Federal Court of Australia

Huber v CellOS Software Ltd (in liq) (No 2) [2023] FCA 459

ORDERS

THE COURT ORDERS THAT:

1.    The application for leave to proceed with the appeal in proceeding VID 338 of 2020 filed 8 August 2022 is dismissed.

2.    The application for a stay of the liquidation of CellOS Ltd (in liq) filed 29 August 2022 is dismissed.

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

REASONS FOR JUDGMENT

MCELWAINE J:

1    In proceeding VID338/2020 (the appeal), Mr Huber seeks to appeal orders made by Beach J on 17 April 2020, where inter alia his Honour declared that Mr Huber breached his statutory and fiduciary duties owed to CellOS Software Ltd (CellOS) by procuring, through a complex number of related off-shore companies, shares in CellOS which were then sold at a profit and which diverted investors from taking up shares in CellOS and at a higher price. Those orders were made following a protracted liability trial which his Honour determined adversely to Mr Huber and associated corporations for reasons published on 20 December 2018: CellOS Software Ltd v Huber (2019) 132 ACSR 468; [2018] FCA 2069 (liability judgment or LJ). His Honour also ordered that Mr Huber and other related corporate respondents must account to CellOS in the amount of $42 million: CellOS Software Ltd v Huber (No 2) (2020) 144 ACSR 267; [2020] FCA 505 (relief judgment or RJ).

2    CellOS was placed into administration on 10 January 2022 and, following the second meeting of creditors, was voluntarily wound up pursuant to s 439C(c) of the Corporations Act 2001 (Cth) on 19 April 2022.

3    Mr Huber as the single appellant attempted to file a notice of appeal from the relief judgment on 15 May 2020, but was unsuccessful due to difficulties in relation to the payment of the filing fee. Eventually, his notice of appeal was accepted for filing on 25 May 2020, 10 days out of time. He requires an extension of time: s 25(2)(b) Federal Court of Australia Act 1976 (FCA Act). That is not the only discretion to be exercised in favour of Mr Huber so that his appeal may proceed. On 29 June 2022, I determined, as a separate question in the appeal, that Mr Huber required leave to proceed pursuant to s 500(2) of the Corporations Act: Huber v CellOS Software Ltd (in liq) [2022] FCA 744 (leave judgment).

4    On 12 August 2022, Mr Huber commenced proceeding VID458/2022 for leave to continue his appeal (leave application). Separately, on 29 August 2022, Mr Huber commenced proceeding VID545/2022 in which he seeks an order to stay the liquidation of CellOS until the determination of his appeal (stay application) pursuant to s 482 of the Corporations Act.

5    CellOS by its liquidator was represented by Mills Oakley in the appeal. No notice of ceasing to act has been filed in the appeal. Mills Oakley also act for CellOS by its liquidator in the leave application and the stay application, however, I was informed by Ms Griggs of the firm at a case management hearing on 12 October 2022, that the liquidator is without funds to facilitate their participation in the leave application or the stay application, despite the fact that CellOS has the benefit of a very substantial judgment which remains wholly unsatisfied.

6    Accordingly, on 8 February 2023 I heard the leave application and the stay application by receiving evidence and submissions only from Mr Huber who is self-represented. For the following reasons, I have determined that each application must be dismissed.

Leave to proceed and extension of time applications: provision and principles

7    Section 500(2) of the Corporations Act provides:

After the passing of the resolution for voluntary winding up, no action or other civil proceeding is to be proceeded with or commenced against the company except by leave of the Court and subject to such terms as the Court imposes.

8    As is well understood, the purpose of this provision is to protect the assets of the company from dissipation by litigation which is unnecessary – a claimant with a provable claim should generally be required to lodge a proof of debt in the liquidation. Recently, Halley J summarised the principles relevant to the exercise of the discretion to grant leave in ZOLL Medical Australia, in the matter of Cardiac Defibrillators Australia Pty Ltd (in liq) v Cardiac Defibrillators Australia Pty Ltd (in liq) [2022] FCA 167 (ZOLL Medical) at [25]. In this case not all of the considerations summarised by his Honour are relevant for the self-evident reason that Mr Huber does not seek to agitate in his appeal an underlying provable debt. Rather, his appeal may be characterised as a defensive proceeding. Nonetheless, I concluded in the leave judgment that s 500(2) applies.

9    Parker J dealt with a grant of leave pursuant to s 471B of the Corporations Act (the terms of which are presently indistinguishable) by an unsuccessful defendant to appeal a judgment entered in the Magistrates Court in Caruso v Built It Pty Ltd (in liq) (No 2) (2019) 134 SASR 280; [2019] SASC 125. His Honour resolved the “vexed question” that leave was required and then from [59] considered factors relevant to the exercise of the discretion. At [63] his Honour referenced as relevant whether the appeal has “a solid foundation in law and fact and give[s] rise to a serious dispute”. His Honour drew attention to the decision of the Full Court of this Court in Vagrand Pty Ltd (in liq) v Fielding (1993) 41 FCR 550 where Wilcox, Burchett and Beazley JJ dismissed an appeal from a primary judge’s decision to grant leave to proceed with an action commenced against a respondent for relief pursuant to s 87 of the Trade Practices Act 1974 (Cth). At issue in the appeal was whether the primary judge applied the correct test to the exercise of the discretion being satisfaction that “a real dispute exists between the parties and that in light of all the circumstances it is more convenient (or otherwise appropriate) to allow the matter to proceed to judgment” at 553. The Full Court undertook a comprehensive review of the authorities and at 556 concluded:

Upon a close reading of the relevant authorities, it is apparent to us that the courts have not in fact required applicants for leave to demonstrate a prima facie case against the company in liquidation, in the technical sense of that term. They have required to be affirmatively satisfied that the claim has a solid foundation and gives rise to a serious dispute. Having regard to the course actually taken by the courts, the term “prima facie case” is misleading. Perhaps it should be avoided in the future.

The test which has actually been applied is akin to that now used in considering whether interlocutory relief should be granted: “a serious question to be tried”…

10    The Court in that matter was not concerned with an application for leave to continue with an appeal. That point of distinction may in some cases be important, however, for the reasons that I explain, it is not in this matter.

11    Rule 36.05 of the Federal Court Rules 2011 (Cth) (Rules) confers a discretion to extend the time for the filing of a notice of appeal. Mr Huber requires a relatively short extension of time. The principles relevant to the exercise of the Court’s discretion to extend time to file a notice of appeal were summarised by the Full Court in BQQ15 v Minister for Home Affairs [2019] FCAFC 218 at [33], per Yates, Wheelahan and O’Bryan JJ:

Under rule 36.05, the Court may grant an extension of the time within which an appeal is to be filed. The principles applicable to the exercise of the Court’s discretion were set out in Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344 at 348-9, which were adopted by the Full Federal Court in Parker v R [2002] FCAFC 133 at [6]:

(a)     Applications for an extension of time are not to be granted unless it is proper to do so; the legislated time limits are not to be ignored.

 (b)     There must be some acceptable explanation for the delay.

(c)     Any prejudice to the respondent in defending the proceedings that is caused by the delay is a material factor militating against the grant of an extension.

(d)     The mere absence of prejudice to the respondent is not enough to justify the grant of an extension.

(e)     The merits of the substantial application are to be taken into account in considering whether an extension is to be granted. Leave will not be granted where there are no reasonable prospects of success on the appeal: Kalanje v Minister for Immigration and Multicultural Affairs [2006] FCA 1618 at [5]. The applicant will have no real prospects of success where the case is devoid of merit or clearly fails; is hopeless; or is unarguable. In making an assessment the Court is not required to go into too great a detail, but is to “assess the merits in a fairly rough and ready way”: Jackamarra v Krakouer (1998) 195 CLR 516 at [7] – [9].

(f)     The discretion to extend time is given for the purpose of enabling the Court to do justice between the parties. Special circumstances often arise in immigration cases….

