the evidence on behalf of the plaintiffs
42 Mr Downey was the only witness to be called on behalf of the plaintiffs. He said that he was a partner in the firm Cole Downey, a Fellow of the Institute of Chartered Accountants specialising in insolvency, an Official Liquidator of the Supreme Court of Victoria and a registered Trustee in Bankruptcy. He was presently engaged in the winding-up of the second plaintiff.
43 Mr Downey said that he first met Mr Andrew Crawford in 1997. They were introduced by a mutual acquaintance over lunch. According to Mr Downey, Mr Crawford said that he needed "some advice of an insolvency nature" in relation to a company of which he was a director. The lunch took less than two hours and the discussions regarding the company occupied not more than fifteen to twenty minutes.
44 The two men next met at Mr Downey's office about a month later. Mr Crawford's purpose in arranging the meeting was to obtain further advice relating to the company and, in particular, to discover what might constitute insolvent trading. Mr Downey said that Mr Crawford provided him with a one or two page trial balance sheet. According to Mr Downey, he gave general advice regarding directors' duties in relation to insolvency. Many months later, he billed Mr Crawford for that advice.
45 Mr Downey said that in about December 1997, he first met Mr Gilbert Crawford, and thereafter had a series of discussions with him. These concerned Mr Gilbert Crawford attempts to obtain urgent funding in order to keep his son's company afloat. Mr Downey understood that Mr Andrew Crawford was overseas at the time. According to Mr Downey, Mr Gilbert Crawford at one point expressed delight that the company appeared finally to have found a buyer for its business. The buyer was Standards & Poor's. Mr Crawford told him that the business had been sold for "millions", and therefore the problem seemed to have gone away.
46 Some time later, after Ernst & Young had conducted a due diligence on its behalf, Standard & Poor's resiled from the agreement. The company was left without a suitor. Mr Downey suggested to the Crawfords that they discuss the sale of the business with an acquaintance of his, Mr John Selak, from Ferrier Hodgson, Corporate Advisory, who had far more expertise in mergers and acquisitions than he did.
47 Mr Downey's next contact with the Crawfords came in late July or early August 1999, when they again consulted him. By that stage, Mr Downey understood that they had successfully concluded an arrangement to sell the business to Flinders Capital Investments Pty Ltd ("Flinders"). They wanted to know how to proceed from there. Mr Downey was aware that the purchase price agreed was $360,000. It was to be paid in three monthly lots of $20,000 and a final payment of $300,000. Shortly afterwards, he was told that the deal had been consummated. He was also told that the money had been paid into the company's bank account, although some of it was being spent in order to keep the company running.
48 According to Mr Downey, he then had a further discussion with Mr Andrew Crawford regarding the company's future. Mr Downey said that it was possible that Mr Gilbert Crawford had also participated in that discussion. Mr Andrew Crawford told him that the company owed him more than $200,000. He also said that the company owed his father about $57,000. He asked Mr Downey whether it would be possible for them simply to withdraw these amounts from the company's bank account in order to meet its debts. Mr Downey told him that he could do so provided there were no other creditors. That immediately gave rise to a problem. Two former consultants to the company, a Mr McGlashan, and a Mr Smith, both claimed to be creditors. Mr McGlashan claimed that he was owed about $60,000, while Mr Smith claimed that he was owed about $40,000. Mr Andrew Crawford said that Mr McGlashan was an extremely difficult person to deal with. He was reputed to be a serial litigant, having previously been involved in several costly and lengthy commercial disputes. He said that the last thing that he wanted was to become involved in litigation with either of these gentlemen.
49 Mr Downey said that he told Mr Andrew Crawford that in these circumstances it would be sensible to have someone independent come in, and attempt to head off any such disputes. That would require the Crawfords to remove themselves from the management of the company. This could be done by the appointment of an administrator who would control the company's business, property and affairs. In due course, the company would be wound-up, with the administrator being appointed as liquidator.
50 Mr Downey said that he briefly canvassed other alternatives with Mr Andrew Crawford. These included the possibility of a deed of company arrangement. However, the company was basically nothing more than a cashbox, which needed to be divided up equitably among the stakeholders in accordance with the priorities set out in the Corporations Law. A deed of company arrangement seemed to Mr Downey to be an inappropriate mechanism for achieving this result.
