Wilson v Waigani Pty Ltd
[2018] VSC 302
•20 July 2018
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
COMMERCIAL LIST
S CI 2012 05378
| WILLIAM ROBERT WILSON on his own behalf and as trustee of the Wilson Family Trust | Plaintiff by counterclaim |
| v | |
| WAIGANI PTY LTD (ACN 005 481 818) as trustee of the Deer Park Trust & others according to the attached schedule | Defendants to counterclaim |
---
JUDGE: | CROFT J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 19 – 22 February, 26 February – 1 March, 5 – 8 March, 15 – 17 May 2018 |
DATE OF JUDGMENT: | 20 July 2018 |
CASE MAY BE CITED AS: | Wilson v Waigani Pty Ltd & ors |
MEDIUM NEUTRAL CITATION: | [2018] VSC 302 |
---
PARTNERSHIP AND JOINT VENTURES – TRUSTS – Trust duties as between directors of a trust company who are also beneficiaries – Application of trust duties in the context of joint ventures carried out through various trusts – Circumstances in which a holistic settlement between a trustee and a beneficiary may be set aside – Construction of warranties as to the conduct of trustees – Alati v Kruger (1955) 94 CLR 216 – Maguire v Makaronis (1997) 188 CLR 449 – Aequitas v AEFC [2001] NSWSC 14 – Trustee Act 1958 s 48(1)
LIMITATION OF ACTIONS – Nature of fraud exception – Laches and acquiescence – Levy v Watt (2014) 308 ALR 748 – Seymour v Seymour (1996) 40 NSWLR 358 – Crawley v Short (2009) 262 ALR 654 – Limitation of Actions Act 1958 ss 5, 21, 27(b)
EVIDENCE – Expert witnesses – Specialised lay opinion – Utility of expert evidence limited to area of expertise – Admissibility of lay evidence informed by lay witness’ expertise – Matthews v SPI Electricity Pty Ltd (Ruling No 9) [2012] VSC 340
PRACTICE AND PROCEDURE – ADMINISTRATIVE LAW – Application for recusal by the trial judge on the basis of the judge’s management of the trial – Webb v The Queen (1994) 181 CLR 41 – Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337 – Concrete Pty Ltd v Parramatta Design and Developments Pty Ltd (2006) 229 CLR 577 – AJH Lawyers Pty Ltd v Careri & ors (2011) 34 VR 236.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff by counterclaim | Mr M.R. Pearce SC with Mr T.P. Mitchell | Mills Oakley |
| For the Defendants to counterclaim | Mr P.J. Bick QC with Dr C.O. Parkinson | HWL Ebsworth Lawyers |
HIS HONOUR:
Introduction
Wilson’s position
The plaintiff by counterclaim (“Wilson”) seeks to set aside various settlement agreements entered into in 2007 by which he surrendered his unitholding in the Oupan Resources Trust and the Deer Park Trust. Wilson contends that he is entitled to rescind those agreements ab initio because he was materially misled when entering them and because they were made by Waigani Pty Ltd (“Waigani”) and Oupan Resources Pty Ltd (“Oupan”) in breach of fiduciary duty, in breach of trust or otherwise unconscionably. More specifically, the allegation is that the accounts provided to Wilson prior to the entering into of the settlement agreements masked the true position of the trusts and that the trustees falsely warranted that there had been no breaches of trust and that Wilson was not properly compensated for the value of his interest in the trusts and the Manning Land.
Wilson further contends that, once the rescission of the settlement agreements is confirmed by the Court, there will be no doubt about Wilson’s standing to seek the removal of the trustees, Waigani and Oupan. It is also said that he is entitled to relief in respect of his interest in the Manning Land, which has been sold by the mortgagee in possession without, Wilson contends, accounting to him as registered proprietor.
In support of his position, Wilson contends that the trustee companies Waigani and Oupan, by the actions of Mr David Geer (“Geer”), Mr Leon Gorr (“Gorr”) and Mr Anthony May (“May”), all of whom were partners in the law firm of Herbert Geer & Rundle (“HGR”), seriously misconducted the affairs of the trusts over many years to the prejudice of Wilson. It is submitted that, while managing the financing of their land developments, Waigani and Oupan were faced with conflicts in countless transactions. Wilson contends that each time a conflict arose, it was resolved by ensuring that Geer, Gorr and May and their entities, the HGR parties, benefited while Wilson never could. Time and time again, it is said, decisions were made which favoured the HGR parties over Wilson; which is submitted to be a “flagrant breach of trust”.[1]
[1]Outline of Closing Submissions of the Plaintiff by Counterclaim (26 April 2018), [3].
Additionally, Wilson submits that the accounts kept by the trustees contain numerous serious errors. Wilson says that the entry for his loan account was wrong and materially misleading. Annual financial statements were, it is said, not prepared promptly or, in some cases, at all. Moreover, it is submitted that the HGR parties were repeatedly unable to explain important aspects of the accounts, which is said to be at odds with the assessment of their accountant, Mr David Taylor (“Taylor”), that they satisfied themselves about the correctness of the accounts. More particularly, in terms of the accounts, Wilson contends that proceeds of the sales of valuable assets of both Waigani and Oupan—including, most significantly, an $11 million cheque made out to Herbert Geer & Rundle in the sale by Oupan of certain quarry assets to Queensland Cement Ltd in 1993—cannot be reconciled in the accounts. It is said that key records for these transactions have not been produced.
Wilson concedes that the setting aside of the 2007 settlement agreements will require some work to ensure that rescission involves a proper accounting for the benefits received by Wilson from the settlement. In this respect, it is contended that resitutio in integrum is neither required nor warranted. Rather, it is said that independent trustees appointed to Waigani and Oupan can work out a proper mechanism for recognising the true value of Wilson’s interests, while at the same time giving credit for the value of the benefits he received in the 2007 settlement. This, Wilson says, is no more nor less than the proposal contained in the open offer which he made, except that the offer contained a $100,000 “buffer” in favour of the HGR parties and costs protection for them.
More generally, Wilson contends that the HGR parties have sought to make this case a case about him, his conduct and his credit as a witness. Rather, it is submitted, the only issue which depends on Wilson’s conduct and credit as a witness is whether he was promised 50% or only 25% of the units in the Deer Park Trust. Every other issue, it is said, in the case can be decided without regard to anything said or done by Wilson. Thus it is said that the real inquiry in the case is into the conduct of Geer, Gorr and May, as directors of the two trustee companies and as persons who dealt with the two trusts in, what are said to be, “numerous hopelessly conflicted transactions”,[2] and frequently also as solicitors acting in the particular transaction. Concluding this point, Wilson submits that the unchallenged documentary evidence and numerous admissions made by Geer, Gorr and May provide an ample basis to make the findings he seeks against them.
[2]Outline of Closing Submissions of the Plaintiff by Counterclaim (26 April 2018), [7].
HGR parties’ position
At the outset, the HGR parties emphasise that the case put against them is of serious misconduct, including fraud and misappropriation of property. Senior counsel for Wilson stated in opening that the essence of his claims are that the HGR parties cheated him of many millions of dollars during the conduct of the trusts between 1980 and 2007, and then by inducing him to accept an unfavourable settlement of his interests in the trust and in certain land, referred to as the Manning Land, in 2007.[3] Senior counsel for Wilson said that the HGR interests were making unwanted loans to the trust “to park spare cash at a high rate of interest, and the payment of interest was so managed, indeed manipulated, by Messrs Geer, Gorr and May that it enabled him to divert profits… ‘away from… Wilson’”.[4] He said that Waigani’s payment of management fees to Oupan Resources Trust were “bogus transactions”, “if not in fact shams”, “just another technique for siphoning profits out of Waigani”.[5] These claims are indeed allegations of serious misconduct, including fraud and misappropriation of property; though care was taken in the making of these allegations and their pleading to avoid use of the word “fraud”, though, in substance, this is the thread running through most, if not all, of the Wilson allegations.
[3]Transcript, 4.
[4]Transcript, 23.
[5]Transcript, 24, 52.
The HGR parties have put on detailed evidence answering each and every pleaded allegation made against them, often where that evidence has been meticulously pieced together from records dating back 35 years or so. It is quite clear, in my view, that given both the serious nature of the allegations and the passage of time since the events the subject of the allegations, Wilson must be held to his pleaded case. To do otherwise would unfairly prejudice the HGR parties.
The HGR parties contend that Wilson’s claims have all the hallmarks of an entirely artificial construct. They are claims made in circumstances where, for critical—and often lengthy—periods where events and account-keeping critical to the Wilson claims occurred, Wilson was managing the businesses conducted by Waigani and Oupan, and was aware of relevant financial arrangements and transactions as it was he who had the responsibility for the maintenance, care and control of the accounts of Waigani and Oupan. The allegations also need to be viewed in circumstances where Wilson accepted, under cross-examination, that he knew Geer and Gorr to be honourable men, having worked closely with them for 17 years.[6] Moreover, Geer and Gorr entrusted Wilson completely to run Waigani and Oupan, including by letting Wilson take a generous salary and borrow almost $6 million from Oupan Resources Trust, and employ his extended family in the various businesses that the HGR parties or interests funded.
[6]Transcript, 404.
Wilson presided over the failure of one of Oupan Resources Trust’s businesses, Alice Roof Tiles Aust. Pty Ltd (“Alice”), that by 1997 had stripped the units in Oupan Resources Trust of all their value. As at 1994, those units were highly valuable: Wilson had redeemed 12 of his units (there then being 90) for $3.171 million. In 1997, Geer and Gorr became aware that Wilson had been mismanaging the Oupan Resources Trust, including, as they saw it, by fraudulently trying to write off his borrowings; a discovery that ended the business relationship.
In 2007, Wilson approached Geer and Gorr, asking for his interests in the Oupan Resources Trust and the Deer Park Trust to be bought out. On 2 May 2007, Wilson and the HGR parties entered into a settlement agreement (“May settlement agreement”), pursuant to which Wilson released the HGR parties from any claims and gave up his interests in his units in the Oupan Resources Trust and the Deer Park Trust for benefits totalling $11.675 million. The HGR parties contend that, contrary to Wilson’s case that he was “cheated”, Geer and Gorr overpaid Wilson for his units just to be rid of him. Wilson’s expert in the case confirmed that even if Wilson’s pleaded allegations of breach were proven (which, as the reasons which follow indicate, they have not been), Geer and Gorr still overpaid Wilson for his units.
As at May 2007, when the parties settled, over and above his salary, Wilson had taken benefits of $11.675 million out of the Oupan Resources Trust and the Deer Park Trust, as well as a further $3.171 million for earlier redeeming 12 units in the Oupan Resources Trust. In contrast, the HGR parties had taken no benefits, and it was apparent that the HGR interests would never recoup most of the interest then owing to them. Thus, it is contended by the HGR parties, that for Wilson, this business relationship resulted in a $15 million windfall, but that this has left the HGR parties in a position where they will not even recoup outstanding interest.
Given this position, one might wonder why Wilson now brings this proceeding; asked the HGR parties, somewhat rhetorically. In answer, they contend that it has nothing to do with Wilson being cheated or misled. Wilson accepted that a purpose in bringing the case was to access some of the profits from the recently improved sales in the Bacchus Marsh area being made by Oupan;[7] a response which the HGR parties characterise, in terms of motive, as that: “[h]e just wants more money”.[8]
[7]Transcript, 345.
[8]Closing Submissions of the Defendants to Counterclaim (HGR parties) (24 April 2018), [8].
