22The Applicants' case was essentially that, under s 1274B of the Corporations Act, "information from ASIC's national database is prima facie evidence of the matters contained in the national registry" and "that the current ASIC registries are valid" and, which provide that -
(a) Mr Florent is a director of Bilquip, and has been so since 28 June 1994;
(b) Mrs Florent is a director of Bilquip, and has been so since 13 July 2000; and
(c) Mrs Florent is a director of Holibas and has been so since 13 October 2005.
23As regards the allegation "that Mr Florent has back dated a series of ASIC documents" it was submitted that the respondent was required to prove the allegation, "on the balance of probabilities, to the Bringinshaw standard" but "has failed to meet this test".
24It was further submitted that -
... The highest accusation the Respondent can make about the documents is that the Applicant has failed to provide all material which has been requested. The Applicant has given evidence (which was not challenged), that the office of John Florent's accounting practice, which is in his home, has been ransacked on a number of occasions. Documents have been pulled out, paint has been thrown over them and even a small fire has been lit with some of the documents. The Tribunal should not draw any inference against the non-production of materials when a reasonable explanation (sic). John Florent has been consistent in the explanation he has provided to the OSR, see for example the file note of a meeting with John Florent and OSR on 16 July 2009 (page 109 of s 58 material).
5.8 It is the Applicant's case that there were prima facie errors on the ASIC registry with respect to Bilquip, such that it should have shown Mr Florent as a director from 28 June 1994 and Mrs Florent as a director from 13 July 2000.
5.9 Mr Florent deposes [John F para 28-34] that Mr Florent has been suffering a number of serious health issues, and has also had significant personal issues to deal with. Mr Florent also deposes that a number of ASIC documents were mistakenly, or incorrectly sent to ASIC [John F paras 34-71], which had the effect of incorrectly having Mr Florent resign, and never appointing Mrs Florent, as directors of Bilquip.
25It was further submitted that -
... notwithstanding that the ASIC records originally did not show Mr and Mrs Florent as directors of Bilquip (and for current purposes) Mr and Mrs Florent will be directors if (and amongst other reasons):
5.36.1 Mrs and Mrs Florent were appointed as directors of Bilquip;
5.36.2 unless the contrary intention appears, Mr and Mrs Florent act in the position of director of Bilquip; or
5.36.3 unless the contrary intention appears, Mr and Mrs Spychala (i.e. the directors noted as directors of Bilquip) are accustomed to act in accordance with Mr and Mrs Florent's instructions or wishes. Further, if Mr and Mrs Spychala do act in accordance with Mr and Mrs Florent's instructions or wishes, then such acts of Mr and Mrs Spychala should not be as a result of Mr and MrsFlorent's professional capacity or business relationship.
5.37 Indeed, it seems that the crucial issue to be determined is whether Mr and Mrs Florent were considered 'de facto' directors of Bilquip as defined in paragraph (b) of the definition of 'director' in section 9 of the Corporations Act.
26The applicants' alternative submission was further expanded as follows:
5.41 Therefore, notwithstanding that Mr Florent was not disclosed on the ASIC registry as a director of Bilquip post- 13 July 2000, and that Mrs Florent was never disclosed a director of Bilquip on the ASIC registry; Mr Florent was in fact a director from the date of incorporation of Bilquip (i.e. from 24 June 1994), until 13 July 2000, after which time he remained as a director, but as a de facto director. Mrs Florent held the position of director of Bilquip from 13 July 2000 as a de facto director.
5.42 The matter of DC of T v Austin (1998) 16 ACLC 1555 ('Austin case') stands for the position that in determining whether John Florent and / or Julie Florent were directors of Bilquip, regard needs to be given to (amongst other things) the breadth of activities and (sic) Mr and Mrs Florent conducted, and in particular, whether those activities were 'general affairs' of Bilquip.