12    More recently, the High Court has considered the power, to extend time pursuant to s 477A(2) of the Migration Act 1958 (Cth) for a remedy in the exercise of this Court’s original jurisdiction: Tu’uta Katoa v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs (2022) 96 ALJR 819; [2022] HCA 28. Although there are differences in the legislative provisions, what is common is the relevance of an assessment of the merit of, in the case of the Migration Act, the proposed application and in this case the proposed appeal. In considering the merit of Mr Huber’s appeal I do not consider that I am confined to an “impressionistic evaluation of the underlying merit” of the individual grounds: [19]. Further, I consider that this is an appropriate case to examine the appeal grounds “in some detail” (at [18]) in order to properly inform the exercise of my discretion pursuant to s 500(2) of the Corporations Act and r 36.05 of the Rules. Why that is so emerges from my consideration of the proposed appeal grounds and also from the fact that I did not have the benefit of submissions from a contradictor.

13    I also consider as relevant to the exercise of my discretion pursuant to s 500(2) of the Corporations Act, some of the matters that are usually considered where the question is whether an applicant should have leave to pursue a claim, or an appeal therefrom, which is a provable debt in a liquidation. I gratefully adopt the summary of Halley J in ZOLL Medical at [25]:

…

(a)     the purpose of s 500(2) is to prevent a company’s assets being dissipated by unnecessary litigation: Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (In liquidation) [2018] NSWCA 139 (Seymour Whyte) at [16] (Sackville AJA), citing In the matter of DSHE Holdings Limited (recs and mgrs apptd) (in liq) [2018] NSWSC 82 (DSHE Holdings) at [18] (Black J); Re Gordon Grant and Grant Pty. Ltd. [1983] 2 Qd R 314 (Re Grant) at 316 (Campbell CJ, Sheahan J and McPherson J);

(b)     the power to grant leave is discretionary: Seymour Whyte at [16], citing DSHE Holdings at [18] (Black J); White, in the matter of Mossgreen Pty Ltd (Administrators Appointed) (No 5) [2018] FCA 184 at [21] (Perram J);

(c)     a plaintiff for leave will be required to show why it should not be left to prove its debt in the winding up: Seymour Whyte at [16], citing DSHE Holdings at [18];

(d)     a plaintiff must establish that the claim has a solid foundation and gives rise to a serious question to be tried: Seymour Whyte at [16], citing DSHE Holdings at [18];

(e)     factors relevant to the exercise of the court’s discretion may include the degree of complexity of legal and factual issues: Seymour Whyte at [16], citing DSHE Holdings at [18]; Zamattia v Jainti Pty Ltd (in liq) in its capacity as Trustee of the Zambito Trust [2022] NSWCA 3 (Zamattia) at [8] (Leeming JA). It may also include whether there are complex procedural matters such as discovery or interrogatories involved: Zamattia at [8]; Re Grant at 317;

(f)     the effects that the proceedings may have on creditors of the company in liquidation are to be taken into account: Zamattia at [8];

(g)     leave should generally be granted for a proprietary claim which cannot be accommodated within the proof of debt procedure: Chahwan v Euphoric Pty Ltd [2006] NSWSC 1002 at [40] (Barrett J); on appeal Chahwan v Euphoric Pty Ltd and Another (2008) 227 ALR 43; [2008] NSWCA 52 at [8] (Beazley, Tobias and Bell JJ); Oliveri v P M Sulcs & Associates Pty Limited (in liq) [2012] NSWSC 1311 at [10] (Black J); Richardson v Lo Pilato (Liquidator); In the Matter of Trojan Hospitality (ACT) Pty Limited (In Liq) [2014] FCA 888 at [52]- [54] (Foster J); and

(h)     the Court will normally grant leave as of right where plaintiffs seek to recover their own property from the company because such claims cannot be accommodated within the proof of debt regime. Claims which can only be resolved by court proceedings include rectification, specific performance, injunction and rescission of a contract: Commonwealth v Davis Samuel Pty Ltd (No 5) (2008) 68 ACSR 336; [2008] ACTSC 124 (Davis Samuel) at [34]-[36] (Refshauge J); cited with approval in Palace v RCR O’Donnell Griffin Pty Ltd (in liq) [2021] QCA 137 at [40] (Sofronoff P and Morrison and Bond JJA); QNI Resources Pty Ltd and Others v Park and Others (2015) 116 ACSR 321; [2016] QSC 222 at [49] (Bond J).

14    I explain in these reasons why some of those factors are relevant where Mr Huber seeks to have set aside a judgment in favour of CellOS and which favour a positive exercise of the discretion.

15    However, as I explain in some detail, I am satisfied that the appeal grounds are without merit and to permit Mr Huber to pursue the appeal would be contrary to the overarching purpose of the civil practice and procedure of the Court at ss 37M and 37N of the FCA Act. These considerations substantially outweigh the other matters. In so concluding it is otiose to separately address the extension of time application.

The liability judgment

16    The reasons of Beach J are comprehensive, detailed and meticulous. The proceeding involved 19 respondents, most of which, in addition to Mr Huber, were corporations that his Honour found were controlled by Mr Huber and which were incorporated in exotic locations such as Belize, the British Virgin Islands, Anguilla, Panama and Samoa. Other corporations featured in the case were beneficially owned or controlled by Mr Huber, but were not parties to the proceedings. Those corporations variously acted to purchase shares from CellOS investors or lent funds to CellOS. It is convenient to refer to all of these corporations as the Huber entities. Some respondents were not associated with Mr Huber: notably Mr and Mrs Peck and Mr Tan. Of the of the Huber entities, only Mr Huber and Blue Delorite Investments Pty Ltd (Blue Delorite) filed defences.

17    CellOS contended that Mr Huber, while appointed as its Chief Executive Officer and as a director, between 2012 and 3 September 2015 engaged in a scheme to trade in the shares of CellOS by creating a grey market and in so doing deprived it of the opportunity of issuing shares to potential investors at a market price higher than the price at which Mr Huber caused its shares to be bought and sold. A further aspect of the scheme contended that LGA Energy Investments Ltd (LGA), an offshore company controlled by Mr Huber, lent money to CellOS and then exercised an option to convert the loan funds into shares at a price significantly less than the market value at the time. CellOS contended that the entire scheme was fraudulent and generated significant profit for Mr Huber. It founded its proceeding in breach of duty by Mr Huber as a director and officer contrary to ss 181, 182 and 183 of the Corporations Act together with breach of fiduciary duty.

18    The trial before his Honour was conducted on various days in September 2017 and May and June 2018. For most of the trial, Mr Huber was self-represented. For reasons published in the liability judgment, his Honour dismissed the proceedings against Mr and Mrs Peck and Mr Tan and upheld the claims against Mr Huber and the Huber entities. Relevantly, his Honour ordered that CellOS, Mr Huber and Blue Delorite within 28 days file and serve short minutes of orders to give effect to the reasons and for the further conduct of the proceeding.

19    The proceeding resumed before his Honour in October 2019. For reasons published in the relief judgment, his Honour declared that Mr Huber had breached his fiduciary duties as well as his statutory duties pursuant to the Corporations Act by procuring the purchase of a substantial number of shares in CellOS and the sale of those shares for profit “thereby diverting investors from taking up shares” in CellOS. Further Mr Huber breached his duties by causing CellOS to enter into a loan agreement with LGA and then by causing it to exercise the option to purchase a substantial number of shares in CellOS for SGD1.80 per share, when the market price for those shares was greater. His Honour ordered Mr Huber and the Huber entities to account to CellOS in the sum of $42 million and ordered that they pay CellOS’s costs of and incidental to the proceeding.

20    His Honour summarised the essential contentions of CellOS against Mr Huber and the Huber entities in the liability judgment at [2]-[19] as follows:

CellOS alleges that Mr Huber carried out a scheme against it, and in carrying out this scheme breached various statutory and fiduciary duties owed to CellOS, particularly under ss 181, 182 and 183 of the Corporations Act 2001 (Cth). Broadly, CellOS alleges that the scheme carried out by Mr Huber consisted of the following steps.

At all relevant times CellOS was not generating sufficient revenue and was reliant upon new equity capital or debt funding to continue its operations and its business of software development. Mr Huber was personally responsible for securing this funding.

From late 2012, Mr Huber instructed a corporate secretarial services provider to establish a web of offshore companies registered in Belize, Panama, Anguilla, British Virgin Islands and Samoa, which Mr Huber was to control, and which were designed to disguise Mr Huber’s involvement in his planned scheme and in those vehicles. Mr Huber established a web of offshore companies to hold his CellOS shares (Huber controlled entities) with the corporate secretarial assistance of Mr Chua Min Wee and his company Grandeza Corporate Services Pte Ltd (Grandeza), a Singaporean company, and Mr Harveen Singh Narulla. The Huber controlled entities disguised Mr Huber’s involvement in what later occurred.

From at least late 2012, Mr Huber procured through these Huber controlled entities at least 47,872,063 CellOS shares from early investors in CellOS, without disclosing his involvement to the vendors or to CellOS; it is said that these transactions were entered into without CellOS’ knowledge. It is known that Huber controlled entities purchased 19,059,834 shares (out of 47,872,063 shares transferred from private investors) for AU$4,848,094. The price for the remainder is not known.

From at least late 2012, Mr Huber sought out potential investors for CellOS, ostensibly to raise funds for CellOS’ ongoing operations. But instead of CellOS issuing shares directly to new investors, Mr Huber procured investors to purchase shares from Huber controlled entities at prices between US$2 and US$10. Between late 2012 and mid-2015, the Huber controlled entities sold 51,945,132 shares in CellOS to 355 private investors. It is known that Huber controlled entities sold 22,832,921 shares out of 51,945,132 shares transferred to private investors for AU$50,353,076. The price for the remainder is not known.

Mr Huber directly or indirectly lent part of the proceeds from these share sales back to CellOS in order to fund its operations.

In or around May 2013, Mr Huber arranged for CellOS to enter into a loan agreement with one of his offshore companies, LGA Energy Investments Ltd based in Belize (LGA) to loan CellOS up to SG$25 million (LGA loan) without disclosing his interest in LGA or the LGA loan to either CellOS’ board or its shareholders, on terms that the loan could be converted to shares at SG$1.80. Mr Huber wearing his CellOS hat would call for loans from LGA and then convert those loans to shares. At the time, CellOS was able to issue new shares at US$5 per share and CellOS shares were on the secondary market at up to US$5 per share.

LGA is not a party to the proceedings. The LGA loan operated such that:

(a)    The loan operated retrospectively to cover money advanced since 1 March 2012, that is, over a year earlier and included advances by third parties nominated by LGA;

(b)    LGA or third parties would loan money to CellOS; and

(c)    LGA had an option to convert the loan amount into CellOS shares at the price of SG$1.80 per share, which was favourable to Mr Huber and LGA but disadvantageous to CellOS and the other shareholders.

The effect of the LGA loan allowed:

(a)    Mr Huber to immediately benefit from the funds he had been lending CellOS since March 2012 by converting them into new CellOS shares at the favourable strike price of SG$1.80 per share; and

(b)    Mr Huber to, first, prospectively sell CellOS shares held by the Huber controlled entities, second, then lend the funds to CellOS under the LGA loan and, third, obtain more shares at SG$1.80 per share by exercising the conversion option.

Significant proceeds from the sale of shares by the Huber controlled entities were paid to CellOS and attributed to the LGA loan. In all, Mr Huber procured payments into CellOS of SG$29,143,387.90 and AU$1,228,786.85, which were attributed to the LGA loan, and through LGA converted those loan funds into 17,477,204 shares in CellOS at SG$1.80 per share.

Mr Huber directed LGA to transfer 16,815,157 of those shares to Huber controlled entities for no consideration and then procured the on-sale of 4,265,157 of those shares, of which 2 million were sold at US$2 per share, 399,000 at US$10 per share, and the remainder at unknown prices.

As I say, between 28 June 2013 and 27 March 2014, LGA came to hold almost 17 million CellOS shares by way of its conversion option under the LGA loan. In May 2014, LGA transferred these shares to seven of the Huber controlled entities.

On 1 July 2014 Mr Huber arranged for CellOS to enter into another loan arrangement with another associated company, Pized Management Ltd (Pized) (Pized loan). Pized is the fourteenth respondent. The Pized loan was similar to the LGA loan, and Mr Huber again failed to disclose his interest. Significant proceeds from the sale of shares by the Huber controlled entities were advanced to CellOS and attributed to the Pized loan. When Mr Huber was removed from his position in September 2015, amounts under the Pized loan in the order of SG$2.5 million and US$8.3 million had not been converted and still remain a liability owing to Pized on CellOS’ books.

CellOS alleges that Mr Huber’s scheme, which it characterises as fraudulent, generated significant profits for him.

But Mr Huber’s response to CellOS’ claims is that Mr Min Wee and particularly Mr Narulla went rogue and set up and used the Huber controlled entities to buy and sell CellOS shares without Mr Huber’s knowledge and for their own profit. Further, in respect of the LGA loan and the Pized loan, Mr Huber says that both of these arrangements were entered into with proper disclosure being made to CellOS that he was the controller of both companies.

As I say, Mr Huber’s defence is that the fraud perpetrated against CellOS was not by him, but by his personal assistant Mr Narulla. Mr Huber says that he instructed Mr Narulla to sell off some of Mr Huber’s personal shares to raise funds for CellOS through the LGA loan and the Pized loan, but that Mr Narulla went rogue and bought and sold shares using the Huber controlled entities. But CellOS says that the contemporaneous record establishes that Mr Huber did carry out the fraudulent scheme. In any event it says that even if the evidentiary foundation of Mr Huber’s defence were to be accepted, nevertheless because Mr Narulla was his agent and Mr Narulla directed the profits from the fraudulent scheme to Mr Huber’s personal benefit both for the purchase of assets and for payment into the LGA loan and the Pized loan, Mr Huber is still liable for that conduct and required to account to CellOS for any profits.

Let me turn to the other respondents. The second to thirteenth and fifteenth respondents include some of the Huber controlled entities that it is said were involved in Mr Huber’s scheme. They are the following:

(a)    Birinc Centre Corp (Birinc) is the second respondent, although it has been incorrectly described as “Birinc Trade Corp” in CellOS’ originating process. Its alleged involvement is the receipt of CellOS shares from LGA as part of the LGA loan scheme.

(b)    Sky Wealth International Ltd (Sky Wealth) is the third respondent. Its alleged involvement is the receipt of CellOS shares from LGA as part of the LGA loan scheme.

(c)    Rex Investors Ltd (Rex Investors) is the fourth respondent. Its alleged involvement is the purchase of CellOS shares from early investors, the sale of those shares to private investors and the receipt of CellOS shares from LGA as part of Mr Huber’s scheme.

(d)    Sun Way Global Group Limited (Sun Way) is the fifth respondent. Its alleged involvement is the receipt of CellOS shares from LGA as part of the scheme.

(e)    Aura Finance Limited (Aura Finance) is the sixth respondent. Its alleged involvement is the receipt of CellOS shares from LGA as part of the scheme.

(f)    Harvest Sky Holdings Limited (Harvest Sky) is the seventh respondent. Its alleged involvement is the purchase of CellOS shares from early investors, the sale of those shares to private investors and the receipt of CellOS shares from LGA as part of the scheme.

(g)    Rich Max Investments Limited (Rich Max) is the eighth respondent. Its alleged involvement is the receipt of CellOS shares from LGA as part of the scheme.

(h)    Nesterland Services Ltd (Nesterland) is the ninth respondent. Its alleged involvement is the purchase of CellOS shares from early investors and the sale of those shares to private investors. There is a contest between the parties as to which of Mr Huber or Mr Narulla truly controlled Nesterland and the identity of its ultimate beneficial owner.

(i)    Willow Financial Limited (Willow) is the tenth respondent. Its alleged involvement is the sale of early investor shares to private investors, which it received by way of transfers from other Huber controlled entities.

(j)    Lighthouse Investments Limited (Lighthouse) is the eleventh respondent. Its alleged involvement is the sale of early investor shares to private investors, which it received by way of transfers from other Huber controlled entities.

(k)    Leario Overseas Corp (Leario) is the twelfth respondent. Its alleged involvement is the purchase of CellOS shares from early investors.

(l)    Stardust Financial Corporation (Stardust Financial) is the thirteenth respondent. Its alleged involvement is the purchase of CellOS shares from early investors and the sale of those shares to private investors.

(m)    Blue Delorite Investments Pty Ltd (Blue Delorite) is the fifteenth respondent; it has also been incorrectly described in CellOS’ originating process. Its alleged involvement is the purchase of CellOS shares from early investors and the sale of those shares to private investors.

