Consolidated Byrnes Holdings Limited ACN 111 052 585 v Hardel Investments... [2009] FCA 399 | Case summary

HISTORY 64 The defendants' claims for indemnity costs against the plaintiffs and the non-parties necessitate an examination of the facts and circumstances giving rise to the bringing of the winding up applications and the circumstances which transpired after their commencement. 65 In a sense, that is undesirable because the proceedings have already been dismissed in circumstances where the plaintiffs have abandoned their claims. However, because of the defendants' claims against the plaintiffs and non-parties, an examination of the facts cannot be avoided. 66 This is not to try a hypothetical action between the parties. The Court should not be called upon to decide whether the plaintiffs' proceedings if pursued would or would not have succeeded. The parties should not be burdened with the conduct of proceedings already dismissed. Moreover, the only evidence before the Court is in affidavit form. The Court has not had the advantage of seeing and hearing the witnesses on matters where the facts are in dispute. In those circumstances, the inquiry must be limited to whether commencing the proceedings was reasonable and whether the conduct in the proceedings, including the conduct leading up to my dismissing the proceedings, was reasonable: Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Quin (1997) 186 CLR 622 per McHugh J at 624. 67 The following matters are taken from the affidavits to which I have referred. 68 The defendant, Hardel is the trustee for the Hardel Investments Unit Trust. It entered into a loan agreement with Contor as trustee for the Contor Developments Unit Trust on or about 16 December 2005 (the loan agreement). 69 The defendant, Avpri entered into a services agreement with Mr Harris, a company director of the defendants and Cobra on or about 14 July 2005 (the services agreement). 70 At the relevant time, Dr Justin Low was the sole director of Contor and Cobra, and the two agreements to which I have referred were entered into in the context of a property development at Coomera in Queensland. 71 The plaintiff, CBH, has as its sole director, Catherine Byrnes, the wife of Mr James Byrnes. At the relevant time, Mr Byrnes was disqualified from managing a corporation. The plaintiff, Alpha, has as its directors, Dr Low and his wife, Mrs Low. It would appear from the evidence that CBH is a company associated with Mr James Byrnes and Alpha is a company associated with Dr Low and Mrs Low. 72 Mrs Low has sworn an affidavit in which she says that she had no involvement in the events except in a formal sense. She was not involved in the negotiations leading up to the loan agreement and services agreement. She was not a director of Contor or Cobra. She had little or no involvement or knowledge of the events that followed. 73 Sometime prior to 2004 Mr Harris and Dr Low met each other as members of the Paradise Community Church and became friends. 74 In early 2004 Avpri obtained an option to purchase land in Coomera, Queensland for the purpose of development. Contor owned adjoining land and, after Avpri obtained its option, approached Avpri offering to sell its land for $8.5 million. On 9 July 2004 Contor and Avpri entered into agreement for the sale and purchase of the Contor land. 75 It is Mr Harris' case that, prior to entering into that agreement, various representations had been made by Dr Low relating to development approval which representations were relied upon by Mr Harris in causing Avpri to enter into the contract for sale and purchase. 76 Settlement was to take place on 9 November 2004 but did not occur because Avpri could not obtain a valuation of the property at the $8.5 million purchase price, nor had development approval been obtained at that date. 77 In July 2005 the purchase price was adjusted to $6.5 million (the second contract of sale). At the same time, Dr Low proposed that a services agreement should be entered into so that Cobra could provide services and skills in relation to property development through Dr Low. The services agreement provided that Avpri would pay Cobra in the order of $2.5 million in instalments. Mr Harris says that agreement was also entered into in reliance on representations made by Dr Low. 78 The second contract of sale was to settle on 15 August 2005. For reasons which are unimportant, Hardel was incorporated to become the vehicle to purchase the land on the same terms and conditions as Avpri had agreed, and the contract for sale between Contor and Avpri was rescinded on 16 December 2005. A deed of rescission was entered into under which Hardel agreed to pay the fees which Avpri had previously agreed to pay. Contor acknowledged in that Deed that it had received $815,000 from Avpri on account of deposit monies and extension fees. 79 A third contract for sale and purchase of the land was entered into by Hardel and Contor. That contract provided for settlement on 16 December 2005 which was the same date upon which the contract was executed. 80 There was a shortfall of funds as a result of which Hardel entered into the loan agreement with Contor. The contract of sale between Contor and Hardel settled on 16 December 2005. 81 Some monies were paid by Hardel in satisfaction of the loan agreement but no monies were paid by Avpri in relation to the services agreement. 82 Mr Harris deposes in his affidavit as to the reasons why no monies were payable: 56. In particular, I disputed (and continue to dispute) that: 56.1. The interest, extension fees and other charges said to be payable by Hardel at settlement of the Third Contract of Sale, and which necessitated entry into the Loan Agreement, were in fact payable by Hardel; 56.2. Dr Low provided the services to Avpri contemplated by the Services Agreement, and certainly not the services which he represented that he was capable of providing and would provide under the Services Agreement; 56.3. The final instalment of $1 million under the Services Agreement is due and payable; and 57. I also believe that a counterclaim exists against Contor and Cobra as a result of the falsity of the July 2004 representations and the July 2005 representations, which were relied upon in entering into the Contracts of Sale and Services Agreement, and in incurring the expenses my companies have incurred based on the representations. I believe that there are further claims available against Contor and Cobra for costs incurred by my companies as a consequence of those representations not being fulfilled or capable of being fulfilled. 58. Throughout mid to late 2007 I had various without prejudice meetings and discussions with Dr Low about settlement of our disputes regarding the Loan Agreement, the Services Agreement, and the sale of the Reserve Road land, including a without prejudice meeting with Church elders held on or about 23 October 2007. 83 Mr Harris says that on 10 October 2007 Mr Ian Lazar advised a financier of Hardel that he had bought "the vendor finance debt" from Dr Low. Mr Lazar is the sole director and secretary of Business Acquisitions Australia Pty Ltd (BAA). Dr Low had first met Mr Lazar in February 2007. Dr Low said in his affidavit that he bumped into Mr Lazar again in April 2007. In August 2007 he told Mr Lazar there was a large amount of money owed to his companies. Mr Lazar said he would help. Mr Lazar suggested Dr Low assign the debt to him and he would recover the debt. In September 2007 Mr Lazar introduced Dr Low's accountant (Michael Armstrong) to Mr James Byrnes, who was then a director of Australian Litigation Funders Pty Ltd (ALF). Dr Low has deposed that he did not wish to engage Mr Byrnes "but he started acting any way and claimed Armstrong agreed to engage him on my behalf. In any case Mr Byrnes assisted Lazar in sending emails to the Harris (sic) and his consultant Ken Pridmore demanding the payment of the debt". 84 On 12 October 2007 Mr Harris received an email from Mr Lazar of BAA in the following terms: I have tried to contact you on all your numbers. I have taken an assignment of debt from Justin Low and unlike Justin I don't wait to be paid. I will be writing to your mortgagee's (sic), any creditors that I will have my mercantile agent track down, the ATO and any other government entity that I think you owe money to or have breached any form of legal obligation by yourself or any current or previous director. I will seek to make an application in court immediately to have you and any family members publicly examined and I will be pushing for an urgent application next week to injunct any of your assets both company family trust or personal under the corporation act that allows me to do so in order to protect my position. I require you to respond as an urgency to confirm how and when I am getting my money back. If I don't get a response by close of business today, I will take this as you wish me to proceed the other way. The email contains a number of threats calculated to obtain a response from the addressee. 85 Mr Harris responded seeking a stamped copy of the assignment of debt from Dr Low referred to in Mr Lazar's email. Mr Lazar responded: I will not be providing you with anything. I suggest you find your own mechanisms to prove the purchase of debt. In the interim I await you solicitors (sic) correspondence. This second email was copied to Dr Low. His email address is given as jlow@pivotd.com.au. 86 There is no explanation in the evidence why such aggressive emails were written. Mr Lazar has sworn an affidavit but has not explained the circumstances in which he (or BAA) received an assignment of the debt (if in fact he did) and why it was that he wrote what he did. 87 Mr Harris said that on 17 October 2007 he made a without prejudice offer to Dr Low to resolve the dispute and he requested a copy of the assignment of debt to Mr Lazar. He said that he received no response from Dr Low but, instead, on 22 October 2007, received an email from Mr Byrnes (a copy of which was sent to Dr Low's email address) in the following terms: I have instructions from Mr Ian Lazar of BAA who has taken assignment of debts, which has been confirmed by Dr Low. Than any offer or settlement will need to be approved by BAA and on terms acceptable to BAA. I prepared a detailed document pertaining to the history and causes of action which are available to the parties. I confirm that from the documents and actions by the parties that Harris and His companies are substantially in breach of the agreements. Clearly even by there offers it is clear they are hopelessly insolvent. I have prepared a document setting out the agreement, the default and the defaulting parties action ... or lack of it. This document will be sent to ASIC to the head of investigations. this area issues section 30 notices and investigates insolvent companies. I know the area and have had dealing with them before on behalf of clients ... it is very simple ... my documents are complete and ASIC will act as I provide information which shows insolvent trading. The term insolvent means cant pay your debts as and when they fall due. To simply turn these insolvent companies to solvent companies you need to schedule debt that is presently due and pay able to be paid in part now and the balance secured in a manner which is acceptable to BAA. I understand Dr Low is in discussion. I am instructed BAA do not authorize any settlement discussions and or any settlement. We will however actively and commercially agree to take part in any fruitful discussions within the next 2 days. After Wednesday if we are not completely satisfied then we shall file such notices and reports as we deem fit. This ranges from filing defaults on the director and the companies with Veda/Baycorp. Filing the appropriate complaint with ASIC fraud and insolvent investigations with a view of seeing ALL companies placed into the hands of a liquidator. Finally if for one second I though there was any truth that, a respectable church and its elders would use un fair and unreasonable tactics to pressure Low. i would be horrified. The man and his company were correctly owed money (the subject of the assignment.) the debt is 3.7 mil and growing. If you are having difficulty ... we are willing to be commercial, don't be thinking 2,350 as we are not interested ... Neither I or Mr Lazar are easy intimated and would suggest you stop all the un godly threats and get real! Email me and fast as my patience is running out fast. Friday I was polite and willing to be as accommodating and reasonable as ever ... Mr Pridmore's rudeness and stupid and unprofessional statements have only inflamed matters and have made me more determined than before and far less accommodating when it comes to commercial give and take ... i am happy however to put things back on track and will deal with any person who is authorized by the two companies to bind the companies to a deal. So its back to you Mr Harris! (Grammatical and spelling errors as per original document.) 88 This was, on the evidence, the first involvement of Mr Byrnes. In this email Mr Byrnes purports to be acting for BAA and claims, as Mr Lazar had, that Mr Lazar had taken an assignment of the debts. Mr Byrnes swore affidavits in the proceedings before the proceedings were listed for trial on 27 June 2008. He has not sought to rely on any further affidavits and has proffered no evidence to explain his actions in the period leading up to the commencement of the proceedings and since. 89 As a result, his conduct remains unexplained. The threats which can be seen in the email, and which will be shown in further communications, remain unexplained. 90 On 23 October 2007 a meeting took place between Dr Low, Mr Harris and elders of the church of which they were both members. Mr Harris said an in-principle agreement was reached to resolve the dispute but the matter did not resolve. 91 On 24 October 2007 at 4.20 pm Mr Harris received a further email, copies of which were sent to Dr Low and Mr Lazar from Mr Byrnes: Further to our Email below [referring to email previously sent on 22 October 2007: see [70]]. We had the opportunity to meet with Mr Low from 11-45 am to 12-15 today. At his request we agreed to withhold lodging caveats, Mr Low also undertook certain positive covenants to meet certain obligations to BAA and ALF. Clearly if those obligations are not meet we reserve our rights It would appear that Mr Low is trying very hard to accommodate the Harris group. We wish to be informed of a time and place for the first tranche of funds to be paid. We wish to be informed of the solicitor who is handling this from the Harris group We seek an undertaking from the Harris group and or its lawyers that they will inform us of 2 things, the time and place of the first settlement and that directions have been given by Mr Low to pay ALF and BAA. As you can imagine if the undertakings are not given we will look to our rights. Further based on agreements reached both BAA and ALF stood to benefit substantially out of recovery of funds from the Harris companies and him personally, so we are to say the least very unhappy with being asked to stand down. Further to accommodate the offer made (which we consider to be at the very low end of the scale at which we believed recoverable) and accepted subject to satisfactory security Mr Low both BAA and ALF agreed to give up certain bonus percentage payments. we trust that the Harris group appreciate that Low has been very accommodating and they should move quickly to settle this matter Whilst we have agreed to allow Justin to enter into settlement discussions and agreements, BAA and ALF have and continue to affirm an equitable interest in the settlement. Justin has arranged for a payment to be made to our respective groups from the proceeds paid down on debts owed by the Harris group BAA are within there rights to seek specific performance of the assignment but have agreed subject to payment to BAA and ALF to agree upon payment to rescind and verbal or written agreement. Likewise ALF have an equitable interest in the proceeds which are presently secured by agreements and guarantees and mortgages There are a number of things the Harris group should be mindful of They have got a good deal from Low and should Honor it. It does not take 2 weeks to draft terms of settlement and provide positive covenants re loan documents. this is in reality should be effected next week. The schedule of payments to be secured and subsequently paid at a latter date are as important to ME JIM BYRNES as is our payment out next week and that if the Harris group default in any way now or in the future we have agreed to immediately assist Mr Low in taking the Harris group to task. (Grammatical and spelling errors as per original document.) 