Australian Securities Commission v AS Nominees Ltd & Ors [1995] FCA 915

TRUSTS AND TRUSTEES - breach of trust - partial decision making - acting in interests of a third party.

TRUSTS AND TRUSTEES - trust company - keeping of records - no records kept of significant trustee decisions and investments.

EQUITY - fiduciary relationship - existence of - between trustees of related trust invested in and the beneficiaries of the investing trust - between trust manager and trust beneficiaries - between directors of a trust company and trust beneficiaries. EQUITY - fiduciary relationship - breach of fiduciary duty - transactions between related parties - loans to fiduciary - purchase of trust property - profit from a position of trust - conflict of duties - director of trust company acting as solicitor for third party in trust dealings - directors of group companies. EQUITY - Barnes v Addy - liability for knowing assistance in a breach of fiduciary duty or trust - accessorial liability - directors of trust company and company's breaches of trust - for improvident investments - for reckless investments - manager procuring a breach of trust or fiduciary duty. CONTRACT - Vendor and Purchaser - sham agreement - contract subject to failed conditions precedent treated by vendor as effective - trust company as vendor - profit on sale booked to trusts, and trust and management fees charged - no effective contract found. EVIDENCE - Commonwealth Evidence Act 1995 - failure of a party and of a senior corporate officer to give evidence in civil proceedings - no explanation - drawing of Jones v Dunkell inferences unaffected by silence of the Evidence Act on this matter. Corporations Law, s60(1) Corporations Law, s232 Corporations Law, s258 Corporations Law, s266 Corporations Law, s289 Corporations Law, s461(k) Corporations Law, s1323 Superannuation Industry (Supervision) Act 1993, ss3, 10 Superannuation Industry (Supervision) Act 1993, ss52(8),(9) Superannuation Industry (Supervision) Act 1993, s97 Superannuation Industry (Supervision) Act 1993, s133 Australian Securities Commission Act 1989, s1(2)(g) Australian Securities Commission Act 1989, s50

Re Attorney-General of Canada and Continental Trust Co (No2) (1986) 52 OR 2d 525 (Can) Australian Securities Commission v Corplan Nominees Pty Ltd, unreported decision of Drummond J of this Court, 29 April 1994 Barnes v Addy (1874) LR 9 Ch App 244 Bartlett v Barclays Trust Co Ltd (No 1) [1980] Ch 515 Charitable Corporations v Sutton (1742) 2 Atk 400; 26 ER 642 In Re Chemicals Plastics Ltd [1951] VLR 136 Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 Re Co-operative Development Funds of Australia Ltd (No3) (1978) 3 ACLR 437 Corporate Affairs Commission v ASC Timber Pty Ltd (1989) 7 ACLC 467 Corporate Affairs Commission (NSW) v Walker (1987) 11 ACLR 884 Daniels v Anderson (1995) 16 ACSR 607 Derry v Peek (1889) 14 App Cas 337 Fouche v The Superannuation Fund Board (1952) 88 CLR 609 Glandon Pty Ltd v Strata Consolidated Pty Ltd (1993) 11 ACSR 543 Harris v S (1976) 2 ACLR 51 Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41 Hurley v BGH Nominees Pty Ltd (1984) 10 ACLR 197 Ex p James (1803) 8 Ves 337; 32 ER 385 Jones v Dunkel (1959) 101 CLR 298 King v Talbot 40 NY 76 (1869) Kokotovich Constructions Pty Ltd v Wallington (1995) 17 ACSR 478 Learoyd v Whiteley (1887) 12 App Cas 727 Loch v John Blackwood Ltd [1924] AC 283 In re Lubin, Rosen and Associates Ltd [1975] 1 WLR 122 Manchester v Cleveland Trust Co 168 NE 2d 745 (1960) Permanent Building Society v Wheeler (1994) 14 ACSR 109; Powell & Thomas v Evan Jones & Co [1905] 1 KB 11 In re The Producers Real Estate and Finance Co Ltd [1936] VLR 235 Royal Brunei Airlines Sdn Bhd v Tan [1995] 3 WLR 64 Sharrment Pty Ltd v Official Trustee (1988) 82 ALR 530 Shuster v North American Mortgage Loan Co 40 NE 2d 130 (1942) Skinner v Trustees Executors and Agency Co Ltd (1901) 27 VLR 218 Space Investments Ltd v Canadian Imperial Bank of Commerce Trust Co (Bahamas) Ltd [1986] 1 WLR 1072 Speight v Gaunt (1883) 9 App Cas 1 Thorby v Goldberg (1964) 112 CLR 597 Walker v Wimborne (1976) 137 CLR 1 Re Walter L Jacob & Co Ltd (1988) 5 BCC 244 Wan v McDonald (1992) 33 FCR 491 Wickstead v Browne (1992) 30 NSWLR 1 AUSTRALIAN SECURITIES COMMISSION v AS NOMINEES LIMITED and OTHERS No ACT AG 3295 of 1995 No ACT AG 3002 of 1995

IN THE FEDERAL COURT OF AUSTRALIA) ) AUSTRALIAN CAPITAL TERRITORY ) ) No ACT AG 3295 of 1995 DISTRICT REGISTRY ) No ACT AG 3002 of 1995 ) GENERAL DIVISION )

BETWEEN: AUSTRALIAN SECURITIES COMMISSION Applicant AND: AS NOMINEES LIMITED (ACN 008 586 267) First Respondent AMPLE FUNDS LIMITED (ACN 008 657 985) Second Respondent AS SECURITIES PTY LIMITED (ACN 008 515 160) Third Respondent PETER GRENFELL WINDSOR Fourth Respondent COURT: FINN J PLACE: CANBERRA DATE: 15 NOVEMBER 1995

THE COURT ORDERS THAT: The applicant is directed to bring in short minutes of orders by filing and serving draft minutes on or before Friday 17 November 1995 for the winding up of the three respondent companies. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules

IN THE FEDERAL COURT OF AUSTRALIA) ) AUSTRALIAN CAPITAL TERRITORY ) ) No ACT AG 3295 of 1995 DISTRICT REGISTRY ) No ACT AG 3002 of 1995 ) GENERAL DIVISION )

BETWEEN: AUSTRALIAN SECURITIES COMMISSION Applicant AND: AS NOMINEES LIMITED (ACN 008 586 267) First Respondent AMPLE FUNDS LIMITED (ACN 008 657 985) Second Respondent AS SECURITIES PTY LIMITED (ACN 008 515 160) Third Respondent PETER GRENFELL WINDSOR Fourth Respondent COURT: FINN J. PLACE: CANBERRA DATE: 15 NOVEMBER 1995

TABLE OF CONTENTS The Parties and the Applications....................... 3 A The Companies, the Trusts and the Trust Business.. 7 1. ASN...................................... 7 2. Ample................................... 11 3. Securities.............................. 14 4. Some Trust Management Practices......... 15 5. Mr Windsor.............................. 17

B The Evidence and Jones v Dunkel.................. 19 I RECURRING LEGAL ISSUES........................... 21 The Standard of Care to be Expected.......... 22 Fiduciary Duties............................. 28 Accessorial Liability........................ 38 II THE TRANSACTIONS................................. 40 1. The Bilambee Loan....................... 41 2. The Janata-Sundowner Transaction........ 44 3. The First Fawkner Centre Transaction.... 53 4. The Calvic Loan......................... 64 5. The APFM Transaction.................... 70 6. The Constant Loan....................... 74 7. The SECCU Transaction................... 79 8. The Securities Loan..................... 88 9. The Woden Loans......................... 92 10. The Second and Third Fawkner Centre Transactions 98 11. Sale of Ample Shares to Fiduciary; Sacking of the Ample Board............................ 115 12. Transfer of the Ample Mortgage......... 117 Exemption Clauses........................... 121 Mr Windsor's Control of ASN and Ample....... 122 The First Application: the Appointment of a Receiver and Manager................... 129 III THE WINDING UP APPLICATION...................... 136 Patterns of Conduct......................... 138 The Australian Securities Commission........ 143 The Just and Equitable Ground............... 146

These are somewhat unusual proceedings. Their object is to secure the removal of trustees and managers of a number of superannuation and unit trusts. Yet in form they involve two applications under the Corporations Law, the one for the winding up of the three corporate respondents, the other (in the alternative) for the appointment of a receiver and manager of all of the property of the corporate respondents and of specified property of the individual respondent. There are good and proper reasons for the proceedings taking the form they have. But as will become apparent in these reasons, the need to view what are essentially trust law problems through the prism of corporations law is itself a complicating factor. The Parties and the ApplicationsParties and the Applications The Australian Securities Commission ("the ASC") is the applicant in both applications. Standing behind and supporting the applications, though not itself a party, is the Insurance and Superannuation Commissioner ("the ISC") - the body whose initial inquiries led ultimately to these proceedings. The first three respondents - AS Nominees Ltd ("ASN"), Ample Funds Ltd ("Ample") and AS Securities Pty Ltd ("Securities") - are all members of a group of companies ("the AS Group") founded by the fourth respondent - Mr Windsor - in the 1970s. It will be necessary below to outline the relationships of these companies and the role of Windsor in them. Suffice it to say here that ASN and Ample operate as trustee companies of superannuation (ASN) and unit (Ample) trusts. Until the initiation of these proceedings, these two had common boards of directors for all practical purposes. For its part Securities, a company controlled directly by Windsor, acts as "manager" of ASN and Ample. It has as well acted as manager of the trusts of both companies, though it is a matter of dispute between the parties as to whether it continues to do so. The AS Group is made up, apparently, of ten companies bound together in a predictably bewildering way by interlocking shareholdings held in some instances by individual companies of the group, in others by directors, and in either case sometimes as trustee or nominee for yet another group company or director. Windsor is the strategic presence in these arrangements. Apart from ASN, Ample and Securities, three other members of the AS Group - AS Properties Pty Ltd ("Properties"), Fiduciary Securities Pty Ltd ("Fiduciary") and Constant Nominees Pty Ltd ("Constant") are significant actors in the events giving rise to these proceedings. Windsor is a director of all three of these companies. The first of the two applications was filed on 16 June 1995. It sought the appointment of a receiver and manager of property of all respondents under the Corporations Law, s1323. This application was made by the ASC in consequence of an investigation (instigated by the ISC) that it had been undertaking into the affairs, first of ASN (since November 1994) and then of Ample and Securities (since April 1995). The second application, filed on 27 July 1995, was made by the ASC under the Corporations Law s462(2). It sought an order under s461(k) that ASN, Ample and Securities be wound up on the just and equitable ground. The applications have been heard together with the evidence in each being evidence as well in the other. Put in very general terms the burden of the allegations made in both applications is that (i) the trustee companies have been run largely at the direction of, and in some real measure for the benefit of, Windsor and his interests; (ii) the directors have demonstrated little appreciation both of their own responsibilities as directors and of the trusteeship obligations of their companies, with the consequence that repeated breaches of the Corporations Law s232 and regular breaches of trust have occurred; (iii) trust funds have been invested recklessly and improvidently often in circumstances of blatant conflict of interest or of partiality; (iv) in one instance fraud of some magnitude has been perpetrated on investor-beneficiaries of the superannuation trusts; (v) ASN and Ample have conducted their affairs as if they were a single entity - to the extent of having a common bank account for all of their various trusts; and (vi) shrouding much of this has been deficient and defective record keeping for both the companies and the trusts. To make out its claims the applicant gave detailed evidence of a series of transactions beginning in 1990 involving one or other of ASN and Ample. These, it alleges, betray a pattern of conduct evidencing both the unfitness of the three corporate respondents and their respective management to have control of the trusts, and the justification for their being put into liquidation. A winding up order, it is claimed, is warranted on public interest grounds. Relied upon in this are (a) the need both to ensure investor protection and to maintain confidence in the proper management of superannuation trusts; and (b) the ASC's statutory responsibility to take action where necessary to enforce the Corporations Law, persistent breaches of ss232 and 258 being alleged here. A clear consequence of the approach taken by the ASC is that my findings and determinations must themselves proceed in two stages. The first will require the separate consideration and evaluation of each of the twelve transactions on which the ASC relies. I would note in passing that here the emphasis in legal principle will be on the law of trusts and of fiduciary obligation more so than on company law. The second stage will require a more synoptic treatment of the transactions and of the conclusions drawn from them individually. The end purpose of this will be to determine whether the case is an appropriate one for the making of a winding up order against any or all of the corporate respondents. These two stages will be reflected in the second and third of the three parts of these reasons. The first part deals with issues of law which are common to some number of the transactions and which conveniently can be dealt with together at the outset. The second will focus on the twelve transactions individually. The third, on the winding up application. However, before turning to each of these it is necessary to deal with two preliminary matters. The first is the need to provide a more detailed account both of the companies and trusts implicated in these proceedings and of the manner in which the trust business has been conducted by the three corporate respondents. The second relates to such evidence as has, and has not, been given by, or on behalf of, the respondents and the Jones v Dunkel (1959) 101 CLR 298 issues raised in consequence. A. The Companies, the Trusts and the Trust Business. The Companies, the Trusts and the Trust Business My comments here will be limited to the three corporate respondents, to the trusts with which they are associated and to the conduct of the trust business. 1. ASN.ASN This is an unlisted public company. The shares in it are held beneficially by another AS Group company, Australian Superannuation Nominees Ltd ("Australian"). That company plays no active role in the business either of ASN or, through it, of Ample, though it shares a common board of directors with ASN and, until 20 June 1995, with Ample. The directors of ASN are (i) Mr Cahill, the executive director and an accountant engaged full-time in the affairs of the AS Group, who is remunerated for this by Securities for which he acts as a consultant; (ii) Mr Napper, a solicitor and consultant to a law firm in Canberra, who is chairman of the boards of both ASN and Ample; and (iii) Mr Sutherland who is a solicitor in legal practice in Canberra. There are two alternate directors. They have not played parts of any significance in the subject matter of these proceedings. Their actual involvement in the company's management, apparently, is negligible. The business of ASN is that of trustee of superannuation trusts. Briefly described that business is conducted as follows. Members of the public who become investors execute their own deed of trust with ASN as trustee (the "Client Plan"). Contributions made under a Client Plan either are invested at the direction of the individual investor ("directed investment") or, in the absence of direction but in accordance with the trust deed, are aggregated with contributions from numerous other Client Plans in pooled superannuation funds (or "SIPs" as they are known). There are three such SIPs - SIP1, SIP2 and SIP3 - each having its own trust instrument. ASN is the designated trustee of each.

The activities of the SIPs have varied over time. For the purposes of these proceedings it is SIP1 which is of most importance. It is the fund which, of recent times, has been the investing arm of the trusts. As will be seen, a deal of that investment has been channelled into unit trusts of which Ample is trustee. Securities (which for practical purposes is Windsor) provides management services to ASN and to the SIPs. Under both the Client Plans and the SIP trusts ASN is entitled to draw trustee's fees. Managers fees (paid to Securities) also are charged on the SIPs and, for that matter, on the Ample trusts. These are calculated, in the main, on the asset value of the trusts. This access to fees, and the manner in which it has been exploited, provides one plank in the complaints of the ASC. The ultimate beneficiary of both forms of fees is in fact Securities, those fees derived by ASN being handed over after deduction of expenses. Some indication of the funds/assets held by the SIPs and of the fees derived from them can be obtained from the following two tables prepared by Mr Howard of the ASC and put in evidence. They are drawn from the financial accounts for the 1993 and 1994 financial years. Table 1 SIP Gross Assets Net Assets SIP1 $ 8,294,426 $6,685,030 SIP2 $ 678,556 $ 676,569 SIP3 $ 1,100,305 $1,100,305 Total $10,073,287 $8,461,904

Table 2 Trust Profit/Loss Detail-1993- Amount Profit/Loss Detail-1994- Amount $ $ SIP1 Fees 175,629 Managers & Trustees Fees 276,825 SIP2 Trustees Fees 1,011 Managers & Trustees Fees 6,942 Managers Fees 11,219 SIP3 Management Fees 147,196 Managers & 150,588 Trustees Fees 55,756 Trustees Fees

I should note that investors in ASN's Client Plans are, in general, referred to ASN by a limited number of advisers around Australia ("client advisers"). For its part ASN ordinarily deals only with the client advisers rather than with investors directly. The AS Group does not publicly promote its business. 2. Ample. This also is an unlisted public company. At all relevant times until 28 January 1995 the two issued shares in Ample were held by ASN and Australian. On that date those shares were transferred to Fiduciary, itself a member of the AS Group as I have already noted. I will return to this transfer later in these reasons. At all relevant times up until 20 June 1995 the directors of Ample were Messrs Napper, Cahill and Sutherland. On that date - which was the day before an interlocutory hearing in this Court of the s1323 application - they were removed by Windsor and replaced with Windsor, Mrs Windsor and a Mr Greig. Ample is the trustee of at least 5 unit trusts. Four of these are relevant for present purposes and can be described as Ample 1, Ample 2, Ample 3 and Ample DUT (the "Ample trusts"). These trusts are created under their own trust deeds and, in practice at least, are more in the nature of trusts for specific investments. As I have already indicated, SIP1 has significant investments in the Ample trusts. In fact it is the preponderant investor in those trusts. As with the SIPs, trustee and management fees are charged to the Ample trusts. The ultimate beneficiary of these fees (both trustee and management) is Securities. Securities provides management services to Ample and to the Ample trusts - although the extent of the latter is the subject of dispute between the parties. Again to illustrate (a) the dimension of the funds/assets under Ample's control, (b) the level of SIP investment in the trusts, and (c) the value of fees charged on the trusts, the following three tables drawn from Mr Howard's evidence and based on the 1993 and 1994 financial years, are set out here. Table 1: Ample Trust assets

Ample Trust Gross Assets Net Assets Ample 1 $11,533,106 $5,076,981 Ample 2 $ 1,757,794 $1,757,794 Ample 3 $ 834,550 $ 834,550 Ample DUT $ 781,404 $ 781,404 Total $14,906,854 $8,450,729

Table 2: SIP1 investment in the Ample Trusts Ample Trust SIP1's share in Gross Assets SIP1's share in Net Assets Ample 1 $11,533,106 $5,076,981 Ample 2 $ 880,778 $ 880,778 Ample 3 $ 11,981 $ 11,981 Ample DUT $ 760,026 $ 760,026 Total $13,185,891 $6,729,766

Table 3: Management and Trustee Fees for Ample Trusts Trust Profit/Loss Detail-1993- Amount Profit/Loss Detail-1994- Amount $ $ Ample 1 Management Fees 193,610 Trustees Fees 35,901.00 Ample 2 Management Fees 9,545 Nil Nil Ample 3 Management Fees 1,492 Managers Fees 6,758.53 Ample Management Fees 2,042 Trustees Fees 7,814.04 DUT