In relation to the opening and running of the Wilson case, the HGR parties submit that it was unfortunate that he pressed his claim in relation to the proceeds from the sale of Oupan’s quarry assets in 1993, given Wilson’s discovered documents establish that he knew then and now precisely where those proceeds went.[9]
[9]Closing Submissions of the Defendants to Counterclaim (HGR parties) (24 April 2018), [20].
Wilson had amended his claim to add an allegation[10] that Oupan did not maintain current and accurate financial records, particulars to which state that proceeds from the sale of five assets, including Oupan’s quarry business in 1993, were not recorded in the ledgers or financial statements of Oupan. Mr Darryn Hockley (“Hockley”), Wilson’s financial expert, looked at these asset sales in his second and third reports, and concluded, in essence, that the information available to him was insufficient to reconcile the transactions.[11] Geer and Ms Angela Palermo (“Palermo”), the HGR parties’ in-house accountant, then put on an amended witness statement that, given the available records after 25 years, explained where the proceeds went and identified all the relevant records.[12]
[10]Fourth Further Amended Counterclaim (17 November 2017), [79A].
[11]Expert Report of Darryn Hockley (9 May 2017) (“the Second Hockley Report”), [15], [94]–[108]; Expert Report of Darryn Hockley (22 December 2017) (“the Third Hockley Report”), [15], [79]–[103]; Third Hockley Report, [20]–[22], [126]–[128].
[12]Amended Witness Statement of David Morton Geer (2 February 2018) (“the Geer Statement”), [94T]–[94AAD]; Amended Witness Statement of Angela Palermo (2 February 2018) (“the Palermo Statement”), [171]–[241]; Further Amended Witness Statement of David Stewart Taylor (7 March 2018) (“the Taylor Statement”), [142]–[144].
On the first day of the trial, senior counsel opened this claim as follows:[13]
What Ms Palermo then says is that out of the proceeds of the sale of those quarries [QCL sale in 1993], Oupan paid off the $7.133 million in principal but it left outstanding the $18 million in interest payments. It’s baffling as to why it did that, or perhaps not, but there needs to be an explanation as to why it did that because I will show your Honour shortly that around that time, it had tens of millions of dollars available also to have paid off that $18 million in interest, but it left that $18 million in interest sitting there.
The tens of millions of dollars available to pay off the interest, according to Wilson’s senior counsel, was to be found in the proceeds from Oupan’s sale of its assets. Specifically, he said that there was about $26 million in proceeds from those sales “unaccounted for” and “unexplained” on Palermo’s evidence.[14]
[13]Transcript, 78.
[14]Transcript, 109, 112, 117–8.
On the second day of the trial, Wilson’s senior counsel said:[15]
We have asked Mr Hockley to run the ruler over what Ms Palermo says and yesterday I said that Ms Palermo put the number - that there was [un]accounted about $26 million. Mr Hockley, having gone over this, thinks it’s actually larger and thinks it’s about $36 million.
Thus, the gravamen of the opening was that the HGR parties had misappropriated at least $26 million from the proceeds of Oupan’s asset sale in 1993 instead of using that sum to repay their loans. This, the HGR parties contend, is an allegation without foundation and, moreover, it is not pleaded.
[15]Transcript, 122–3.
Wilson’s senior counsel immediately asked for Hockley to prepare a further report to justify this assertion, and that night he filed his fourth report.[16] In opening, having received Hockley’s fourth report, the HGR parties’ senior counsel was highly critical of how Wilson’s senior counsel opened this claim and of the content of the fourth report, in that it was plainly wrong.[17] Hockley then adopted the fourth report as his evidence, but, before doing so, read the comments of the HGR parties’ senior counsel in opening on the fourth report and thus knew the criticisms that had been made of it.[18] Nonetheless, and, as the HGR parties contend, despite knowing it was in error, Hockley did not seek to correct any part of the fourth report before permitting it to go into evidence as his expert opinion.[19]
[16]Transcript, 122–3; Letter from Darryn Hockley to Andrew Brown (20 February 2018) (“Fourth Hockley Report”).
[17]Transcript, 201, 215.
[18]Transcript, 521, 524.
[19]Transcript, 523, 573.
The fundamental problem with Hockley’s fourth report is, the HGR parties submit, that he did not look at the settlement statements for each transaction that Palermo referenced in her witness statement, and that showed where the proceeds went.[20] Hockley did accept that he had not looked at these settlement statements,[21] despite the statements being available to him;[22] and that it was desirable to look at these settlement statements;[23] his failure to see these settlement statements was an oversight;[24] looking at these settlement statements before expressing an opinion would have assisted the court;[25] and that there were deficiencies in the fourth report.[26]
[20]Transcript, 572.
[21]Transcript, 574.
[22]Transcript, 522, 524, 573.
[23]Transcript, 574.
[24]Transcript, 522.
[25]Transcript, 574.
[26]Transcript, 531.
In relation to the sale for which Hockley had originally asserted unreconciled proceeds of $36 million, Hockley accepted that the settlement statements showed where the proceeds went.[27] Wilson’s senior counsel was then permitted to lead further evidence from Hockley, who said, in relation to the asset sale in 1993, that there was an $11.3 million cheque drawn on HGR that he could not trace through the general ledgers to see who ultimately received those amounts as payee.[28] In further cross examination, Hockley was then taken to Oupan’s ledger where the $11.3 million cheque was recorded with the descriptor “QCL sale clearing”.[29] That is, Oupan—which was then being run by Wilson—had recorded receipt of that cheque in its ledgers, which was said to be a complete answer to the allegation pleaded in the particulars to the allegation with respect to the failure to maintain current and accurate financial records on the part of Oupan.[30]
[27]Transcript, 579, 581.
[28]Transcript, 582–3.
[29]Transcript, 588.
[30]Fourth Further Amended Counterclaim (17 November 2017), [79A, Particulars, (b)]; cf Outline of Closing Submissions of the Plaintiff by Counterclaim (28 April 2018), [77]–[83].
Moreover, and it is said significantly, given that Wilson’s senior counsel had opened the claim on the basis that there were “unaccounted” for proceeds, Hockley disavowed that there were any “unaccounted” for proceeds, accepting that such a suggestion would be wrong.[31] Hockley said that he only referred to unreconciled proceeds,[32] and accepted that there was a highly significant difference between “unaccounted” for and “unreconciled” proceeds.[33] Finally, Hockley was emphatic that he did not conclude that there was money missing.[34]
[31]Transcript, 572.
[32]Transcript, 571.
[33]Transcript, 572.
[34]Transcript, 587.
The commercial arrangement
The commercial arrangement between Wilson and the HGR interests was recorded in five documents.
(a)By Loan Agreement with HG&R Nominees dated 7 March 1980,[35] HG&R Nominees loaned Mr Wilson $65,000.[36] Wilson never repaid that loan sum.[37]
[35]Loan Agreement between HGR Nominees and Wilson (7 March 1980).
[36]Geer Statement, [44]; Transcript, 268.
[37]Geer Statement, [45]; Transcript, 266, 289.
(b)By an assignment of interest dated 7 March 1980,[38] Wilson assigned and transferred half his interest in the Manning Land to HG&R Nominees as consideration for the loan, and Cougle consented.
[38]Assignment of Interest from Wilson to HGR Nominees (7 March 1980).
(c)As to the Unit Trust Deed for Oupan Resources Trust,[39] Oupan was the corporate trustee of Oupan Resources Trust, with Geer, Charles Keith Geer (“Geer Senior”), Wilson, and from 1981, Gorr, as directors.[40] The initial unit holders of Oupan Resources Trust were:[41]
[39]Unit Trust Deed for Oupan Resources Trust (31 January 1980).
[40]ASIC: Current & Historical Extract for Oupan Resources Pty Ltd (10 June 2014).
[41]Unit Trust Deed for Oupan Resources Trust (31 January 1980), First Schedule.
(i)Wilson as trustee of The Wilson Family Trust, 30 units;
(ii)Sixth Oupan Pty Ltd, as trustee of the CK Geer Oupan Trust, 15 units;
(iii)Sixth Oupan Pty Ltd, as trustee of the DM Geer Oupan Trust, 30 units;
(iv)Sixth Oupan Pty Ltd, as trustee of the L Gorr Oupan Trust, 15 units.
(d)By the Joint Venture Agreement dated 7 March 1980,[42] it was recorded that the unit trust was set up to acquire property in the Bacchus Marsh area for the purpose of winning soil gravel sand and other materials and for Sixth Oupan Pty Ltd to fund the acquisition and development of such property on terms including that:
[42]Joint Venture Agreement between Wilson and Sixth Oupan Pty Ltd (7 March 1980).
5. OUPAN shall procure such finance as may be necessary to acquire such property together with such equipment as the parties consider necessary to carry on the business of extraction of soil, sand and gravel and other materials on the said property. Oupan Resources Pty Ltd will charge its assets to secure such advances and will pay an interest rate of fourteen per centum (14%) per annum on such funds. In the event that such funds are procured at an interest rate of less than fourteen per centum (14%) it is agreed that the difference between the rate paid and fourteen per centum (14%) shall be paid to [Sixth] Oupan.
6. THE parties agree to use their best endeavours at all times to further the interests of the Unit Trust and it is also agreed that in the absence of agreement to the contrary the profits of the venture should be used to reduce its liabilities.
Importantly, the 14% rate specified was the rate then available to the HGR interests through HG&R Nominees for a loan secured against a first mortgage.[43]
Wilson accepted that, in 1980, there may well have been discussion about the HGR advances being made at 14%, and that this rate would not have troubled him.[44]
(e)By the Labour Agreement dated 15 April 1980,[45] Wilson was appointed head contractor to provide all labour for Oupan operations, and to be paid a fee representing a fair recompense to Wilson considering the amount of labour he had to employ to provide such service to Oupan. This agreement, entered into five weeks after the other agreements, reflected Geer’s, Geer Senior’s, and Gorr’s concern that they, through Oupan, might be exposed to personal liability for payouts to any workers taken on by Wilson to run the quarry business.[46] Once Oupan grew, Oupan contracting with Wilson to provide labour was not realistic, and Oupan directly employed persons.[47]
[43]Geer Statement, [50].
[44]Transcript, 299–300.
[45]Labour Agreement (15 April 1980).
[46]Geer Statement, [51].
[47]Geer Statement, [74]. As is clear from its terms, the Labour Agreement did not entitle Wilson personally to be paid a reasonable remuneration himself: see Witness Statement of William Robert Wilson (2 March 2017) (“the Wilson Statement”), [25].
The structure of the arrangements with Wilson and the commercial bargain in relation to Oupan was that the HGR interests supplied the finance (whether from HGR clients, HGR interests or commercial lenders) at market rates, Wilson used those funds in property investment, and once all loans and liabilities had been repaid, the unit holders stood to benefit from any profits to the extent of each person’s unit holding.[48]
[48]Geer Statement, [52].
In relation to the HGR interests’ agreement as to the terms upon which they would make funds available to Oupan, Geer’s evidence was that there was one “blanket” agreement between Oupan and the lenders that operated throughout.[49]
[49]Transcript, 699.
The terms of that agreement were:[50]
(a)principal would be repaid and interest would be paid when Oupan[51] formed the view that it had the financial capacity to pay;
(b)the rate of interest payable by Oupan would equate with the rates of interest available to the lenders through HG&R Nominees; and
(c)any unpaid interest would be compounded at quarterly rests.
[50]Transcript, 676, 678, 682–4, 676 (confirming that [67] recorded the original agreement), 729, 742, 768.
[51]Gorr was unclear in his evidence whether he thought the HGR interests’ loans were repayable when the lender, or when the borrower, formed the view the borrower had the capacity to repay the loan: Transcript, 993, 994, 995.