5.43 The Court in Austin'scase held that a necessary condition of acting as a director (whether the person was properly appointed or not) is that the person exercises what was referred to as 'top level management functions'.
5.44 The facts in Austin's case (as with the position with John Florent - notwithstanding that the resignation by him was a mistake), Mr Austin resigned as a director of the relevant company, but Mr Austin continued to play an active role in the company. The Court observed that whether a person acts as a director '...will often be a question of degree, and requires a consideration of the duties performed by that person in the context of the operations and circumstances of the particular company concerned'. Broadly speaking, the broader the scope of Mr and Mrs Florent's duties, the more likely they will be considered 'director' of Bilquip.
5.45 The Court in Austin's case considered the relevant factors in determining whether one was a 'director' include:
5.45.1 the size of the company. In a large and diversified company, then great (sic) discretion to deal with significant matters may be given to employees.
5.45.2 the internal practices and structure of the company that certain work given to an individual may be of such a type that it is more appropriate to classify that work as being undertaken by the individual in the capacity of an expert employee or consultant, rather than a director; and
5.45.3 how the person who it is claimed has acted as a director was reasonably perceived by outsiders who deal with the company.
27It was also submitted that the factors highlighted in Austin have been 'applied in a number of cases' including Chameleon Mining N L v Murchison Metals Limited [2010] FCA 1129. Attention of the Tribunal was also drawn to the recent decision of the Full Federal Court in Grimaldi v Chameleon Mining NL (No2) [2012] FCAFC 6, which considered in some detail the position of a person not validly appointed as a director but acted in that position in the context of the definition of 'director' in the Corporations Act.
28The Applicants' case was that the 'evidence adduced by the Applicants clearly show that both Mr and Mrs Florent held and exercised the roles of directors with Bilquip' and which included:
Negotiating contracts of employment with new staff members and making offers of employment;
Resolving staff conflicts and where necessary, reprimanding staff who breached employment and/or harassment laws;
Terminating contracts for employment;
Providing direction and instruction to staff members on a day to day basis running the business; and
Provided correspondence relating to workers compensation insurance disclosing himself (i.e. Mr Florent) as a director.
29Some reliance was placed on the evidence given by employees of the Applicants -
5.54 Mike Persons gave evidence that he worked at Mid-Coast Ford, the dealership owned by Ilmat, which is next door to the Nissan Dealership owned by Bilquip. He would take directions from Walter Spychala, and knew John Florent worked as the company accountant, as well as operating Bilquip. In his view both John and Julie were directors - and his understanding of a director is someone who gives directions to staff and is the principal decision maker of a company.
5.55 Amanda Stewart gave evidence that on commencement of her employment with Bilquip, John Florent said to her words to the effect "I am a director of Bilquip" and that at all times she had taken instructions and direction from John Florent.
5.56 Shane Fiegl gave evidence that he was employed by John and Julie and considered them to be owners of Bilquip.
5.57 Fay Brooks gave evidence that John Florent retained an office in the Ilmat premises, but that this office was rented from Ilmat on commercial terms.
30In relation to Julie Florent's role in the management of Holibass the following submission was made:
5.59 Julie Florent gave evidence she was a secretary of Holibass from October 2005 to date. She was asked to become a director on the departure of Melissa McGilvary who had separated from her husband, Adam McGilvary.
5.60 Her duties as a director were to go over figures of the company each month with the other directors and meet to discuss company policy.
5.61 The Applicants concede ASIC was not notified of this change of directorship until the lodgement of a 304 form in 2008, after the audit by OSR had been commenced.
5.62 The Respondent will make a submission that because Mr McGilvary who signed and lodged the 304 form, did not appear to give evidence, the tribunal should draw a negative inference against the Applicant that the evidence of Mr McGilvary would not have assisted the Applicant.