The final observation that should be made is this. The Client Plan which appoints ASN as trustee for each individual investor contemplates that that investor's contributions may be pooled in a SIP. What those Client Plans do not on their face contemplate - or expressly authorise - is that an investor's contribution (so pooled) will be further used to subscribe for units in trusts (i) held by a related entity subject for practical purposes to an identically constituted board; and (ii) on which management and trustee fees were to be charged. According to Mr Cahill's evidence, both the decision to create Ample and the recommendation to constitute the Ample trusts were made by Securities (the manager of the SIPs). I have no evidence before me as to why this additional tier of unit trusts - and of fee imposition on investors - was interposed between the SIPs and the actual assets in which SIP funds were invested. I would add by way of chronology that while the first of the SIPs (SIP1) was created in 1986, Ample itself was not incorporated until the end of 1989 and the first Ample trust (Ample 1) was not constituted until mid-1991. 3. Securities. This is a private company. Its two issued shares are held by Mr Windsor and by Capable Nominees Pty Ltd (a member of the AS Group). The directors are Mr and Mrs Windsor. As I have already noted (i) Securities provides management services - as also staff, equipment, and premises - to ASN and Ample and, though this is disputed, to the SIPs and the Ample Trusts; (ii) after deduction of ASN's and Ample's expenses, it is the ultimate beneficiary of all management and trustee fees paid by the SIPs and by the Ample trusts; and (iii) it provides for the remuneration of Mr Cahill's services through a consultancy agreement. Having regard to the arrangements for accounting for fees charged, the conclusion is inescapable that such profit as is derived from the trust business inures to the benefit of Securities, hence to the Windsors. I will refer below to the legal character of Securities' relationship with investor-beneficiaries of the SIPs and the Ample trust. 4. Some Trust Management Practices. The various transactions to be considered provide example enough of how the affairs of the trusts and the companies were conducted. Here I wish merely to note four matters of more general character which reveal aspects of the style or practice of trust management adopted in ASN and Ample. First, notwithstanding the clear requirements of the law of trusts to the contrary, ASN and Ample maintain a common bank account for all of the SIPs and the Ample trusts. It is in the name of ASN: on the duty to keep separate the funds of separate trusts unless expressly authorised to the contrary, see Skinner v Trustees Executors and Agency Co Ltd (1901) 27 VLR 218; Re Harvey, Westminster Bank Ltd v Askwith [1941] 3 All ER 284; Ford and Lee, Principles of the Law of Trusts, para 948 (2nd Ed); Scott on Trusts, para 179.2(4th Ed). Furthermore, on at least one occasion money owned beneficially by another company in the AS Group (Fiduciary) found its way into this joint trust account. Secondly, while it was by no means the invariable practice, joint board meetings of ASN and Ample were not at all uncommon when trust business was being conducted. I merely note at this stage that an issue in these proceedings is the extent to which the two trustee companies gave separate consideration to the several interests of the individual trusts under their respective control. This undoubted duty of trustees reflects in its own way the like responsibility of directors of a company which is part of a corporate group: see eg Walker v Wimborne (1976) 137 CLR 1 esp at 6-7. Thirdly, despite the provisions of the Corporations Law ss258 and 289 relating to the keeping respectively of minutes of board meetings and of accounting records, a notable feature in quite some number of the transactions to be examined is an absence of any, or else any appropriate, documentary record either of meetings at which trustee decisions were said to have been taken or of those decisions themselves (whether or not taken at a board meeting). I would note in passing that for the purpose of its s1323 application, the ASC investigation into Ample and Securities was based on suspected contraventions of s289. Fourthly, dealings between SIP1 and the Ample trusts and between ASN, Ample and other companies in the AS Group were a pervasive phenomenon over the period inquired into by the ASC. It is this which accounts for the level and intensity of allegations both of conflict of interest and of partial decision-making which have been raised here. 5. Mr Windsor. As will later become apparent, much in these proceedings is concerned with Windsor and his actions. Here, simply for reasons of convenience in exposition, I will refer to two unrelated matters. First, an issue raised in this case is whether the relationship and actions of Windsor vis-a-vis the directors of ASN and Ample are such that I should conclude he is "a person in accordance with whose directions or instructions the directors of [both companies] are accustomed to act": Corporations Law, s60(1). In other words it is alleged that by virtue of that section he is a director of those two companies. Given the scale of infra-AS Group dealing which I have already foreshadowed, the effect of my so concluding would be to facilitate the finding of conflicts of interest in those dealings. Later in these reasons I in fact make the finding that Windsor is a s60 director. However, analysis of the twelve transactions is not conducted on that assumption. I have considered it appropriate first to identify the ills of those transactions without resort to this deeming provision and only later to suggest the difference in practical effect the s60 finding would make. Such are the vices revealed that that difference, as will be seen, is of no great consequence. Secondly, there was a practice engaged in by Windsor which warrants some explanation if only to cast light on an otherwise somewhat perplexing aspect of some number of the transactions to be discussed. From as early as 1991 it is apparent that Windsor was attempting to secure large scale overseas investments in unit trusts under the control of his AS Group. The Janata-Sundowner Transaction to which reference will be made illustrates one such attempt. It equally is apparent that he considered overseas investors would be more likely to make a commitment to the AS Group if he could demonstrate that he had, or at least appeared to have, large dollar investments under the Group's control. It would seem for this reason he adopted a strategy on the making of investments which appeared to promote that end. Put briefly the strategy was this. When an AS Group company made an investment with another party, that party (or one of its affiliates) was requested/required to make a substantial (usually multi-million dollar) deposit with a trust controlled by a group company (usually Ample). The deposits were not ones intended to produce management fees of any significance for the trust company involved. The benefit sought from the deposit was the appearance created - i.e. that the AS Group had substantial funds under its control. B. The Evidence and Jones v Dunkel. Two key figures have not given evidence in the respondents' cases. They are Windsor and Napper. On the evidence before me Windsor can properly be assumed to have an intimate knowledge of almost all of the individual transactions to be considered. They were, in the main, of his making. For his part, Napper was chairman of the boards of ASN and Ample for all of the transactions. He was a principal actor in several of them. The propriety or else the providence of every such transaction involving one or other of the two men is in issue. Evidence was given by two of the directors of ASN and Ample - Mr Cahill and Mr Sutherland. Though having some responsibilities (if only as board members) in all of the transactions, their involvement was, usually, of a lesser order. Often enough they relied on Napper and Windsor for advice and explanation. I have been provided with no explanation at all for the failure to call Napper. He has, apparently, been in Canberra throughout the proceedings. The apparent reason for Windsor's unavailability is that, with notice of these proceedings, he went overseas to generate business for the AS Group. This I do not regard as an explanation of his failure to give evidence as the term "explanation" is used in this context: see Payne v Parker [1976] 1 NSWLR 191 at 202. In these circumstances the applicant has submitted, consistent with Jones v Dunkel (1959) 101 CLR 298, that the inference that may be drawn from the failure to call these witnesses is that their evidence would not have helped the respondents' cases. This is an inference I am prepared to draw given the state of the evidence in these proceedings. It is not an inference which counsel for the respondents felt able to resist either in oral or written submission. Furthermore, as will be seen, it is the case that the majority of the transactions to be considered have unusual, untoward or ambiguous features. These call for explanation. The failure to explain these assists materially in determining the inferences fairly to be drawn from the applicant's evidence: see Dilosa v Latec Finance Pty Ltd (1966) 84 WN (NSW) 557 at 582. I will indicate as appropriate where such assistance is being relied upon in the drawing of inferences. Finally I should add that I do not consider the silence of the Evidence Act 1995 (Cth) on the inferences that may be drawn from the failure of a person to give evidence in a civil case, as in anyway undermining the long standing practice of courts in drawing such Jones v Dunkel inferences as I have indicated I am prepared to draw in this case: cf Cross on Evidence para 1215 fn1; para 1815 (Australian ed.). I RECURRING LEGAL ISSUES There are at least three legal issues which either alone or in combination are relevant to almost all of the twelve transactions examined below. So as to avoid undue repetition it is appropriate at the outset to outline those issues and my conclusions on them. The issues are - (i) the standard of care to be expected of the trustee companies and of their directors in the conduct of the trust business; (ii) the extent to which fiduciary duties are owed by the trustee companies, the manager (Securities), and the directors of the trustee companies, to the investor-beneficiaries; and (iii) the exposure of the directors and of related companies to accessorial liability in consequence of their participation in breaches of trust and of fiduciary duty.

The Standard of Care to be Expected It is old and accepted law that in managing a trust business the trustee should exercise the same care as an ordinary, prudent business person would exercise in conducting that business as if it were his or her own: Speight v Gaunt (1883) 9 App Cas 1; Learoyd v Whiteley (1887) 12 App Cas 727; Knox v Mackinnon (1888) 13 App Cas 753. There is an equally well accepted gloss on (or adjunct to) this in relation to trustee investments which is aptly described in Scott on Trusts as the "requirement of caution": para 227.3. That requirement is well expressed in King v Talbot 40 NY 76 (1869) to which Scott refers: It ... does not follow, that, because prudent men may, and often do, conduct their own affairs with the hope of growing rich, and therein take the hazard of adventures which they deem hopeful, trustees may do the same; the preservation of the fund, and the procurement of a just income therefrom, are primary objects of the creation of the trust itself, and are to be primarily regarded. To like effect are the observations of Lindley LJ in In re Whiteley; Whiteley v Learoyd (1886) 33 ChD 347 at 355. In these proceedings I emphasise particularly the requirement of caution. It is this which, often enough, is used to differentiate the expectations properly to be had of trustees and of directors respectively. So in Daniels v Anderson (1995) 16 ACSR 607 at 658, for example, Clarke and Sheller JJA observed that:

While the duty of a trustee is to exercise a degree of restraint and conservatism in investment judgments, the duty of a director may be to display entrepreneurial flair and accept commercial risks to produce a sufficient return on the capital invested.

See also on this distinction the observations of Jacobs J in Re International Vending Machines Pty Ltd (1961) 80 WN(NSW) 465 at 473. I would add that underlying the distinction today is, probably, not merely an historical assumption about the separate purposes of companies and of trusts, but also a generalisation about the different risks that persons who invest their assets in companies on the one hand and in trusts on the other are considered likely to have assumed: for an example of risk assumption applied to trusts see Space Investments Ltd v Canadian Imperial Bank of Commerce Trust Co (Bahamas) Ltd [1986] 1 WLR 1072. Where the trustee is itself a company the requirements of care and caution are in no way diminished. And here, unlike with companies in general, these requirements have a flow-on effect into the duties and liabilities of the directors of such a company. It was early established - largely it would seem from case law on charitable and municipal corporations - that at least when, and to the extent that, directors of a trustee company are themselves "concerned in" the breaches of trust of their company, they are liable to the company according to the same standard of care and caution as is expected of the company itself: Charitable Corporation v Sutton (1742) 2 Atk 400; 26 ER 642; Attorney-General v Wilson (1841) 10 LJ Ch 53; Joint Stock Discount Co v Brown (1869) LR 8 Eq 381; Fouche v The Superannuation Fund Board (1952) 88 CLR 609. To affirm such a limited coalescence in the standard of care of directors and trustees in the case of directors of trust companies is not to reignite the arid debate on whether directors are trustees: cf Re International Vending Machines Pty Ltd (1961) 80 WN(NSW) 465 at 473; L S Sealy, "The Director as Trustee" [1967] Camb LJ 83. It is merely to say that in this context the duties of trusteeship of the company can give form and direction to the common law and statutory duties of care and diligence imposed on directors, where the directors themselves have caused their company's breach of trust: on the duty of care of directors generally, see Daniels v Anderson (1995) 16 ACSR 607; Permanent Building Society v Wheeler (1994) 14 ACSR 109; see also Superannuation Industry (Supervision) Act 1993, s52(8), (9). It needs, though, to be emphasised - and this is of importance in what later is described as the "SECCU Transaction" - that the coalescence noted is only operative when the trust business itself is involved. Where the company is engaged in its own affairs - and the SECCU Transaction is an example of this - the directors' duty of care and skill will for that reason be unaffected by trust law considerations. The standard of trustee care and caution of which I have been speaking so far does not differentiate between types of trustee. It is of general application. That standard, moreover, was settled a century ago and during a period when trust corporations were not used for the trading and investment purposes that are the commonplace in this country today. There is, in my view, a substantial question now to be answered as to whether a higher standard is not to be exacted from at least corporate or professional trustees (i) which hold themselves out as having a special or particular knowledge, skill and experience and (ii) which, directly or indirectly, invite reliance upon themselves by members of the public in virtue of the knowledge etc they appear so to have. In Bartlett v Barclays Trust Co Ltd (No 1) [1980] Ch 515 at 534 Brightman J was prepared to impose such a higher duty of care on a trust corporation: a professional corporate trustee is liable for breach of trust if loss is caused to the trust fund because it neglects to exercise the special care and skill which it professes to have.

This decision has been cited with apparent approval, though it was not in terms relied upon, by Gleeson CJ in Gill v Eagle Star Nominees Ltd, SC of New South Wales, 22 September 1993. It is, in its own way, consistent with observations of the Privy Council in the Australian appeal, National Trustees Company of Australasia Ltd v General Finance Company of Australasia Ltd [1905] AC 373 at 381, when refusing to excuse a trust company from a breach of trust. There is an extensive United States case law affirming such a higher standard. It is conveniently explained and exemplified in Scott on Trusts para 174.1 (4th Ed); see also Fales v Canada Permanent Trust Co [1977] 2 SCR 302 (Can) where the question is recognised but not answered by the Supreme Court of Canada; and see Bogert, The Law of Trusts and Trustees, para 541 (Rev 2nd Ed). If it were in fact necessary for me so to do (which it is not), I would be prepared to apply to the trustee companies in these proceedings a standard of care higher than that of the ordinary prudent business person. The applicant in its submission has invited me to adopt this course. I should indicate that I do not regard the observations of the High Court in Fouche v The Superannuation Fund Board (1952) 88 CLR 609 at 641 on the standard of care and prudence expected of the statutory corporation in that case (ie the prudent business person standard) as precluding the adoption of a different and higher standard in the circumstances of a trustee company (a) carrying on business as such in the now established field of superannuation; (b) accepting and soliciting the utilisation by members of the public of its services as a funds manager; and (c) charging significant fees for so doing. The Board in Fouche was a body of a materially different variety. It was created by statute to administer a superannuation scheme for members of the Tasmanian public service. It did not hold itself out as conducting a trust business or as rendering professional trust services. I should also add that it is unnecessary for the purposes of the present proceedings to examine the standards of care for corporate trustees of superannuation entities prescribed in the Superannuation Industry (Supervision) Act 1993, s52 and especially s52(8) and (9). That legislation even now applies only to ASN. For almost all of the period with which I am concerned those provisions were inoperative: see ibid, s2(4). In the event, though, there is no need to specify a higher standard of conduct for the corporate trustees in this instance. This is because the actions alleged to constitute breaches of trust in the transactions to be referred to, characteristically fall short of even the prudent business person measure and by some distance. Finally, I merely note that there is a question whether the duty of care owed by directors of a trustee company to their company is owed as well to the beneficiaries of the trust: see Royal Brunei Airlines Sdn Bhd v Tan [1995] 3 WLR 64 at 75; see also Wickstead v Browne (1992) 30 NSWLR 1; and cf Scott on Trusts, para 326.3 (4th Ed). Given the view I take of the relevance to these proceedings of the accessorial liability rule in Barnes v Addy (1874) LR 9 Ch App 244, the question is not one that need be explored here. Fiduciary DutiesFiduciary Duties The possible fiduciary issues in this case are multi-dimensional. Given the various roles and responsibilities of the respondents and of the directors of Ample and ASN, it has in effect been submitted that all of these are bound to the investor-beneficiaries by a web of fiduciary relationships both orthodox as well as unusual. The possible fiduciary character of three particular relationships will be raised here. These are the relationships with the investor-beneficiaries (i) of ASN and of Ample; (ii) of Securities; and (iii) of the directors of ASN and Ample. (i) ASN and Ample It need hardly be said that both ASN and Ample are in fiduciary relationships with the beneficiaries of the SIPs and of the Ample trusts respectively. In relation to the SIPs those beneficiaries are the investors whose contributions, not being the subject of directed investment, have been pooled in the SIPs. The situation with the Ample trusts is less straightforward. With trusts other than Ample 1, investments have been made variously by ASN (for the SIPs) and by individual investors so directing their investment. Investment in Ample 1 in contrast appears to be limited to the SIPs. Formally then, insofar as SIP funds are invested in Ample trusts, the beneficiary of those trusts is ASN as trustee for those investors beneficially interested in the SIPs. However, this is a case in which the artificiality of form can be overwhelming. Given that ASN and Ample have common boards of directors, and given that the funds invested in Ample 1 by ASN have come exclusively from the SIPs, it would, in my view, be to ignore the true character of the relationship between Ample (as the trustee of Ample 1) and the investors in the SIPs, to conclude that that relationship was not itself a direct fiduciary one. Though it probably is unnecessary so to do for the purpose of these particular proceedings, I am prepared to make such a finding. The investors alone have the real interest in Ample 1 and its administration. In saying there is such a fiduciary relationship, I am not suggesting that Ample has formal powers over the SIPs. Rather I am saying that, in exercising its powers in the Ample 1 trust, it is obliged to act in the interests of the investor-beneficiaries in the SIPs who are for practical purposes to be regarded as the beneficiaries of that trust. I should also add that I am not suggesting that a direct fiduciary relationship necessarily arises between the trustees of trust A and the beneficiaries of trust B whenever trust B invests in trust A. My conclusion is limited to the situation where trust B is the exclusive investor in trust A and where the trustees themselves have common directors. It is unnecessary to express any more general opinion on the possible fiduciary effects of inter-trust investment. (ii) Securities Whether or not Securities is in a fiduciary relationship with the beneficiaries of the SIPs and/or the Ample trusts is a matter of some legal significance given the level of its involvement in the transactions to be considered. The two SIPs which are of particular significance for the purposes of these proceedings are SIP1 and SIP3. The Trust Deed of SIP1, executed on 13 August 1986 by ASN and Securities, constituted the former the trustee of the SIP and the latter its manager. The Manager's covenants in that deed were expressed to be for the benefit "not only [of] the Trustee but [of] the Unit Holders jointly and ... severally". The SIP3 Trust Deed of 29 June 1990 between the same parties had like covenants. For its part the Ample 1 Trust Deed of 24 June 1991 did not formally constitute Securities (or any other body) the manager of the trust. The deed, though, gave Ample a wide power to engage the services of a manager. The ASC's case is that Securities was, in fact, so engaged for this and the other Ample trusts.