51 I should perhaps interpolate here that if the amounts said to be owing to the Crawfords were added to the amounts claimed by Messrs McGlashan and Smith, there was likely to be a shortfall in the company's assets.
52 Mr Downey was asked whether, as a result of what he had been told by Mr Andrew Crawford regarding the company's assets and liabilities, he had formed any view as to whether or not it was insolvent. He said that his view was that the company was insolvent.
53 As previously noted, on 4 August 1999, the directors resolved to put the company into administration. Pursuant to s 439C of the Corporations Law, Mr Downey was appointed as administrator.
54 Mr Downey said that after his appointment, he took the usual steps to secure the company's assets. For example, he wrote to the company's bank, arranging to have its bank account frozen. However, before doing so, he authorised Mr Andrew Crawford to draw a cheque for approximately $250,000. Mr Downey invested that sum in a new account in the company's name. Subsequently, he closed that account and transferred the balance of the monies to himself.
55 Mr Downey said that his other activities were essentially procedural. These included lodging various requisite documents with ASIC. On 10 August 1999, he convened a first meeting of creditors. On that day, Mr Andrew Crawford provided him with a report as to the affairs of the company.
56 The first meeting of creditors did not put forward any proposal for a deed of company arrangement. Accordingly, on 27 August 1999, at a second meeting of creditors, it was resolved that the company be wound up. Mr Downey was appointed liquidator. By that stage, he had been provided with a number of financial statements regarding the affairs of the company. These included directors' minutes, details of shareholdings, various negotiations concerning the sale of the business to Flinders, and other records of a formal kind.
57 It is important to note that omitted from the documents provided to Mr Downey were the terms of settlement that had been reached with Standard & Poor's on 3 September 1998. Also missing were any documents that referred to that settlement, or indeed to the BT Funds Management Account. According to Mr Downey, he did not learn of the existence of that account until almost two years later, after Standard & Poor's responded to a request for information regarding a cheque for $19,139.40 that it had paid to the company. Mr Downey found out about that cheque only as a result of the fact that the Australian Taxation Office had lodged a proof of debt in about February or March of 2000. That led him to question Mr Andrew Crawford, who then produced additional bank records showing a deposit of about $77,000 a year or so before Mr Downey's appointment. Mr Downey described the annotation on the deposit slip as "curious". So too, he said, were the subsequent drawdowns of two cheques within the next few days, each of approximately $25,000. An annotation regarding the payment of a cheque for $25,809.30 was "GC loan". Another annotation regarding the payment of a similar amount was "AC cash". Both annotations were said to be in Mr Andrew Crawford's handwriting.
58 According to Mr Downey, it was only at about that stage that he recalled that there had been some earlier correspondence between the company and Standard & Poor's. He had been shown that correspondence by Mr Gilbert Crawford. He was then asked about the two annotations regarding the payments of $25,809 and said:
"Mr Downey, when you saw those entries, what did you then do?---I started picking back through my brain as to what might have occurred. I remembered that at about that time there had been some correspondence between the company and Standard & Poor's, some correspondence of which I had been given copies of by facsimile from Gilbert Crawford at the time, although that did not extend to the conclusion of the negotiations which subsequently transacted resulting in the amount being paid. I also recalled having heard that Andrew had received some payment from Standard & Poor's, but obviously that was outside of my purview up until then. I recalled that Mr James Higgins had been the solicitor acting for the company at that time, so I telephoned him and asked whether I could come around to review his file on the matter - initially he objected, saying that ‑ ‑ ‑
Sorry, Mr Downey, if you can just say what you then did?---I then went to his office and reviewed the company's file, and found on that a copy of the deed of settlement. That led me to contact Standard & Poor's, and I requested that I come to their office for a meeting, and at that meeting I indicated that I was the appointed liquidator and would like to see what records they had regarding this transaction. After getting clearance through Allens, their solicitors, on a telephone hook‑up, they agreed to hand over and fully cooperate with me.
HIS HONOUR: Mr Downey, you said that prior to seeing the deed of settlement you had some information about Andrew Crawford having possibly got some money from Standard & Poor's - where did that information come from?---I believe Gilbert Crawford had mentioned it in conversation some many months before, but it hadn't really registered at the time as being a potential asset or source of funds for the company. I was not privy to the detail of whatever had gone on between Standard & Poor's and the company, other than to know that Standard & Poor's had pulled out of the transaction at the last minute and the company was left without a buyer.
But you didn't, as it were, connect the dots?---No, I didn't.
You knew that Standard & Poor's had pulled out and you knew - or were told that Standard & Poor's had made some payment to Mr Andrew Crawford ‑ ‑ ‑?---That's right."
59 Mr Downey was then asked whether he could recall when he had the conversation with Mr Gilbert Crawford to which reference was made in the passages set out above. He replied that it would have been prior to his appointment as administrator.
60 Returning to the events of 1999, Mr Downey was asked about the circumstances in which he had applied to the Supreme Court of Victoria to have the company, then in liquidation, put back into administration. He explained that he had been approached by a solicitor representing the Crawfords. They were upset by the fact that Mr Andrew Crawford had been passed over for the position of director of a public company because he was, at that stage, the director of a company in liquidation. According to Mr Downey, he was asked on behalf of the Crawfords to stand aside as liquidator. He replied that he could see no basis for doing so. He advised that there had to be an application to the Court, pointing out that such an application could be made if, for example, a deed of company arrangement were executed which would operate to the advantage of the creditors generally. He said that one way in which such a result could be achieved was if the Crawfords were prepared to pay at least 50% of the costs of the administration, and to subordinate their debts to those of the other creditors.
61 On 27 September 1999, the Crawfords filed a notice of motion in the Supreme Court seeking orders staying the winding-up, and again appointing Mr Downey as administrator. The notice of motion expressly stipulated that, after Mr Downey's reappointment, the winding-up would be terminated. The Crawfords also proposed a deed of company arrangement. On 21 October 1999, Mandie J made orders in those terms.
62 On 24 November 1999, the creditors resolved that the company execute a deed of company arrangement. Mr Downey was appointed the deed administrator.
63 According to Mr Downey, on 9 June 2000, Mr Andrew Crawford requested him, under s 445F(1)(b) of the Corporations Law, to convene a meeting of creditors to terminate the deed of company arrangement. Mr Downey arranged for that meeting to be held on 28 June 2000. The meeting resolved to terminate the deed, and once again place the company into liquidation. Despite having asked Mr Downey to call the meeting, Mr Andrew Crawford actually voted against the motion to terminate the deed. He was the only creditor to do so. Be that as it may, Mr Downey was again appointed liquidator on that day.
64 On 24 October 2001, Mr Downey commenced this proceeding. He said that he had, by then, formed the view that, contrary to what was indicated in the company's books and records, the $25,809.30 claimed by each of the Crawfords was not a loan by them to the company, but rather a payment by the company to them. Accordingly, he had rejected the claims for these amounts from their proofs of debt. When asked specifically about a meeting that he had with Mr Andrew Crawford on 16 May 2000 regarding his proof of debt, Mr Downey said that he did not immediately make known to Mr Crawford the fact that the deed of settlement with Standard & Poor's had come into his possession. He wanted to see whether, given the opportunity, Mr Crawford would volunteer any information about any payment made under that deed of settlement. Later in the meeting, he challenged Mr Crawford about his claim that the $25,809.30 had been a loan to the company as stated in the proof of debt, "or in fact the reverse". According to Mr Downey, Mr Crawford "prevaricated". He eventually explained that his legal advisor had told him that he personally was entitled to a third of the settlement monies. Mr Downey told Mr Crawford that he did not share that view.
65 In further elaboration, Mr Downey said that Mr Crawford had initially claimed that the $77,000 deposited in the company's bank account with the ANZ Bank had been "his money" and that it had only been deposited in that account because he did not have one of his own. He said that the cheques that were subsequently drawn on that account in favour of his father and himself simply reflected the fact that they were entitled to a third each, leaving a third in the company. However, he also said that the third left with the company was a loan, thereby implying that the entire amount had been his money, or his father's money.