5.63 The Tribunal should not draw such an inference. It is submitted that pursuant to the principle in Jones v Dunkell (1959) 101 CLR 298, it is not a negative to be drawn, but an inference that Mr McGilvary's evidence would not have assisted the Applicant. Further, date of lodgement of the 304 form regarding the appointment of Julie Florent to Holibass is not directly relevant to the Applicant's case. The Applicant contends that the test the Tribunal should undertake with regard to this question is, was Julie Florent a de facto director of Holibass from October 2005.
5.64 It is not contested evidence that this date is the date when Mr and Mrs McGilvary separated. Julie Florent gave clear and consistent evidence of her role with Holibass changed at this time because of this event. It is consistent and logical that on the removal of one director of a company, another is appointed to fill in the gap.
5.65 Under cross-examination, the Respondent asked Julie Florent about other companies she had been made a director. Ostensibly to establish that Julie Florent had been made a director of these companies without any real role as defined by section 9 of the Corporations Act (2001). The evidence of Julie Florent instead was that for each of the companies raised by the Respondent, she in fact had had an active role as director and would have qualified as a de facto director for each case.
5.66 Julie Florent presented as a credible witness and her evidence should be accepted by the Tribunal. Especially with the consideration that no evidence was led by the Respondent in this matter at all which would contradict Julie Florent's statement.
31By way of summary, the Chief Commissioner's case was put as follows;
6. In short the Respondent contend that the grouping decision is correct for the following reasons:
(a) John Florent made the decision and did resign as a director of Bilquip from 13 July 2000. Form 902 ought to be given no weight, as being a document in existence before July 2008, for the reasons outlined in paragraphs 35 to 42. The objective documentary evidence, being the annual returns referred to at paragraphs 43 to 54 point to Mr Florent no longer being a director of Bilquip after 13 July 2000. The copy minutes produced ought to be given no weight for the reasons outlined in paragraphs 55 to 58. From at least 2000 Mr Florent was providing accountancy services to Bilquip and he was being paid "accountancy fees" in respect of those services. From this evidence the Tribunal could infer that Mr Florent carried activities out from 13 July 2000, not as a director, but rather in the course of providing accountancy services for which he was being paid fess, for example in 2005 and 2006 accountancy fees of $12,000 were charged. In 2008 accountancy fees of $12,212 were charged. In 2008 accountancy fees are disclosed as "-" in Bilquip's financials (see section 58 Document, pages 697 and 703). Further, the Applicants have not adduced sufficient evidence to satisfy the Tribunal as to the nature and extent of the business of Bilquip and the roles and functions within the operations of employees and governance of Bilquip during 2000 to 2008. These are all factors for the Tribunal to take into account when considering whether Mr Florent was de facto director (see Grimaldi v Chameleon Mining NL (No.2) [2012] FCAFC 6 at [66] to [68] set out in these submissions below). The onus of proof is on the Applicants to adduce sufficient evidence to satisfy the Tribunal as to the relevant matters. The Tribunal on the evidence adduced cannot be satisfied that John Florent held the position of de facto director prior to July 2008.
(b) Mrs Florent was not validly at law appointed director of Bilquip from 13 July 2000 because the evidence adduced by the Applicants is not such that would satisfy the Tribunal that as at 13 July 2000 Mrs Florent provided a written consent to act as a director and there was a resolution at a general meeting of Bilquip as required by Bilquip's constitution appointing Mrs Bilquip (sic) as director. Further, even though Mrs Florent had an interest in the business of Bilquip after 2000, that fact does not mean that she intended to be director of Bilquip. This is reinforced by the fact that Julie Florent at paragraph 5 of her affidavit says that in around 1998 she went into business with the Spychalas and Adam and Merisse McGilvary to purchase Taree Subaru dealership through Holibass. It is common ground that before 13 October 2005 Julie Florent was not a director of Holibass. Therefore the fact that Mrs Florent had an interest in Bilquip, given her past conduct with Holibass, does not point to her being a director of Bilquip. Mrs Florent's activities after 13 July 2000 with regard to Bilquip included providing assistance to her husband, John Florent, in carrying out his accountancy services for Bilquip. For the reasons outlined in sub paragraph (a) as to what evidence needs to be adduced as to whether Mrs Florent is a de facto director, the Tribunal on the evidence adduced cannot be satisfied that Julie Florent held the position of de facto director prior to July 2008.