Now defences have only been filed by the first and fifteenth respondents, that is, by Mr Huber and by Blue Delorite. The second to fourteenth respondents are variously registered in Belize, Anguilla, Samoa, Panama and the British Virgin Islands. Service out of the jurisdiction has been effected on some of these respondents, but they have otherwise taken no role in these proceedings.

21    His Honour dismissed the proceeding against Mr and Mrs Peck on the basis that he was not satisfied that they were knowingly concerned in and parties to the scheme of Mr Huber. His Honour dismissed the proceeding against Mr Tan on two grounds: first, he was not satisfied that Mr Tan knew or could be expected to know what had taken place with respect to the share dealings orchestrated by Mr Huber and second, that Mr Tan did not understand that what he was doing was causing loss to CellOS.

22    As the summary of the claims by his Honour which I have set out makes clear, the defence mounted by Mr Huber to the effect that he had been the victim of a fraud perpetrated by Mr Wee and Mr Narulla failed. In particular in reasoning to that conclusion, his Honour made some very adverse findings of credit against Mr Huber. At LJ [39] his Honour found:

Let me address a discrete issue that needs to be developed before proceeding further. There are a number of companies who bought, sold and transferred amongst themselves CellOS shares during the relevant period. In broad terms, CellOS submits that these entities were controlled by Mr Huber and used by him to cover his tracks. I would say now that I have little doubt that these entities were controlled by Mr Huber and, generally speaking, used to conceal his share dealings. Moreover, the opaque structures that he used, the denial of his control and his assertion that somehow Mr Narulla had gone rogue in relation to a large number of transactions did not instil me with great confidence as to the reliability of his evidence generally or the weight I should give to it. Indeed I would say at this point in relation to Mr Huber’s evidence that I have given it little weight except where it has been independently corroborated by other probative evidence or where it was adverse to his interest.

23    In many other paragraphs, his Honour variously found the evidence of Mr Huber to be “not credible” (at LJ [465]), “evasive and argumentative” (at LJ [436]), “misleading” (at LJ [447]), “false” (at LJ [451], [452] and [460]), “incoherent” (at LJ [470]), “a recent invention” (at LJ [471]) and ultimately and in summary at LJ [474]:

…I have not found Mr Huber’s evidence to be reliable, and have not accepted it unless independently corroborated by other probative evidence or it was otherwise adverse to his interest.

(Original emphasis.)

24    Somewhat obviously, these findings are more than simply problematic for Mr Huber in the exercise of my discretions to grant leave to continue with the appeal and to extend the time for its commencement. They are major hurdles which Mr Huber fails to grapple with in the drafting of his appeal grounds or in the written and oral arguments that he relies upon in support of his applications.

25    In contrast, his Honour accepted as truthful and honest the evidence of other witnesses, in particular, Mr and Mrs Peck (at LJ [486] and [490]); the company auditors from Deloitte, Mr Zannis and Mr McGuigan (at LJ [655]-[656]); the Chief Operating Officer and a director of CellOS, Mr Patel (at LJ [418]); Mr Wolfenden, a shareholder and director of CellOS (at LJ[423]); Ms Tapner, the group accountant of CellOS (at LJ [424]); Mr Roche, an audit partner of Deloitte (at [425]); Mr Reid, the company secretary of CellOS (at LJ [426]) and Ms Hennessey, an expert witness and forensic accountant (at LJ [428]).

26    Mr Narulla did not give evidence and no Jones v Dunkel inference was drawn:  LJ [429]-[433].

27    His Honour’s judgment is factually intense for the reasons stated by his Honour commencing with “a few preliminary observations” (at LJ [33]), where he addressed the apparent tension between there being “nothing wrong per se” with a director buying and selling shares in the corporation of which he or she is a director, putting aside cases of insider trading, and the scenario that his Honour faced where Mr Huber as the CEO and a director of CellOS surreptitiously created a grey market in the trading of its securities and in doing so diverted, for his benefit or that of the Huber entities, opportunities that would otherwise have been afforded to CellOS to raise equity by issuing shares at market prices. This was a fact intense case as his Honour noted at LJ [36]:

…My case is rich in facts, including the application of Singaporean law proved as a foreign fact. Now brevity may be desirable where one is intellectualising on a legal issue stripped of the complexity of intricate commercial dealings over a lengthy period. But it is a luxury I cannot afford in the present case.

28    In oral submissions before me, after I pointed out the difficulty that appellants generally face in overturning adverse credit findings, Mr Huber described his appeal as one which asserts that “almost every material finding of fact” that Beach J made adverse to him was contrary to the evidence. That submission immediately invites suspicion that what Mr Huber seeks to do by vehicle of an appeal is to have the Full Court rehear the proceeding ab initio. Relevant to the present applications is how his Honour dealt with the morass of evidence in order to find the CellOS claims proven and in particular to reject the contention of Mr Huber that, as an innocent actor, he was a victim of fraud.

29    In summary, his Honour found:

(1)    In November 2012, Mr Huber personally signed a share statement for Basalt Pte Ltd (Basalt) evidencing a purchase by it of 25,152,717 shares in CellOS from early investors: LJ [44] and [52]. Basalt was one of the companies established at the direction of Mr Huber: LJ [722]. Basalt then transferred the shares to offshore companies that Mr Huber admitted were controlled by him: LJ [55];

(2)    Maitreya Mandala Ltd (Maitreya) is not a party to the proceeding. It purchased 5,642,500 CellOS shares from early investors and sold 5,019,921 CellOS shares to private investors: LJ [58]. Mr Huber claimed that this company was controlled by Mr Narulla, but accepted that in May 2013 he gave instructions to approve the transfers of CellOS shares to the company: LJ [60];

(3)    Child and Family Education Foundation PTE LTD (Child and Family) is not a party to the proceeding, but purchased 3,110,000 CellOS shares from early investors and sold 9,125,755 CellOS shares to private investors: LJ [66]. It did so on Mr Huber’s behalf and transferred 615,745 to his personal company, Swallow Ltd: LJ [67];

(4)    Stardust Financial Corporation (Stardust) is the thirteenth respondent. It purchased 1,588,181 CellOS shares from early investors and sold 477,181 CellOS shares to private investors: LJ [72]. It is incorporated in Belize. Mr Huber controls and is the ultimate beneficial owner of Stardust, which acted to hold shares in CellOS on his behalf: LJ [76]. In May 2013, Stardust purchased 775,000 shares from an early investor for USD0.15 per share: LJ [78]. Mr Huber denied any knowledge of this transaction, which denial could not be reconciled with an admission made by Mr Huber in an affidavit in a related proceeding in Singapore where he stated that the shares were purchased because the vendors wanted to “exit the company”. This evidenced direct knowledge by Mr Huber that the corporations associated with him were buying shares in CellOS at well below the market price, and his evidence to the contrary was rejected: LJ [78]-[79];

(5)    Harvest Sky Holdings Ltd (Harvest) is the seventh respondent. It bought and sold shares in CellOS: LJ [80]. Mr Huber admitted that Harvest was one of the offshore companies operated by Mr Narulla: LJ [81]. Mr Narulla stated in writing to Mr Huber that Harvest was being administered to hold shares on behalf of Mr Huber: LJ [81];

(6)    Rex Investors Ltd (Rex) is the fourth respondent. Mr Huber admitted that it held shares on his behalf: LJ [84]. It purchased significant shares in CellOS and sold shares to private investors: LJ [83]. Mr Huber personally signed and approved the transfer forms: LJ [86];

(7)    Money Max Foundation (Money Max) is not a party to the proceeding. Mr Huber admitted that it was transacting the sale of his shares for his benefit: LJ [90]. It received an indirect transfer of 3,500,000 CellOS shares and then transferred those shares to other Huber entities: LJ [91]. Mr Huber received specific legal advice in relation to Money Max making a large sale of shares to a particular investor: LJ [94];

(8)    Nesterland Services Ltd (Nesterland) is the ninth respondent. It purchased 457,286 CellOS shares from early investors and sold 11,842,000 CellOS shares to private investors: LJ [95]. Mr Huber admitted that Nesterland is one of the offshore companies operated by Mr Narulla which held and sold shares on his behalf: LJ [96]. Mr Huber sold 7 million CellOS shares to Mr and Mrs Peck that were transferred from Nesterland pursuant to his instructions: LJ [97]. Despite conflicting evidence as to the ultimate beneficial owner of Nesterland, on any view Mr Huber used it as a conduit for the implementation of his scheme: LJ [100];