92 As already noted, ALF which was referred to in Mr Byrnes email of 24 October 2007 is a company associated with Mr Byrnes. 93 Mr Byrnes again claims in that email to be representing BAA which is surprising in view of the fact that on the same day Mr Lazar of BAA wrote to Dr Low acknowledging that the assignments of debts from Contor and Cobra to BAA "are now rescinded" and BAA has now relinquished its rights under the assignment. A deed was entered into on the same day to that effect. A redacted form of the Deed of Release is exhibited to Mr Harris' affidavit. The parties to the Deed are BAA, ALF, Mr James Byrnes and Cobra, Contor and Dr Low. 94 Paragraph C of the Deed of Release records that a "verbal agreement" had been entered into between Cobra and Contor and BAA "to assign the debt to BAA with the option for Justin to withdraw the assignment should he negotiate a satisfactory settlement directly with the Harris parties". It is further recorded that BAA subsequently introduced ALF to act on BAA's behalf. 95 Paragraph D of the recital to the Deed of Release records that "Justin's Group" had negotiated a settlement with "the Harris parties". It is a term of the Deed of Release that "ALF and Jim further agreeing not to contact "Justin's Group" or the Harris parties or take any action whatsoever which will adversely affect the Harris parties or jeopardise the payment to be made by the Harris parties at any time unless requested to do so by Justin Low". 96 It would appear that no assignment had occurred as at the date of the release but merely an agreement to assign. 97 On 25 October 2007 the defendants' Sydney solicitors (J. Biady & Associates) wrote to Mr Lazar at BAA saying: Our client instructs as follows :- a) It is the registered proprietor of development properties at Coomera ("the Properties") which were acquired from Contor Developments Pty Ltd ("Contor"); b) Demands for payment have been received from you in relation to the Properties; c) You have written to our client and asserted that certain monies payable by Hardel to Contor have been assigned to you. As such you requested that our client must pay those monies to you in lieu of paying them to Contor; d) Our client requested you to provide some evidence of the assignment in order to establish your legal entitlement, if any, to be paid any amounts and to quantify the amounts to which you lay claim; e) Your response was to steadfastly refuse to provide any of the information requested. You also refused to provide a copy of the assignment document and repeatedly stated to Mr Harris, the CEO of our client, that he should "get it himself". f) Our client has not been able to obtain any confirmation from Contor that there has been any assignment of any debt by it to you. g) Our client is and remains ready, willing and able to meet all proper claims on it. Our client will pay any debts properly and legitimately due and owing. h) At this stage there is nothing whatsoever that might suggest that any moneys are due to you. i) Our client has had no dealings whatsoever with you, no contract with you and no notification of any assignment of any debt to you. If you wish to assert that you have a binding and valid entitlement to claim moneys from Hardel, you will need to particularise the claim and substantiate it to our client's reasonable satisfaction. If we do not receive the requested substantiation within 14 days of the date hereof, our client will proceed to deal with Contor without further regard to you. Please be very clear that unless you take the necessary steps to allow our client to verify and quantify the claims you are making, our client intends to disregard the claims by you and you may lose any entitlement you may have to require our client to deal with you. The letter set out the substantiation which was required. 98 On 30 October 2007 Dr Low's accountant, Mr Armstrong, was provided with a facsimile of the letter written by Mr Lazar on 24 October 2007 of BAA to Dr Low acknowledging that the assignment had been relinquished and enclosing a copy of the redacted Deed of Release. 99 Apparently in November, Mr Harris and Dr Low exchanged further correspondence in an attempt to resolve the ongoing disputes. No settlement was achieved. 100 Dr Low said in his affidavit that in late November 2007 he had a number of discussions with Mr Byrnes regarding the debts owed to Cobra and Contor. Mr Byrnes offered to purchase the debts for $200,000. Dr Low said in his affidavit that it was agreed that any funds recovered would cover costs and the balance would be distributed according to the Heads of Agreement dated 29 November 2007. He said, "We agreed to establish an entity named the Coomera Trust for the purpose of conducting the matter." 101 The Heads of Agreement of 29 November 2007 is a handwritten agreement, the parties to which are Cobra, Contor, Dr Low and BAA and ALF. The agreement claims: This agreement is an agreement, not an agreement to agree as defined in Masters and Cameron. 102 Contor and Cobra were to assign for the consideration of $1 each to BAA all "claims, interest and securities it either holds or may be entitled from Avpri Pty Ltd (owed to Cobra) Hardel Investments Pty Ltd (owed to Contor)". BAA was to hold the assignments "non-beneficially" - "to the benefit of BAA/ALF unit trust which will issue units equally to ALF and BAA". The total consideration was expressed to be $1 each to Cobra and Contor on signing; a further two instalments of $25,000 on two separate but unidentified Fridays in November; and two further instalments of $75,000 each to Cobra and Contor on 31 January 2008. The Heads of Agreement then provided for the disbursement of funds owed. $200,000 was payable to the unit holders. BAA was to be entitled to be reimbursed all costs and expenses involved in the recovery of the debts: Upon repayment of the 200,000 and costs BAA will then Direct the Next $650,000 to Be Paid to Either Cobra, Contor or at Justin Lows Direction. (Grammatical and spelling errors as per original document) 103 The Heads of Agreement provided that "all funds and assets" were to be distributed as to 50% to the BAA unit trust and 50% at the direction of Justin Low. The document exhibited to Dr Low's affidavit is unsigned. 104 On 10 December 2007 Mr Byrnes emailed Mr Pridmore and copied in Mr Michael Armstrong, Dr Low and Mr Lazar: Ken I extended you an olive Branch, you failed to take advantage of the offer. Big mistake! As you would have appreciated my firm and Lazars firm have a vested interest in making sure YOUR client pays Justin a portion of what is legally owed. There was an agreement to assign the debts rights and entitlements, this did not proceed because of your promises. My firm was engaged as an advisor and part of a team of professionals to assist Low. As an agent for the lender and or contractor to Harris companies Low is perfectly entitled to discuss what is going on much the same as Harris uses your services and know doubt pays (or should do) for same. If nothing eventuates we will complete the assignment process, then the fun will really begin, but not for Harris nor you if you ever expected to get fees that may be owed .!!. Low and I have discussed again assigning all rights title an interest to a trust associated with the writer. And we have now completed a new assignment which we have agreed to hold for a few days to see if you were going to provide a proof of funds and execute an acceptable agreement ... that acceptable to us ... you have no bargaining power here ... Instead I here you again carry on with rubbish about confidentiality, there is No binding Confidentiality agreement ... there was an offer and an acceptance of the offer that required an agreement that we needed to approve ... Time UP ..., there was a draft agreement sent, not accepted By Low ... the terms of which would need to be changed before being executed and your time process to effect same would need to be in hours not days. If you or Harris want to play games re the agreement, expect that we will need to discuss this with Bankwest as it is a default under your loan to have proceedings on foot for such an amount as is owed to Low entities. They are entitled to be fully informed of the position and as a fellow member of the same reporting agency we are entitled to discuss with them defaulting commercial accounts Low and I have discussed causes of action that he legally able to pursue. As this may surprise you, I have a very senior contact at Bank west who I am yet to talk to regarding this offer to settle the moment I talk to him forget getting 1c. I will call him and tell him what a rogue and cheat Harris is ... maybe tomorrow. see how you respond by 12 noon I will advise him that I plan to have Harris listed as a payment defaulter with credit reporting agencies. I will advise him that I will be seeking a section 30 examination through ASIC. I will advise him that after chatting to my old friend David Geer, who I was borrowing off 16 years ago, that there is action afoot which will no doubt Domino in to a cascading series of liquidations of the Harris group. Seeking enforcement under the personal Guarantees Seeking to lodge personal default notices under the guarantees. Seeking to set aside the variation based on breaches of the trade practices act and enforcing the original securities on comera. Taking assignment of existing securities. Causing yet more good Christians to be thrown to the lions (Harris being the predator) That's just for starters. So pull your head in with the silly statements and threats as they only make a fool of you ken. Your man owes the money. Low wants his money. He agreed to an offer subject to an acceptable agreement and payment. So far all you have done is talk. time to put up or shut up as they say. Provide the proof of funds from Bankwest by 12 noon tomorrow. Set aside Wednesday to fly to Sydney with your lawyers to meet and finalise the agreement ... including allowing Low security over comera for the 800 k p> Now I hope you understand this is not a negotiation, do it or watch how I Huff and Puff and Blow your house down Merry Christmas Jim Byrnes (Grammatical and spelling errors as per original document.) 105 It would appear from Mr Harris' affidavit that that email was received without any warning. In any event, Mr Byrnes claimed that his firm and Mr Lazar's firm had a vested interest in ensuring that Mr Harris pays Dr Low a portion of what is legally owed. Mr Byrnes threatened that a number of actions would be taken to embarrass Mr Harris with his bankers and bring Mr Harris to the attention of reporting agencies. The writer also threatened to have Mr Harris examined by ASIC. The email is written in similar terms to previous correspondence. The email suggests that the agreement to assign the debts did not proceed. It may be inferred that the Heads of Agreement of 29 November 2007 did not proceed. 106 As I have said, Dr Low was sent a copy of the email, as was Mr Lazar. Both would have been aware of the threats that Mr Byrnes made in that email. 107 On 11 December 2007 Mr Byrnes emailed Mr Pridmore (consultant to Mr Harris) and Mr Armstrong (accountant to Dr Low) at 10.16 am: I start writing to you at 10-10, so we can be clear that leaves you 1 hour 50 minutes to respond to yesterdays email. Low entities have agreed to assign all rights and interest to a new entity which will be jointly controlled by ALF. The offer to settle will be terminated, repudiated, finished ... gone ... as will Harris's chances of borrowing money until after he comes out of bankruptcy in 2011. There will be a new Sherif in town and he wants the 3.7 million owed ... but will be reasonable. i will give him a few alternatives. Oopppsss sorry Only 1 hour 47 minutes to go (Grammatical and spelling errors as per original document.) 108 Later the same day, at 12.44 pm, he wrote again to the same gentlemen but this time copied in Dr Low: Mark Altschwager you Bankwest relationship manager is away today ... lucky you ... My contact is far senior and has given me all his contacts. So ken ... are you feeling Lucky? (Grammatical and spelling errors as per original document.) 109 He wrote twice more on 11 December, at 2.31 pm and 2.43 pm, in much the same vein. In the second of those emails, a copy of which was sent to Dr Low, Mr Byrnes wrote: Post 12 noon update. Assignments now being finalized. I have spoken with Bankwest and am talking to the Hardel relationship manager tomorrow and have already got the ear to someone much more senior. Have not decided what I want to tell them yet ... but the truth is that companies and Harris are in default of contractual obligations and the security holder is within there rights to list the companies and directors as defaulters today. The security Holder can seek the appointment of a controller over the sites ... note I am saying sites. the Group is insolvent and unable to pay its debts as and when they fall due. http://www.asic.gov.au/asic/asic.nsf/byheadline/Complaining+about+companies+or+people?open Document great page, have completed the complaint and have spoken to ASIC and said I have information about a that represents they have a ASIC commission license, yet there phone does not work. they have no C.R.M, they have no corporate governance, they are associated with a group that has an un approved funds or funds. the funds are insolvent and they are still trying to raise money. remember insolvent means unable to pay it debts as and when they fall due. it is a great Pity that ken Pridmore and or the companies management did not have either the manners or good sense to properly deal with these issues before it became to late. (Grammatical and spelling errors as per original document.) 110 He continued his email assault on 12 December by sending two emails. The first was sent at 12.29 am: Good evening gentleman. Got a message saying you don't want to pay your bills and don't want to resolve this. Fine, I expect to forward you a notice of assignment mid morning. I will speak to Bankwest tomorrow and advise them of the default and our intention to move to wind up various entities. Our action to move to Bankrupt Mr Harris under is Guarantee that he has defaulted on. Our listing with the credit reference tomorrow both personally as a defaulter under is guarantee and as a director. We will list the defaulting companies as well I have had a preliminary discussion with ASIC but to date have not advised who the party is, that changes tomorrow. Caveats will be lodged on other entities property tomorrow. I have arranged already to acquire from lenders securities held over a property. Any securities taken out or lodged to secure investor funds will be set aside. Securities taken or given by other companies are an uncomercial transaction and will be void. All payments made to unsophisticated investors and related parties will be subject to claims as preferential payments and or uncomercial transactions. Transfers by the director to related parties and family within the past 5 years will be subject to claw back. I will suggest ASIC review the various funds raised from unsophisticated investors and the numerous breaches that ASIC can and will pursue, of course Ken is no stranger one only needs to see what happened to his last major client. We will support ASICs move to appoint a provisional liquidator as the companies are clearly insolvent and unable to pay there debts as and when they fall due it may be a contest to see who gets a controller appointed first. I will encourage ASIC to undertake an immediate section 30 examination. Within days of me really bring to the attention of your lenders the position and our causes of action, they will need to appoint a receiver under there respective charges. We will advise Paradise Church that we feel for the investors who have been cheated but we are bring an end to Harris Pridmore ponzi scheme Perhaps you Mr Harris should consider getting advise from someone besides Pridmore. I don't like bullies ... there is only one way to deal with them and that's to let them no were they stand and deal them numerous decisive blows up front. Unfortunately this makes me act like a bully, which is not how I wanted to resolve this ... but as your MR PRIDMORE IS ABOUT TO LEARN ... THERE IS ALWAYS A BIGGER BULLY OUT THERE ... AND YOU HAVE FOUND HIM I was offended by Pridmores rude behaviour, his disingenuous comments, and his complete lack of morality but it will be Mr Harris who pays for Pridmores behavior. All offers are withdrawn. All settlement discussions and offers have been repudiated by the Harris group. There purported settlement offer was an agreement to agree and falls within the masters and Cameron definition of agreement to agree and is therefore non binding on the parties, even if it was a binding agreement the Harris failure to adequately provide a document on acceptable terms and the Harris failure to pay as per the original offer means that the offer was repudiated by the constant failures of the Harris companies Mr Harris you have the most to lose here Our advise suggests that the variation agreement should be either set aside as it was based on deceptive conduct. This allows us to maintain our position on comera. We are happy to Be paid the $3.8m owed plus further cost and interest. You had the chance ... you choose to listen to someone whose advise will ultimately see you bankrupt and struck of as a director and possibly facing criminal charges. You have my contact details, you can stick your head in the sand ... in which case its going to be quick and devasting ... or you can smarten up get your "A" team together and get to Sydney and try and resolve this. I will be talking to my contact at the bank tomorrow, David Geer with whom I have known for 16 years, ASIC fraud and insolvency investigation area, let me make it clear ... what I propose wont all happen in the next couple of days, some parts of my intended actions will happen within days, others may take months ... Recently I received lots of negative press arising out of comments by a road contractor from Victoria. He misappropriated 3 million of my clients money. He wanted to settle but try as he may he could not do what was required. All his companies went into receivership (I WARNED HIM OF THIS DAY ONE), his companies were then liquidated (I HATE TO SAY BUT I TOLD HIM SO), I arranged for funding for the liquidator to examine the director. the transcript has been sent to the DPP with a senior counsels advise. (ALL MY PLANS ALL CARRIED OUT) I pushed him into bankruptcy. His wife is being pursued now for funds she received 2 years prior to the liquidation ... she will be forced to hand back not only several million ... but interest and cost ... she is soon to be bankrupt. Finally I am fair and I can be negotiable and commercial ... let me make it perfectly clear ... never mistake Kindness for weakness ... i am Not Justin and I have no qualms about doing what is required to recover money. (within the law that is) So consider Mr Harris your options ... consider them quickly, as I am out of the office until 12 noon but am on my mobile. If you Mr Harris don't call me to plead your case and ask politely to meet for a without prejudice discussion ... then by 5pm, I will have the defaults listed and called in my contact at Bank west. Up to you ,,, BY THE WAY NO NEED CALLING JUSTIN ... THAT'S TO LATE ! (Grammatical and spelling errors as per original document.) 111 In the second email, sent at 9.43 am, he said that he was "passing the SA area of Bankwest and discussing the situation at a national senior management level". Mr Byrnes threatened to inform the defendants' bankers of their default; Mr Harris will be bankrupted and listed as defaulter with credit reference queries; ASIC has been informed; ASIC will be asked to review the defendants and appoint a provisional liquidator; ASIC will be encouraged to undertake a s 30 examination; and the Church will be informed. 112 Mr Byrnes boasts that he is a bigger bully and boasts about how he ruined a road contractor. 113 The email sent at 12.29 am contains naked threats. They go further than a creditor pressing for repayment of a debt. The email contains threats that no reasonable person would make. They are outrageous and constitute harassment. There can be no doubt that the series of emails to which I have referred constituted serious threats which I find were made for the purpose of frightening Mr Harris into paying to Dr Low the amount which Dr Low was seeking from Mr Harris at or about this time. 114 The emails were written after Dr Low had withdrawn the offer to assign the debt to BAA which was recorded in the Deed of Release of 24 October 2007. During that interval Dr Low and Mr Harris were attempting to resolve their dispute. 115 It must be inferred that at some time shortly before 10 December 2007 Dr Low or someone associated with Dr Low spoke to Mr Byrnes and instructed or retained him for the purpose of attempting to persuade Mr Harris to pay the debts. 116 Mr Byrnes sent another email on 12 December 2008, this time to Mr Harris' Adelaide solicitors advising that he had a notice of assignment to forward on the Low/Harris matter and enquiring whether it should be sent to them or some other party. He continued: I will not suffer fools or Bullies, I have reviewed all files records and documents, I have sought counsels advise (sic) to determine causes of action, I have obtained consents to act by a liquidator, I have conducted a detailed investigation in to the Harris Co method of capital raising and have a strong view on the matter. I will at all times be sensible and act in a polite and dignified manner ... until treated inappropriately, at which time I will take a much more hard line approach. 117 It is difficult to reconcile Mr Byrnes' statement that he "will at all times be sensible and act in a polite and dignified manner" with the emails to which I have referred. 118 On 12 December 2007 ALF wrote a long letter to the defendants' Sydney solicitors in response to complaints made by those lawyers concerning Mrs Byrnes' conduct in more measured tones than previously employed. In that letter, Mr Byrnes said that no action would be taken for recovery or for notifying credit reference departments until such time as Mr Harris' solicitors had been provided with a notice of assignment. 119 Both the email and the letter of 12 December suggested an assignment was in place of the debts from Cobra and Contor to some other party which is represented by Mr Byrnes. However, as the facts will show, no such assignment had been executed at that time. It is clear enough that insofar as it was claimed at that time there was an assignment, the claim was false. 120 On 14 December 2007 Alpha was appointed joint trustee with CBH of the Coomera Trust. An undated Deed of Settlement constituting the Coomera Trust was exhibited to an affidavit of Mrs Low. The settlor of the trust was Michael Armstrong. The trustees are CBH and Alpha. The Coomera Trust is a discretionary trust. The beneficiaries of the Coomera Trust include ALF, CBH as trustee for the Byrnes Motor Trust, CBH as trustee for Byrnes Family Trust, BAA, Elizabeth Low for the Coomera Discretionary Trust, Ian Lazar and Mrs Victoria Lazar. 121 It is tolerably clear when regard is had to the deeds of assignment which were said to be executed on 17 December 2007 that the parties intended the Coomera Trust to be the vehicle by which any debts which were recovered would be distributed. The joint trustees of the Coomera Trust were controlled by Dr Low and Mr Byrnes respectively. Dr Low's accountant was the appointor. 122 Dr Low has exhibited to his second affidavit, sworn on 23 October 2008, two separate deeds of assignment made by Cobra and Contor in which it is said each of those companies assigned to Alpha and CBH as joint trustees the two debts said to be owing by the defendants to the assignors. 123 The two deeds are similar in form. Contor is the assignor in one deed and Cobra in the other. The assignees in both deeds are Alpha and CBH. Jim Byrnes and ALF and Ian Lazar and BAA are also parties to the deeds. 124 In the respective deeds the "Seller" is defined to mean Contor and Cobra. In both deeds the "Buyer" is said to be Alpha. In both deeds the "Buyer's Guarantor and Indemnifier" is defined to mean "Ian David Lazar and Business Acquisitions Australia Pty Ltd (ACN 114 268 361) of Suite 2, 11 Rangers Road, Neutral Bay in the State of New South Wales and Jim Byrnes and Australian Litigation Funders Pty Ltd (ACN 117 508 586) and Consolidated Byrnes Holdings Ltd (ACN 111 052 585)". 125 The debt in the Contor deed is the debt said to be owned by Hardel Investments Pty Ltd and in the Cobra deed the debt is said to be owned by Avpri Pty Ltd. 126 In both deeds the recitals state that the Seller has agreed to assign the respective debts to the Buyer. The Buyer it is said is the assignee in the recitals but Buyer is defined in the deed to be Alpha, not Alpha and CBH. In both cases, the Buyer, as I have said, is Alpha which is said in the recitals to both deeds to be the trustee of the Coomera Trust and is buying the debt for the benefit of the beneficiaries of that trust. 127 The deeds seem to assume that Contor and Cobra will assign the debts to the Buyer but the Buyer will buy the debts rather than take them by way of assignment. 128 In both deeds the operative clause is clause 2.1 which provides: In consideration of the payment of $100,000 by the Buyer to the Seller, payable as set out in Schedule 1 hereof, the Seller as the legal owner immediately assigns to the Buyer absolutely all of the Seller's right title and interest in the Debt together with all interest which has accrued or which may accrue in the future on the Debt and all securities relating thereto which are held by or which the Seller is entitled to enforce pursuant to the Debt. 129 Schedule 1 provides that the date of payment is 31 January 2008. Clause 3 provides for the Seller's covenants which include a covenant that "the Seller has full power to assign the Debt to the Buyer". 130 In both deeds the Seller appoints the Buyer as the attorney of the Seller to demand the debt; conduct any legal proceeding in relation to the debt; and appoint any substitute delegate or sub-attorney. 131 Clause 10 provides that the deed is the whole agreement between the parties and supersedes all oral and written communications by or on behalf of any of the parties. 132 Clause 16 provides for a guarantee and indemnity. Clause 16 provides: 16.1 In consideration of the Seller, at the request of the Buyer's Guarantor and Indemnifier, to enter into this agreement and agree to allow the Buyer to pay the payment under clause 2.1 by instalments as set out in Schedule 2, the Buyer's Guarantor and Indemnifier agrees as follows: (a) The Buyer's Guarantor and Indemnifier guarantees to the Seller that the Buyer will comply with all its obligations under this Deed at the time they should be complied with; (b) the Buyer's Guarantor and Indemnifier agrees to indemnify the Seller for any loss the Seller suffers as a result of the Buyer not complying with its obligations under this Deed; (c) The guarantee and indemnity in this clause is a continuing guarantee and indemnity and they do not come to an end until released in writing by the Seller; (d) The Seller shall be at liberty without discharging The Buyer's Guarantor and Indemnifier from liability hereunder to grant time or other indulgence to the Buyer in respect of the Buyer's obligations under this Deed and to accept payment from the Buyer in cash or by means of negotiable instruments and to treat The Buyer's Guarantor in all respects as though he were jointly liable with the Buyer as a debtors under this Deed to the Seller instead of being merely surety for the Buyer and in order to give full effect to the provisions of this guarantee the Buyer's Guarantor and Indemnifier hereby waives all rights inconsistent with such provisions and which he might otherwise as surety be entitled to claim and enforce; (e) This guarantee and indemnity shall not be determined by the death or bankruptcy of the Buyer's Guarantor and Indemnifier but shall be binding upon his executors, administrators and assigns. 133 It would seem from that clause that Mr Lazar and Mr Byrnes and the companies associated with them are guaranteeing to Contor and Cobra respectively that Alpha will comply with its obligations under this deed. That follows because Alpha is the Buyer and clause 2 talks of the Buyer paying the sum of $100,000 for the Seller to assign to the Buyer all of the rights in the debt. 134 It is not clear why Mr Lazar and Mr Byrnes and their companies would guarantee Alpha's performance in purchasing a debt from Cobra and Contor. All three parties, Cobra, Contor and Alpha, are controlled by Dr Low and Mrs Low. The Buyer and the Seller are controlled by the same parties. 135 There does not seem to be any need for any form of guarantee at all. 136 Moreover, if these were the deeds which operated between the respective parties to the deed, then CBH was not the assignee or buyer of the debts. Even though CBH is said to be an assignee to the deed, the assignment is not to the assignee but is a sale by the Seller to the Buyer and CBH is not one of the Buyers. 137 In the end there may be no assignment to Alpha and CBH. CBH's entitlement to any part of the debt might arise because the debt purchased by Alpha became an asset of the Coomera Trust of which it was a joint trustee with Alpha. 138 The deeds perhaps raise more questions than provide answers. 139 In the end result, the deeds do, however, disclose that Dr Low purported to sell the debts to a company associated with himself for the benefit of the beneficiaries of the Coomera Trust and, for reasons which are unexplained, Mr Lazar, Mr Byrnes and the companies associated with them guaranteed the performance of that transaction. 140 The deeds do not disclose the advantages which might flow to CBH or Mr Lazar and the companies associated with him. 141 It is Mrs Low's evidence in her affidavit that the deeds were executed on 17 December 2007 at the offices of Guardian Lawyers. She said at the same time she executed notices of assignment which are in the form of the notices of assignment annexed to the affidavit of James Warren Byrnes sworn on 29 May 2008. 142 Dr Low said that it was agreed at that time that CBH and Alpha would appoint Mr Byrnes as the agent of the Coomera Trust and that Mr Byrnes would provide a consultancy service in relation to the recovery of the debt. Dr Low says: In this capacity he was authorized and responsible for engaging and liaising with lawyers and generally conducting the matter. At all times, I was of the understanding that the assignment of the debts was lawful and proper. I relied upon representations made by Mr Byrnes and Mr Lazar that they were experts in debt recovery and knew what they were doing. Furthermore, Mr Byrnes worked for an entity named Australian Litigation Funders Pty Ltd who I assumed was its business to engage in this type of activity. 143 Mrs Low said that on 17 December 2008 she and Mrs Byrnes met as trustees of the Coomera Trust. Of course, they were not that. The trustees of the Coomera Trust were CBH and Alpha. However, she said they met as trustees and minutes of that meeting were signed by herself and Mrs Byrnes. Annexed to Mrs Low's affidavit are those minutes which record that Alpha and CBH, as trustees of the Coomera Trust, resolved to appoint an agent: The trustees resolved to appoint James Warren Byrnes of James W Byrnes & Associates and/or Australian Litigation Funders Pty Ltd and/or in his individual capacity as the representative of the trustees and do all things necessary on the trustees (sic) behalf. Mr James Warren Byrnes is instructed to make demands on behalf of the directors of the trustee company. Mr James Warren Byrnes is also instructed to liaise with lawyers on behalf of the trustees. The minutes are signed by both Mrs Low and Mrs Byrnes. 144 On 18 December 2007 CBH sent to the defendants' Adelaide solicitors, Magarey Farlam Lawyers, with copies to their Sydney solicitors, a letter and notices of assignment assigning the interest of Cobra and Contor to the joint trustees, Alpha and CBH. CBH and Alpha are the trustees of the Coomera Trust. 145 The notices of assignment were in the following form: Notice of Assignment TO Avpri Pty Ltd (A.C.N. 109-814-057) WE GIVE YOU NOTICE THAT: 1. Cobra Property Services Pty Ltd A.C.N. 079-999-992 (the 'Assignor') has assigned to Alpha Asset group Pty Ltd & Consolidation Byrnes Holdings Limited as joint trustees for the Coomera Trust absolutely the debt of $2,1000,000-00 due and owing by you to Cobra Property Services Pty Ltd. 2. You are irrevocably directed to pay $2,100,000-00 to The Coomera Trust Dated this 18day of December 2007 For and on behalf of Alpha Asset group & Consolidated Byrnes Holdings Limited. By its duly authorised representitive James W Byrnes Notice of Assignment TO: Hardel Investment Pty Ltd A.C.N. 083 276 000 46 Riversiside Grove, Denmancourt, SA 5075 (fax (08-8266 4089) WE GIVE YOU NOTICE THAT: 1. Contor Developments Pty Ltd A.C.N. 104 784 367 of Suite 404, 33 Lexington Drive, Bella Vista in the State of NSW (the 'Assignor') has assigned to Alpha Asset group Pty Ltd & Consolidated Byrnes Holdings limited as joint trustees for the Coomera Trust absolutely the debt of $1,791,032.50 plus interest accruing from the date of the assignment and cost now due and owing by you to the assignor 2. You are irrevocably directed to pay $1,791,032.50 plus interest and cost to the Coomera Trust. Dated this 18day of December 2007 For and on behalf of Alpha Asset group & Consolidated Byrnes Holdings Limited. By its duly authorised representitive James W Byrnes (Grammatical and spelling errors as per original documents.) They were each dated 18 December 2007 and they were each signed by Mr Byrnes as "By its duly authorised representitive (sic) James W Byrnes". The notices might purport to reflect the authority that Mrs Low said was given on the previous day. 146 In the letter of 18 December 2007 Mr Byrnes writes: Therefore the assignee now demands payment by Harris, the guarantor to the debtor in the amounts of $2,100,000.00 (two million one hundred thousand dollars) in relation to Avpri Pty Ltd, further the assignee now demands from Mr. Harris the guarantor in relation to Hardell (sic) Investments Pty Ltd the amount of $1,791,030.50 (one million, seven hundred and ninety one thousand, thirty dollars and fifty cents). The demands having now been made, we give notice that we reserve our rights to immediately seek to notify any and/or all credit reporting agencies of the default of both the companies and we give notice that within seven days unless the amounts have been paid and/ or compounded to the satisfaction of the assignee, we reserve our rights to list the guarantor and the debtors as payment defaulters. 147 The demand mentioned in the second of the paragraphs referred to above would seem to be the demand made in the first paragraph. There is, however, no suggestion in that letter of 18 December 2007 that any statutory demands have been made or served or attempted to be served on any of the defendants. The demand in the letter cannot be thought to be a statutory demand for the purpose of Part 5.4 of the Act. 148 On the same day at about 4.10 pm Mr Pridmore received an email from Mr Byrnes which had attached to it copies of the notices of assignment which were in the same form as the notices of assignment sent to the defendants' Adelaide solicitors on that day. I shall refer to the notices of assignment sent to the Adelaide and Sydney solicitors, and Mr Pridmore on 18 December 2007 as the "first notices of assignment". 149 On 20 December 2007 CBH wrote to the defendants' Sydney solicitors and said: Please note that I write to you in our capacity as Joint Trustee and I have been empowered by the Trustees to deal with matter; I have full and complete carriage of the debts owing formerly to Contor Developments Pty Ltd and Cobra Property Services Pty Ltd. 150 The letter also encloses two notices of assignment again addressed to Hardel and Avpri which were in the following form: Notice of Assignment TO: Hardel Investment Pty Ltd A.C.N. 083 276 000 46 Riversiside Grove, Denmancourt, SA 5075 (fax (08-8266 4089) WE GIVE YOU NOTICE THAT: 1. Contor Developments Pty Ltd A.C.N. 104 784 367 of Suite 404, 33 Lexington Drive, Bella Vista in the State of NSW (the 'Assignor') has assigned to Alpha Asset group Pty Ltd & Consolidated Byrnes Holdings limited as joint trustees for the Coomera Trust absolutely the debt of $1,791,032.50 plus interest accruing from the date of the assignment and cost now due and owing by you to the assignor 2. You are irrevocably directed to pay $1,791,032.50 plus interest and cost to the Coomera Trust. Dated this 18day of December 2007 For and on behalf of Alpha Asset group & Consolidated Byrnes Holdings Limited. By its duly authorised representitive James W Byrnes (signed) By duly authorised representitive Elizabeth Laura Low (signed) Notice of Assignment TO Avpri Pty Ltd (A.C.N. 109-814-057) WE GIVE YOU NOTICE THAT: 1. Cobra Property Services Pty Ltd A.C.N. 079-999-992 (the 'Assignor') has assigned to Alpha Asset group Pty Ltd & Consolidation Byrnes Holdings Limited as joint trustees for the Coomera Trust absolutely the debt of $2,1000,000-00 due and owing by you to Cobra Property Services Pty Ltd. 2. You are irrevocably directed to pay $2,100,000-00 to The Coomera Trust Dated this 18day of December 2007 For and on behalf of Alpha Asset group & Consolidated Byrnes Holdings Limited. By its duly authorised representitive James W Byrnes (signed) By duly authorised representitive Elizabeth Laura Low (signed) (Grammatical and spelling errors as per original documents.) 151 I shall call these notices of assignment the "second notices of assignment". 152 Those notices of assignment are in different form to the first notices of assignment. The second notices of assignment are signed by both Mr Byrnes and Mrs Low as the "duly authorised representitive[s] (sic)" of the assignees. The notices of assignment have not been signed by the assignors. 153 Mr Byrnes said that on 18 December 2007 he sent notices of assignment by email to Mr Harris and Mr Ken Pridmore. He exhibited to his affidavit the notices of assignment which he said he sent to the respondents care of their registered offices. They are not the notices of assignment which the defendants' Adelaide solicitors received on that date. They are in the same form as the form of notices of assignment which were exhibited to an affidavit of Mr Byrnes sworn on 19 March 2008 which was filed in the respective proceedings on 28 March 2008. The notices of assignment which are said to be dated 17 December 2007 and which he said were sent to "Peter Harris and Ken Pridmore of the Respondents and to their then solicitor Jim Biady" is in each case: Notice of assignment TO: Avpri Pty Ltd A.C.N. 109-814-057 255 Port Rd Hindmarsh SA 5007 WE GIVE YOU NOTICE THAT: 1. Cobra Property Services Pty Ltd A.C.N. 079-999-992 (the 'assignor') has assigned to Alpha Asset Group Pty Ltd & Consolidated Byrnes Holdings Limited absolutely [the debt of $2,100,000-00 due and owing by you to the assignor. 2. You are irrevocably directed to pay $2,100,000 to. Alpha Asset Group and Consolidated Byrnes Holdings Limited 3. You may contact the assignee through there appointed consultant James W Byrnes of level 3 suit 1 , 50 Margaret St Sydney or PO Box H172 Australia Square Sydney 1217 or by j.byrnes@alfpl.com Dated this 17 day of December 2007 For and on behalf of (signed) Justin Low, as director of Assignor (signed) Elizabeth Low as director of co Assignee, Alpha Asset Group (signed) Catherine Byrnes as Director of co Assignee, Consolidated Byrnes Holdings Limited Notice of assignment TO: Hardel Investments Pty Ltd A.C.N. 083 276 000 255 Port Rd Hindmarsh SA 5007 WE GIVE YOU NOTICE THAT: 1. Contor Developments Pty Ltd A.C.N. 104 784 367 (the 'assignor') has assigned to Alpha Asset Group Pty Ltd & Consolidated Byrnes Holdings Limited absolutely [the debt of $1,791,032-50 due and owing by you to the assignor. 2. You are irrevocably directed to pay $1,791,032-50 to. Alpha Asset Group and Consolidated Byrnes Holdings Limited 3. You may contact the assignee through there appointed consultant James W Byrnes of level 3 suit 1 , 50 Margaret St Sydney or PO Box H172 Australia Square Sydney 1217 or by j.byrnes@alfpl.com Dated this 17 day of December 2007 For and on behalf of (signed) Justin Low, as director of Assignor (signed) Elizabeth Low as director of co Assignee, Alpha Asset Group (signed) Catherine Byrnes as Director of co Assignee, Consolidated Byrnes Holdings Limited (Grammatical and spelling errors as per original documents.) 154 I shall call this latest version of the notices of assignment the "third notices of assignment". The third notices of assignment are the only versions which have been signed by the assignors. 155 It is clear that there are three different versions of the notices of assignment and the defendants made much of the facts of those differing versions. 156 The defendants contended that the notices of assignment were not signed on 17 December 2007 as each of them purport. 157 Mr Byrnes has not given evidence in relation to that matter. Mrs Low said that she executed a deed of assignment and a notice of assignment "on or about 17 December 2007". She said that the deed and notices which she signed are annexed to the affidavit of James Warren Byrnes sworn on 29 May 2008. She says that she also executed further notices of assignment, copies of which are annexed to the affidavit of James Warren Byrnes. She does not indicate which affidavit but her evidence cannot be correct. The only notices of assignment annexed to Mr Byrnes' affidavit are the third notices of assignment. The second notices of assignment, which she executed, were not exhibited to any affidavit of Mr Byrnes. She does not explain when they were executed. Neither Dr Low nor Mrs Low explain how Dr Low came to execute the third notices of assignment. 158 The applicants and the non-parties have not attempted to explain the discrepancies in the notices and Mrs Low was not cross-examined in relation to her evidence. In my opinion, it is likely that the only notices of assignment which were executed on 17 December 2008 were the first notices of assignment sent to the Sydney and Adelaide solicitors, and Mr Pridmore on 18 December 2008. 159 The second notices of assignment must have been executed prior to 20 December 2008 because CBH sent a copy of those documents to the Sydney solicitors on that date. It is unclear when the third notices of assignment were executed but it is unlikely that they would have been executed prior to 20 December 2008 because otherwise, if they were, they would have been supplied either on 18 December 2008 when the first notices of assignment were sent or on 20 December 2008 when the second notices of assignment were sent. 160 The applicants had the opportunity of explaining the differences and the evolution of the notices of assignment but neglected to do so. I accept the defendants' criticism of Mrs Low's evidence when she speaks of the document having been executed on or about 17 December. 161 The third notices of assignment were relied upon by the plaintiffs and Mr Byrnes, and Mrs Low as the notices given to the defendants. Mr Byrnes sent those notices of assignment to Mr Pridmore on 1 February 2008 but there is no evidence that the notices of assignment were ever served on the defendants or their solicitors. 162 I find that the third notices of assignment which she said were executed on 17 December 2008 were not executed on that date, were not executed before 20 December 2008, but were executed some time after 20 December 2008. 163 Mr Byrnes has sworn an affidavit on 29 May 2008 which was relied upon by the first plaintiff and Mr and Mrs Byrnes on this application. He said that he received advice from Dr Low's accountants of the registered office of both Avpri and Hardel which was at Brentnalls SA, 225 Port Road, Hindmarsh. 164 He said that he completed the creditors' statutory demands which he placed into the one envelope, affixed a stamp, addressed the envelope to the defendants' registered offices and posted the statutory demands in the mail box at the post office at New South Head Road, Double Bay. The envelope, he said, bore a return address care of Thomas and Co Solicitors, Level 3, 50 Margaret Street, Sydney, New South Wales which was an office which he shared with those solicitors. He does not in that affidavit exhibit the statutory demands which he said he sent. At no time has an executed copy of the statutory demands been adduced by the plaintiffs or any of the non-parties. 165 Mr Matthew Holden is an accountant employed by Brentnalls SA Chartered Accountants for Hardel and Avpri. He has the responsibility for the day to day management of those companies' files under the supervision of a partner. 166 The registered office of Avpri was at the offices of Brentnalls at 255 Port Road, Hindmarsh from 28 July 2004 to 26 December 2007. The registered office of Hardel was at the same office from 18 February 2005 to 26 December 2007. 167 Mr Holden has deposed that no statutory demand was received by Brentnalls for Hardel or Avpri in December 2007 or January 2008 from CBH or Alpha or at all. He has deposed to the procedures which exist in Brentnalls which is a small accounting firm of four partners and four associates. Mail addressed to the firm at 255 Port Road, Hindmarsh is delivered each week day. Mail addressed to a post office box is collected by a member of the administrative staff each week day morning from the post office which is across the road from Brentnalls' offices. The receptionist sorts all of the mail and allocates the mail to the accountant responsible for the particular client. 168 Some time in December 2007 Mr Holden was told by either Mr Harris or Mr Pridmore to "look out for any demands or court proceedings directed to Hardel or Avpri and to notify them immediately if anything was received". Mr Holden's evidence is that the original of the statutory demands, which are attached to Mr Byrnes' affidavit which is exhibited to the originating process, were never received at the registered office of the defendants. 169 On 22 December 2007 Mr Pridmore wrote to Dr Low and Mr Byrnes in the following terms: As you are aware from previous correspondence we are engaged as consultants by Mr Peter Harris to assist with his business matters and those relating to various entities associated with Mr Harris ("the Harris Entities"). Mr Harris has requested that we communicate with you in relation to claimed rights of action by Justin Low, Contor Developments Pty Limited and Cobra Property Services Pty Limited against various of the Harris Entities and alleged assignments to Alpha Asset Group Pty Limited and Consolidated Byrnes Holdings Pty Limited as proposed in correspondence dated 18 December 2007 from Consolidated Byrnes Holdings. We further write to each of you in your personal capacity as well as your capacity as director, trustee or representative. We understand that you are already well aware of this, however, for abundance of clarity, the amounts that you claim to be owed by the Harris Entities are in dispute, both because our clients do not recognise the alleged assignment as being valid and because they deny the amounts that you assert are owed. The Harris Entities do not consider that your alleged assignment, be it in favour of the Coomera Trust or some other entity or person, is enforceable and regard that you or those who you purport to represent, do not have any rights in any way as against any of the Harris Entities. In addition: 1. Avpri Pty Limited disputes that there is anything at all owing under the Consulting Agreement or on any other basis to Cobra Property Services Pty Limited; 2. Hardel Investments Pty Limited disputes, in the very least, the amount claimed as owing by it to Contor Developments Pty Limited; and 3. Hardel Investments Pty Limited further claims that, to the extent that there is any amount owing to Contor Developments Pty Limited it is, at the very least reduced if not fully eliminated by reason of causes of action that Hardel Investments Pty Limited has against Mr Justin Low and Contor Developments Pty Limited. Please also be advised that Mr Peter Harris disputes that any amount is owed or can be owed under any guarantee arrangements and relies upon the above. 170 Mr Pridmore has deposed as to the events of 19 December 2007 and a telephone conversation with Dr Low. He said: 7. At or about 12 noon on Wednesday 19 December 2007 I received a telephone call from Dr Justin Low in which he indicated that he wished to discuss the ongoing settlement discussions. Amongst other things, in the course of that discussion Dr Low said words to the effect that he had until 3:00 pm that afternoon to decide whether to proceed with the assignment or not. At the conclusion of the conversation, Dr Low indicated that he would need to go and talk to his wife Elizabeth about the matter, and would call me back shortly. 171 Dr Low has not denied that telephone conversation. Indeed, he has not addressed the topic. He has deposed that the Deeds of Assignment were executed on 17 December 2007. 172 There is, in the absence of any evidence to the contrary, no reason to reject Mr Pridmore's evidence as to the events on 19 December 2007 and accept that he had a telephone conversation with Dr Low and Dr Low said words to the effect that he had until 3.30 that afternoon to decide whether to proceed with the assignment or not. Moreover, having accepted that Dr Low said that, there is no reason to think that Dr Low was intending to mislead Mr Pridmore at that time. It is in my opinion likely that Dr Low was truthful when he said that he had until that afternoon to decide whether to proceed with the assignment or not. 173 That is not inconsistent with Mr Byrnes sending the first notices of assignment to the defendants' Adelaide and Sydney lawyers because those notices were not executed by Dr Low and Mrs Low. As I have already said, the second notices of assignment must have been executed before 20 December for them to have been sent to the defendants' Sydney solicitors on 20 December. For reasons already given, it is likely that the third notices of assignment were executed after 20 December. 174 On 22 December 2007 Mr Pridmore wrote to Dr Low and Mr Byrnes enclosing a copy of the email to the defendants' Adelaide solicitors advising that he had been requested by Mr Harris to communicate in relation to claimed rights of action by Dr Low, Contor and Cobra against various of the Harris entities "and alleged assignments to Alpha Asset Group Pty Ltd and Consolidated Byrnes Holdings Pty Ltd". He wrote: We understand that you are already well aware of this, however, for abundance of clarity, the amounts that are claimed to be owed by the Harris entities are in dispute, both because our clients did not recognise that the alleged assignment as being valid and because they deny the amounts that you assert are owed. The Harris entities do not consider that your alleged assignment, be it in favour of the Coomera Trust or some other entity or person, is enforceable and regard that you or those who you purport to represent, do not have any rights in any way as against any of the Harris entities. In addition: (1) Avpri Pty Limited disputes that there is anything at all owing under the Consulting Agreement or on any other basis to Cobra Property Services Pty Limited; (2) Hardel Investments Pty Limited disputes, in the very least, the amount claimed as owing by it to Contor Developments Pty Limited; and (3) Hardel Investments Pty Limited further claims that, to the extent that there is any amount owing to Contor Development Pty Limited it is, at the very least reduced if not fully eliminated by reason of causes of action that Hardel Investments Pty Limited has against Mr Justin Low and Contor Developments Pty Limited. 175 On 25 December 2007, Mr Byrnes sent an email to Mr Pridmore, Dr Low and Mr Lazar which was copied to the defendants' Adelaide lawyers. Mr Byrnes wrote: Formal demands had been issued and sent to the companies. I would expect the appropriate action would be for the companies to provide detailed points of claim to determine what they said is in dispute. 176 On 27 December 2007 Mr Pridmore responded to Mr Byrnes' email, a copy of which he sent to Dr Low reminding Mr Byrnes that Mr Byrnes had been sent a letter from the Sydney solicitors on 21 December 2007. Mr Pridmore was no doubt referring there to a letter which had been written by the defendants' Sydney solicitors, J Biady & Associates which had given rise to the more measured reply from CBH to which I have already referred. 177 Mr Byrnes responded again and Mr Pridmore wrote again on 2 January 2008: We think that you have a gross misunderstanding of the situation. In relation to this matter, our clients do not recognise you, the people or entities you purport to represent or your so-called claims. Notwithstanding many requests to both yourself and Mr Lazar there has been a (sic) absence of any genuine evidence in support of your claimed assignment of debts. Further, our clients have made it abundantly clear that they dispute the debts that you claim to have had assigned. If there is any misunderstanding as to the nature of those disputes we suggest that you refer to Dr Justin Low. 178 Mr Byrnes responded to that email on 2 January 2008 (a copy of which was sent to the defendants' Adelaide solicitors and Mr Lazar) advising that he would not provide Mr Pridmore with a copy of "executed assignments of both debts" but would allow Mr Pridmore to inspect them at any meeting which was convened. 179 On 4 January 2008 Mr Byrnes emailed Mr Pridmore with a copy to the defendants' Adelaide solicitors and Mr Lazar arguing that neither Cobra nor Contor or the assignees were obliged to provide any further evidence apart from the notice of assignment. He continued: You are well are I have made you aware of the demands both orally and in writing. I have without prejudice to the creditors rights extended an olive branch. I have been polite in every approach to you. I have acted in a courteous and pleasant manner. I again remind you of an old saying "never mistake kindness for weakness" the position is if not resolved by the time I go overseas on Thursday instruction which will result in the debtors being wound up. I plan to instruct a large firm who can deal with the formalities and filing of applications. The appointment of a liquidator will be the end I fear of the groups ability to operate. I have said and so we can be very clear, my phone is on 24/7 ... the number 0425 266600. I am despite what you believe a reasonable person to deal with ... until I reach a certain point. Then I will take all such legal actions as may be required to not only recover the funds but to ensure those who may have broken the law a prosecuted to the fullest extent of the law. I again confirm. Demands require the debtors attention. (Grammatical and spelling errors as per original document.) 180 I am not sure how Mr Byrnes assesses what might be described as a "courteous and pleasant manner". 181 On 7 January 2008 Mr Byrnes emailed Mr Pridmore (with copies to the defendants' Adelaide solicitors and Mr Lazar): As the sun slowly sets over the horizon I can but only imagine what is going on in the Harris camp. perhaps it is normal to leave things to the last moment. Now again and for the record. Debts owed to Dr lows 2 companies have been assigned. You have had and your lawyer acknowledges receipt of the assignment. You constantly imply without any particularization that the assignment is not recognized. The assignment notices were sent to the registered office prior to the Harris group changing the registered office to PKF. The demands were sent to the registered office prior to the companies changing there registered office. I have on behalf of the assignor obtained a verbal consent for Mr A Wily to act as liquidator of the 2 Harris companies. On Friday lawyers will be instructed to make an application to the court which we believe will ultimately lead to the appointment of Mr Wily as liquidator. I just want you all to be clear, when you go before the judge and try to stop the application it will be to little to late. I offered to review any genuine and dispute or any genuine cross claim. I simply requested that the details of your claim be particularized. There are a great many firms who are in full swing, yet not even a letter. I have offered to sit a discuss in a rational and sensible manner any reasonable proposal that would see the debt owed compounded to the creditors satisfaction. But we get silly threats from the Harris camp. Now a time will come when the only hope you have is to prove solvency. Any attempt to do will need to factor in our total debts. Next to prove solvency you need to demonstrate you can pay the bills as and when they fall due. Well gentlemen then both due, well and truly. Time is running out. (Grammatical and spelling errors as per original document.) 182 Because of the mention of formal demands, Mr Harris made enquiries at the registered office of the defendants (Brentnalls SA Chartered Accountants) as to whether the defendants had been served with any statutory demand or any other court proceeding. 183 Mr Byrnes deposed that on 7 January 2008 he had a telephone conversation with a partner in Johnson Winter & Slattery who some time in early January became the defendants' solicitors who told him that they had not received the statutory demands. He deposed to the conversation which he said was in the following form: She said words to the effect, referring to the Statutory Demands: "We don't have them. Can you send me copies?" I replied with words to the effect: "Look, I don't have access to my office. I share some space in a law firm and they closed on 22nd December re opening on the 14th of January. I have some IT issues and I can't log onto my server. I can receive and send emails but I can't access saved documents. I advised Biady of this in my letter to him of 20 December." (See annexure B page 2 para 2). "Miss Vozzi you are the third lawyer in the space of a month involved in this. This is not my first trip to the rodeo. Your clients owe the money. They might have some rubbish excuse over a small part of the debt. They might claim the interest calculation is incorrect but look, they are hopelessly insolvent. They offered to settle before the assignments to make a payment of $1,200,000 plus secure another $800,000 so I guess Miss Vozzi you can say the debt is $2,000,000 but they defaulted on that agreement and that settlement is out the window. I hope you get some funds on account. Look, send me an email particularising your dispute. I will even agree not to proceed even if it is out of time if you can particularise a genuine and bona fide dispute. Please do not waste my time by sending me self serving statements that you believe there is a dispute, that will just infuriate me and lead to an eventual winding up of your clients. Also Miss Vozzi if you can put to me a sensible resolution, if you can compound to my satisfaction on behalf of my clients funds which would constitute part payment of an offer to settle this I will consider that to be satisfaction of the demand by compounding payment. Get some instructions, I'm not going to immediately move after theca expiry date as I am about to leave with my family to travel to Los Angeles. I am happy to give you some time to try and settle it but you have to do one of three things. Appoint a controller, provide me details of a genuine and bona fide dispute for the full amount claimed or compound to my satisfaction an amount to be agreed upon." She then said: "I will get some instructions". 184 On his own evidence, Mr Byrnes was well aware, as at 7 January 2008, that it was the defendants' case that they had not received the statutory demands. 185 On 8 January 2008 Mr Pridmore wrote to Mr Byrnes by email, a copy of which was sent to Mr Lazar and Dr Low claiming to be entitled to the assignment documents together with copies of all collateral documents and evidence of the debt which was the debts which were asserted to exist. 186 He concluded: Please do not misunderstand what is being put to you. If, indeed, you can provide supporting evidence for your claims, then please provide it. Don't offer to meet and "show" us. Provide us with full and unadulterated copies of all documents upon which you rely, including those listed above, and allow our client's legal advisors to review them and provide appropriate advice. We are instructed that: (a) Our clients are and remain ready, willing and able to meet all proper claims on them; and (b) Our clients will pay any debts properly and legitimately due and owing. Please be aware that this is an open letter and will be produced to the Court. 187 Mr Pridmore's request is reasonable. Moreover, he has made it clear that the defendants will and are able to meet the proper claims of its creditors. 188 Mr Byrnes responded to Mr Pridmore's email, with a copy to Mr Lazar and Dr Low writing, inter alia: Thank you for your response. I shall deal with your request one by one. 1. There is no legal entitlement or obligation for either and assignee and or assignor of a debt to provide assignment documents, there only obligation at law is to provide a notice of assignment setting out who the assignor and assignee is and the amount that is purported to have been assigned. 2. The documents which give rise to the claim you and or your client already have. These are the loan agreement between Contour developments pty ltd and Hardel investments pty ltd, dated 16 dec 2005. the amount as per item 7 of the schedule at the time of the advance was $1,237,542.47. interest is at 15% and the default rate is at 20%. the next debt the subject of an agreement is Agreement between Avpri pty ltd and cobra property Services Pty Ltd., the agreement sets out in the recitals the parties obligations. the fee was largely the result of the introduction to the land, in addition point three deals with the engagement and again notes that the appointment is non cancelable. point 6 is a release to Cobra which should deal with any claims that the landowner may have. the initial Debt was 2.5 million. interest is not specified but interest can be levied by a court judgment on amounts not paid on the due dates. the final payment was to be paid by 31 December 2007 3. The debts are arrived at as per the agreements executed as mentioned above, there is no obligation to provide a tax invoice for repayment of a mortgage as it is a financial transaction and thus not liable for GST as defined under the GST tax act. The repayment of funds as per the consulting agreement are however the subject of a need to produce a Tax invoice. the act states that a creditor must provide a tax invoice upon payment being tendered and or the debtor can write to the creditor and demand a tax invoice to be issued within 28 days. non compliance is an offense and can be reported and dealt with by the ATO, however both the agreement and the deed of variation do not make payment conditional upon the production of a tax invoice, the document sets out dates for payment and the debtor should have tendered payment on the due dates. I can confirm that the assignor will produce a tax invoice at the time payment is tendered. 4. Again with respect none of anyone's business and I suggest somebody gets advice on a creditor 's obligation when a debt has been assigned the only obligation is for the production of a notice of assignment. I am not interested in your clients reasonable satisfaction. They are parties who are seriously in default of there obligations and they are moving perilously close to having there companies would up. I leave for overseas on Thursday morning. So essentially they have till late Wednesday to meet and negotiate a settlement. When I come back I expect to be informed of a return date for an application which will be filed on Friday. As for your clients suggestion that they stand ready and able to pay the debts as and when they fall due this is nonsense. The first debt had a repayment date of not later that 30 June 2006 your clients are 18 months late and have confirmed they did not have the funds and were attempting to refinance. As far as open letter to the court, try getting an affidavit of solvency together as that is what you need or tender the amounts claimed in the demands. (Grammatical and spelling errors as per original document.) 189 Mr Byrnes did not provide the information sought. Nor in fact has he ever provided the information. Any request of Mr Byrnes induced a quarrelsome response. 