FEDERAL COURT OF AUSTRALIA

Asden Developments Pty Ltd (in liq) v Dinoris [2017] FCAFC 117

ORDERS

THE COURT ORDERS THAT:

1.    The appeal be dismissed.

2.    The cross-appeal be dismissed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

THE COURT:

introduction

1    Peter Dinoris (“Mr Dinoris”) and Nick Combis (“Mr Combis”) (together “the former liquidators”) are the former liquidators of Asden Developments Pty Ltd (in liq) (“Asden Developments” or “the company”), which went into liquidation in December 2010 on a members’ voluntary winding up. In August 2013 the former liquidators were replaced by David Clout (“Mr Clout”), the current liquidator. Following Mr Clout’s appointment, the company instituted proceedings against the former liquidators claiming they had breached their statutory duty owed as liquidators to the company under s 180(1) of the Corporations Act 2001 (Cth) (“the Act”), and seeking compensation under s 1317H(1) of the Act for the damage resulting from the alleged breaches.

2    It was claimed, amongst other things, that Mr Dinoris breached s 180 of the Act in failing to make personal contact with the company’s sole director, Melinda Nichols (“Ms Nichols”), about certain funds that Ms Nichols had withdrawn from the company’s bank account the day before the company was placed into liquidation. The company’s case, in short compass, was that Ms Nichols would have told Mr Dinoris where the funds had gone had Mr Dinoris contacted her in late 2010 or early 2011 and Ms Nichols would have repaid the funds, had she had been asked to do so. Ms Nichols was called as a witness for the company and gave evidence to that effect. The company also relied on expert evidence from Matthew Joiner, a partner in the firm of BDO, who expressed the opinion that a reasonable prudent liquidator in the position of Mr Dinoris would have contacted Ms Nichols directly and demanded repayment of the missing funds. It was claimed Mr Dinoris’ failure to make personal contact with Ms Nichols caused damage to the company.

3    Whilst Mr Dinoris knew that Ms Nichols had withdrawn the funds, he nevertheless did not contact her personally to inquire about the whereabouts of the funds. Mr Dinoris contended that the duty under s 180(1) of the Act did not, in the circumstances of this case, require him to contact Ms Nichols personally. Mr Dinoris advanced a number of reasons for his decision not to make direct personal contact with Ms Nichols. Mr Dinoris also relied on expert evidence from David Stimpson of SV Partners Insolvency (Qld) Pty Ltd who expressed the opinion that it was not unreasonable for Mr Dinoris not to contact Ms Nichols personally.

4    The primary judge was not persuaded that any of the reasons given by Mr Dinoris justified him not contacting Ms Nichols about the missing funds. The primary judge also did not find Mr Stimpson’s reasoning for the opinion he held persuasive. The primary judge held that Mr Dinoris breached his duty as the liquidator of Asden Developments and made a finding of contravention of s 180(1) of the Act against Mr Dinoris.

5    The primary judge did not, however, award compensation under s 1317H of the Act. The primary judge rejected Ms Nichols’ evidence that she would have disclosed the whereabouts of the funds and paid them to Mr Dinoris had she been contacted by him and accordingly held that the company had not established that any damage had resulted from the contravention, which entitled the company to compensation under s 1317H(1) of the Act. As the company did not establish entitlement to relief, the primary judge considered it unnecessary to consider the defences relied on by Mr Dinoris under ss 1317S and 1318 of the Act.

6    The primary judge dismissed the proceeding with costs against Asden Developments: Asden Developments Pty Ltd (in liq) v Dinoris (No 3) [2015] FCA 788; Asden Developments Pty Ltd (in liq) v Dinoris (No 4) [2016] FCA 1001. Asden Developments has appealed those orders and the former liquidators have cross-appealed, amongst other things, the findings made against Mr Dinoris.

7    For the reasons that follow, both the appeal and the cross-appeal should be dismissed.

underlying facts

8    The underlying facts were not contentious.

9    Asden Developments was incorporated in 2005 to undertake a property development (“the Wakerley Project”) for the family of Ms Nichols’ then husband, Phillip Nichols. From incorporation Ms Nichols was the company’s sole director and shareholder but the evidence indicated that Ms Nichols managed the company under the direction of her father-in-law, George Nichols, at whose request Ms Nichols had taken on the role as director. The company’s operations were largely funded by members of the Nichols family and Ms Nichols would go to her father-in-law when the company needed more funds. Neither Ms Nichols nor her husband provided any funds to Asden Developments.

10    In early December 2010, the company was experiencing financial difficulties and Ms Nichols requested more funds from George Nichols to pay various creditors. Following a meeting on 4 December 2010, George Nichols gave Ms Nichols two cheques: one for $100,000 on 6 December 2010 and the other for $170,000 on 14 December 2010. Ms Nichols deposited the cheques into the company’s bank account at the Suncorp Bank on 6 December 2010 and 14 December 2010 respectively. However, instead of using those funds to pay creditors Ms Nichols took the following steps.

11    On 15 December 2010, Ms Nichols withdrew the funds from the company’s bank account with the Suncorp Bank and deposited the funds into a new bank account in the name of the company with the Bank of Queensland. Ms Nichols was acting on the advice of a Mr Peter Levis (“Mr Levis”) in establishing the new account and transferring the funds. Mr Levis was a “pre-insolvency expert” whom Ms Nichols had consulted in early December 2010.

12    On 20 December 2010 Ms Nichols used $22,322.43 of the $270,000 paid into the Bank of Queensland account to pay for a car she had earlier ordered.

13    On 21 December 2010, Ms Nichols withdrew the balance of the funds of $236,500 from the company’s Bank of Queensland account and deposited the funds into an account in the name of Urban Property Consulting Pty Ltd (“Urban Property”), a company controlled by Mr Levis. Mr Levis withdrew $180,000 from Urban Property’s account the same day, which he deposited into an account in the name of TJI Investments Pty Ltd (“TJI”). TJI had been established by Ms Nichols on 14 December 2010 on advice from Mr Levis and Ms Nichols was the sole director and shareholder.

14    On 22 December 2010, Ms Nichols resolved that Asden Developments be wound up voluntarily and that the former liquidators be appointed as the liquidators. In winding up the company, Ms Nichols was also acting on the advice of Mr Levis, who had approached Mr Dinoris on 15 December 2010 for his consent to act as liquidator.

15    On the day of their appointment, the former liquidators obtained a copy of the bank statement for the company’s account with the Bank of Queensland and became aware that $236,500 had been withdrawn from that account. Ms Del Monte from the former liquidators’ office sent an email to Mr Levis inquiring about the withdrawn funds. She did not receive a response.

16    On 23 December 2010, the former liquidators became aware that Ms Nichols had withdrawn the funds, when the Bank of Queensland provided the former liquidators’ office with a copy of the withdrawal slip signed by Ms Nichols. Mr Dinoris contacted Mr Levis by telephone that day enquiring as to the whereabouts of the withdrawn money. Mr Levis told Mr Dinoris that the funds were not received by Ms Nichols personally and Mr Dinoris should further investigate the withdrawal of the funds.

17    Mr Dinoris sent a letter to Ms Nichols on 22 December 2010 informing her that she was required to deliver up forthwith all the company’s books and records, any other records to which the company was prima facie entitled and “any money or property to which the company [was] prima facie entitled”. Mr Dinoris did not contact Ms Nichols personally though. Whilst Mr Dinoris considered there was a real possibility that Ms Nichols had removed the funds in breach of her duty to the company, he formed the view there was little to be gained from contacting Ms Nichols personally. Mr Dinoris gave evidence that:

… though I held reservations about what I was being told by Mr Levis, there was at that stage no, or no sufficient, evidence available to challenge the veracity of what I was being told by Mr Levis as it was, at that stage, unclear as to where the funds had gone.

I considered, in the circumstances, that there was little to be gained from speaking or meeting personally with Melinda Nichols. I considered, in the circumstances that any such attempts to do so would prove fruitless and I was not at all confident that I would obtain the information from Melinda Nichols in any event. No such information was forthcoming in any documentation,, records, computer files or statutory forms already provided by or on her behalf.

I considered, in all of the circumstances, that the best course was to investigate the transaction further by reference to the documentary evidence including the company’s MYOB, the tracing of the transaction and other documents, which investigations were undertaken. Ultimately that led me to determining to seek funding in order to utilise statutory powers to conduct a public examination of Melinda Nichols and others regarding the examinable affairs of the Company…

18    Ultimately Mr Dinoris did not get funding and the public examination never happened.

19    The following other events occurred before the company was placed into liquidation.

20    In October 2010, Ms Nichols and her husband separated. In about mid-November 2010, Ms Nichol applied for a domestic violence order against her then husband and, according to Ms Nichols, the Nichols family were “completely negative” towards her. She claimed that “their attitude towards me changed and they no longer were willing to help or support me at all”.

21    Around the same time, Ms Nichols told George Nichols that she did not want to have anything more to do with Asden Developments. Her evidence was that he told her that he would take over the company. Despite this indication, it did not happen.

22    Ms Nichols gave evidence that she became deeply concerned about her personal liability in December 2010. The Nichols family were withdrawing their support for the company and she thought that the company may be trading whilst insolvent. These concerns caused her to seek advice from her accountants who referred her to Mr Levis. Ms Nichols’ evidence was that the general thrust of Mr Levis’ advice at the time was that she would be left in extreme debt and destitution if she did not protect herself and the outcome would possibly mean bankruptcy.