(9)    Blue Delorite is the 15th respondent. It purchased 400,000 CellOS shares from early investors and sold 2,050,000 CellOS shares to private investors: LJ [101]. Mr Huber is the sole shareholder and director of Blue Delorite: LJ [102];

(10)    Leario Overseas Corp is incorporated in Belize: LJ [108]. Mr Huber admits that he is the ultimate beneficial owner of this company: LJ [110]. It purchased 241,086 CellOS shares from early investors: LJ [107];

(11)    Between 20 September 2011 and 8 May 2015, the Huber entities transferred 51,945,132 CellOS shares to 12 companies that were used to sell the shares to private investors. The same corporations bought and sold shares in the shadow marketplace. Some of the companies were merely intermediaries: LJ [114];

(12)    Lighthouse Investments Ltd (Lighthouse) is the eleventh respondent. It sold 5,150,000 CellOS shares to private investors: LJ [116]. Mr Huber admitted that he is the ultimate beneficial owner of Lighthouse: LJ [118];

(13)    Willow Financial Ltd (Willow) is the tenth respondent. It sold 320,000 CellOS shares to private investors: LJ [119]. Mr Huber admitted that he is the ultimate beneficial owner of this company, which was administered to hold shares on his behalf: LJ [122];

(14)    On 9 May 2014, LGA transferred to seven Huber entities shares that it had acquired in CellOS in consequence of the exercise of options. Approximately 14 million issues were transferred: LJ [123];

(15)    Birinc Centre Corp (Birinc), Sky Wealth International Ltd (Sky), Sun Way Global Group Ltd (Sun), Aura Finance Ltd (Aura), and Rich Max Investments Ltd (Rich Max) are each respondents to the proceeding. Each received a significant transfer of CellOS shares from LGA. Mr Huber admits that he is the ultimate beneficial owner of each of these corporations: LJ [125]-[139];

(16)    Mr Narulla may have been engaged in some dealings in the shares of CellOS that were unknown to Mr Huber. However, that does not “substantially detract from” the finding that “Mr Huber set up and engaged in the relevant scheme”: LJ [157];

(17)    Between 2013 and 2015, Mr Huber engaged Mr Narulla to assist in managing shares in CellOS in respect of which Mr Huber had or held interests or rights: LJ [208];

(18)    In early 2013, CellOS entered into a loan and convertible option agreement with LGA, signed by Mr Huber. LGA agreed to provide facility finance of up to SGD25 million at an interest rate of 10% per annum and with an option to convert any outstanding amounts to equity in CellOS at an option price fixed at SGD1.80 per fully paid ordinary share: LJ [214];

(19)    Loan conversion events and the option was occurred by exercised in October 2013 and February 2014 for 3,467,877 and 1,666,666 shares respectively: at LJ [305] and [351];

(20)    On 27 March 2015, Mr Huber met with three persons from Deloitte. Minutes of the meeting were prepared, albeit much later. The minutes record an admission made by Mr Huber that there was “an active grey market” for CellOS shares and that he “controls” the market. It also records Mr Huber admitted that he was “selling his own shares” which enabled him to control the market: at LJ [402];

(21)    Mrs Peck commissioned a report from a former director as to the state of affairs of CellOS. In that report dated 3 June 2015, the author stated that there was evidence of fraud and misrepresentation by Mr Huber and that he was running a “Ponzi” scheme: LJ [404];

(22)    Mr Huber was removed as a director of CellOS on 3 September 2015: LJ [408];

(23)    Extensive and adverse credit findings were made about Mr Huber and his evidence: LJ [435]-[474]. In numerous respects, the evidence of Mr Huber was found to be false, misleading or otherwise unreliable. In particular evidence from Mr Huber that between 2008 and 2010 he transferred 4.5 million shares in CellOS to Mr Narulla to hold for him and later sell, and which were sold to Child and Family by mid-2012 at which point he transferred a further 16 million shares to Mr Narulla to sell, was found to be false. The 4.5 million shares were not transferred to Mr Narulla on trust for Mr Huber, but were provided in consideration for services rendered: LJ [450]-[451];

(24)    A claim made by Mr Huber was that he transferred 20.5 million of his personal shares to Mr Narulla to be sold to investors, with the proceeds being loaned to CellOS to fund company operations. By the mechanism of the LGA loan agreement, the loan funds could be converted to shares at a strike price of SGD1.80. However, what occurred is that Mr Narulla was buying shares cheaply from early investors and the shares were then sold at higher prices. Mr Huber falsely denied knowledge of that conduct:LJ [459]-[460]. The first tranche of shares, 4.5 million, were not the personal shares of Mr Huber and there was no further transfer from his personal holdings of 16 million shares: LJ [461]-[462]. Mr Huber knew Mr Narulla was not selling his personal shares. Mr Huber personally signed statements for the share transfers from the original investors as a director. He admitted that he was “at relevant times monitoring all transactions, and indeed controlling the transfers of his shares”: LJ [464]. Further, Mr Huber’s denial that he was monitoring and was unaware of Mr Narulla’s share trading between January 2013 in 2014 was false, in that he personally signed letters approving the transactions from companies controlled by Mr Narulla: LJ [465];

(25)    Mr Huber “knew about and hid his involvement” in the share transfer transactions: LJ [466]. He used various private email addresses in an effort to hide his involvement in the share trades and when it was put to him that he did so in order to “cover up his involvement”, he simply responded “there’s no reason”: LJ [467];

(26)    Mr Huber was the only person responsible for fundraising in order to conduct the operations of CellOS: LJ [577]. Despite the existence of “willing buyers”, he did not take meaningful steps to cause CellOS to raise equity through the issue of new shares in order to conduct its business and then, at LJ [587]:

Instead of Mr Huber procuring potential investors to buy shares issued by CellOS, Mr Huber diverted them to buying shares from him through companies he controlled, which shares he was purchasing for that purpose in the grey market for CellOS shares at a substantial discount to the price that CellOS could have issued them for. Further, in order to fund CellOS, Mr Huber then caused companies he controlled to enter into loan agreements with CellOS, without disclosing his interest in the lending entries.

In acting in that way, Mr Huber diverted an opportunity that was available to CellOS of issuing its shares to investors in order to raise significantly greater sums of money than it did: LJ [589]-[595]. At various times the difference was between SGD1.80 per share and USD2 and USD5 per share: LJ [595];

(27)    Mr Huber failed to disclose his related party transactions to the auditors: LJ [643]-[650];

(28)    The loan agreement between CellOS and LGA was an uncommercial transaction: LJ [687]; and

(29)     Mr Huber admitted that on various share sales to Mr and Mrs Peck he made a profit being the difference between the option strike price of SGD1.80 and the sale price of SGD2.50: LJ [689].

30    This is not for obvious reasons a comprehensive summary of all of the adverse factual findings made by Beach J. However together with highlighting the overall findings by way of conclusion, it is sufficient to inform the exercise of my discretions. Those conclusions were, at  LJ [714]-[717]:

First, Mr Huber did not disclose to the board at the relevant time his interest in LGA or Pized or the relevant loans.

Second, both the LGA loan and the Pized loan contained uncommercial terms in relation to the strike price for the conversion options. Moreover, the retrospective operational aspect of the LGA loan was uncommercial.

Third, the substitution of debt funding for equity funding caused CellOS to be placed at a disadvantage.

Fourth, by LGA exercising the conversion option at a strike price below market value, this caused relative detriment to other shareholders of CellOS. Their shareholdings were being diluted in disadvantageous circumstances. Moreover, it was not in the interests of CellOS to issue shares at less than their market value.

31    The ultimate effect of the scheme was found by his Honour at LJ [726]-[735] as follows:

Between 20 September 2011 and 12 August 2015, the Huber controlled entities had transferred to them at least 47,872,063 shares in CellOS from third party investors.

Between 20 September 2011 and 8 May 2015, the Huber controlled entities transferred at least 51,945,132 shares in CellOS into 12 offshore companies that would be used to sell the shares to private investors. That is, the same companies were not both buying and selling shares in the marketplace. Some companies were merely intermediaries.

Mr Huber then promoted CellOS shares to investors, ostensibly to raise capital directly for CellOS by the issue of new shares, but in fact it was to sell to such investors the same shares, which Mr Huber had purchased from early investors, at a considerable profit margin.

Between about February 2012 to late 2013, Mr Patel attended around 20 potential investor presentations with Mr Huber. There were about 10 to 20 potential investors at each, and they were held in CellOS’ Singapore offices.

Between 20 September 2011 and 11 August 2015, Mr Huber procured the sale of at least 51,945,132 shares in CellOS from the Huber controlled entities to 355 third party investors.

Mr Huber was using various brokers to sell the offshore companies’ CellOS shares in addition to Mr Tan. In March 2015, Mr Huber said that he was then using 8 brokers. These brokers included Mr Tan, Ms Sandra Dierstein at Proventus Consulting JLT in Dubai, Ms Charlene Kwok and Ms Marie Cronogue at Boswell Management Services & Consultancy.

It is known that Huber controlled entities purchased 19,059,834 shares (out of 47,872,063 shares transferred from private investors) for AU$4,848,094, and Huber controlled entities sold 22,832,921 shares (out of 51,945,132 transferred to private investors) for AU$50,353,076.35. The prices for the other transactions are unknown.

Mr Huber used part of these profits to fund CellOS through the LGA loan and the Pized loan. Mr Huber also used the profits in connection with the discharge of his bankruptcy, other personal expenses, and the purchase of properties in Melbourne and Dubai.

In order to provide funds to CellOS so that it could continue to operate, in or about May 2013 Mr Huber procured CellOS to enter into a loan agreement with LGA, one of his offshore companies, with the loan convertible to shares at a price below market value.

Mr Huber did not disclose his relationship with LGA to CellOS’ board nor that the loan was being funded by profits generated from his trading in CellOS’ shares.

32    Finally, it is relevant for present purposes to record that at RJ [788]-[790], his Honour soundly rejected three key claims of Mr Huber:

First, Mr Huber says that the claim concerning the share trading conduct fails because it falls outside Mr Huber’s duties. But the evidence is clear that Mr Huber, as a director and the CEO with responsibility for fund raising, conducted share trading to divert the relevant opportunity otherwise available to CellOS.

Second, Mr Huber says that there was no diversion because there was no mature effort to obtain funding. Further, Mr Huber says that the board needed to resolve that there would be an equity raising in order that the opportunity be mature. But CellOS was always trying to raise equity. And the principle is that a corporate opportunity that a director diverts covers opportunities which the company could have been expected to pursue if it had had the opportunity to do so, having regard to its stated aspirations. That principle was engaged here by Mr Huber’s conduct.

Third, Mr Huber’s evidence was to the effect that he did not do the share trading conduct. He says that it was undertaken without his knowledge by his personal assistant Mr Narulla, and to a more limited extent by Mr Min Wee. But in my view, Mr Huber’s evidence was unreliable. And for the most part Mr Huber knew and authorised what Mr Narulla and Mr Min Wee were doing on his behalf. But even if Mr Huber’s evidence were to be accepted, his assertions do not constitute any defence or excuse. For the most part Mr Narulla and Mr Min Wee were acting as Mr Huber’s agents in buying and selling the shares of early investors. Mr Narulla and Mr Min Wee were directing profits from the sale of those shares into the LGA loan and the Pized loan and to Mr Huber personally. Further, Mr Huber ratified those transactions by directing CellOS’ registry manager and bookkeepers to record and process these transactions. I agree with CellOS that Mr Huber is responsible for the acts of his agents.

(Original emphasis.)

33    The trial before his Honour proceeded first on the question of liability. Having resolved the liability claims adversely to Mr Huber, his Honour adjourned the hearing in order to receive submissions “as to the necessary orders to make to facilitate the next stage of the proceedings”:  LJ [1057]. The trial resumed on 28 and 29 October 2019 (the account hearing). CellOS claimed by way of remedy an account of profits made by Mr Huber and the Huber entities on the share sale transactions. His Honour received, and found in accordance with, independent expert evidence from Ms Hennessey, a partner of PwC Australia. His Honour for reasons published in the relief judgment accepted the methodology of Ms Hennessey as set out in two reports: one dated 21 May 2019 (Hennessey report) and the other 2 December 2019 (supplementary report). Mr Huber relied upon material which his Honour characterised as “two sets of extensive written submissions” dated 21 October 2019 and 20 December 2019 “together with additional documentary material by way of further evidence”: RJ [7].

34    His Honour (at RJ [9]-[34]) summarised the principles applicable to an award of an account of profits against a defaulting fiduciary, particularly by reference to Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd (2018) 265 CLR 1; [2018] HCA 43 (Ancient Order), Kiefel CJ, Gageler, Keane, Nettle and Edelman JJ. A point that should be emphasised, as it looms large in the submissions made by Mr Huber, is the onus of proof once it is established that a causal connection exists between breach of fiduciary obligation and the benefit or gain which is liable to be accounted for: RJ [22] – [23]. Where that causal connection is established: “the onus shifts to the respondent to establish that it is inequitable to require an accounting of the total value of the benefit or gain received” (at RJ [24]), by reference to the plurality in Ancient Order at [13]. His Honour particularly emphasised what Gageler J said in his separate reasons in Ancient Order at [92] and [94] where, in the former, he observed:

Putting aside those cases in which equitable relief might be withheld on established discretionary grounds by reference to disentitling conduct of the plaintiff, the defendant needs to demonstrate, in order to establish that it is inequitable to order an account of the value of the whole of the identified benefit or gain, either that the benefit or gain is attributable in part to one or more other contributing causes by reference to which it is “practically just” that the benefit or gain be apportioned or that some allowance be made in favour of the defendant, or that there is some other reason why accounting for the whole of the gain would amount to a windfall to the plaintiff of such a nature or to such a degree that the accounting would fail to vindicate the purposes underlying equity’s imposition of the fiduciary obligation that has been breached. (Citations omitted.)

35    Returning to the analysis of the facts, his Honour concluded that “by diverting CellOS’ opportunity for it to issue new shares into the market, Mr Huber improperly gained profits”: RJ [35]. The Hennessey report set out Ms Hennessey’s calculations to determine the quantum of that profit. Necessarily, Ms Hennessey did so based on various assumptions including that the profit varied between $52,515,488 and $114,196,498. The primary variable in that analysis turned upon assumptions made by Ms Hennessey as to the price paid to the Huber entities for share sales where the price was not known: RJ [38]. Accordingly, Ms Hennessey proceeded by reference to weighted averages. His Honour found her methodology to be appropriate: RJ [40].

36    Ms Hennessey made an allowance for a $1 million annual salary in favour of Mr Huber, conformably with Warman International Ltd v Dwyer (1995) 182 CLR 544, “notwithstanding that it was for Mr Huber to make out any appropriate allowances in light of his conduct”: RJ [41].

37    Mr Huber failed to file an affidavit as directed to disclose the profits that he had made: RJ [42]. Rather, his affidavits were described by his Honour as “in the main” seeking to challenge the liability judgment. Accordingly, his Honour proceeded as explained at RJ [42]-[43]:

Much remains unexplained and undisclosed, including Mr Huber’s failure to disclose additional bank accounts which may show the flow of funds to him, the source of the payment of US$900,000 for the balance of his personal property purchase in Dubai or much in the way of corroborating documentation for the assertions contained in his affidavits.

In such circumstances, I am entitled to draw inferences about the respondents’ profits extrapolating out from the known purchase and sales consideration, and upon making the assumption that shares were sold at market price. Indeed, it was for Mr Huber to prove that the consideration actually paid in respect of any of those share transfers was less than the market price, and to make out any appropriate deductable allowances.

38    From RJ [57], his Honour methodically dealt with eight issues agitated by Mr Huber in addition to his “more general point that he made no profit”: RJ [58]. Each issue was resolved adversely to Mr Huber, primarily on the onus question. For example, in resolving the third issue where Mr Huber claimed to be entitled to an allowance for 12.7 million shares asserted to have been erroneously included by Ms Hennessey as a component of 20.8 million shares transferred to Mr Narulla as purchases from third parties, his Honour found (at RJ [80]) that save for 3 million shares transferred to Maitreya, the 20.8 million shares were not the property of Mr Huber. Further, his Honour found at RJ [84]:

In my view Mr Huber bears the onus of disentangling any profits obtained from his property from the profits obtained by reason of his fiduciary breaches. Accordingly, even if the 20,800,000 shares were transferred to Mr Narulla and others to hold on Mr Huber’s behalf, he has failed to prove that any of his shares, save for CellOS’ concession as to 1,100,000 of these shares, were sold as part of the Scheme and erroneously included in Ms Hennessy’s assessment of profit.