Geer’s evidence was that Wilson agreed to these terms,[52] and said to him, “You can get the same return as you would get lending it through your system. This way, you’ll get your return and you’ll also get an equity kicker, you can be involved in the business as well”.[53] Geer was clear that in agreeing the loan terms, Geer and Wilson were representing Oupan, and Geer was representing the lenders.[54]
[52]Transcript, 938.
[53]Transcript, 676.
[54]Transcript, 730.
Oupan’s role as trustee
The Oupan Resources Trust was a trading trust. The terms of the Unit Trust Deed for the Oupan Resources Trust made clear that the trustees’ obligations are circumscribed so that they may operate the Oupan Resources Trust on that basis and wear various hats in relation to transactions involving the trust.[55]
[55]Unit Trust Deed for Oupan Resources Trust (31 January 1980).
The following were express terms of the Unit Trust Deed for the Oupan Resources Trust:[56]
[56]Unit Trust Deed for Oupan Resources Trust (31 January 1980).
(a)it was desired that the Trustee shall have the most absolute discretion possible in relation to the administration of the Trust Fund (recital E);
(b)the Trustee shall pay first out of the gross income of the Trust and then out of the corpus thereof all costs and disbursements, commissions, fees, taxes (including land tax and income tax), management charges and other proper outgoings in respect of the investments and administration of the Trust Fund (cl 23(b));
(c)the Trustee may apply and invest all moneys at any time forming part of the Trust Fund in any such investments, whether or not involving liabilities or upon personal credit, with or without security and upon such terms and conditions as the Trustee shall in its absolute discretion think fit and to the intent that the Trustee shall have the same powers in all respects as if it were the absolute owner beneficially entitled (cl 26(a));
(d)the Trustee may advance and lend moneys to, and borrow and raise moneys from, and secure by mortgage or otherwise howsoever the payment of money to, any persons, firms, companies, corporations, or government or municipal bodies, and upon such terms, with or without security or interest, as the Trustee shall deem fit (cl 26(c));
(e)the Trustee may pay out of the Trust Fund or the income thereof all costs, charges and expenses incidental to the management of the Trust Fund or to the exercise of any power, authority or discretion contained in the Oupan Trust Deed or in carrying out or performing the trusts which the Trustee may at any time incur (cl 26(h));
(f)the Trustee may exercise or concur in exercising all of the powers and discretions contained in the Oupan Trust Deed or otherwise by law conferred notwithstanding that the Trustee or any person being a director or shareholder of the Trustee has or may have a direct or personal interest (whether as trustee of any other trust or in his personal capacity or as a director or shareholder of any company or otherwise) in the mode or result of exercising such power or discretion, or may benefit either directly or indirectly as a result of the exercise of any such power or discretion, notwithstanding that the Trustee for the time being is the sole Trustee (cl 26(r));
(g)the Trustee may in its absolute discretion lend or advance any moneys to the Trustee in its personal capacity or in its capacity as trustee of any other trust fund or otherwise howsoever, or to any company or partnership whatsoever, notwithstanding that the Trustee is a shareholder, director, member or partner of such company or partnership, or to a wife, husband, child or children of any Trustee absolutely (cl 29(a));
(h)the Trustee may in its absolute discretion borrow any moneys from the Trustee in its personal capacity or in the capacity of trustee of any other trust fund or otherwise howsoever, or from any company or partnership whatsoever notwithstanding that the Trustee is a shareholder, director, member or partner of any such company or partnership, or from the husband and wife or child or children of any Trustee (cl 29(b));
(i)the Trustee covenanted to exercise all due diligence and vigilance in protecting the rights of the unitholders provided that no Trustee shall be responsible for:
(i)any loss or damage occasioned by the exercise of any discretion or power conferred by the Oupan Trust Deed or by law, or by failure to exercise any such discretion or power, or by any error or forgetfulness whether of law or fact;
(ii)any breach of duty or trust whatsoever on the part of the Trustee, or its legal or other advisers, or generally, unless it shall be proved to have been committed, made or omitted in personal conscious fraudulent bad faith by the Trustee charged to be so liable,
(cl 35); and
(j)nothing in the Oupan Trust Deed shall prevent the Trustee or any subsidiary of the Trustee or the directors or officers thereof or any of them from subscribing for, purchasing, holding, dealing in or disposing of units, or from otherwise at any time contracting or acting in any capacity as insurer, representative or agent, or entering into any insurance, financial, banking, agency or other transaction with any other of them or any unitholder or any company whose shares form part of the Trust Fund, or from being interested in any such contract or transaction or otherwise (cl 40).
It is within the context of these duties and obligations that the conduct of Geer and Gorr (and Wilson for the period at least to September 1997) is to be examined.
Deer Park Trust [Waigani]
Establishment of the Deer Park Trust
In around April 1982, Wilson came to Geer’s office and said that he had bought 200 acres (around 80 ha) of grazing land at Deer Park on his way in to see Geer, and that he thought it was a good long term investment as the site had potential to be developed for subdivision for industrial use.[57] There were two parcels of land: 40.35 ha purchased for $105,000; and 44.46 ha for $100,000.[58]
[57]Geer Statement, [189].
[58]Contract for Sale of 40.35ha (23 April 1982); Contract for Sale of 44.46ha (23 April 1982).
Geer inspected the land, and told Wilson that they could go into a joint venture together.[59] Geer and Wilson agreed that this land should go into a separate vehicle, not Oupan, because it was going to be a long term project requiring significant funds.[60] Geer told Wilson that he and Wilson would have equal interests in the new entity, and that Geer needed to bring on board other investors from the HGR partnership out of a sense of fairness to the partnership and because the project needed significant funding.[61]
[59]Geer Statement, [192].
[60]Geer Statement, [193].
[61]Geer Statement, [194].
Geer approached Gorr, Geer Senior and May, and each agreed to be part of the venture.[62]
[62]Geer Statement, [195]–[196]; Amended Witness Statement of Leon Gorr (2 February 2018) (“the Gorr Statement”), [59]–[61].
Geer and Wilson agreed that the terms for the new venture would be that:[63]
(a)Geer would create a new legal trust structure in which Wilson and Geer would have equal holdings and the balance of the holdings would reflect ownership from other HGR interests.
(b)Geer and the other parties identified by Geer would procure loans to finance the purchase and development of the Deer Park land.
(c)Geer and Wilson would perform the same roles in respect of the new trust and the development of the Deer Park land which each then performed in respect of the Oupan Resources Trust.
In or about April 1982, the name of an existing trust was changed to the Deer Park Trust,[64] and Waigani replaced the existing trustee.[65]
[63]Geer Statement, [197]–[198].
[64]See Southern Cross Trust No. 4 Trust Deed; Deed of Name Change: “Southern Cross” to “Deer Park” Trust (19 April 1982).
[65]Geer Statement, [201].
The initial unit holders of the Deer Park Trust were:[66]
[66]Geer Statement, [204].
(a)Daydeb Nominees Pty Ltd (as trustee of the Geer Wentworth Trust), a trust associated with Geer, as to 30 units;
(b)Applecross Secretarial Services Pty Ltd (as trustee of the Gorr Wentworth Trust), a trust associated with Gorr, as to 30 units;
(c)Daydeb Nominees Pty Ltd (as trustee of the Keith Trust), a trust associated with Geer Senior, as to 15 units;
(d)T.S. & G. Nominees Pty Ltd (as trustee of the Dewdrop Trust), a trust associated with May, as to 15 units; and
(e)Wilson (as trustee of the Wilson Family Trust) as to 30 units.
Trustee powers and obligations under the Deer Park Trust deed
The Deer Park Trust (like the Oupan Resources Trust) was a trading trust. The terms of the Unit Trust Deed for the Deer Park Trust made that clear in relation to the trustees’ obligations.[67]
[67]Southern Cross Trust No. 4 Trust Deed, as amended by the Deed of Name Change: “Southern Cross” to “Deer Park” Trust (19 April 1982).
There were express terms of the Unit Trust Deed for the Deer Park Trust as follows:[68]
[68]Southern Cross Trust No. 4 Trust Deed, as amended by the Deed of Name Change: “Southern Cross” to “Deer Park” Trust (19 April 1982).
(a)it was desired that the Trustee shall have the most absolute discretion possible in relation to the administration of the Trust Fund (Recital E);
(b)the Trustee shall pay first out of the gross income of the Deer Park Trust and then out of the corpus thereof all costs and disbursements, commissions, fees and taxes (including land tax and income tax), management charges and other proper outgoings in respect of the investments and administration of the Trust Fund (cl 22(b));
(c)the Trustee may apply and invest all moneys at any time forming part of the Trust Fund in any such investments and upon such terms and conditions as the Trustee in its absolute discretion thinks fit (cl 25(a));
(d)the Trustee may borrow and raise moneys upon such terms without security or interest as the Trustee shall deem fit (cl 25(c));
(e)the Trustee may pay out of the Trust Fund or the income thereof all costs, charges and expenses incidental to the management of the Trust Fund or in carrying out or performing the trusts which the Trustee may at any time incur (cl 25(k));
(f)the Trustee may exercise or concur in exercising all of the powers and discretions contained in the Deer Park Trust Deed or otherwise by law conferred notwithstanding that the Trustee or any person being a director or shareholder of the Trustee has or may have a direct or personal interest (whether as trustee of any other trust or in his personal capacity or as a director or shareholder of any company or otherwise) in the mode or result of exercising such power or discretion, or may benefit either directly or indirectly as a result of the exercise of any such power or discretion, notwithstanding that the Trustee for the time being is the sole Trustee (cl 25(u));
(g)the Trustee shall have power in its absolute discretion to sell, transfer, hire, lease or dispose of any real or personal property of the Trust Fund or to lend or advance any moneys to the Trustee in its personal capacity or in its capacity as trustee of any other trust fund or otherwise howsoever or to any company or partnership whatsoever notwithstanding that the Trustee is a shareholder, director, member or partner of such company or partnership, or to a wife, husband, child or children of any Trustee absolutely (cl 28(a));
(h)the Trustee shall have power in its absolute discretion to buy, transfer, acquire, hire or lease any real or personal property or to borrow any moneys from the Trustee in its personal capacity or in the capacity of trustee of any other trust fund or otherwise howsoever, or from any company or partnership whatsoever, notwithstanding that the Trustee is a shareholder, director or member or partner of any such company or partnership, or from the husband and wife or child or children of any Trustee (cl 28(b));
(i)the Trustee covenanted to exercise all due diligence and vigilance in protecting the rights of unitholders provided that no Trustee shall be responsible for:
(i)any loss or damage occasioned by the exercise of any discretion or power hereby or by law conferred on the Trustee or by failure to exercise any such discretion or power or by any error or forgetfulness whether of law or fact;
(ii)any breach of duty or trust whatsoever on the part of the Trustee or its legal or other advisers or generally unless it shall be proved to have been committed, made or omitted in personal conscious fraudulent bad faith by the Trustee charged to be so liable,
(cl 34);
(j)nothing in the Deer Park Trust Deed shall prevent the Trustee or any subsidiary of the Trustee or the Directors or Officers thereof or any of them from subscribing for, purchasing, holding, dealing in or disposing of Units or from otherwise at any time contracting or acting in any capacity as insurer, representative or agent, or entering into any insurance, financial, banking, agency or other transaction with any other of them or any unitholder or any company whose shares form part of the Trust Fund or from being interested in any such contract or transaction or otherwise (cl 39).
It is within this context that the conduct of Geer, Gorr and May is to be assessed.