23    On 15 December 2010, Ms Nichols was informed by various members of the Nichols family that they considered she was responsible for the company’s debts. The same day, acting on the advice of Mr Levis, she withdrew the $270,000 from the company’s Suncorp bank account and deposited the funds into a new bank account in the name of the company with the Bank of Queensland.

24    On 20 December 2010, Ms Nichols received a letter from the Nichols’ family lawyers demanding that she pay the Nichols family the sum of $270,000 and threatening legal proceedings. Ms Nichols did not respond to the letter as she obtained advice from Mr Harris (incorrectly identified as Mr Doyle in the reasons for decision) at Doyle Keyworth Harris Family Lawyers about her rights under the Family Law Act 1975 (Cth) and was advised that the amount of $270,000 formed part of the joint matrimonial property because it had been advanced to her as a loan.

25    Also on or about 20 December 2010, Ms Nichols received a letter from her husband’s aunt, Debra Nichols, enclosing a large number of invoices from subcontractors and advising that these invoices would not be paid by the Nichols family.

26    Against that background, on 20 December 2010 Ms Nichols used $22,322.43 of the $270,000 to pay for a car she had earlier ordered and, on 21 December 2010, acting on the advice of Mr Levis, undertook the transactions by which $180,000 of the remainder of the funds was placed into the account of a company she owned and controlled. Ms Nichols did not include the funds she had withdrawn from the company’s accounts in the report as to affairs of the company nor did she return the funds on receipt of the letter from Mr Dinoris dated 22 December 2010 requiring her to deliver up “any money or property to which the company [was] prima facie entitled”.

27    The following other relevant events occurred after the company was placed into liquidation.

28    Soon after his appointment on 22 December 2010, Mr Dinoris was contacted by David Edwards, a barrister instructed by Phillip Nichols in relation to a proposed family law proceeding against Ms Nichols. In a letter sent by facsimile on 22 December 2010, it was asserted that one of the matrimonial assets that was to be the subject of the proceeding was “Asden Developments Pty Ltd and its assets”, noting amongst other things that George Nichols had recently advanced $270,000 to Ms Nichols “so that the company’s current liabilities could be paid”.

29    Mr Dinoris sought clarification as to whether the funds had been advanced to Ms Nichols or to the company and asked for delivery up of all the company’s assets. On 23 December 2010, Mr Edwards, in response, advised that the Nichols family were asserting that they were the owners of the company’s assets under a resulting trust and the liquidators had no entitlement to take possession of them. Mr Dinoris was also informed that the Nichols family would be joining in the family law proceeding and seeking injunctions to prevent the liquidators from taking possession of the assets and from disposing of the assets already in their possession. There followed correspondence between Mr Dinoris and Mr Edwards, including notification to Mr Dinoris on 30 December 2010 of an initiating application filed in the Federal Magistrates Court of Australia (as it then was) by Phillip Nichols against Ms Nichols which included an application for interlocutory relief against the liquidators from taking possession of, or dealing with, any assets of the company until true ownership had been determined. It is unclear whether the interlocutory application proceeded.

30    However, in April 2011 the Nichols family did join in the family law proceeding between Phillip Nichols and Ms Nichols. They claimed that the sum of $270,000 was an asset held on a resulting trust to them and asserted that those funds were provided to Ms Nichols for the purpose of completing the Wakerley project.

31    Between February and May 2011, on advice from her solicitor, Ms Nichols paid the balance of the funds held in the TJI account into her solicitor’s trust account. The total amount transferred was $173,831.53.

32    In mid-2012, the partners of Doyle Keyworth Harris Family Lawyers, Mr Levis and Urban Property were joined as third parties to the family law proceeding on the basis that they had received part of the funds which Ms Nichols had withdrawn from the company’s bank account.

33    On 13 March 2013, the Nichols family obtained judgment against Ms Nichols on their resulting trust claim. Ms Nichols, the partners, Urban Property and Mr Levis were each ordered to pay various amounts to the Nichols family. As a consequence of the judgment against them, Ms Nichols was declared bankrupt on 8 May 2013, Urban Property was ordered to be wound up in June 2013 and Mr Levis was declared bankrupt in July 2013.

amended notice of appeal

34    The company’s amended notice of appeal has 11 grounds. Grounds 1 to 8 allege errors by the primary judge in the rejection of Ms Nichols’ evidence. Ground 9 is that the primary judge erred in not finding that the company had suffered loss and was therefore entitled to compensation as a consequence of Mr Dinoris’ breach of duty. Ground 10 challenges the costs order made by the primary judge against the company on the dismissal of the proceeding and ground 11 is that the primary judge erred in not disqualifying himself from hearing the proceedings because of comments his Honour made at a case management hearing regarding the reliability of the evidence of Ms Nichols.

Ground 11: should the primary judge have recused himself for apprehended bias?

35    Ground 11 should be dealt with first because there must be a retrial if the ground is established, irrespective of the findings on the other grounds: Concrete Pty Ltd v Parramatta Design & Developments Pty Ltd [2006] HCA 55; (2006) 229 CLR 577 (“Concrete Pty Ltd v Parramatta Design & Developments Pty Ltd”).

36    The trial began on Tuesday 14 July 2015. At the commencement of the trial, senior counsel for Asden Developments applied to have the primary judge recuse himself on the ground of apprehended bias by reason of comments made by the primary judge at a pre-trial case management hearing the previous Friday about the proposed evidence of Ms Nichols and Mr Clout, the current liquidator.

37    The following statements, extracted from the transcript, founded the application.

38    In relation to Ms Nichols, the primary judge said:

“So even if I accept Ms Nichols …”

The primary judge then later said:

“Having made all these transfers, [Ms Nichols] put her hands in the air and said ‘here, you can have it back’.”

39    In relation to Mr Clout, whom the company proposed to call as an expert witness, the primary judge said:

In a party who I regard Mr Clout as in these circumstances as an expert witness because he is not intervenor (sic) of the parties ...... And I can’t place the same weight that I could place on his evidence as an expert that I could on an independent expert ... If you persist with it, the problem for you may be that I will give no or little weight to it in which event probably ...

(Errors and omissions in original transcript)

40    The primary judge dismissed the application, reasoning as follows:

Both sets of comments arose during a discussion about the issues that were to be agitated at the trial and the evidence that each party intended to call to establish their case. My questions about Ms Nichols’ evidence were directed to gaining an understanding as to how precisely her evidence would be used to prove a particular element of the applicant’s case. In this respect, I should record that Asden’s primary case, as explained to me, is that the respondents failed in their duty as liquidators of Asden by not taking prompt action to recover certain moneys that had been transferred out of the company’s accounts shortly before it was placed in voluntary liquidation.

I was aware from the statement of claim that Asden alleged that Ms Nichols and a person by the name of Mr Levis had together “misappropriated” – and that was the expression used in the statement of claim – the various sums of money that Asden was now seeking to reclaim from its former liquidators, the respondents, as a result of them allegedly having breached their duty. I was also aware from the affidavit evidence filed on behalf of Asden that Ms Nichols was to give evidence at the trial that, if she had been asked to do so by the respondents soon after she had transferred the money on Mr Levis’ advice, she would have willingly repaid that money to the respondents.

It was in that context that I made the comments about Ms Nichols’ evidence. My comments were made to test Mr Martin on the strengths and weaknesses of the applicant’s case, rather than to express any concluded views on Ms Nichols’ evidence. After all, I had not heard it by that stage. As a counsel of perfection, it might have been as well if I had stated that I had not reached any conclusions about her evidence, but in circumstances where I was having a discussion with senior counsel during a case management hearing, I did not think it was necessary to take that counsel of perfection.

41    The primary judge concluded that whilst his comments were “colourful and frank”, he did not think a reasonable independent observer might have concluded from them that he had already decided not to accept Ms Nichols’ evidence.

42    It is unnecessary to refer to the primary judge’s reasoning in concluding that apprehended bias was not established in relation to his statements concerning Mr Clout as the company does not challenge that conclusion. However, in relation to Ms Nichols, whose evidence was said to be significant to the company’s case, it was submitted for Asden Developments that the primary judge’s comments took the form of a “prejudgment” which would raise serious concerns with the “fair minded lay observer” that the primary judge might not bring an impartial mind to the resolution of the question as to whether Ms Nichols’ evidence should be accepted. It was submitted that “it was clear” that the primary judge had expressed the view that the “proposed evidence of Ms Nichols was inherently unbelievable before the trial had commenced” and “that sentiment was carried through in the reasons for judgment”. It was submitted that the reasons for judgment should be considered together with the comments made at the directions hearing “to see whether the cumulative effect was one of apparent bias”, citing in support Concrete Pty Ltd v Parramatta Design & Developments Pty Ltd at [179] per Callinan J. There are several reasons for rejecting these submissions.

43    First, the statements, read in context, do not amount to the expression of a “clear view” by the primary judge concerning Ms Nichols’ credit.

44    The relevant part of the exchange commenced with the primary judge stating that as best as he could ascertain from the pleadings the basic facts were not in dispute and the issue was the content of the duty owed by Mr Dinoris as liquidator. Senior counsel for the company identified that there was also the question of causation. In response to the primary judge’s question as to the evidence the company would rely on, there was the following exchange:

MR MARTIN: Well, there’s the evidence of Melinda Nichols, where she has sworn an affidavit saying that, if she had been contacted by the liquidator the day after she put the company into the liquidation, she would have told the liquidator where the money was and she would have paid back the $180,000 that she had and she would have told the liquidator that the other $56,000 was sitting in Mr Levis’ bank account.

HIS HONOUR: Is there some relationship between Ms Nichols and Mr Levis?