It may well be that, as a matter of construction, the terms of the two SIP trust deeds are themselves sufficient to constitute Securities the fiduciary of the investor-beneficiaries of the two SIPs to the extent that Securities is authorised or required to perform services for their benefit: cf Australian Fixed Trust Pty Ltd v Clyde Industries Ltd (1959) 59 SR (NSW) 33 at 59; Hughes, The Law of Public Unit Trusts, 106ff. I do not, though, proceed on this particular basis of itself to justify the finding of a fiduciary relationship with the SIP investors. For this reason also, I have not here examined the terms of the trust deeds in any detail. It is the case that Securities has acted as a manager for both the SIPs and the Ample trusts. By manager I mean the party who sought out both investors in, and investments for, the trusts. As will be seen, Windsor was a pivotal figure in securing the commitment of the trusts to some number of the investments to be examined even if, as a matter of legal form, the investment decision itself may have been made by the board of the particular trust company concerned. Again as I have noted the benefit of all fees derived from the SIPs and the Ample trusts (less expenses) have been passed on to Securities. The evidence of Mr Cahill was that Securities acted as manager both of the two companies and of their trusts until "several years ago" when it ceased to act as manager of the trusts. No reasonably definite time was given as to when this change was supposed to have occurred. No convincing explanation was given as to why the change did not result in a change in the fee arrangements with Securities. No variation was made of the SIP1 and SIP3 trust deeds to reflect the change. But most significant of all, it seems clear from the transactions to be examined that Windsor has continued to perform a strategic management role in the affairs of the SIPs and the Ample trusts. A late illustration of this to which reference will be made is the Third Fawkner Centre Transaction of 1994. It equally seems clear that Windsor has, throughout, maintained a formidable manipulative capacity in trust decision making. The uncritical reliance placed on his proposals by the directors of ASN and Ample is, as will be seen, sometimes breathtaking. Of relatively recent times it may well be that the level of Windsor's active involvement in SIP and Ample trust affairs has changed. But if Cahill in his evidence was suggesting that Windsor (hence Securities) had abandoned strategic responsibility in guiding and contriving those affairs and that the directors of ASN and Ample in consequence no longer conceded him that power, I am unable to accept this evidence. The considerations I have noted above can lead to no other conclusion. I find that Securities has continued to discharge a management role for the trusts. I should, however, add that some of the difficulties with Cahill's evidence here may be attributable to differing connotations given to the term "manager" itself by the parties in these proceedings. Turning directly to the fiduciary question. My preferred approach is to resolve it by reference to what Securities in fact did for the trusts and to the context in which this occurred. The ASC has submitted that Securities, in any event, is in a fiduciary relationship with the investor-beneficiaries. That conclusion is one with which I agree for the following reasons. Even if it is the case that Securities can properly be said as a matter of legal form to be the manager for, or the agent of, the trustees (ie ASN and Ample) in performing services for the trusts, this by no means precludes a finding that it is, as well, in a direct fiduciary relationship with the beneficiaries of the trusts when providing those services: cf Powell & Thomas v Evan Jones & Co [1905] 1 KB 11; Blair v Martin [1929] NZLR 225. When one has regard (i) to the functions actually performed for the trusts by Windsor who is Securities' alter ego (reference will be made to these in later analyses of the transactions); (ii) to the level of responsibility for identifying and securing trust investments in fact conceded to Windsor by the boards of ASN and Ample; (iii) in the case of SIP1 and SIP3, to the terms of the respective trust deeds and of the "Manager's" undertakings in them; (iv) to the appreciation Windsor must reasonably be taken to have had of the vulnerability of the trusts to Securities' actions; and (v) to the awareness he must reasonably be taken to have had that the function Securities was performing was for the benefit of the trust beneficiaries - the conclusion in my view is irresistible that Securities was in a fiduciary relationship with the beneficiaries of the respective trusts in rendering services to them. The more prominent of the criteria which have been endorsed or relied upon in case law in this country for identifying fiduciary relationships - (i) undertaking: see Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41 at 72 per Gibbs CJ and 96-97 per Mason J; (ii) vulnerability to another's power or vulnerability necessitating reliance: Hospital Products Ltd v United States Surgical Corp at 142 per Dawson J; Mabo v State of Queensland (No 2) 175 CLR 1 at 200-201 per Toohey J; and (iii) reasonable expectation - Glandon Pty Ltd v Strata Consolidated Pty Ltd (1993) 11 ACSR 543 - when applied to the factors I have identified above, confirm in my opinion the conclusion I have reached. Securities is so circumstanced vis-a-vis the beneficiaries of the various trusts of ASN and Ample that the beneficiaries of each individual trust are entitled to expect that Securities will act in the interests of those beneficiaries to the exclusion of its own or any third party's interests, in its dealings for or on behalf of that trust. On the various criteria I have noted above see generally Glover, Commercial Equity: Fiduciary Relationships, Ch3. This being a clear case it is unnecessary to examine those criteria and their present application in any detail. (iii) The Directors of ASN and Ample The applicant has submitted that the directors of the two companies owe fiduciary duties not just to their companies respectively, but also to the beneficiaries of the trusts of those companies. As I understood it, the burden of the submission was this. Because the companies were trust companies, if the directors breached their duty to the company in the course of exercising its powers of trust management, that breach would give rise to a related breach of duty by the directors to the trust beneficiaries. That "related" duty was derived, it would seem, from the fiduciary duty owed by the company to the beneficiaries. For the reasons I will give below it is unnecessary to express a concluded view on this particular submission: but see Wilson v Lord Bury (1880) 5 QBD 518 at 535 per Baggallay LJ; In re The French Protestant Hospital [1951] 1 Ch 567; and cf Bath v Standard Land Co Ltd [1911] 1 Ch 618. It is not open to doubt that the particular factual relationship existing between a (or the) director(s) of a trustee company and a beneficiary or beneficiaries of a trust, may properly warrant the finding of fiduciary relationship between them: cf Coleman v Myers [1977] 2 NZLR 225; Glandon Pty Ltd v Strata Consolidated Pty Ltd (1993) 11 ACSR 543. But to say this is not to say that there is anything fiduciary in the trust company director-trust beneficiary relationship as such. It also is not open to doubt that some at least of the disabilities fiduciary law imposes on a fiduciary (including a trust company) are imposed as well on the officers, employees and agents of that fiduciary. A simple example is the rule in Ex p James (1803) 8 Ves 337; 32 ER 385 proscribing the purchase of trust property: see eg In re James; Bagot's Executor and Trustee Co Ltd v McGregor [1949] SASR 143. In contrast with the above is the controversial suggestion in a number of cases that the duty of directors to their "company" can itself embrace some level of direct fiduciary responsibility to the beneficiaries of a trust of which their company is a trustee: see eg Hurley v BGH Nominees Pty Ltd (1984) 10 ACLR 197; Inge v Inge (1990) 3 ACSR 63. This view is not without its critics: see e.g. Ford and Austin's Principles of Corporations Law, para 8.110 (7th Ed); J D Heydon, "Directors' Duties and the Company's Interests", in Finn (ed), Equity and Commercial Relationships, 131-132. It is questionable, in my view, whether this heralded development in our law is a desirable or necessary one in the trust company context. To the extent that it is advanced as a means of protecting trust beneficiaries from misuse by directors either of their company's trustee powers or of their own position vis-a-vis the trust property, it can be said that that protection can be afforded by other quite orthodox means and in a more extensive way. I will in the section next following refer in a little detail to aspects of the rules in Barnes v Addy (1874) LR 9 Ch App 244. Suffice it to say at this point, that the position now reached in the accessorial liability rule of Barnes v Addy is such as to render the directors of trust companies particularly and peculiarly vulnerable to suit by the trust beneficiaries for acts etc which constitute breaches of trust or of fiduciary duty on their company's part. As I indicated earlier it is not necessary to venture a concluded opinion on the applicant's submission as to the fiduciary status of the directors of ASN and Ample vis-a-vis the trust beneficiaries of those companies. The practical result the applicant would seem to wish to achieve through that submission can be secured as well by the Barnes v Addy route. It is that which I would prefer to adopt for the purposes of these proceedings. A final, general observation should be made about the impact of fiduciary law on the transactions to be considered. It is uncontroversial law that, absent an effective exemption clause, if a fiduciary is to be immunised from the legal consequences of conduct that would constitute or has constituted a breach of fiduciary duty, that person at the least requires the informed consent of the beneficiaries to his or her conduct. I say "at the least" because for particular rules (e.g. self-dealing or undue influence) the fiduciary's onus can carry additional burdens. The two points to be made for the purposes of these proceedings are (i) there are not, I am informed, effective exemption clauses covering the conduct to be considered; and (ii) that in none of the trust transactions in which fiduciary wrongdoing is alleged, has disclosure been made to the relevant trust beneficiaries. Accessorial LiabilityLiability Legal decision and scholarly opinion in common law jurisdictions are converging in the view that at least what is known as the second ("the knowing assistance") limb of the rule in Barnes v Addy is a fault based form of accessorial liability. For present purposes that liability rule can be formulated (conservatively) as one which exposes a third party to the full range of equitable remedy available against a trustee if that person knowingly or recklessly assists in or procures a breach of trust or of fiduciary duty by a trustee: Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373; see Royal Brunei Airlines Sdn Bhd v Tan [1995] 3 WLR 64 and the cases and writings referred to therein; Wickstead v Browne (1992) 30 NSWLR 1; Equiticorp Finance Ltd v Bank of New Zealand (1993) 32 NSWLR 50 per Kirby P; Bogert, The Law of Trusts and Trustees, para 901 (Rev 2nd Ed); Oakley, "Liability of a Stranger as a Constructive Trustee" in Cope (ed) Equity: Issues and Trends. As has long been recognised in case law in the United States - see eg Shuster v North American Mortgage Loan Co 40 NE 2d 130 (1942); Seven G Ranching Co v Stewart Title & Trust of Tucson 627 P 2d 1088 (1981); see also Scott on Trusts, para 326.3 ("Directors and officers of corporate trustee") (4th Ed); Bogert, The Law of Trusts and Trustees, para 901 esp fn 10 (Rev 2nd Ed) - this form of liability is one of no little significance to the directors of a trust company for the very reason that, often enough, it will be their own conduct in exercising the powers of the board which causes their company to commit a breach of trust. They are, in other words, peculiarly vulnerable to this rule. Recent Australian case law is demonstrating an appreciation of this: see eg Young v Murphy (1994) 13 ACSR 722; see also Biala Pty Ltd v Mallina Holdings Ltd (1993) 11 ACSR 785 at 832. It cannot be said that all of the various controversies which have beset this limb of Barnes v Addy have been stilled in Australian law - and the "knowledge" requirement is perhaps the most significant of these: see Lodge, "Barnes v Addy: The Requirements of Knowledge" (1995) 23 Aust Bus L Rev 25 and cf the observations on knowledge in the Privy Council in Royal Brunei Airlines Sdn Bhd v Tan, above at 75. Given the particular findings later made in these reasons, none of those controversies would be enlivened in the circumstances of these two applications. In consequence the terms in which I have formulated this type of liability are in my view sufficient and appropriate for the purposes of these proceedings. I should make plain that questions of accessorial liability in the transactions to be considered are not limited to the participation of directors in alleged breaches of trust by their companies. They extend to dealings by ASN and Ample with other companies in the AS Group. Their extension beyond this to "genuine" third parties has not been argued. II THE TRANSACTIONS THE TRANSACTIONS Each of the twelve transactions to be examined - the first took place in January 1990, the last in June 1995 - will be presented in chronological order. The ASC in its written submissions presented separate factual accounts of the transactions. The respondents have agreed with the accounts given save in a number of specific respects. Because of the level of agreement that does exist, each transaction will be presented in two parts. The first will be a factual account of the transaction itself. This will be based on the facts agreed. Where material is referred to which is not subject to agreement this will be noted specifically. The second part will embody the issues raised and the conclusions reached on the transaction in question.

1. The Bilambee Loan.The Bilambee Loan This, the earliest of the transactions, is the least contentious. (a) Facts On 22 January 1990 ASN (as trustee of one or more of the SIPs) resolved to lend $500,000 to Bilambee Pty Ltd ("Bilambee"), a development company. The loan was secured by a registered first mortgage over land at Coolum in Queensland. Guarantees were given by two directors of Bilambee. The board of ASN was advised on 20 October 1990 that the loan was in default. The loan was never again serviced. The accounts for ASN reveal that the interest outstanding was capitalised and that by 31 March 1994 the loan stood at $1,067,386.77. On that date the board was told that the mortgaged property had been sold at auction for $967,500. This resulted in a shortfall which as at 30 June 1994 stood at $141,523.50. With the two guarantor-directors now bankrupt there is no prospect of recoupment from them. There is no record in ASN's minutes of any action being taken to pursue the defaulting loan. Apart from the interest being capitalised the only evidence of any step being taken between 20 October 1990 (the first default) and 31 March 1994 (the notification of the sale) is Cahill's evidence in cross-examination that a valuation of the Coolum property, sometime in 1993 he thought, showed it to be worth around $1.1 million. No copy of any such valuation has been produced.

(b) Issues The issue the ASC raised on these facts is whether the more than three years failure by ASN to foreclose on the mortgage or to call up the guarantees amounted to a breach of trust resulting in the loss of over $140,000. Such explanations as were given for this failure to pursue the default were (a) by Cahill, that, notwithstanding the default, the return secured through interest capitalisation meant that the loan remained a good trust investment; and (b) by Sutherland, that negotiations for sales occurred over the period and an ordinary sale was preferable to a mortgagee's sale. I should note that, if a valuation was made in 1993 as Cahill suggested, Sutherland seems, from his evidence, to have been wholly unaware of it. Neither explanation is sufficient in my view to defeat a finding that ASN so mismanaged this investment as to expose itself to liability for breach of trust. Whatever the attractions of the capitalisation provisions in the loan agreement, ASN was holding a defaulting loan. For practical purposes its only certain source of repayment was the security it held. If it was to continue to rely upon the default/capitalisation clauses of the loan agreement - and, as will be seen, this has been a repeated, and unsuccessful, practice of AS Group companies - then as a matter of prudent management to safeguard the investment, ASN was required closely to monitor the security and its adequacy, the more so as the investment itself was an escalating one because of the capitalisation provisions. Even if I was prepared to find that a valuation was obtained in 1993 - and I refrain from so doing - I have no evidence that it informed deliberations of the board in its management of this investment. Indeed Sutherland's evidence would suggest it was not drawn to the attention of all board members. Viewed in its totality the evidence distinctly lacks any demonstration of careful consideration being given over time to this investment and to the appropriate time for its realisation. The conclusion in my view is inevitable that it was allowed to drift to a point well beyond that where a prudent trustee would have acted to protect it. In his submissions counsel for the applicant conceded that one might have expected the trustees to have acted a little more swiftly. This is an understatement. All of the directors were aware from as early as October 1990 that the loan was a non-performing one. This notwithstanding, they neglected to take such steps as would facilitate ASN's prudent management of the investment. In these circumstances, though there may be a possible question as to whether the directors have acted knowingly or recklessly for Barnes v Addy purposes (cf Royal Brunei Airlines Sdn Bhd v Tan, above, at 73G), there is a prima facie case of conduct amounting to a breach both of their common law duty of care and of the Corporations Law s232(4), which conduct caused ASN to incur the liability it appears to have. I should state in conclusion that while the loss from the shortfall is $140,000, counsel for ASN submitted that this bald figure gives an exaggerated impression of the real loss actually sustained. The $140,000, he submitted, represents an amount equivalent to what had been derived over the period as interest on interest. It would not have been derived at all if no default had occurred. Of this I would merely indicate that, howsoever it may be said to have been made up, the $140,000 was money to which ASN was entitled as trustee and is now irrecoverable. 2. The Janata-Sundowner Transaction. (a) Facts This matter involved the loss of $279,000 drawn by ASN on SIP3. This sum was paid by way of a commitment fee to secure an investment of US$10 million from a US company, California Sundowners Corporation, whose president was a Mr Janata. The commitment fee - which was to be returned to ASN when the first instalment of investment money was made - was to be paid in the US to Fidelity Contract Insurance Inc. It was first placed in escrow with a Mr Baskette, a US attorney, pending his validation of a financial surety bond to be given by Fidelity Contract Insurance. It was then paid over and lost in what proved to be a scam practised on investors. The transaction apparently was a consequence of proposals to invest in orchards in eastern Australia which were brought to Windsor's notice by a Mr Pilley (of whom more will be said in discussion of later transactions). It is uncertain how Windsor came to learn of the apparent availability of US funds to invest in orchards. What seems clear from the documentary evidence is that he was acting at the time on behalf of another AS Group Company - "Constant" - and that his dealings with US sources in this matter were through a Mr Marshall, a commercial consultant in New Zealand whose fee of $20,000, according to Sutherland, was paid by ASN or, according to Cahill, by another company in the AS Group. A fax from Marshall to Windsor of 16 November 1991 incorporated a proposal from California Sundowners to invest in a joint venture project involving plantation investments. US$10 million was to be made available. The proposal, as distinct from the fax, was directed to Cahill at ASN and the project was identified in the proposal as an ASN project. The two additional features of the proposal were (i) it set out the requirement of a commitment fee; and (ii) it stressed the need for urgent decision and secrecy. The proposal was put to the ASN board by Windsor on 18 November 1991. The documentation for that meeting included a memorandum from Windsor which indicated (i) that his project had been presented and approved by the funding source; (ii) that the project would be established in the form of a unit trust with Constant as trustee; (iii) that future loans were likely to be available from the funding source; and (iv) that all aspects of the arrangements needed to be verified and to that end he intended to go to the US and proposed that an ASN board member accompany him. The minutes of the board meeting of 18 November note that: The Manager's recommendations for venture with United States financing was accepted in principle. ... Concern was expressed at the bona fides of the American source and it was RESOLVED that Messrs Windsor and Sutherland should go to the United States and check all avenues before we proceed. It was FURTHER RESOLVED that the Manager guarantee the interest which could be foregone on the investment and the costs of investigating the proposals to ensure there was no loss to the pools.

After a further board meeting of 22 November in which the need for verification was reiterated, Windsor and Sutherland went to the United States. On 25 November, Sutherland had a meeting with a lawyer, Mr Astiz, of the Palo Alto offices of Baker & McKenzie. That evening he received written advice from Astiz which warned that the "lending transaction" could be fraudulent. It went on to note that: there have been increased reports of fraudulent attempts to seek payment of advance loan commitment fees for loans which are never made.

It equally commented on deficiencies in the terms of the proposed financial surety bond which was to guarantee repayment of the commitment fee. The advice offered only superficial and heavily qualified comments about the bona fides of Fidelity Contract Insurance, the company providing the surety bond, and of Baskette, the escrow agent. On 27 November Sutherland had two meetings with Baskette who was to hold the fee in escrow until he (Baskette) validated the surety bond. In evidence Sutherland said he could not remember having Baker & McKenzie's advice before those meetings although it is clear that suggested amendments made by Mr Astiz found their way into the final form of the surety bond. Sutherland agreed in cross-examination that he had the advice prior to negotiating those amendments. It is also clear that Sutherland personally took no steps to check the bona fides of the surety company or of Baskette whom, he admitted, he took at face value. Shortly after these meetings with Baskette, Sutherland gave Baskette the commitment fee. Neither he nor Windsor were able to meet Janata prior to the fee being handed over. Sutherland indicated he had no intention of meeting Janata whom he described at the time as a "Scarlet Pimpernel". Sutherland returned to Australia and at a board meeting of 4 December 1991 he reported his satisfaction with the escrow arrangements and the surety bond. Under the surety bond, California Sundowner was to have made the first payment of investment funds by 27 May 1992. This did not happen. A default notice was faxed by ASN to the bond company, Fidelity Contract Insurance. It then became clear that the commitment fee was lost. Sutherland was retained by ASN to seek to recover the commitment money. He engaged an attorney in Georgia to advise and make further inquiries. On 1 September 1993 that attorney reported that had "any reasonable and diligent inquiry" been made in November 1991, it would have revealed that the principals behind Fidelity Contract Insurance were not licensed to act as surety bond holders. On 14 September 1992 Sutherland wrote to ASN setting out the progress of his inquiries and seeking further instructions. That letter noted that there was "also concern about AS Nominees and the Windsor security aspect". This reference to Windsor related to the guarantee to be provided by Windsor which is referred to in the board resolution of 18 November 1991. I have earlier set out the terms of this resolution. Though Cahill said in evidence that he had seen this letter, it was neither discussed at a board meeting nor was it responded to by ASN. It remains to refer to two matters which are not agreed between the parties. First, notwithstanding the terms of the board resolution which indicated that both Windsor and Sutherland were, in going to the US, to "check all avenues before we proceed", Sutherland has maintained that this was not his understanding of his responsibilities. He considered that his task was merely to examine the bona fides of the escrow arrangements and the financial surety bond. Windsor was solely responsible for examining the rest of the transaction. While I am prepared to find this to be his understanding - and it is reflected in his actions - it betrays a lack of appreciation of the responsibilities of a company director who, in the face of his board's declared concern about a proposed investment, has been given the opportunity to investigate the wisdom of that investment. In this regard, as in his role of director more generally, Sutherland was swimming in waters into which he should never have ventured. The second area of disagreement between the parties relates to why SIP money was used at all in making the commitment fee given that the investment moneys to be secured were to go (whether by way of loan or not is unclear even on the respondents' evidence) to Constant. The memorandum Windsor submitted to the board meeting of 18 November makes plain that the investment was to support unit trusts of which Constant was to be trustee. Though I raised this issue of the use of SIP funds with counsel for ASN, the best explanation that could be given was that it was something of a mystery because, for lack of other documentation, it could not be said what the directors had in mind. (b) Issues The first and most obvious issue arises out of the matter last mentioned above: Why was ASN trust money used in this way at all when, on the material before me, there was no prospective benefit to the beneficiaries of SIP3 from the transaction? The ASC in its oral submissions proposed that the inferences were open to be drawn either that SIP3 was used because ASN alone had funds at the time, or, alternatively, that funds controlled by one company in the AS Group were used from time to time for the benefit of the Group or of another company in it and that this was an example of such a usage. This is a situation upon which Windsor could have cast light. He has not done so. While I do not consider that the first of the above two inferences is an available one to draw on the evidence before me, the second is. It is one which, in the absence of explanation, can fairly be drawn - the more so given other examples of the practice to which I will later refer. Accordingly I am prepared to find that the decision to use SIP3 funds to pay the commitment fee was itself a breach of trust as being a decision taken without appropriate separate regard being had to the interests of the beneficiaries of SIP3. It suffered a like vice to that which, in the group company context, was condemned in Walker v Wimborne (1976) 137 CLR 1. Irrespective of whether this decision was wrongful per se, the commitment fee arrangement and the $10 million investment it was to ensure, as the board itself recognised, were ones which excited concern. The demands for haste and secrecy only compounded the problem. The payment of the commitment fee being entrusted to Sutherland, ASN was poorly served by his exertions on its behalf. It is not possible to avoid the conclusion that he had notice of the warnings sounded by Baker & McKenzie. His advice to ASN of 14 September 1992, in its reference to time constraints preventing further inquiries being made in consequence of the Baker & McKenzie advice, tend to confirm this conclusion. Yet he handed over the fee to Baskette. Although the respondent has submitted to the contrary, I can only conclude that Sutherland has failed in his duty as agent and delegate of ASN to exercise care, prudence and caution in the matter and his failure so to do caused the loss sustained by SIP3. The sequel to the loss exposes a different set of issues. The ASC has submitted that, by accepting instructions from ASN to recover the money, Sutherland placed himself in a position of conflict of interest for the reason that he was one of the persons potentially liable to be sued by ASN in negligence for loss of the funds. The ASC also submitted that, given the board resolution of 18 November 1991 requiring a guarantee from Windsor, there is no satisfactory explanation as to why recourse was not had against him. This, it was suggested, further demonstrated his dominance of the board of ASN. There is substance in both submissions. Sutherland's position as legal adviser in this matter was an untenable one. He should have recognised this but did not. As to Windsor, what he proposed, what he in fact secured from the board and his apparent immunity from pursuit by the board, all provide emblems of his course through some number of the transactions yet to be considered. Finally, if I am incorrect in the view that the use of ASN funds for the commitment fee was itself wrongful, and if it be the case that ASN in fact was intended to benefit in some way from the entire transaction, there is, nonetheless, a strong arguable case that entering into the California Sundowners investment arrangement with its ancillary requirement of a commitment fee was in the circumstances so imprudent as to amount in all probability to a breach of trust. The transaction was one which excited concern from the outset. Far from being prosecuted with haste - only 10 days elapsed between the matter being first brought to the board of ASN and the handing over of the commitment fee in the US - it was a matter in which caution of some order was required. Though it tried to protect itself by sending Sutherland abroad with Windsor, the risk ASN was taking - "the hazard of adventure": King v Talbot 40 NY 76(1869) - was itself not one which was appropriate for a prudent trustee to take. "[R]estraint and conservatism" were what were required in this matter if it was to be pursued at all: cf Daniels v Anderson (1995) 16 ACSR 607 at 658. Responsibility for the loss SIP3 suffered because of the loss of the commitment fee cannot in consequence be off-loaded onto Sutherland alone.

3. The First Fawkner Centre Transaction. This is the most financially significant investment of the period under review. Effected by Ample for the Ample 1 trust, its burden in fact has been borne by SIP1.

(a) Facts The Fawkner Centre is a large office building on St Kilda Rd, Melbourne. The Fawkner Centre Trust is a unit trust with 21 million $1 units. Its manager is Hudson Conway Corporation Ltd. The trust was created to purchase the building. The promotion of sale of units in it was undertaken by Cornwall Stodart Financial Services Pty Ltd, an offshoot of Cornwall Stodart, Solicitors ("Cornwall Stodart"). Baillieu Knight Frank prepared a valuation for the unit sale prospectus showing the value of the building on 21 May 1991 as $46 million. Hudson Conway Corporation Ltd underwrote the promotion of the trust in the following way. If more than 14 million but fewer than 21 million units were subscribed, it would buy the unsold units. If fewer than 14 million units were subscribed, it had the option to buy. If the trust was not fully subscribed by 31 January 1992 (taking into account the underwriting agreement) subscriptions would be returned to investors. On 30 January 1992 this date was extended to 13 March 1992. Hudson Conway Ltd ("Hudson Conway"), I should note, provided an income guarantee for the trust. In March 1992 Windsor was given a "very good presentation" about the Centre and the trust by a private consultant, Sinn, who worked in conjunction with Cornwall Stodart Financial Services Pty Ltd in the promotion of the trust. Windsor was introduced to Sinn by a Mr Davis apparently of Cornwall Stodart. On 12 March 1992 - the day before subscriptions were to be returned to investors if the trust was not fully subscribed - Cornwall Stodart faxed a proposal from Hudson Conway Corporation Ltd for Ample to invest in 7 million units in the Centre. There was to be some discount (relating to foregone commissions to which I will refer below) because Cornwall Stodart was facing the prospect of the trust being undersubscribed. Though it is of no direct relevance to my examination of this transaction, I would note that the practice of Windsor described earlier of having funds deposited in association with an investment was heralded - but in the event not put into effect - in this proposal. I quote from the proposal merely to illustrate the form the practice took at this stage: Hudson Conway has accepted in principle the proposition put forward by Peter Windsor on behalf of his American associates, namely that they, Hudson Conway, will deposit funds in a Cash Management Fund to equivalent value of the sale price of any property being sold subject to the progressive payment of such purchase price over a 12 month period as discussed. Hudson Conway have agreed that the Fawkner Centre can be used as a "trial run" for this concept.

As for the investment proposal itself, this was put to the board of Ample on the afternoon of 12 March 1992. Board members had also been provided with copies of the prospectus. Windsor was in attendance at that meeting. In less than three hours the board resolved to buy 7 million units to be funded as follows: Cash $320,000 (provided by the SIPs) Foregone commissions $280,000 (see below) Borrowings $100,000 Loan $6.3 million (provided by Vania Pty Ltd, a company associated with Hudson Conway Corporation Ltd) In reaching its decision the board took into account three "scenarios" (described in the minutes of 12 March 1992). These were: (i) to borrow $6.3 million, but to limit the lender's recourse in the event of default to the units acquired; (ii) to sell the units within 3 months to a buyer introduced by Windsor - and the minutes indicate that Windsor advised the board that he was presently negotiating with other buyers; and (iii) to pay down the borrowing by further investment. In considering what the result would be if a sale did not occur the board took as its "worst-case scenario" the projection contained in the Cornwall Stodart fax that the gearing be reduced to 70 per cent. This it considered would show a return on investment of 15 per cent. The minutes do not indicate how that reduction was to be effected. And what was not considered was what in fact occurred - the result if the gearing remained at 90 per cent. Ample entered into a secured loan agreement with Vania Pty Ltd ("the Vania loan") for $6.3 million. That agreement, in contrast with the board's decision, did not limit the lender's recourse to the units purchased. Recourse could in fact be had to the assets of the Ample 1 trust. Beyond the Vania loan, Ample also assigned to Hudson Conway Ltd by way of security its income from the Alamagordo Film Book investment, a distinct, and seemingly profitable, investment of Ample 1. If the Vania loan was not reduced or the units sold, Ample would not have sufficient income from Fawkner trust distributions and from the Alamagordo investment to service the loan. It would need money from the SIPs. And the SIPs were so used. I would emphasise that there does not appear to be a single minuted instance of the board of ASN deciding to invest SIP funds in Ample 1. As I noted early in these reasons, SIP1 has invested over $5 million in Ample 1. I will return to this matter. It needs, though, to be said that if the board of ASN had, in effect, agreed to underwrite Ample's liability to Vania that, of itself, would have been an improper - a "fettering" - exercise of discretion on its part: see Ford and Lee, Principles of the Law of Trusts, para 954 (2nd Ed); see also Thorby v Goldberg (1964) 112 CLR 597 at 605-606. In the year ending 30 June 1992 the Fawkner Centre investment was wrongly attributed to SIP3. The effect the Vania loan repayments had on Ample was not, in consequence, disclosed in Ample's accounts. By the time the error had been corrected its effect in Ample 1's accounts was disguised because Ample, as will be seen, treated a later "transaction" - the Second Fawkner Centre Transaction - as an effective one. At the time it resolved to make this investment the board had no independent valuation made of the property. The valuation in the prospectus alone was relied upon. There is no evidence before me that any member of the board had experience either in valuation or in the Melbourne commercial property market. Both Mr Cahill and Mr Sutherland said they thought it unnecessary in the circumstances of this investment for the trust company, Ample, to obtain an independent valuation before investing in the units. Mr Cahill further indicated in cross-examination that the board was aware that there had been a slump in Melbourne's commercial property market. The Fawkner Centre property was valued in the prospectus as at 21 May 1991, at $46 million. The Ample investment was made in March 1992. By 30 October 1994 the value of the property had fallen to $35.3 million. Such legal advice as was obtained by the board was furnished by Davis of Cornwall Stodart, the firm which provided the solicitor's report for the promoters, Hudson Conway, in the prospectus for the units. Cahill said he did not at the time see any conflict of interest in this. Two final matters require mention. First, the negotiations Windsor was having with "other buyers" which were referred to in the minutes of 12 March 1992 came to nothing. No other buyer was found. Secondly, and this is not fully agreed, one of the sources of funds making up the investment were referred to in the minutes as "foregone commissions" amounting to $280,000. The provenance of these commissions was described in a letter of 27 May 1992 from Davis, a Cornwall Stodart lawyer. They were in the nature of brokerage provided by Hudson Conway to Cornwall Stodart Financial Services ($105,000), Windsor ($105,000) and Pilley ($70,000). The letter indicates that these sums had been advanced to Ample to allow it to aggregate sufficient funds to make its subscription. They "can be repaid by Ample when it is able to refinance its position". The letter also enclosed a cheque for $5,000 from Cornwall Stodart as a contribution to Windsor's costs of travel to Melbourne. This was made apparently in recognition of Windsor's efforts on the Fawkner Centre. In his examination by the ASC Windsor professed irritation at this letter which he said was compromising. He said the commission was never intended to be paid; that it was, effectively, a discount of the purchase price the benefit of which went to Ample. What he seems not to have explained is how and why Hudson Conway thought it appropriate that he, Windsor, receive brokerage in the first place. He was, after all, acting for the manager of the purchaser. Equally it is not clear whether, when it passed its resolution to invest on 12 March, the board was aware that Windsor had a sizeable interest in the commissions foregone. (b) Issues The alleged vices in the events I have narrated are unsurprising: (i) this negatively geared investment was reckless, speculative and hazardous; (ii) it was founded on conflicts of interests involving variously ASN, Windsor and Cornwall Stodart; and (iii) its inadequate documentation in relation to ASN breached the Corporations Law, s258. I should state at the outset that I refrain from entering upon whether or not the provision to Windsor (a) of brokerage by Hudson Conway and (b) of $5000 by Cornwall Stodart could, on further inquiry, provide a possible basis for impeaching the entire Fawkner Centre investment by Ample. However, I would observe that it is not apparent why Windsor should have had such provision made for him by parties with interests adverse to those which he was duty bound to protect, whether or not he personally received the benefit of the brokerage: cf Grant v The Gold Exploration and Development Syndicate Ltd [1900] 1 QB 233; Taylor v Walker [1958] 1 Lloyds R 490. The question whether the investment was of such character and was made in such circumstances as to be characterised as reckless and hazardous admits only one possible answer in my view. In less than three hours, and on the day before the unit trust scheme may well have fallen to the ground for undersubscription, the board of Ample made a $7 million investment without independent advice or an up-to-date independent valuation. It did so with what can only be said to be a cursory consideration of the financial implications of the investment for Ample and, for that matter, ASN and the SIPs. It did so without any clear view of what the strategy was the board was putting into effect in making the investment - the investment may in fact only have been for 3 months and, it could be said, for Mr Windsor's convenience while he negotiated with other buyers. This was reckless behaviour for a trustee to engage in - and it was recklessness of some magnitude. The breach of trust here is a grave one. Its actual consequences are a testament to this. But this is not to judge the matter simply from the standpoint of hindsight. Responsibility to the investor-beneficiaries was, simply, abdicated. The transaction became the haemorrhaging wound of SIP1. I should add, though it was not argued expressly in these terms, that there are obvious grounds here upon which a claim for accessorial liability could be made against Windsor. He was the procurer of the investment and of the breach of trust: see Elders Trustee and Executor Co Ltd v E G Reeves Pty Ltd (1987) 78 ALR 193 at 238-239. The ASC's case sought to impose liability on Windsor directly as a Corporations Law s60 director of Ample. I will return to this later in this judgment. The ASC likewise submitted that the directors of Ample were in breach of the Corporations Law s232(4) in taking Ample into this investment. I agree with this. It was their own reckless behaviour which caused Ample to commit the grave breach of trust it did and to be exposed to the drain of the Vania loan: cf Fouche v The Superannuation Board (1952) 88 CLR 609 at 641. The manner in which the transaction was put into effect is no less arresting. (i) The promoter's legal adviser was engaged by the manager seemingly to negotiate with Hudson Conway. (It is the same legal adviser I would note who wrote the letter of 27 May 1992 detailing the brokerage arrangements.) (ii) The Vania loan agreement failed to give effect to the board decision as to the basis of the borrowing (ie limited recourse). (iii) The accounting treatment initially attributed the transaction to SIP3 - which was at this stage the source of its funding in any event. (iv) Finally there has been what can only be called the pirating of the SIP funds. As I have noted, there has never been a minuted board decision of ASN committing SIP1 funds to any investment in the Ample 1 trust. Yet, as I have also noted, over $5 million of SIP1 funds are now so invested. There has been in this a breach of fiduciary duty by ASN and on a large scale. At best it has acted in the interests of Ample without considering and protecting those whom its first and paramount duty is to serve. At worst it has simply allowed this use of SIP1 funds to occur because of its own reckless indifference to its responsibility to the investor-beneficiaries. The ASN directors are deeply implicated in this. Their potential liability as accessories under Barnes v Addy is strongly arguable. Given my earlier finding that Ample itself was in a direct fiduciary relationship with the beneficiaries of the SIPs, its own conduct once SIP investments in Ample 1 became necessary has probable fiduciary law consequences. Consideration of these, though, is better later left to discussion of the Second Fawkner Centre Transaction. The respondent's submissions in relation to these events were, in essence, that the investment should not be judged with the benefit of hindsight; that negative gearing was an acceptable investment technique; and that there was no evidence to show what a prudent investor would have done in the circumstances. I mean no disrespect when I say that the considerations relied upon by the respondents may possibly have carried some weight if the question was whether the directors of a non-trust company had exercised due skill and diligence in making a commercial decision. That is not the question here. One is not concerned with "good or bad company conduct" - to use language from the respondent's written submission. One is concerned with the proper discharge of duties of trusteeship. It cannot be assumed that persons who invest in superannuation funds intend their investment to be hazarded in high risk activities: cf Space Investments Ltd v Canadian Imperial Bank of Commerce Trust Co (Bahamas) Ltd [1986] 1 WLR 1072. The person making investment provision for his or her future may be expected to be somewhat more risk averse than the corporate entrepreneur.

4. The Calvic Loan. The Calvic Loan This transaction is of narrow compass. It nonetheless exhibits features apparent in some of the transactions so far considered. (a) Facts It is uncertain who introduced this investment to Ample. California Film Finance (Vic) Pty Ltd ("Calvic") is a film finance company whose directors at the relevant time were Messrs Pilley, Park and Crombie. Cahill became a director as a result of the loan transaction discussed here. The manager of Calvic is Australian Property and Financial Management Pty Ltd ("APFM"). The subject transaction involved a loan to a film finance company that was to on-lend the money to investors in a film called "Carlito's Way". The funds came from Ample 2 which had been created for the specific purpose of lending money to Calvic. Part of the funds for this loan ($877,016.64) came from directed investments. The basis on which those investments were made was that the funds were directed to a film investment. I did not understand it to be suggested that some form of Quistclose trust was created in consequence: cf Re Australian Elizabethan Theatre Trust (1991) 102 ALR 681. On 31 July 1992 Ample paid $2,088,500 to Calvic. It was described in the cheque payment voucher as "Loan to APFM for finance for film book loan". There are no minutes of Ample recording a board decision to make that loan. In the accounts for the year ended 30 June 1993 Ample split the Calvic loan into two parts: Loan 1 of $1,571,062.56 and Loan 2 of $569,889.40. The loan was not split in the general ledger. Loan 2 was in fact on-lent by Calvic to APFM. It is not clear when this happened. It was not part of the original agreement for Calvic to on-lend to APFM. That seems to have happened when some investors in the film pulled out late in the day leaving Calvic with unapplied funds. According to Cahill, Calvic applied to Ample for permission to on-lend; Ample did not ask for what purpose APFM wanted the money; and it did not take security from APFM. There is no documentation to support this agreement though Cahill asserted that the permission was sought by letter. It was not discussed at a board meeting. And there is no evidence that the consent of any of the investors was sought to have their moneys applied otherwise than in accordance with their original intention. At the time of the loan to Calvic, Ample took a charge over Calvic. This was not registered with the ASC until 18 September 1994, 48 days after its creation. It would for this reason be void against a liquidator should Calvic go into liquidation: Corporations Law, s266. A Melbourne solicitor (Lewis) was handling the documentation including the charge. Cahill was unaware of the late registration until quite recently. Loan 1 has been regularly serviced. Loan 2 has not been serviced since the split because APFM was having difficulties servicing its borrowings. Park suggested the loan not be serviced. Ample apparently has acquiesced in this. Pilley proposed in or about September 1993 that Ample take over the Calvic loan to APFM so that the latter's liability would be to Ample direct. This has not happened. Loan 2 has been capitalised in the Ample accounts. The last Calvic accounts received by Ample were those for 30 June 1993 and were considered by the Ample board in November 1994. This leads me to another matter not the subject of agreement between the parties but still a matter of evidence in these proceedings. In August 1993 litigation erupted in the Federal Court in Melbourne between Park and Pilley on the one hand and (inter alia) Cahill, Windsor and Ample on the other over the control of Calvic. In his affidavit in these proceedings of 11 August 1995 Cahill said that (para 276): The dispute arose after Ample pressed for tighter control over the actions of APFM and Calvic. Pilley & Parkes attempted to prevent this. The litigation was subsequently settled with APFM and Calvic agreeing to abide by the majority of the requirements imposed by Ample.

In cross-examination it became apparent that the settlement was quite to the contrary. Cahill ultimately agreed that Park and Pilley achieved the outcome they sought in the Federal Court: they control Calvic and the composition of its board. I should also add that by that time Pilley had become a director of APFM. As a result of the litigation Ample has lost such capacity as it previously possessed to get reasonable financial information from Calvic. It has had constant difficulty getting such information from APFM. The final observation I would make in light of his evidence about the Federal Court proceedings is that I do not regard Cahill's evidence in relation to this transaction as reliable when it is not supported by documentary evidence. (b) Issues The ASC's submission raises two matters of concern in relation to this loan: (i) to the extent money was on-lent to APFM, investors' funds have to Ample's knowledge been used inconsistently with the understanding upon which they were contributed by the investors; and (ii) the general administration of the loan has been lax to the point where the loan is at risk because of (a) a security which effectively is worthless; (b) part of the loan not being serviced; and (c) inadequate financial information about either Calvic or APFM being available to Ample. To the extent that submissions were made by the respondents they were, first, that if complaint was to be made about the late registration of the security that properly was complaint (and possible action) against the solicitor, not against Ample and its directors; and, secondly, that the splitting of the loan was a mere book entry. It is unnecessary to determine whether or not the on-loan of funds to APFM constitutes a breach of contract by Calvic. What is clear is that the loan to Calvic, to the extent of the on-loan to APFM, is non-performing. Though the interest to that extent is being capitalised, it is not supported by an effective security. No adequate explanation has been given as to why it was in the interests of Ample 2 that Calvic should have so been relieved of its full interest obligation to Ample. Cahill gave evidence of a verbal agreement permitting capitalisation. It is not at all evident for whose benefit such agreement was made. It is difficult to feel at all confident that a complete or accurate picture of the actual administration of the loan has been given - this difficulty being compounded by the attempt of Cahill to put as favourable a complexion as he seemed able on Ample's actions vis-a-vis Calvic and APFM. I have previously commented on Mr Cahill's evidence relating to this transaction. Whatever may have been the case at the time of its making, this loan has for some time been a risky one. If loss is sustained on it, the foundations for a prima facie case of imprudent management have in my view already been laid. There has been a lamentable laxity in its supervision. There is a final comment that should be made about the late registration of the security. It may well be the case that, in the circumstances, the consequences of this should in the first instance be visited upon the solicitor concerned. I would note, though, that this is not the only example of inadequate attention being given by the directors to security arrangements upon which loans have been made. This is the major concern in the transaction next to be considered. The adequacy of internal systems to monitor and supervise such matters does bear on the question of the care and diligence demonstrated by a trust company. 5. The APFM Transaction. The APFM Transaction This transaction and its problems take up, in a sense, where Calvic left off. APFM is the same company referred to in discussion of the Calvic transaction. (a) Facts The transaction was introduced by Pilley who, as has already been seen, is a recurrent presence in some number of the transactions. APFM manages a dairy venture including the breeding of cattle and milk production conducted on a number of properties. Pilley became a director of it in August 1993. Between July 1992 and January 1993 funds administered by both Ample and ASN lent a total of $1,156,090.48 to APFM. It appears that three separate trusts - Ample 3, Ample 5 and Ample DUT - were created specifically for the purposes of making loans to APFM, the separate trusts being for loans made at different times, for different periods and at different interest rates. Some directed investments were in APFM loans. By June 1994 the three trusts had invested over $2.4 million in APFM loans. Security was provided in the first instance in the form of two charges over APFM. The first of these was dated 23 July 1992 but was not lodged with the ASC until 8 June 1993, the date of the second charge. Further security was provided by charges over two companies, Compton Grange Pty Ltd and Milford Heights Pty Ltd. The Compton Grange security was taken out on 26 August 1992 but not lodged with the ASC again until 8 June 1993. These charges were discharged in late 1993. By some time in 1993, Windsor and Napper were, according to Windsor at his ASC examination, concerned about Pilley's integrity. A report was commissioned from an accountant and farm manager about APFM's operations. It was considered by the board of Ample on 11 June 1993 where discussion occurred concerning the possibility that a receiver would be appointed over APFM's property under the charges held by Ample. Again according to Windsor, neither he nor the boards of Ample and ASN were happy with the situation revealed in the report I have mentioned. They instructed a Victorian solicitor - Mr Lewis (who also was responsible for the Calvic mortgage) - to prepare security documents over APFM assets. This documentation was thought to have been prepared. By the time of Windsor's ASC examination it still had not been lodged for registration. Correspondence with Lewis as late as 15 June 1995 reveals concern by Ample that its APFM investment was not secured. Windsor has said he came to regard Pilley as "dangerous, treacherous, deceitful, calculatingly so" with "a track record of being associated with companies that become insolvent". This opinion he said he communicated to the Ample board. The board, nonetheless, continued to invest in APFM. I have in discussing the Calvic transaction noted the difficulty Ample had in receiving reasonable financial information from Calvic which then was subject to Pilley's control. It is likewise with APFM. The latest accounts received were dated 30 June 1993 together with some 1994 "updates". The APFM loans are being serviced. (b) Issues The ASC's submission is that the board has failed to take any adequate steps to ensure the security of this investment. It has exposed the trusts to potential losses if the loans are not repaid. Not only have charges been lodged late, the securities Lewis was instructed to prepare in 1993 have not been put in place at the time of this hearing. An associated submission related to the prudence of continuing to place funds with APFM given the evolving concerns said to be had about Pilley, APFM's management and the problems with securities. It is only the first of these two submissions that I will consider. The evidence on the timing of investments made after January 1993 is not such that a satisfactory conclusion can be arrived at by me on the associated submission. The respondents' submission on the securities matter paralleled that made in relation to the Calvic loan: it was the solicitor's fault. This cannot be accepted. Whatever may be the case where there is an isolated incident of a security being lodged late or not being prepared as instructed, here there is a pattern of delay and non-performance extending over 3 years - a pattern of which the board of Ample was cognisant for much of the period. And I note there are two practising solicitors on the board. Neglect to intervene in the face of demonstrated dilatoriness or worse, cannot be condoned in a trust company carrying on a business such as Ample. The matter is not simply one of a failure properly to supervise an agent: cf Low v Gemley (1890) 18 SCR 685 at 690 (Can). It is one of the trustee failing to take appropriate steps to protect its investment given the concerns it is said to have had or, as a prudent person, should have had. 6. The Constant Loan.The Constant Loan This transaction is without redeeming features. (a) Facts Constant is an AS Group company. Windsor, Mrs Windsor, and Cahill are its directors. The proposal was made by Windsor to Cahill that a loan of $330,000 be made to Constant as trustee for the Corporate Benefits Trust (a Windsor family trust). The money was to be used as part of the purchase price of a house in Tristania Rd, Chapel Hill, Brisbane, the street in which the Windsor's reside. It appears that Windsor's original intention was to obtain a mortgage from a Melbourne company - "MAM" (the subject of a later transaction). That loan was approved but not available until November 1992. In consequence Constant borrowed the money for 60 days. It came from SIP1. The loan was then to be refinanced. Cahill in cross examination said the refinancing was to come from overseas sources, not MAM. These collapsed. In November the term of the loan was extended to 12 months. I merely note in passing that, as at December 1992, Constant had a negative asset balance of $8. Nonetheless Cahill asserted that it was thought a safe investment at the time because it was considered that Windsor would be able to refinance the loan from either his overseas transactions or his management fees. As I have noted the moneys were advanced from SIP1, an ASN trust. Nonetheless all the documentation, including the mortgage that was executed and registered to secure the loan, showed Ample as the lender. If this was a mistake, as the respondents allege, there is no explanation for it. A Declaration of Trust was executed (the actual date of this is in dispute) under which Ample declared itself to be trustee of the mortgage for ASN. There are no records in the minutes of Ample or of ASN of the decisions (i) to lend money to Constant; (ii) to extend the term of the loan to 12 months; or (iii) to execute the Declaration of Trust. No independent valuation of the property was obtained. No interest at all has been paid on the loan. In November 1993 after the loan became due, Cahill has said he asked Windsor what was happening about repayment, and that, subsequently, Windsor was spoken to on several occasions and letters were written about the matter. No records were kept of any of this. The first record of board discussions of the loan is on 5 July 1994 which minutes that a formal demand should be issued. This was not done apparently because of assurances given by Windsor. There is no record of these assurances. The property was subject to a second mortgage. In August 1994 Windsor wrote to ASN noting he expected to pay out the second mortgage in September 1994. He promised to repay ASN in May 1995. This proposal was found to be unacceptable. No formal demand was then issued. As a result of the continued failure of Constant to repay the loan, ASN was obliged to borrow $300,000 from Woden Constructions Pty Ltd (the 4th Woden loan considered below) on 22 February 1995. This loan was not repaid on time. After Napper had discussed with the board the options available to Woden including the possibility of a receiver being appointed to ASN (he was acting for Woden in the matter as well), Ample transferred the mortgage over the Tristania Rd property to Woden. This transfer is the subject of separate consideration in these reasons. Neither the loan from Woden nor the transfer of the mortgages were recorded in the minutes of either company. There is dispute between the parties as to when the Declaration of Trust was executed. The document itself is dated 5 November 1992, the date of the Bill of Mortgage. There is documentary evidence both before and after that date which suggests that Ample and not ASN was to be or was the lender. From this I am asked to infer that the Declaration of Trust was in fact prepared long afterwards and was backdated. Given the far more significant issue of the alleged backdating and transfer of the mortgage to Woden it would serve no useful purpose to attempt to resolve this particular matter. It is not disputed that the loan money came from SIP3. Finally I would note that the Tristania Rd property was sold for $405,000 during the course of these proceedings. By that time the Constant loan stood at $486,000. The property was subject as I have noted to a second registered mortgage and a third unregistered mortgage. (b) Issues The vices in this transaction are many. It is unnecessary for the purposes of these proceedings to enumerate them all. (i) There have been repeated breaches of the Corporations Law, s258 as also of the trusteeship duty to maintain proper records of trust affairs: on which see D Paling, "The Trustee's Duty to Keep Accounts and Records", (1974) 124 NLJ 452; (ii)Though not formally conceding that the loan was tainted with breaches of fiduciary duty, counsel for the respondents nonetheless conceded that this criticism could be made. In my view the breaches were various and palpable. I merely note that (a) on the facts agreed, the loan can only be said to have been entered into and maintained for the benefit of Windsor and his interests; and (b) Cahill, with conflicting duties as a director of all three companies, was in an untenable position. As a trust investment it was made without independent valuation; it has been allowed to run beyond its agreed term and by well over 18 months; and it has not been serviced. This is not what properly can be expected of a prudent business person. The transaction is again indicative of the predominant position occupied by Windsor in the AS Group and of the seeming preparedness of AS Group company directors to act in his interests.

Though I will return to this matter I would note that one of its effects was to imperil ASN because of the liquidity shortage to which the non-repayment contributed. 7. The SECCU Transaction. The SECCU Transaction This matter is both complex and perplexing. It involves an investment by Ample, not as trustee, but in its own right. (a) Facts Windsor introduced this transaction to Ample. Its early investigation involved Davis of Cornwall Stodart (see First Fawkner Centre Transaction) and Pilley (see the Calvic and APFM transactions). The investment related to the purchase by Ample of a portfolio of mortgages from the SEC Credit Union Co-operative Ltd ("SECCU") for their face value of $3.8 million. The manager of the portfolio, MAM Mortgages Ltd ("MAM"), was in administration (a receiver had recently been appointed). SECCU was said to be keen to limit its exposure to adverse publicity and to a possible run on funds resulting from its association with MAM. At a meeting with the general manager of SECCU, Windsor was informed that SECCU instigated an ASC investigation into MAM when it discovered an irregularity in the treatment of a particular mortgage transaction. If it did not occur at this meeting, then shortly thereafter Windsor - and I find probably Napper - were made aware by directors of MAM that the irregularities in the SECCU portfolio involved the allocation of two separate mortgage advances against the same property without the knowledge of the parties making the advances. Those directors represented that the maximum exposure of MAM to SECCU in consequence of this was $300,000. Windsor did not verify this from documents or other inquiries. I would note in passing that in a collateral transaction Ample took an assignment from one of the MAM directors (or an associated party) of income to be derived in an unrelated dealing. This was to cover the $300,000 shortfall. That assignment did not realise any funds. At his meeting with SECCU, Windsor offered to accept a transfer of the SECCU mortgages managed by MAM at face value ($3.8 million) on vendor finance (interest was payable) provided SECCU deposited $10 million for two years in a deposit fund which for convenience I will describe as being within SIP2. The AS Group was to charge no fees in respect of the deposit. On 19 March 1993 Cornwall Stodart on behalf of the AS Group attempted to persuade the ASC not to appoint a liquidator to MAM pending inquiries by the receiver who in turn was to be assisted by Ample and funded up to $20,000 by SECCU. The receiver estimated his inquiries would take 3 weeks. On 22 March Davis of Cornwall Stodart and Pilley as consultant to the AS Group met with the ASC. A matter discussed was the hypothesis of there being "staggering losses". On 23 March 1993 the board of Ample resolved to purchase SECCU's mortgage portfolio on the terms of the Windsor offer I noted above. Windsor attended this meeting. The board was aware that a receiver had been appointed and it considered the prospect of a liquidator being appointed. Board members knew there were some non-performing mortgages in the portfolio. Cahill appreciated from the outset that it was "to some extent" an inherently risky venture. Ample had insufficient income to service the vendor finance in the event that the mortgages did not perform. Windsor is said by Cahill to have expressed optimism that the mortgages would perform. The contingency that they would not was not separately considered by the board. There was an expectation of further business from SECCU which would generate fees to meet interest. No such business eventuated.

On 26 March Windsor, under a power of attorney, executed a Deed of Assignment purchasing the mortgages, as also a complementary agreement relating to the $10 million deposit. As to the latter it was agreed in effect that no fees would be drawn on the deposit. Clause 7 of the Deed of Assignment stated that SECCU:

expressly does not warrant, undertake or guarantee to Ample that: 7.1.1. it is the legal and/or beneficial owner of any of [the mortgages] 7.1.2. the total of the principal sums due under [the mortgages] is equal to the Purchase Price; AND Ample discharges and releases [SECCU] from any claim it may otherwise have against [SECCU] in respect of the matters referred to in subclauses 7.1.1 and 7.1.2.

On 29 March 1993 Cornwall Stodart wrote to Windsor on behalf of Ample, that: We have acted for you in the negotiation of preparation of the Deed of Assignment ... Your instructions to us were not to undertake any due diligence whatsoever of the transaction and, in particular, of the mortgages that were the subject of assignment. Indeed, you were made aware that S.E.C Credit Union Co-Operative Limited may not have any interest in the mortgages set out in the first schedule to the Deed of Assignment of 26 March 1993. Ample Funds Limited has entered into the transaction on this basis.

It was not in dispute that Windsor was authorised to act for Ample in the SECCU transaction. Cahill gave evidence suggesting the Board did not see the Deed of Assignment before it was executed. He claimed he did not become aware of clause 7 until late 1994 or early 1995. He could offer no explanation why he would not have seen the letter from Cornwall Stodart. He admitted that concealment of the clause from the Board would mean he could no longer have confidence in Windsor. Sutherland claimed to have been unaware of clause 7 and the Cornwall Stodart letter until some time in 1994. He said he did not participate in any board meeting which authorised the inclusion of the clause in the Deed. He was not informed of the meetings with the ASC or of the proposed investigation into the mortgages by MAM's receiver. He agreed in light of the clause and the letter that the investment was not prudent. I note in passing that Napper chaired the board meeting of 23 March 1993. I note again he has not given evidence in this matter. I further note the following which is not the subject of agreement between the parties. Napper was a director of a company related to MAM when the investment was made. According to Mr Fletcher - the then employed accountant of Ample and ASN whose evidence is in no way impugned - Napper was in Melbourne for significant periods at the time of the SECCU investment. It was Fletcher's understanding that his involvement in the investment was quite substantial. Fletcher communicated with him in Melbourne on one occasion on this basis. I should add that counsel for the respondents in his oral submissions accepted that Napper was at least privy to the SECCU negotiations if he was not more fully involved in them. I am prepared to find the former to have been the case. MAM went into liquidation. Though this is not agreed, the evidence before me suggests that the shortfall on the mortgages is in the order of 40 per cent. A loss of something of this magnitude is probable. There is now litigation between Ample and SECCU. The proceedings were initiated by SECCU for reasons I will note below. Ample has counter claimed in these for rescission of the Deed of Assignment. It is not in dispute that if Ample is unsuccessful in these proceedings it will be insolvent. The liquidator of MAM declared one dividend which reduced Ample's then capital liability to SECCU by about $500,000. Ample has received no moneys from the mortgages themselves. Interest payments due by Ample during the 1993-1994 financial year were paid by Securities and Fiduciary, both AS Group companies. Roughly $70,000 of the money paid by Securities came from a loan made to it by SIP1. This loan is an aspect of the next transaction to be analysed. In January 1994 Ample ceased to make interest payments. Shortly thereafter SECCU commenced the litigation I have noted. (b) Issues My initial comment on this transaction was that it was perplexing. The respondents have submitted that what it displays are matters of business judgment. It is difficult enough, in my view, to understand why a company would, as a matter of judgment, make such a risk-fraught investment when its board knew that (a) a receiver had been appointed and that there was the prospect of liquidation of MAM; (b) some mortgages in the portfolio were non-performing; (c) it could not finance it from its own income if there was significant non-performance; and (d) the only apparent advantages were future goodwill with SECCU and the fact of the $10 million deposit. When one adds to this the haste with which it was effected - seemingly for no better reason than to help SECCU avoid embarrassment - the difficulty I have noted is exaggerated. But to be added to all of this is the conduct of Windsor. For the purpose of these proceedings there are only a few issues that need address. The first relates to such due diligence as was undertaken on behalf of Ample before entering into the transaction, bearing in mind the knowledge had from both SECCU and MAM that there were irregularities with some mortgages. Windsor claimed in his ASC examination that he was unaware of the other directors performing any due diligence in the transaction. There is no evidence to suggest that they did. Then there is the Cornwall Stodart letter of 29 March (to which I have referred) indicating it had been instructed by Windsor not to undertake any due diligence. Windsor, at his examination, denied the solicitors were "specifically instructed" not to do this. While that letter can obviously be said to have been written for reasons of self-protection, it is consistent with clause 7 of the Deed of Assignment. It equally is a letter that could reasonably be expected of solicitors who have acted on behalf of Ample in negotiations with the ASC in relation to the possible liquidation of MAM and who were aware of the need for such investigation of the mortgages as the receiver was to undertake and in which Ample's help was offered by them. In these circumstances I am prepared to find that Cornwall Stodart was instructed by Windsor in the terms indicated in the letter and that Windsor was advised before the Deed was executed that SECCU's title to the mortgages may be suspect. Windsor, having given a not unambiguous denial that the firm received this instruction, has not been prepared to have his ASC examination response tested in these proceedings by submitting himself to cross-examination. In these circumstances and despite the submission made to the contrary, I feel fortified in the inference I am prepared to draw. It is fairly open on the evidence. I am in consequence prepared to find that: (i) Windsor did not disclose this instruction, or the advice, to the board; (ii) he was aware that a clause in a form such as 7 was to be in the Deed but did not forewarn board members of this; and (iii) when regard also is had to the evidence of Cahill and Sutherland, he concealed from the board that the receiver was investigating the MAM mortgages. While it is likely that Napper was aware of some deal of this, I am not in a position on the evidence to make a positive finding as to what precisely was Napper's knowledge. Even though he did not give evidence, I cannot for this reason engage in speculation on this matter. Windsor's conduct was reprehensible. It has, potentially, brought Ample to ruin. I refrain from comment upon the litigation with SECCU in which Ample is now embroiled. Why Windsor should have acted in this fashion, what final advantage he anticipated would flow from the investment - these are not matters on which I can or should speculate. What needs to be said, though, is that there is a variety of bases upon which action could be brought against Windsor (and I would add most probably Securities as manager) for such loss as Ample may suffer in consequence of his actions. The ASC in its submission, while referring to duties owed by Windsor in equity and under the Corporations Law (by which I presume is meant owed as a s60 director) did not seek to particularise possible causes of action. In these circumstances I do not feel it necessary or appropriate to catalogue the possibilities although I would add that the common law as well as equity can provide remedies for nondisclosure: see Brownlie v Campbell (1880) 5 App Cas 925 at 950; Hawkins v Clayton (1988) 164 CLR 539. I will later return to the question of liability as a s60 director. Finally, it is not necessary for the purpose of these proceedings that I express a view on whether Cahill and Sutherland breached their common law and statutory duties of care in their participation in this board decision. I would note that it has been submitted that their reliance on Windsor and Napper was appropriate in the circumstances. 8. The Securities Loan. The Securities Loan This is another example of self-dealing within the AS Group. (a) Facts The transaction was initiated by Windsor in a phone call to Cahill. He sought a loan for Securities from ASN of $300,000 to allow Securities to develop business. Cahill then communicated with the other directors. On 1 July 1992 ASN as trustee for SIP1 entered into a loan agreement with Securities. This was not proceeded with. A subsequent agreement was signed on 17 April 1993. This apparently governed the loan actually made. It did not provide for a definite term and the loan was repayable on demand. No demand has ever been made. On 27 April 1993 the ASN Board resolved to make "an unsecured loan" to Securities of an amount not exceeding $300,000 at 15 per cent interest. I would note that the preceding item in those minutes was a loan from Woden to ASN of $800,000 at the same rate of interest ("the First Woden Loan"). It is clear that part of the Woden loan monies went straight to Securities. The loan was fully drawn down, a repayment of $100,000 was made, then there was further drawing down. The purpose of the loan according to Cahill was to allow Windsor to pursue the general development of his business and to obtain more clients. The uncontradicted evidence before me is that the loan funds were used (i) to pay various operating expenses of Securities; (ii) to make payments to Administration (an AS Group company) and ASN - these payments were described as "loans" or "fees"; and (iii) two payments totalling almost $70,000 to SECCU on account of Ample's interest liability: see the SECCU Transaction. The only "security" for the loan was said to be ASN's right to set off management fees due to Securities. While the agreement of July 1992 contained a set-off provision, that of April 1993 did not. In any event no right of set-off has been exercised. Equally no guarantee was obtained from Windsor. On 5 July 1994 the ASN board decided to write to Securities requesting payment of the balance owing. No formal demand was in fact made. On 30 August the board decided to request information from Windsor as to Securities' ability to support the loan. Windsor apparently said in informal discussions that business he was working on at the time was expected to come to fruition. According to Cahill, Windsor was given a deadline of 30 June 1995. On 28 November 1994, the board noted that documentation had been prepared to register a charge over Securities for the loan. No such security has been taken. (b) Issues In their submissions the respondents conceded that the loan was not at arms length but, nonetheless, sought to defend it. In oral submission that defence became all but formal. While it is unnecessary for me to determine in what circumstances it would be acceptable for a trustee to lend without security, the loan here was a prima facie breach of trust. Such is the applicant's submission. It was unsecured; no inquiry was made as to how it could be supported; and it required a parallel borrowing from Woden (which resulted in no overall advantage to ASN) for it to be able to be made: on lending without security see Scott on Trusts para 227.8 (4th Ed); Jacobs on Trusts, para 1805 (5th Ed); on lending for the purpose of accommodating the borrower, see Langston v Ollivant (1807) Coop G 33. The more basic objection to the loan is, of course, the multiple breaches of fiduciary duty which infect it. It not only is an infra-AS Group loan, it is a loan between trustee and manager both of which, as I have previously indicated, owe fiduciary duties to the investor-beneficiaries of SIP1 and one of whom, Securities, remunerates a director (Cahill) of the other. It was with Cahill that the loan was initiated. The loan is impeachable in all probability on the ground that it was a partial one taken in the interests of Securities and not of the SIP1 beneficiaries: see Sutherland v Sutherland [1893] 3 Ch 169; see also Walker v Wimborne (1976) 137 CLR 1; cf In Re Clifford [1948] SASR 83. It could constitute as well a per se breach of fiduciary duty on the grounds that it violated the "no conflict" and "no profit" fiduciary rules: see the formulation of Deane J in Chan v Zacharia (1984) 154 CLR 178 at 198-199 - "no conflict", arguably, on the basis that, if it is wrong for a fiduciary to lend to itself without informed consent: cf Paul A Davies (Australia) Pty Ltd v Davies [1983] 1 NSWLR 440, it is equally wrong to lend to a manager who is a party to the trust deed and who for this purpose should be taken to be in the same position as the trustee: cf Ex p James (1803) 8 Ves 337 at 346-347; the "no profit" rule on the ground that the only benefit the manager should expect to derive from the trust funds without the beneficiaries' consent is its fees and allowances. It should be unnecessary to say that there is nothing in the character of superannuation trusts which takes their trustees and managers outside of the ordinary operation of these rules of equity: see In re Drexel Burnham Lambert, UK Pension Plan [1995] 1 WLR 32. The question of accessorial liability of the directors of ASN and of Windsor was not raised in this matter. I refrain from comment on it. 9. The Woden Loans. The Woden Loans Woden Constructions Pty Ltd ("Woden"), a Canberra construction company, was introduced to the AS Group by Napper. Napper's firm acted as Woden's solicitors. (a) Facts Between April 1993 and February 1995 Woden made four loans to ASN as trustee for SIP1. Documentation of these transactions is conspicuously sparse - so much so that despite the ASC investigation one of these loans only came to light during the hearing. First Woden Loan On 27 April 1993 ASN resolved to borrow $800,000 for SIP1 to cover what the minutes describe as "short term commitments" of the trust. The loan was repayable on 14 June 1993. The money was received on 29 April. Its application cannot be identified. As I noted early in these reasons, all of the SIPs and the Ample trusts share a common bank account. On 30 June 1993, $512,739 was repaid by SIP1 to Woden. The source of this payment is likewise unknown. Second Woden Loan On 8 November 1993 Woden made a further loan of $900,000 to SIP1. There are no minutes recording this loan or its purpose. The money was used for a number of substantial payments by the SIPs. It is impossible to tell the precise application of the funds because of the common banking arrangements. The loan was not repaid on the repayment date of 8 January 1994. On 22 February 1994 the board of ASN resolved to grant a floating charge over the assets of SIP1 to secure the loan at an annual interest rate of 20.5 per cent. The charge was never granted. The loan was repaid on 18 April 1994 using the proceeds from the Bilambee mortgagee sale: on which see the Bilambee Loan. Third Woden Loan Woden made a loan of $180,000 to SIP1 on 2 June 1994. There are no board minutes approving the loan or its purpose. The application of the loan funds is unknown. Fourth Woden Loan On 14 February 1995 a loan of $300,000 was made to SIP1. Coupled with this loan was a charge over the assets of ASN. The charge is dated 22 February 1995. Napper on behalf of Woden lodged it with the ASC on 3 April 1995. This loan was needed, according to Cahill, because of Windsor's failure to repay the Constant loan: on which see the Constant Loan. The associated charge over all of ASN's assets to secure this loan was not considered by Cahill to be excessive. The justification given by Cahill for using Woden as a lender (it not being a financial institution) was that it was more flexible than a bank and did not charge the usual bank fees. The latter is not surprising given the interest rates it charged. The prevailing Reserve Bank rates at the times of these loans have been put in evidence. At the time of the first Woden loan that rate was between 9.4 and 9.5 per cent. The Woden rate was 15 per cent. As to the second Woden loan, the prevailing rate was between 8.95 and 9.5 per cent. The Woden rate was 20.5 per cent. The prevailing rate for the third Woden loan was unchanged from the time of the second. The Woden rate was 14 per cent. For the fourth loan the prevailing rate was between 10.6 and 11.5 per cent. The Woden rate was 13 per cent on compliance and 15 per cent on default. Cahill in cross examination did not accept that the higher rates made the loans unsound or that (taking into account bank charges) they would still have been substantially higher than borrowing from a bank. He denied that the pattern of higher interest rates and lack of security (save for the last loan) indicated that Woden was a lender of last resort. (b) Issues By the time of the fourth Woden loan, the Superannuation Industry (Supervision) Act 1993, s97 governed ASN's borrowings. The section prohibits borrowing save in two narrowly confined situations. Despite the valiant attempt of ASN's counsel to argue to the contrary, the exceptions are at such distance from this loan as to make it unnecessary to burden these reasons with an exposition of them. The loan breached the section. That ASN so needed to avail of Woden as a lender is of itself a matter for comment. The ASC has submitted that there are four available inferences: (i) ASN had so poorly managed its affairs that it was unable to meet ordinary calls, whether for day-to-day expenses or from beneficiaries; (ii) Windsor's activities had caused a drain on available funds - both the first and fourth loans were related directly (the loan to Securities) or indirectly (the Constant loan) to transactions involving him; (iii) Napper, while Chairman of ASN's board, was seeking to confer benefits on his client; and (iv) ASN was not able to borrow from any orthodox financial institution because it could not demonstrate a capacity to repay. Counsel for the respondents in oral submission conceded that the first three inferences were possibilities on the facts. He rejected the fourth essentially on the ground that Woden was a handy, available, friendly lender. That submission may have had some attraction were it not for the interest rates to which ASN subjected the SIPs. As previously noted, the interest rates charged were significantly in excess of bank rates - and grossly so in the case of the second loan. It is unlikely that any of the first three loans could be said to be prudent transactions for this reason alone. The fourth, when considered in the light of the security taken, has the hallmarks of a company in some difficulty - and very real difficulty at that as will be seen when the Ample Mortgage transaction is considered. I am prepared to draw the first two of the inferences noted above. These relate to how ASN has managed its affairs and to the effect of Windsor's activities on ASN's available funds. I do not draw the third inference suggested i.e. as to Napper conferring a benefit on Woden. This is not because I do not think there are serious fiduciary issues raised by his conduct. Rather it is because the conclusion of favouritism (or partiality) is on the facts before me more in the nature of speculation than an inference. Having said this, Napper has, in my view, quite improperly placed himself in a position where he owes fiduciary duties to two separate and adverse interests. The objections to this practice are well known: see Moody v Cox & Hatt [1917] 2 Ch 71; particularly where legal advisers are concerned. It may well be that on examination an actual conflict of duties will be found (I would point in this to ASN agreeing to a charge over all of its assets) with consequential potential exposure to liability: see Wan v McDonald (1992) 33 FCR 491; Moody v Cox & Hatt, above at 81 and 91. Again it may well be found on examination that, in committing ASN to a transaction in which his firm apparently had an indirect pecuniary interest, he failed properly to consider whether the terms of the loan were in ASN's best interests: cf Richard Brady Franks Ltd v Price (1937) 58 CLR 112. For present purposes all I need do is to note Napper's actions in this matter. The fourth inference advanced by the ASC relating to ASN's alleged inability to borrow from orthodox lending institutions is not one I am able to make. It embodies too great a generalisation. There are two final comments that should be made. First, there have been breaches of the Corporations Law, s258 in relation to three of the four loan transactions. Secondly, I merely wish to emphasise how, through its borrowings, ASN has been used to support (the Securities loan) and to protect (the Constant loan) the Windsor interests. 10. The Second and Third Fawkner Centre Transactions. The Second and Third Fawkner Centre Transactions Because of their length and detail, only an abbreviated version of the agreed facts will be provided here. (a) Facts The second Fawkner Centre transaction appears to have originated in discussions between Windsor, a Cornwall Stodart Financial Services associate (Mr Sinn) and the managing director of Hudson Company (Mr Hamilton). Having acquired its 7 million units in the Fawkner Centre unit trust, Ample was unable to reduce its indebtedness to Vania. Its own financial position was unsatisfactory. In 1993 the Ample board began to consider the disposal of its units. There is, for example, a resolution of the boards of Ample and ASN of 18 January 1993 which suggests that another AS Group company - "Properties" - was to acquire all of the units in the Fawkner Centre. The Windsors are the directors of Properties. Mr Windsor is its principal shareholder. On 20 April Sinn wrote to Windsor and Hamilton setting out details of a proposal to which agreement had by then been reached. It involved a (a) $7 million deposit by Hudson Conway with a SIP2 related trust; (b) the purchase by an AS Group company from Hudson Conway or other nominated party of 7.734 million units in the Fawkner Centre; and (c) the sale of the Ample units. The sales by Hudson Conway and Ample were to be back-to-back with both transactions being completed by 31 December 1994. Both sales were for $1 per unit. Though subject to some changes this proposal provided the essence of the agreement finally executed. On 23 April, Fletcher, Ample's accountant, wrote to Sinn confirming that Ample would commit itself to this agreement. There is no Ample board minute approving this commitment prior to the letter. There is no suggestion, though, of Fletcher acting unilaterally. The only person he could remember discussing the letter with was Windsor. Properties agreed to buy both Ample's 7 million units and 7.734 million units belonging to Consolidated Press Holdings Ltd (CPH). On 11 June 1993 the board of Ample met on two occasions to approve the agreements which were to give effect to the overall proposal. The documents included the Ample Unit Sale Agreement, the Properties/CPH Unit Sale Agreement, and an Investment Agreement under which Banvid Pty Ltd (a Hudson Conway company) was to deposit $7 million in a SIP2 related trust. For reasons of no present significance the documents were not finally executed until 18 June by Napper under a power of attorney. All of the documents which were to carry the various transactions into effect (including the three noted above) were placed in escrow on 1 July 1993. The agreement for the sale of Ample's units produced to the ASC in these proceedings by the respondents gave the sale price of the 7 million units as $9 million. During the cross examination of Cahill the actual documents put into escrow were produced. The sale agreement in these revealed a sale price of $7 million which was consistent with the $1 per unit sale price in the CPH agreement. For ease in reference I will differentiate the two by referring to the $9 million agreement as the "Ample Agreement" and the $7 million agreement as the "Escrow Agreement". The Ample Agreement was in fact prepared by Cahill and Sutherland using a photocopy of an earlier version of the Escrow Agreement. Cahill was cross examined extensively upon the Ample Agreement before he was presented with the Escrow Agreement. At no time until it was so produced did he indicate that there was this second document. It was likewise with Sutherland. The two agreements are relatively similar in their terms. They differ on price of the units, the completion period, the localising of the Ample Agreement to the ACT, and the removal from it of an attorney clause which in the Escrow Agreement gave control of the operation of the agreement to representatives of Hudson Conway. Perhaps the most startling similarity was that the payment provisions of each had the effect that the purchase price in its entirety in each case was to be paid, not to Ample, but to Hudson Conway and to Vania. I would interpolate that, given the Vania loan, there is a plausible explanation for this in relation to the Escrow Agreement. There is none in relation to the Ample agreement. It is clear that it was Windsor who proposed the $9 million purchase price for the Ample Agreement. It was the Ample Agreement that Ample represented as being the operative one between it and Properties. Cahill's explanation of the fact of the two agreements was that the Escrow Agreement was deliberately created at a lower price to conceal from CPH the true price being paid for the Ample units. This explanation I would add was only advanced the morning after he was confronted with the Escrow Agreement. All of the agreements put into escrow, as also the Ample Agreement, contained a common "conditions precedent" clause. One of the two conditions precedent was that Banvid subscribe for 7 million units in a SIP2 trust. This never happened. The terms of the escrow were (inter alia) that if the Escrow Holder did not receive notice that the condition precedents had been complied with (this is a paraphrase) by 14 July, all transactions contemplated in the escrow documents were to be at an end. I might interpolate that that, one would have thought, was the end of the matter. Neither Hudson Conway nor CPH ever questioned the fact that the transaction had not proceeded. Ample acted quite differently. Ample treated the $9 million transaction with Properties as remaining enforceable. It booked a $2 million profit in its 30 June 1993 accounts. In turn, the transaction was treated as effective for the purposes of distribution to SIP3 and, in turn, SIP1. $1,901,265 was so distributed. An effect of treating the transaction as operative (with its profit and its subsequent distributions) was that both Ample 1 and SIP1 assessed trustee's and manager's fees on the basis of the increased value of the trusts. These fees flowed to Securities.

Cahill prepared Ample 1's accounts. He disagreed that the accounts should not have treated this transaction in this way. Fletcher in contrast agreed that, as a matter of accounting practice, it was not appropriate to book a profit in respect of a contract unless the person preparing the accounts was satisfied on the basis of documentary substantiation that the proposed purchaser was able to complete. This evidence is consistent with the report on the 1994 accounts of Ample 1's new auditors. They qualified the accounts in relation to the booking of the unit sale. Cahill and Sutherland, I would note, signed off on the accounts of both Ample and ASN. I refer below to Properties' financial circumstances. Cahill said that he believed the Ample Agreement to be operative despite the fact that Banvid had not subscribed the 7 million units. He said he relied on verbal assurances from Windsor. He further said he relied on advice from Napper or Sutherland - Sutherland could not remember this - that Windsor's verbal representations overrode the specific clauses of the Ample Agreement. An affidavit of Sutherland likewise asserts that the transaction is enforceable, and records assurances from Windsor that it will be completed. The board had taken no steps to satisfy itself that $9 million was a proper price for the units. Turning to Properties, it had no assets on which it could draw to pay either the $9 million under the Ample Agreement or the total of $14.734 million payable under the Escrow Agreement and CPH unit sale agreement. Cahill knew as at 18 June 1993 that Properties was in no position to complete the transaction from its own funds. They would have to come from elsewhere. Sutherland suggested that fees from transactions Windsor was pursuing in Indonesia were to be that source. I would interpolate that such documentary evidence as I have before me on those transactions (Exhibit 34) is not consistent with Properties deriving fee (or other) income from them. Sutherland agreed that Ample had never been satisfied about Properties' ability to complete the transactions. Ample has taken no steps to enforce the Ample Agreement. The effects of treating the sale as having occurred were various. It resulted in Ample 1 being able to record a profit rather than a loss making investment. As Cahill accepted, this outcome relieved Ample of the need to explain the transaction to the client advisors of investors. The accounts in turn created the impression of competent, profit making management. And through the fees exacted, it provided funds at a time when there had been a rapid run-down of available monies to meet general ongoing commitments. Cahill reported such a run-down to the Ample board on 11 June 1993. As I have noted both Cahill and Sutherland have given evidence that they regarded the Ample Agreement as remaining enforceable. Despite this, it is apparent from documents produced by Sinn on subpoena that by September of 1993 Windsor was developing a new proposal for the purchase of Fawkner Centre units. Again a large deposit with a SIP2 trust was being sought. The subject of the proposal seems to have been the acquisition of 14.5 million units in the Fawkner Centre trust. Discussions concerning this, and in the end involving all Ample directors, occurred in May 1994. Thereafter the matter seems to have petered out. This last attempt at purchase is referred to in these reasons as the "Third Fawkner Centre Transaction". Finally, I would note in passing that as late as 20 May 1994 Windsor was acting on behalf of Ample, and with its authority according to Sutherland, in writing to the Melbourne solicitors of Hudson Conway. I am prepared to infer that even at this stage he was acting as manager of Ample 1. This, as I have noted on a number of occasions, is not a matter of agreement between the parties. (b) Issues The actions I have narrated raised some number of potential issues. For present purposes I need only focus on those of major significance. The first relates to the very fact of the agreement by Ample to sell its units to Properties, an agreement in the negotiation of which its manager Securities (through Windsor) was implicated. That agreement is one in which Securities has assisted in conferring a prospective benefit upon a related entity - Properties - the latter having the same directors and principal shareholder as Securities. Because of conclusions I later reach it is not necessary to express a final opinion on whether the agreement would have been impeachable for the above reason alone. However I would note that Securities could not in my view have purchased the units without (inter alia) full disclosure to, and the consent of, the beneficiaries of the Ample 1 trust who, as I have earlier held, are the investor-beneficiaries of SIP1: see Ex p James (1803) 8 Ves 337; Estate Realties Ltd v Wignall [1992] 2 NZLR 615. The fact that the purchaser was a third party (i.e. Properties) would seem not to take one outside this requirement if that third party is simply the fiduciary under another guise: see Silkstone and Haigh Moor Coal Co v Edey [1900] 1 Ch 167. I would equally note that Securities could well be said to be itself in a position of conflict because of its relationship with Properties through Windsor: cf Manchester v Cleveland Trust Co 168 NE 2d 745 (1960); Transvaal Lands Co v New Belgium (Transvaal) Land and Development Co [1914] 2 Ch 488. Relatedly, the applicant has submitted that the benefit derived by Ample and ultimately Securities from increased fee flow, and the illusion of an improved financial position for Ample, compound this conflict. The right to fees is a matter of express provision in the Ample 1 trust - and Securities' right is a derivative of that. Equally, any transaction entered into by a trust will have some reflection in its financial position. For these reasons acceptance of this submission would require proof, not merely that Ample and Securities stood to benefit from the sale, but that obtaining that benefit was the substantial purpose of the sale: see Smith v Cock (1911) 12 CLR 30 at 37; Permanent Building Society v Wheeler (1994) 14 ACSR 109; Richard Brady Franks Ltd v Price (1937) 58 CLR 112. While I do not make a positive finding that such was the case on the evidence before me, there is nonetheless evidence as to concerns about fee flow and about the appearance of Ample's position in the eyes of others - primarily in Cahill's evidence and in the Ample Board resolution of 11 June 1993 - which suggests that there may well be an arguable case to this effect against at least Ample. There is no escaping the conclusion that such agreements as were put into escrow failed with the failure of the conditions precedent. Banvid did not make its investment. Nonetheless Ample has submitted that there is an operative sale agreement between it and Properties and that is the $9 million Ample Agreement. The company's affairs have been conducted on that assumption notwithstanding that that agreement contained the same unsatisfied conditions precedent.

The ASC in contrast has submitted that that agreement was a "sham" as that term is used by the Full Court of this Court in Sharrment Pty Ltd v Official Trustee (1988) 82 ALR 530. It points to the inconsistencies between the claims made as to the present efficacy of the Ample Agreement and the provisions of that agreement relating (inter alia) to conditions precedent and payment. The ASC emphasises the gulf between appearance and reality. I am not persuaded that the agreement is a sham in the sense that the parties did not intend the document to create the legal rights and obligations which they gave it the appearance of creating - cf Sharrment Pty Ltd v Official Trustee, above. Nonetheless, I am of the opinion there is no legally binding contract at all between Ample and Properties. The Ample Agreement on its face could never have the effect claimed for it by Ample's representatives. The conditions precedent and the payment provisions preclude this. Counsel for Ample sought refuge from the inconvenience of these provisions by resort to rights of waiver. This, in my view, involved no less than an attempt to propound a new contract between the parties with quite different terms. I was not informed what these terms were to be, for example, in relation to payment and to whether Vania was still to be paid out as part of the arrangement. If there is any legally binding arrangement between the parties it cannot be the Ample Agreement. No other has been suggested. The reason I do not characterise the Ample Agreement as a sham is that I do not consider it to be capable of use as a disguise, artifice, or false front. By its own terms it fell down on 14 July 1993. It is a monument to incompetence if it was intended to have life beyond then. At best, in my view, the Ample Agreement provided a symbol and no more of a state of affairs which Ample hoped would eventuate and as to which Windsor, apparently, provided reassurances. It is not for me to speculate about the level of self-delusion that may have affected some of the Ample directors in this. What seems clear, and in this I accept the ASC's submission, is that Windsor did not continue to regard the Agreement as a binding and operative one. This is the significance of his actions in what I have described as the Third Fawkner Centre Transaction - a transaction to which, at least by some time in 1994, all of the directors of Ample were privy as the meeting of 31 May 1994 illustrates. Despite their lack of legal justification for so doing - and I do not understand Ample to be relying on any agreement other than the Ample Agreement - the directors of Ample acted as if a sale had been effected and a $2 million profit made. They have caused Ample in its accounts to make a false representation. They have acted upon that representation both in Ample and in ASN. The effects of this have been various.

(i) Trustee and management fees have been drawn, so reducing the value of the trust funds to that extent. (ii) Distributions have been made to the SIPs of $1,901,265. (iii) Financial detriment has been caused to investor-beneficiaries who, having had the value of their interest inflated by an illusory profit, have suffered permanent damage to the extent that retiring beneficiaries have taken out their funds on the basis of a false value being given them by the profit. And there have been tax consequences for the investors as well because of the "profit" and its effect on income. There is a complex of breaches of trust here which are likely to have financial consequences of some magnitude. Far from preserving the trust property, Ample has allowed sums to be abstracted both in fees and in consequence of retirements for which there was no lawful authority at all. It has committed - and allowed - expropriation. The directors are accessories in this. If there had been legal justification for assuming a binding contract in the sale, there may have been a question whether it was proper for Ample to book the profit of $2 million. There has been disagreement in evidence on what would have been appropriate as a matter of accounting practice if that assumption was correct. All I would say of this is that, at the least, one would have expected written and convincing substantiation of Properties' ability to complete. Mr Fletcher in his evidence suggested that accounting practice would require as much. I would also note that the Auditor's Report on Ample 1's 1994 accounts qualifies those accounts because it is unable to form an opinion as to whether the contract will be completed. Whatever the beliefs of the individual directors of Ample, there was no justification for booking a profit nor for the actions taken in consequence of that. The ASC has submitted that they have perpetrated a fraud on the beneficiaries of Ample 1 and SIP1 - a fraud both at common law and in equity. I do not consider that an examination of this matter from the general standpoint of "fraud in equity" - whatever this might mean or encompass: cf Meagher, Gummow & Lehane, Equity: Doctrines and Remedies, para 1207 ff (3rd Ed) - as distinct from that of specific equitable doctrines such as I have already done, would serve a useful purpose here. The common law claim is a different matter. The raw material for a successful fraud claim is here and in some quantity:

(a) Cahill and Sutherland actually prepared the Ample Agreement. They must in consequence be taken to have had some familiarity with its contents including the conditions precedent. (b) Ample and its directors knew the Escrow Agreement had fallen over. (c) There were incentives to treat the Ample Agreement as effective if the directors were of that mind. As Cahill acknowledged in evidence Ample 1 was suffering a loss which SIP1 could not continue to underwrite. Equally, there was the effect on Ample 1's accounts for the 1993 financial year: a loss making investment would have required explanation to the client advisors of the investors as Cahill conceded. Treating the transaction as on foot relieved Ample from embarrassing questions. (d) Minutes of the board meeting of 11 June 1993 have Cahill reporting on a cash flow problem within Ample itself. There had been a rapid run-down of available monies to meet general on-going commitments. (e) There was no reasonable ground based on past performance for the board to place any faith in Windsor's assurances that the agreement would be completed.

(f) There was, at least on Cahill's evidence, the designed use of the Escrow Agreement as an instrument of deception of CPH. Against this Sutherland and Cahill have asserted as their honest belief that the transaction would go ahead and that it was enforceable. Cahill has suggested his view on enforceability came from advice from one or other of his lawyer co-directors. Napper has not given evidence. As is well known, actionable fraud requires proof that a false statement has been made (1) knowingly, or (2) without belief in its truth, or (3) recklessly, not caring whether it be true or false: Derry v Peek (1889) 14 App Cas 337; The Commonwealth v Murray (1988) ATR 80-207; for a discussion of "intent to deceive" see Prosser and Keeton on Torts, para 107 (5th Ed); Harper, James and Gray, The Law of Torts, para 7.3 (2nd Ed). It is the case in Anglo-Australian law, that an unreasonable ground for belief will not support a finding of deceit, but it provides evidence from which fraud may be inferred: cf Derry v Peek (1889) 14 App Cas 337 at 361; Harper, James and Gray, The Law of Torts, para 7.3 (2nd Ed); cf 37 American Jurisprudence 2d para 199. Likewise the honest forgetting of known facts which falsify the representation made will preclude a per se finding of fraudulent intent. But the circumstance of prior knowledge and the claim of forgetting may provide a basis upon which an inference of fraud may be able to be made: see Clerk and Lindsell on Torts, para 18-25 (16th Ed). There has, at the least, been gross negligence displayed by the directors of Ample. There is a strongly arguable case on the evidence before me that their actions were fraudulent. However I am not prepared here to make a finding of fraud. My reasons are these. First, the allegation of fraud was raised relatively late in these proceedings. I suggest no impropriety in this. It was not, though, a matter which was at the forefront of these proceedings. Amidst the plethora of matters agitated, it has not received sufficient direct attention both in evidence and in submissions to satisfy me that it would be appropriate to make findings against any or all of the directors - and there may be different findings available as between them - on an issue of this gravity: cf Rejfek v McElroy (1965) 112 CLR 517. Secondly, it is not essential in these particular proceedings that a finding be made on this matter. What I have said is sufficient for the applicant's purposes, as will be seen, for its s1323 claim. It is not an indispensable finding for the purposes of the winding up claim. I have already found that Ample has, in booking the profit, in distributing it and in exacting fees, committed breaches of trust. The directors, the cause of these, are in my view liable as accessories. I further find that Securities and Windsor who have received the benefit of the fees drawn are liable as accessories on the ground that they knew that the profit on which those fees were computed had not been made and that the fees in consequence were not exigible, yet they participated in the breach involved in their abstraction from the trust. 11. Sale of Ample Shares to Fiduciary; Sacking of the Ample Board. Sale of Ample Shares to Fiduciary; Sacking of the Ample Board The share sale On 8 December 1993 the ISC wrote to ASN expressing concern, amongst other things, about the lack of independence of the board of directors given that they had a variety of roles with different trusts and were directors of Ample. Cahill responded to this letter on ASN's behalf on 9 February 1994. That letter said that a company reorganisation had been approved by ASN and Ample which involved the sale of Ample to a "non-related entity" and that there would be appointed "[a]n unrelated Board ... severing any ties" with ASN. What in fact happened was that on 28 January the directors of ASN and Australian had resolved each to sell their one share in Ample to another AS Group company, Fiduciary. Fiduciary is controlled by Windsor and he is one of its two directors. Cahill has denied that his letter is misleading and has asserted that Fiduciary is not a "related entity". The ASC has submitted that the letter was intended to mislead. In my opinion, the letter clearly is deceptive in character. It could well have been intended to be so. It is equally consistent with the totally inadequate appreciation of what was objectionable in infra-AS Group relationships and dealings which has characterised Cahill's evidence. Neither interpretation does him credit. Sacking the Board Far from an unrelated board being appointed as the letter held out, the old board remained until 20 June 1995 - the day before these proceedings were to be listed for an interlocutory hearing - when there was a disagreement between Windsor and the board as to the funding of the present litigation. In his affidavit of 30 June 1995 Cahill swore that the change in the board resulted from the concerns expressed by the ISC, and that it carried into effect what was said in his letter. No reference was made to the disagreement I have noted. In cross examination Cahill acknowledged there was such a disagreement. And he admitted (Transcript 718.22) that it was the reason for the removal of the board. His affidavit was sworn 10 days after the removal. It can only be said to be deliberately misleading in these circumstances. As with his inconsistent evidence concerning the Calvic litigation to which I referred earlier in these reasons, this contradiction does reflect seriously on Cahill's reliability as a witness. 12. Transfer of the Ample Mortgage. Transfer of the Ample Mortgage The manner in which this transaction was effected gives reason for some concern. (a) Facts As has been seen, on 22 February 1995 SIP1 borrowed $300,000 from Woden repayable on 1 May 1995 (the Fourth Woden loan). That loan was not repaid and remains in default. On 16 June the corporate respondents were served with the first application in this matter (the s1323 proceedings). At a time which Sutherland could not recall exactly (but which was before 20 June and, it is the better view, after the proceedings were served), Napper advised ASN that his client, Woden, was considering appointing a receiver under the charge given it as security for the loan. No written threat was received from Woden that it would take this action. The board of ASN resolved to placate Woden by granting it a sub-mortgage over the Tristania Rd property, the subject of the mortgage given to Ample in the Constant loan. On 19 June 1995 Sutherland obtained a precedent mortgage from agents in Queensland. The precedent was used to prepare a mortgage in Woden's favour, of Ample's interest as mortgagee of the property. Napper prepared the form. It was executed on 20 June 1995 by Ample (the "sub-mortgage"). Executed on the same day was a guarantee by Ample in Woden's favour of ASN's debt limited, though, to money owing to Ample under its mortgage from Constant. On 20 June, as noted previously, Windsor sacked the Ample board. On 21 June, Sackville J made orders and received undertakings the effect of which were to restrain the respondents from dealing in any way with their property (including trust property) until further order, subject to exceptions of no present relevance. This precluded any disposal of Ample's or ASN's interest in the mortgage over the Tristania Rd property.

A Brisbane solicitor, Mr Meiklejohn, advised Napper by fax on 27 June 1995 at 10.33am that the sub-mortgage could not be registered. I am informed that the reason for this was that legislative changes in Queensland in 1994 precluded this method of dealing with mortgages. At 2.45pm on the same day Meiklejohn faxed Napper a precedent Form 1 Transfer of Mortgage "as requested". This form, I am prepared to infer, was used by Napper (or at his direction) to draft a Transfer of Mortgage. This was engrossed and executed. It is dated 20 June. Sutherland sent it to law stationers in Brisbane for registration with a covering letter dated 28 June 1995. Sutherland denied that the document was backdated. Nonetheless I find that his recollection of the sequence of events points to execution on 27 June. He did not advance any evidence to contradict the applicant's case of backdating. In my view, the facts in this point strongly to execution on 27 June. Given (a) that the Transfer was prepared by Napper; (b) that a convincing alternative explanation is required if that date is not to be found the date of execution; and (c) that Napper has not given evidence, the fair inference to be drawn is that the Transfer was backdated. I draw that inference.

I would note that both Cahill and Sutherland deny that the additional security was given to Woden as a result of these present proceedings. I would also note that the Transfer is signed by Napper and Sutherland under Ample's seal. They were not directors of Ample on 27 June. (b) Issues The gist of the respondents' submissions - on the assumption that I find (as I have) that the Transfer was backdated - was that the later action (the Transfer) merely perfected what had been done on 20 June. The burden of this was that the effect of the sub-mortgage of itself was to create an equitable sub-mortgage or transfer. I do not consider it necessary for present purposes to consider such effect as the sub-mortgage may have had or still have. The submission does not address the fact that on the date of backdating the signatories were not directors of Ample. Neither does it take account of Sackville J's orders. The Transfer purports to deal with property of Ample and by the use of a contrivance which would have the effect of avoiding those orders. I do not know precisely when and by whom the date was inserted on the Transfer. Nonetheless there clearly has been improper behaviour here. The transaction itself demonstrates the plight of ASN caused by its director's failure to pursue Windsor in respect of loans to his interests. As Cahill agreed in evidence, by June of this year the financial fortunes of ASN hung on the slender thread of an amount of $300,000. It equally reveals Napper's sense of, and manner of discharge of, his fiduciary duty to Ample. If the effect of the transfer (if valid) is that it secures only ASN's debt of $300,000 - and this is arguable - it means that the balance of the Constant loan of $180,000 is now unsecured. While it is not necessary to express a view on this matter, if a loss to Ample on this loan is incurred in the event, I would note that there is now a large body of law on the risks of liability run by those who attempt to serve two masters: the case law on solicitors so acting is conveniently collected in Wan v McDonald (1992) 33 FCR 491. Exemption ClausesClauses I mention this matter for the sake of completeness. In making the findings I have of actual or potential wrongdoing, I have not had regard to the possible effect that such exemption clauses as may be contained in the various trust deeds could have on some of those findings. I should add I was not addressed specifically on the particular effect that individual clauses might have (if any) in given instances. I gave counsel the opportunity so to do. A significant number of my findings would in any event be beyond the reach of trust deed exemptions from liability. And I refer particularly to findings on accessorial liability and on company law matters. The proceedings, furthermore, have been conducted on the basis that none of the trust deeds contain clauses which authorise or indemnify against conflicts of duty and interest and conflicts of duty and duty in ways which are of relevance to the transactions considered. Finally, given the character of some of the breaches of trust which I have found, it is questionable whether they would afford much comfort at all to the trustees: see generally Duncan and Traves, Due Diligence, 378ff; Ford and Lee, Principles of the Law of Trusts, para 1806 (2nd Ed). Whatever limited effect the exemption clauses may then have for individual liability purposes, they have no real bearing on the larger issues of these proceedings. They will not be considered further. Before turning to consider the first - the s1323 - application directly, there is one additional matter which requires mention and on which the ASC has made submissions. It relates to the level of control exercised by Windsor over the affairs of Ample and of ASN. Mr Windsor's Control of ASN and Ample The short point here is whether, as the applicant submits, Windsor is "a person in accordance with whose directions or instructions the directors of [either ASN or Ample or both] are accustomed to act": Corporations Law, s60(1). If the evidence establishes that such is the case Windsor will be deemed to be a director of either or both companies for the purposes of the Corporations Law. The substance of the ASC submission is that Windsor's relationship to the two companies should be seen in its true light. He should not be seen as a mere accessory of the companies and their directors. Rather, in the matters in which he has been involved, he has been the moving force. The respective boards have in effect been his accessories in the pursuit of his ends. The respondents' submission acknowledged that Windsor had an influence upon the actions taken by the boards. But this was because he acted (both through Securities and otherwise) as manager of the companies; he introduced much of the trust business; and he was involved in its negotiation. He was a person on whose advice the director's acted. But that "advice [was] given by [him] in the proper performance of the functions attaching to ... [his] business relationship with the directors" of each company: Corporations Law, s60(2). If such was the case then, because of that sub-section, he was not a deemed (or s60) director. I have found that Windsor: (i) has induced or procured a range of transactions which constituted or have resulted in breaches of trust. I note in this (a) both the pursuit of the proposal, and the use of ASN funds, in the Janata-Sundowner transaction; (b) the First Fawkner Centre transaction which he orchestrated; and (c) the Constant and Securities loans which were for the benefit of companies under his direct control; and (ii) brought Ample to the verge of financial disaster in the SECCU transactions through conduct which cannot be condoned. I also have found that the directors of ASN and of Ample: (i) have acted without due deliberation (and in some cases recklessly so) in entering into transactions introduced by Windsor - the Janata-Sundowner and First Fawkner Centre transactions are clear illustrations; and (ii)have acted in transactions involving the Windsor interests in ways calculated to protect or advance those interests - the Constant and Securities loans exemplify this.

Cahill in his evidence has suggested that there were, on occasion, disagreements between Windsor and the boards. The one specific instance of which there is evidence resulted in Windsor's peremptory sacking of the Ample board on 20 June 1995. I would note that while there may be some question as to whether he formally had the power so to do, the dismissed directors did not question his right to remove them. Both Cahill and Sutherland have denied that they acted on Windsor's directions or instructions. Cahill in his affidavit of 11 August 1995 refers specifically to s60 in this regard. To the extent that Windsor's actions were reflected in board action, Sutherland related this to his management role and to the trust so placed in him. The burden of this evidence was to suggest that the boards, nonetheless, retained and exercised independent judgment in the matters which Windsor brought to them. The relationship of Windsor to the directors - and there is no reason for distinguishing the two companies in this - is relatively distinctive. First, it is not one in which the directors can be said at all times and for all purposes to have acted entirely as his puppets without exercising any discretion at all in company matters: cf Selangor United Rubber Estates Ltd v Cradock (No 3) [1968] 1 WLR 1555 at 1577-1578. If such had been the case there would have been no dispute as to the applicability of s60. Secondly, the case likewise is not one of the boards acting simply in the fashion of errant nominee directors who unduly favour the interest they represent: see Scottish Co-operative Wholesale Society Ltd v Meyer [1959] AC 324; see also Berlei Hestia (NZ) Ltd v Fernyhough [1980] 2 NZLR 150. Such without more, would not bring the "nominor" within s60: Standard Chartered Bank of Australia Ltd v Antico (1995) 131 ALR 1 at 66; see Ford and Austin's Principles of Corporations Law, para 9.420 (7th Ed). Thirdly, it cannot be said that, if there was "direction or instruction", this extended to all board decisions. As has been seen, some at least of the transactions I have considered - for example the Bilambee and Woden loans - have not on the evidence before me involved Windsor either at all or else significantly. I do not regard this of itself as denying s60 any application in this matter. The reference in the section to a person in accordance with whose directions or instructions the directors are "accustomed to act" does not in my opinion require that there be directions or instructions embracing all matters involving the board. Rather it only requires that, as and when the directors are directed or instructed, they are accustomed to act as the section requires. Given the findings I previously have made, I conclude that Windsor has exercised control over the affairs of ASN and Ample. However that control has been primarily of a strategic character and, of recent times, increasingly so as he has pursued off-shore dealings. Nonetheless, that control has defined the context in which the companies have operated. It has contrived the transactions of significance in which they were to be involved. In my opinion it cannot be said that in those matters in which Windsor intruded, the boards of either company exercised an independent role at all. The First Fawkner Centre transaction is the Ample board's testament to its servility. The Securities and Constant loans, to the pliability of both boards. When one looks to the aggregate of the transactions analysed, it cannot properly be said that the case is merely one of directors acting on the advice of a manager in the proper performance of his duties: Corporations Law, s60(2). What so often was asked of, and conceded by, the boards was either to act partially towards Windsor or to act in ways which, in furthering his designs, required the dereliction of their own, and of their trust company's, duties. In these circumstances it can and should be found that Windsor is a director of both ASN and Ample as a result of s60. This finding does not, in my opinion, require it to be shown that formal directions or instructions were given in those matters in which he involved himself. The formal command is by no means always necessary to secure as of course compliance with what is sought. There is no reason to construe the section so as to deny this: cf Corporations Law, s109H. The idea of the section, as Wells J noted of its predecessor in Harris v S (1976) 2 ACLR 51 at 64, is that the third party calls the tune and the directors dance in their capacity as directors. This aptly describes Windsor's role. The question the section poses is: Where, for some or all purposes, is the locus of effective decision making? If it resides in a third party such as Windsor, and if that person cannot secure the "advisor" protection of s60(2), then it is open to find that person a director for the purposes of the Corporations Law. The practical consequences of my finding Windsor to be a director for s60 purposes are several. First, in transactions such as the First and Second Fawkner Centre and the SECCU transactions, he thus becomes liable potentially under s232(4) of the Corporations Law. Secondly, in the cases of the Securities and Constant loans and of the Second Fawkner Centre transaction, the conflict of interest becomes more direct because of this deemed relationship with the lender or vendor company. The net effect is that his liabilities become less that of accessory, more that of principal actor. But in the context of these proceedings that is appropriate. In relation to those matters in which he involved the companies it can be said with some justice: "He is the fons et origo of the whole of this mischief": cf Midgley v Midgley [1893] 3 Ch 282 at 301. A consequential effect of this finding may well be to vary Securities' liability in some (but not all) of the transactions in which it is implicated. That would be from primary liability to ASN or Ample, and the trust beneficiaries, to liability as an accessory to wrongs committed by Windsor. I have not been addressed on this matter. It is not one of real consequence for the purposes of these proceedings. I would make this final comment. It was not argued that Windsor was in a direct fiduciary relationship with the investor-beneficiaries notwithstanding the distinctive circumstances of this case. For this reason I make no comment on this other than to suggest that consideration of that possibility may well have alleviated the need to resort to the more circuitous routes of s60 and of accessorial liability in order to bring home liability to Windsor for actions which have so impacted on the interests of the investor-beneficiaries. The First Application: the Appointment of a Receiver and Manager

Insofar as is relevant to this application, the Corporations Law s1323 provides: (1) Where: (a) an investigation is being carried out under the ASC Law or this Law in relation to an act or omission by a person, being an act or omission that constitutes or may constitute a contravention of this Law; ... and the Court considers it necessary or desirable to do so for the purpose of protecting the interests of a person (in this section called an "aggrieved person") to whom the person referred to in paragraph (a) ... (in this section called the "relevant person"), is liable, or may be or become liable, to pay money, whether in respect of a debt, by way of damages or compensation or otherwise, or to account for securities, futures contracts or other property, the Court may, on application by the Commission ... make one or more of the following orders: ... (h) an order appointing:

(i) if the relevant person is a natural person - a receiver or trustee, having such powers as the Court orders, of the property or of part of the property of that person; or (ii)if the relevant person is a body corporate - a receiver or receiver and manager, having such powers as the Court orders, of the property or of part of the property of that person; ...

(2A)A reference in paragraph 1(g) or (h) to property of a person includes a reference to property that the person holds otherwise than as sole beneficial owner, for example: (a) as trustee for, as nominee for, or otherwise on behalf of or on account of, another person; or (b) in a fiduciary capacity.

This is not the first occasion in these proceedings in which I have been asked to appoint a receiver and manager of the property of the corporate respondents. I previously have refused to make an interim order under s1323(3), but for reasons which have no bearing on the substantive issues raised here: see Australian Securities Commission v AS Nominees Ltd, unreported, 1 September 1995. If the present application was the only one before me, I would have no hesitation in acceding to it on the evidence now before me. I would also add that a hearing of the duration of this one would not have been necessary to warrant arriving at that conclusion. Save in one respect which I will later note, I do not understand there to be a significant difference between the parties as to the appropriate principles to be applied in s1323 applications. Their differences are ones of emphasis and application. 1. The well accepted purpose of the remedies provided in s1323 is to protect the interests of persons who might have claims against corporations and others who are subject to the provisions of the Corporations Law (whether or not those claims flow from a breach of the Corporations Law): Corporate Affairs Commission (NSW) v Walker (1987) 11 ACLR 884; Corporate Affairs Commission (SA) v Lone Star Exploration NL (No 2) (1988) 14 ACLR 499. It achieves this by securing (a) the assets of the person, corporate or natural, against whom the relevant claims may lie for the purpose of providing security for those claims: Corporate Affairs Commission (NSW) v Walker, above, at 888; Corporate Affairs Commission (NSW) v Transphere Pty Ltd (1988) 15 NSWLR 596 at 611; or (b) assets for which that person may be liable to account in such a claim: Australian Securities Commission v Corplan Nominees Pty Ltd, unreported decision of Drummond J of this Court, 29 April 1994. 2. When application is made by the ASC, three jurisdictional pre-conditions are imposed by s1323(1)(a): Corporate Affairs Commission v United International Technologies Pty Ltd (1987) 6 ACLC 637 at 642. I need make no reference to these specifically as it has not been suggested that they have not been satisfied in relation to all four respondents. However, I would note that in Windsor's case the investigation into his actions arises in consequence of - and is a derivate of - the investigation into at least Securities: Corporate Affairs Commission v ASC Timber Pty Ltd (1989) 7 ACLC 467 at 476. 3. Whatever may be the case where an investigation is in its early stages when the application is made - cf Corporate Affairs Commission (NSW) v Walker, above, at 888 - in proceedings such as these in which the investigation has been completed, it is appropriate that the evidence relied upon to establish actual or potential liability in a respondent should be compelling. In the present proceedings there is no difficulty in this. Findings of actual or potential liability have been made against all four respondents and in some number. 4. The one issue before me is whether I consider it "necessary or desirable" to make the order requested. The respondents' in their submission have highlighted the "drastic nature" of the appointment of a receiver and manager; that such should only be made after "great scrutiny and in extraordinary circumstances"; and that lesser remedies should be considered: Bond Brewing Holdings Ltd v National Australia Bank (1990), 1 ASCR 445 at 458; Beach Petroleum NL v Johnson (1992) 9 ACSR 404 at 406. Though the respondents originally placed some emphasis upon protection against fraud as being the trigger to an appointment - cf Corporate Affairs Commission (NSW) v Lombard Nash International Pty Ltd (1986) 11 ACLR 566 at 571 - the late raising of fraud in relation to the Second Fawkner Centre transaction robbed this of its sting. In any event, I do not regard proof of actual or apprehended fraud as an essential requirement before an order can or should be made under this section. In the case of the First Fawkner Centre transaction there may not have been fraud. But there has been a potentially devastating breach of trust caused by "an undeveloped sense of trusteeship": see Prochnow, "Conflict of Interest and the Corporate Trustee", (1967) 22 Business Lawyer 929 at 929. Protection from incompetence can be as necessary as protection from fraud: Corporate Affairs Commission (NSW) v ASC Timber Pty Ltd, above, at 478; Australian Securities Commission v Corplan Nominees Pty Ltd (above). But for the fact that more appropriate relief is being sought in the second application, I would unhesitatingly have made an order for the appointment of a receiver. I have found serious and persistent breaches of trust and conflicts of interest. The trust funds have been subject both to depredation and dissipation. I need not recount the instances here. For as long as these remain under the control of the respondents there can be no reassurance that such will not continue. Actions taken by corporate officers have been misleading: (a) to investors (e.g. the booking of profit on the Second Fawkner Centre transaction); (b) to the ISC (e.g. the correspondence over the ownership and control of Ample); and (c) to this Court (e.g. the Constant Mortgage transfer). In such circumstances it would not be appropriate to rely upon undertakings from the respondents as a better form of remedy than the appointment of a receiver. This is what was proposed. For so long as Ample continues to hold units in the Fawkner Centre the prospect remains of new investors simply having their funds used to prop up a loss-making investment and in circumstances where they are unlikely to have been forewarned that their funds are being doubly "taxed" in fees. The protection of new as well as of existing investors is a significant matter for concern in relation to these trusts. The conclusion I have arrived at is that it is not safe to leave the trust funds under the control of all or any of the respondents. If this were an application merely for their removal as trustees it would be granted peremptorily given their actions and apprehended future conduct: Letterstedt v Broers (1884) 9 App Cas 371 at 385-386. The "security of the trust property" - cf Miller v Cameron (1936) 54 CLR 572 at 580 - which would justify that removal would, in light of my findings and of the liabilities to which the respondents have in all probability exposed themselves, justify a s1323 order. However, I do not intend to make an order against the corporate respondents because, but only because, winding up is a preferable and more efficacious remedy. Injunctive relief already has been granted by consent against Windsor in this application. That order will remain in effect. No additional order is now sought against him.

III THE WINDING UP APPLICATION This application is distinctive. It is not founded on insolvency. The complainants are not members of the company. Indeed those who appear to own the companies - I use the word "appear" because certainty is elusive in this corporate structure - oppose the application. The substance of the matter relates primarily to the manner in which the respondent companies together have conducted a trust business - a business from which they do not wish to withdraw. One can point readily enough to breaches of the Corporations Law which have been committed by the directors of these companies. But even these, in the main, are infused with issues of trusteeship and of trustee's duties. The ASC's application is based on the just and equitable ground. There is no other that could remotely meet the circumstances of this case. The question before me is its appropriateness to these circumstances. As will be seen, the ASC's case begins by employing conventional just and equitable ground terminology - "a justifiable lack of confidence in the conduct and management of the company's affairs": Loch v John Blackwood Ltd [1924] AC 283 at 788. But it employs that language in an unconventional context - the lack of confidence comes not from within the companies, but from without. It comes primarily from the ASC (as also from the ISC) which for this purpose relies upon its responsibility to protect the public interest. The respondents' resistance to the application follows two courses. The first emphasises the reluctance of courts to wind up a solvent company. The second relies upon the seemingly habitual tendency of this ground to reduce itself to categories despite the unfettered language of the ground: cf In re Wondoflex Textiles Pty Ltd [1951] VLR 458; In re Straw Products Pty Ltd [1942] VLR 222 at 223. The present case not falling within what are said to be the ground's "three broad heads" - cf International Hospitality Concepts Pty Ltd v National Marketing Concepts Inc (No 2) (1994) 13 ACSR 368 at 371 - the application ought be dismissed. Having emphasised that issues of trusteeship loom large in this matter I should indicate that, though belatedly given the opportunity to intervene - see my decision in Australian Securities Commission v AS Nominees Ltd, 17 August 1995 - the trust beneficiaries are not a voice in these proceedings. Before turning to the submissions in detail it is desirable to review briefly the twelve transactions on which I already have made findings. The ASC has submitted that when viewed together they reveal patterns of conduct in the management of the trusts and of the companies and that these provide justification in themselves for this application. I agree with these submissions. Having already considered the transactions in some detail, and mindful of the length of these reasons, I will here simply state my own conclusions on the ASC's submission in light of the findings I have made. I should add that the ASC provided detailed written submissions covering the subject matter to which I will refer - though not classified precisely as I have - and that the respondents had the opportunity to address these. Patterns of Conduct

1. Imprudent Investment. The trusts, repeatedly, have made or else managed investments in ways which have brought actual or potential loss to the trust funds. More than half those considered share this characteristic. In two instances, one involving the trusts, the other Ample in its own right, the transactions have had potentially disastrous consequences. I refer to the First Fawkner Centre and the SECCU transactions. In each of these, as with Janata-Sundowner, it should have been (and in Janata's case was) reasonably apparent to the boards from the outset that there were significant risks being run. In all three instances the boards acted with undue haste and with little deliberation. Impropriety more often than not has been associated with imprudence. The Constant and Securities loans epitomise this.
2. "A sense of trusteeship". It can only be said that Windsor, Napper, Cahill and Sutherland each have what I earlier referred to as "an undeveloped sense of trusteeship". They have used only one bank account for all of the trusts. Major trust decisions often were not recorded - there are, for example, no minutes at all of the second and third Woden loans, or of the decision to make the Constant loan. Trust funds were used without separate regard to the interests of the particular trust making an investment or loan - the Janata-Sundowner transaction, the Securities loan and the use of SIP1 to prop up Ample 1 illustrate this. The directors of both trust companies repeatedly neglected the first duty of the companies which was to preserve the property of the trusts - their failure to take any, adequate or timely security for loans (e.g. Securities, Bilambee, Calvic and APFM) and the interest rates they agreed to in the Woden loans are examples. They have not understood the difference between the entrepreneurial action allowed companies and the caution required of trustees. I have characterised their entry into the First Fawkner Centre transaction as reckless.
3. Conflict of interest and partiality. Neither Cahill nor Sutherland - and I am prepared to assume Windsor and Napper - have understood, or else have felt inhibited by, their own and their companies' fiduciary responsibilities. This has been manifested in a variety of ways. Trust decisions have been taken so as to protect or advance Windsor's own interests (e.g. the Securities and Constant loans) or to further his ambitions (an available inference from all three Fawkner Centre transactions). Infra-AS Group dealings are a recurrent and unpleasant feature of this trust business and are typified variously in the SIP1-Ample 1 relationship and the Second Fawkner Centre transaction. The individual directors regularly placed themselves in positions of conflict of duty and interest or of conflicting duties. Windsor I have found to be a s60 director. His conflicts were multifarious because of intergroup dealings. Cahill was compromised in dealings with Securities: it paid his salary. Napper did not allow his office of director to impede his legal practice in the Woden loans. Sutherland's most obvious conflict was in advising in the aftermath of Janata-Sundowner. The conflicts they allowed themselves they tolerated in others who, with conflicting loyalties, they used to advise them - as witness the role given Cornwall Stodart in the First Fawkner Centre transaction.

(b) The correspondence with the ISC over the ownership and board membership of Ample was likely to mislead. (c) The backdating of the transfer of the Constant mortgage and its signing by persons who had ceased to be directors speaks for itself. (d) In the Calvic loan, Ample knowingly allowed funds to be on-lent to APFM where the understanding upon which some part of the funds was invested was that they would be used as a film investment. (e) Windsor, on my findings, concealed basic information from at least Cahill and Sutherland in Ample's decision to enter into the SECCU transaction. (f) A comment needs to be made of ASN's use of Ample as the investment vehicle for the SIPs. This was of Windsor's and Securities' doing. What it has meant is that investors in Client Plans whose funds have been pooled in the SIPs have had those funds invested in a related company with additional brokerage being charged. Such is not expressly contemplated in the Client Plans and is not, in my view, what reasonably would have been expected by an investor. I would add this. It is difficult to see the purposes served by Ample - other than convenience and fee augmentation - which could not and (given the Client Plans) should not have been served by ASN. Ironically, as I indicate below, it is the very existence of Ample that has necessitated the ASC's assumption of the policing role over these trust companies. 5. Breaches of the Corporations Law. Apart from the directors duties provisions, there have been repeated breaches of s258 and, most likely, s289 of the Corporations Law. The failure to minute important decisions has left to speculation or inference the actual course taken in some number of the transactions inquired into. Whether there has been a practice of positive concealment or merely neglect of, or indifference to, lawful obligations is not a matter on which I have been asked to make findings and I refrain from so doing. 6. Windsor. Given my earlier findings that Windsor is a s60 director I here need only make these additional comments. First, he was the orchestrating force in much that has been examined in these proceedings. He has so acted that his "private interests present a constant threat of conflict with the management of the trust estates": cf Manchester v Cleveland Trust Co 168 NE 2d 745 at 753 (1960). Secondly, the formal instrument he employed in much of what he has done has been Securities. It is the source of his profit from the trust business. It is his corporate face (or front) in that business. Despite Cahill's assertion to the contrary, I have found that Securities has continued to provide, and to be recompensed for, management services to the trusts as well as to ASN and Ample as corporations. I emphasise the role of Securities (via Windsor) in the trust business. Securities cannot, in my view, properly be treated separately from ASN and Ample in the winding-up application, such has been the level of its implication in the affairs of the trusts they control. Windsor is responsible for that. The Australian Securities Commission While the ISC has supervisory powers over ASN its reach does not extend to Ample and Securities. Neither are trustees of superannuation entities: see Superannuation Industry (Supervision) Act 1993 ss3, 10 (the "SIS Act"). Ample in particular is beyond the ISC's power to suspend or remove trustees, a power which in any event requires the written consent of the Minister for its use: SIS Act, s133. And so, what to some may well seem to be problems of trust management have been placed in the hands of the ASC. The ASC for its part has jurisdiction over all of the companies. And there is no doubting its authority to bring the present application: Corporations Law, s464. But the ASC does not have the responsibility to supervise the trusts of ASN and Ample as such. The roles it is purporting to discharge in this application - and these are reflected in its submissions - are (i) in accordance with its statutory objects, "to enforce ... the national scheme laws" by this action: Australian Securities Commission Act, 1989, s1(2)(g); and (ii) as a matter of public interest, to protect the investing public whose funds are solicited and managed by these companies: cf Re Walter L Jacob & Co Ltd (1988) 5 BCC 244. The latter of these roles raises a question of some importance both for the ASC and for the reach of s461(k) (the "just and equitable" ground). This is whether the public interest is a proper matter upon which to rely to justify a winding-up on this ground. I would note that, unlike s461(h), the ground does not refer to "the interests of the public": but on s461(h) in this regard see Re Co-operative Development Funds of Australia Ltd (No3) (1978) 3 ACLR 437 at 445. As a matter of obligation in our system of government the ASC, like all other agencies of government, is required to act in the public interest within its sphere of responsibility: cf the observations of McHugh JA in Attorney-General (UK) v Heinemann Publishers Australia Pty Ltd (1987) 10 NSWLR 86 at 191. For this reason, when bringing an application under the Corporations Law s464 to wind up a company, the ASC cannot be seen quite in the same light as an ordinary creditor or contributory when so applying. Its powers and purposes are not those of the private applicant. And it does not, or at least should not, have a private self-interest to pursue. In bringing winding up proceedings the ASC may well appear on occasions to be little more than the surrogate of other persons who are interested in the relevant company's affairs either as creditors or contributories. But this will not always be so. It can be the case, as here, that those interested in the company have not the desire or else the incentive to wind it up. They may, as here, positively oppose that step: cf Re Walter L Jacob & Co Ltd (1988) 5 BCC 244. It is in just such circumstances that the ASC's public interest responsibility is most pronounced: see e.g. Re Attorney-General of Canada and Continental Trust Co (No 2) (1986) 52 OR 2d 525 (Can); see also In re Lubin, Rosen and Associates Ltd [1975] 1 WLR 122; and for further recognition of the ASC's public interest responsibility, albeit in a different context, see Australian Securities Commission Act 1989, s50. I have laboured this matter for this reason. Once it is recognised that considerations of public interest should properly inform the ASC's decision to initiate a just and equitable ground application, the question whether those considerations can and should properly be taken into account in applying the ground itself then arises. It is to that question I now turn. The Just and Equitable Ground The contrary trends in judicial treatment of this ground are well-known: see for example McPherson, "Winding Up on the 'Just and Equitable' Ground" (1964) 27 MLR 282. The tendency for limiting categories to develop, though at odds with the provision's language, is understandable enough. The usual applicant is a contributory. The justice and equity to which regard is had and the balance to be struck are, in consequence, usually as between infra-company contestants. It is not surprising that limitations are imposed on the types of complaint that will be countenanced in infra-company disputes. But the ground is not limited to resolving the disputes of members nor is it only available to members: see for example In re Alfred Melson & Co Ltd [1906] 1 Ch 841 where an order was made on the petition of an unsecured creditor. The relevant interests to be balanced can extend, then, beyond those of the company and its members. It has been the practice in some number of Commonwealth countries to authorise responsible institutions of government - Ministers of the Crown, designated statutory bodies and the like - to apply for the winding up of companies (or types of company): as to the latter see Re Attorney-General of Canada and Continental Trust Co (No 2) (1986) 52 OR (2d) 525 (Can). That authority may require the governmental body to make a prior public interest determination before application to wind up on the just and equitable ground is made: cf Re Waller L Jacob & Co Ltd (1988) 5 BCC 244. Or it may not, as is the situation here with the ASC. But in either case there seems to be no reason at all why a court entertaining such an application should not have regard to such actual public interest considerations as have (in the one case) or may have (in the other) induced the governmental body to seek a just and equitable winding up order. It is the course I intend to take in this application. Such case law as there is seems consistent with this. Australian authority on earlier State legislation involving applications by the Attorney-General demonstrate that this ground has a proper - and one would have thought appropriate - role to serve as an instrument of investor protection. So In re The Producers Real Estate and Finance Co Ltd [1936] VLR 235 a company was wound up (inter alia) on this ground because: it cannot be carried on consistently with candid and straightforward dealings with the public, from whom further capital must be obtained if its existence is to be prolonged: at 246

A like order was made in In Re Chemicals Plastics Ltd [1951] VLR 136 because the company, if it was to continue its operations: must do so with money which virtually belongs to its creditors, and under a management and control in which creditors and shareholders could no longer have any confidence: at 142

If the word "investors" were substituted for "creditors" and "shareholders" in the latter quotation it would aptly describe the present case. The respondents in their submission have advanced the proposition that the fact the ASC is the applicant does not put it in any different position from an ordinary applicant when it comes to applying the ground itself. If this was intended to suggest that it could not rely upon, and that the court cannot take account of, public interest considerations, I reject the submission for the reasons I have given. Extended judicial consideration of the public interest's possible impact on the just and equitable ground was recently given in Re Walter L Jacob & Co Ltd (1988) 5 BCC 244. Referring there to "'public interest' petitioners", the English Court of Appeal indicated that (at 251):

where the reasons put forward by the petitioner are founded on considerations of public interest, the court, if it is to discharge its obligation to carry out the balancing exercise, must itself evaluate those reasons to the extent necessary for it to form a view on whether they do afford sufficient reason for making a winding-up order in the particular case.

Such will be my own approach. The ASC's application is founded first and foremost on the lack of propriety and competence in the management and conduct of the affairs of the three companies. I will not again repeat my findings which more than justify this characterisation. It is not the ASC's case that the trusts are insolvent, although it points rightly (i) to the problem ASN found itself in by June of this year in meeting its commitments; and (ii) to Ample's certain insolvency if it is unsuccessful in the SECCU litigation. However, while indicating that insolvency is not a precondition for the making of an order, the ASC has acknowledged that to wind-up a prosperous company is an extreme step requiring a strong case: Kokotovich Constructions Pty Ltd v Wallington (1995) 17 ACSR 478 at 494. Its submission is that there are public interest considerations which make this case an overwhelming one in relation to all three companies - whether or not any of them can be said to be "prosperous". First, there is a distinct public interest in the ASC securing compliance with the Corporations Law as such. Its statutory object requires that of it. In these proceedings reliance is placed upon this, given the regular and repeated breaches that have occurred of particularly ss232 and 258 of the Corporations Law. But these breaches in turn evidence a larger, a second, public interest concern. That is investor protection, but investor protection in the particular context of superannuation. As to this the ASC, while emphasising the unquestionable shortcomings of the respondent companies and their directors, has highlighted the particular importance of upholding high standards in the superannuation industry. That industry is developing rapidly in consequence of governmental measures. It should have its standards established clearly - and enforced - at this early stage in its development. The use of superannuation as a means both for making retirement provision for the Australian workforce and for increasing national savings is an accepted instrument of public policy in this country. The extent to which it has been made a compulsory obligation has been emphasised by the ASC: see also, The Hon R Willis, MP, Saving for Our Future, 9 May 1995. Also emphasised are the regulatory developments accompanying this which have culminated in the enactment of the Superannuation Industry (Supervision) Act 1993. The ASC has acknowledged that, for practical purposes, this legislation only came into effect in the 1994-1995 financial year, and that it does not in any event extend to Securities and Ample. Nonetheless it submitted that the SIS Act provisions on the standards of conduct to be expected of the trustees of superannuation entities provide a significant manifestation from our Parliament of the protections which, as a matter of public interest, should be accorded to investors in the superannuation industry. To that extent this statute can properly be used in conjunction with such other sources as are used to identify the public interest. Reference was made particularly to those SIS Act provisions dealing with the keeping of minutes and records (s103), ensuring investments are made on an arm's length basis (s109), accounting records (s111) and the obligatory trustee covenants which prescribe (inter alia) standards of conduct for trustees (s52). These provisions either reflect, or are emanations of, established common law rules. In those circumstances where statute and the common law point in the same direction, it is, in my view, entirely appropriate to use such legislation to assist in illuminating the public interest in this matter. That interest is to protect investors from abuses of trust by ensuring proper standards are maintained in trust management and in trustee behaviour. But whether or not one has regard to the standards contained in the SIS legislation, or merely relies upon the common law and Corporations Law standards I have relied upon to make the findings I have against the three companies and their directors, there can be no doubt that the manner in which the affairs of the trust business have been conducted has been such as to lead to only one conclusion. There has been misconduct and mismanagement in the conduct of the trust business in such degree as to make it unacceptable for these three companies to solicit, hold, manage and deal with investors' money on a fiduciary basis. Investors (but not only investors) have been misled. Their funds have on occasion been hazarded - and lost - in reckless and/or improvident ways. And those funds have been the subject of improper fee exactions. Trustee decision making has often been partial and tainted with conflicts of interest. Record keeping has been glaringly inadequate. The duties of trusteeship were unknown or else ignored in important respects. Windsor and his interests have had untoward place and protection in the conduct of the trust business. Windsor, and his fellow directors, have betrayed little understanding of their own and of their companies' fiduciary responsibilities. And there have been regular breaches of provisions of the Corporations Law. I need not repeat the detail of all of this. It involves all three corporate respondents. Such is not conduct that an investor, who is seeking to make provision for his or her future and who, in a real sense, entrusts that future to persons holding themselves out as skilled and reliable in funds management, would at all expect - or should be required to endure. To order the winding up of these companies is not merely a convenient means of securing their removal from the control and management of the trusts with which I have been concerned - notwithstanding that there is an urgent need for effective, external administration of the trust business. Rather it is the appropriate expression of the lack of confidence one must have in the directors of these companies in their conduct and management of the affairs of their companies. Such an order should, also, convey a message to companies which hold or manage funds on a trust basis: cf Re Walter L Jacob & Co Ltd, above, at 258 - an undoubted and proper purpose the ASC has had in mind in these proceedings. The one concern I have had in deciding to make this order is as to its possible effects on the beneficiaries of the trusts. I am persuaded, however, that short of granting no relief at all - and that is not an available option - the appointment of a liquidator is likely to provide the greatest protection to the beneficiaries that is possible in the circumstances. It is to be expected that further legal proceedings by or against the companies could ensue from any order I make. Finally I should indicate that the respondents have submitted that rather than make such an order I should accept undertakings from them as to their future conduct, these undertakings being designed to redress - or at least address - past wrongs. I need not labour here why I regard such a course as inappropriate. The lack of confidence there must be in the management of these companies (and this has been exacerbated by the change in Ample's board), the degree to which the respondents have transgressed, and the need for effective external administration, provide reason enough for my refusal to entertain it. I will, then, make orders winding up AS Nominees Limited, Ample Funds Limited and AS Securities Pty Limited, under the provisions of the Corporations Law. The transactions into which I have inquired will, on my findings, give rise in all likelihood to claims between the three respondent companies. A question may arise whether in the circumstances it is appropriate for a common liquidator to be appointed to each of the three companies as the application of the ASC proposes. I will require to be addressed on this. Accordingly I direct the applicant to bring in short minutes of orders by filing and serving draft minutes on or before Friday 17 November 1995 for the winding up of the three respondent companies. I certify that this and the preceding 153 pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Finn. Associate Dated: 15 November 1995 Counsel for the applicant : R S McColl S.C. and C M Erskine Solicitors for the applicant: Jonathan Caddick, of Australian Securities Commission Counsel for the respondent : S L Walmsley Solicitors for the respondent : Bush, Burke and Company Date of hearing : 14 August 1995 15 August 1995 16 August 1995 17 August 1995 21 August 1995 22 August 1995 23 August 1995 24 August 1995 28 August 1995 29 August 1995 30 August 1995 26 September 1995 27 September 1995 28 September 1995 29 September 1995 3 October 1995 4 October 1995 5 October 1995 9 October 1995 10 October 1995