66 Mr Downey was then taken in detail to Mr Andrew Crawford's proof of debt. As previously indicated, he had rejected that proof of debt in part. He provided a detailed explanation as to why various amounts claimed were rejected. For example, he rejected a claim for unpaid salary in the amount of $38,854.40 for 1997 in its entirety on the basis that the audited accounts of the company disclosed that no salary was owing. Similarly, he rejected claims relating to unpaid salary in later financial years because the amounts in question exceeded those set out in the relevant resolutions of directors, which accompanied the proof of debt.
67 Finally, Mr Downey was asked whether, as at 4 August 1999, he would have recommended a voluntary administration had he known the true position of the company. He replied that he would have regarded the company as solvent on that date, and recommended that it be wound up voluntarily. This would have incurred costs of no more than $10,000-$15,000. Instead, by reason of the misleading information that he had been given, he had recommended an administration followed by a liquidation. That in turn had required a further administration and a further liquidation. Vastly greater costs had been incurred, quite unnecessarily.
68 Mr Downey also claimed that Mr Andrew Crawford owed the company various amounts relating to what he regarded as "unpaid shares". He said that he had reached that conclusion by reference to various documents. These included a document of particular significance that he described as the "Term Sheet".
69 Mr Downey's evidence on this point was brief, and is set out below.
"MR EVANS: One last matter. Might the witness be reshown exhibit P8.
Mr Downey, that's the bundle of documents regarding the settlement of the list of contributories. Can you go to document 541, form 541, which is the settled list of contributories?---Yes.
Mr Downey, in that document, you determined that Mr Andrew Crawford had issued to him how many shares?---95,507 shares.
Do you recall how you reached that determination?---I do.
How was that?---By reference to the Term Sheet and other documents relating to the various issues of shares by the company, I think of which there were four.
When you say the term sheet - might the witness be shown exhibits P9 and P10. Mr Downey, exhibit P9 is the Term Sheet?---That's correct.
In what way did you rely upon the Term Sheet?---On the page carrying the date 2 July, page 2, summary item (c) reads, "AGC owns 95,507 ordinary shares of $1 each, fully paid, in the capital of ISPL, and serves as ISPL's chief executive officer."
And that's a document that's signed by Mr Crawford?---It is.
Mr Andrew Crawford?---Yes.
Mr Downey, in addition to settling the number of shares Mr Crawford held, you reached a conclusion as to the amount which was unpaid on those shares?
---Yes.
What amount did you conclude was unpaid?---I think it's $72,500 or thereabouts. Yes, $72,500.
And how did you reach the conclusion that amount was the unpaid amount on the shares?---By reference to the books and records of the company, I established how much had been paid on each of the issues of shares and therefore how much had not been paid. In other words, the receipts of the company.
HIS HONOUR: You treated that as an asset of the company?---The 72,500, your Honour?
Yes?---Yes, I did."
70 Mr Downey was cross-examined at some length. He was first asked about the sum of $72,500 that he claimed remained unpaid in relation to shares issued to Mr Andrew Crawford. It was suggested to him that he had based that conclusion solely upon the "Term Sheet". He accepted that this was largely true, though he said that he had also relied upon several other documents, including a bundle of share certificates, and applications for shares, apparently signed by Mr Andrew Crawford. The common seal of the company had been affixed to those documents.
71 The Term Sheet is of considerable importance in this proceeding. It is dated 2 July 1999, and purports to record an agreement reached between three parties. These were Flinders on the one hand, and InvestorSource and Mr Andrew Crawford on the other. Under the terms of that agreement, Flinders would purchase the company business. Importantly for present purposes, recital C was in the following terms:
"AGC owns 95,507 ordinary shares of $1.00 each fully paid in the capital of ISPL and served as ISPL's chief executive officer."
72 Recital C was significant, so far as the Term Sheet was concerned, because the price to be paid for the business, at one time, involved an issue of shares in the new company that was to be established to operate it. The number of shares to be issued was linked to the number of shares held in InvestorSource. Accordingly, the more shares held by Mr Andrew Crawford, the greater the amount that he would receive for his previous interest in the business. It is to be noted that Mr Andrew Crawford signed the Term Sheet, both in his capacity as an individual, and on behalf of the company.
73 Mr Downey was asked how he had arrived at the figure of $72,500 as being the amount owing on the supposedly unpaid shares. He said:
"I erred on the conservative, in that from the other records of issues of shares I was able to deduce how many had been accounted for in the folder - the share registry, if you will; then there was a gap between that amount, the total of those four issues, and the amount of shares quoted on the Term Sheet…."
74 Mr Downey said that he did not become aware of the Term Sheet and, in particular, recital C, until quite late in the piece. After discovering this document, he went through the process of settling a list of contributories. He said that the documents originally provided to him by the Crawfords were in such a confusing state that he had been forced to attempt to reconstruct the shareholding. It had taken him some time to produce what he considered to be a definitive picture. Importantly, when shown documents that did not accord with recital C, and asked whether he could state positively that they were inaccurate, Mr Downey replied, "No, I can't".
75 Mr Downey was then taken in detail to the various documents that purported to record shares ostensibly issued to Mr Andrew Crawford. He agreed that on 20 May 1997, 39,631 shares had apparently issued. On 31 July 1997, a further 2,820 shares had issued. On 21 January 1998, 11,111 shares were recorded, and on 28 February 1998, a further 4,444. When these four bundles of shares were aggregated, the total number of shares issued came to 58,006 (including one subscriber share). That was roughly 30% of the total number of 144,000 shares recorded on the register as having, by that stage, been issued. What Mr Downey then did was to subtract the 58,006 shares recorded as having been issued to Mr Andrew Crawford from the 95,507 shares identified in recital C. That led to a figure of 37,501. It was that figure that he used when calculating the amount allegedly owed by Mr Andrew Crawford in relation to unpaid shares.
76 Mr Downey then explained how he had arrived at a figure of $72,500 in relation to unpaid shares. He said:
"The difference between 95,507 and 58,007 is 37,500. That was $1 shares, therefore it's $37,500. I add to that $25,000, which is owing in relation to the issue of 11,111 shares on 28 January 98, for which I could find no entry in the cash receipts journal for that $25,000. Further, there was an amount of $10,000 still owing in respect of the fifth issue on 28 February 1998 for 4444 shares, together with a premium of $5556. So $25,000 plus $10,000 plus 37,500 comes to 72,500."
77 When challenged about the difference between his claims regarding unpaid shares in this proceeding, and several earlier reports that he had filed with ASIC which indicated that all of the company's shares were fully paid, Mr Downey confessed to an oversight on his part. He said that the reports lodged with ASIC had been erroneous. He acknowledged that Mr Andrew Crawford had always denied having been issued with 95,507 shares, notwithstanding what was set out in recital C. He further acknowledged that he had been told that the Term Sheet had never been put into effect, and indeed that it had been superseded and replaced by a quite different agreement. The Term Sheet contemplated an issue of shares by Flinders to the then existing shareholders of the company in proportion to the shares that they then held. Ultimately, however, the business had been sold for cash. Nonetheless, Mr Downey explained:
"Did you know the basis upon which Flinders Capital Investments was to acquire the business of InvestorSource?---My understanding is that it was a negotiated position that had several forms at different times. At one such time, there was proposed that there would be shares allocated by Flinders Capital to the existing shareholders of InvestorSource in accordance with the shares that they then held. Ultimately I think that that didn't form part of the agreement but it seemed to me that that document comprised an admission by Andrew Crawford that he had somehow issued to himself this 37,500 extra shares, which would have been to his benefit in the event that that was how the Flinders Capital deal went. So I thought that one should be hoisted on one's own petard."
78 When asked to explain what he meant by "hoisted on his own petard", Mr Downey replied:
"Well, it seemed to me that it was a very convenient position to have, to on the one hand allege to Flinders Capital, "Here I am, I have 95,507 shares," which would have been on the basis of an allocation of further shares by Flinders Capital, if that was the way the deal went, but then conveniently not show any record within the company records of such an issue so that you could swing either way, depending on which way the deal went. It seemed to me that as it had been completed and signed by him under seal, and by Flinders Capital, whilst it may not have been the final document, it was certainly to me fairly compelling evidence that such shares had been issued or agreed to be issued.
Agreed to be issued, as distinct from issued?---The document said that they had been issued as fully paid‑up $1 shares, but there was no evidence of it being paid‑up.
If the document was prepared for the purpose of gaining an additional benefit from Flinders as a result of the acquisition but did not actually reflect an issue of shares, you would still regard the document as proof of an issue of shares? In other words, it was prepared as a contingency with a view to getting a greater amount for himself out of the ultimate acquisition?---Why then if it was only a draft document was it signed by Flinders on the other side?
So it was the fact that it was signed on the other side that influenced you into treating it as an actual issue of shares or reflecting an issue of shares?---It did."
79 Mr Downey acknowledged that he had been unaware, prior to the trial of this proceeding, that Flinders might have drafted the Term Sheet. He said that whether this was the case did not particularly interest him. When pressed as to whether he might have come to a different conclusion regarding the "unpaid shares" had he known that the document was not drawn by Mr Andrew Crawford, and might have contained factual errors, he acknowledged that this was indeed possible. He also accepted that, had he had that knowledge, he might have carried out further enquiries.
80 Mr Coady next cross-examined Mr Downey with regard to his earlier dealings with Mr Gilbert Crawford. It was suggested to him that as far back as 1997 both the Crawfords had been concerned about the survival of the company, particularly since other investors were apparently shy about contributing capital. Mr Downey agreed that he had assisted Mr Gilbert Crawford in preparing a letter to one of those investors, Mr Clive Batrouney, which contained a reference to the fact that the company might be put into administration as a result of Mr Batrouney's unwillingness to contribute capital. Apparently, Mr Batrouney at that stage occupied a senior position with the Australian Stock Exchange. Presumably, he would have been embarrassed if the company had gone into liquidation.
81 It was then suggested to Mr Downey that he had been aware in 1998 that Standard & Poor's were contemplating buying the company's business for an amount "in the millions", and that it had backed out of the deal after a due diligence. Mr Downey recalled a figure of $1.5 million as having been mentioned. He described Mr Gilbert Crawford as having been, at that stage, delighted about the situation. He recalled that the deal had broken down in late June 1998. Not surprisingly, the Crawfords were deeply upset and concerned about the future of the company. They wanted to know whether it should be put into administration or whether they should look for another buyer. Mr Downey recalled having seen two letters that Mr Gilbert Crawford sent to Standard & Poor's complaining about the damage done to the company by its having backed out of the deal. It was at that stage that he referred the Crawfords to Mr Selak. Mr Downey also gave some advice regarding the need for an injection of funds into the company. He conceded that, at that stage, its financial position appeared parlous. The company had no cash, and plainly could not continue to trade.
82 Mr Downey claimed that he knew nothing about the terms of settlement involving Standard & Poor's until approximately May 2000. He discovered those terms only after having had certain records delivered to him on or about 11 April 2000. He acknowledged that some time between July 1998 and January 1999 Mr Gilbert Crawford had mentioned the payment of a substantial sum - he thought it was $70,000 - to Mr Andrew Crawford. However, he took little notice of what Mr Gilbert Crawford had said at the time.
83 It was suggested to Mr Downey that relations between the Crawfords and himself had totally broken down by the early part of 2000. They were constantly complaining about how he was handling the liquidation. By April 2000, the correspondence between the parties had become "very blunt and … acrimonious".
84 When questioned further about Mr Gilbert Crawford's having mentioned that Andrew had received a sum of money, Mr Downey said that he had been told that the payment had been made "to effectively shut him up" because Andrew Crawford was threatening to go to the press, and to ASIC, challenging Standard & Poor's licence to operate in Australia. In other words, Mr Downey regarded the payment as "hush" money. It did not occur to him, at that stage, that it might in fact be an asset of the company.
85 In February 1999, the Crawfords told Mr Downey that Flinders was interested in purchasing the company's business. He understood that over the next few months there were ongoing negotiations regarding the deal, and there was some discussion regarding a possible winding-up of the company once the business was sold. Mr Andrew Crawford had concerns about the two major creditors, Messrs McGlashan and Smith. He had been unable to resolve the amounts said to be owing to them. It was for that reason that Mr Downey proposed the appointment of an administrator, thereby avoiding the anxiety associated with that dispute, and reducing the risk of litigation.