190 On 8 January 2008 Mr Harris instructed his present solicitors, Johnson Winter and Slattery to write to Mr Byrnes advising him that their enquiries revealed that no formal demand or notice had been served on the registered office of the defendants. He instructed his solicitors to ask what formal demands it was asserted had been sent. They wrote: We act for Mr Peter Harris, Hardel Investments Pty Ltd (Hardel Investments) and Avpri Pty Ltd (Avpri). Your email to Ken Pridmore and others sent on 7 January 2008 at 8.30pm has been referred to us. Your email suggests that "formal demands" have been sent to the registered office of Hardel Investments and Avpri, and you foreshadow making application to the Court to wind up the companies on Friday (11 January 2008). We are instructed that our clients have made enquiries of both Bretnalls SA (former registered office of Hardel Investments & Avpri) and PKF Australia, Adelaide (current registered office of Hardel Investments & Avpri) as to whether any formal demands or notices have been received. Our clients have been informed that no formal demand or notice has been served on the registered offices. Please clarify, as a matter of urgency, what "formal demands" you assert have been served, (and provide us a copy of any such written demand), and give details of the address, date and method of service. We are further instructed that you are well aware (through previous correspondence sent on behalf of our clients) that there are genuine disputes: ● between our clients and Dr Justin Low & his related companies concerning the debts allegedly owed by our clients arising from the purchase of the Coomera property in Queensland; and ● between our clients and entities that you apparently represent concerning claims of assignments of the alleged debts. In the circumstances it is entirely inappropriate for statutory demands to be made, and in the event that any such demand has been made, then we will be instructed to apply to set the demand aside. Any application to wind up our client companies will also be vigorously opposed. We also request that we be given reasonable notice of any application or Court proceedings commenced against our clients. Our clients reserve all rights. This is an open letter and our clients may seek to bring this letter to the attention of the Court, if so advised. Please direct all future correspondence in relation to this matter to this office. 191 Whatever might have been Mr Byrnes' impressions as at 7 January 2008, he must have known when he received the letter from Johnson Winter & Slattery on 8 January 2008 by email (copies of which were sent to Mr Lazar and Dr Low) that the defendants asserted that they had not received any statutory demands. Dr Low and Mr Lazar must have been aware of the defendants' position. 192 On 11 January 2008, after Johnson Winter and Slattery had obtained confirmation from the defendants' accountants and former solicitors that they had not received any statutory demand, they wrote to Mr Byrnes advising that in those circumstances he could not apply to wind up the defendants. The letter was sent by email, a copy of which was sent to Mr Lazar. They wrote: We refer to our letter dated 8 January 2008 and to your subsequent telephone conversation with Toni Vozzo. We are instructed to write to you further as follows. Our client companies have not been served with any statutory demand. We enclose a copy of letters from the current and former registered offices of our client companies confirming this. Accordingly, on the basis of our instructions, we can see no basis upon which you could apply to wind up our client companies. Our clients continue to reserve all rights including, but not limited to, the right to claim indemnity costs and damages against you and those you represent arising from any winding up application. 193 On 15 January 2008 Mr Byrnes wrote to the defendants' solicitors and said: The demand's (sic), now expired was sent by mail to the registered address of the companies. I personally saw to the postage and have agreed to swear affidavit Relating (sic) to same. He further wrote: The demand has now expired. An act of insolvency has occurred. I will hold of filling the winding up notice in the supreme court of NSW for a short period to allow you to seek instructions from your clients about there ability to make a genuine offer capable of almost simultaneous settlement. (Grammatical and spelling errors as per original document.) 194 On 21 January 2008 the defendants' solicitors wrote to Mr Byrnes in a letter sent by email and marked "URGENT", a copy of which was sent to Mr Lazar and Mrs Low and a solicitor, Mr Noney at Guardian Lawyers. First, they sought advice from Mr Byrnes as to what capacity he purported to act in relation to the matter. Secondly, they confirmed that the defendants had not been served with any statutory demands or other formal proceedings in relation to the matter. Thirdly, they advised that the defendants disputed the validity and effectiveness of the assignments of the "Alleged Debts". They advised that the defendants asserted that the Alleged Debts were incapable of assignment; because the services agreement was a contract for personal services and not capable of assignment; and because Cobra and Contor had fixed and floating charges over their assets and undertakings to National Australia Bank Ltd and Equititrust Ltd. Fourthly, they disputed that any money was owing under the Alleged Debts. In respect of the services agreement they disputed that any amount was owing. In respect of the loan agreement they asserted that there were significant defences and counterclaims arising from the underlying property transactions concerning the sale of the Coomera land to Hardel. Lastly, they complained about Mr Byrnes and Mr Lazar having approached various of the defendants' financiers, including BankWest and making defamatory or misleading remarks about the defendants. 195 In respect of the last matter they wrote: We are instructed that you and Mr Lazar have approached various financiers of our clients, including BankWest. Our clients believe such approaches may have included the making of defamatory or misleading remarks regarding our clients. These approaches are entirely without our clients' authority or consent. Our clients maintain that neither you, Mr Lazar, Mrs Low nor those you purport to represent have any proper basis to approach our clients' financiers or anyone associated with our clients' business interests (other than, of course, ourselves). Please immediately desist from all communications with our clients' financiers, including BankWest. All communications relating to this matter must be in writing directed to this office. Our clients reserve all of their rights in relation to all such unauthorised communications, including the right to seek damages for any loss suffered. Our clients continue to reserve all of their rights. 196 The solicitors reserved the right to rely on the letter in the event that proceedings were commenced. 197 Mr Byrnes responded to the letter on 21 January 2008. He continued to maintain that there was no obligation on either the assignor or assignee to provide copies of the assignments to either the defendants' solicitors or the defendants, but only to provide a notice of assignment which had been done. 198 He said he had authority to deal with the matter. He said that demands were sent unanswered and an act of insolvency had occurred. 199 He addressed the other matters referred to in the defendants' solicitors' letters and said that, under the circumstances, "we will now file an application for winding up of the 2 debtor companies and seek the appointment of a liquidator". 200 On 22 January 2008 Mr Byrnes sent an email to Mr Harris, with copies to Dr Low, Mr Pridmore and Mr Lazar, Johnson Winter & Slattery, and Mr Grant McCartney who, by this stage, had apparently become the plaintiffs' solicitor. He wrote that no genuine bona fide dispute had ever been articulated. The debts had been properly assigned and "[n]otices of assignment had been forwarded to the companies and there (sic) lawyers" at the time. He again said that the debtor had no right to see the assignment agreements. He said demands had been issued and "the correspondence above supports the argument that the Harris Group and its respective companies have been on notice since dec 07 (sic)". He said: To simply say we did not receive them is not going to hold up. the (sic) correspondence suggests that you new (sic) as you were advised about the demands but never rejected the fact that demands had issued (Jones and Dunkel). He continued: The winding up of these two companies will be the start of the complete collapse. the (sic) appointment of any controller to a Harris group company will be an act of default on all loans as well. It is for this reason when filing the winding up application today I asked that an early return date could be found, we would not propose to advertise initially with the view that you may finally take things seriously and try and finalise a settlement. 201 It seems to me that that statement which was published to Dr Low and Mr Lazar and Mr McCartney evinces an intention on the part of Mr Byrnes to use the winding up procedure as a debt collection process. That seems to be clear from his statement that he would proceed in the way that he mentioned so that a settlement could be finalised. 202 The thrust of that particular statement is clear evidence, it seems to me, that at least as at 22 January 2008 Mr Byrnes saw the winding up procedure as an opportunity to collect the debts which he claimed had been assigned to the plaintiffs. 203 On 23 January 2008 Johnson Winter & Slattery emailed Mr Byrnes with a copy to Mr Lazar and Guardian Lawyers requesting that Mr Byrnes desist from approaching the defendants' financiers as Mr Byrnes had threatened to do earlier that day. 204 This drew a further response from Mr Byrnes, a copy of which was sent to Dr Low, Mr Lazar, Guardian Lawyers and a number of other persons. In that email he wrote: As for actions in damages, your clients are defaulting, insolvent, delinquent, unprofessional, un commercial, dishonest. Do as you like ... I will not stop. in fact I just got back from a lovely 10 days in the USA and am just starting. this is the beginning. I have complaints ready for ASIC I have a complaint ready to go to the Major fraud Squad, re 178 ba and 178 bb of the crimes act (NSW) I have a press release ready to go to the media about how the Harris group raised its funds, or fleeced the flock. I have now detailed a list of every Harris company every lender to every company and have a letter just waiting to go to every lender. I have 2 Sydney liquidators who have consented to act in winding up applications. I have reports ready to go to every credit reporting agency in Australia listing Harris personally and his companies as payment defaulters. As I get out of Holiday mood and go from cheerful to full scale collection mode, your clients will see that I will either achieve a result by liquidating and funding a liquidator to recover from related parties, reject un commercial claims from parties who really have no commercial interest in the project. I have given up on your clients being sensible and wanting to try and resolve this with dignity and common sense, now its about getting every penny and then bankrupting the directors and getting ASIC to step in and protect the investors who have contributed to a scheme that is anon conforming scheme Thank you, you will be forwarded the notices from the supreme court and you can arrange to either attend or appoint an Sydney agent. Perhaps your clients, might get some advice and not act like amateurs. They have as I see it got more problems then me coming. Have a nice day J (Grammatical and spelling errors as per original document.) 205 The opening sentence in the email says it all. The email contains a plethora of threats. Mr Byrnes indicates in that email he will leave no stone unturned in bringing the defendants to their corporate knees. The tone of that email again indicates the plaintiffs' and Mr Byrnes' purpose at that time, which was known to the persons to whom I have mentioned the email was sent, was to exact a settlement out of the defendants by the commercial threats contained in that email. 206 On 25 January 2008 Mr Byrnes emailed Mr Pridmore advising that "Winding up applications were finalized and attempted to be filed today, however one signature was missed". He also advised that the lawyer handling the winding up application was Grant McCartney of Simmons and McCartney, Lawyers and Attorneys. 207 Dr Low has deposed that he was told by Mr Byrnes that Mr Byrnes had appointed Mr McCartney to assist him with the matter. He said that he and his wife felt comfortable with Mr McCartney's involvement "and our expectation was that as such, the debt would be pursued in a professional and legitimate manner. We relied upon Mr Byrnes to keep us updated on progress in relation to the matters and to ensure that proper legal advice in relation to the process was obtained at all times." 208 He also says that he and his wife have been kept abreast of developments but that most of the time they had not been fully aware of what Mr Byrnes and Mr McCartney have been doing. 209 Dr Low said that he was aware that Mr Byrnes and Mr McCartney were intending to pursue the matter by commencing winding up applications based upon the statutory demands but did not understand the significance of that action. He said that at no time did he have any understanding that anything done by Mr Byrnes or Mr McCartney was irregular. 210 Dr Low was, in fact, copied into a number of the emails sent by Mr Byrnes. He was not only aware of what Mr Byrnes was doing but he must have been aware of the manner in which Mr Byrnes was carrying out the exercise. Dr Low does not suggest in his evidence that he did not receive copies of the communications which were said to have been sent to him. 211 On 1 February 2008 the defendants' solicitors wrote to Mr McCartney of Simmons and McCartney in the following terms: We act for the Harris Companies in relation to a dispute with Dr Justin Low, Contor Developments Pty Ltd (Contor) and Cobra Property Services Pty Ltd (Cobra) regarding the sale of a property at Coomera, Queensland, in 2005. We have been informed by Mr James Byrnes that he has instructed you to act in relation to applications to wind up the Harris Companies. We understand that Mr Byrnes purports to represent alleged assignees of rights claimed by Contor and Cobra to arise under a Loan Agreement and a Consultancy Agreement entered into with various of our clients. We request that you confirm whether you are instructed in this matter and who you are instructed by. We have previously sought information from Mr Byrnes as to whom he purports to represent, and evidence of his authority to represent any entities other than himself. Mr Byrnes has not to date provided us with satisfactory, or indeed any, evidence of his authority to act on behalf of an entity other than himself. If you are instructed by Mr Byrnes, we therefore foreshadow that we will need to be satisfied regarding Mr Byrne's (sic) capacity and authority to instruct you in relation to this matter. Finally, as we have advised Mr Byrnes a number of times, our clients have not to date been served with any statutory demands or other court proceedings. You should also be aware of our recent correspondence with Mr Byrnes concerning the underlying dispute. We especially refer to our letter to Mr Byrnes of 21 January 2008 (copy attached). We have instructions to accept service of any such demands or proceedings. Our clients reserve all of their rights. Their letter of 21 January 2008 addressed to Mr Byrnes was enclosed. 212 Mr McCartney was put on notice, if he had not been earlier, as was his firm, that the defendants asserted that they had never been served with any statutory demands at any time. He was also aware because he received Johnson Winter & Slattery's letter of 21 January 2008 of the various matters which they had raised in that letter with Mr Byrnes. Mr McCartney later suggests that he did not receive that letter when it was sent. That may be so but, as will be shown, there is no question that he later received the letter. 213 On the same day, 1 February 2008, Mr Byrnes emailed the defendants' solicitors with copies to Mr Pridmore, Mr Harris, Mr McCartney and Dr Low enclosing copies of the third notices of assignment. The third notices of assignment were those subsequently exhibited to Mr Byrnes' affidavit. He also advised that he had instructed Mr McCartney to file a winding up application on Monday morning. He wrote: I again enclose for your reference a copy of the notice of assignment. An earlier notice that complied with legal requirements was sent on the day of the assignment. I took the trouble of sending you yet another copy for your records. I have instructed Grant McCartney to file the winding up application on Monday morning. I have spent much time recently with Justin Low preparing the basis of an affidavit for him to swear outlining the history, chronology, earlier default when Avpri failed to settle on the first contract for sale. details of the other buyer, the valuation at the time of exchange and at settlement. I have prepared details of my emails that clearly put the group on notice of the demands and the offers to listen to any genuine dispute, thus avoiding a cost order if they had a proper claim, which was never brought. And its far to late now. We will next week also seek an order that the companies execute loan documents over QLD and provide details of the repudiation including the removal of the security which formed part of the variation which has now been repudiated. The repudiation of the variation allows for the original security to be demanded. Next, we plan to seek an order for the removal of the Harold Sealy security to be removed, based on the advances no funds from him would have been used in this project, A liquidator doing a forensic tracking will find much has been lent to inter company loans without security ... so we would then move to allow the court to appoint our liquidator as provisional liquidator over the group. Silly thing is I tried to settle, I offered time after time to meet and resolve this .... i could have been a big help, as you know I could have arranged to fund the South Australian project as well Have a nice weekend (it just does not get any better than this) (Grammatical and spelling errors as per original document.) 214 Again, in my opinion, this email is written for the purpose of trying to secure a settlement which, at least until this point of time, was the plaintiffs' and Mr Byrnes' plan. 215 This is made clear, in my opinion, by an email sent the next day to the defendants' solicitors, Johnson Winter & Slattery, their former Adelaide solicitors, Dr Low and Mr Armstrong and other parties. He wrote: Pardon my cut and pasted extracts. There are 2 winding up applications which I have held back in having filled till now. I have, so you can be clear copied the initial draft on the Hardell application which is shown below. Next I have obtained a chronology from Justin which will be used to prepare as a supporting affidavit from him as to the facts nd circumstances. I will provide an additional affidavit attaching the correspondense clearly outling our postion and requesting info re the demands. There is not nor has there ever been any proper dispute and or cross claim by Hardell or ny Haris entity. I have bent over backwards to try and encourage fruitfull discussion. Every time I do I get feedback of derogritory and defamatory comments directed t me. I have always acted with a sense of deciency and always used manners. I have offered to try and resolve this. I am not stupid, a melt down of all harris companies will not get back 100c in the dollar, given that you people don't even have the manner to discuss I am left with no choice. The applications are now ready for filing and we will proceed. In the attempt to save your groups ultimate collapse I urge you to make an immediate and direct contact with me by mobile this morning so s to set up an urgent conference to resolve this. Very very ;ast chance (Grammatical and spelling errors as per original document.) 216 This email, in my opinion, establishes that the plaintiffs and Mr Byrnes were using the winding up procedures in Pt 5.4 of the Act for the purpose of debt collection, not for the purpose for which the procedure was designed. The final two paragraphs of the email establish that. 217 On 7 February 2008 the defendants' solicitors wrote again to Mr McCartney enclosing the email which they had received from Mr Byrnes that day which suggested that an application had been made under s 459P of the Act. They wrote: In view of the matters noted, we request that you provide us with a response to our letter to you of 1 February 2008 without further delay, given that you now appear to be acting on behalf of the two entities associated with Mr Byrnes in relation this matter on instructions from Mr Byrnes. More importantly however we reiterate that our clients have not been served with any statutory demand. The only documents which have been provided to our clients have been Notices of Assignment and a letter from Mr Byrnes dated 18 December 2007. None of these documents could possibly constitute a valid statutory demand under the Corporations Act which could be relied upon in an application under Section 459P of the Corporations Act. We also request that you provide us with a copy of the "statutory demand" which you intend to attach to the Originating Process. Our clients reserve all of their rights. 218 On the same day Mr McCartney wrote to the defendants' solicitors advising that he had not received a letter of 1 February and asking it to be sent again, which it was. 219 Mr McCartney's reply to the three letters written by Johnson, Winter & Slattery on 21 January 2008, 1 February 2008 and 7 February 2008 was somewhat laconic. He said: I suspect the issues that you raise will be addressed in the due course of litigation. I am not particularly sure that the responses that you seek have any particular relevance to the matters at hand. I will however give those matters some consideration. 220 Mr Byrnes received a copy of Mr McCartney's email to Johnson, Winter & Slattery and replied to it sending a copy to Ms Thomson at Johnson, Winter & Slattery. But his email adds nothing to the statements already made except he reiterates the threat of winding up proceedings. 221 No explanation has been given as to why the plaintiffs, Mr Byrnes and the plaintiffs' solicitors were not prepared to accede to the reasonable requests made by the defendants' solicitors. They could easily have sent copies of any statutory demands which had been served at that time. There does not, it seems, to be any reason not to. Mr McCartney's reply which is referred to above suggests, as his behaviour generally in the proceedings confirms, that he was not in control of the proceedings. The proceedings were being run by Mr Byrnes. However, that is no consolation for Mr McCartney or his firm. He and they had a responsibility like his client not to use the winding up procedure except for the purpose for which it was designed. 222 The separate proceedings were commenced on 28 March 2008 in the New South Wales Registry of this Court in which CBH and Alpha sought the winding up of the defendants under s 459P of the Corporations Act. CBH and Alpha relied upon the failure by the defendants to comply with statutory demands. In each proceeding a copy of the statutory demand was said to be attached to the originating process. 223 Annexed to each of the originating processes was a creditor's statutory demand for payment of a non-judgment debt which was in each case said to be dated 18 December 2007 and said to be under the hand of James Warren Byrnes but was unsigned. 224 Also annexed to the originating process was an affidavit of Mr Byrnes under s 459E of the Corporations Law but which was also not signed or witnessed. 225 In both cases, Mr Byrnes deposed to the following: 1. I am a consultant authorised by the Creditor to swear this Affidavit. 2. I have reviewed the amounts owed by the Debtor to the Creditor and believe there is no genuine bona fide dispute to the amount claimed by the Creditor. 3. I confirm that the amount is currently due and payable. 4. I have provided the debtor with notices of assignment. 226 On 1 April 2008 Mr Pridmore conducted electronic searches at the Federal Court and discovered that the originating applications in these proceedings had been filed. 227 On 4 April 2008 the defendants' solicitors wrote to Messrs Simmons and McCartney advising them that they had become aware that winding up applications had been filed but had not been served, but that in any event the winding up applications were themselves based upon statutory demands that also had not been served. They wrote: We also advised that we had instructions to accept service of any statutory demands. We have not received any statutory demands directed to Hardel or Avpri since 7 February 2008 or at all. The registered offices of Hardel and Avpri have not received any statutory demands since 7 February 2008, or at all. In addition to our correspondence advising you that service had not occurred, your client Mr Byrnes was so advised in various correspondence, including letters dated 8 January 2008, 11 January 2008, 21 January 2008 (which was forwarded to you on 1 February). Mr Byrnes has therefore been aware since at least 8 January 2008, and you have been aware since at least 1 February 2008, that our clients' position is that they have not been served with any statutory demands. Despite this, neither you nor your client has forwarded us or our clients the statutory demands which are now attached to the Applications. In our correspondence we have also made it clear that if statutory demands were served, our clients would dispute the amount of the alleged debts, that your clients had taken an assignment of the alleged debts (or had any interest at all in the alleged debts) and Mr Byrnes' capacity to deal with the alleged debts. Rather than forwarding us copies of the statutory demands alleged to have been served (which we requested by letter dated 7 February 2008), Mr Byrnes has apparently now sworn before you two affidavits to the effect that Hardel and Avpri have been served with the statutory demands attached to the Applications. Furthermore, Mr Byrnes deposes that there is no genuine bona fide dispute as to the amount claimed, contrary to our earlier correspondence. In these circumstances, there are serious issues concerning and arising from Mr Byrnes' allegation that there has been service of the statutory demands in the form attached to the Applications. It follows therefore that there are serious issues regarding the underlying basis of the Applications. We invite your clients to discontinue the proceedings immediately. Please provide us with a sealed copy of the Notice of Discontinuance of both proceedings within seven days. 228 The defendants were served on 7 April 2008. 229 On 8 April 2008 Mr McCartney replied: Attached please find Mr Byrnes' response to your facsimile letter of 4 April 2008. I would point out that your repetitious statements that your clients have not been served with stat demands is (sic) not in itself any form of evidence of the fact. Our instructions are clear on the issue of service and the applications on foot have been filed based on those instructions. If you dispute service your options are clear. That is one matter. The other which needs to be resolved is how your clients propose to repay the monies owed to our clients. You appear to be silent on this point. Our view is that your clients are insolvent and to date all conduct supports that conclusion. Rather than continue with strident denials of service you should put on some evidence but make sure that evidence includes proof of solvency. As you know we are authorised to accept service. 230 It is somewhat surprising to have a party's solicitor enclose his client's reply to the opposing solicitor's correspondence. However, Mr Byrnes wrote: 231 Mr McCartney sent on Mr Byrnes' email. In that email, Mr Byrnes wrote: Mr McCartney has forwarded me your letter and I have responded as follows. Your letters of the 1st and 7th of February 2008 presuppose that the creditors proposes to issue fresh demands. The creditors are not disposed to issue fresh demands and rely upon the demands sent in December last year. The applications to wind up are based on the demands issued sent and deemed served last year, your proposition that the demands were not served is an issue for evidence. Again the creditors rely on the demands served last year which are out of time. Your constant repeating of we don't have the demand is a matter for evidence; a copy of the demand attaches to the application to wind up. You should however review the vast correspondence that was issued from my office that referred to demands. (Jones v Dunkel) Your client's baseless allegation of genuine monetary dispute is tiresome. They have never articulated the proper basis for a genuine and bonified dispute. In fact, I invite you (your office) or staff) to properly particularize in detail the basis for the dispute. In doing so I draw your attention to the agreements entered into by Harris and co ... please do not waste your and my time with fairy tales about non existent damages. The only defense is one of solvency, a test your client cannot meet. As for the comment that rather than provide details of demands you take acceptation to the creditors fulfilling there rightful obligation, your firm were advised with a short but precise response, that the issues raised was and is a matter for evidence. You invite the creditors to discontinue and provide sealed orders. In the words of Daryl Kerrigan "Tell em there dreaming" Instead of making silly demands and again more hollow threats, I again ask you for the last time; show us your bonified dispute. rather than waste our time with request that you clearly know the creditors will reject, I would suggest before the advertising and notification starts that your client gets on a plane and fly's to Sydney were he can sit with the creditors and there representatives and lawyers and we will entertain a settlement of the claim. I have even advised your client after receiving instructions that the creditors would consider buying stage 2 to clear the debt (at current market value) (englobo, undeveloped) if this assists. The creditors would prefer money than land, the creditors have had numerous offers from Harris and co and your client by his actions at least has confessed in part that the debt is owed, but I am advised that if the debtor and guarantor wish to remain solvent they will need to have the creditor withdraw. the only way that will happen is with a short minutes of order setting out payment and or payment terms, I suggest your client arranges a substantial amount of money before he travels to Sydney is he is inclined not to want to sell the land. The current debt due and payable is in excess of 4 million dollars (Grammatical and spelling errors as per original document.) 232 Mr McCartney's statement that the defendants' statements that they had not been served with the statutory demands was not itself evidence of the fact of non-service is, of course, correct. However, he had been put on notice prior to the issue of these proceedings, and was put on notice again immediately after the issue of the proceedings, that the defendants maintained that they had not been served with the statutory demands. Notwithstanding he was so advised, he caused the proceedings to be issued. 233 Mr Byrnes also was well aware of the defendants' position and he was prepared to allow the matter to be dealt with as an issue in the proceedings. Like Mr McCartney, he was prepared to leave the question of whether there was a genuine dispute for determination in the proceedings. He was not prepared to address either issue at that early stage of the proceedings. 234 Even after these proceedings were issued, Mr Byrnes made it clear that the plaintiffs' motivation for the bringing of the proceedings was to obtain an offer of settlement from the defendants in relation to the dispute. The plaintiffs were prepared to settle by way of receiving money or buying into the development itself. That is clear by what is said in the penultimate paragraph of the email mentioned above.

DOES S 1335(2) PREVENT AN AWARD OF COSTS AGAINST A NON-PARTY? 285 The non-parties argued that s 1335(2) of the Corporations Act is a bar to making an order in a proceeding under the Corporations Act against a non-party. Section 1335(2) provides: The costs of any proceeding before a court under this Act are to be borne by such party to the proceeding as the court, in its discretion, directs. 286 A winding up application has its genesis in Pt 5.4 of the Corporations Act. "[C]ourt" is defined in s 58AA of the Corporations Act. A winding up application is a "proceeding" under the Corporations Act and "Court" includes the Federal Court of Australia which has jurisdiction by reason of s 58AA of the Corporations Act. 287 The non-parties contended that s 43 of the Federal Court Act does not apply in circumstances where "any other Act provides that costs shall not be awarded". The Corporations Act, it was contended, was an Act to which s 43 applied and s 1335(2) limited the power to award costs to a party to the proceeding. 288 The Act which is referred to in s 43(1) is any Commonwealth Act: s 38 of the Acts Interpretation Act 1958 (Vic). The Corporations Act is an Act of the Commonwealth and so, to that end, it could be an Act referred to in s 43(1) of the Federal Court Act. 289 However, the exceptive words in s 43(1) (ignoring the exceptive words in the introduction to the subsection which are irrelevant) do not and are not intended to apply to any Act which has been passed subsequent to the enactment of s 43(1) of the Federal Court Act: Rose v Hvric (1963) 108 CLR 353 at 357. 290 In that case the High Court was concerned with s 74(1) of the Justices Act 1958 (Vic) (the Justices Act) which allowed a court to impose a penalty other than an imprisonment if the court thought the justice of the case would be thereby better met. Section 74(1) commenced: "Except by the right expressly enacted ...". The Justices Act came into force on the same day as the Licensing Act 1958 (Vic) (the Licensing Act) so by force of the Acts Interpretation Act 1958 (Vic) it can be construed as coming into operation simultaneously. 291 Section 154 of the Licensing Act provided for a penalty of imprisonment for a term not less than six months or more than 12 months for a second offence of selling liquor without a licence. The question for the Court was whether the exceptive words in s 74(1) meant that the Court could not exercise the power in s 74(1) to reduce a penalty to something less than imprisonment if the justice of the case would be better met. The Court said: Because this is so, exceptive words such as those which introduce s. 74(1) have no legal effect beyond saving earlier enactments which otherwise would be inconsistent with the provision introduced. In regard to later enactments they "go no farther than the general law": Garnett v Bradley (1878) 3 App. Cas. 944, at p. 965 and "are not really necessary because if the later Act shows a contrary intention the earlier enactment cannot control it. But they remind us of the general rule". So Isaacs J. observed in Bennett v. Minister for Public Works (N.S.W.) (1908) 7 C.L.R. 372, at p. 384, speaking of the exceptive expression "unless the contrary intention appears". Whatever the verbal formula employed, it cannot have in regard to later legislation any greater force or value than that expression. As Keating J. remarked in Chorlton v. Lings (1868) L.R. 4 C.P. 374, "to do more would be exceeding the competency of parliament with reference to future legislation" (1868) L.R. 4 C.P., at p. 395. The Court said at 359: The general provision of s. 74(1) of the Justices Act is accordingly prefaced by words which have a saving effect as regards earlier enactments and serve as a reminder in relation to later, meaning in regard to both that the general provision which follows is not to be denied any of its operation save by something actually inconsistent with it in the operation of another enactment. 292 Section 43 authorises the Court to make an order for costs against a non-party. The exceptive words in the body of s 43 do not by themselves limit the operation of s 43 by any later Act. Section 43 of the Federal Court Act was enacted before s 1335(2) of the Corporations Act. It cannot control that subsection. A later Act could limit the operation of s 43 but that would raise the question of the construction of the later Act. 293 Therefore, the question which is to be determined is whether s 1335(2) as a later enactment has the effect of limiting the operation of s 43(1) to a party or a party to a proceeding brought under the Corporations Act. 294 The non-parties' argument was accepted by Jenkinson J in Re Wridgemont Display Homes Pty Ltd (1992) 39 FCR 193. In that case, Jenkinson J held that s 43(2) had to be read subject to s 1335(2) which limits persons whom the Court may direct to bear the costs of the proceeding to those who are parties to the proceeding. He thought, however, an application could be made to join a person as a party to obtain an order for costs. 295 That decision was approved by Lindgren J in Australian Forest Managers Ltd (in liq) v Bramley (1996) 136 ALR 431. In that case, Lindgren J said at 441: The terms of s 1335(2) of the Law are mandatory: once a proceeding before a court is seen to be one "under" the Law, s 1335(2) requires the costs of the proceeding to be borne by a party or parties. The court's discretion relates only to how the costs are to be so borne. Such terms are inconsistent with an exercise of the power given by s 43 of the FCA Act to order a non-party to pay costs. The excepting words in s 43(2) of the FCA Act are apt to refer to, inter alia, a provision of such a nature. 296 The non-parties contended that I should follow the decision of Jenkinson J in Re Wridgemont Display Homes Pty Ltd 39 FCR 193 and Lindgren J in Australian Forest Managers Ltd (in liq) v Bramley 136 ALR 431. Both those decisions were given prior to the enactment of the Corporations Act but s 1335(2) has been re-enacted in the Corporations Act. There is nothing in the Corporations Act itself which would allow those decisions to be distinguished. I should as a matter of comity and unless I think the decisions to be plainly wrong follow them. 297 However, there are decisions of the Supreme Court of Victoria and the Supreme Court of New South Wales which need to be considered. In U.T.S.A. Pty Ltd (In liquidation) v Ultra Tune Australia Pty Ltd 1 VR 204, Chernov J was concerned with an application by the defendant to a proceeding for an order that two non-parties pay the costs of the proceeding. His Honour assumed, but later decided otherwise, that the proceeding with which he was concerned was a proceeding under the Act. 298 The two non-parties sought to set aside the notice of motion seeking costs on two grounds. First, because judgment had been entered and therefore there was no jurisdiction for the Court to exercise its discretion under s 24(1) of the Supreme Court Act 1986 (Vic) (SC Act (Vic)) to order that costs be paid by the respondents; and secondly, because s 24(1) of the SC Act (Vic) which gave the Court jurisdiction to award costs was to be read subject to s 1335(2) of the Corporations Law. 299 As I have already observed, the first argument was rejected by the Court following the decision of this Court in Caboolture Park v White Industries 45 FCR 224. His Honour then turned to consider the effect of s 1335(2). 300 Section 24(1) of the SC Act (Vic) relevantly provided: Unless otherwise expressly provided by this or any other Act or by the Rules, the costs of and incidental to all matters in the Court ... is in the discretion of the Court and the Court has full power to determine by whom and to what extent the costs are to be paid. 301 His Honour concluded that s 1335(2) did not fall within the words "otherwise expressly provided ... by any other Act" in s 24(1) of the SC Act (Vic). He found that the exceptive words of s 24(1) had no legal effect beyond "saving earlier enactments which otherwise would be inconsistent with the provision introduced": Rose v Hvric 108 CLR 353 at 357. He addressed the question whether s 24(1) of the SC Act (Vic) was limited by s 1335(2) of the Corporations Act. The real question was whether s 1335(2), being a later enactment, evinced an intention to limit the operation of s 24(1) of the SC Act (Vic). 302 His Honour traced the legislative history of s 1335(2). He noted that the English Judicature Acts of 1873-1875 did not address all of the anomalies which then existed in relation to the Court's powers in relation to costs. Costs in the common law courts were entirely creatures of statute: Garnett v Bradley (1878) 3 App Cas 944 at 962. On the other hand, the Court of Chancery claimed to have power to deal with costs at its discretion although there was some uncertainty as to the extent of that power. The authorities suggested that the position in equity continued after those Acts. He noted that s 5 of the Judicature Act 1890 (UK) which gave the Court expanded jurisdiction to award costs resolved the uncertainty. That section relevantly provided: subject to the ... Acts and the Rules ... and to the express provisions of any statute ... the costs of and incidental to all proceedings in the Supreme Court ... shall be at the discretion of the Court or Judge and the Court or Judge shall have full power to determine by whom and to what extent such costs are to be paid. He noted that it was not until 1928 that s 5 of the Judicature Act 1890 (UK) was adopted in Victoria as s 32(1) of the Supreme Court Act 1928 (Vic) (now s 24(1) of the SC Act (Vic)). Section 32(1) gave the Court jurisdiction to deal with all questions of costs, including proceedings under the Companies Act. Before the Uniform Companies laws of 1961, there was no equivalent of s 1335(2) in the Victorian legislation. There was on his Honour's reasons no need for s 1335(2) because s 32(1) gave the Court power to award costs in all proceedings and therefore s 1335(2) was not picked up by the Victorian Companies Act of 1938 or its consolidation in 1958. 303 He turned his attention to the New South Wales jurisdiction. He noted that New South Wales did not adopt the Judicature Acts until 1970 when the Court was given the statutory provision equivalent to s 5 of the Judicature Act 1890 (UK). In the meantime, the predecessor of s 1335(2) was introduced into the Companies Act 1936 (NSW) (the Companies Act) by s 365(2). Section 365(2) eventually became s 1335(2). His Honour said at 211: It seems fairly clear that this subsection was an enabling provision, intended to give the Supreme Court in New South Wales a similar discretion to that which was given to English Courts in 1890 and to the Victorian Supreme Court in 1928. Bearing in mind that s. 24(1), or its equivalent, was in force in Victoria and England, there was no need to introduce in those jurisdictions a provision such as s. 365(2) of the Companies Act of New South Wales. On the other hand, there was reason to pass such legislation in New South Wales in 1936 if its Supreme Court was to have a wide discretion to award costs in a proceeding under the companies legislation. 304 Because there was no general power in New South Wales of the kind given by s 5 of the Judicature Act, it was arguable that the Courts did not have the power to award costs in matters under the Companies Act. The enactment of s 365(2) was to put beyond doubt the Courts' power to award costs for proceedings under that Act. It was not enacted to limit the circumstances in which costs might be awarded. Thus it was that his Honour held that s 365(2) at the time of its introduction was an enabling provision, not a limiting provision. 305 His Honour also noted that the equivalent of s 365(2) was not introduced into Victorian law until 1961 at the time of the Uniform Companies legislation in the form of s 363(2). His Honour pointed out that there was no need to introduce such legislation into the Victorian Uniform Companies legislation because the position was covered by s 24(1) of the SC Act (Vic). 306 Moreover, his Honour observed was that there was no need to continue with s 365(2) in the New South Wales legislation after the New South Wales Parliament adopted the Judicature Act in 1970 but the provision has remained and has become s 1335(2). 307 For those reasons, his Honour found that s 1335(2) was intended to be an enabling provision, not a limiting provision. In those circumstances, it did not limit the provisions of s 24(1) of the SC Act (Vic). 308 His Honour concluded and said at 212: Whatever may be the position in relation to s. 43 of the Federal Court of Australia Act, s. 1335(2) does not so inhibit the jurisdiction of this court on the question of costs as was contended for by the respondents. 309 His Honour's analysis of the legislative history of s 1335(2), in my opinion, has the same application in the construction of s 43 of the Federal Court Act. 310 The decision in U.T.S.A. v Ultra Tune 1 VR 204 was followed by Brereton J in Re Struthers (liq of Project Management, Architecture and Construction Interiors Pty Ltd) (No 3) (2005) 56 ACSR 238. His Honour said at [50]-[51]: At first sight, the suggestion that the Commonwealth Parliament has enacted a provision to detract from the existing costs powers of courts in which it invests jurisdiction to deal with proceedings under the Corporations Act is a surprising one. But were it not for the judgment of Chernov J in UTSA, despite these initial impressions about s 1335, I would unquestionably have followed Wridgemont and Australian Forest Managers, particularly given Lindgren J's strong endorsement of Wridgemont, and also given that those cases had been followed in this court by Bergin J. However, in circumstances where there has been, since Australian Forest Managers, what impresses me as a compelling analysis of the history and purpose of the section by Chernov J - the benefit of which does not appear to have been afforded to Bergin J when her Honour came to consider the point - and where Ryan J, albeit without reference to the authorities, had adopted an opposite approach, I consider that I am at liberty to give effect to my own views. I agree with Chernov J that s 1335 should not be construed as a limiting provision, but as an enabling one. Its history shows that it was intended to confer a jurisdiction or a power to make costs orders when there was doubt as to the existence that power, at least in the equitable jurisdiction of this court in this state. If there were no s 1335(2), the court would not be without power to make costs orders in proceedings under the Act; it would have all its powers under the Supreme Court Act and the Civil Procedure Act. Section 1335 was not intended to limit such other powers to make costs orders as the court already enjoyed, but to supplement them. In my opinion, the current provisions ought not be taken as intended to exclude the power of courts under, for example, Civil Procedure Act, s 98, and UCPR, r 42.27, to make costs orders which are designed to protect the processes of the courts and the integrity of those processes and the procedural rights of parties who litigate in those courts. 311 Professor Dal Pont GE in Law of Costs (2nd ed, LexisNexis Butterworths, 2009) says, after referring to Jenkinson J's decision: [22.11] ... As a significant proportion of proceedings under the Corporations Law are heard before the Federal Court, it appears strange that that court - which by s 43(1) of its Act is conferred the jurisdiction to award costs in all proceedings before it except those 'in respect of which any other Act provides that costs shall not be awarded' - should be denied the jurisdiction to make a non-party costs orders in this context. In that s 1335(2) simply replicates the former s 533(2) of the Companies Code, enacted prior to the courts' recognition of a jurisdiction to order costs against non-parties, it could not have been intended to deny that jurisdiction. Certainly this has not been the approach of other judges when ordering costs against directors, receivers or liquidators of companies as litigants. Moreover, s 43(2) deals with the court's discretion, not its jurisdiction, which is the province of s 43(1), and which is not expressed '[e]xcept as provided by any other Act'. [22.12] The fact remains that s 1335(2), as a more specific provision than either s 43(1) or 43(2), could be argued to prevail. Even so, it does not necessarily follow that s 1335(2) should be seen as ousting the operation of s 43(1) or 43(2), which provisions can arguably operate consistently with s 1335(2). To remove any degree of uncertainty, however, it would be useful if the legislature either reworded s 1335(2) to extend to non-parties, or defined the term 'party' more extensively. This is more pressing following the replacement of the Corporations Law with the Corporations Act 2001 (Cth), which comes within the phrase 'any other Act' in s 43(2). In any case, Jenkinson J in Re Wridgemont Display Homes referred to O 71 r 10(4) of the Federal Court Rules, which empowers the court to order a person who is or claims to be a creditor, contributory or officer of the company to be added as a respondent in proceedings under the Corporations Law. According to his Honour, this power could circumvent the lack of jurisdiction just mentioned, allowing it to be exercised in a case where the court considers that such a person ought to bear the costs of the proceeding. 312 Like Brereton J, I would have, but for the decision of Chernov J, followed the decisions at first instance in this Court. However, in my opinion, Chernov J's reasoning is compelling and I think should be adopted. For the reasons given by Chernov J in relation to the legislative history of s 1335(2), s 1335(2) does not limit the operation or reach of s 43(1) of the Federal Court Act. 313 It would be surprising if Parliament intended in enacting the Corporations Act to limit the circumstances where this Court might make an order for costs to parties or parties to the particular proceeding and to exclude from the scope of an order for costs non-parties who would, if it were not for the proceeding being brought under the Corporations Law, be liable to pay the costs of a party to the proceeding. 314 In my opinion s 1335(2) does not have the effect of preventing this Court from making an order for costs against non-parties in proceedings brought under the Corporations Act.

Consolidated Byrnes Holdings Limited ACN 111 052 585 v Hardel Investments Pty Limited ACN 083 276 000

At a glance

Court

Decision date

Before

Source

Judgment (57 paragraphs)

Parties

Legislation Cited (10)

Cases Cited (29)

Cited By (6)