(c) Mrs Florent was not validly at law appointed a director of Holibass from 13 October 2005 because the evidence adduced by the Applicants is not such that would satisfy the Tribunal that as from 13 October 2005 Mrs Florent provided a written consent to act as a director and there was a resolution passed at a general meeting of Holibass as required by its constitution appointing Julie Florent as a director. As to whether Julie Florent was a de facto director of Holibass, it is noted that Mr Florent provided accountancy services to Holibass for which he received fees. In 2005, Holibass paid accountancy fees of $10,276. In 2006 the accountancy fees of Holibass were $11,910 (section 58 documents, page 94). In 2007, Holibass paid accountancy fees of $10,909. In 2008 the accountancy fees of Holibass were $12,345 (section 58 documents, page 105). Julie Florent agreed that she provided assistance to John Florent as to his provision of services to Holibass. Therefore, the Tribunal can infer that the services provided by Julie Florent after October 2005 were not carried out solely as director of Holibass. Again, the Applicants have led insufficient evidence as to the nature and extent of the business of Holibass and the roles and functions within the operations of employees and governance of Holibass, such that the Tribunal cannot on the current evidence be satisfied that Julie Florent was a de facto director of Holibass. Further, and notably the evidence of Julie Florent that she is a director of Holibass should be treated with caution and not accepted because the person who could have given evidence as to these matters for Holibass, being Adam McGilvary, was not called as a witness by the Applicants (see paragraph 86(c), 88 as to inferences the Tribunal can draw from the failure to call Adam McGilvary as a witness).
32The Chief Commissioner's response in relation to sections 1274B and 1274C of the Corporations Act and documents held by ASIC was -
26 Sections 1274B and 1274C create a presumption that information drawn by ASIC from National database is prima facie fact in the absence of evidence to the contrary:Kocic v Deputy Commissioner of Taxation [2011] NSWCA 322 at [41] and [42]. However in this case the Tribunal would not rely on the information set out in the database now recorded that John and Julie Florent were directors of Bilquip from 13 July 2000 and Julie Florent was a director of Holibass from 13 October 2005 because there is evidence to the contrary, being that ASIC data base for Bilquip was only amended retrospectively on 18 August 2008 so as to note the appointment of John Florent as a continuing director of Bilquip from 28 June 1994 and Julie Florent as director of Bilquip from 13 July 2000.
...
31. Under cross-examination Mr Florent said that his hand writing appears on Form 304 (T.p. 35.27-35). Mr Florent said he prepared Form 304 to resign as a director because at that time in July 2000 (T.p. 36.13-16) his "kidneys had failed". He was "given three months" before he had to go on dialysis. He "was a mess" and he did not want to leave "affairs uncleared" (T.p. 35.40-44).
32. However, Mr Florent says he then "had a discussion between Walter and Julie" and "they did not want me to do so". The Applicants lead no evidence from Mr Spychala as to the discussion of the type that John Florent says took place. It was a matter for the Applicants to lead this evidence (Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418-419. Failure to lead that evidence can permit the Tribunal to draw an adverse inference.
...
39. John Florent in his affidavit at paragraph 52 says on 20 September 2001 he sent in two 902 Forms and attaches the same annexure "F". Both these forms are signed in a similar fashion by Julie Florent and dated 20 September 2001. It can be seen that one of the attached forms is the Form 902 at Tab 2 of Exhibit R1, which was not processed by ASIC until 26 August 2008. The second Form 902, attached as annexure "F", is the same as the Form 902 at Tab 18 of Exhibit R1. This form was processed by ASIC on 16 January 2002. It is curious that one of the Form 902 is received and processed by ASIC, whilst the other is not. As the Tribunal will see, it is noteworthy that only documents said not to have been received by ASIC are those seeking to reappoint John Florent as a director of Bilquip and appoint Julie as director of Bilquip. It is noted that in relation to Bilquip it is not suggested that ASIC failed to process other documents in a timely fashion after they were sent. Further, when one looks at ASIC historical search for Ilmat and Holibass, at Exhibit R1, tabs 25 to 53, it can be seen that ASIC process documents received in a timely manner and the only document for Holibass said not to have been received was the change of office holder appointing Julie Florent as a director of Holibass from 13 October 2006 (Tab 54, Exhibit R1). The Tribunal could infer from this that the evidence points to ASIC processing documents in a timely manner after receiving them, which suggests that Form 902 at Tab 23, Exhibit R1, and the change of office holder for Holibass at Tab 54, Exhibit R1 were not in fact sent to ASIC at the dates noted on those documents. This further points to the Tribunal not being able to be satisfied that Form 902 and the change of office holder for Holibass being prepared at the time they are dated.
...
43. The objective records, being the ASIC Annual returns show that prior to 13 July 2000 (the date Mr Florent completed Form 304 at Tab 18, Exhibit R1) he was signing the Annual returns and other ASIC documents for Bilquip in the capacity as Director (see Tabs 8,9, 12, 14, Exhibit R1).
44. Then after 13 July 2000, at a time that Mr Florent had completed the Form 304 resigning as a director, Mr Florent signs ASIC Annual returns in the capacity of "Secretary" (see Tabs 15, 16, 19 of Exhibit R!). Mr Florent during cross-examination tried to explain this by saying sometimes he signed as director and sometimes secretary (T.p. 35.37-43) but the objective evidence is that he always, for Bilquip up to 13 July 2000, signed as "Director", and after 13 July 2000 he signs as "Secretary". This is some evidence to cast doubt on accepting Mr Florent's evidence that after 13 July 2000 he changed his mind and decided not to resign as director of Bilquip.
33The Chief Commissioner's submission as to the absence of proper minute books was set as follows:
57. Although an explanation has been given as to why the original minutes books have not been produced the Tribunal would be cautious to place weight on the copy minutes that have been produced to be satisfied that John and Julie Florent were directors of Bilquip because despite repeated requests (Tab 1, 3 and 5, Exhibit R1) no original or for that matter copies of minutes have been produced for Holibass and Ilmat for the period requested to 30 June 2008. The explanation that the office of John Florent was broken into in 2003, 2005 and 2006 does not explain why original minutes have not been produced for the years 2007 and 2008 for Bilquip and only copies were produced and why no minutes copy or original were produced for Holibass and Ilmat for the period requested to 30 June 2008.
34The Chief Commissioner, in rejecting Julie Florent's evidence that she was appointed a director of Holibass from 13 October 2005, made the following observation:
69. In the absence of Adam McGilvary being called as a witness and the failure to produce the minute books for Holibass at least for the years 2007 and 2008, and for the reasons outlined in Section E on inferences, the Tribunal ought not to accept Julie Florent's evidence that she was appointed as a director of Holibass on 13 October 2005.
...
74. Walter Spychala under cross-examination said that prior to 2000, at a time when Julie Florent was appointed "secretary" of Bilquip her work involved "supporting John in the day to day actions" (T.p 128.30-40). Walter Spychala in cross-examination expanded upon what he meant by "day to day actions", he said that he meant "well there is the running of the company. There was hiring, firing, notes and general business" (T.p. 128.4245). However at T.p. 128.47 Mr Spychala agreed that prior to 2000 Bilquip was not operating any active business. Mr Spychala then admitted at T.p. 129.33 that the conversation he outlined in his affidavit at paragraph 9 as having taken place in or around 2000 being that John Florent told him that Julie is also director of Bilquip now, could have been a conversation that took place at a different time than 2000. However Mr Spychala said that he was not told at a directors meeting that Julie Florent was to be a director of Bilquip (T.p. 129.45-47). Further Mr Spychala said that he cannot recall the issue of appointment of Julie as director being raised to any directors meeting (T.p. 130.4-6). The evidence at paragraph 12 of Mr Spychala's affidavit that "Julie Florent had been a director of Bilquip until at least 2000" was based on Mr Spychala's evidence that he had a conversation with John Florent to that effect. However Mr Spychala admitted under cross-examination that the said conversation could have taken place at a time other than 2000 (T.p. 130.26-44).