Conflicts of interest and breaches of fiduciary duties
It is clear that both trustees and company directors owe fiduciary duties to act in the interests of the beneficiaries or the company, and not to use their position to make unauthorised profits for themselves or others, and to devote undivided loyalty to their beneficiaries or the company.[69] Consistently with these duties, a power conferred by a trust deed is a fiduciary power, and may only be exercised for the purpose for which it is conferred; for the benefit of the beneficiaries and not for collateral purposes.[70]
[69]See Heydon, Leeming and Turner, Meagher, Gummow and Lehane’s Equity Doctrines and Remedies (LexisNexis, 5th ed, 2015) at [5-050].
[70]Re Burton; Wily v Burton (1994) 126 ALR 557 at 559-60 citing Duke of Portland v Topham (1864) 11 HLC 31 and Re Skeats’ Settlement (1889) 42 Ch D 522.
It is also clear that a term in a trust deed excluding the strict rule against conflicts of interests by the trustee does not give the trustee an untrammelled power to abuse his or her position. It does not follow from the exclusion of the strict application of the conflict rule that any exercise of the fiduciary power in favour of the trustee is permissible. The trustee must still consider the proper exercise of the power, take into account only relevant considerations and exclude irrelevant ones. The exclusion of the conflict rule merely removes one obstacle to the lawful exercise of the power so that, if acting in the best interest of the beneficiaries the power would involve dealing with the trustee, the trustee will not be prohibited from doing so.[71] It also follows that the exclusion of the conflict rule does not permit a trustee to disregard his obligations as trustee when dealing with trust property.
[71]Geraint Thomas, Thomas on Powers (Oxford University Press, 2nd ed, 2012), 676–7 [12.26].
In this context, Wilson contends that the evidence of Geer, Gorr and May discloses that they did not discharge the duties of their office as directors of the trustee companies and, as a result, Oupan and Waigani also breached their duties as trustees. Moreover, it is said that the conflicts of interest were exacerbated by the role of the law firm Herbert Geer & Rundle, where Geer, Gorr and May were partners. The law firm acted, Wilson says, at various times for the trustee companies and the HGR interests and frequently against his interests. These duties do not, however, arise in or fall to be assessed with respect to compliance or breach in a vacuum. They arise to an extent and with dimensions in the context of particular circumstances and agreements between relevant parties. In the present circumstances, for the reasons which follow, they have not, in my view, been breached having regard to the nature and context of arrangements between the parties and various entities involved; whether reduced to formal agreements or not.
Witnesses
Wilson’s witnesses
William Wilson
The HGR parties contend that Wilson’s evidence should be rejected unless independently corroborated. Given the time that has elapsed since the critical events the subject of these proceedings, great care must be taken in accepting witness recollections of events so long ago. Thus, as a general proposition, witness testimony supported by contemporaneous documentation provides a much surer and safer basis for the Court to proceed.[72] The HGR parties do, however, in the present circumstances, raise doubts as to Wilson’s testimony, for two particular reasons.
[72]See Food Co UK LLP (t/a Muffin Break) v Henry Boot Developments Ltd [2010] EWHC 358 (Ch), [4] (Lewison J as his Lordship then was):
Although some of the representations on which the tenants rely were made in writing, in all cases they allege that these representations were confirmed, expanded, or supplemented by oral representations. These oral representations were made in conversations and at meetings of which there is scant record. In approaching the evidence I have tended to place weight on contemporaneous documents and documents which came into existence before the problems emerged. In assessing the recollections of witnesses, it is also important to avoid the benefit of hindsight. I must try to assess what people did, said and thought at the time. In that connection I have borne in mind the words of Lord Pearce in his dissenting speech in Onassis v Vergottis [1968] 2 Lloyd’s Rep 403, 431:
“Credibility involves wider problems than mere ‘demeanour’ which is mostly concerned with whether the witness appears to be telling the truth as he now believes it to be. Credibility covers the following problems. First, is the witness a truthful or untruthful person? Secondly, is he, though a truthful person, telling something less than the truth on this issue, or, though an untruthful person, telling the truth on this issue? Thirdly, though he is a truthful person telling the truth as he sees it, did he register the intentions of the conversation correctly and, if so, has his memory correctly retained them? Also, has his recollection been subsequently altered by unconscious bias or wishful thinking or by overmuch discussion of it with others? Witnesses, especially those who are emotional, who think that they are morally in the right, tend very easily and unconsciously to conjure up a legal right that did not exist. It is a truism, often used in accident cases, that with every day that passes the memory becomes fainter and the imagination becomes more active. For that reason a witness, however honest, rarely persuades a judge that his present recollection is preferable to that which was taken down in writing immediately after the accident occurred. Therefore, contemporary documents are always of the utmost importance. And lastly, although the honest witness believes he heard or saw this or that, is it so improbable that it is on balance more likely that he was mistaken? On this point it is essential that the balance of probability is put correctly into the scales in weighing the credibility of a witness, and motive is one aspect of probability. All these problems compendiously are entailed when a judge assesses the credibility of a witness; they are all part of one judicial process and in the process contemporary documents and admitted or incontrovertible facts and probabilities must play their proper part”.
First, it is said that Wilson admitted that he had previously sworn a false statutory declaration, motivated by a desire to keep the money paid to him as part of the settlement in 2007.[73] The HGR parties submit that the objective evidence was, however, such that it showed that the earlier statutory declaration was true, and that Wilson was now lying about the earlier statutory declaration being false so that he could now press an untenable claim that he held half the beneficial interest in the Manning Land, worth $5 million.[74]
[73]Wilson Statement, [50].
[74]Closing Submissions of the Defendants to Counterclaim (HGR parties) (24 April 2018), [24]; and see the Schedule to these submissions (“Schedule”), [348]–[427].
Secondly, the HGR parties submit that his witness statement and oral evidence were deliberately misleading in that his statement about the Manning Land looked to be part of a strategy to cover up or subvert what really occurred to enable him to make a claim to half the beneficial interest in the Manning Land and his false declaration that he had never seen any documents about the unitholders of the Deer Park Trust can only have been deliberate[75] as Wilson had signed an original deed recording the unitholders and this was provided in discovery and relied upon by the HGR parties in their pleaded defence. These are matters which are addressed further in the reasons which follow in the context of the particular questions to be determined in this proceeding.
[75]Transcript, 431–470; Closing Submissions of the Defendants to Counterclaim (HGR parties) (24 April 2018), [24]; and see Schedule, [180]–[187].
More generally, the HGR parties submit that Wilson did not make proper concessions. For example, he continued to maintain that he did not know where the sale proceeds from the quarry business in 1993 went,[76] despite—as the evidence showed—at all times holding all the cheques from that sale that showed where the funds went, being sent letters contemporaneously that stated where the money went, having teams of internal and external accountants looking into this issue at that time, and personally signing off accounts and tax returns that recorded where the money went.[77] Moreover, it is said that Wilson also had a poor demeanour in the witness box and was prone to making speeches.[78] It was submitted that he was evasive and far from candid.
[76]Transcript, 303, 311, 330, 335.
[77]Closing Submissions of the Defendants to Counterclaim (HGR parties) (24 April 2018), [25]; and see Schedule, [65]–[82]; cf Outline of Closing Submissions of the Plaintiff by Counterclaim (28 April 2018), [77]–[83]; and see above, [20].
[78]Transcript, 263, 269, 270, 407, 458.
The more general criticisms are addressed further in these reasons so far as they go to the sale proceeds from the quarry business in 1993. More generally, in relation to demeanour, I accept the criticisms made by the HGR parties in this respect. On a number of occasions it was necessary for the Court to call upon Mr Wilson to address the question he had been asked and to provide a responsive answer. Nevertheless, harking back to my initial observations in relation to evidence of this kind having regard to the amount of time having elapsed since critical events, I do not regard any assessment of Wilson’s credibility as a witness as being decisive in the present circumstances, as I am of the view, as indicated in the reasons which follow, that the objective circumstances and the contemporaneous and later documents do not support Wilson’s case in any event.
Jill Wilson
Mrs Jill Wilson worked as the office manager at Oupan from the early 1980s to 1997, attending the offices on a daily basis.[79] She oversaw the staff doing purchasing, sales, invoicing and wages.[80] It became clear during cross-examination that she did not even recall what she had said in her own witness statement, such as that Oupan’s accountant reported to Wilson.[81]
[79]Witness Statement of Jill Wilson (20 February 2017), [2], [6].
[80]Witness Statement of Jill Wilson (20 February 2017), [6], [7].
[81]Transcript, 482–3.
Frederick Michalski
Oupan employed Mr Frederick Michalski (“Michalski”) to keep its accounts from 1992 to 1997.[82] Michalski was, I accept, a truthful witness.
[82]Witness Statement of Frederick Michalski (20 February 2017), [1].
Steven Foale
Mr Steven Foale (“Foale”) is a special counsel at Maurice Blackburn Lawyers (formerly Maurice Blackburn Cashman) and, at the relevant time, was engaged by Wilson to act as his solicitor in the settlement negotiations in 2007.[83] Foale recalled few details in relation to that transaction, save that he acted on Wilson’s instructions and that Wilson entered the settlement of his own free will.[84] Nevertheless, I accept that Foale was a truthful and helpful witness.
[83]Witness Statement of Steven Foale (10 March 2017), [4].
[84]Transcript, 488, 496, 497.
Dennis Cougle
Mr Dennis Cougle was appointed the trustee under the deed of assignment of Wilson’s property under Part X of the Bankruptcy Act, on 21 December 1976, and he released Wilson’s interest in the Manning Land in 1985.[85] Mr Cougle was not cross-examined.
[85]Witness Statement of Dennis John Cougle (20 February 2017), [3].
Denis Murphy
Wilson sought to rely upon the affidavit sworn by Mr Denis Murphy (“Murphy”) on 2 February 2018 because Murphy was too unwell to travel to Melbourne to give evidence. Wilson’s solicitors provided a letter, dated 25 January 2018, from Murphy’s treating doctor, stating that he had various medical conditions, and “[t]he cumulative effect of these has been to impair his cognitive function and memory”. The doctor continued, “I would have to cast some doubt on his reliability as a witness”. The HGR parties objected to that course and Wilson then made Murphy available for cross-examination and provided a further letter from Murphy’s treating doctor, dated 13 February 2018, that stated that Murphy “is prone to confusion and his memory is poor”. The HGR parties say that, given Murphy’s health and the opinion of his doctor that his memory is impaired, they did not think it appropriate to trouble Murphy. Thus, the HGR parties submit that while Murphy’s affidavit may go into evidence, they say that it should be given little or no weight, as it was sworn at a time when Murphy was cognitively impaired and could not be tested. In my view, the medical evidence provided supports the position put by the HGR parties.
Mr Darryn Hockley
Hockley, a chartered accountant, provided four reports: dated 25 November 2016 (“First Hockley Report”); dated 9 May 2017 (“Second Hockley Report”); dated 22 December 2017 (“Third Hockley Report”); and dated 20 February 2018 (“Fourth Hockley Report”). The HGR parties contend that these Hockley reports were generally not useful in the determination of issues in the proceeding. More particularly, they say as follows:[86]
33.First, Mr Hockley did not have appropriate expertise to opine on commercial interest rates and their availability (whole of questions 2[87], 3[88], 4[89], 14[90], 15[91] and 16[92] in the First Report), on reasonable management fees for land development (whole of questions 5 to 10[93] in the First Report), or on how a prudent director/trustee would have utilised assets (whole of supplementary questions 5[94] and 6[95] of the Second Report). (The HGR parties press their objection to these opinions under s 79 of the Evidence Act.)[96]
34.Second, Mr Hockley was asked questions that do not arise on the pleadings, such as how a prudent director/trustee would have utilised assets (whole of supplementary questions 5[97] and 6[98] of the Second Report). (The HGR parties press their objection to these opinions on the ground of relevance.)[99]
35.Third, Mr Hockley was sloppy in the preparation of his reports and in answering questions put to him, as typified in his preparation of the fourth report (addressed above). Indeed, Judge Woodward and Daly AsJ also found him sloppy.[100] Daly AsJ stated that Mr Hockley’s opinion “is simply not supported by any comprehensible data or analysis and taken as a whole, this section of the third Hockley report is close to unintelligible”.[101] Similar comments could be made about his reports here.
