Boorer v HLB Mann Judd

Supreme Court of NSW|2012-11-29|Before: Adamson J

Introduction 1The plaintiff was the executive director and major shareholder of Techontap International Limited (Techontap), an unlisted public company which was wound up on 14 December 2005. He sues the defendant, a firm of accountants, for damages in negligence. First, he alleges that the defendant ought not to have lodged a Form 484 which notified the Australian Securities and Investments Commission (ASIC) that Leonard King and Brett King had been appointed directors when they had not signed consent forms to be directors. Secondly, he alleges that the defendant ought to have warned him that Techontap might be trading while insolvent. 2The plaintiff contends that the defendant's negligence caused ASIC to disqualify him from managing a corporation for a period of two years from 27 June 2008 (the Disqualification). The Disqualification was subsequently reviewed by the Administrative Appeals Tribunal (the AAT), which reduced the period of disqualification to one year: Boorer and Australian Securities and Investments Commission [2010] AATA 390. The plaintiff alleges that the Disqualification has damaged his reputation and that his income has been adversely affected. He claims such loss as damages from the defendant.

The preparation and lodgement of documents with ASIC 11In order to maintain Techontap's share register the defendant obtained details of the various members of Techontap from time to time. Generally, Ms Von-Lucken communicated with the plaintiff by telephone or email although they met frequently. From July 2003, until it was evicted in about May 2004, Techontap had its business premises in the same building as was occupied by the defendant. Further shares were issued from time to time, which generated a deal of correspondence between the plaintiff and the defendant. No issue arises concerning the share register. 12On 22 March 2004, Techontap changed the address of its registered office to the defendant's premises. The defendant also became the ASIC registered agent at that time.