...
76. Julie Florent gave evidence at Tp 104. 18-43, that prior to 2005, at a time when she was the secretary of Holibass she attended meetings with Adam McGilvary and John Florent to go over figures, financials, take minutes.
77. Julie Florent, during examination in chief was asked "What are your duties as director of Holibass" (Tp.88.13). Julie answered at (Tp. 88.14) that "My duties as director of Holibass, to go over the figures with the other directors and directors meeting from time to time. Liaise with staff from time to time." At p 121.14-27 Julie Florent said she deals with issues with staff and goes over accounts.
35Finally, the Chief Commissioner submitted that the Tribunal should, in the absence of Mr Florent's daughters and Adam McGilvary, exercise care in accepting the evidence given by the Florents -
86. The Applicants failed to call as witnesses the following persons:
(a) Mr Florent's daughters who it is said did the clerical work in the office and were involved in sending in documents. The evidence of the daughters would have been relevant to the question whether the Form 304 was sent in to ASIC by mistake and it was not intended that such form be sent to ASIC.
(b) Further the evidence of the daughters would have been relevant to the issue of whether "one of the girls" took off Mr Florent's desk the annual return for 2002 for Bilquip and sent it in, thinking it was completed (T.p. 45.33-38; Tab 20, Exhibit R1).
(c) Adam McGilvary, a director of Holibass, who it was said was responsible for completing the paperwork for the appointment of Mrs Florent as a director of Holibass from 13 October 2005 (T.p 77.7-19). Mr McGilvary could have given evidence as to the central issue in contention regarding Holibass, that is appointment of Mrs Florent as a director of Holibass from 13 October 2005.
87. The Tribunal ought to treat with great reserve the inference that the Applicants are asking the Tribunal to infer and that is that the Form 304 was sent in by mistake: Payne v Parker [1979] 1 NSWLR 200.F to 201.B. The conditions operate for the Tribunal to not accept the evidence of Mr Florent, being that the form was sent in by mistake, because Mr Florent could have been expected to call his daughters or staff members on that issue. Secondly, the daughters' or staff's evidence would have outlined their relevant duties in 2000 and until 2008 and what involvement, if any, they had with Form 304 and as to the alleged mistake in sending in the Form 304. Finally, the daughters' and staff members' absence was unexplained: Payne v Parker [1979] 1 NSWLR 200.E. Further, it was not for the Respondent to cross-examine as to the absent witnesses whereabouts: Coles Supermarkets Australia Pty Ltd v Tormey[2009] NSWCA 135 at [62].
88. Finally it is open to the Tribunal to not accept the evidence of Mrs Florent that she is appointed director of Holibass from 13 October 2005 because of the Applicants failure to call Adam McGilvary, a director of Holibass who was said was responsible for completing the paperwork for the appointment of Mrs Florent as a director of Holibass from 13 October 2005 (T.p. 77.7-19). Mr McGilvary could have given evidence as to the central issue and contention regarding Holibass, that is the appointment of Mrs Florent as a director of Holibass from 13 October 2005. Mr Walter Spychala, a director of Holibass gave evidence that Adam McGilvary runs the business of Holibass (T.p.127.41) and Mr Spychala was not involved in relation to appointing directors of Holibass (T.p. 128.4-6).