86 Mr Downey was asked by Mr Coady why, when he concluded some time between 10 August 1999 and 27 August 1999, that there was a deficiency of about $90,000 (based on what he had been told by Mr Andrew Crawford) he did not simply ask the defendants to reduce their claims by that amount, and pay out all the other creditors 100 cents in the dollar. He replied, "I could have done but I didn't".
87 When Mr Downey was asked about his rejection of part of Mr Andrew Crawford's proof of debt, he agreed that at least with regard to the financial year ending 30 June 1997, Mr Crawford had waived his unpaid salary. However, he denied having heard it said before that he had only done so on the basis that others would also waive their entitlements. It was suggested to him that his reliance upon a resolution or resolutions by the board to compute Mr Crawford's entitlements for later years was misplaced because those resolutions may have contained errors. He agreed that Mr Andrew Crawford's contract of employment entitled him to remuneration based on a 52-week year whereas the resolutions in question assumed a working year of only 47 weeks. In other words, they omitted the month of January, during which Mr Crawford took his vacation. Mr Downey said that where the contract was in conflict with a resolution of the board, he would act only upon that resolution. He said that cl 2.1 of the contract, which provided that the company did not have to pay Mr Andrew Crawford if he was not present at work, justified his decision to delete just over a month each year of Mr Crawford's claims in his proof of debt.
88 Mr Downey was then asked some questions about a file note dated 1 June 2000 that he had made regarding a conversation with Mr James Higgins, the solicitor who was advising the Crawfords regarding their dispute with Standard & Poor's. According to the file note, Mr Higgins told Mr Downey:
"If asked to give evidence, he would have to say that Standard & Poor's really wanted to shut up the Crawfords, particularly Gilbert."
89 Mr Downey was also taken to a letter dated 3 September 1998 written by Mr Higgins, and addressed to Mr Andrew Crawford. In that letter, Mr Higgins responded to a request for advice regarding apportionment of the settlement sum, as between the parties to the deed of settlement of that date. He said, inter alia:
"Considering that InvestorSource Pty Ltd and Messrs G. and A. Crawford are each parties to and bound by the restrictions and releases contained in the Deed, in my view there is equity in splitting that sum in three equal portions between those three parties. This allocation would also be supported by the fact that the main motivation for Standard & Poor's entering into the Deed was the actions and words of the Crawfords since the time when the negotiations were aborted at the instance of Standard & Poor's."
90 Mr Downey claimed that during the course of his discussion with Mr Higgins, on 1 June 2000, Mr Higgins came round to his view of the matter. His file note of that conversation recorded the following statement:
"But I said anything they did they did as directors of InvestorSource and they would not be able to simply take the monies as their own. He [Mr Higgins] agreed."
91 Neither side chose to call Mr Higgins to give evidence in this proceeding.
92 Finally, there was some cross-examination of a general kind directed towards Mr Downey's credit. He was challenged about the effect of a settlement reached at mediation with Mr Gilbert Crawford. It was suggested that the present case was an abuse of process given that a number of the matters now pleaded had been the subject of that settlement, and had therefore been compromised. That suggestion was rejected. Mr Downey was also attacked for having forcibly evicted Mr Gilbert Crawford from a meeting of creditors in 2000, ostensibly on the basis that he was not a creditor at all. He was cross-examined about his motives for having brought charges of theft against the Crawfords, all of which had ultimately been dismissed. Some of these matters were also the subject of what I have earlier described as the "cross-claim" that the Crawfords had themselves belatedly filed. I had previously ordered that by reason of the lateness of its filing, that cross-claim not be heard together with the present action. Ultimately, Mr Coady indicated that the cross-claim was abandoned.
93 In the final analysis, the case put on behalf of the Crawfords, through cross-examination, was that Mr Downey had behaved improperly in a number of respects. It was he who had suggested that the company be put into administration when, on a proper analysis, there were cheaper and better alternatives available. According to the Crawfords, he had responded vindictively towards them when they expressed criticisms of his conduct first as administrator and then as liquidator, rejecting proper claims made in their respective proofs of debt. He had also falsely claimed that they had misappropriated the Standard & Poor's settlement monies when, in truth, they were perfectly entitled to those monies. Finally, he had brought a wholly unjustified claim against Mr Andrew Crawford in relation to the unpaid shares when, upon proper analysis, it was clear that no monies were owing for those shares.