The appointment of directors of Techontap 13Techontap, as an unlisted public company, was required to have three directors, at least two of whom were required ordinarily to reside in Australia. It was part of the defendant's retainer to lodge relevant forms to notify ASIC of any change in Techontap's officeholders. 14By email dated 10 May 2004, the plaintiff informed the defendant that Robert Ian Machin had offered his resignation as a director of Techontap and related companies. The plaintiff's email continued: "As no other director will accept appointment to Techontap Pty Ltd, it is likely that resignation cannot be effected, however Machin has offered his resignation this day and I am keen to at least have signatures. I plan to meet with him Friday perhaps at your offices - will advise. As to Techontap International Limited, please prepare appointment as Director for John Warburton, copied herewith, who will provide his DOB, place of birth and full name and address. Following my trip to Melbourne I will have the other directors by then." 15By email dated 29 June 2004, the plaintiff wrote to Leonard King and his son, Brett, to offer them founder shares in Techontap and positions on the board as non-executive directors. After informing them that the company was recently incorporated for new investment and "is solvent", the plaintiff continued: "If this is agreed, please supply full names, date and place of birth, current addresses and I will instruct Mann Judd, who keeps compliance and share registry, to produce the necessary paper work. Although Sam Seabury will join the board as CEO, Walter Adamson as non-exec, and no doubt the founder will seek a board seat, I hope that between us three, we can provide a united front and with my chairman's deciding vote, maintain board control." 16On 14 July 2004, the plaintiff, Mr Seabury, Mr Adamson and Leonard King met to discuss Techontap. Brett King was privy to the conference by telephone link-up. Mr Adamson and Messrs King expressed their intention to accept an invitation to become directors of Techontap when formally invited by the board. However, Mr Seabury expressed reservations about becoming a director until sufficient capital had been raised to implement the business plan. Mr Seabury's reservations caused Messrs King to have misgivings. They decided not to sign consents to become directors of Techontap unless and until the capital had been raised and Mr Seabury's concerns had been assuaged. Leonard King said in oral evidence that he hoped that it would be only a short time before the requisite capital could be raised. 17Shortly before 22 July 2004, the plaintiff telephoned Ms Von-Lucken. He instructed her to prepare the necessary documentation to have Mr Adamson and Messrs King appointed as directors of Techontap. Ms Von-Lucken told him that she would need written consents from the new directors and details of the board meeting at which new directors were approved, so that she could prepare the minutes and the Form 484 to be lodged with ASIC. 18In the course of the conversation the plaintiff said: "I have spoken with each of them and they have all agreed to be directors. So just send me what you need so we can lodge them quickly so we are not in breach." 19On 22 July 2004, the plaintiff emailed Messrs King and Adamson in the following terms: "I urgently need your DOB, place of birth, current address and legal entity to hold shares - CAN, registered address etc. Mann Judd auditors are pushing to complete, also same for directors consent." 20Leonard King responded by email that day and provided his details. He gave no indication in the email that his consent to being appointed a director was conditional upon a capital raising. The plaintiff forwarded Leonard King's email to the defendant, and copied his email to the defendant to Mr King. The plaintiff instructed the defendant in the following terms: "Leonard King has consented to be director/ secretary Techontap International Limited- can you please provide consent form to him and register accordingly." 21Mr Adamson also responded that day. The plaintiff forwarded his details to the defendant and notified it that Mr Adamson was also to be appointed a non-executive director of Techontap. 22Brett King also responded with his details. Once again, the plaintiff forwarded the email to the defendant. On 23 July 2004, the plaintiff sent a further email to the defendant in the same terms as the one he had sent with respect to Leonard King the day before. 23As a result of these emails, Ms Von-Lucken understood that Mr Adamson and Messrs King had each agreed to be directors of Techontap. The plaintiff telephoned Ms Von-Lucken and told her that he was arranging a meeting of the Techontap directors on 26 July 2004 to appoint the new directors and issue founder shares. Ms Von-Lucken then caused to be prepared minutes of the proposed meeting to be signed by the plaintiff after the meeting had been held. 24The minutes which Ms Von-Lucken caused to be prepared recorded that on 26 July 2004 the plaintiff and his son, Ruben, held a meeting of directors of Techontap at which a resolution was passed in the following terms: "IT WAS RESOLVED that Walter John Adamson, who has consented to the appointment, be appointed Director to take effect from today." 25Resolutions in similar terms were passed appointing Brett King as a director and Leonard King as a director and secretary. 26On 28 July 2004, the plaintiff went to the defendant's premises to see Ms Von-Lucken. Consistent with her usual practice, she had prepared an agenda prior to the meeting, the fourth item of which was: "Sign forms to appoint directors, secretary and issue shares." 27At the meeting Ms Von-Lucken gave the plaintiff the following documents to review: (1)the draft minutes she had prepared of the board meeting on 26 July 2004; and (2)the Form 484 for the appointment of Mr Adamson and Messrs King as directors and of Leonard King as secretary. 28I accept Ms Von-Lucken's evidence that the plaintiff read each of these documents and signed them in her presence. I do not accept the plaintiff's evidence that he was given a "sheaf" of documents and he simply turned to the stickers which indicated where he should sign and signed the documents without reading them. While the plaintiff displayed, at times, a rather cavalier approach to his duties as a director, I am satisfied that Ms Von-Lucken described the documents, and their purpose, and ensured that the plaintiff reviewed them before he signed them. The plaintiff did not impress me as a reliable witness for reasons given in more detail below. 29Once the plaintiff had signed the documents, including the minutes of the meeting on 26 July 2004, I consider that Ms Von-Lucken was reasonably entitled to believe that all three proposed directors had informally consented to their appointment, although she knew that none of them had signed consents at that stage and that they would sign the consent forms once they were provided to them. As the High Court said in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; 219 CLR 165 at 180: "It should not be overlooked that to sign a document known and intended to affect legal relations is an act which itself ordinarily conveys a representation to a reasonable reader of the document. The representation is that the person who signs either has read and approved the contents of the document or is willing to take the chance of being bound by those contents, as Latham CJ put it, whatever they might be." 30Ms Von-Lucken then gave the plaintiff the unsigned directors' consent forms and asked him to deliver them to Messrs King and Mr Adamson so that they could be signed and returned to the defendant. The plaintiff said: "Of course. Leave it with me." 31In the following days, the plaintiff rang Ms Von-Lucken several times and said words to the following effect: "Can you lodge the form with ASIC - I don't want to be fined by ASIC for not having enough directors." 32She informed the plaintiff that she had not received signed consent forms. As far as the evidence discloses, Mr Machin was no longer a director, having ceased being a director in May 2004. Accordingly Techontap only had two directors: the plaintiff and his son. Techontap was therefore in breach of the requirement that it have three directors, at least two of whom must ordinarily reside in Australia. 33At some time between 28 July 2004 and 12 August 2004, Ms Von-Lucken received a consent form signed by Mr Adamson. Once Mr Adamson had consented, Techontap had the requisite number of directors. It would have been open to the plaintiff to sign another Form 484 with only Mr Adamson's name on it and have the defendant submit it. This did not, however, occur. The plaintiff does not contend that the defendant was negligent in not having him re-engross an amended Form 484. 34On 12 August 2004, the plaintiff once again asked Ms Von-Lucken to lodge the Form 484 with ASIC. She objected on the grounds that, although she had received a written consent from Mr Adamson, she had not yet received signed consent forms from Messrs King. The plaintiff asked Ms Von-Lucken to send new consents to Messrs King. He then instructed her in the following terms: "I promise to chase them up, but please lodge the forms with ASIC now so that I am not in breach of the Act." 35In accordance with her instructions, Ms Von-Lucken lodged the Form 484 with ASIC. She also caused new consent forms to be sent by mail to Leonard King for him to sign and to arrange for his son to sign. A further consent form was sent by email to Brett King on 25 August 2004. 36I accept that these forms were received by Messrs King but that they chose not to respond. I formed the impression from their non-response, and from Leonard King's evidence that they preferred not to bring matters to a head and were both content to rely on the fact that they had not signed consent forms although they had indicated orally that they consented to their respective appointments. Brett King was not called. 37I accept Ms Von-Lucken's evidence that she did not consider that their non-response indicated that they did not consent to act as directors of Techontap. Rather she inferred that they did not place much importance on the formality of signing and sending her the form when they had already indicated their consent by email. By contrast, the plaintiff well knew that although at first they had expressed some willingness to be directors, Messrs King did not in fact consent and probably would not consent until Techontap was better capitalised so as to overcome Mr Seabury's reservations which they shared. 38By email dated 30 September 2004, the defendant wrote to Mr Crewe-Brown requesting "letters of consent". I infer that the reference to such documents was a reference to the consent forms from Messrs King which were still outstanding. Mr Crewe-Brown forwarded the email to the plaintiff. In Mr Crewe-Brown's covering email to the plaintiff he added: "Are you following up the matters relating to the signing of forms?" 39These documents establish that as at 30 September 2004, the plaintiff knew that no consent forms had been received by the defendant. There is no suggestion that the plaintiff himself had received signed consent forms from Messrs King, or indeed that such forms were ever signed. Accordingly, the plaintiff knew that, although they had earlier indicated that they would consent to becoming directors, they were not prepared to sign consent forms and therefore were not in fact willing to be directors of Techontap. 40Mr Adamson notified the plaintiff by email dated 29 March 2005 that he resigned as a director as of 15 March 2005. The following day, the plaintiff instructed Ms Von-Lucken to effect the resignation. 41On 28 May 2005, the plaintiff sent an email to Brett King which contained the following passage: "...however recently I saw a ASIC company print out and saw you listed as a director of Techontap International Limited - did you sign Consent to Act as Director forms? If so I sincerely apologise for not keeping you across matters, If you did, then Ruben Simon Boorer (my eldest son) you and I are the three directors (Walter resigned two months ago) Sam Seabury, whom Dad introduced, will not accept appointment until funding is in place, however he is proving a solid CEO and has the discipline, determination and loyalty to manage high growth that I believe will come once the business plan is funded. That said Techontap is dangerously close to being insolvent and so Sam and my efforts are focussed on raising in investing a Stage One Convertible Note for $AUD250,000 and $AUD1.25 Stage Two for 20% equity. Stage One is needed asap and while we have $500K from R&D Grants due by 22 July, we are running close to the wind." 42Brett King responded by email on 30 May 2005, relevantly as follows: "...I didn't sign anything that I can recall (I don't think I've been back in Oz to do so)? Please provide me some details, as to my responsibilities and I'll make the call whether it is appropriate for me to continue as a Director, as time is my most valuable commodity." 43Later that day, Brett King sent a further email to the plaintiff which said: "Have confirmed with Dad that neither he nor I consented to directorships for [Techontap]." 44The plaintiff responded shortly thereafter in the following terms: "That is a relief! Will action to ensure ASIC reflects that- and how come your name appears. Mann Judd may have mistakenly submitted forms, certainly without my approval. ... Anyway, as you say you are flat out, mainly wanted to ensure the directorship issue." 45Notwithstanding this exchange of emails, the plaintiff took no action to rectify the ASIC records. The plaintiff would have me believe that as soon as he wrote the email to Brett King representing that he would rectify ASIC's records, he promptly forgot about it. I do not accept this evidence for reasons given further below with respect to his credibility. 46By that time the only persons who were recorded as directors of Techontap and who had properly been been appointed were the plaintiff and his son. This circumstance put Techontap in breach of s 201A of the Corporations Act 2001 (Cth), which requires that it have at least three directors. 47On 5 September 2005, Leonard King sent an email to ASIC, which was copied to Brett King, in the following terms: "I received today 5th September 2005 notification that suggests Leonard Keith KING and Brett Andrew KING were appointed as Directors to Company Techontap International Limited CAN 106 462 971 with lodgement date of 12/08/04. Please be advised that concent [sic] was not given by Myself or my Son (Brett) to become a Director - infact [sic] we refused to be appointed. As I am not the Secretary please send adjustments to whoever sent the lodgement but because of the nature of this mistake I wish confirmation in writing by ASIC that I or my Son have never been Directors in this or any associated Company." 48Later that day, the plaintiff, to whom Leonard King's email had been forwarded, sent an email to Ms Von-Lucken in the following terms: "Len King is quite upset over the matter below - and rightly so. He has never signed Consent to act as Director - neither has his son Brett. Can you please advise urgently how this matter can be corrected?" 49In the meantime and prior to 23 September 2005, Techontap received a R & D grant in the order of $350,000, a portion of which was used to pay the defendant's fees and the balance of which was paid to CIUT. 50On 26 September 2005, a meeting was held at the defendant's premises, which was attended by the plaintiff, Mr Fittler and Ms Von-Lucken. The defendant was instructed to lodge forms removing Messrs King as directors of Techontap. The plaintiff undertook to find a director and secretary for Techontap so that it would not be in breach of the requirement that it have three directors. 51Later that day, 26 September 2005, the plaintiff caused CIUT to call up its fixed and floating charge over Techontap's assets and appointed Robert Moodie as an administrator. The plaintiff had not foreshadowed at the meeting earlier that day with the defendant that that was what he proposed to do. 52By letter dated 28 September 2005, ASIC wrote to Techontap in the following terms about the correspondence it had received from Leonard King: "A document lodged with us by the company (Form 484 - Change to company details) notified the appointment of this person as Director of the company on 26 July 2004. Please review the company records and provide us (and the person concerned), a copy of the person's consent you obtained to act as an officer of this company. If no consent was obtained, please advise us (and the person concerned) in writing." On the same day, ASIC wrote a similar letter concerning Brett King. 53On 12 October 2005, Leonard King wrote to the plaintiff in the following terms: "I have spoken at length with Mann Judd and ASIC. Mariana has agreed she with [sic] give me confirmation later today (with a copy to the Administrator) that there was no consent and we are not Directors. ASIC advise that unless the 'contested' forms arrive at ASIC by 19th of October our name will be removed. We would prefer that the matters be fixed before then. They would prefer that Mann Judd writes a simple letter making reference to Brett and I having not consented and being 'lodged in error'. They appear totally OK with that solution they also understand that the error lead [sic] to 2 active Directors instead of 3. Please advise." 54In his affidavit Leonard King deposed that Ms Von-Lucken had acknowledged that it was the defendant's error and one for which she, and the defendant, would take full responsibility. The plaintiff read a similar affidavit in the AAT proceedings supporting his written submission that the defendant "admitted that the appointment of the Kings was their error". No such evidence was relied upon in the ASIC hearing itself, although once the Disqualification decision had been made, the plaintiff appears to have contacted Leonard King to gain support for his contention that the blame should be attributed to the defendant. 55I do not accept Mr King's evidence about this conversation. I am satisfied that Ms Von-Lucken told him that she would investigate the documentation and also that she was prepared to inform ASIC that there had been an error. However, I am not satisfied that she admitted that it was her mistake or that she was responsible for it. As I have found above, Ms Von-Lucken did what the plaintiff had instructed her to do. She had no reason to admit that she had made a mistake and I am satisfied that no such admission was made. 56The plaintiff dealt with Leonard King's 12 October 2005 email by sending an email that day to the defendant as follows: "As advised below, and previously raised with you, Leonard and Brett did not send Consent Forms to you and hence should not have been listed as Directors. Consequently, the company had only two directors not three, leaving me open to serious breaches of the Corporations Law after Walter resigned in earlier this year. As Mann Judd was keeping the Company Secretariat and Share Registry, onus is on them to correct the situation. While on the surface it appears a procedural error, it does have significant potential ramifications for the Kings and indeed myself now the company is Under Administration and potentially will be liquidated." 57Ms Von-Lucken corresponded directly with Leonard King on 13 October 2005 in an email which contained the following passage: "Contrary to his earlier advice and the above documentation, we were notified by Graeme Boorer by email on 5th September 2005 that you and Brett had not agreed to be directors of Techontap International Ltd. We advised Graeme that the company would need another director as three directors are required. We were awaiting a response from Graeme when on the 30th September 2005 we received a fax from Rodgers Reidy that they had been appointed Administrator on the 26th September 2006." 58I have set out at length the emails between relevant persons on the topic because they demonstrate the extent to which the plaintiff endeavoured to portray himself as the victim of a mistake by the defendant, when, as I have found, he was the progenitor of the error in. He had specifically instructed Ms Von-Lucken to send in the Form 484 at a time when he not only knew that Messrs King had not signed consent forms to be directors, but also knew that their consent was conditional on further funding and that the condition had not been fulfilled.