MR MARTIN: No, none at all. What the evidence shows from Melinda Nichols’ affidavit is that she didn’t know Mr Levis at all. She went to her accountants, called Frederiks, and they recommended Mr Levis, who is some sort of insolvency adviser….

…

HIS HONOUR: ..... So why did she ..... Money ..... Into his account?

MR MARTIN: Because Mr Levis advised her to do that. She went to her accountants, told them about the financial situation of the company. They referred her to Mr Levis. Mr Levis – he was the one that sourced the work for the respondents, got the documents to wind up the company on a voluntary basis and then told Ms Nichols’, according to her affidavit, that she should withdraw the money from the bank account of the company and put it into his bank account or a bank account under the name of Urban Property, which was his company, from which he then kept $56,000, paid Ms Nichols $180,000, and he – from the account – his account he paid the $10,000 to the liquidators for their fees.

HIS HONOUR: ..... Understand why a woman would pay $180,000 into the account of someone she didn’t know.

MR MARTIN: It was $236,000. Yes. It was all the money, effectively all the money that was left in the company bank account.

HIS HONOUR: ..... She’s willing to do that at the direction of someone that’s she has just met .....

MR MARTIN: Yes, but - - -

HIS HONOUR: Why on earth would she .....

MR MARTIN: But in the – well, in the context of he was a professional, so she was told, who could assist her with the winding-up of this company. And that person was recommended to her by her accountants. She probably frankly conceded that she was naïve, and she followed the advice of her professionals.

HIS HONOUR: Was that all? The respondent might have ..... Affected by what was going on in the background of the family law proceeding .....

MR MARTIN: Well, no, no. That’s what Ms Nichols is sworn to.

HIS HONOUR: ..... Trying to get rid of the money to – or get the money away from her husband .....

MR MARTIN: Well, there’s no suggestion. That – it might be put to her in cross-examination, but ultimately where the money ended up was her solicitor’s – her share of it ended up in her solicitor’s trust account.

HIS HONOUR: So that’s the evidence on your side.

MR MARTIN: Yes.

HIS HONOUR: Mr ..... Mr Cliff, the solicitor ..... About how much .....

MR MARTIN: Can I say that Mr – I’m sorry, your Honour. I’ve interrupted.

HIS HONOUR: Mr Cliff is the solicitor .....

MR MARTIN: Mr Cliff is the solicitor. But his evidence is really – was largely responsive to an affidavit from a Mr Taylor, who gave evidence of what it would all cost to bring a Mareva injunction and so forth. Now, Mr Taylor is no longer being called. We’ve now got an – because he’s not available. Mr Broderick is being called. He’s a solicitor. And he says “Well, I’ve read both Mr Taylor and Mr Cliff’s affidavit, and I think in some respects Mr Taylor might be a little bit expensive in some aspects, but Mr Cliff is – he’s a bit too cheap”. So I assume he pitches the costs of bringing an injunction, a Mareva-type injunction on an urgent basis somewhere in between the two of those. But can I say of course the applicant’s primary contention is there wouldn’t have been a need for any of that, certainly insofar as Melinda Nichols was concerned, because she says that if she was contacted about this by the liquidator she would have simply paid him back the $180,000.

HIS HONOUR: .....

MR MARTIN: And the $56,000 was sitting in Mr Levis’ account. She could have identified that ..... A fairly simple matter. If Mr Levis - - -

HIS HONOUR: .....

MR MARTIN: Well, an injunction would have had to have been obtained. I’m sorry, your Honour?

HIS HONOUR: ..... Money he was likely to say no, wasn’t he?

MR MARTIN: Well, he was – it seems he was somewhat of a rogue, your Honour, because he was the point of contact for Mr Dinoris, and he’s on the phone to him saying “Yes, the money is gone. You will have to investigate it”, and it was sitting there in his bank account. He was lying to him, clearly.

HIS HONOUR: He was lying to Mr Dinoris?

MR MARTIN: Yes, absolutely. Yes. Absolutely. And – but the money and the bank – and his bank statements from that account are in evidence, and so at the time of that conversation all of that money, all of the $56,000, was in his account, and Ms Nichols had $180,000. So - - -

HIS HONOUR: So even if I accept Ms Nichols’ ..... It really depends on whether or not ..... Mr Levis - - -

MR MARTIN: I don’t think - - -

HIS HONOUR: - - - ..... The money available.

MR MARTIN: I don’t think, with – no, no, no. Because she had $180,000 by the time – she had $180,000 that she controlled in her account, so she could have given that back, and that’s what she says she would have done if she was asked. Because she was concerned about it all.

HIS HONOUR: Okay.

MR MARTIN: But as for Mr Levis, well, the submission will be made the money was sitting in a bank account there. Phone call to Mrs Nichols. She says that’s where the money is. Mr Dinoris gets straight back on the phone to Levis and said “You just lied to me. You’re sitting there with $56,000 in your account. It’s from the company. I want it. Pay it now, or I go off to court this afternoon and get an urgent injunction”. That’s what we say should have happened and what would have happened if simply the phone had been picked up. And that in essence is the applicant’s case. …

(Errors and omissions in original transcript)

45    Senior counsel then outlined a further breach of duty claim relating to the sale of a boat and the allegation that the liquidators had failed to supervise the sale properly, with the consequence that the proceeds of $9,790 were paid to a company associated with Mr Levis.

46    After raising that matter, there was the following exchange:

HIS HONOUR: It’s essentially the 180 that you say … Having made all these transfers, put her hands in the air and said “here, you can have it back”.

MR MARTIN: Yes.

HIS HONOUR: Plus the 10,000. So it was really 190,000 ….

MR MARTIN: Well, and there’s also the 56 that Mr Levis had that we say was sitting in his account. And he was the point of contact.

47    A fair reading of the transcript does not indicate that the primary judge expressed a “clear view” by the statements made at the pre-trial case management hearing that Ms Nichols’ proposed evidence was “inherently unbelievable”. The statement “So even if I accept Ms Nichols …” was plainly said in the course of the primary judge endeavouring to understand Mr Levis’ role in the return of the $180,000. The statement “Having made all these transfers, put her hands in the air and said ‘here, you can have it back’” was said in the course of an exchange about the amounts that the company was claiming by way of compensation, namely the $180,000 (which on the company’s case Ms Nichols would have returned had she been asked), the boat proceeds rounded to $10,000 (paid to a company associated with Mr Levis) and the $56,000 which was in Mr Levis’ account. The comments about which complaint is made must be read in context and not in isolation and, considered in context, those comments do not convey an apprehension that the primary judge had formed a view that Ms Nichols’ credit was inherently unbelievable, as contended.

48    Secondly, it would be wrong to have regard to the reasons for judgment in determining whether the comments made at the pre-trial case management conference gave rise to an apprehension of bias. As the High Court explained in Michael Wilson & Partners Ltd v Nicholls [2011] HCA 48; (2011) 244 CLR 427 (“Michael Wilson & Partners v Nicholls”) at [67]:

As pointed out earlier in these reasons, an allegation of apprehended bias requires an objective assessment of the connection between the facts and circumstances said to give rise to the apprehension and the asserted conclusion that the judge might not bring an impartial mind to bear upon the issues that are to be decided. An allegation of apprehended bias does not direct attention to, or permit consideration of, whether the judge had in fact prejudged an issue. To ask whether the reasons for judgment delivered after trial of the action somehow confirm, enhance or diminish the existence of a reasonable apprehension of bias runs at least a serious risk of inverting the proper order of inquiry (by first assuming the existence of a reasonable apprehension). Inquiring whether there has been "the crystallisation of that apprehension in a demonstration of actual prejudgment" impermissibly confuses the different inquiries that the two different allegations (actual bias and apprehended bias) require to be made. And, no less fundamentally, an inquiry of either kind moves perilously close to the fallacious argument that because one side lost the litigation the judge was biased, or the equally fallacious argument that making some appealable error, whether by not dealing with all of the losing side's arguments or otherwise, demonstrates prejudgment.

(footnotes omitted)

The fact that in subsequent reasons for decision, after a full hearing, the primary judge did reject Ms Nichols’ evidence is not some form of confirmation of an apprehension of bias.

49    The test for apprehension of bias is forward looking and objective. The test is whether a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial and unprejudiced mind to the resolution of the question the judge is required to decide: Michael Wilson & Partners v Nicholls at [31]; Ebner v Official Trustee in Bankruptcy [2000] HCA 63; (2000) 205 CLR 337, 344 at [6]. The test requires an objective assessment of the connection between the facts and circumstances said to give rise to the apprehension and the asserted conclusion that the judge might not bring an impartial mind to bear upon the issues that are to be decided: Michael Wilson & Partners v Nicholls at [67].

50    Thirdly, applying these principles, the statements in relation to Ms Nichols upon which the application for disqualification was based did not found a reasonable apprehension of prejudgment of the credit of Ms Nichols. The statements were made during a pre-trial case management hearing four days before the hearing was due to commence in which the primary judge was exploring with the parties the issues to be agitated at trial and the evidence that each party intended to call to establish their case. It is clear from reading the transcript of the pre-trial case management hearing that his Honour was educating himself about the case that the company would be advancing and the quantum in dispute. Even if the primary judge should be taken to have expressed a strong view that Ms Nichols’ proposed evidence was inherently unbelievable, the fair-minded lay observer, appropriately informed, would know that the view was expressed in the context of a pre-trial case management hearing in which the Court may explore the issues in dispute and the nature of the evidence to be given, during the course of which the Court may form tentative opinions on matters in issue: Johnson v Johnson [2000] HCA 48; (2000) 201 CLR 488 (“Johnson v Johnson”) at [13]. The expression of tentative views by the primary judge of itself does not manifest partiality or bias: Concrete Pty Ltd v Parramatta Design & Developments Pty Ltd at [112]-[114]; Johnson v Johnson at [13]. As the High Court explained in Johnson v Johnson at [13]:

Whilst the fictional observer, by reference to whom the test is formulated, is not to be assumed to have a detailed knowledge of the law, or of the character or ability of a particular judge, the reasonableness of any suggested apprehension of bias is to be considered in the context of ordinary judicial practice. The rules and conventions governing such practice are not frozen in time. They develop to take account of the exigencies of modern litigation. At the trial level, modern judges, responding to a need for more active case management, intervene in the conduct of cases to an extent that may surprise a person who came to court expecting a judge to remain, until the moment of pronouncement of judgment, as inscrutable as the Sphinx. In Vakauta v Kelly Brennan, Deane and Gaudron JJ, referring both to trial and appellate proceedings, spoke of "the dialogue between Bench and Bar which is so helpful in the identification of real issues and real problems in a particular case." Judges, at trial or appellate level, who, in exchanges with counsel, express tentative views which reflect a certain tendency of mind, are not on that account alone to be taken to indicate prejudgment. Judges are not expected to wait until the end of a case before they start thinking about the issues, or to sit mute while evidence is advanced and arguments are presented. On the contrary, they will often form tentative opinions on matters in issue, and counsel are usually assisted by hearing those opinions, and being given an opportunity to deal with them.

(Footnotes omitted)

In Concrete Pty Ltd v Parramatta Design & Developments Pty Ltd, Kirby and Crennan JJ, said to like effect at [112]:

Sometimes judicial interventions and observations can exceed what is a proper and reasonable expression of tentative views. Whether that has happened is a matter of judgment taking into account all of the circumstances of the case. However, one thing that is clear is that the expression of tentative views during the course of argument as to matters on which the parties are permitted to make full submissions does not manifest partiality or bias.

The primary judge cited this passage and with reference to that authority correctly held that his comments “fell into [the same] realm”.

51    The statements complained about were not capable of giving rise to an apprehension of bias and ground 11 is not established.

Grounds 1-8: did the primary judge err in the rejection of Ms Nichols’ evidence?

52    Ms Nichols gave the following evidence in chief:

MR MARTIN: Now, if on the 22nd or 23 December, taking into account that the company was wound up on 22 December, if either on the 22nd or 23 December, the liquidator or one of them, Mr Dinoris or Mr Combis, had rung you and asked you about these transactions and the money in the bank account of the company that had been taken out, what would you have told them?---Well, I would have told them the truth, where it had gone.

If they had asked you to repay what you had, what would you have done?---I would have repaid it.

53    In cross-examination it was put to Ms Nichols that had she been contacted by Mr Dinoris she would not have repaid the money. Ms Nichols denied this, stating that Mr Dinoris was the liquidator and “the authority” and she would have complied with his direction. The evidence was as follows:

MR ERSKINE: All right. I suggest you would not have repaid the money? --- No, I – I think that I would have repaid the money.

I put to you that you would have sought the advice of Mr Levis? --- Well, like, I’ve said Peter Levis was – Peter Levis told me that Peter Dinoris was already aware of what had happened with this money so ---

…

HIS HONOUR: So was the answer yes or no?: You would have told-you would have sought Mr Levis’ advice or no? ---Yes, I – I suppose, yes.

You would have? --- As far as his advice I –I probably would have spoken to him, but as far as paying it back, I mean, Peter Dinoris, he is the liquidator as such. So he, you know, he is –the authority so I –I guess I’m trying to say I –I would have paid it back.

MR ESRKINE: Well, you had already received a letter ---? --- I just – I ---

I’s Sorry? --- Sorry. It – this is just a little bit because Peter Dinoris and Peter Levis as far as I’m aware through this whole thing knew. So had I received a phone call from Peter Dinoris I do believe I would have paid it back.

54    The primary judge rejected Ms Nichols’ evidence. At [163], his Honour stated:

When Ms Nichols’ evidence at the trial of this matter approximately five years after the events of late 2010 and early 2011 is assessed against the evidence bearing on all the relevant surrounding circumstances existing at that time, I consider the likelihood is that she would not have responded to an enquiry from Mr Dinoris in late 2010 or early 2011 by agreeing to pay back the funds. Instead, I consider she would most likely have sought advice from Mr Levis, or Mr Doyle, or both of them, and acted on that advice. Further, in the circumstances, I consider it is more likely that both Mr Levis and Mr Doyle, for different reasons, would have advised her not to repay the funds to Mr Dinoris…

55    The primary judge considered that the second question put to Ms Nichols in her evidence in chief was leading and imprecise and the answer so ambiguous that its meaning was difficult to discern. This significantly affected the weight he gave to Ms Nichols’ answer. At [164] the primary judge said:

First, I agree with Mr Dinoris that the second and most critical question put to Ms Nichols in her evidence-in-chief above (at [161]) was a leading question: “If they had asked you to repay what you had, what would you have done?” Her answer (“I would have repaid it”) must therefore be weighed accordingly. Furthermore, the question was so imprecise and the answer was so ambiguous that its meaning is difficult to discern. There is no difficulty with the word “they” in the question because, in the context of the previous question, it plainly meant Mr Dinoris or Mr Combis: “if on the 22nd or 23 December, ... Mr Dinoris or Mr Combis, had rung you and asked you about these transactions and the money in the bank account of the company that had been taken out, what would you have told them?” However, in the same context, the words “repay what you had” is more problematic. It could mean the money “that had been taken out” of the company’s bank account, or it could mean the money that Ms Nichols “had” at the time. Both possibilities are open on the previous question and both suffer from similar difficulties. On the first possibility, in fact, there were at the time two company bank accounts – one at Suncorp and one at the Bank of Queensland – and different amounts had been taken out of each at different times: $264,531.02 from the Suncorp account on 15 December 2010 and $236,500 from the Bank of Queensland account on 21 December 2010. On the second possibility, the difficulty is whether “had” meant in her possession, or under her control, bearing in mind the fact that, at the time, Mr Levis had the remainder of the money, namely $56,500. These features demonstrate the importance of framing precise non-leading questions when a witness is being asked to state how he or she would have acted in a particular hypothetical situation. In this case, the imprecise and leading nature of the question significantly affects the weight that can be given to Ms Nichols’ answer.

56    The primary judge noted that late 2010 was clearly a stressful period for Ms Nichols in view of her separation from her husband, her domestic violence order application against her husband, the withdrawal of support from her parents-in-law and the contemporaneous financial pressures associated with Asden Developments’ affairs. The primary judge said at [167]:

In my view, this stress affected the reliability of Ms Nichols’ evidence about the events of this period. She acknowledged as much in cross-examination when she said her recollection of those events was: “A little bit hazy, but I would try and – I will do my best. I’ve tried to put a lot of this behind me.” I do not therefore consider her hypothetical evidence about what she would have done in this period is likely to be accurate.

57    The primary judge discounted Ms Nichols’ evidence as reliable based on other matters as well. Those matters included Ms Nichols’ pattern of conduct during the relevant period.

58    The primary judge had regard to the evidence concerning the steps immediately taken by Ms Nichols after she received the second cheque for $170,000 from George Nichols on or about 14 December 2010. At [171], the primary judge stated that it was clear that Ms Nichols and Mr Levis began to implement their scheme to protect her from financial ruin at the hands of the Nichols family almost immediately after she received the second cheque. At [172], the primary judge stated that the scheme took seven days to implement and “[b]y any measure, it was elaborate”. His Honour detailed that the scheme involved incorporating TJI, establishing a bank account in Asden Developments’ name at the Bank of Queensland, transferring approximately $264,000 to that account, approaching Mr Dinoris to accept appointment as liquidator of Asden Developments in preparation for placing it in voluntary liquidation, establishing a bank account in the name of TJI at the Bank of Queensland, transferring $236,500 to Urban Property’s bank account, transferring $180,000 to TJI’s bank account, and placing Asden Developments in voluntary liquidation and appointing Mr Dinoris as its liquidator. The primary judge noted that the end result of the scheme was that approximately $264,000 was removed from the company’s bank account and, through a series of transfers, placed in two bank accounts, neither of which bore Ms Nichols’ name. As well, Ms Nichols had removed herself from the directorship of Asden Developments.

59    The primary judge found that Ms Nichols, in undertaking these steps, was at all times acting on the advice of Mr Levis whom she had retained for the purpose of protecting herself. At [174], the primary judge stated that his assessment of Ms Nichols’ oral and written evidence was that “from relatively early in the events of late 2010, Ms Nichols was sensitive to the personal financial dangers that might befall her as a result of her involvement with [Asden Developments] and was astute in her actions to avoid them.” The primary judge noted that:

Sometime before matters came to a head on 15 December [Ms Nichols] had realised that the Nichols family may abandon [Asden Developments] and leave her with the responsibility for its debts. Having appreciated that possibility, she obtained advice from Frederiks Accountants and then, on referral to, Mr Levis, she obtained advice from him. Having obtained that advice she acted on it and participated in the elaborate scheme.

The primary judge noted that Ms Nichols involvement with Mr Levis did not cease in December 2010 but continued in March 2011 when she obtained advice from him about the sale of a boat and paying out a loan.

60    The primary judge further reasoned that Ms Nichols displayed the same astuteness in relation to her legal rights in connection with the family law property dispute with her husband. She had received advice from a solicitor upon receipt of the letter from her husband’s lawyers on 20 December 2010 demanding repayment of the $270,000. The solicitor advised her that the funds were part of the joint matrimonial property and acting on that advice she did not comply with the demand set out in the letter. At [175], the primary judge said that the fact that Ms Nichols was alerted to the family law property implications of the funds at this early stage provided a further demonstration of her vigilance in relation to her legal rights. At [176], the primary judge made a finding that Ms Nichols must have accepted the solicitor’s advice to defend the proceedings against her by the Nichols family. At [177], the primary judge noted that at no stage from late 2010 until final judgment did Ms Nichols demonstrate any intention to comply with any demand from the Nichols family with respect to those funds and she did not comply with the demand from Mr Dinoris in his letter of 22 December 2010 to deliver up any assets of the company that she held.

61    At [178]-[179] the primary judge concluded:

I do not therefore accept Ms Nichols’ evidence that the “authority” of a personal approach from Mr Dinoris in late December 2010 or January 2011 would have caused her to pay the funds to him. I also do not accept that Ms Nichols was naïve and merely doing what Mr Levis told her to do. To the contrary, as I have already observed above, I consider Ms Nichols was alert to the risks her directorship of Asden posed to her personal financial security and she was vigilant to protect herself from that. She was also jealous to protect her legal rights in connection with respect to the family law property dispute with her husband. It was in this light that I consider Ms Nichols received, and acted on, Mr Levis’ advice, not as a naïve compliant. The same applies to the advice she received from Mr Doyle [sic Harris] with respect to her rights concerning the family law proceeding. In both cases, she acted on their advice in order to protect herself from attacks she was convinced were being made on her by various members of the Nichols family.

To sum up, all this evidence is consistent with Ms Nichols’ pattern of conduct throughout this period of obtaining and acting on the advice she received from Mr Levis or Mr Doyle [sic Harris] whenever any issue arose with respect to the funds, or her family law property matters, respectively. I therefore consider that if Mr Dinoris had approached Ms Nichols in late 2010, or early 2011, and asked her about the whereabouts of the funds, she would have reacted in the same way. That is to say, she would have sought advice from either Mr Levis or Mr Doyle [sic Harris], or both of them, and acted on that advice. The former is reinforced by the answer she gave during cross-examination when pressed to answer whether she would have sought advice from Mr Levis: “Yes, I suppose so” (see at [162] above). If she had sought advice from Mr Levis, given the elaborate scheme he had constructed for her with respect to the funds, his personal stake in that scheme to the extent of $56,500, the evasive response he gave to Mr Dinoris on 23 December 2010 when he asked him a similar question and the tenor of his advice to her throughout this period, I consider Mr Levis would most likely have advised Ms Nichols to deny any knowledge of the funds, or to give an evasive answer similar to that which he gave to Mr Dinoris on 23 December 2010.

62    At [180], the primary judge rejected as “fanciful” the contention that Mr Levis would have bowed to a “threatening” telephone call from Mr Dinoris to repay the $56,500 he held in the Urban Property bank account.

63    At [181], the primary judge said that had Ms Nichols approached her solicitor for advice, the solicitor would most likely have advised her that she should pay the funds into his trust account to abide by the outcome of the family law proceeding, consistent with the advice that the solicitor had given to her throughout this period.

64    At [182], the primary judge concluded:

Taking into account the difficulties associated with the form and wording of the question, the stress Ms Nichols was experiencing at the time and the evidence relating to the surrounding facts and circumstances outlined above, I do not accept Ms Nichols’ evidence that, had Mr Dinoris made an enquiry of her in late 2010 or early 2011 about the whereabouts of the funds, she would have disclosed where they were and paid them to him.

65    It was argued that the primary judge fell into error in rejecting the evidence of Ms Nichols:

(a)    in holding, and placing significant weight on the “erroneous” view, that the questions asked of Ms Nichols in evidence-in-chief were leading and imprecise. It was argued that the questions were not leading or imprecise because at trial it was not disputed that the only money that Ms Nichols “had” as at 22 or 23 December 2010 was the $180,000 in TJI’s account;

(b)    in placing significant weight on the stress which Ms Nichols was suffering in late 2010, finding it affected the reliability of her evidence. It was argued that not only was this not a factor that was pursued to any great extent in cross-examination, it did not matter what stress Ms Nichols may have been suffering at the time because she was not being asked to recall what she said, or did, in 2010 but what she would have done at that time if particular demands had been made of her; and

(c)    in failing, accordingly, to give “the appropriate weight” to Ms Nichols’ evidence that she would have repaid the funds had she been contacted by Mr Dinoris.

66    Criticism was also made of a number of paragraphs of the primary judge’s reasoning, namely:

(a)    the finding at [174] that Ms Nichols was “sensitive to the personal dangers that might befall her as a result of her involvement with Asden Developments and was astute in her actions to avoid them” was said to be contradictory to the evidence from Ms Nichols in cross-examination that she ultimately placed $173,000 into her solicitors’ trust account because she did not want it and did not know what to do with it and her solicitors told her to put it into their trust account where it would be safe;

(b)    the finding at [176] that “Ms Nichols must have accepted Mr Doyle’s [sic Harris’] advice to defend [the Federal Magistrates’ Court] proceeding to final judgment” was said to be factually incorrect as Ms Nichols was represented at that trial by a Mr Curram, who was briefed directly;

(c)    the ultimate conclusion at [179] was said to be inconsistent with the findings at [178] in that at [178] the primary judge found that Ms Nichols was alert to the risks that her directorship of Asden Developments posed to her personal financial security and was vigilant to protect herself from that, and was also jealous to protect her legal rights with respect to the family law property dispute with her husband. The primary judge stated that it was “in this light that [his Honour considered] Ms Nichols received, and acted on, Mr Levis’ advice, not as a naive compliant”. At [179] the primary judge concluded that had Ms Nichols sought advice from Mr Levis if she had been approached by Mr Dinoris, Mr Levis “would most likely have advised Ms Nichols to deny any knowledge of the funds, or to give an evasive answer similar to that which he gave to Mr Dinoris on 23 December 2010”. It was submitted that “lying at the behest of Mr Levis would be Ms Nichols being naïve and doing simply what [Mr] Levis told her”;

(d)    the rejection as “fanciful” at [180] of the contention for Asden Developments that Mr Levis would have bowed to a threatening call from Mr Dinoris given Mr Levis was a source of work for Mr Dinoris and in constant contact with him in late 2010 and 2011, and, it was said, “there can be no doubt that [Mr] Levis’ conduct exposed him to criminal prosecution”. It was submitted that there was “every reason to believe that if the liquidator found out [Mr] Levis had $56,000 of [the company’s] money in a bank account which he controlled some or most of it would have been returned upon a threatening telephone call from the liquidator”. It was also put that the submission was made at first instance that it would have been a relatively inexpensive exercise to obtain a freezing order against Mr Levis’ bank accounts if he was not cooperative, but this was “not something with which the [primary] judge dealt”.

67    It was argued that as the rejection of Ms Nichols’ evidence was not based upon Ms Nichols’ conduct or demeanour as a witness, it was the “entitlement and duty” of this Court, on the appeal, to conduct its own analysis on the evidence and to give effect to the conclusions derived from that analysis: CSR v Della Maddalena [20016] HCA 1; (2006) 224 ALR 1 per Kirby J at [44] and [48]. It was further argued that, on the evidence, it was more probable than not, that if Mr Dinoris had made a direct and personal inquiry of Ms Nichols as to the whereabouts of the funds, they would have been returned to the extent they remained in bank accounts controlled by Ms Nichols and Mr Levis.

68    Reliance, among other things, was placed on the fact that Ms Nichols was challenged in cross-examination as to whether she would repay the money and she affirmed that that was the course she would have adopted. It was submitted that there was no reason for Ms Nichols to give false and misleading testimony at the trial. The moneys that she withdrew from the company’s account were found to be held on trust for the Nichols family and the evidence she gave in this proceeding was a further admission of wrongdoing by her. It was also put that she had no more allegiance to Mr Clout than she did to Mr Dinoris, and in failing to take that factor into account the primary judge fell into error.

69    However, the primary judge was not bound to accept the answers given by Ms Nichols in cross-examination as truthful and reliable: [Australian Competition and Consumer Commission v Australia and New Zealand Banking Group Limited [2015] FCAFC 103, (2015) 236 FCR 78 at [264]]. Even if the question was not truly a leading question, it does not mean that the primary judge should have given significant weight to the answer. The question asked was a hypothetical question and the primary judge correctly and properly took into account all the evidence in weighing up the cogency and reliability of Ms Nichols’ evidence as to what she would have done had she been contacted by Mr Dinoris as put to her.

70    The task of an appellate court on an appeal by way of rehearing on the evidence that was before the primary judge is to conduct a “real review” of the evidence given at first instance and of the primary judge’s reasons for judgment to determine whether the judge has erred in fact or law. The task is the correction of error: Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 at [20]–[31]. But an appellate court should not, however, interfere with the primary judge’s findings of fact unless persuaded that the finding was plainly and obviously wrong, or where it is concluded that the findings made are glaringly improbable or contrary to compelling inferences in the case: Robinson Helicopter Company Incorporated v McDermott [2016] HCA 22; (2016) 90 ALJR 679 at [43].

71    In the present case, the primary judge’s findings of fact are not demonstrated to be wrong by incontrovertible facts or uncontested testimony, nor are they glaringly improbable or contrary to compelling inferences. To the contrary, it was plainly open to the primary judge to conclude that Ms Nichols’ evidence in examination in chief and cross-examination should carry little weight and, taking into account the evidence relating to the surrounding facts and circumstances and the stress Ms Nichols was experiencing at the time, then to reject her evidence about what she would have done. Ms Nichols’ subjective assertion did not have to be accepted by the primary judge without critical assessment but required a close examination of the facts and surrounding circumstances at the time.

72    Moreover, contrary to the submission for the company, it was not immaterial that Ms Nichols was under stress at the time but a legitimate factor to take into account in assessing the probity and reliability of Ms Nichols’ evidence. The evidence showed that Ms Nichols was extremely concerned at the time with her exposure to substantial liabilities as a result of her position as the sole director of the company and where she had lost the support of the Nichols family, following a serious breakdown in the matrimonial relationship with Phillip Nichols and, in the circumstances where she refused to return the $270,000 paid by George Nichols, having received advice that the funds were joint matrimonial property. Mr Levis informed Ms Nichols, on or around 14 December 2010, that she would have been “left in extreme debt and destitute if she did not protect [herself] and the outcome would possibly mean bankruptcy”. On that advice she withdrew the $236,500 from the company’s bank account through the elaborate scheme and, having done so, put the company into liquidation.

73    Much was made of the fact that the primary judge fell into error at [177] in stating that Ms Nichols had agreed in cross-examination that she understood that the letter from the liquidator dated 22 December 2010 related, at least in part, to the funds. It appears that was not her evidence but, rather, her evidence was that she did not read at least that part of the document informing her that she was required to deliver up “any money or property to which the company [was] prima facie entitled”. Ms Nichols also gave evidence in cross-examination that she did not know what “prima facie” meant. Senior counsel submitted on the strength of that answer that it was clear that Ms Nichols really had no idea what this document meant. It is telling though that Ms Nichols did not include the funds she had removed from the bank account in the report as to the affairs of the company. It is not to the point, as submitted for the company, that the report was prepared by Mr Levis, as she signed that document in her capacity as director.

74    For the reasons given by the primary judge, there was an abundance of evidence, direct and circumstantial, justifying the rejection of Ms Nichols’ evidence, which is supportable on a consideration of the whole of the evidence before the Court. The rejection of her evidence cannot be said to be plainly and obviously wrong, nor was the rejection contrary to compelling inferences in the case. The other factual errors said to have been made by the primary judge do not compel any different assessment. The undisputed facts were that Ms Nichols, acting on Mr Levis’ advice in circumstances where she was advised by him that she would be left in extreme debt and destitute if she did not protect herself, withdrew the $236,500 from the company’s bank account through the elaborate scheme and, having done so, put the company into liquidation. Mr Levis, who set up the elaborate scheme, then assisted Ms Nichols by filling out the report as to affairs of the company, knowing about, but omitting reference to, the funds withdrawn and, notwithstanding his statement to Mr Dinoris that the funds withdrawn by Ms Nichols were not received by Ms Nichols personally and Mr Dinoris should investigate the withdrawal, did not disclose to Mr Dinoris that he had $56,500 of those funds in a bank account of a company he controlled. The evidence supported the findings that Ms Nichols was “sensitive to the personal financial dangers that might befall her as a result of her involvement with [Asden Developments] and was astute in her actions to avoid them” and was not a naive compliant. The evidence also supported the finding that had Mr Dinoris contacted her personally about the missing funds, and had Ms Nichols asked Mr Levis for advice at the time, Mr Levis would have advised her to deny any knowledge of the funds, or to give an evasive answer as Mr Levis had done and she would have acted on that advice.

75    Accordingly, grounds 1 to 8 have not been established.

Ground 9: did the primary judge err in finding that the company was not entitled to compensation under s 1317H of the Act?

76    It follows that ground 9 also fails because the rejection of Ms Nichols’ evidence meant that causation was not proved.

Ground 10: did the primary judge err in not awarding the company its costs or a part of its costs?

77    The company argued at first instance that although it ultimately failed in the proceeding it only did so because of a failure to show causation and it had otherwise been successful in proving that Mr Dinoris had breached his duty under s 180 of the Act. The primary judge acknowledged that measure of success but said “[h]owever it failed on all other aspects, including the other component of its breach of duty claim”. It was submitted that the primary judge failed properly to take into account the extent to which the question of liability occupied the trial which was a very large proportion of the proceeding. It was submitted in this proceeding the predominant issue was the liability of the respondents.

78    The award of costs was at the discretion of the primary judge: s 43(2) of the Federal Court of Australia Act 1976 (Cth). Thus, an error of law of the type identified in House v The King [1936] HCA 40; (1936) 55 CLR 499 at 504-505 must be shown to warrant the appellate court interfering with the costs order that was made. Ordinarily costs follow the event and ordinarily it is appropriate to award the costs of the proceeding to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed: Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56; (2007) 234 CLR 52 at [25] to [34]. As stated in Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) [2015] HCA 53; (2015) 90 ALJR 270 at [6] (per French CJ, Kiefel, Nettle and Gordon JJ:

… the preferable approach in this case is the one usually taken, that costs should follow the outcome of the appeal. This is not a case where it may be said that the event of success is contestable, by reference to how separate issues have been determined [Compare Plaintiff M76/2013 v Minister for Immigration, Multicultural Affairs and Citizenship (2013) 251 CLR 322 at 393[241]]. There are no special circumstances to warrant a departure from the general rule, and good reasons not to encourage applications regarding costs on an issue-by-issue basis, involving apportionments based on degrees of difficulty of issues, time taken to argue them and the like.

In the present case, no error of principle is shown in the exercise of discretion of the primary judge and the result is not so unreasonable or plainly unjust that an error of principle should be inferred. The originating application was dismissed because the company failed to establish that any loss flowed from the breach of duty and there are no special circumstances to warrant a departure from the general rule. It was open to the primary judge to award costs against the company as the unsuccessful party, notwithstanding its success in establishing that there was a breach of duty.

CONCLUSION ON THE APPEAL

79    As none of the grounds of appeal have been established the appeal must be dismissed.

cross-appeal

80    The amended notice of cross-appeal has 6 grounds, of which grounds 3, 4 and 5 were not pressed. Ground 1 alleges error by the primary judge in finding that Mr Dinoris breached s 180(1) of the Act. Ground 2 is that the primary judge erred in not finding that the company had failed to establish that the funds withdrawn were the property of the company and ground 6 is that the primary judge erred in finding that it was unnecessary to consider statutory defences relied on by Mr Dinornis under ss 1317S and 1318 of the Act.

Ground 1: Did the primary judge err in finding that Mr Dinoris breached s 180(1) of the Act?

81    It was not disputed that the primary judge had regard to the correct relevant legal principles in determining whether Mr Dinoris contravened s 180 of the Act in failing to contact Ms Nichols personally about the missing funds. At [89], the primary judge summarised the applicable legal principles as follows:

… the test is an objective one. It requires an assessment as to whether Mr Dinoris’ conduct as a professional liquidator demonstrated the requisite degree of care and diligence that was reasonable in all the relevant circumstances. That assessment is to be made at the time of Mr Dinoris’ alleged breach and not with the benefit of hindsight. It is to have regard to the degree of care and diligence expected of a skilled and professional accountant performing the role of a liquidator. It also requires care to be taken to distinguish between conduct amounting to a breach of the statutory duty and that amounting to a mistake or error of judgment.

82    At [131] the primary judge found that Mr Dinoris had not displayed the care and diligence of a reasonably competent liquidator when he made the decision not to attempt to make direct personal contact with Ms Nichols about the withdrawal of the funds. The primary judge also found that Mr Dinoris’ conduct was “sufficiently deficient” to constitute a breach of duty rather than a mistake or error of judgment.

83    Senior counsel for Mr Dinoris submitted that the primary judge failed to consider the distinction between negligence and a mere error of judgment properly and erred in law in finding that the conduct of Mr Dinoris constituted a breach of s 180 of the Act, rather than a mere non-negligent error of judgment.

84    It was submitted that this was not a case of negligence by omission (viz, failing even to consider the point). It was submitted that Mr Dinoris did not fail to turn his mind to the issue of whether or not he should have instigated direct contact with Ms Nichols but, to the contrary, the evidence was that Mr Dinoris specifically considered the issue and determined, for his own reasons which were explained in evidence, not to telephone her but rather to pursue a public examination. It was submitted that the evidence supports the view that Mr Dinoris made two conscious determinations at the time. First he formed the view that there was little to be gained from a direct telephone conversation with Ms Nichols and, in this view, he was completely supported by the finding of the primary judge that Ms Nichols would not have responded to a phone call by repaying the money she had taken. Secondly, it was said, Mr Dinoris determined that, in the circumstances the best course was to examine the company’s books and records and other information which he did, and then to seek funding from creditors to conduct a public examination. It was submitted that the decision not to contact Ms Nichols by telephone was the product of his own judgment, made in the circumstances and his approach was reasonable.

85    The reasons given by Mr Dinoris in evidence as to why he did not contact Ms Nichols by telephone were that:

(a)    he considered there was a real possibility that the funds had been removed from the company’s bank account by Ms Nichols in breach of her duty to the company (and which he reported in the report to creditors dated 24 December 2010), referring also to Phillip Nichols’ apparent involvement as a shadow director;

(b)    in his conversation with Mr Dinoris on 23 December 2010, Mr Levis had stated “matter of factly” that the funds were not received by or held personally by Ms Nichols;

(c)    although he held reservations about what he was being told by Mr Levis there was at that stage no, or no sufficient, evidence available to challenge the veracity of what he was being told by Mr Levis as it was, at that stage, unclear as to where the funds had gone;

(d)    he considered, in the circumstances, there was little to be gained in speaking or meeting personally with Ms Nichols and that any such attempts would prove fruitless. He was not at all confident that he would obtain the information from Ms Nichols in any event. No such information was forthcoming in any documentation, records, computer files or statutory forms already provided by or on her behalf;

(e)    he considered that the best course was to investigate the transaction further by reference to the documentary evidence including the company’s MYOB, the tracing of the transaction and other documents and he undertook those investigations. This ultimately led him to determine to seek funding in order to utilise statutory powers to conduct a public examination of Ms Nichols and others regarding the examinable affairs of the company.

86    Expert evidence was also led by both parties concerning whether or not Mr Dinoris’ conduct as the liquidator of Asden Developments was reasonable in all the circumstances. The primary judge rejected the expert evidence of Mr Stimpson, which he did not find persuasive, partly because there was a lack of evidence supporting some of Mr Stimpson’s reasoning and partly because Mr Stimpson’s reasoning depended on Mr Dinoris’ reasons for not contacting Ms Nichols personally, and the primary judge was not persuaded that those reasons justified Mr Dinoris failing to make any inquiry of Ms Nichols. Senior counsel for Mr Dinoris did not challenge the rejection of Mr Stimpson’s evidence.

87    The primary judge’s reasoning for finding that Mr Dinoris had breached his statutory duty under s 180 of the Act was as follows:

(a)    by the late afternoon of 22 December 2010, Mr Dinoris became aware that $236,500 had been withdrawn from one of Asden’s bank accounts on the day before it was placed in voluntary liquidation;

(b)    Mr Dinoris knew that Ms Nichols was the sole director and shareholder of the company;

(c)    by the late afternoon of 23 December 2010 he became aware that her signature appeared on the withdrawal slip relating to the withdrawal of those funds;

(d)    upon acquiring that information Mr Dinoris clearly thought that Ms Nichols may be able to advise him as to the destination of those funds because he immediately spoke to her agent, Mr Levis, and asked him that question;

(e)    Mr Levis told him that Ms Nichols did not hold the funds “personally” and that he should investigate the withdrawal of the funds;

(f)    Mr Dinoris was suspicious of Mr Levis’ answer.

88    The primary judge said “importantly” Mr Levis did not tell Mr Dinoris not to speak to Ms Nichols, Mr Dinoris did not ask Mr Levis to provide him with Ms Nichols’ telephone number or contact details and, despite the fact that Ms Nichols was the most obvious person with information about the withdrawal of the funds, Mr Dinoris did not take any steps to speak to her at that time, or, indeed, at any time. The primary judge accepted that it was reasonable for Mr Dinoris to investigate the company’s MYOB and accounting records and then to seek funds to conduct a public examination of Ms Nichols but he did not consider that this course constituted a valid substitute for a timely personal inquiry of Ms Nichols about her involvement in the transfer of the funds. His Honour considered it immaterial that Mr Dinoris was not confident that he would obtain any information from Ms Nichols. Similarly, his Honour did not see how the threat of Ms Nichols further dispersing the funds provided any justification for Mr Dinoris not inquiring of her about their withdrawal. Earlier at [128] the primary judge said that he considered that Mr Dinoris’ explanation for not pursuing inquiries from Ms Nichols because they would “prove fruitless” was irrational.

89    Error is not shown in the primary judge’s conclusion and reasoning that Mr Dinoris breached his duty as the liquidator of Asden Developments by not contacting Ms Nichols personally in December 2010 and January 2011.

90    First, whether Mr Dinoris breached his duty of care and diligence as liquidator of Asden Developments must be considered without the benefit of hindsight. The test is forward looking as to what a reasonable liquidator would have done, not backward looking by reference to what the primary judge found: Australian Securities and Investments Commission v Cassimatis (No 8 ) [2016] FCA 1023; (2016) 336 ALR 209 at [487]. It is an erroneous submission that Mr Dinoris’ view was “completely supported” by the finding of the primary judge that Ms Nichols would not have repaid the money she had taken had Mr Dinoris contacted her. An assessment of Mr Dinoris’ conduct must be made in the context of the circumstances as they existed at the time, not in light of the primary judge’s finding.

91    Secondly, the primary judge’s conclusion that Mr Dinoris’ decision not to contact Ms Nichols directly was not a mere error of judgment but a breach of his duty of care and diligence under s 180 was justified. The test under s 180 is an objective inquiry as to what might be expected to have been done by a liquidator exercising the care and diligence that was reasonable in all the circumstances. There are two relevant elements to the objective inquiry: (1) the particular circumstances of the company to which the duty is owed by the liquidator as an “officer” of the company within the meaning of s 9 of the Act (s 180(1)(a)); and (2) the office and the responsibilities within the corporation as the liquidator (s 180(1)(b)): Shafron v Australian Securities and Investments Commission [2012] HCA 18; (2012) 247 CLR 465, 476 [18]. In Pace v Antlers (1988) 80 FCR 485 at 499, Lindgren J said:

… a liquidator must exhibit care (including diligence) and skill to an extent that is reasonable in all the circumstances. ‘All the circumstances’ will include the facts that a liquidator is a person practising a profession, that a liquidator holds himself or herself out as having special qualifications, training and experience pertinent to the liquidator’s role and function, and that a liquidator is paid for liquidation work. ‘All the circumstances’ will also include the fact that some decisions and courses of action which a liquidator is called upon to consider will be of a business or commercial character, as to which competent liquidators acting with due care, but always without the benefit of hindsight, may have differences of opinion

It is well recognised that liquidators, appointed and paid to exercise particular professional duties, must meet high standards of skill and competence in the performance of those duties: In re Windsor Steam Coal Company (1901), Limited [1929] 1 Ch 151 at 165; In re Home and Colonial Insurance Company, Limited [1930] 1 Ch 102 at 125; Australian Securities and Investments Commission v Edge [2007] VSC 170; (2007) 211 FLR 137 at [46]. It is also well recognised that conduct that is found to be a mere error of judgment does not contravene the statutory standard under s 180(1): Australian Securities and Investments Commission v Rich [2009] NSWSC 1229; (2009) 236 FLR 1 at [7242]. But as Austin J pointed out in Australian Securities and Investments Commission v Rich at [7242], the statutory issue is not whether a mistake was made but whether there was a failure to meet the standard of care and diligence that the statute lays down, namely the degree of care and diligence that a reasonable person would exercise, taking into account the corporation’s circumstances, the office occupied and the officer’s responsibilities within the corporation.

92    The fact that Mr Dinoris did turn his mind to whether he should contact Ms Nichols directly and made the conscious determination not to contact her because he thought that such an inquiry would have been fruitless does not mean that his failure was merely an error of judgment. Tellingly, in this case, Ms Nichols was the sole director and shareholder of the company and the person who had put the company into liquidation. Mr Dinoris knew those facts and knew the day after his appointment that Ms Nichols had withdrawn the funds. Mr Dinornis also knew that Mr Levis was advising her in relation to putting the company into liquidation and had been told by Mr Levis that the funds were not hers personally and he should investigate the withdrawal. Mr Dinoris was on notice that the funds may have been improperly withdrawn by her. It is not to the point that Mr Dinoris considered that such an inquiry would be fruitless as it was, nonetheless, an obvious line of inquiry to pursue in the circumstances. As the primary judge stated, Ms Nichols was “the most obvious person with information about the withdrawal of the funds”. Having regard to Mr Dinoris’ duty as liquidator to collect the assets of the company, the failure to pursue an obvious line of inquiry went beyond a mere error of judgment and, as the primary judge held, was sufficiently deficient to constitute a breach of s 180 of the Act.

93    Thirdly, contrary to the submission for Mr Dinoris this case does not fall into the category of cases such as Yeomans v Walker (1986) 5 NSWLR 378 (“Yeomans v Walker”). In a passage relied on by senior counsel for Mr Dinoris, Hodgson J stated at page 383:

In my view, the general approach of the court in a case like this is that it should not interfere with a decision made by a liquidator unless either there is fraud, or it can be said that the discretion has not been exercised bona fide, or it can be said that the liquidator has acted in a way in which no reasonable liquidator could have acted… It may be that if a liquidator does take into account entirely irrelevant considerations, then it would be appropriate to intervene, but, in my view, that is not the case here.

However, his Honour was there concerned with the general approach taken by supervising courts to the statutory duties imposed on liquidators. Whilst the Courts do not readily interfere in commercial decisions or discretionary decisions involving business judgments made by a liquidator, in the present case the decision made by Mr Dinoris was not a discretionary decision on a commercial matter of the kind considered in Yeomans v Walker.

94    Accordingly, ground 1 of the cross-appeal has not been established.

Ground 2: did the primary judge fall into error in not finding that the company had not established that the missing funds were the property of the company?

95    At [129] the primary judge held that “since [the] funds were deposited in a bank account in [the company’s] name, they were prima facie part of the assets of the company” but, it was contended, the primary judge did not make a finding that the missing funds were the property of the company.

96    It was contended that the failure to make a finding was an error of law.

97    It was also contended that there was cogent evidence that the missing funds were not property of the company and there ought to be a finding that the company had not established that the missing funds were the property of the company.

98    The primary judge did not fall into error as contended.

99    The fact that the Nichols family were later found to have a claim to the moneys does not gainsay the duty on the liquidators to collect the missing funds taken from the company’s account which, as the primary judge correctly stated, were prima facie part of the assets of the company at the time. The later determination by the Federal Magistrates Court (as it then was) that the funds were held on resulting trust for the Nichols family may be another reason for holding that no damage resulted from Mr Dinoris’ breach of s 180, but in issue was the proper performance of the duties of Mr Dinoris as liquidator and the question was whether a reasonable liquidator in Mr Dinoris’ position, acting with due care and diligence, would have contacted Ms Nichols about the missing funds. Establishment of the breach did not require a finding that the missing funds were the property of the company and there was no onus on the company to have it established as a fact.

Ground 6: did the primary judge err in finding that it was unnecessary to consider the statutory defences under ss 1317S and 1318 of the Act?

100    Section 1317S provides as follows:

Relief from liability for contravention of civil penalty provision

(1)    In this section:

“eligible proceedings”:

(a)    means proceedings for a contravention of a civil penalty provision (including proceedings under section 588M, 588W, 961M, 1317GA, 1317H, 1317HA or 1317HB); and

(b)    does not include proceedings for an offence (except so far as the proceedings relate to the question whether the court should make an order under section 588K, 1317H, 1317HA or 1317HB).

(2)    If:

(a)    eligible proceedings are brought against a person; and

(b)    in the proceedings it appears to the court that the person has, or may have, contravened a civil penalty provision but that:

(i)    the person has acted honestly; and

(ii)    having regard to all the circumstances of the case (including, where applicable, those connected with the person's appointment as an officer, or employment as an employee, of a corporation or of a Part 5.7 body), the person ought fairly to be excused for the contravention;

the court may relieve the person either wholly or partly from a liability to which the person would otherwise be subject, or that might otherwise be imposed on the person, because of the contravention.

(3)    In determining under subsection (2) whether a person ought fairly to be excused for a contravention of section 588G, the matters to which regard is to be had include, but are not limited to:

(a)    any action the person took with a view to appointing an administrator of the company or Part 5.7 body; and

(b)    when that action was taken; and

(c)    the results of that action.

(4)    If a person thinks that eligible proceedings will or may be begun against them, they may apply to the Court for relief.

(5)    On an application under subsection (4), the Court may grant relief under subsection (2) as if the eligible proceedings had been begun in the Court.

(6)    For the purposes of subsection (2) as applying for the purposes of a case tried by a judge with a jury:

(a)    a reference in that subsection to the court is a reference to the judge; and

(b)    the relief that may be granted includes withdrawing the case in whole or in part from the jury and directing judgment to be entered for the defendant on such terms as to costs as the judge thinks appropriate.

(7)    Nothing in this section limits, or is limited by, section 1318.

101    Section 1318 provides as follows:

Power to grant relief

(1)    If, in any civil proceeding against a person to whom this section applies for negligence, default, breach of trust or breach of duty in a capacity as such a person, it appears to the court before which the proceedings are taken that the person is or may be liable in respect of the negligence, default or breach but that the person has acted honestly and that, having regard to all the circumstances of the case, including those connected with the person's appointment, the person ought fairly to be excused for the negligence, default or breach, the court may relieve the person either wholly or partly from liability on such terms as the court thinks fit.

(2)    Where a person to whom this section applies has reason to apprehend that any claim will or might be made against the person in respect of any negligence, default, breach of trust or breach of duty in a capacity as such a person, the person may apply to the Court for relief, and the Court has the same power to relieve the person as it would have had under subsection (1) if it had been a court before which proceedings against the person for negligence, default, breach of trust or breach of duty had been brought.

(3)    Where a case to which subsection (1) applies is being tried by a judge with a jury, the judge after hearing the evidence may, if he or she is satisfied that the defendant ought pursuant to that subsection to be relieved either wholly or partly from the liability sought to be enforced against the person, withdraw the case in whole or in part from the jury and forthwith direct judgment to be entered for the defendant on such terms as to costs or otherwise as the judge thinks proper.

(4)    This section applies to a person who is:

(a)    an officer or employee of a corporation; or

(b)    an auditor of a corporation, whether or not the person is an officer or employee of the corporation; or

(c)    an expert in relation to a matter:

(i)    relating to a corporation; and

(ii)    in relation to which the civil proceeding has been taken or the claim will or might arise; or

(d)    a receiver, receiver and manager, liquidator or other person appointed or directed by the Court to carry out any duty under this Act in relation to a corporation.

(5)    This section does not apply to a corporation that is an Aboriginal and Torres Strait Islander corporation.

Note:    Similar provision is made in relation to Aboriginal and Torres Strait Islander corporations under section 576-1 of the Corporations (Aboriginal and Torres Strait Islander) Act 2006 .

102    The primary judge held that because of the conclusion that his Honour reached that Asden Developments had failed to establish that it was entitled to compensation under s 1317H, it was unnecessary for him to consider the statutory defences relied on by Mr Dinoris under ss 1317S and 1318 of the Act. Mr Dinoris had argued that if he was found liable to Asden Developments for breach of duty owed under s 180(1) he ought to be relieved in whole, or alternatively in part, for any liability by reason that he acted honestly and having regard to all of the circumstances of the case ought fairly to be excused for any such breach.

103    It was argued that the primary judge was wrong not to consider these statutory defences as the sections would apply by reason of the finding of contravention of s 180 of the Act, although no loss was found to have been suffered by reason of the contravention. It was submitted that if it were otherwise the law would have the absurd outcome that a person in Mr Dinoris’ position would be able to invoke a defence under s 1318(1) if his contravention of the Act had caused loss but is put in a worse and less protected position where his conduct caused no loss at all.

104    The nature and effect of ss 1317S and 1318 were examined in Australian Securities and Investments Commission v Healey (No 2) [2011] FCA 1003; (2011) 196 FCR 430. Middleton J helpfully set out the relevant principles at [83]-[86] as follows:

83.    Sections 1317S and 1318 make substantially identical provision for the relief of persons who have or may have contravened a civil penalty provision (s 1317S) or who are or may be liable in respect of negligence, default, breach of trust or breach of duty in the capacity of, amongst others, an officer of the corporation (s 1318).

84.    Both ss 1317S and 1318 involve three stages of inquiry:

(a)    whether the applicant for relief has acted honestly;

(b)    whether having regard to all the circumstances the applicant ought fairly to be excused; and

(c)    whether the applicant be relieved from liability wholly or in part, and if partly, to what extent.

85.    As I have said, s 1317S is substantially similar to, and is derived from s 1318. Chief Justice Spigelman in Deputy Commissioner of Taxation v Dick (2007) 242 ALR 152 at [44]-[45], stated that:

[44]…    Plainly, with respect to the power to impose pecuniary penalties, and probably also with respect to the power to make a disqualification order, parliament proceeded on the basis that the interpretation of s 1318 either required a clear extension of the reference to “civil proceedings” in s 1318 itself or a new parallel provision. Parliament chose the latter course. In so doing parliament proceeded on the assumption that s 1318 would not, of its own force, apply to proceedings for a penalty even if, by statute, any such “penalty” was recoverable by civil proceedings.

[45]    No doubt this choice was made, in part, as a matter of convenience in order to have all of the civil penalty provisions together in Pt 9.4B of the Corporations Act 2001 (Cth). The separate provision, now found in s 1317S, which operates in parallel with s 1318, may reflect the objective of establishing a regime involving a clear pyramid of enforcement containing a hierarchy of sanctions, increasing in seriousness from civil liability to civil penalty liability to criminal liability. The legislation was based on this regulatory philosophy as expounded by the Senate Standing Committee on Legal and Constitutional Affairs Report, “Company Directors Duties: Report on the Social and Fiduciary Duties and Obligations of Company Directors 1989” (called the “Cooney Committee Report”): see generally H Bird, “The Problematic Nature of Civil Penalties in the Corporations Law” (1996) 14 Companies and Securities Law Journal 405; Vicky Comino, “The enforcement record of ASIC since the introduction of the civil penalty regime” (2007) 20 Australian Journal of Corporations Law 183 esp at pp 185-91.

86.    Neither s 1317S nor s 1318 operate to remove the breach, rather they operate as a dispensing power to excuse the contravener. In Dick, Santow J said at [78]:

What is salient is that in the United Kingdom, dating back from s 32 of the Companies Act 1907 (UK), later adopted in the Australian States, there is a consistent theme that the court should have power to relieve, in order that penal provisions or quasi penal provisions should not operate unfairly or harshly. Relief so extended does not strictly speaking exonerate the person in question by removing the breach; rather it operates as a dispensing power excusing the contravenor. “Exonerate” used in this s 1318 context has therefore the sense of taking a burden from a person who has committed a breach. It does not mean that the breach is deemed never to have occurred. Rather the person concerned seeks to satisfy the court that “having regard to all the circumstances of the case” he or she “ought fairly to be excused” so as to receive dispensation.

As pointed out, these sections do not operate to remove the breach but, rather, operate as a dispensing power to excuse the contravener and to grant relief from “liability”.

105    In the present case, no “liability” arose from the finding of contravention because the primary judge found that the company had not established that it suffered any loss by reason of the contravention. Had an order for compensation been made, it would have been necessary for the Court to consider the application of those sections and whether as a matter of discretion it should relieve Mr Dinoris from liability to pay compensation, either at all or in part.

106    Since the company did not suffer any loss as a consequence of the contravention, there is no liability to which Mr Dinoris is subject or which has been imposed by reason of the contravention and accordingly no liability from which to relieve Mr Dinoris. Accordingly this ground also fails.

Conclusion

107    As none of the grounds of cross-appeal have been established the cross-appeal must be dismissed. Since the appeal and the cross-appeal have been dismissed, there will be no order as to costs.

Associate:

Dated:    10 August 2017