39    The supplementary report made various allowances consequential upon the matters dealt with at the hearing in October 2019. In this report Ms Hennessey calculated the profit, again based on various assumptions, between $44,663,904 and $106,896,164. In particular, in the supplementary report, Ms Hennessey removed from her calculation profit on any of the 20.8 million shares being those identified by Mr Huber as his, and which Ms Hennessey was unable to trace through the scheme: RJ [97]. Nor could the proceeds of those share sales be traced into the loan monies advanced pursuant to the LGA loan or the Pized loan: RJ [98]. However, his Honour accepted that “on any view, the funds going into CellOS as part of the LGA loan and the Pized loan can be treated as funds derived from the Scheme, even if not sourced to these 20,800,000 shares specifically”: RJ [99].

40    From RJ [100] to [138], his Honour undertook a comprehensive analysis of the supplementary report to ultimately accept her methodology (at RJ [139]) as founding an account of profits based on the low scenario estimate of $44,663,904, which he discounted for contingencies to the round sum of $42 million. Within that analysis (at RJ [121]-[128]), his Honour considered and rejected further written submissions and material filed by Mr Huber on 23 December 2019, ostensibly for the purpose of responding to the supplementary report of Ms Hennessey, but which invited his Honour to reopen and review his findings as set out in the liability judgment. Unsurprisingly, his Honour rejected the invitation. A matter that Mr Huber raises in one or more of his grounds of appeal is that his Honour erroneously did not take account of losses which Mr Huber asserted he had made and his further assertion that he did not make a secret profit from the share trading of others. His Honour rejected those arguments at RJ [123]-[127] as follows:

Second, Mr Huber asserted that he made losses on the LGA and Pized loans. He has also asserted that he made no profit from the secret trading of others. Now I have looked at appendix one to his submissions of some 20 pages which seems to be a cobbled together version of bits and pieces which constitute in a sense Mr Huber’s case thesis that I largely rejected at the trial on liability. Moreover, I found that the proceeds of the Scheme were used to provide the funds that were then advanced as part of the LGA loan and the Pized loan. I do not accept any of his analysis including assertions about losses at the relevant time. Moreover, his detailed analysis in appendix one seems more focused, in the case of LGA, on shares in and out, and shares “owed” to him by CellOS (see p 28). But none of this is to deny the appropriateness of the profit calculations or methodology used by Ms Hennessy flowing from the Scheme. Further, as to his assertion that he is down 705,000 shares concerning Pized, again this does not take him anywhere. The fact is that the proceeds of the Scheme were used to fund the Pized loan.

I should say that I do accept that there may be losses now in terms of the value of the shares currently held by the Huber controlled entities. But of course for an account of profits, one is looking at the profits made from and at the time of the breaches of fiduciary duty.

Third, what has been asserted by Mr Huber from [5] to [13] of his latest submissions is a composite of a stream of consciousness and wishful thinking. The opportunity given to Mr Huber was to respond to the supplementary Hennessy report in terms of its up to date calculations flowing from the hearing on quantum. It was not an opportunity for Mr Huber to have another go as to how he would have wished the trial on liability to have proceeded and been determined.

Fourth, I have considered the miscellany of points at [14] to [25] of his latest submissions. To the extent, which are few in number, that they engage with Ms Hennessy’s analysis they are unconvincing. Nevertheless I am going to discount Ms Hennessy’s overall figures in order to cover any contingencies or points that I might have overlooked. Further, to the extent that these points seek to re-open my liability findings, I reject them.

Fifth, Mr Huber has made submissions on topics such as “Alleged leakage” (including appendix three) and “Secret Share Trading” (including appendix four), but again much of this seems to engage more with my liability findings and not with the supplementary Hennessy report although there are some rare exceptions (see for example [111] on p 53). The same can be said for matters concerning Mr Patel (appendix two). In this context, I have also considered the summary of points at [19] to [25], [41] to [43], [44] to [46] and [47] to [53], but the same points can be made.

The notice of appeal

41    Pursuant to orders as ultimately made by Davies J on 18 June 2021, leave was granted to Mr Huber to file and serve an amended proposed notice of appeal. The document pressed by Mr Huber with that title is dated 7 April 2022 and comprises nine grounds and 10 pages. Unfortunately that economy masks the real complaints of Mr Huber which are revealed in a prolix document with the disarming title: Appeal Book Chapters 1-9 (Chapters document) extending over 841 pages with multiple annexures. Some of the annexures appear to be documents that were before Beach J. Others were not, for example there is much material that is concerned with the liquidation of CellOS. There is also material that Mr Huber provides as his account of losses that he claims he and the Huber entities suffered in consequence of the share trading. The Chapters document is replete with argumentative material, claims of lies and fraud to the effect that the other persons concerned in the management of CellOS implemented a project to oust Mr Huber from the company, to ruin his personal and professional life and to fraudulently commence the proceeding as a component of the scheme. Mr Huber refers to this as “PROJECT-D (Decapitation)”. In his own words the scheme amounted to: “Sabotage, Theft and ruin of CellOS and its founder.” Mr Huber describes the scheme participants and primary elements as :

2.1     By the middle of 2013 a Secret Share Trading Scheme was set up by Harveen Singh Narulla (“Harveen”) with Melvin Tan (“Melvin” or “TAN”). Eventually Melvin Tan brought Constance Peck (“Constance”) into the scheme and by 2015 the scheme also included Janifer Yeo-Tan, Jasbir Narulla, Inderjit Singh, Kamlesh Patel, Thio Gim Hock, Ong-Ang Ai Boon and others.

2.2.     From 2007 Harveen was company secretary of CellOS and was responsible for the company’s share management. In mid 2013 Harveen, arranged to secretly trade CellOS shares with one of the main CellOS engaged share brokers called Melvin Tan and his client Constance Peck and they set up several secret companies with the help of Chua Min Wee and his company Grandeza. Harveen admitted Refer to Douglas Reid Affidavit 08/09/2017 DR-3 that he used these companies and secretly bought cheap shares from early shareholders including his family and friends. Harveen used many secret companies (“Harveen Controlled Companies “HCC”) and further transferred the shares to more secret Harveen Controlled Companies. see para 28 witness statement (amended) 17/05/2018 Tan.

2.3.     Harveen sold most of the shares to Melvin Tan, and Constance Peck. Melvin Tan also interposed his wife, Seah Chye Tin to further hide their identities from the Appellant, who then on-sold the shares mainly to the parishioners of the Christian City Mission Church in Kallang Singapore with the help of the two Senior Pastors Thio Gim Hock and Ong-Ang Ai Boon. Shareholders were made to pledge 10% of their impending profits to Thio Gim Hock’s Charities. See Ex P17 List of Exhibits tendered at trial provided to parties May 2018, BUNDLE OF PLEDGES IN WITH THE PURCHASE OF SHARES (NOT IN CB)

2.4.     The Appellant discovered and stopped the secret trading. As explained below It is incomprehensible that the share trading could be conducted for the Appellant when the Glaringly Obvious Evidence is that the Conspirators deliberately hid the trading from him and that he did everything possible find out about it and subsequently stopped it.

(Original emphasis.)

42    This is a component of Chapter 9, comprising 32 pages of argumentative propositions and references to evidence that it is said Beach J overlooked or misunderstood. Of course the immediate difficulty with this Chapter is that his Honour well understood that Mr Huber’s case at trial included the contention that he was the victim of fraudulent conduct by Mr Narulla and Mr Tan, which he summarised (at LJ [16]-[17]) and rejected as implausible, unreliable, false, as falling with the adverse credibility findings and as a recent invention: for example, LJ [39], [436], [451],[465] and [471].

43    I return to the proposed appeal grounds. They provide (with original emphasis and without correcting for grammatical errors) that Beach J erred in:

1.    failing to objectively consider that the allegations made against the Appellant were so serious and had such serious consequences see Appeal Book Chapter1 Para16 that the evidence and issues presented in the case were required to be considered by application of the Briginshaw standard. This provision reflects Dixon J’s discussion of the quality of persuasion required for this purpose in Briginshaw v Briginshaw [1938] HCA 34; [1938] 60 CLR336 at 361-2; [1938] HCA 34; [1938] ALR 334 at 342 (Briginshaw).

1.1    The Learned Judge ought to have recognised the seriousness of the allegations against the Appellant as Gzell J. did in Australian Securities and Investments Commission v Macdonald [No 11] [2009] NSWSC 287; [2009] 71 ACSR 368, [2009] 230 FLR1, and the potential consequences of civil penalty proceedings demanded the application of the Briginshaw standard. His Honour explained (at [182]-[186]) that: Section 140 of the Evidence Act 1995 prescribes the standard of proof in civil proceedings as the balance of probabilities and provides that the court may take into account in deciding whether it is so satisfied, the nature of the cause of action or defence, the nature of the subject matter of the proceedings and the gravity of the matters alleged.

1.2    the Learned Judge ought to have proceeded upon the basis that the Briginshaw standard applied following the recognition of the serious consequences, see appeal book Chapter1 Para similar to the decision by Spigelman CJ, Beazley and Giles JJA, in the Court of Appeal decision of Morley v Australian Securities and Investments Commission (2010) 274 ALR 205; [2010] NSWCA 331; Their Honours confirmed that that standard finds its modern expression in the terms of Section 140 of the Evidence Act 1995 (Cth) (‘The Evidence Act’) and that the Briginshaw standard is routinely applied in civil penalty proceedings.

1.3    applying the Briginshaw standard to the facts of the case which involved detailed accounting statements, required that he consider all of the information before him objectively. Instead, the Learned Judge applied a subjective standard where he preferred the statements proffered by the Respondent over those of the Appellant based on his incorrect assessment of relative credibility of the witnesses. as follows: See Appeal Book Chapter1 paragraph10 to 15

2.    failing to provide reasons for not providing a reconciliation between the competing accounting statements of the parties to demonstrate why the Appellant’s financial statements were incorrect.

2.1    In Makita (Australia) Pty Ltd v Sprowles, (2001) 52 NSWLR 705. Heydon JA interpreted Australian Corporations Law s.79 to require identification and proof of the factual basis of an opinion, and the exposure of the expert’s reasoning process to demonstrate that an opinion is based on specialised knowledge. It is necessary for the expert to disclose the reasoning which led to the expert’s opinion. (Refer Makita at para 85.) The Learned Judge again based his Verdict 2020 for Quantum on the third Hennessy report of 2 December 2019. Ms Hennessy erred at law when she failed to provide the necessary factual basis for not disclosing her reasons why she considered all the transactions to be “homogeneous” and therefore not producing the ordered reconciliation. See Appeal Book Chapter1 para4.2

3.    failing to provide reasons for not providing a reconciliation between the competing accounting statements of the parties to demonstrate why the Appellant’s financial statements were false.

3.1    The Learned Judge referred to this comprehensive share transfer and cash flow analyses articulated by the Appellant in Appendix 1 of the Affidavit dated 20/12/2019 Huber, as ‘cobbled together’. see para 6, 122 and 123 Verdict 2020 which in layman or non-technical terms, are not acceptable. further and in the alternative the learned Judge erred in law when he failed to provide reasons and explain how the cash flow analysis is "cobbled". See Appeal Book Chapter1 para3&4.

4.    failing to objectively consider the reconciliation provided by the Appellant that the Appellant did in fact suffer substantial losses in providing additional working capital for the Respondent.

4.1    When the reconciliation provided by the Appellant showed that he suffered losses of over 4.5million shares see below Table 3 line 7 for the benefit of CellOS under the loan agreements AND the Appellant lost another 3.8 million shares see below Table 3 line 12 in shares he transferred to Directors and Staff on behalf of CellOS. The Appellant’s Total Loss was 8.3million shares see below Table 3 line 13, for the benefit of CellOS. see Appendix1 in the Affidavit VID951/2015, 20 December 2019 Huber, and see Appeal Book Chapter4 TABLE3, Page 18 table2 and 3.

4.2.     Below Table 2 is a reconciliation between June 2011 and June 2015 of the original shares contributed by the Appellant to Fund CellOS with the shares sold under the LGA and Pized Loans. see attached Appeal Book Chapter 4 TABLE 3 Page 18 table 2.

Below Table 3 is a Reconciliation June 2011 and June 2015 of the Appellant’s original shares sold with the shares refunded, and the Appellant’s original shares transferred by the Appellant to Directors and Management. see Appeal Book Chapter 4 TABLE 3 Page 18 table 3.

5.    failing to objectively consider the evidence that the Appellant was not aware of, did not participate in, and did not benefit from the secret trading by Harveen Narulla when:

5.1    the evidence is that None of these transactions that he attributed to the Appellant were seen or signed by the Appellant, who was unaware of the secret trades because from August 2012, he no longer signed any share statements. Harveen Narulla admitted that from the Middle of 2013 he was able to deliberately hide the transactions from the Appellant because the investors dealt directly with Computershare, enableing Harveen Narulla to circumvent the Appellant. When the evidence is that the Appellant made efforts to find out about the share trading and upon discovery, he blocked them, still not knowing that Harveen Narulla was secretly supplying the shares to Melvin Tan. See full Affidavit VID338/2020, 10 August 2021 Huber.

5.2    the Respondent admitted that by June 2015, the Appellant sold all his original 21 million shares, to Singapore based retail investors and the proceeds, A$40million advanced to CellOS, of which CellOS only refunded to the Appellant 16.8million shares. See Mathew Critchley Letter attached to Appeal Chapter 4.1 and Appendix A 3rd Revised Report 2 December 2019 Hennessy. Compare Appeal Book Chapter 4 Table 3 to Chapter 3 Table 3

•    when all the Appellant’s share sales to fund CellOS under the LGA and Pized loans were personally signed by the Appellant See Appeal Book Chapter 4 TABLE 1

WHEREAS:

•    when none of these secret sales by Harveen Narulla were seen or signed by the Appellant. See Appeal Book Chapter 3 TABLE 1.

AND:

•    when none of the share transfer forms of the secret purchases by Harveen Narulla were seen or signed by the Appellant. see Appeal Book Chapter 3 TABLE 2

5.3    Harveen Narulla, Melvin Tan and Constance Peck all gave uncontested, and glaringly obvious evidence and testimony of their scheme to secretly trade CellOS shares mainly using Melvin Tan’s wife Seah Chye Tin as a front and testified about the great lengths they took to camouflage the trades from the Appellant for example: see Appeal Chapter1 para 8.2

5.3.1.     when Melvin Tan testified ---No. Absolutely – I – I strongly believe there’s no inkling between Jason Huber and – and Harveen, because he swore me to secrecy time and time and again that, “Melvin, please, never, ever – if you want to buy my shares, never, ever to let Jason Huber know that I am selling CellOS shares.” So I strongly believe that it’s nothing to do with Jason Huber. He is completely out of the loop.” T1309 Melvin Tan. And see witness statement 5/09/2017 Melvin Tan and when Melvin Tan testified that Mr Narulla and his family had plenty of money and controlled many companies with money and had the personal ability to buy the shares. and the evidence confirmed this statement by Melvin Tan T1309 Melvin Tan. See Appeal Book Chapter 2 Para 10.2&10.3 and see Appeal Appendix 10.

5.3.2    when the glaringly obvious evidence was that the Appellant was unaware of the secret trades because from August 2012, he no longer signed any share statements. The Investors dealt directly with Computershare enabling Harveen to hide the transactions from the Appellant. See full affidavit VID338/2020, 9 August 2021 Huber.

5.3.3    when Harveen Narulla wrote to Chua Min Wee of Grandeza. “Your firm managed my CellOS assets” and “it made sense for me to ensure that my shares were managed discretely, with no reference to him.” And “I hopped along that relationship as I was also at the time looking for someone to help manage my own assets.” Harveen admitted that he understood how the Lawyers would misinterpret the company ownership, control and shareholdings when he wrote “the lawyers in Melbourne seem to have assumed that whatever is held these companies was Huber's. This is not correct, but I can understand them making this mistake.” Refer to DR-3 VID951/2015 Affidavit 08/09/2017 Douglas Reid.