The preparation of accounts for Techontap's tax returns 59The work performed by the defendant in preparing Techontap's tax returns is relevant to the allegation of negligence that it failed to warn the plaintiff that Techontap might be insolvent. The primary facts germane to these matters are set out below. 60For the 2004 financial year, the defendant received profit and loss statements and balance sheets from Mr Crewe-Brown on 14 December 2004 and revised versions on 4 January 2005. On 25 January 2005, the defendant lodged Techontap's 2004 tax return electronically, in order to comply with the due date, although it had not received all of the research and development (R & D) data from Techontap. Techontap's refund of $91,156.80 was received by the defendant on 7 February 2005 and hand delivered to the plaintiff on 10 February 2005. The defendant lodged an amended tax return on 31 March 2005 once it had received the missing data from Techontap. 61As at 29 June 2005, Techontap owed the defendant some $19,000 in respect of outstanding fees. As at that date, the CIUT loan to Techontap stood at $750,000, with interest running at 15%, convertible to shares and secured by a floating charge over Techontap's assets. The defendant wrote to the plaintiff seeking the his authority to withhold an amount from the tax refund expected in respect of the 2005 tax return to cover outstanding fees of $19,008, work in progress of $3,900 and proposed fees of $10,000. The plaintiff signed the letter signifying his agreement with the proposal and that he authorised the deduction. 62The defendant undertook work in reviewing the accounts, which had been prepared by Mr Crewe-Brown, for the 2005 tax return, which was lodged on 2 September 2005.

Other tasks performed by the defendant 63Most of the work performed by the defendant for Techontap related to the share register. Many of the documents in evidence record instructions given to the defendant by the plaintiff as to the details of new investors and the number of shares each was to be allotted. It is not necessary to record the details of this correspondence. 64In April 2005, the plaintiff requested that the defendant advise Techontap on the planned restructure of the group of companies, to which Techontap, Techontap Australia Pty Limited and Xontap Pty Limited belonged. Mr Crewe-Brown had prepared a combined balance sheet for the group which took into account adjustments. In an email to the plaintiff, Mr Crewe-Brown wrote: "These adjustments should be 'blessed' by Mann Judd and the Board before they are shown to potential investors." 65The plaintiff also sought general information about the capitalisation of R & D expenditure and related matters. Mr Rose, who worked in the defendant's audit department, sent an email to the plaintiff on 6 April 2005 setting out the general principles applicable to the accounting treatment of such matters. He also attached the relevant accounting standard, ASRB 1011. 66I refer to these matters specifically because I consider that they fall within the aspect of the defendant's retainer which pertains to specific tasks, as requested, rather than the more general retainer as contended for by the plaintiff.

The draft Information Memorandum 67In March 2005, the plaintiff and Mr Seabury met with Justin Audcent, who was a partner of the defendant, in its Corporate Finance Division in Melbourne, with a view to Techontap raising further capital. The plaintiff introduced Mr Seabury as the Chief Executive of Techontap. 68Later, in June 2005, the plaintiff caused to be prepared a draft Information Memorandum (IM) dated June 2005, which he emailed to Mr Audcent. The IM was never actually published or used by Techontap to raise capital. However the plaintiff was cross-examined about its contents. 69In the executive summary it stated, in relation to projected performance: "Techontap's business plan projects the following earnings with significant profit potential and customer growth from future acquisitions not as yet quantified." 70In the executive summary it stated, in relation to projected growth: "The financial models are based on the core applications only and in respect to future growth prospects would appear to be very conservative." 71The plaintiff accepted that these represented his views at that time and that it was not something about which he sought advice from the defendant. 72The defendant reviewed the IM in that Mr Audscent offered comments on its structure and general suggestions for amendment but the defendant was never retained by Techontap to conduct a capital raising; nor did Techontap engage the defendant to review the IM, beyond these introductory comments. The letter of engagement dated 20 July 2005 in respect of the proposed capital raising was not accepted by Techontap. 73As with the advice concerning capital raising, this was another ad hoc request by the plaintiff of the defendant.

The ASIC investigation and disqualification 74As referred to above, CIUT appointed an administrator to Techontap on 26 September 2005. Techontap was wound up on the grounds of insolvency on 14 December 2005. 75Once Techontap was wound up, the plaintiff fulfilled the threshold criteria provided for by s 206F of the Corporations Act in that he had been a director of two or more corporations that were not related which had been wound up on the grounds of insolvency. 76On 27 May 2008, ASIC conducted a hearing under s 51 of the Australian Securities and Investments Commission Act 2001 (Cth) to give him an opportunity to be heard on why ASIC ought not disqualify him from managing corporations for up to five years. 77In substance, ASIC relied on three principal matters: first, the plaintiff's failure to retain company records; secondly, that he had permitted the company to trade while insolvent; and thirdly, that he had engaged in misleading and deceptive conduct by lodging a Form 484 in which he represented that Messrs King were directors of Techontap when they had not consented to be directors and had not signed a written consent. 78In the proceedings before me, the defendant relied on the plaintiff having given a different version at the ASIC hearing than he had given in evidence in these proceedings or that was evident from his own emails. For example, he told ASIC on 27 May 2008: "I did not hold them [Messrs King] out to be directors. I did not believe they were directors and until I downloaded them from ASIC, just as you'll see a few weeks ago, I couldn't believe that I had actually signed it." 79This evidence is at odds with his knowledge that they were shown on the company register as being directors at least as at May 2005, as is evident from his emails with Brett King referred to above. The emails of May 2005 were not referred to, or in evidence, in the ASIC hearing. The defendant was neither involved in the ASIC hearing nor in the AAT proceedings. 80In the ASIC hearing, when referring to his emails of September 2005, the plaintiff said, falsely, that: "they show that this was news to me. It was news to them, and they independently went to ASIC and signed that they had not signed consent forms and ASIC then expunged their name from the company records." 81While it may have been "news" to Leonard King in September 2005 that he was shown on the company register as a director when he had not signed a consent, it was "news" neither to the plaintiff, nor to Brett King since they had corresponded about that very topic in May 2005 when the plaintiff had agreed to fix it. 82After the ASIC hearing, the plaintiff sent ASIC an email in the following terms: "Mariana Von-Lucken presented me with a bundle of papers, 14 pages in all, with a bulldog clip binding them together." 83The plaintiff also submitted correspondence from Leonard King to ASIC, referred to above. 84On 27 June 2008, ASIC issued a Notice of Disqualification to the plaintiff to notify him that he was disqualified for a period of two years from the date of service of the notice from managing corporations without the leave of ASIC. ASIC considered that Techontap failed because it did not have enough capital to fund its expenses. The delegate recorded the following findings in the reasons: "62. Mr Boorer denied that he had reasonable grounds for suspecting Techontap was insolvent. He believed that the proposed sources of funding would be fruitful and he expected sales to be strong. 63. I am satisfied that the need to make requests for extensions of time to pay creditors, the suspension of payments by the major creditor in exchange for the promise of equity in the business, the failure to attract new customers and finance/equity partners, the continuing to incur debts and Mr Boorer's admission that the business was undercapitalized, lead me to find that there were reasonable grounds for suspecting that Techontap was insolvent when it incurred debts prior to being placed into administration, as reported by the liquidator. The inability to meet even relatively small debts, indicates that the company was suffering from a severe shortage of working capital over an extended period and was not able to meet its debts as and when they fell due. The conclusion I draw from the circumstances is that Mr Boorer permitted Techontap to trade whilst insolvent. ... 69. I note that Mr Boorer has signed the ASIC forms appointing Brett King and Leonard King as directors to Techontap. 70. I accept Mr Boorer's evidence and submissions that he relied on his accountant to undertake the company secretarial matters. However, in view of Mr Boorer's experience as a director of 10 companies, I do not find it credible that he signed dated forms appointing Brett King and Leonard King as directors without understanding what he was doing, particularly as the relevant form has large headings indicating that the purpose of the form is to appoint a company officeholder. 71. Mr Boorer has not provided evidence to support his assertion that HLB Mann Judd lodged the documents contrary to Mr Boorer's instructions. He must have returned the duly signed forms to HLB Mann Judd in order for them to have lodged the forms with ASIC. In the absence of documentary evidence to the contrary, the conclusion I draw is that the forms were lodged on Mr Boorer's instructions." 85The ASIC delegate said that the findings made against the plaintiff were serious. He found: (1)the companies did not have sufficient capital to meet their obligations; (2)the plaintiff failed to keep adequate books and records; and (3)the authorising of documents to be lodged with ASIC which showed persons to be directors when they had not consented amounts to misleading and deceptive conduct by the plaintiff within s 1308 of the Corporations Act. 86The plaintiff's disqualification was published on the ASIC website. There was also a piece published in the Sydney Morning Herald online on 18 July 2008, in which the plaintiff's disqualification and the grounds for it, were reported in summary form.

The AAT hearing 87The plaintiff applied to the AAT for review of ASIC's decision to disqualify him from managing a corporation. 88In the hearing before the AAT on 15 December 2009, the plaintiff said that when he told the defendant by email on 22 July 2004 that Messrs King had consented to be directors, he knew that their consent was conditional upon funding being obtained and that it had not been obtained, although he expected that it would be soon. 89When he was cross-examined in the AAT hearing about the size of the bundle by reference to the email referred to above, he changed his version and said that the bundle was bigger than 14 pages. He did, however, agree that the documents were "not dense documents". In his written outline of argument dated 14 December 2009, submitted in the AAT, the plaintiff estimated that there were 24 pages in total presented to him on 26 July 2004. In his closing submissions provided to the AAT after 14 December 2009, he estimated that he was presented with 60 pages on that day. I note that by the time the matter was heard by me, the plaintiff estimated that he had been presented with up to 80 documents. 90The AAT reduced the period of disqualification from two years to one year but otherwise upheld the decision under review. The substantive difference between the ASIC Delegate's findings and the AAT's findings was brought about by the evidence of Leonard King. The AAT said, at [38] of its reasons for decision: "Mr King states that an employee of HLB Mann Judd admitted that she had not received consent forms signed by Brett or Leonard King and that lodgement with ASIC showing them as directors was an error on their part. Having regard to the evidence of Mr King, I am satisfied that the misleading statement was made, but that it was explicable by a fact that arose from an error on the part of the accountants and miscommunications which were not intentional. I find that no adverse conclusion can be drawn as to the conduct of Mr Boorer in relation to this matter. I accept that it was an honest mistake."

The plaintiff's credibility 91The defendant submitted that I ought not accept the plaintiff's evidence unless corroborated or against interest. It relied on the oft-cited passage from Sir Richard Eggleston QC's Evidence, Proof and Probability (1978), at 155, where the main tests to be used by a judge to determine witnesses' credibility are set out: (1)the consistency of the witness's evidence with what is agreed, or clearly shown by other evidence, to have occurred; (2)the internal consistency of the witness's evidence; (3)consistency with what the witness has said or deposed on other occasions; (4)the credit of the witness in relation to matters not germane to the litigation; and (5)the demeanour of the witness. 92For the reasons given below, I do not accept the plaintiff's evidence unless it is corroborated or is against interest.

The consistency of the plaintiff's evidence with contemporaneous documents or incontrovertible facts 93The plaintiff's evidence was contradicted on a number of occasions by contemporaneous documents. For example, he repeatedly denied knowing that Brett King had been listed as a director of Techontap with ASIC prior to 5 September 2005. He also gave evidence, in the ASIC hearing and before me, that he took action to correct ASIC's records as soon as he discovered that they were incorrect. Yet he did know that the ASIC records were incorrect by reason of the emails he had exchanged at the end of May 2005 with Brett King and did nothing to rectify them. I do not accept that he simply forgot this exchange. Rather, I consider that it was not convenient for him to try to find another director as at May 2005. 94Whether the plaintiff was conscious that he was not telling the truth when he gave his evidence before me is questionable. He impressed me as a man who continually reconstructs the past to arrive at a version that portrays him in the best light. By reason of this practice, he may be simply unreliable, as distinct from dishonest. When confronted with contemporaneous documents which were inconsistent with his version, he made concessions, however, he did so only to the extent required by the contents of the document.

Internal consistency of the plaintiff's evidence 95When he was asked about the circumstances of termination of the lease of premises from which he worked in the same building as the defendant's offices, the plaintiff said that he did not recall which company had the lease and did not recall being evicted. This is at the very least implausible, particularly given that the plaintiff was able to recall that the lessee was in arrears by an amount in the order of $26,000, payment of which he had personally guaranteed and $22,000 of which was covered by a bank guarantee.

Consistency with what the witness has said or deposed on other occasions 96As set out above, the plaintiff gave various versions of the number of documents with which he was presented to sign on 28 July 2004 when he met with Ms Von-Lucken. The number grew from 14 at the ASIC hearing to 80 in the proceedings before me. Whether this inflation was due to a conscious desire to mislead or arose from a subconscious tendency to make the case better from his point of view is a matter that need not be determined. However it is another indication of the plaintiff's unreliability.

The plaintiff's credibility in relation to matters not central to the litigation 97In his affidavit the plaintiff deposed that he had caused Techontap to lease premises in the same building as the defendant in order to facilitate a closer working relationship. When presented with documents which established that the lease was entered into some months before Techontap engaged the defendant, the plaintiff conceded that his evidence was false. 98Whether the defendant was in, or near, the premises occupied by Techontap is not particularly germane to the duty of care owed, or the scope of the retainer. Nonetheless, the plaintiff's evidence, which he ultimately admitted was false, indicates the extent to which he was prepared to distort his own evidence in the hope that it would improve his case.

The plaintiff's demeanour 99By and large, the plaintiff's demeanour was calm and controlled. He was not easily flustered, even when presented with inconsistent prior evidence or documents which may have caused others to exhibit embarrassment. 100However, the plaintiff became noticeably irritated during the following exchange in his cross-examination: "Q. So at this time in August 2004, who did you think were directors of the company? A. Ruben and myself. Q. Didn't concern you that you knew you were supposed to have three directors? A. It did concern me. Q. So you were in contact with Ms Von-Lucken about the directors, weren't you? A. Ms Von-Lucken - as emails we have here, was told to go get consent forms so we could appoint directors. Get consent forms and register accordingly, given she had consent forms. No-one is a director until they've consented in writing. I may have made mistakes and may not have read documents, but I'm not an idiot. People are not committed to anything until they sign a document. Q. When did you find out that Mr King senior and Mr King junior were directors of Techontap International? A. I believe the date was around September 5th when Len rang me urgently saying we are directors and we shouldn't be, we've never signed consent forms." [Emphasis added.] 101I took his change in demeanour, particularly in light of the ensuing cross-examination, to amount both to a consciousness that he was the person responsible for what had occurred and to an expression of concern that he may not be believed when attributing blame to Ms Von-Lucken.

The duty owed by the defendant to the plaintiff 102It was common ground that the relationship between Techontap and the defendant was such as to give rise to a duty of care owed by the defendant to the plaintiff personally. 103For the reasons given above, I am satisfied that the retainer was limited in scope and relevantly required the defendant to perform company secretarial work; review accounts for tax purposes and lodge tax returns; perform audit work and other work as specifically requested. The audit work was never performed because the accounts were not provided for that purpose. 104As such, the defendant owed a duty to the plaintiff to exercise reasonable care in the performance of its retainer since the plaintiff was a person who might reasonably be expected to suffer loss if those services were not performed with reasonable care. 105Two experts gave concurrent evidence regarding the duties of chartered accountants, whether the defendant had breached its duty of care to the plaintiff and assessment of the plaintiff's damages. Mr Green was called by the plaintiff and Ms Jones was called by the defendant. Each was appropriately qualified. 106Mr Green's opinions as expressed in his reports were substantially based on material which is either not proved, or on a version which I have rejected. For example, Mr Green assumed that the defendant would have access to current accounting data for Techontap, including cash flows but this was not borne out by the evidence. He based his opinion that the defendant ought to have been aware that Techontap was insolvent on a version of the retainer which I have rejected. 107Nonetheless, his evidence and that of Ms Jones has assisted in the determination of these proceedings to the extent to which I have referred to it below.

Alleged breach of duty: the Form 484 108The first basis on which the plaintiff alleged that the defendant breached the duty of care it owed to him personally is that on 12 August 2004 the defendant lodged a Form 484 appointing Messrs King as directors of Techontap: (1) when the defendant knew or ought to have known that Messrs King had not given their consent to such an appointment; (2) when the defendant failed to inform the plaintiff that Messrs King had not given their consent to act as directors of Techontap; and (3) knowing that Messrs King had not given written consent, allowing the plaintiff to execute a document in relation thereto, knowing that the plaintiff may be committing an offence under the Corporations Act. 109As I have found above, as at 12 August 2004, both the plaintiff and Ms Von-Lucken knew that neither of the Messrs King had signed a consent to act as a director of Techontap. At that time, Ms Von-Lucken had no grounds to believe that although they had not signed consents, they would not sign them within a short period of time. 110It was not, in my view, unreasonable for Ms Von-Lucken to ask the plaintiff to sign the Form 484, in circumstances where she had specifically explained its purpose to him. Had she kept the document in escrow as she proposed to do until she received all three written consents, rather than lodge it, it would have had no capacity to mislead anyone. The plaintiff exposed himself to the risk of prosecution for an offence under s 1308, or for breach of s 1308 being taken into account in respect of disqualification under s 206F, only when the Form 484 was actually lodged with ASIC. The defendant lodged the form on 12 August 2004 only because Ms Von-Lucken had been specifically instructed to do so by the plaintiff. 111Mr Green's opinion that the defendant had breached its duty to the plaintiff by lodging the Form 484 was based on the plaintiff's evidence, which I have rejected. The defendant complied with the duty imposed on accountants who undertake corporate secretarial services which Mr Green articulated in the following terms: "...professional accountants should not take corporate secretarial actions without the consent of their clients." 112I consider that Ms Von-Lucken did all that she could reasonably have been expected to do. Her duty was to take reasonable care. Hers was not a fiduciary duty to stop the plaintiff from doing that which he might later regret if things did not turn out as he expected. I do not consider that an obligation was imposed on her to protect the plaintiff from risks, such as this one, which he was prepared to take in circumstances where he knew of the potential consequences. 113Accordingly, the plaintiff has failed to establish breach associated with the lodgement of the Form 484.

Alleged breach of duty: failure to warn of insolvency 114The second basis on which the plaintiff alleged that the defendant breached its duty of care is alleged in [10] of the statement of claim in the following terms: "In or about November 2004 the defendant further breached the duty of care it owed to the plaintiff. Particulars of further breach The defendant failed to inform and warn the plaintiff that Techontap was either trading whilst insolvent or might have been trading whilst insolvent." 115As at November 2004, the plaintiff had not provided any accounts to the defendant. The 2004 draft accounts were first provided to the defendant in mid-December 2004 for review and eventual attachment to Techontap's tax return for the 2004 year. There was therefore no basis on which the defendant could have appreciated whether Techontap was insolvent as at the time pleaded. 116The defendant's counsel identified the defect in the pleading in submissions. However, she fairly addressed me as if the date had been amended to a later date. Notwithstanding that he had been amply put on notice of the deficiency in the pleading, the plaintiff's counsel did not seek to amend the pleading, although, curiously, he tendered particulars which were outside the pleading. I did not, of my own motion, instigate an amendment since I considered that the plaintiff may have, effectively, abandoned this part of his case. 117However, lest the matter go further, I propose to set out my reasons for rejecting this part of the plaintiff's case, even had an amendment been sought and allowed to change the date to a later date. I propose to address each of the so-called particulars of further breach set out in a letter of 18 August 2010: "(b) On or before the 29th March 2005, the Defendant became aware that Graeme J. Boorer ATF Corporate Investment Unit Trust (CIUT) was responsible for the payment of the Plaintiff upon receipt of payments from Techontap International pursuant to the service agreement dated 1 January 2004. (c) On 1st April 2005, the defendant was put on notice of the fact that Techontap International was liable to CIUT for the sum of $494,743.62. (d) On or before 19th April 2005, the Defendant was in possession of the Service Agreement between Techontap International and CIUT and forwarded to the Plaintiff's insurance agent and was thus in a position to know that Techontap International was the source of all income to CIUT. (e) On or before 6th May 2005, the Defendant created the balance sheets for CIUT for the 2003 and 2004 financial years and forwarded these to the Plaintiff. (f) On or before July 2005, the Defendant produced statutory account showing payables that are 30, 60, 90 and 120 days overdue. The Defendant was fully aware of interdependency between CIUT and Techontap International and the likely inability of Techontap International to pay back to CIUT. (g) On 1st September 2005, the Defendant sought authority to deduct payments for its professional service to CIUT Demitra Boorer, Graeme Boorer and Super fund from Techontap International ATO refund. (h) On or before 22nd September 2005 the Defendant transferred $30,000.00 plus $16,000.00 for future work to be debited from the Techontap International Pty Ltd monies held in trust, to which the Plaintiff had not given authority for the $16,000.00. (i) The Defendant was in a a position to perceive the movements between the mentioned accounts and that of Techontap and knew or ought to have known the risk that Techontap was either trading whilst insolvent or might have been trading whilst insolvent or would become insolvent. (j) The Defendant failed to inform and warn the Plaintiff of this fact." (referred to below as Particulars (b) to (j), as the case may be) 118The principal difficulty with the plaintiff's case on this ground is that the defendant's retainer did not extend to general financial advice or to any matter which would have given it access, or made it privy, to current financial information pertaining to Techontap's solvency. 119Furthermore although it was contemplated that the defendant would audit Techontap's accounts, this did not occur. Had it occurred, then the defendant, as auditor, owed Techontap a separate duty to give an independent opinion whether the accounts had been drawn up in accordance with applicable accounting standards and whether they represented a true and fair view of the company's position: AWA Ltd v Daniels (1992) 7 ACSR 759; Daniels v Anderson (1995) 37 NSWLR 438 at 477-487. If the accounts have been prepared on a going concern basis but the auditors do not consider that they ought to have been, or where the auditors consider that it is necessary to add a note to the accounts setting out the basis of the company's ability to continue as a going concern for the relevant period, there is a duty on the auditors to qualify the audit opinion. 120There was therefore no occasion on which the defendant had either an opportunity, much less a responsibility, to assess the solvency of Techontap at any particular time. Nor did it have the information to permit it to be done. 121I make the following findings, each of which was the subject of an appropriate concession by Mr Green in cross-examination: (1)The amount of R & D expenditure that a company is carrying as an asset in its balance sheet reflects the directors' view of its recoverability, rather than an external accountants' view. (2)There is no obligation on an external accountant to advise as to the amount of R & D carried in the balance sheet unless specifically requested to advise on the matter or in the course of reaching an audit opinion on whether the accounts represent a true and fair view of the company's financial position or are retained to prepare an IM for capital raising purposes. (3)Any such obligation would not arise if the accountant was providing tax services to the company. (4)A company which has committed substantial expenditure on R & D which has not yet produced income may be solvent as long as it continues to be supported by a major shareholder. (5)It would have been sufficient, in the circumstances of the instant case, for the defendant to inform the plaintiff that it had concerns about Techontap's solvency. If the plaintiff had responded by saying that he was aware that there could be potential problems but there was a number of "irons in the fire", the defendant would have discharged its duty of raising the issue and would not be obliged to go through the books of Techontap with a view to coming to an opinion on solvency, absent specific instruction. (6)The duty of care owed by the defendant to the plaintiff did not require it to tell him what he already knew and the significance of which he could reasonably be expected to appreciate. 122Particulars (b), (c) and (d) can be dealt with shortly. The plaintiff knew that much of Techontap's expenditure was referable to the Service Agreement by which CIUT provided his services to Techontap. It was within his control whether to call up the loan, as he eventually did in September 2005, or to allow it to accrue interest. The plaintiff knew better than anyone what the state of the accounts was between Techontap and CIUT at any given time. Techontap paid CIUT when the plaintiff chose to cause Techontap to make a payment. 123As to Particular (e), the information on which this material was based depended on the view of the directors, including the plaintiff as to certain items, the most significant of which for the purposes of the balance sheet was the capitalisation of R & D. Not only was the plaintiff's view of the appropriateness of such capitalisation determinative, since he was a director of Techontap, there was no obligation on the defendant to investigate this figure, absent specific instructions or an audit. 124As to Particulars (f) and (g), I am satisfied that the plaintiff had much greater access to material germane to Techontap's current financial situation than the defendant did. For example, the plaintiff knew, but the defendant did not, that Techontap was evicted from its lease because of failure to pay rent. The plaintiff knew which creditors were outstanding for what periods; which creditors were pressing for payment; which had been content to accept share allocations in lieu of cash payments in the 2004 financial year; and would have had a better idea than the defendant whether any of Techontap's creditors for the 2005 financial year would have been prepared to accept equity in the company in exchange for debts. 125Most importantly, the plaintiff knew the position of Techontap's major shareholder and major creditor because he was in a position to control the support each would give to Techontap. As at 20 April 2005, the plaintiff held 8,538 shares in Techontap. The next largest shareholder was The Kingstone Group Pty Limited, Leonard King's company, which had 625 shares. 126In his written submissions to the AAT the plaintiff explained the circumstances surrounding the appointment of an administrator in the following terms, which I accept as being accurate, since they relevantly amount to an admission for the purposes of these proceedings: "When the grant reimbursement finally arrived, the TOTI board and its majority shareholder concluded that without the property refinance, equipment leaseback or completed new sales, [Techontap] was insolvent or likely to become insolvent. As trustee of CIUT, the [plaintiff] exercised his legal right and fiduciary responsibility to call up CIUT's registered charge on 22 September 2005. As director of [Techontap] [the plaintiff] appointed an administrator within days. ...The [plaintiff] contends that insolvency arose from when CIUT called up its registered charge. No debts were incurred between then and days later when the [plaintiff] appointed the administrator. ... The [plaintiff] submits that prior to September 2005, although [Techontap] experienced temporary cash flow pressures, it was solvent until the charge was called up. In the three months before administration, given tight cash flow, the [plaintiff] incurred one $102 debt, any others being long-standing, contracted and automatic liabilities." 127The plaintiff himself was the trustee of his family trust, CIUT, which was a secured creditor of Techontap. As referred to above, CIUT was owed $750,000 as at 29 June 2005, for which it charged Techontap 15% interest. As long as the plaintiff and CIUT supported Techontap, there was reason to believe that it was solvent. Once that support was no longer forthcoming, as occurred in September 2005, when the plaintiff caused CIUT to call up the loan and appoint an administrator, Techontap was immediately insolvent. 128The plaintiff was in the best position to judge whether Techontap was solvent; "dangerously close to being insolvent", as he described it in May 2005 to Brett King; or insolvent, as he caused it to be in September 2005. 129I do not consider that, in all the circumstances, the defendant had any duty to monitor Techontap's solvency; but if it did, it would have needed more information that that to which it was privy to perform that assessment. 130Particular (h) has not been established. 131As to Particular (i), the so-called movement relied upon is referable to current liabilities. Mr Green agreed that if about three-quarters of the current liabilities were referable to a debt owed to the primary shareholder, in this case, the plaintiff, because of monies owed to CIUT, the question whether it raised issues of solvency would depend on whether the company had the ongoing support of its major shareholder. 132In light of the findings I have made above I do not consider that the defendant was negligent by neither informing nor warning the plaintiff that Techontap was at risk of trading while insolvent. 133In any event the plaintiff bears the onus of proving causation on the balance of probabilities; in other words, that had the "correct" advice been given he would have done something different: s 5D and s 5E of the Civil Liability Act 2002 and Sellars v Adelaide Petroleum NL [1994] HCA 4; 179 CLR 332 at 355, per Mason CJ, Dawson, Toohey and Gaudron JJ. The plaintiff has failed to establish what, if any, difference it would have made had the defendant warned him at any time that Techontap was either at risk of being insolvent or insolvent. 134Accordingly, the plaintiff has failed to establish breach of any relevant duty or causation.

Damages 135Although it is not necessary in light of my findings that I assess damages, I shall proceed to make findings in respect of these matters: Wolfenden v International Theme Park Pty Ltd (Trading As Wonderland) and Anor [2008] NSWCA 78 at [6], per Giles JA.

The plaintiff's historical capacity to earn 136The Disqualification was effective on 27 June 2008. It is therefore necessary to examine the plaintiff's earning capacity prior to and subsequent to that date. 137The plaintiff admitted in the AAT hearing that his company, Customer Strategies Pty Limited (CS), ceased trading in 2002 when that business "virtually dried up". The plaintiff explained the reasons for its demise in a questionnaire he was required to complete and forward to its liquidators on 11 November 2001: "Customer Strategies was a successful consulting, training and seminar business from date of incorporation until late 2001. As the 'expert' consulting company headed by myself the business enjoyed regular income and met its obligations. In 2001 major consulting firms began heavily marketing competing services and software companies began giving similar services for free with product sales. Despite advertising and promoting heavily, income dried up and efforts to diversify the business failed." 138Later, CIUT contracted with Techontap to provide the plaintiff's services for a fee of $20,000 per month plus expenses pursuant to a Service Agreement referred to above. 139Subsequently, after Techontap ceased trading, the plaintiff operated a company known as Customer Strategies International Pty Limited (CSI) which engaged his services as a consultant. I consider that although there may have been distinctions between the business of CS and the business of CSI, any such differences were not material, as is evident from the promotional material and the plaintiff's cross-examination. 140In August 2007, almost two years after an administrator had been appointed to Techontap, the plaintiff was engaged, through CSI, as a consultant to the Western Australian Chamber of Commerce and Industry (CCI). The period of the contract was from 2 August 2007 until 2 May 2008 unless earlier terminated. The fee for the assignment was $24,000 plus GST per month. The total fees received by CSI from CCI in the period from 3 April 2007 until 9 September 2008 amounted to $655,453.90. This did not, however, convert to any substantial taxable income, either for CSI or for the plaintiff. 141In the 2008 financial year, potentially the most significant since it reflected his pre-Disqualification income, the plaintiff's taxable income was $14,500. However, the plaintiff arranged his affairs so that he paid very little tax. It was common ground that his personal tax returns were neither a reliable guide to his actual earnings nor to his earning capacity. 142The net income of CSI was modest once expenses had been deducted. The level of taxable income was substantially determined by the level of "management fees". 143The experts agreed that the so-called "management fees" did not reflect services actually provided. Mr Green, the plaintiff's expert, said: "...unfortunately, some people just push management fees to distribute income. They should be commercially justified, but often times they just do it without any commercial justification." 144Ms Jones observed that there was no "management fee" charged for 2006 or 2007 but in 2008 it was $340,864. She agreed that it was "not a true expense". 145Had I been inclined to award substantial damages for economic loss I would have been disposed to measure the plaintiff's earning capacity by reference to what CSI earned from CCI, without making a deduction for expenses labelled "management fees", since they were neither commercially justified nor referable to services actually provided, but were monies ultimately used for the benefit of the plaintiff's wife and children. However for the reasons that follow, I do not consider any such award to be warranted. It is therefore not necessary to consider the precise figures further. 146The CSI contract with CCI came to an end in August 2008. By email dated 2 September 2008, the plaintiff despatched an invoice with respect to a "bonus payment" of $14,000 which was payable when certain milestones had been achieved. CCI wrote back by email dated 9 September 2008 in the following terms: "Thanks Graeme for the below response. Following discussion with Frances and Geoff we have agreed to process your invoice in full to finalise your agreement with CCI. As I may have mentioned previously, the focus for the balance of this year needs to be on the implementation of the technology itself, and we have decided to insulate the team from anything else as best we can, until this is indeed achieve. It has been a very enlightening process, Quantum for the Group and the benefits it will bring will take time for us to bring to fruition, simply we need to get the technology in, and then look to these to be delivered." 147Later on 9 September 2008, the plaintiff wrote again to CCI by email which included the following passage: "Would you please advise at your earliest convenience when you need the five days ordered for the technical review - if parts of it become available before hand am happy to start and then complete onsite. May I express my appreciation for your confidence in me, even though I ruffled feathers - and likely yours - at times. It was never intentional and always out of eagerness to ensure CCI's success." 148The plaintiff subsequently invoiced CCI for five further days of work. CCI's response included the following: "In regard to your claim, via your Invoice dated 30th September 2008 I respectfully advise that CCIWA will not be making a payment. As you are aware the Consultancy Agreement of 30th April 2008 ended on 31st of August 2008. Although there were discussions about a further five days for reviews, it was made clear to you that we wanted to put that off for the time being and 'finalise your agreement with CCI', see our emails of 27th August and 9th September 2008. You have accepted that and have conveyed to us that you would not be 'out of pocket'. To suggest that the invoice attached to your e-mail is now due and payable when work has not been performed is simply not the way we have interacted in the past, and as such an incorrect assertion." 149There is no evidence that would permit me to infer either that CCI knew of, or cared about, the disqualification. Indeed, the plaintiff's conduct in demanding a cancellation fee for five days work not performed would, in my view, tend to supersede any other cause for the plaintiff not being re-engaged with CCI since it tended to destroy any goodwill that may have otherwise extended to the plaintiff. 150Accordingly, I do not accept that the Disqualification had any causal connection with the plaintiff's capacity to obtain contracts such as with CCI, or to perform such work.

Relevant principles 151The relevant measure of damages in tort is the amount of money which it will take to put the plaintiff in the position he would have been in had the tort not been committed: Gates v City Mutual Life Assurance Society Limited [1986] HCA 3; 160 CLR 1. 152As the plurality said in Husher v Husher [1999] HCA 47; 197 CLR 138, at 143, damages for loss of earning capacity are awarded if the diminution of earning capacity is or may be productive of financial loss. Accordingly, it is necessary to identify both what capacity has been lost and the likely economic consequences of the loss of capacity.

Findings on causation and damages regarding the lodgement of the Form 484 153Had the defendant refused to lodge the Form 484 until the written consents had been received, then the plaintiff would still have been disqualified under s 206F from managing a corporation for a year, since this was what the AAT decided was the appropriate length of disqualification: Boorer and Australian Securities and Investments Commission [2010] AATA 390. 154The plaintiff submitted that his loss of income ought be assessed by reference to figures in the order paid by CCI to CSI referred to above. I accept the defendant's submission that this contract was, in the plaintiff's career, an outlier. There is no evidence to establish that this contract with CCI was other than an extraordinarily lucrative period in an otherwise relatively unremunerative working life. Furthermore, for reasons given above, I am not satisfied that the cause of cessation of the CCI work had anything to do with the Disqualification. 155The next question that arises is whether the opprobrium of being disqualified for managing companies that did not have sufficient capital to meet their obligations and failing to keep adequate books and records is significantly less than the opprobrium of those matters together with the opprobrium of authorising a document to be lodged with ASIC which showed persons as directors when they had not consented in breach of s 1308 of the Corporations Act. The plaintiff submitted that the additional ground carried a significant additional stigma since it impugned the plaintiff's reputation for honesty and integrity, in a way that record-keeping and under-capitalisation did not. 156I accept that the effect on the plaintiff's reputation for honesty and integrity of a finding of misleading and deceptive conduct would be substantial and that, conceivably, it would affect his capacity to earn in roles for which honesty and integrity were prerequisites. It does not, however, seem to me that the role that the plaintiff, through CSI, performed for CCI required such qualities, or that the role the plaintiff performed through CS previously, required such qualities. His role in both instances was essentially technical and involved him in assisting clients to set up systems and databases and use them effectively. 157In any event, for the reasons given above, there is no basis for concluding that but for the Disqualification, CCI would have offered him more work.

Assessment of damages, where there is no, or little, evidence 158The plaintiff submitted that it was my obligation to assess damages, no matter how difficult it was to do so. 159The paradigm example of a case where a court will strain to overcome such a difficulty is when a defendant's negligence causes damage to a young child whose future, but for the negligence, can never be established in other than a speculative way. However, it is one thing when the difficulty in assessment of damages arises from matters connected with the defendant's breach. It is quite another thing when, as here, a plaintiff simply fails to adduce evidence to establish loss and enjoins the Court to "do the best it can" to assess damages on the unstated premise that the plaintiff must have suffered some loss which ought result in substantial damages. 160The need to establish damages in cases where there is injury to reputation as a result of alleged negligence or breach of contract was considered in Aerial Advertising Co v Batchelors Peas Ltd (Manchester) [1938] 2 All ER 788. 161In that case, the defendant had engaged the plaintiff to promote its business by flying over towns in an airplane trailing a banner enticing the public to buy its brand of dried peas. The plaintiff had mistakenly flown over Manchester on Armistice Day shortly before 11 am. The defendant, in its cross-claim, alleged that it had suffered substantial commercial loss because of the damage to its reputation caused by the plaintiff's insensitive timing. However the defendant failed to adduce evidence of any economic loss to quantify loss of sales although it was undoubtedly the case that there was a reduction in sales of its peas around Manchester. Atkinson J said, at 796-797: "Difficulty of proof does not dispense with necessity of proof. In considering damage on this part of the case, one has to be very careful that one is not giving damages for injury to reputation and that type of thing. One can only give general damages in respect of the pecuniary loss which has been sustained. The evidence as to that establishes beyond all question that there must be pecuniary loss, which is still going on. In the case before me, five or six retail greengrocers were called, and their evidence was all more or less to the same effect. One said: 'Whereas I used to sell very freely Batchelor's peas, after this customers would not touch them.' Another one said that it used to be in the proportion of three to one in favour of Batchelor's peas, but that now it is the other way round, one in three... I can only do the best I can, being very careful not to put it too high, and particularly for the reason that, although I appreciate the difficulty, I think that the defendants, if they had taken the trouble, could have given me more reliable figures. For instance, the manager talked about the difficulties that travellers had in making new connections, but no traveller was called to say, "AB refused to take our goods," or, "CD refused to order from us." I think, therefore, that they must bear the responsibility for that... I repeat that I have not the least doubt it is too little, but I feel that they could have given me better evidence if they wanted a larger figure. I think that they could have called more evidence about it, and that is all that I feel I can award on an absolutely safe basis." 162The plaintiff has adduced no reliable evidence that any diminution of earning capacity that he has suffered as a result of the defendant's (assumed) negligence, has or will be productive of economic loss. 163While the plaintiff was disqualified, he could not be a director, or manage a company. There is no evidence of his being a director of a company other than one of which he was a major shareholder. He did not put his case on the basis that he ought be awarded a buffer for the loss of opportunity to be a director of companies of which he was not a shareholder. In all the circumstances, I do not consider that I should award a buffer. 164Nor am I satisfied that work such as the work that the plaintiff was performing through CS, and later CSI, would not have been as available to him after the Disqualification as it was prior to the Disqualification. 165For these reasons, even had I been satisfied that the plaintiff was entitled to success on damages, I would not have awarded him more than nominal damages.

Orders 166For the foregoing reasons, I make the following orders: (1)Judgment for the defendant. (2)Subject to order (3) below, order the plaintiff to pay the defendant's costs of these proceedings. (3)Direct that any party who, or which, seeks a costs order different from that set out in (2) make such application in writing to my chambers within seven days of these reasons.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 06 December 2012

Australian Securities and Investments Commissions Act 2001(Cth)

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