28 However, as I have said, the Defendant pleaded that he ceased to be a director on 25 January 2002 and thereafter took no further part in the management of the Company. He also pleaded that he was not a director of the company at the time the agreement was made and there were no steps he could have taken to ensure that the Company complied with the agreement. This last mentioned assertion and the assertion that he took no part in the management of the Company after 25 January 2002 will require further consideration.
29 At this stage, however, it can be said that the finding that an agreement under s 222ALA was entered into on 25 January 2002 obviates the need to consider further the claim by the Plaintiff based upon service of a notice on 10 January 2002. The company within the stipulated time complied with the notice by entering into an agreement under s 222ALA and thereby discharged any liability of the Defendant arising under it (s222AOG). If necessary, I would find that a notice complying with s 222AOE was duly served on the Defendant on or about 10 January 2002.
30 The Defendant, in my opinion carries the onus of establishing the defences provided for by s 222 AOJ and s 222 AQD as a matter of statutory construction, if not because of the evidentiary provisions of s 255-45 and s 255-50. He did not give testimony himself and adduced no evidence except exhibit 1, about which I have already made comment.
31 Nonetheless, the Plaintiff tendered documents which became exhibits E, F, G, H and J and which, to my mind, demonstrate that the Defendant undertook the primary or, at least, a leading role in the management of the Company well into February 2002. For instance, exhibit J comprises an email dated 20 February 2002 sent by the Defendant to members of the staff of the Company. The email omitting formal parts states:-
"Dear All,
There are a number of issues floating around at the moment that are wasting an enormous amount of our time, effort and money. The purpose of me sending this out to you is to address certain of the issues and to invite your response on any issue that I haven't covered, or is worrying you. Please feel free to send to me, via return email, any question or query you have and I will do my best to answer you quickly, confidentially.
The current situation is as follows:
· I am the Managing Director of this company. I also happen to be by far its largest shareholder (owner).
· Ever since I bought this company there have been several unsubstantiated and stupid rumours floating around. Most of these rumours have been of a malicious nature and have been instigated by people (fuckwits) who would like to see Halion fail. Some of these idiots have their own agendas and self-interests at heart.
· Despite all these major distractions Halion is at a point where:
Funding: as you are all acutely aware, funding has been a major issue. The company has attempted to raise money in various forms over the past two years. A number of our attempts have been thwarted by events totally out of our control. We had the 11 Sept issue, we had ASIC bring in a new law in the middle of our previous prospectus which meant we had to withdraw it and we have had a few dickheads who would prefer to see Halion fail.
As of now, Halion has a written undertaking, which is enforceable at Law, that an Investment group will invest into Halion a few million dollars.
We also have written offers from two banks (conditions that we are meeting apply) to fund Halion to the tune of several million dollars.
These two lines of funding are imminent.
With regards other issues.
· Yes we are in the process of buying CARS. Once completed, Andy Bell will take over as the "Head of Security". For those of you that are concerned about titles, it has not been decided as yet.
· We are also in the process of completing the acquisition of Fogl Knight. The combination of the CARS and Fogl Knight businesses will create a significant manpower company, with the ability to offer a range of complementary services to the group's client base.
· Finally, we are also in the process of completing the acquisition of CSS. This acquisition is very important to Halion as it adds a new dimension to the Halion "offering". It is my opinion that Steve and his guys will give Halion a totally new angle to come at the traditional market, that is not so say that we will not continue to trade in the traditional market in the Halion integrated way (offering guarding response and monitoring) what I mean to say is that Steve and his guys have the potential to offer Halion's clients an edge over our rivals.
· I would like to apologise for the late payment of some of your salaries last month and hope that by paying you slightly early this month we have restored some of your faith.
I hope this clarifies some of the issues that are floating around. I would like to think that you can get back to work and make Halion the type of company that we can all be proud of working for. It is clearly in every member of this company's interest to work as a TEAM going forward.
Once again I extend the offer to make any other issues, problems or just plain questions known to me via return mail and I will address them quickly and confidentially."
