory, to rely upon indirect evidence, that is, evidence outside the period.

75 Certainly there was no direct evidence. Her Honour was plainly relying upon the presumption of continuance. Mr Williams had purported to resign on 8 February 2002. He had given a reason for his resignation. He was ill, having been diagnosed with multiple sclerosis. His reasons were implausible. They were not supported by any of the specialists he consulted. His assertions that he had not participated in the running of Minfox and Fox McLanahan were, as her Honour said, self serving. They were apparently designed to insulate him from the worsening financial situation of Minfox (and the other corporations in the group). Minfox had a significant tax liability as at November 2001. Mr Williams continued to act as a Director of many companies after 8 February 2002, including companies in the group. He was plainly working when he said he was not. He may have had some stress related symptoms, but they were not, one infers, as disabling as his affidavit evidence would suggest. Despite his assertion that he severed his association with the Fox Group, it is clear that he did not. The elaborate arrangements made on 8 February 2002 contemplated his continued involvement. The documentary trail, though sparse, confirmed his involvement. The involvement continued into February 2003, when he signed the Charge. In other words, his involvement had been demonstrated, both before and after the relevant period.

76 Upon that basis, and with the aid of the presumption of continuance, her Honour’s conclusion was open to her. There was some evidence reasonably capable of giving rise to an inference (cf Re Valleys Rugby League Football Club Ltd [1997] 2 Qd R 645, Williams J).

Order.

77 I make the following orders:

1. The appeal is dismissed.

2. The plaintiff should pay Bearing Traders’ costs of the appeal.

3. In respect of the reserved costs on the Notice of Motion before Associate Justice Malpass, the plaintiff (Williams) should have 70% of the costs of the Motion.

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