[86]Closing Submissions of the Defendants by Counterclaim (HGR Parties) (24 April 2018), [33]–[35].
[87]First Hockley Report at [2], [43]–[51].
[88]First Hockley Report at [3], [52]–[56]; Second Hockley Report at [4(a)], [6], [20(a)], [21].
[89]First Hockley Report at [4], [57]–[59]; Second Hockley Report at [4(b)], [6], [20(b)], [22].
[90]First Hockley Report at [14], [129]–[132].
[91]First Hockley Report at [15], [133]; Second Hockley Report at [4(a)], [6], [20(f)], [37].
[92]First Hockley Report at [16], [134]; Second Hockley Report at [4(b)], [6], [20(g)], [38].
[93]First Hockley Report at [5]–[10], [60]–[95]; Third Hockley Report at [5]–[6], [37]–[43].
[94]Second Hockley Report at [10], [76]–[78].
[95]Second Hockley Report at [11], [79]–[80].
[96]Defendants to Counterclaim’s objections to Mr Hockley’s Reports (26 February 2018).
[97]Second Hockley Report at [10], [76]–[78].
[98]Second Hockley Report at [11], [79]–[80].
[99]Defendants to Counterclaim’s objections to Mr Hockley’s Reports (26 February 2018).
[100]Ford Kinter & Associates Pty Ltd v Reliance Franchise Partners Pty Ltd [2018] VCC 9, [40]; and L&H New Developments Pty Ltd v Myr Investments Pty Ltd [2015] VSC 89, [71].
[101]L&H New Developments Pty Ltd v Myr Investments Pty Ltd [2015] VSC 89, [71].
For the reasons which follow, I am of the opinion that these criticisms of the Hockley reports on the part of the HGR parties are justified.
HGR parties’ witnesses
David Geer
Geer has been a director and the secretary of Oupan since 1980, and has been a director of Waigani since 1978.[102] Interests associated with Geer hold units in the Oupan Resources Trust and the Deer Park Trust. Geer gave detailed evidence about HGR’s mortgage lending business, his and the other HGR interests’ business relationship with Wilson, the ending of that relationship, and the settlement agreement reached between them in 2007. Geer was cross-examined over three days, including, the HGR parties submit, about topics not helpful to the resolution of the issues for determination.[103] The HGR parties submit that the cross-examination served to demonstrate him to be a truthful witness. In this respect, reference has already been made by the HGR parties to the evidence of Wilson that he regarded Geer, Gorr and May as honourable men. Wilson, on the other hand, contended that Geer had been an evasive and unhelpful witness, or worse. As indicated in the reasons which follow, I am of the view that Geer did properly attempt to provide responsive and accurate answers to the questions put to him in cross-examination and that to the extent it might be said that his answers were unhelpful, this was the product of the passage of a considerable amount of time since relevant events about which he was questioned and also as the result of the state of the business records of both Waigani and Oupan, which was the product of the period during which Wilson was managing the businesses of those companies and responsible for keeping accounting and other company records.
[102]Geer Statement, [5], [7]–[8].
[103]Referring to Transcript, 624, 699, 715, 728, 786, 790, 791, 939. By way of one example, there was a wide-ranging cross-examination apparently directed to the proposition that the present proceeding was commenced by Geer and Gorr for an improper purpose (Transcript, 630–1, 632, 633), which, it is said, was dispelled later when Gorr was asked, and stated, that the claim was commenced on advice from counsel (Transcript, 1039).
Leon Gorr
Gorr has been a director of Oupan since 1980 and a director of Waigani since 1978.[104] Interests associated with him hold units in both trusts. Gorr gave evidence about his and the other HGR interests’ business relationship with Wilson, the ending of that relationship, and the settlement agreement reached between them. Gorr was cross-examined and was, in my view, a helpful and truthful witness to the extent that matters were within his knowledge and, subject of course, to the issues already referred to with respect to the passage of time since critical events. In closing submissions, Wilson’s senior counsel made criticism of Gorr’s evidence with respect to a number of matters, particularly the state of accounts. However, these criticisms were not justified having regard to the fact that Gorr was not involved with or responsible for those accounts and, in my view, could not respond other than as he did to the questions put to him where his answers were subject to this criticism.
[104]Gorr Statement, [6]–[8].
Anthony (Tom) May
May has been a director of Waigani since 2007; though he participated in board meetings of that company prior to his appointment as a director. This was apparently in the belief that he had been so appointed—but due to an oversight, this was not the case.[105] Interests associated with him hold units in the Deer Park Trust. He was cross-examined and, in my view, was a truthful witness and responded, having regard to his involvement in the affairs of Waigani and Oupan, and given the passage of time since the occurrence of critical events, as best he could.
[105]Further Amended Witness Statement of Anthony Henry May (27 February 2018) (“the May Statement”), [37]; and see Geer Statement, [202].
David Taylor
Taylor is a partner at McLean Delmo Bentleys (formerly McLean Delmo & Partners),[106] engaged by Oupan in 1997, and Waigani in 1999, to prepare their accounts. He was cross-examined and, in my view, was a truthful witness.
[106]Taylor Statement, [4].
Yan Li Wang
Ms Wang (“Wang”) is a lawyer who was involved in documenting the settlement in 2007.[107] She was cross-examined briefly and was, in my view, a truthful witness.
[107]Witness Statement of Yan Li Wang (24 March 2017), [4].
Angela Palermo
Palermo has been the account manager dealing with the HGR interests’ loans since 1980, and administered the HGR interests’ loans to Oupan and Waigani.[108] She was cross-examined and, in my view, was a truthful and helpful witness. Again, to the extent that she was unable to assist or helpfully comment on questions put to her in relation to the state of accounts and various transactions this was, again in my view, due to both the passage of time since critical events and the state of the company and accounting records of Waigani and Oupan flowing from the period during which Wilson managed the businesses of those companies and their records, including the accounts.
[108]Palermo Statement, [2]–[3], [11]–[14].
Elizabeth Mukherji (named O’Doherty in 2007)
Ms O’Doherty (“O’Doherty”) was a junior solicitor at Maurice Blackburn Cashman working on the settlement in 2007 and gave evidence in response to a subpoena.[109] She was, in my view, a truthful witness.
[109]Transcript, 1129.
Brian Dudakov
Mr Dudakov (“Dudakov”) is an expert valuer who gave evidence about the value of Oupan’s and Waigani’s land as at the settlement in 2007. Wilson agreed that, for the purposes of this trial, the parties use his valuations.
Questions for determination set out in the Schedule to the Orders of the Court of 22 December 2016
These questions are contained in the Schedule to the Orders of the Court, dated 22 December 2016, as follows:
SCHEDULE OF QUESTIONS FOR DETERMINATION
Adopting defined terms from the third further amended counterclaim (Counterclaim)
(1)Did Mr Gorr, on behalf of Waigani, make the 18 April representation?[110]
[110]Third Further Amended Counterclaim (19 April 2017), [105].
(2)Were:
(a)the 18 April representation (if made); and
(b)the 2006 accounts,
false, misleading and deceptive by reason that they showed no distributable profits for the Oupan trust and the Waigani trust, when the trusts would have been profitable but for the trustees’ breaches in relation to the Oupan Interest Payments, the Waigani Interest Payments, and the Management Fees?[111]
[111]Third Further Amended Counterclaim (19 April 2017), [107].
(3)Did Mr Wilson rely upon the 18 April representation and the 2006 accounts in executing the May agreement and the July agreements?[112]
[112]Third Further Amended Counterclaim (19 April 2017), [110]–[111].
(4)On a proper construction of the July agreements, did Oupan and Waigani make the Trustee Warranties?[113]
[113]Third Further Amended Counterclaim (19 April 2017), [112].
(5)If Oupan and Waigani made the Trustee Warranties, were the Trustee Warranties false by reason that:[114]
[114]Third Further Amended Counterclaim (19 April 2017), [113].
(a)Waigani acted in breach of trust by making the Waigani Interest Payments as alleged in [31] of the Counterclaim?
(b)Waigani acted in breach of trust by paying the Management Fees as alleged in [34] of the Counterclaim?
(c)Waigani acted in breach of trust by making the Balanced Loan as alleged in [37] of the Counterclaim?
(d)Waigani acted in breach of trust by making the Superannuation Payments as alleged in [40] of the Counterclaim?
(e)Oupan acted in breach of trust by making the Oupan Interest Payments as alleged in [75] of the Counterclaim?
(f)Oupan acted in breach of trust by granting the Daydeb Accommodation as alleged in [78] of the Counterclaim?
(6)Has Mr Wilson suffered loss and damage by the misleading or deceptive conduct of Oupan or Waigani?[115]
[115]Third Further Amended Counterclaim (19 April 2017), [115].
(7)By providing the 2006 accounts, giving the Trustee Warranties, and entering the May agreement and the July agreements, did Oupan prefer the interests of the defendants to counterclaim and thereby act in breach of trust?[116]
[116]Third Further Amended Counterclaim (19 April 2017), [116C].
(8)By making the 18 April representation, giving the Trustee Warranties, and entering the May agreement and the July agreements, did Waigani prefer the interests of the defendants to counterclaim and thereby act in breach of trust?[117]
[117]Third Further Amended Counterclaim (19 April 2017), [116A].
(9)Is Mr Wilson:
(a)estopped from contending that the May agreement and the July agreements are invalid?[118]
[118]Defence to Second Further Amended Counterclaim (16 March 2015), [131], [132].
(b)ready, willing and able to take all steps to put the parties back in the position they were in at the time of entry into the May agreement and the July agreements, and in any event is that possible?[119]
[119]Defence to Second Further Amended Counterclaim (16 March 2015), [133].
(c)entitled to a declaration that the May agreement and the July agreements are void pursuant to s 87 of the Trade Practices Act1974 (Cth)?[120]
[120]Third Further Amended Counterclaim (19 April 2017), [116(c)]. The generality of this question is not affected by questions (1), (2), (3), (4), (5), (6), (7) and (8).
(d)entitled to rescind the May agreement and the July agreements?[121]
[121]Third Further Amended Counterclaim (19 April 2017), [116E]. The generality of this question is not affected by questions (1), (2), (3), (4), (5), (6), (7) and (8).
(10)If the answer to Question 9(c) or (d) is yes:
(a)did Oupan act in breach of trust by:
(i)making the Oupan Interest Payments as alleged in [75] of the Counterclaim?
(ii)providing the Daydeb Accommodation as alleged in [78] of the Counterclaim?
(iii)failing to keep and render accurate accounts as alleged in [79] and [80] of the Counterclaim?
(b)is relief for any act in breach of trust in (a) above statute barred or barred by virtue of Mr Wilson’s laches and or acquiescence?[122]
[122]Defence to Second Further Amended Counterclaim (16 March 2015), [83A], [83B].
(c)should Oupan be removed as trustee of the Oupan Trust pursuant to s 48 of the Trustee Act1958 (Vic)?[123]
[123]Third Further Amended Counterclaim (19 April 2017), [81].
(d)did Waigani act in breach of trust by:
(i)making the Waigani Interest Payments as alleged in paragraph at [31] of the Counterclaim?
(ii)paying the Management Fees to Oupan as alleged in [34] of the Counterclaim?
(iii)making the Balanced Loan as alleged in [37] of the Counterclaim?
(iv)making the Superannuation Payments as alleged in [40] of the Counterclaim?
(v)failing to keep and render accurate accounts as alleged in [49] of the Counterclaim?
(e)is relief for any act in breach of trust in (d) above statute barred or barred by virtue of Mr Wilson’s laches and or acquiescence?[124]
(f)should Waigani be removed as trustee of the Deer Park Trust pursuant to s 48 of the Trustee Act 1958 (Vic)?[125]
(11)Did Mr Geer and Mr Wilson agree that Mr Wilson would hold 25% or 50% of the units in the Deer Park Trust, as alleged in [22] and [23] of the Counterclaim?
(12)In relation to the Manning Land, is Mr Wilson entitled to the relief at [104] of the Counterclaim?
[124]Defence to Second Further Amended Counterclaim (16 March 2015), [52A], [52B].
[125]Third Further Amended Counterclaim (19 April 2017), [50].
It will be observed that these questions for determination make reference to the Third Further Amended Counterclaim although, subsequently, there was filed a Fourth Further Amended Counterclaim (amended pursuant to orders made on 17 November 2017). It was, however, agreed in the course of the trial of this matter, particularly reaffirmed in closing submissions, that there was no material difference between the parts of the Third Further Amended Counterclaim referred to in these questions and the corresponding paragraphs of the Fourth Further Amended Counterclaim, though where such material differences do arise they are addressed in these reasons.
Questions for determination
Question 1
Did Mr Gorr, on behalf of Waigani, make the 18 April representation?[126]
[126]Fourth Further Amended Counterclaim (17 November 2017), [105].
The claim, as originally pleaded by Wilson, was that, on 18 April 2007, he attended a meeting with Gorr at which Gorr, on behalf of Waigani, told Wilson that the Deer Park Trust had been and continued to be unprofitable.[127] Wilson now alleges that Gorr also said that the Oupan Trust had been and continued to be unprofitable, and that the Manning Land, held in the Manning Trust, had a mortgagee in possession and had made no money.[128]
[127]Second Further Amended Counterclaim (3 February 2015), [105].
[128]Fourth Further Amended Counterclaim (17 November 2017), [105]; and the HGR parties address the change in the pleaded case more particularly in the Closing Submissions of the Defendants to Counterclaim (HGR Parties) (24 April 2018), Schedule, [263]–[274].
Wilson, in his witness statement, says:[129]
[129]Wilson Statement, [41].
I cannot recall exactly what was said but, to the best of my recollection, Gorr said words to the effect that “the trusts have made no money” and they “never would”. Gorr added something like they had to “bring in a lot of interest charges that aren’t shown in the accounts”.
In cross-examination, however, Wilson, who was given every opportunity to give evidence about what was said to him at this time, could not recall any representation being made to him at this meeting.[130] In view of the importance of this meeting and the allegations with respect to the fact of and what might flow from any representation made on 18 April 2007, it is helpful to set out Wilson’s evidence in cross-examination with respect to this meeting:[131]
[130]Transcript, 382–4.
[131]Transcript, 382–4.
The day before the letter containing the accounts went out, you had a meeting with Mr Gorr, do you recall that?---When was that?
On 18 April 2007?---On 18th of?
April 2007?---Yes.
Do you recall that?---I recall that.
Would you tell his Honour, please, what Mr Gorr said to you and what you said to Mr Gorr at that meeting?---We discussed settling the issues.
Do you recall what was said in relation to settling the issues?---I can’t be certain, that was nearly 10 years ago, what was said at which meeting.
Can his Honour take it that you don’t recall what was said to you by Mr Gorr at the meeting on 18 April 2007?---Mr Gorr said to me at one of those meetings, “Here are the accounts, they are not final but I believe they are pretty accurate. However, there may be further interest charges to be added once calculated”.
Do you recall Mr Gorr saying anything else to you at that meeting?---I’m sorry?
Do you recall Mr Gorr saying anything else to you at that meeting?---No, I don’t but there were some notes taken by Mr Foale.
I see?---There were a couple of meetings that weren’t too far apart and I can’t tell you exactly what was said but certainly the main points of it, I can.
Have you told his Honour all of the main points as you recall them?---Have I told his Honour all the main points?
As you recall them for the meeting you had, which included Mr Gorr, in April 2007, around 18 April?---We discussed what could be done about the Waigani land.
Yes?---We discussed what was left, we discussed what it might be worth. They had a view, I had a view. It’s still sitting there. Whether my view was right or theirs, we will find out one day, I suppose.
Do you recall anything else discussed at this meeting?---They agreed to give me some money.
Does that cover everything that you recall was said at the meeting around 18 April attended by you and Mr Gorr, amongst others? Is that all you recall that was discussed involving Mr Gorr?---We talked about maybe them selling me some of the property that Oupan still had. I made some suggestions, there was some land at the end of my street that I thought I might be able to buy. They weren’t interested in selling that. We discussed the Manning land. They told me there was still a mortgage on the Manning land and that – they didn’t say what the mortgage was but they said there was still a mortgage on it and I knew that some of the land had been developed and sold off. When we agreed on the arrangements for the money and eventually we got down to the fact that there might be three properties that I could buy.
I think we are getting ahead of ourselves. I just want to make it quite clear to you, Mr Wilson, the meeting that I’ve asked you to recount is a meeting that took place very shortly prior to the letter of 19 April being sent out to you?---Could you say that again, please?
I want you to be perfectly clear about this, the meeting that I have asked you some questions about occurred shortly prior to the 19 April letter which had all the attachments, including the accounts, being sent out to you?---Okay. As I said, there were two meetings that weren’t too far apart. I’m not sure exactly what happened at which meeting.
The letter was sent to you by Mr Gorr the day after, or very soon after the meeting about which I’ve just asked you some questions?---All right.
Have we exhausted your memory as to what occurred at that meeting?---I told you what I thought occurred at that meeting.
In closing submissions it was submitted on behalf of Wilson by his senior counsel that his evidence-in-chief, as set out in his witness statement, should stand in spite of these answers by Wilson in cross-examination.[132] In my view, the position is quite clear that Wilson, having been given every opportunity to give evidence with respect to this meeting, has been unable to do so. Moreover, the evidence now that he has no relevant recollection with respect to the alleged 18 April 2007 representation must undercut any basis upon which his evidence-in-chief as set out in his witness statement could be given any weight at all.
[132]Transcript, 1407–8.
Moreover, the evidence given by Gorr supports the view that Wilson’s allegations with respect to any 18 April 2007 representation had no foundation whatsoever and, further, that nothing of the sort now alleged occurred at that meeting or at any other time—there being no evidence to suggest there was another occasion. In any event, Gorr does recall a meeting with Wilson on 18 April 2007,[133] but denies, however, saying: “the trusts have made no money and never would; we have to bring a lot of interest charges that aren’t shown in the accounts; the Manning land is in the Manning trust which has made no money and there was a mortgagee in possession”.[134] Geer does not recall being present at any meeting at this time[135] and, indeed, Wilson did not suggest that he was in the cross-examination just set out, though he is said to be present in Wilson’s witness statement.[136]
[133]Gorr Statement, [91].
[134]Transcript, 1026–7.
[135]Geer Statement, [312].
[136]Wilson Statement, [41]–[42].
Additionally, the alleged representation is at odds with the contemporaneous objective facts, namely, the stage of negotiations and the nature of negotiations between the parties, and contemporaneous documentation.
In relation to the alleged Deer Park Trust representation, the alleged representation that the Deer Park Trust “would never” make any money is inconsistent with what was occurring. The parties were negotiating part of the settlement sum based on the value of the landholding of that trust.[137]
[137]Geer Statement, [325]–[326]; Wilson Statement, [46].
In relation to the alleged Oupan Trust representation, it is inconsistent with Oupan’s draft financial statement for the year ended 30 June 2006, which Gorr gave to Wilson and which showed that Oupan had an operating profit in the 2005 year and had net equity of almost $34m.[138] What had occurred earlier was that Geer had stated that Wilson’s units in Oupan had no value, given Wilson’s outstanding loan and Oupan’s liability to pay interest to the HGR interests.[139]
[138]Letter from Herbert Geer & Rundle Lawyers to Bill Wilson (19 April 2007) (cc Steven Foale of Maurice Blackburn Cashman Lawyers), attaching Financial Report for year ended 30 June 2006.
[139]Geer Statement, [300]–[301]; Gorr Statement, [88].
In relation to the alleged Manning Land representation, this is not supported by Wilson’s own witness statement; though he does mention the Manning Land in his witness statement and in cross examination.[140] The Manning Land is not held by a separate trust; the benefit of that land is held by Oupan.[141] Moreover, Gorr did not even know any details about the Manning Land.[142]
[140]Cf. Wilson Statement, [46]; and see above, [62].
[141]Geer Statement, [325A]–[325B].
[142]Transcript, 1027, 1030, 1042, 1043.
In conclusion, having regard to material changes in Wilson’s claims relating to the 18 April 2007 representation and given his failure to recall any of the alleged representations under cross-examination, I am of the opinion that his evidence must be treated as a fabrication.
For these reasons, I find that no representation occurred on 18 April 2007 as alleged by Wilson. It follows that the answer to question (1) is “no”.
Question 2
Were:
(a) the 18 April representation (if made); and
(b) the 2006 accounts,
false, misleading and deceptive by reason that:
(a) they showed no distributable profits for the Oupan trust and the Waigani trust, when the trusts would have been profitable but for the trustees’ breaches in relation to the Oupan Interest Payments, the Waigani Interest Payments, and the Management Fees?
(b) the Manning Land had made profits, and was a valuable asset unencumbered by any debt from February 2004?[143]
[143]Fourth Further Amended Counterclaim (17 November 2017), [107]; see also the answer to Question 12 below, [227]–[232].
The representations
First, I have found that the 18 April 2007 representation was not made. Secondly, in relation to the 2006 accounts, I observe that they did state that the Oupan Interest Payments—being the payment of interest to entities of which Geer, Gorr and May were directors or associates[144]—were $5,296,353.17 and that the Waigani Interest Payments—being the payment of interest at the rate of 18.75% per annum to certain entities of which Geer, Gorr and May were directors between 1988 and 30 June 2006[145]—were $3,637,714.13. The 2006 accounts did not, however, state the Management Fees; these being payments from Waigani to Oupan made from 1989 to 2006, totalling $3.166 million. Rather, the 2006 accounts stated that a payment of $128,000 was made in 2005 and a payment of $940,000 was made in 2006. In respect of Management Fees, the HGR parties contend that on this basis alone, this part of the claim must fail, but it is addressed further in their submissions and in the reasons which follow on the assumed basis that the 2006 accounts did state the Management Fees.
The Oupan Interest Payments [References to pleadings paragraphs are to the Fourth Further Amended Counterclaim]
[144]As to the particular entities, see Fourth Further Amended Counterclaim (17 November 2017), [71(a)–(f)].
[145]As to the precise entities, see Fourth Further Amended Counterclaim (17 November 2017), [28(a)–(h)].
The pleaded allegation at [107] of the Fourth Further Amended Counterclaim refers back to allegations at [71] to [75].
In 2005 and in 2006, Geer instructed Palermo that Oupan had funds of $5,296,353.17 to repay some interest owing to the HGR interests and asked her to calculate how that cash could be split. She did not recalculate the interest then owing, but referred to the unpaid interest burden that had totalled $18.2m as at 30 September 1993 and had continued to compound.[146] In 2005 and in 2006, Oupan paid that sum to the HGR interests for part of the outstanding interest.[147]
[146]Palermo Statement, [102]–[103].
[147]Palermo Statement, [102]–[103].
The allegation at [74] – the advances were not made
Palermo identified each advance made by the HGR interests to Oupan.[148] Between March 1980 and 30 June 2005, the unsecured loans from the HGR interests which are the subject of allegations in this proceeding totalled $24,901,952.60.[149] Hockley agreed that the HGR interests made the advances to Oupan on which related party interest has been incurred.[150] This was known to Wilson, who abandoned this part of the claim in the witness box.[151]
[148]Palermo Statement, tables 3 to 25.
[149]Palermo Statement, [50].
[150]First Hockley Report at [13], [123]–[128]; Transcript, 555.
[151]Transcript, 318.
It is useful to expand upon what is required for a successful application for apprehended bias. It is a relatively undemanding “double might” test,[529] which does not involve prediction, but, rather, a consideration of whether a real and not a remote possibility of apprehended bias exists.[530] However, a real likelihood of bias need not be demonstrated; a reasonable apprehension of bias in the mind of the fair-minded lay observer is sufficient.[531] It is not a test of probability,[532] nor is the test narrow or technical.[533] The fair-minded lay observer is presumed to be informed as to the relevant facts of the case and the issues in it. That includes having a basic understanding of the duties and responsibilities of counsel and the judge and a sufficiently knowledgeable mind to bring a rational and reasonable assessment to bear on the question.[534] Determinative is not the court’s own view, but instead the court’s view of the public’s view of the administration of justice.[535]
[529]British American Tobacco Australia Limited v Gordon [2007] NSWSC 109, [94].
[530]Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337 at 345 [7].
[531]Smits v Roach (2004) 60 NSWLR 711 at 736 [35].
[532]Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337 at 345 [7].
[533]Builders Registration Board of Queensland v Raubner (1983) 47 ALR 55 at 69.
[534]Webb v The Queen (1994) 181 CLR 41 at 51–52, 55, 57, 76, 87–8; Concrete Pty Ltd v Parramatta Design and Developments Pty Ltd (2006) 229 CLR 577 at 582 [4], 609–10 [110]–[112], 612 [120], 635–6 [177]; Vakauta v Kelley (1989) 167 CLR 568 at 584–5; British American Tobacco Australia Limited v Gordon [2007] NSWSC 109, [63].
[535]Webb v The Queen (1994) 181 CLR 41 at 52.
The judicial convention is that where there is a real possibility of an application for bias being made prior to the hearing of the proceeding, then judges often transfer the case to another judge.[536] This application was made on the eleventh day of trial, the day before evidence concluded.
[536]S & M Motor Repairs Pty Ltd v Caltex Oil (Australia) Pty Ltd (1988) 12 NSWLR 358 at 369; British American Tobacco Australia Limited v Gordon [2007] NSWSC 109. This was the approach taken in QBH Commercial Enterprises Pty Ltd v Dalle Projects Pty Ltd (No 2) [2018] VSC 231.
Of the four recognised categories of apprehended bias,[537] the second category, conduct in the course of proceedings, was submitted by Wilson to give rise to the apprehension of bias in this case. Wilson, referring to the cumulative effect of the conduct,[538] submitted:[539]
[Y]our Honour has made inconsistent rulings on evidence favouring the defendants throughout; your Honour has made frequent and hostile interjections in Mr Wilson’s cross-examination, invariably to drive home a point of cross-examination or to suggest to Mr Wilson he was not telling the truth.
Your Honour’s conduct towards the defendants’ witnesses has been in stark contrast to that. The interjections have been to protect them from legitimate cross-examination, to excuse their failure to provide responsive answers, and even on occasion, to supply the witness with an answer the witness seemed incapable of giving. Your Honour also, in my respectful submission, has impermissibly limited legitimate cross-examination of the defendants’ witnesses and displayed, at times, a hostile and aggressive demeanour towards both Mr Wilson and me.
[537]Webb v The Queen (1994) 181 CLR 41 at 74.
[538]Dovade Pty Ltd v Westpac Banking Group (1999) 46 NSWLR 168.
[539]Transcript, 1052.
Wilson was the first witness called. His cross-examination lasted two long days, documented in more than 200 pages of transcript.[540] It is true that throughout the cross-examination of Wilson, I reminded him to focus on and answer the question.[541] Wilson’s evidence was characterised by a propensity not to answer the questions that were put to him and to make speeches or submissions in support of his case. This kind of exchange was typical:[542]
[540]Transcript, 262–471.
[541]Transcript, 263, 269, 282, 303, 317, 323, 357, 436.
[542]Transcript, 356–7.
MR BICK: You did not at this meeting deny that you had a loan account, did you? --- In my mind, sir, I did not have a loan account.
That’s not what I put to you. What I put to you was, you did not at this meeting deny you had a loan account? --- It wouldn’t matter what I said at that meeting - - -
HIS HONOUR: Mr Wilson, please answer the question? --- I don’t accept that I had a loan account, sir.
MR BICK: You didn’t dispute your loan account at this meeting is what I’m putting to you? --- I didn’t.
In Wilson’s submission, my requests that he focus on the questions asked and confine his answers to them, were hostile interventions.[543]
[543]Transcript, 1053, 1055.
On one occasion, it appears from the transcript that I did ask Wilson to answer a question apparently at the same time a question was finally answered.[544] The pages preceding that exchange show the question being asked, broken down, and asked again, with prolonged failure to answer by Wilson before I spoke up.[545] In my view, on this occasion as well as other instances where I made the same request, I neither prevented a party from putting their case, nor did I lead the fair minded lay observer to reasonably apprehend that I might not take the answer given into account.
[544]Transcript, 455.
[545]Transcript, 455.
At one point, I asked Wilson whether he understood the effect of making a false statutory declaration.[546] I did this, as I later explained, to determine whether I should offer him a certificate under s 128 of the Evidence Act 2008,[547] though it should be noted that this may well have been far from obvious to a reasonable lay observer, and thus of no relevance to the disposition of the application for recusal. Nevertheless, Wilson insisted that this exchange supported the apprehended bias application, on a cumulative basis, as an intervention hostile to him.[548] On another occasion, when Wilson appeared to have contradicted himself, I asked him: “is that a serious answer given what’s been put to you?”[549] This, too, was later characterised as hostility.[550]
[546]Transcript, 422.
[547]Transcript, 1058.
[548]Transcript, 1057–8.
[549]Transcript, 341.
[550]Transcript, 1057.
On the other hand, when I asked clarifying questions of the HGR parties’ witnesses, Wilson submitted that I was assisting or protecting those witnesses. It is true that I did make interventions involving obvious clarifications, the recapping of evidence already given and asking the next logical question. Apropos of this, although perhaps not by design, Wilson said in an intervention of this kind I had dropped my judicial mantle and descended into the fray, citing Denning LJ in Jones v National Coal Board.[551] The trial judge in that case was found to have done just that by preventing both parties from putting their cases including via his taking over from counsel in the examination of witnesses. This is in contrast to the present facts. Indeed, to extract more fully his Lordship’s words:[552]
The judge’s part in all this is to hearken to the evidence, only himself asking questions of witnesses when it is necessary to clear up any point that has been overlooked or left obscure; to see that the advocates behave themselves seemly and keep to the rules laid down by law; to exclude irrelevancies and discourage repetition; to make sure by wise intervention that he follows the points that the advocates are making and can assess their worth; and at the end to make up his mind where the truth lies. If he goes beyond this, he drops the mantle of a judge and assumes the role of an advocate; and the change does not become him well.
[551]Transcript, 1073–4; Jones v National Coal Board [1957] 2 QB 55 at 64.
[552]Jones v National Coal Board [1957] 2 QB 55 at 64.
Inconsistent rulings were alleged by Wilson. There was an instance in each of Wilson and Geer’s cross-examinations where a question of law seemed to be being put to the witness.[553] In both instances, opposing counsel objected and I ruled. Wilson was being asked what effect he thought a particular agreement[554]—by which he avoided personal liability for a significant loan in respect of which he was in default and thereafter held his interest in the Manning Land for the benefit of Oupan—had when he entered into it. This was significant, as Wilson gave evidence that his understanding of the effect of the agreement was not the same as what was written in the agreement.[555] The way in which that question could be put appropriately was settled on in discussions involving the bench and both counsel, following the objection. By contrast, the question Geer was being asked was very broad, and did not become any narrower through similar discussions:[556]
Is it your case here, Mr Geer, that through the entirety of the period when those trusts were constituted in the early 1980s until 2007 that both Oupan and Waigani complied with all their trustee duties which they owed to Mr Wilson?
I allowed the former but ruled against the latter. In my view, the question relating to each objection was different and was rightly considered on its own merits. The nuances in each question and the place in which each question occurred were different. I was obliged to rule on those objections and did so.
[553]Transcript, 440–2; 610–1.
[554]Herbert, Geer & Rundle File (Completed No 55712, opened 14 February 1984); the particular agreement being Joint Venture Agreement regarding the Manning Land (November 1985).
[555]Transcript, 443–4.
[556]Transcript, 610. This question was repeated in the same terms later, see Transcript, 611, 612–3.
In another alleged inconsistency, Wilson submitted that I had signalled that I was already contemplating an adverse costs order against him:[557]
[557]Transcript, 430–1; see also, 1086–7.
MR BICK: Mr Wilson, you are being evasive. Who is ultimately paying the legal bills in this case?
MR PEARCE: Your Honour, could I just query the relevance of this? It may be relevant on a question of payment of costs in the trial ultimately.
HIS HONOUR: That would make it relevant now, it may as well be asked now.
MR PEARCE: If your Honour pleases.
In the course of Wilson’s opening submissions and the open settlement offer made by Wilson, I commented on the costs he anticipated seeking against the HGR parties:[558]
[558]Transcript, 184.
HIS HONOUR: I presume you say, in accordance with obligations under the Civil Procedure Act and I assume on the basis of this correspondence, in the event that you are successful - - -
MR PEARCE: We will certainly be relying on this letter, don’t worry about that.
HIS HONOUR: - - - you will be seeking indemnity costs and compensation under the Civil Procedure Act.
MR PEARCE: Since May last year.
HIS HONOUR: Against parties and others involved, I assume.
MR PEARCE: Yes, all of the above, your Honour.
Comments directed to costs but “on the other side of the ledger” were not complained of by Wilson.[559] On no view, on either occasion, could it be said that I had formed a view of who should ultimately be paying costs of the proceedings at either point. Moreover, as would have been apparent to a reasonable observer, on both occasions I merely identified a possibility, as raised in the submissions put to me. In this matter I was, indeed, consistent.
[559]Transcript, 1120–1.
Another instance where I made a ruling on relevance which I explained and Wilson disagreed with at the time[560] was also raised as a so-called inconsistent ruling and reasonable basis for the apprehension of bias.[561]
[560]Transcript, 942–3.
[561]Transcript, 1087.
On one occasion, on an objection raised by senior counsel for the HGR parties I ruled in Wilson’s favour but did then comment that:[562]
[I]n general terms, it’s not very helpful to encourage speculation but I will allow you to continue. Submissions can be made on what the realities are. It is fairly clear the witness hasn’t got much recollection of these accounts, so I don’t know what weight a lot of the answers will bear.
The question I ruled against was: “[y]ou don’t know in respect of which assets generated that interest for Oupan”.[563] This was answered in degrees of conditionality by Gorr: “I think that…”, “…as I understand it…”, “…that would have been…”.[564] It is unclear why a ruling on objection in favour of Wilson would be later complained of.[565] The caution with which the evidence would be treated was a general comment, as I stated at the time, having regard to the distant memories of all lay witnesses which were called on by both parties to support their submissions.
[562]Transcript, 1002–3.
[563]Transcript, 1002.
[564]Transcript, 1002–3.
[565]Transcript, 1088.
On another occasion, Wilson was cross-examined on an allegation he made against Gorr, who Wilson said had once physically threatened him. Senior counsel for the HGR parties asked if Gorr was in the courtroom and requested that he stand up. He did so, and I asked him “[h]ave you got a black belt?”.[566] The line of cross-examination at this point did go to the improbability of Gorr inciting fear in Wilson, being as senior counsel for the HGR parties put it, “half [Wilson’s] size.”[567] This exchange is rightly characterised as a moment of levity.[568] It was not mentioned in the subsequent cross-examination of Gorr, as senior counsel for the HGR parties duly observed.[569] It was, however, complained of in this application.[570]
[566]Transcript, 357.
[567]Transcript, 357.
[568]Transcript, 1121.
[569]Transcript, 1121–2.
[570]Transcript, 1087–8.
When Geer, in the course of his cross-examination, commented that unused land still incurred significant holding costs, I commented that I come across similar issues in the course of hearing primary production claims in the taxation list.[571] In my view, there was nothing inappropriate or which could be perceived by a reasonable lay observer as demonstrating any lack of impartiality in that comment. Nor was there in my mentioning my expertise in mortgagees’ notices to pay, when Geer was cross-examined on this question.[572]
[571]Transcript, 783.
[572]Transcript, 833–4.
Aspects of the cross-examination of Geer and the other HGR witnesses were unusual.[573] It was highly repetitive, the same topic was gone over on a number of occasions, and at times I asked senior counsel for Wilson to get on with his questions.[574] This is an accurate description of the cross-examination of Geer:[575]
[573]Transcript, 1105.
[574]Transcript, 641.
[575]Transcript, 728.
MR BICK: Your Honour, I object to this cross-examination continuing. It’s been a couple of hours now, we have covered very little ground. It seems to me to be the result of cross-examination on semantics and expression in documents rather than the facts. One would have expected the cross-examination to focus on the facts and go to documents if they are inconsistent. Instead, we have started the other way around and we are going round and round in circles. It’s unfair for the witness for him to have to endure more than two hours of cross-examination with very, very little progress being made because the cross-examiner is focusing on semantics and expression.
MR PEARCE: I agree with my learned friend that we are making little progress and the reason for that is that this witness continually gives unresponsive answers.
HIS HONOUR: It may assist you to know that I accept what Mr Bick says. I think that’s a very good summary of what’s happened in the last two hours.
MR PEARCE: Very well, your Honour. …
This objection followed eight pages of transcript where the same question had been asked over and over again.[576] In the course of this I expressed my own inability to understand what was meant by the repetition,[577] and clarified with the witness that I had understood what was meant by the answers given.[578] Finally, I expressed a view in relation to the objection that senior counsel for the HGR parties had raised, which I am required to do.
[576]Transcript, 720–8.
[577]Transcript, 723.
[578]Transcript, 726–7.
Instances where I commented on repetitive questions were raised in the recusal application.[579] On these occasions, it might be fair to say that my tone might have indicated a degree of exasperation, as in this example,[580] to which Wilson also objected:[581]
[579]See e.g. Transcript, 672–4.
[580]Transcript, 674.
[581]Transcript, 1065.
HIS HONOUR: Mr Pearce, I think you’ve asked this question about six times.
MR PEARCE: I’m not getting a direct answer.
HIS HONOUR: You’ve got an answer, you might have to live with it. If Mr Geer’s provided an explanation, whether you like the answer or not, that’s - - -
MR PEARCE: In my respectful submission, I’m entitled to keep asking the question.
HIS HONOUR: Ask it again.
MR PEARCE: I won’t, your Honour. I can see your Honour is not assisted, so I won’t.
On another occasion, where senior counsel for Wilson felt that he was getting non-responsive answers, I did not agree:[582]
[582]Transcript, 847–8.
HIS HONOUR: Mr Pearce, you’ve asked that question umpteen times.
MR PEARCE: But he’s giving different answers now, your Honour. He’s now giving a different answer.
HIS HONOUR: I thought the state of the evidence was that three documents were known of, there might be other documents and nobody really quite knows, but if you want to ask the question, ask the question.
MR BICK: Your Honour, I object, not only for reasons articulated by your Honour which I would, with respect, adopt, but because it requires the witness to express a legal conclusion. It’s a matter for your Honour.
MR PEARCE: My learned friend put these documents to Mr Wilson, a quarryman, and put propositions to him based on legal conclusions from the documents. I’m entitled to do the same with this man who is a solicitor.
HIS HONOUR: How will a question like that assist the court? The court draws legal conclusions on documents. Mr Geer probably is, I’m sure, a very experienced solicitor and probably could give opinion evidence in this respect but how does this actually help the court?
MR PEARCE: Because it’s an issue in the case who the beneficial owner of this land is.
HIS HONOUR: Put the question and may that be the last question on this cycle of umpteen repeating questions.
MR PEARCE: I can see your Honour is not being assisted.
HIS HONOUR: No, his Honour is not being assisted one little bit.
The long-winded and repetitive form that the cross-examinations took led me to ask questions that at times re-capped evidence to confirm my understanding,[583] and sometimes asking the next logical question in a series.[584] In my view, there is a difference between a question from the bench to clarify understanding and the bench’s supplying an answer to a witness. An example of the former is:[585]
[583]Transcript, 656–7, 733, 781–2, 821–2.
[584]Transcript, 665, 683, 732, 774.
[585]Transcript, 732.
MR PEARCE: You did turn your mind to the conflict of interest? ---Yes.
I think you said before the break that you didn’t raise the conflict of interest with Mr Wilson?---I may not have raised it with him other than to say that I thought it was important that he went off and got independent legal advice, I think that was an acknowledgment.
HIS HONOUR: Which he did? --- Which he did.
MR PEARCE: After the agreement was made on day one? --- No, before it was made.
So before day one he got this independent legal advice? --- Before the documents were executed he got independent legal advice.
In Wilson’s submission this exchange was an “interjection, plainly designed … to assist the witness”.[586]
[586]Transcript, 1074.
At times, comments to Wilson’s senior counsel did more than express some exasperation, they indicated that the Court was not being assisted.[587] This led me to comment that there was a serious question to be tried, and to remind him that we were in the midst of a major commercial trial in a superior court.[588] This was referred to as grounds for my recusal, characterised for that purpose as a “gratuitous comment to counsel”.[589] In fact, in my view it was unfortunately entirely necessary to remind Wilson that nothing that occurs in a trial in the Commercial Division of the Supreme Court is gratuitous. This example typifies a theme of the examples supplied by Wilson in this application. That theme can be summed up in this exchange:[590]
[587]Transcript, 847–8.
[588]Transcript, 632.
[589]Transcript, 1077–8.
[590]Transcript, 977.
HIS HONOUR: How is this relevant to any issue in the case?
MR PEARCE: I’ve given my reasons for that before and I accept it’s covered by your Honour’s earlier ruling but I wanted to at least ask the question.
HIS HONOUR: See if I’d changed my mind?
MR PEARCE: No, because it’s important that I try to present my client’s case.
HIS HONOUR: And assist the court.
MR PEARCE: I’m under a duty to present my client’s case.
HIS HONOUR: Under a duty to assist the court.
MR PEARCE: Very well. That’s all I have, your Honour.
The exchanges excerpted from the transcript here and in the course of the application reveal the robust nature of Commercial Court trials. It is incorrect to say that any of these exchanges, either individually or cumulatively, might give rise to a reasonable apprehension in the mind of a reasonable lay observer that I might decide the case other than on its legal and factual merits. Moreover, no logical connection between this conduct and the feared bias was articulated in Wilson’s submissions. Having had regard to the applicable law and all the examples raised by Wilson, these are the reasons for which I rejected the application for my recusal on the basis of apprehended bias.
Summary and conclusions
For the preceding reasons, the questions posed in this trial are answered as follows:
(1) — No.
(2) — No.
(3) — No.
(4) —Yes, but the Trustee Warranties do not have the effect contended for by Wilson.
(5(a)–(f)) — No.
(6) — No.
(7) — No.
(8) — No.
(9(a)) — Yes.
(9(b)) — No and no, respectively.
(9(c)) — No.
(9(d)) — No.
(10(a)(i)–(iii)) — No.
(10(b)) — If any or all acts referred to in 10(a) were in breach of trust, which they are not, yes for any or all of those acts.
(10(c)) — No.
(10(d)(i)–(v)) — No.
(10(e)) — If any or all acts referred to in 10(d) were in breach of trust, which they are not, yes for any or all of those acts.
(10(f)) — No.
(11) — No, the original agreement was that Wilson would have a 25% unit holding in the Deer Park Trust.
(12) — No.
The parties are to bring in orders to give effect to these reasons. I otherwise reserve the question of costs and will hear the parties further on this issue.
SCHEDULE OF PARTIES
WILLIAM ROBERT WILSON (ON HIS OWN BEHALF AND AS TRUSTEE OF THE WILSON FAMILY TRUST)
Plaintiff by Counterclaim
WAIGANI PTY LTD (ACN 005 481 818)
First Defendant by Counterclaim
APPLECROSS SECRETARIAL SERVICES PTY LTD (ACN 005 127 524)
Second Defendant by Counterclaim
DAYDEB NOMINESS PTY LTD (ACN 005 181 242)
Third Defendant by Counterclaim
H. G & R. CUSTODIAN PTY LTD (ACN 004 996 712)
Fourth Defendant by Counterclaim
T.S. & G. NOMINEES PTY LTD (ACN 004 964 514)
Fifth Defendant by Counterclaim
H.G. & R. MANAGEMENT PTY LTD (ACN 005 327 346)
Sixth Defendant by Counterclaim
SECOND MESIAL PTY LTD (ACN 006 199 579)
Seventh Defendant by Counterclaim
SECOND PERA TOKA PTY LTD (ACN 005 751 333)
Eighth Defendant by Counterclaim
PURUS NOMINEES PTY LTD (ACN 005 364 063)
Tenth Defendant by Counterclaim
BRADBELLE PTY LTD (ACN 126 282 353)
Eleventh Defendant by Counterclaim
OUPAN RESOURCES PTY LTD (ACN 005 600 895)
Twelfth Defendant by Counterclaim
DAVID MORTON GEER (IN HIS OWN RIGHT AND AS EXECUTOR OF THE WILL AND ESTATE OF CHARLES KEITH GEER)
Thirteenth Defendant by Counterclaim
LEON GORR
Fourteenth Defendant by Counterclaim
ANTHONY HENRY MAY
Fifteenth Defendant by Counterclaim
DEBORAH MARGARET KENNEDY (AS EXECUTRIX OF THE WILL AND ESTATE OF CHARLES KEITH GEER)
Sixteenth Defendant by Counterclaim
H. G. & R. NOMINEES PTY LTD (ACN 004 462 659)
Seventeenth Defendant by Counterclaim
5
10
0