32 In the absence of any evidence to the contrary, I accept, in accordance with the records of ASIC, that the Defendant was a director of the Company until 7 March 2002. Upon the evidence, I infer that he continued as Managing Director until that date and thus continued to be involved in the management of the Company. He has therefore, up to 7 March 2002 at least, failed to make out the statutory defences provided for by sections 222AOJ and 222AQD to the extent that they put in issue his directorship of the Company beyond 25 January 2002. Of course, in respect of the s 222AQD defence, there is the additional hurdle contained in ss (5) as to which there was no evidence except perhaps inferentially from exhibits E, F, G and H. They referred to negotiations for a company Amco Consortium Company Pty Ltd to subscribe further capital to the Company.
In the absence of other evidence, these exhibits do not persuade me to find affirmatively that the Defendant, as at 25 January 2002, had reasonable grounds to expect, and did expect, that the Company would comply with the agreement.
33 I am satisfied that the Company had liabilities to the Plaintiff as set forth in the s 222ALA agreement and that the company defaulted in its obligations under that agreement. The consequent liability of the Defendant for the balance due under the agreement depended only upon him being a director when the agreement was entered into viz 25 January 2002and upon him failing to establish the defences provided for by s 222AQD.
34 In my opinion, the evidence overwhelmingly establishes the liability of the Defendant for the sum payable under the s 222ALA agreement against which he is entitled to a credit for the total of the sums identified by Mr McIntosh, namely $56,432.14. The liability of the Defendant in respect of the breach of the s 222ALA agreement is thus $460,512.86.
35 As to that part of the Plaintiff's claim which relies on service of the notice dated 22 May 2002 under s 222AOE, I am satisfied that as at that date there was an underlying indebtedness of the Company to the Plaintiff as set forth in the notice and that such indebtedness related to money withheld within s 222AOA.
36 The notice to the Defendant was posted on 22 May 2002. Ms Altaris (Bennetts) based her actions on s 222AOF but, in my opinion, that section was not available to her as the ASIC document she relied on, although itself dated 22 May 2002, showed that the Defendant ceased to be a director on 7 March 2002. In my opinion, the opening words of s222AOF require the extract to show that the relevant person remained a director or had been a director within the last 7 days. In other words, the focus is on the currency of the directorship rather than the recency of the extract, although obviously the extract would also need to be recent.
37 I cannot conceive that parliament would have intended that reliance could be placed upon an ASIC extract in relation to the residential address of a person who may have ceased to be a director months, or even years previously, and had neither the obligation nor the means to update the record.
38 However, reliance on s 222AOF is not the exclusive method of service upon a director or former director. The notice could have been served in accordance with s28A of the Acts Interpretation Act by sending it by prepaid post to "the address of the place of residence …..….last known (to the Plaintiff)". If necessary, I would be willing to infer that 3 Wanganella Street, Balgowlah, NSW 2093 was the last residential address of the Defendant known to the Plaintiff. Such an inference may, I think, be more readily drawn in the absence of any evidence upon the subject from the Defendant, himself.
39 However, in any event, in my opinion, the Plaintiff is entitled to rely upon the Defendant's admission on the pleadings. I am satisfied, as indicated earlier, that the Defendant admitted receipt of the notice dated 22 May 2002 in the ordinary course of the mail, shortly after 22 May 2002.
40 It seems to be common ground that the notice of 22 May 2002 was not complied with and, accordingly, unless he proves one of the defences afforded by s 222AOJ, the Defendant is liable for the amount claimed if he were a director of the Company at a time after the first deduction day. Deductions were made in the period from 1 December 2001 to 28 February 2002. For most of that period namely, the whole of it, from 14 December 2001, the Defendant was a director of the Company. The fact that he was not a director for the whole of the period or even at the time of service of the notice is irrelevant, (see Canty v Deputy Commissioner of Taxation 59 ATR 408). As there was no evidence to support the defences provided for by s 222 AOJ, I hold him liable for the sum claimed in the notice dated 22 May 2002, namely $103,641
41 In the result, the Plaintiff is entitled to a verdict for $564,153.86. As to interest, I will provisionally allow interest in the sum of $151,239.96 as sought in Mr Quinn's submissions. That figure, which was not the subject of argument, may well require revision and I will give the parties liberty to apply for that purpose. Costs should follow the event.
42 I make the following orders: