Edwards v Australian Securities and Investments Commission [2009] NSWCA 424 | Case summary

Edwards v Australian Securities and Investments Commission [2009] NSWCA 424 | Case summary | Zoe

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Tuesday 22 December 2009 EDWARDS v AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Judgment 1 SPIGELMAN CJ: I agree with Macfarlan JA. I also agree with the supplementary observations of Campbell JA. 2 CAMPBELL JA: I agree with the reasons of Macfarlan JA. I wish to give some additional reasons for the conclusion that a "debt" within section 588G Corporations Act 2001 (Cth) includes a quantum meruit liability. 3 There is, as his Honour says, ample authority that "debt" can include claims on a quantum meruit, in various different legal contexts. However, as Gleeson CJ said in Hawkins v Bank of China (1992) 26 NSWLR 562 at 572, the word "debt" is not a word of "precise and inflexible denotation". Gleeson CJ there said that where "debt" appeared in section 556 of the Corporations Code (a direct statutory predecessor of the present section 588G) it was to be "applied in a practical and commonsense fashion, consistent with the context and with the statutory purposes." 4 I can see no particular aids to construction in the context in which section 558G appears in the Act. However, assistance can be derived from its purpose. The statutory purpose of section 588G is to discourage and provide a remedy for a particular type of commercial dishonesty or irresponsibility. Without seeking to provide a substitute for the statutory text, that dishonesty or irresponsibility occurs when a company that is at or approaching insolvency obtains a loan, or obtains property or services on credit, and either there is a director who knows or suspects the insolvency or approaching insolvency, or a reasonable person in the director's position would know or suspect it. In that situation, any director (whether or not personally involved in the obtaining of the particular loan or property or services) can be made personally liable for the repayment of the loan or the payment of the price of the property or services obtained. The section aims to encourage directors to carry out their duties properly if the company is at or approaching insolvency, and provides a sanction if they do not. That statutory purpose is advanced if "debt" is treated as extending both to liquidated amounts owing pursuant to a contract and to amounts that are owing by reason of a quantum meruit. It is consistent with this statutory purpose that "debt" in this context has been held to include the amount that a defaulting trustee is liable to pay to make good a breach of trust: Wickstead v Browne (1992) 30 NSWLR 1 at 14 per Handley and Cripps JJA (an aspect of the decision not affected by the subsequent reversal of the case on the issue of negligence: (1993) 10 Leg Rep SL2). The statutory purpose is not advanced by taking a narrow or technical approach to what is a "debt". 5 The present section 588G differs from some of its predecessors (eg, section 374C Companies Act 1961) in that an element of its breach is that "the company incurs a debt", rather than the company contracting a debt. That deliberate change in the statutory language is consistent with the "debt" referred to including a quantum meruit liability. 6 I agree with the orders proposed by Macfarlan JA. 7 MACFARLAN JA: These reasons for judgment are organised under the following headings:

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Nature of Case and Conclusions 8 In this case the respondent ("ASIC") sought declarations pursuant to s 1317E of the Corporations Act 2001 (Cth) (the "Act") that Malcolm Leslie Edwards (the "appellant"), and Leonard George Jones ("Mr Jones") had contravened s 588G(2) of the Act in failing to prevent Murray River Limited ("MRL"), a company of which they were directors, from incurring debts at a time when the company was insolvent. After a hearing occupying seventeen days and the lodgement thereafter of extensive written submissions, Barrett J found ASIC's case proved. He made declarations of contravention and disqualified the appellant from managing corporations for a period of ten years. The proceedings against Mr Jones were compromised prior to the hearing at first instance. 9 The debts which the primary judge found were incurred by MRL were quantum meruit liabilities arising in favour of a building contractor, Colin Joss & Co Pty Ltd ("CJC"). The judge found that, at the request of MRL, CJC commenced building work in February 1999 on a resort development project of MRL, and continued the work thereafter, in circumstances where a formal contract was contemplated but was not concluded. 10 The project involved the redevelopment by MRL of an existing resort conducted on leasehold land in the Riverina area of New South Wales by Mulwala & District Services Club Ltd ("the Club"). MRL was a company in which the Club and Essington Asia Pacific Pty Ltd ("Essington") held equal shareholdings. It was intended to become the lessee of the site of the resort. Negotiations and preliminary arrangements between the Club and Essington culminated in their entry into a joint venture agreement on 22 December 1998. 11 Essington was a company substantially owned by the appellant and members of his family but in which Mr Jones also had an interest. The appellant was the effective controller of Essington in 1998 and 1999. Mr Jones was a director of MRL, and as an employee of Essington, was subject to the appellant's directions, 12 This appeal and, so far as (a) below is concerned, cross-appeal involve the determination of challenges to the findings of the primary judge in connection with the following questions:

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Contract formation 19 First, the primary judge found ([2005] NSWSC 831) that the form of building contract under consideration by the parties was never executed in such a way as to render it binding on MRL and CJC. 20 There was in evidence a form of contract executed by CJC and signed by Mr Jones on behalf of MRL, Mr Jones' signature being witnessed by a Mr Bourke of MRL. An impression of the common seal of MRL appeared in conjunction with Mr Jones' signature and the date 3 May 1999 appeared under Mr Bourke's signature. The judge said about this document: "59 … [I]t is not clear that this is in reality a single document executed by both parties. It may be something that was put together after the event. Nor is there anything to show to the requisite standard that parts executed by the respective parties were ever exchanged. 60 Indeed, Mr Jones said in evidence that he never delivered to CJC the part of the contract he had signed ostensibly on 3 May 1999 and that this was at the [appellant's] suggestion or direction. 61 The impression I have just stated is strengthened by Mr Reid's letter of 13 May 1999 to Mr Jones setting out steps in relation to the proposed contract and payments from 19 November 1998 to 13 May 1999. The last entry (for 13 May 1999) is, '11.27 am. Signed (TBC) contract documents picked up'. This suggests that contract documents supposedly signed by MRL were to be picked up by CJC on 13 May 1999 (the date of the letter) but that it was not confirmed that they were in fact signed. ('TBC' means, I assume, 'to be confirmed')." 21 Secondly, the judge rejected ASIC's contention that a contract had come into existence by less formal means and thus rejected the contention that a preliminary contract falling within the first, second or fourth category identified in Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353 and Sinclair Scott & Co Ltd v Naughton [1929] HCA 34; (1929) 43 CLR 310 had been formed. He did this on the basis that there were two matters which the parties recognised were in need of agreement but which were not ever in fact agreed (Judgment [67] - [68]). His Honour described these two matters as "Confirmation of Contract Sum" and "Security for Murray River Pty Ltd".

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76 Nor can the situation be viewed as one in which there was a mutual expectation that there would be no payment unless and until the entire task was completed. The parties showed this by embracing and implementing at an early stage and on a continuing basis, the regime under the contemplated contract for progress claims, assessment of them, the issue of certificates by KCC and payment against those certificates." 25 The judge said that "the performance of work [by] CJC progressively generated rights for CJC to be paid" for that work which it did in response to MRL's request for commencement (Judgment [81]) and that regard could be had to the "shared intentions" of the parties (necessarily non-contractual in light of his Honour's finding as to the absence of a contract) as to the way in which the value of the work done should be quantified. He relied upon the following observation of Lord Wright in Way v Latilla [1937] 3 All ER 759: "… [T]he amount to which the appellant is entitled is left at large, and the court must do the best it can to arrive at a figure which seems to it fair and reasonable to both parties, on all the facts of the case. One aspect of the facts to be considered is found in the communings of the parties while the business was going on. Evidence of this nature is admissible to show what the parties had in mind, however indeterminately, with regard to the basis of remuneration. On those facts, the court may be able to infer, or attribute to the parties, an intention that a certain basis of payment should apply." (at 766). 26 In the present case, the parties were contemplating entering into formal contracts which provided for the making of progress claims and the certification of them by Knapman Clark & Co Pty Ltd ("KCC"). KCC was a quantity surveyor engaged by MRL in relation to the resort development and was associated with Knapman Clark Management Services Pty Ltd ("KCMS") which was the project manager appointed by MRL. The primary judge held that "KCMS was at all material times acting for and in the interests of MRL" (Judgment [62]). Consistently with the proposed contractual documents, CJC submitted progress claims which were certified by KCC. 27 As to the time when quantum meruit liabilities were incurred, the primary judge said the following: "87 Because of the finding as to lack of contract, a right for the builder to be paid was generated solely by the doing of work. And a particular quantum meruit entitlement was quantifiable only as and when recognisable work was completed. Given the contractual position, the builder could have stopped work at any time and MRL could have put a stop to the builder's activities at any time. Completion of each work segment was therefore the event that gave rise to a debt, since there was no certainty in advance that the segment would be completed and the reward earned. On principles analogous with those discussed in Hussein v Good (1990) 1 ACSR 710, Rema Industries and Services Pty Ltd v Coad (1992) 7 ACSR 251 and Credit Corporation Australia Pty Ltd v Atkins (1999) 30 ACSR 727, the time of certification by KCC, following receipt of the relevant progress claim from CJC, should be regarded as the time of the incurring of the quantum meruit debt for the work done, as reflected in the KCC certification." 28 The amounts certified by KCC and which were found, from the dates 10 working days after the dates of certification, to constitute "debts" for the purposes of s 588G of the Act, were as follows: Claim No Claim Date Certification Date Certification Amount 1 1 March 1999 13 April 1999 $390,000 2 31 March 1999 26 April 1999 $635,000 3 30 April 1999 7 May 1999 $1,340,000 4 31 May 1999 4 June 1999 $859,370 5 30 June 1999 8 July 1999 $183,889 6 31 August 1999 10 September 1999 $181,772

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Insolvency 31 The primary judge referred to expert evidence on the issue of insolvency given by Mr Christopher Chamberlain who became liquidator of MRL on 14 November 2000, having previously been appointed administrator on 18 October 2000. The judge said that balance sheets of MRL identified by Mr Chamberlain showed a negative current asset position as at 21 December 1998 of $88,014, as at May 1999 of $1,524,844 and as at 30 June 1999 of $3,303,012 (after adjustments). He concluded that "MRL must be regarded on the basis of the balance sheet information, as having been insolvent at all times from its creation until 30 June 1999 - unless it had resources and funding capability not reflected by the balance sheets" (Judgment [96]). After reference to authority, his Honour said, in a finding which is not in contention on this appeal: "99 I accept that funds which, on a realistic commercial assessment, are capable of being raised from outside sources are relevant to the question whether a company is solvent. But the availability of such funds in the form of a loan will not enhance solvency (or have the potential to avoid a finding of insolvency) unless the loan terms are such as to exclude the loan liability from consideration in its own right as part of the debts due or near due. In other words, availability of loan funds for a very short term or payable on demand, as a source from which debts overdue may be paid, does not enhance solvency: it merely substitutes one form of immediate (or near immediate) obligation for another. … " 32 The judge then undertook a detailed review of the evidence relating to efforts made by MRL from late 1998 to obtain finance. These efforts included negotiations with two financial intermediaries, Australian Financial Solutions Pty Ltd ("AFS") and Direct Mortgage Funding Pty Ltd ("DMF"). 33 His Honour concluded as follows: "200 The first written confirmation of an in-principle decision by WAMC [a reference to the Water Administration Ministerial Corporation, the lessor to the Club of the development site] to extend the lease to 2088 was issued by WAMC in February 2000. Mr Jones told Mr Male a year earlier, in February 1999, that WAMC had agreed to the extension, citing Mr Beattie as the source of this information. But Mr Beattie's correspondence of that period (his letter of 15 January 1999 to Mr Jones and his letter of 28 June 1999 to Mr Radcliffe) does not bear out any suggestion that he had received any such assurance from WAMC. And several months later, on 8 November 1999, Mr Radcliffe made it clear to Mr Beattie that the attitude of the Regional Director, Murray Region, to the matter of extension of the term was still awaited. Before February 2000, there may have been grounds for speculation that WAMC would eventually agree to an extension of the lease term. But there was no basis on which anyone could believe that the extension would be granted. … 210 Even allowing for the fullest recognition of the principle in Sandell v Porter (1966) 115 CLR 666, as understood in the light of Lewis v Doran (2004) 50 ACSR 175, that an assessment of solvency pays attention not only to financial resources already held but also to those reasonably obtainable in a relatively short time, the clear conclusion must be that MRL was insolvent at the time it incurred each of the debts to CJC upon which ASIC relies. It had no reasonably accessible source of capital and no developed means of raising capital by prospectus or from the joint venture parties. Nor did it have saleable assets. The only way in which it could have obtained cash was by borrowing. For reasons I have stated, $600,000 must be regarded as fairly representing the maximum extent of MRL's borrowing capacity. The Leigh loan [a loan of $440,000 obtained on 5 May 1999 to pay CJC's first progress claim together with interest and fees] was for an extremely short term and on onerous terms. Its availability therefore really did nothing to enhance the availability of cash to meet other debts. By obtaining the Leigh loan and applying it towards satisfaction of the indebtedness to CJC, MRL merely substituted debt carrying a one month term for debt that was overdue. That did nothing to enhance solvency. Any remaining borrowing capacity of the order of $160,000 was quite inadequate in the circumstances ." 34 The judge found that in these circumstances "MRL was insolvent when, on 3 February 1999, CJC began work on the project and that it continued in a state of insolvency at all times thereafter" (Judgment [211]). The date of commencement of work is elsewhere referred to as 10 February 1999. The precise date is not material.

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The appellant's knowledge of MRL's obligations to pay CJC 37 The primary judge took the view that the "new and inconsistent evidence" which he considered the appellant to have given after introduction of the newspaper article and of the appellant's handwritten note of 27 January 1999 into evidence, made "unreliable his initial version and warrant[ed] a finding that he was aware on 27 January 1999 not only that work was to begin but that it was to be for the account of MRL" (Judgment [227], [229]). His Honour said that he was satisfied that the appellant was aware at least from 27 January 1999 that CJC's work would be "for the account of MRL", that is, that it was work for which "MRL would be financially responsible" (Judgment [231] - [232]). 38 The judge referred to the appellant's acceptance that he saw the KCC certificate on 13 April 1999 and concluded that "[a]t and after 13 April 1999 … the [appellant] knew that continuation of work by CJC entailed an increasing debt obligation" (Judgment [235]). His Honour rejected the appellant's evidence that he did not consider that MRL had any obligation to pay CJC, "at least before action was taken by Mr Jones on 3 May 1999 to execute a copy of the building contract for MRL" (Judgment [237]). The judge recorded that the appellant asserted that "he regarded any obligation in respect of earlier work as an obligation of the Club because the work was being done on the Club's land and MRL had not become party to any contract with CJC" (Judgment [237]). His Honour took the view that the appellant's failure to assert to the directors of MRL at either of two meetings which occurred on 13 April 1999 that MRL was not obliged to make the first progress payment supported "a finding that [the appellant] did not, at the time, hold the views he described in his evidence. As at 13 April 1999, he accepted that MRL was obliged to meet the first progress payment and was engaged in efforts to raise the necessary funds. And that remained his state of mind into the future" (Judgment [239]). 39 The judge considered that a memorandum of 26 May 1999 from the appellant to Mr Jones, which was relied upon by the appellant to corroborate his evidence, was prepared by the appellant "to protect himself", as was asserted by Mr Jones in evidence he gave about the memorandum (Judgment [243] - [246]).

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The Judgment at First Instance on Disqualification 40 In his separate judgment on the question of disqualification ([2006] NSWSC 376: the "Disqualification Judgment") the primary judge rejected the appellant's contention that he should, pursuant to s 1317S or s 1318 of the Act, be excused from responsibility upon the basis that he had acted honestly and ought fairly to be excused. 41 The judge made the following observations as to the meaning of the word "honestly" in this context: "8 The first question relevant to exoneration under each provision is whether the defendant acted 'honestly'. Referring to observations in both Commonwealth Bank of Australia v Friedrich (1991) 5 ACSR 115 and Re HIH Insurance Ltd; Australian Securities and Investments Commission v Adler (2002) 42 ACSR 80, Austin J, in Australian Securities and Investments Commission v Vines (above), equated honesty, for these purposes, with lack of moral turpitude. Such a meaning of 'honestly' may also be gathered from the judgment of Bollen J in R J Elrington Nominees Pty Ltd v Corporate Affairs Commission (SA) (1989) 1 ACSR 93 at p.110: 'I think that the word 'honestly' [scil: 'dishonestly'] may comprehend conduct which is not criminal but which is morally wrong in the commercial sense. It comprehends conduct which is not straightforward. Moreover, I think it may comprehend such conduct viewed objectively. The evidence does not prove that Elrington intended to misrepresent or disregard the position to customers or disregard the advice given him by McNamara nor that he intended to profit by failure to make the position clear.'" 42 The judge then referred to the guidance given by the High Court in Rich v Australian Securities and Investments Commission [2004] HCA 42; (2004) 220 CLR 129 as to the proper approach to the making of orders once contraventions of the civil penalty provisions have been found and, in particular, to the description of McHugh J at [43] of the nature of the inquiry to be undertaken and his Honour's approval of a series of fifteen propositions formulated by Santow J in Re HIH Insurance Ltd; Australian Securities and Investments Commission v Adler [2002] NSWSC 483; (2002) 42 ACSR 80 (at [48] - [49]). 43 Matters of significance in the judge's reasoning as to disqualification, and which are of relevance to grounds of appeal, were as follows. 44 First, the judge said that although he had no basis for making a precise finding as to the extent of the losses that were attributable to the appellant's conduct, he inferred that that conduct was "productive of some appreciable loss to both the Club and CJC" (Disqualification Judgment [21]). 45 Secondly, the judge took into account three instances of comments, arguably reflecting adversely upon the appellant's conduct, which were made by external representatives of companies of which the appellant had been a director. His Honour also took into account (at Disqualification Judgment [22] - [24], [38]) adverse observations as to the appellant made by Rogers CJ Comm D in a 1992 unreported decision. 46 Thirdly, the judge did not attach any particular significance to the character evidence that was called on behalf of the appellant (Disqualification Judgment [29] - [33], [50]). 47 Fourthly, the judge concluded that the appellant had not acted honestly in the sense referred to in [41] above. His Honour observed: "35 … [The appellant's] conduct was not straightforward. Knowing as he did that there were reasonable grounds for suspecting that the resultant debts would never be paid, he allowed CJC to begin work. He knew that CJC was not 'building for practice' and expected to be paid - indeed, that CJC would have a right to be paid. In allowing CJC to proceed (something he could have stopped), he did not act in a way that was straightforward. His conduct was morally wrong entailing, as it did, allowing CJC to embark on a course which the defendant knew would lead to CJC's disadvantage and to the benefit of the interests the defendant represented as well as his personal interests (in that CJC would perform services for the benefit of MRL - and therefore for the benefit of its shareholder, Essington, a company owned by the defendant and his family - when there was no reasonable prospect of its being remunerated by MRL); and this was in circumstances where the defendant must have known that CJC was working on an assumption that MRL had adequate funding available. There were elements of unconscionability and moral turpitude in what the defendant allowed to happen. He did not act honestly." 48 Fifthly, the judge took the view that despite the appellant saying "I am sorry and deeply regret others have been hurt as a result of my lack of pro activity resulting in these proceedings" (Disqualification Judgment [42]), the appellant had not truly shown contrition because he had not acknowledged his wrong-doing (Disqualification Judgment [44]). 49 Sixthly, the judge recognised that the period of disqualification he proposed to order would be likely to "put an end to the [appellant's] commercial career" but said that that was "an inevitable by-product of his conduct" (Disqualification Judgment [64]). 50 Seventhly, the judge held that the appellant's conduct involved "a greater degree of culpability" than did that of Mr Jones and that a period of disqualification in excess of the period of five years for which Mr Jones was disqualified was justified in the case of the appellant (Disqualification Judgment [47]). 51 I now proceed to consider the issues arising on the appeal.

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Chronology of events 53 On 19 November 1998 KCMS provided to CJC an Invitation to Tender, a form of Tender, and a form of Building Contract incorporating General Conditions of Contract. A further version of the form of Building Contract was provided on 30 November 1998. Subject to the subsequent replacement of some pages (the new pages bearing a footer date of 19 March 1999), this was the form of contract signed by Mr Jones and referred to in [20] above. Clauses 4.4 and 4.5 of the General Conditions of Contract provided in November 1998 were in the following terms: "Within 21 days from the date of notification of acceptance of the tender, the Employer and the successful tenderer shall execute, in the format given on Part III, Building Contract Agreement, the agreement for the proper fulfilment of the Works. Such an agreement is referred to as the Building Contract Agreement. Until the Building Contract Agreement is executed by the parties, offer and acceptance by the Contractor and the Employer respectively for the execution of the Building Contract howsoever made, including documents to which reference may properly be made in order to ascertain the rights and obligations of the parties shall constitute the Building Contract between them and that contract shall include all the terms and provisions contained in the Invitation to Tender and its acceptance and all notices put out by the Employer to tenderers prior to closing of tenders." 54 On 16 December 1998 CJC made a tender submission, the price stated being $15,975,760. The submission was not accompanied by an executed form of Tender as had been contemplated by the Invitation to Tender. 55 Negotiations as to price occurred thereafter, as a result of which, by letter of 22 December 1998, CJC reduced its price. 56 The principal of CJC, Mr Colin Joss, gave evidence that on 15 January 1999 he had the following conversation with Mr Jones: "Leonard Jones said: 'Good day Colin, Len Jones - how are you?' I said: 'Good thanks Len - how are you?' Leonard Jones said: 'Great - look everything is just falling into place nicely. AFS will be financing the job. The job is a goer and you blokes are on if you can knock $84,166.81 off your price.' I said 'You know we have worked the job over already. There is not another $84 grand in it unless we find it in the quality of the fittings and fixtures or something like that.' Leonard Jones said: 'That sounds alright to me.' I said: 'Well if you're happy with that, that's fine.' Leonard Jones said: 'Great. Deal done. Its going to be a great job.'" 57 On the same day Mr Jones said in a fax to Mr Joss that he and Mr McNamara, the principal of KCC and KCMS, were "preparing the documents for contract which will be forwarded for your comments shortly". 58 On 20 January 1999, Mr McNamara wrote to CJC saying: "With the client having notified your company as the successful contractor on the above project we list herewith, for your assistance, the items required to be undertaken for preparation of the contract together with initial requirements of the conditions of contract". 59 A number of items were then listed including "Completed Bond Form in the amount of $1,000,000.00". 60 On 8 February 1999, CJC confirmed in a letter of that date its preparedness to accept a contract price of $14,483,447. 61 In circumstances which are described in more detail in [96] - [118] below, CJC commenced demolition and construction work on 10 February 1999. 62 A letter from CJC to KCMS of 15 February 1999 indicated that there were a number of contractual issues still to be resolved between the parties. 63 CJC's letter of 23 February 1999 to KCMS indicated that there were by this time only two "significant contractual issues" which remained outstanding. These were the issues of "Confirmation of Contract Sum" and "Security for Murray River Pty Ltd" referred to by the primary judge (see [21] above). 64 It is apparent that by this stage the parties had not entered into a building contract. There were still significant issues to be resolved. Moreover, there had been no submission by CJC of a signed form of Tender as contemplated by the Invitation for Tender of November 1998, nor had a form of Building Contract been executed by either party. 65 On 2 March 1999, KCMS advised CJC that a certificate as to its Progress Claim No 1 could not be issued until "all contractual requirements are met". 66 On 22 March 1999, KCMS forwarded two sets of contract documents to CJC for execution. They showed the contract price as $14,483,447, being the amount which CJC had confirmed in its letter of 8 February 1999 (see [60] above). Despatch by KCMS to CJC of contract documents containing this price in my view indicated that the amount of the contract sum was no longer an issue between the parties and that the first of the two issues referred to in the letter of 23 February 1999 (see [63] above) was by this stage no longer outstanding. 67 Further, the other issue referred to in that letter was resolved by 26 March 1999. On that date, Mr Jones wrote to CJC indicating that CJC would not be required to provide a performance bond. So far as MRL's obligations were concerned, CJC had sought, by its letter of 15 February 1999, confirmation that MRL would provide a $3 M bank guarantee in favour of CJC. In evidence which was not contradicted, Mr Joss said that it was subsequently agreed between the parties that the requirements for assurances as to each party's obligations would be waived by "one being traded off against the other". It is clear that, by its letter of 26 March 1999 referred to above, MRL waived the requirement of a performance bond from CJC. The effect of Mr Joss' evidence was that it was agreed that in these circumstances the requirement of the guarantee from MRL was no longer one that was pressed. This is consistent with the execution on 26 March 1999 by Mr Joss, on behalf of CJC, of the form of Building Contract and his despatch of it to MRL. 68 By this point in time there was thus a consensus between the parties as to the terms of their proposed contract. I disagree therefore with the primary judge's conclusion that there were, and remained at this time, two outstanding matters of significance (see [21] above). In my view, those issues had been resolved. This conclusion is confirmed by the acceptance by senior counsel for the appellant that the requirement for a performance bond was the last matter of commercial substance that was in issue and that ceased to be a matter of contention when the letter of 26 March 1999 was sent. 69 Included amongst the documents executed on behalf of CJC and despatched to MRL on 26 March 1999 was the Form of Tender, duly completed with the contract price which had been agreed between the parties. The form of Building Contract which had been transmitted between the parties contemplated that a preliminary contract would come into existence in certain circumstances (see Clauses 4.4 and 4.5 quoted in [53] above). Submission and acceptance of the signed Form of Tender would have constituted such circumstances but at this stage the Form of Tender had just been submitted and had not been accepted. 70 Sometime on or before 9 April 1999, Mr Jones signed the contract documents on behalf of MRL and on 9 April 1999 he advised Mr Joss "the signed contract documents will be couriered back to you today". On 12 April 1999 Mr McNamara of KCMS informed CJC that he had been "advised by Mr Jones that the contract has now been executed by Murray River P/L". Nevertheless, on Mr Edwards' instructions, Mr Jones did not send to CJC the form of contract signed by him on behalf of MRL. 71 On 13 April 1999 KCC prepared and signed Draw Down Certificate No. 1 certifying the value of the work done to 27 February 1999 as $390,000 and referring to the value of the contract as $14,483,447. On 15 April 1999, KCMS forwarded to CJC, a copy of a letter dated 15 April 1999 from Mr Jones on behalf of Essington to KCMS. The letter referred to CJC's Progress Claim No 1 and said that following receipt of KCMS's certification in relation to that progress claim, Essington had "issued this to our financier for payment. Their valuer is visiting the site today to authorise payment. Their cheque should then be issued on Monday. This is still within the contractual time requirements as I understand".

[57]

Execution of formal contract 74 On 26 April 1999, KCC issued to MRL, and copied to CJC, a certificate in the amount of $635,000 in respect of CJC's Progress Claim No 2 for work done during March. The value of the contract was again referred to as $14,583,447. A progress claim for work done during April 1999 was submitted by CJC to KCMS on 30 April 1999. 75 On 3 May 1999, the appellant was informed that the proposed lender to MRL of $440,000, Leigh Superplan, required the building contract to be executed before it would allow the loan to be drawn down. This sum was to be used to pay the first Draw Down Certificate in favour of CJC. Mr Jones and the appellant then proceeded to sign the building contract and Mr Jones made a statutory declaration, witnessed by the appellant, stating the following: "2. Attached and marked 'A' is a true complete and current copy of the Building Contract dated 26 March 1999 between the Company as the employer and Colin Joss & Co Pty Ltd ACN 003 538 587 as the contractor (the Building Contract); 3. The Building Contract has been executed and is binding on the Company;" 76 A copy of the contract document executed by MRL was not provided to CJC before 13 May 1999. Mr Joss' evidence was that he received a signed document on that day. The primary judge (see Judgment [60] quoted in [20] above) said that Mr Jones gave evidence that he "never delivered to CJC the part of the contract he had signed ostensibly on 3 May 1999". However, the evidence Mr Jones gave on that topic related to the form of document he had executed early in April (see [69] and [70] above). The appellant's written submissions (see Orange Appeal Book 249H-T) recognised that this was so and implicitly accepted that the primary judge was mistaken in saying otherwise. 77 The primary judge saw his conclusion as being strengthened by Mr Reid's letter of 13 May 1999 (see Judgment [61] quoted in [20] above). However, the fact that at the time Mr Reid wrote his letter it was still to be confirmed that the "contract documents picked up" at 11.27 am on 13 May 1999 were signed is of little, if any, significance as the letter was written on that very day and the opportunity to check the execution may not yet have arisen. Thus the entry in Mr Reid's letter did not contradict Mr Joss' evidence. 78 The appellant attributed significance to the fact that Mr Joss' evidence did not clearly identify the form of the signed document that was picked up. However, it was not suggested that there was any material difference between the form of document signed by Mr Jones in early April and that executed on behalf of MRL on 3 May 1999. If (contrary to my view) no contract had been concluded on or about 15 April 1999, I consider that a building contract was concluded on 13 May 1999, even if the document supplied on that day was the document which bore the signature placed upon it by Mr Jones in early April (and witnessed by Mr Bourke) rather than the document signed by Mr Jones and the appellant on 3 May 1999.

[59]

Is a Quantum Meruit Liability a "Debt" for the purposes of s 588G of the Act? 80 The Act does not contain a definition of "debt". In ordinary parlance it means "that which is owed; that which one person is bound to pay or to perform for another" or "a liability or obligation to pay or render something" (Macquarie Dictionary, 4th ed. (2005)). A debt is distinct from a right to damages for breach of contract. As was said in Young v Queensland Trustees Ltd [1956] HCA 51; (1956) 99 CLR 560: "The common law does not and never did conceive of indebtedness in a sum certain for an executed consideration as a mere breach of contract: it is rather the detention of a sum of money and that was so whether the creditor enforced his demand by an action of debt or by indebitatus assumpsit … … A debt recoverable under an indebitatus count was not and is not now conceived of simply as a cause of action for breach of duty or obligation. In other words it is a mistake to regard the liability to pay a debt of a kind formerly recoverable in debt or indebitatus assumpsit as no more than the result of a breach of contract, a breach which the creditor must affirmatively allege and prove" (at 567, 569 per Dixon CJ, McTiernan and Taylor JJ; see also Sunbird Plaza Pty Ltd v Maloney [1988] HCA 11; (1988-1989) 166 CLR 245 at 255 per Mason CJ). 81 There is a wealth of authority for the proposition that a claim for the reasonable value of work done, enforceable by a quantum meruit action, is a "debt or liquidated demand" for the purposes of court rules conferring procedural advantages on persons suing for debts or making demands for liquidated amounts. There is no present significance in any difference that may exist between the concepts of "debt" and "liquidated demand". The concepts are substantially the same and case authority indicating that a quantum meruit claim of the nature which is in question in the present case is a "debt or liquidated demand" may be taken as authority that such a claim is a "debt" for the purposes of s 588G of the Act. 82 Relevant authority includes the following. 83 In Spain v The Union Steamship Company of New Zealand Ltd [1923] HCA 21; (1923) 32 CLR 138 it was held that an action by the captain of a ship against the owner to recover the reasonable expenses incurred by the captain in relation to a hearing before a Court of Marine Inquiry into the cause of the wreck of the ship, was a claim for a "debt or liquidated demand", with the consequence that the captain was entitled to issue a default summons pursuant to s 64 of the District Court Act 1912. Knox CJ and Starke J described the defendant's contention that the claim was not for a debt or liquidated demand because the plaintiff's right was to cover "reasonable expenses" and "not a sum certain or any liquidated amount" as untenable (at 142). Isaacs and Rich JJ were of the same view and referred to the plaintiff being entitled "to a sum payable instanter before action and in law ascertained" (at 145) and to the plaintiff's right being one "to instant payment of the reasonable sum" (at 154). 84 In Crisp & Gunn Co-operative Ltd v Hobart Corporation [1963] HCA 55; (1963) 110 CLR 538, the High Court held that a claim to recover compensation for compulsory acquisition of land was an action to recover a "debt". McTiernan, Taylor and Windeyer JJ rejected the proposition that the claim was not an action for debt because it was "not an action for a sum certain" but rather, involved an assessment of compensation (at 543). In support they cited Spain, Segur v Franklin (1934) 34 SR (NSW) 67 and Lagos v Grunwaldt [1910] 1 KB 41. 85 In Segur, a claim for fees due for acting as an arbitrator was held to be an action for "a debt or liquidated demand". In Lagos, a claim by a solicitor for professional charges and disbursements was held to be a liquidated demand. 86 In Victorian WorkCover Authority v Esso Australia Ltd [2001] HCA 53; (2001) 207 CLR 520, the plurality judgment referred to: "debts" capable of being set-off under the Statutes of Set-Off as including "claims in quantum meruit and quantum valebat where goods had been sold or services were performed without the agreement of a price and the claims were disputed on grounds which could easily be resolved in the litigation" (at [30]). 87 In Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221, the High Court held that an action by a builder upon a quantum meruit for the value of work done and materials supplied under an oral, unenforceable building contract was a claim in debt (see particularly per Deane J at 250-257). 88 In my view it is clear, in light of this authority, that a liability in quantum meruit to pay to a plaintiff reasonable remuneration for work done at the request of the defendant is a "debt" within the meaning of s 588G of the Act. 89 In these circumstances, it is unnecessary to consider the alternative submission made by ASIC that if a liability in quantum meruit is a liability for unliquidated damages, such a liability is nevertheless a "debt" for the purposes of s 588G because that expression encompasses claims for unliquidated damages. ASIC submitted that the decision of this Court in Box Valley Pty Ltd v Kidd [2006] NSWCA 26; (2006) 24 ACLC 471 which held otherwise was contrary to the decision of the High Court in Bank of Australasia v Hall [1907] HCA 78; (1907) 4 CLR 1514 (see in this respect the comments of White J in New Cap Reinsurance Corporation Ltd (in liq) v A E Grant [2008] NSWSC 1015; (2008) ACSR 176 at [53] - [70]). 90 In anticipation that the present case might require determination of this issue, the Court made an order at the commencement of the hearing of the present appeal referring questions associated with this issue for separate determination by a five judge bench. That bench, which comprised the three judges constituting the present bench and two additional judges, heard argument upon that issue. As the correctness of the decision in Box Valley does not arise in the present case, my view is that the order for separate determination should be rescinded, leaving the question as to whether a liability in quantum meruit is a "debt" within the meaning of s 588G of the Act for determination by the present bench of three judges.

[61]

The appellant's role in MRL 92 Most of the day to day dealings between MRL on the one hand and the Club, CJC and KCMS on the other, were undertaken, so far as MRL was concerned, by Mr Jones rather than the appellant. In these circumstances, it is important, in considering the extent of the appellant's knowledge in relation to the project, to have regard to the nature of the relationship he had with Mr Jones and the role he took within MRL. 93 The judge made the following findings concerning the relationship between the appellant and Mr Jones: "12 …The [appellant] and Mr Jones had been business associates in the property development field for some time. The [appellant] had been active in property development for many years. Mr Jones was an architect by profession. They were both located in Essington's office premises at North Sydney and saw one another virtually every working day. It was their habit to have coffee together on a daily basis. They often lunched together and had drinks after work. Their offices were almost adjoining. Each would regularly call unannounced at the other's office when the need arose. … 256 … [W]ithin Essington, it is clear that the [appellant] was, in a practical sense, superior to Mr Jones who in many ways did the bidding of the [appellant] or carried through plans he had developed. Mr Jones gave evidence that the [appellant] preferred to appear to be in the background even though he was active. While allowing Mr Jones to appear to be the active party, the [appellant] was busy behind the scenes, even to the extent of correcting and re-writing Mr Jones' letters". 94 Mr Jones' affidavit evidence as to the appellant's role in MRL included the following: "22. In 1998 and 1999 the relationship between Malcolm Edwards and I was one of continual contact and exchange of information. We both started work early at between 7.30am and 8.00am. On nearly every workday we had a morning coffee together and would talk about Essington's projects and their prospects. In particular we would talk about the cash flow that the projects would generate for Essington. These morning talks continued until when I resigned from Essington in 2000. Malcolm Edwards always had an open door policy. If he was on the phone I would tap his door and he would wave me in. In most weeks Malcolm Edwards and I would lunch together for at least three of the days and in most weeks we would meet on three or four occasions after work at the Union Hotel which was across the road. Malcolm Edwards often invited business associates to the after work get togethers at the Union Hotel. … 27. In 1998 and 1999 Malcolm Edwards ran the office. Malcolm Edwards vetted all correspondence in or out of the office and in many cases he changed draft correspondence. … Malcolm Edwards introduced an office procedure where incoming mail was opened by a general secretary and put on Malcolm Edward's [sic] desk. Malcolm Edwards or I wrote the major portion of outgoing mail (letters and facsimiles). I would handwrite mail and give it to the typist. Malcolm Edwards introduced an office procedure where the typist gave my outgoing mail to him. I understood this as my letters were often returned with Malcolm Edward's [sic] alterations." 95 In his response to the relevant affidavit of Mr Jones, the appellant said that he agreed "with the purport of the allegations but not the precise content". He went on to say that he "ensured that [he] was informed as much as possible of matters relating to the Mulwala Project" but said that it became apparent to him (presumably after the event) that his communications with Mr Jones had been insufficient to give him the "necessary information and knowledge that [he] needed to be properly informed". The primary judge's conclusions were inconsistent with the proposition that the appellant had not been "properly informed" about the project.

[62]

Chronology of events 96 A number of meetings of a Project Control Group occurred. This Group involved representatives of the Club, KCMS and others. Mr Jones ordinarily attended on behalf of Essington. The Minutes of the Group's meeting of 22 July 1998 referred to construction being programmed to commence in February 1999. The Minutes of meetings of 26 August 1998, 16 October 1998 and 16 November 1998 referred to the proposed commencement of construction on 3 February 1999. 97 The proposed commencement date of 3 February 1999 appears to have originated from a calculation done by Mr McNally of KCMS. That was the date by which building needed to commence if what he described as "the developer's desire to have the construction completed by about 5 December 1999 to take advantage of the Christmas holidays occupancy rates" was to be achieved. It was understandable that a programme such as this would be adopted as, if adhered to, it would have enabled advantage to be taken by the existing resort of the 1998/9 summer holiday season and by the new resort of the 1999/2000 summer holiday season. The desire to achieve this timing can be inferred to have underlain the later dealings between the parties including the reference in the 8 January 1999 conversation referred to in [103] below to the "tight programme" and the reference in the 12 January 1999 letter referred to in [104] below to a 31 January 1999 "deadline" for a valuation of the Mulwala leasehold land. 98 The draft building contract provided to CJC on 19 November 1998 provided that the construction works were to be completed by 6 December 1999. 99 In early December 1998 the appellant and Mr Jones met Mr Branagan of DMF in connection with the raising of funds for the Mulwala Project (Judgment [135]). On 8 December 1998 Mr Jones wrote to Mr Branagan supplying information "in relation to questions asked". His letter said that a builder was to be selected within ten days and that the facility sought through DMF was "required to meet payment of consultant's fees initially to enable the builder to commence work on 3 February 1999. Monthly draw-downs for the construction in accordance with attached schedule to a maximum with a take-out on or before July 1999". 100 On 10 December 1998 Mr Jones again wrote to Mr Branagan. He attached a cash-flow showing construction costs over the eleven month period from February 1999 to December 1999 of $16 M, with the cost to be incurred in February being $711,200 and that in March being $1,058,500. 101 The appellant referred in his affidavit to the letters of 8 and 10 December 1998 and to a response from DMF of 15 December 1998, commenting that "Len Jones and I determined at that stage that this money was too expensive and accordingly we decided to make further enquiries as to alternative further sources of funding". 102 Draft 4, dated 16 December 1998, of a prospectus under which MRL proposed to raise funds for the project referred to construction being programmed to commence in February 1999 and completed by December 1999. It referred to the closure of the existing resort at the end of January 1999 "to make way for the new resort". Statements to similar effect were contained in Draft 3 of 2 December 1998. The appellant conceded in cross-examination that it was likely that he would have seen that draft in December (Judgment [214]). 103 Mr Joss gave evidence, which was not contradicted by Mr Jones, of a conversation which occurred on 8 January 1999 in the following terms: "Leonard Jones said: 'We are very close to having everything in place and ready to go.' I said: 'What is the commencement date?' Leonard Jones said: 'We are still a couple of weeks off commencing.' I said: 'Are you in a position to give us a letter of intent?' Leonard Jones said: 'Colin we are really happy and appreciative of the work you have done on this but before we formally give you a letter of intent we just need to make sure the finance is signed off, the council is right and we have a few things to square away with the club.' I said: 'Given the tight program, would it be proper for our engineer to commence design on the footings?' Leonard Jones said: 'I think that is an excellent suggestion but wait until I confirm that in a letter I will get to you by Tuesday of next week.'" 104 By letter of 12 January 1999, AFS told Mr Edwards that it had identified "a couple of possible funders", but did not see any point in making a submission to MRL without a valuation of the project or confirmation that the lease term would be extended to 99 years. It said that "[w]e are concerned with the January 31st 1999 deadline as the valuation is critical to the final proposal". 105 By facsimile of 14 January 1999, Mr Jones told Mr Joss that it was in order for his engineer "to prepare engineering drawings for the foundations." He then said: "We have [a] few formalities to complete before we are able to send you a letter of appointment, [h]owever, we look forward to meeting with you at Mulwala on Monday for press announcements and a walk around the site with the Club Manager and President". 106 Reference by Mr Jones to "a letter of appointment" seems to be a further reference to what he had described in the conversation of 8 January 1999 (see [103] above) as "a letter of intent". The evidence did not suggest that execution of a formal building contract was imminent or that Mr Jones' reference to a "few formalities to complete", in his facsimile of 14 January 1999, included obtaining execution by CJC of the building contract. In these circumstances it was apparent that the parties were contemplating that work would commence prior to execution of a formal building contract and that CJC was seeking MRL's approval of that commencement. 107 On 15 January 1999 Mr Joss was told by Mr Jones that AFS would be financing the project and that CJC would have the construction job if it reduced its price by a further amount. Mr Joss immediately agreed to this (see [56] above). 108 The Minutes of the Project Control Group meeting which occurred on 18 January 1999 referred to commencement of construction on 4 February 1999, the appointment of CJC as builder for the project, and to a press announcement being made. 109 The letter from KCMS to CJC of 20 January 1999 (see [58] above) referred to "the client having notified your company as the successful contractor on the above project" and listed "items required to be undertaken for preparation of the contract". 110 On 23 January 1999 an article relating to the resort appeared in a local newspaper. It referred to Mr Joss as the contractor, to construction work commencing on 4 February 1999 and to the resort being completed in December 1999. On 27 January 1999 the appellant appended to a copy of the article a handwritten note to Mr Jones which stated: "LJG for info. Have we got the valuation yet. MLE 27/1". 111 The article, and the appellant's comment on it, were regarded by the primary judge as of significance because the article referred to the commencement of work at the beginning of February and the appellant had denied any knowledge that that commencement was to, or did then, occur. The judge said in relation to the article: "224 The [appellant] conceded in cross-examination that he had read this article in its entirety. He said that, at the time, he saw it as a 'marketing article' and that, having seen it, he asked for a letter to be sent to Mr Joss and Mr Mullarvey 'to make certain that everybody knew there were no contracts'. He also said that he asked Mr Jones to make it clear to both those persons that nothing could commence until the contracts had been completed; and that he believed that Mr Jones had done this. In addition, the [appellant] said that he had had such a conversation himself with Mr Mullarvey 'at some stage in February.'" 112 The appellant's evidence in cross-examination, to which the judge there referred, was later referred to by the judge in the following terms: "227 The [appellant's] initial evidence was thus that he had no advance knowledge that work was to start on 3 February 1999 and that he had found out about it by chance by overhearing the conversation some weeks later between Mr Jones and Mr McNamara that led on [to] the 'building for practice' understanding. The introduction into evidence of the newspaper article carrying his handwritten note to Mr Jones dated 27 January 1999 caused the [appellant] to give new and inconsistent evidence which, I am satisfied, makes unreliable his initial version and warrants a finding that he was aware on 27 January 1999 not only that work was to begin but that it was to be for the account of MRL." 113 Mr Jones' evidence was that he told the appellant early in 1999 that "the Club has stated that construction needs to be completed by December 1999 and that construction therefore needs to commence by February". 114 By a letter of 1 February 1999 to KCMS, CJC said the following: "Demolition is programmed to commence on Thursday 4 th February, 1999. Prior to Thursday could your [sic] please organise a formal letter of intent, subject to finalising [the] Contract Sum and the Contract as documented in our correspondence dated 7 th December, 1998." 115 On 2 February 1999, Mr Jones informed Mr Joss by letter that there was a delay in the "issue of [the] contract … due to paperwork required by the Club's bankers giving clear title to the land". He said that he had been assured that this was a "purely procedural matter". This appears to have been the matter referred to by Mr Jones in a note to the appellant dated 29 January 1999 in which Mr Jones said that he was advising the Club and CJC "of the delay due to documentation". The matter was referred to also in subsequent correspondence. Whilst it was regarded as delaying the preparation and execution of contract documents, it did not delay the commencement of work. 116 In a memorandum of 3 February 1999 Mr McNamara said the following to Mr Jones: "Mr Martin Reid, of Colin Joss, rang at 4.55pm today stating that the letter of intent has not yet been received and they cannot give the Demolition subcontractor the OK to proceed for tomorrow until they have this letter.

[69]

(f) CJC commenced work on receipt of the letter. 120 Mr Jones met with Mr Joss and Mr Reid of CJC at Essington's office in Sydney on 10 February 1999, the day on which work commenced at the site. The Minutes record discussion of such matters as a need for CJC each month to provide a statutory declaration confirming that subcontractors had been paid. Mr Jones acknowledged in his evidence that he was aware, from about this date, of the commencement of work and said that he informed the appellant that CJC had started demolition. He said that around this time he showed the appellant a construction programme provided by the builder and also a draw-down schedule. Whilst the appellant denied that he was so informed by Mr Jones, his response to Mr Jones' affidavit that he showed the appellant a construction programme and draw-down schedule was: "71. I admit that Mr Jones showed any documents [sic] to me as referred to in this paragraph. Those documents and the many other documents and schedules that I saw at that time were nevertheless indicative and subject to the acceptance and approval of the Board of Murray River." 121 By memo of 17 February 1999 to Mr Joss, copied to Mr Jones, Mr McNamara of KCMS responded to a request in CJC's letter of 15 February 1999 for confirmation of payment terms, that is, "five days for issue of Progress Certificate and five days after issue of Certificate/Payment is made". Mr McNamara said: "Murray River advise that the Progress Certificate will be processed within seven days of receipt of conforming Contractor's Progress Claim and payment is to be made within seven days of date of issue of Knapman Clark's Certificate of Payment". 122 On 17 February 1999, AFS wrote to the appellant, with a copy to Mr Jones, offering "interim funding" of $1.76 M "which according to your Draw-Down Schedule would cover all of February and March expenses". In cross-examination, the appellant acknowledged that on one copy he had written the words "Mulwala Valuation file" and on another "LJG for discussion". He said: "I did not understand this letter particularly and I wanted to talk to Len about it". In response to the suggestion in cross-examination that there were to be draw-downs for expenses for February and March he said "there were to be no draw-downs". 123 This answer of the appellant in cross-examination needs to be read in the context of the primary judge's finding, well supported by the evidence, that within Essington, it was the appellant, and not Mr Jones, "who played the leading role in relation to financing and MRL's financial needs" (Judgment [265]). His involvement in relation to AFS is illustrated by the facsimile message of 12 January 1999 referred to in [104] above. The subsequent letter from AFS of 3 March 1999 (see [130] below) showed that AFS was well aware that CJC had commenced work. 124 The appellant said that it was not until late February or early March that he found out that CJC was working on site. He said that he overheard Mr Jones and Mr McNamara talking about site preparation and asked them to which site they were referring. When told that they were referring to Mulwala, he said that the following conversation occurred: "I said: 'But we haven't got any contracts or finance in place for Mulwala yet. No-one should be on the site as yet.' Len said: 'Joss is on site but he's only building for practice.' I said: 'What are you talking about?' He said: 'Joss is on the site carrying out some preparatory demolition works. The Club has allowed him on the site to do this preparatory work.' I said: 'What do you mean - preparatory work?' He said: 'The first stage is demolition and I guess he's just working out what he'll need to do. The Club said it was okay for him to go onto the site and start preparing for demolition work.' I said: 'As long as we [Murray River] are not doing anything with him, we don't even have the land or financing as yet.' He said: 'I am aware of that.'" 125 In cross-examination, the appellant referred to this conversation in the following terms: "They were talking about site clearance or site works and I asked in relation to what and one or other of them was saying that it was Mulwala and I said: 'Well you can't be dealing with that' and I believe they just said that the club had allowed some preliminary site works to be carried out and I said: 'Well, we haven't got any contract with him' and that was confirmed and I said: 'Well, the club's an idiot'. That was the sort of, the context of the discussion. … I said, you know, there's no contract and there's no obligation and the comment was made by Jones, 'Oh, he's building for practice' and I said: 'Well, as long as it is not our obligation, because nothing has been transferred, there are no contracts', and that was confirmed". 126 The primary judge observed the following about this conversation: "226 Mr Jones … confirmed having spoken with the [appellant] about CJC 'building for practice'. But it is clear that this description was not intended by him to convey the meaning that CJC was not entitled to reward. The [appellant] merely assumed that, because the land (leasehold) belonged to the Club, it would be to the Club that CJC would have to look for reward under what he assumed must have been an arrangement between the Club and CJC - an assumption which, in cross-examination, he eventually accepted to be 'an incorrect and stupid assumption'". (Judgment [226]) 127 On 1 March 1999 CJC submitted its first progress clam. Of the amount claimed of $581,723.92, $284,505.50 related to Preliminaries and Consultants' Fees and $187,689 to Demolition. The remainder of $109,529.42 related to "Building Works". 128 KCMS responded the next day, saying amongst other things: "We have … verbally advised the Client that a claim has been received in the amount of $540,000 and which subject to checking appears reasonable and that our certification will occur as soon as possible following receipt of contract requirements". 129 In early March KCMS issued a Monthly Progress Report for February 1999. It referred to the commencement of demolition on 3 February, the completion of demolition on 19 February and the setting out of concrete slabs for certain of the proposed buildings. The Report attached a construction programme showing substantial work to be done in February, March and the following months. 130 On 3 March 1999, AFS wrote to a third party seeking to arrange a construction loan for MRL in the amount of $1,680,000 for a period of six months. It said that the funds were to be used to assist in the funding of "works already commenced on the site by the builder (Colin Joss & Co)". 131 On 31 March 1999, CJC submitted its Progress Claim No. 2 (relating to work done in February) in the amount of $847,437.13. 132 On 13 April 1999, KCC issued Draw Down Certificate No. 1, certifying $390,000 for payment in respect of CJC's first progress claim. 133 The appellant said that when Mr Jones gave him a copy of Certificate No 1 on 13 April 1999 he went "from a position of calm, where I understood that progression was being made towards transferring the Property and getting the finance in place, to a crisis position in an instant". He asserted that he said to a Project Control Group meeting held on that day: "How can it be that the builder is on site because the contract has not been signed. I wasn't told the builder was on site". 134 The appellant said in his evidence that at that time he "did not believe Murray River had any obligation to the Builder as Murray River did not own the land and had not as yet entered into any Building Contract". Nevertheless, the appellant received from AFS on 14 April 1999 a letter of offer to lend to MRL the amount of $440,000 "[t]o make progress payment to Colin Joss & Co Pty Ltd in the amount of $390,000.00 and associated fees with the advance". 135 Referring to the first and also subsequent certificates issued by KCC, the primary judge said that "MRL never disputed its liability for any of the certified sums" and that "MRL, by both payment and acknowledgement of liability, acted on the footing that Payment Certificates issued by KCC required payment by it" (Judgment [63] - [64]). 136 The primary judge concluded in relation to the appellant's conduct at this time: "239 There is no record of the [appellant] having said at the board meeting [of 13 April 1999] that MRL was not obliged to make the first progress payment. He was, at the time, party to efforts to raise funds to enable MRL to make the payment. Had he been of the opinion that MRL was under no obligation but that it might (or would) be in MRL's interests to meet the payment in any event, he would, as a responsible director, have raised those matters with his co-directors and sought approval of the strategy to outlay MRL funds in the absence of any liability and for the purpose of 'keeping faith' with the Club and the joint venture. He raised no such matter with the board. I am satisfied that his failure to do so supports a finding that he did not, at the time, hold the views he described in his evidence. As at 13 April 1999, he accepted that MRL was obliged to meet the first progress payment and was engaged in efforts to raise the necessary funds. And that remained his state of mind into the future" (Judgment [239]). 137 This conclusion is supported by the evidence of Mr Gamble of AFS that at a point of time in April 1999 which he was not able to recall (but which was presumably on or about 13 April 1999), the appellant telephoned him and said words to the effect: "[w]e need immediate funds in order to meet the building costs already incurred. The payment to the builder is outstanding". Mr Gamble said that he said in response: "[t]here will be significant costs involved in getting interim finance at short notice", to which the appellant responded: "[w]e need to find some finance immediately in order to pay Colin Joss his first progress claim". This, and much other evidence of the appellant's response to receipt of the first progress claim was inconsistent with a belief on the appellant's part that MRL did not have any responsibility to CJC to pay the claim, particularly when account is taken of the onerous terms to which MRL had to agree to borrow the money to enable it to pay the claim. The loan in question was from Leigh Superplan Pty Ltd in an amount of $440,000. As described by Mr Gamble, "[t]he interest rate was a fixed fee of $40,000 for the first thirty days with a further fee of $15,000 for each week over and above the initial term". From the proceeds of the loan, $390,000 was paid to CJC on 5 May 1999 in respect of the first Draw Down Certificate.

[70]

Quantum meruit liabilities were incurred 138 As pointed out in [119] above, CJC commenced work at MRL's request. MRL thereby became liable to pay to CJC the value of the work which CJC did. It is sufficient that the request was implied from the communications and the circumstances in which they occurred (Lumbers v W Cook Builders Pty Ltd (in liq) [2008] HCA 27; (2008) 232 CLR 635 at [88] - [89]). 139 The appellant submitted that whilst it was clear that the parties "intended that if a contract was formed CJC would be paid for work performed under it", it was not established that the parties intended "that, absent a contract, MRL would be liable to pay CJC for work performed". He submitted that a remedy of quantum meruit was not available where work has been done "on the basis [the party doing the work] will accept the commercial risk of a contract never coming into existence". 140 Whilst it is true that CJC (and MRL) at all times contemplated that a contract would come into existence there is no basis in the evidence for concluding that CJC was content to run the risk that it would not be paid for the work it was doing. As pointed out in the summary in [119] above, CJC made it clear that it would not commence work without a "letter of intent" but would do so if such a letter were given to it (see the communications described in [103], [105], [114] and [116] - [118] above. As the primary judge held, the letter of 4 February performed the function referred to by Allsop J (as his Honour then was) in Evans Deakin Pty Ltd v Sebel Furniture Ltd [2003] FCA 171 (at [280]) of assisting in "the recovery of money expended in the interim by the tenderer or supplier if contractual arrangements cannot be reached". 141 CJC's subsequent conduct in submitting on 1 March 1999 its progress claim for work done in February reflected an assumption on its part of an entitlement to payment notwithstanding that a formal contract had not by then been executed. The appellant could not in argument on the appeal identify any sound factual basis for his proposition that CJC was prepared to take the risk of non-payment. This was not a case where the work done was simply designed to procure the contemplated contract: such as work in preparing a quotation or time spent in abortive negotiations (see Mason & Carter's Restitution Law in Australia, 2nd ed. (2008), at [1035]). Rather, this was a case of the partial performance, at the request of MRL, of the contemplated contractual obligations. 142 The appellant also submitted that "quantum meruit requires acceptance of the benefit constituted by the work, and that no such acceptance took place in this case". His argument was that the Club, rather than MRL, benefited from the work because it was the Club which was the holder of the leasehold estate upon which the work was done. This submission should in my view be rejected. MRL, the Club and Essington were parties to a joint venture agreement dated 22 December 1998 relating to the development of the project. MRL had a clear interest in having construction work on the development proceed in the manner that it did.

[71]

When quantum meruit liabilities were incurred 143 The primary judge took the view that "[c]ompletion of each work segment was … the event that gave rise to a debt since there was no certainty in advance that the segment would be completed and the reward earned". He concluded that the time of certification by KCC should be regarded as the time of the incurring of the quantum meruit debt for the work done (Judgment [87] quoted in [27] above). My view however is that the quantum meruit liabilities arose day by day as the work was done. I do not consider that there is any basis for the view, implicit in the judge's conclusions, that CJC would not have been entitled to recover an amount representing the value of the work it had done if it were directed to stop work before it had completed any particular "work segment" or if it did not obtain certification from KCC. 144 The draft building contract which was under consideration by the parties referred in Clause 19.1 to the submission by the builder of progress claims "at the end of each month". In the period when it is relevant to consider the incurring of quantum meruit liabilities, that is, before a building contract was concluded, ex hypothesi this provision was not binding. I see no reason why a claim properly founded upon quantum meruit principles would be precluded if it were not made at the end of a month during which building work was proceeding. 145 Further, whilst, for the reasons given by the primary judge it was appropriate to have regard to the outcome of the certification process as evidence of the value of the work done (see [25] above), recourse to that process was not the only way in which the work might have been valued in the absence of a binding contract. Accordingly, I do not consider that CJC's quantum meruit rights were contingent upon certification occurring. 146 Accordingly, my view is that the liabilities of MRL to pay CJC for the value of its work accrued day by day as that work was done. The liabilities thus started to be incurred when work commenced on 10 February 1999. In light of the circumstances in which CJC commenced and continued the work, MRL came under an "unavoidable obligation" (see this expression used in Hawkins v Bank of China (1992) 26 NSWLR 562 per Gleeson CJ) to pay CJC the value of that work as soon as CJC did it. As pointed out in [79] above, those liabilities were superseded by the building contract that was concluded in April (or alternatively, in May).

[72]

The appellant's awareness of the construction work and MRL's liability to pay for it 147 The primary judge's findings that the appellant was aware of the construction work and of MRL's financial responsibility for it (see [35] above) were made in the face of denials by the appellant of any such knowledge. The appellant was extensively cross-examined, as were other witnesses, including Mr Jones. The bases upon which findings made in these circumstances can be challenged were identified by the High Court in Fox v Percy [2003] HCA 22; (2003) 214 CLR 118. For the appellant to successfully challenge the judge's credibility based findings it would be necessary for him, in essence, to show that they were contrary to "incontrovertible facts or uncontested testimony", "glaringly improbable" or "contrary to compelling inferences" (at [28] - [29]). 148 The principal matters relied upon by the appellant to support a challenge on these bases were as follows: 149 First, it was submitted that "the directors of MRL were proceeding on the basis that until and unless the building contract was signed and returned there would be no liability to CJC". This was said to be supported by a written advice from solicitors Eakin McCaffery Cox. It was said that "[i]mplicit in that advice was the view that debts would not be incurred to CJC until and unless a building contract was signed". 150 Neither that letter nor any other evidence suggested that the solicitors were aware of the facts as to commencement or continuation of construction work which gave rise to a liability in MRL on a quantum meruit basis. Their recommendation that MRL not enter into a building contract until MRL's funding was secure and it was the registered proprietor of the property is in these circumstances of no assistance to the appellant. In any event, the advice is dated 20 April 1999 and cannot have operated on the appellant's mind before that date. In light of my conclusion that a contract was entered into on or about 15 April 1999, it is the two and a half months prior to that date which are of significance in relation to the quantum meruit claim. 151 Secondly, the appellant submitted that his instruction to Mr Jones not to return the signed building contract to CJC demonstrated that he did not believe that MRL was liable to CJC, absent a contract. The giving of this instruction did not however contradict the judge's conclusion. When entered into, the contemplated building contract was to subject MRL to an obligation to pay in excess of $14 M for building works. This was an altogether different, and greater, obligation than one to pay CJC for the limited works it had done and was proceeding to do. According to the construction programmes and payment schedules which were in existence, it would be many months before a large proportion of the total works were completed. The fact that the amounts certified in respect of February and March 1999 work were $390,000 and $635,000 respectively is illustrative of this. 152 In these circumstances, it is not surprising that the appellant might have been reluctant to allow a signed contract for the total building work to go to CJC when finance had not been arranged. That state of mind is not inconsistent with a recognition on the appellant's part that such work as was done would have to be paid for by MRL. 153 Thirdly, the appellant submitted that the primary judge "was wrong to rely, in support of a finding that [the appellant] knew there were grounds to suspect that MRL was insolvent upon [the appellant's] awareness in early 1999" of the newspaper article of 23 January 1999 referred to in [110] above. 154 The judge explained the significance that he attributed to the appellant's awareness of this article and to the terms of the handwritten note that the appellant wrote in relation to it, as follows: "227 … The introduction into evidence of the newspaper article carrying his handwritten note to Mr Jones dated 27 January 1999 caused the [appellant] to give new and inconsistent evidence which, I am satisfied, makes unreliable his initial version and warrants a finding that he was aware on 27 January 1999 not only that work was to begin but that it was to be for the account of MRL. 228 The most significant matter underpinning this conclusion is the handwritten notation itself. If, as he sought to say, the [appellant] was alarmed by the prospect of work beginning without a contract and saw a pressing need to impress on Mr Joss and Mr Mullarvey the message that there was no contract (the implication being that the Club and CJC were at risk and should see themselves as being at risk), he would not have been content with merely sending the press article to Mr Jones 'for info', with an apparently casual inquiry whether the valuation had been received. The [appellant's] assertions that, after seeing the article, he told Mr Jones to put Mr Joss and Mr Mullarvey appropriately on notice about the absence of a contract and actually spoke to Mr Mullarvey himself to that effect are quite inconsistent with the handwritten notation. They are also matters not mentioned in the [appellant's] affidavit evidence or in the evidence of Mr Jones, Mr Joss or Mr Mullarvey. 229 The substantive content of the handwritten note of 27 January 1999 was an inquiry by the [appellant] of Mr Jones as to progress with the valuation. The [appellant] knew that the valuation was important to the obtaining of finance. The inquiry was thus an inquiry concerned with the general issue of the availability of finance to MRL. Concern about (or interest in) that matter was consistent with an understanding and expectation on the [appellant's] part that MRL would have to pay for construction work which, as the article made clear, was about to begin" (Judgment [227] - [229]). 155 I do not consider that there is any error evident in this reasoning of the judge, certainly none which would warrant appellate intervention consistently with the Fox v Percy principles. The judge quite properly used the contents of the appellant's note, and its demonstration of the appellant's awareness of the proposed commencement of work, to assist in his assessment of the appellant's evidence. He did not in my view draw from the note any inference that was plainly unavailable. The appellant's response to the article indicated a consciousness of MRL's need for finance, which in turn suggested a consciousness on his part of the need for CJC to be paid for the work the article said it was about to commence. 156 Fourthly, the appellant challenged the judge's finding that the introduction into evidence of the newspaper article caused the appellant to give "new and inconsistent evidence". However, there was a proper foundation for this view because in his affidavit of 28 October 2004 (referred to by the judge as the appellant's "initial evidence": Judgment [227]), the appellant said that "[a]t no time prior to April 1999 did anyone discuss with me any proposal whereby the Building Works were required to commence on or around 1 February 1999". It was open to the judge to take the view that this evidence was inconsistent with the evidence that the appellant gave, for the first time, when being cross-examined about the newspaper article, that "he told Mr Jones to put Mr Joss and Mr Mullarvey appropriately on notice about the absence of a contract and actually spoke to Mr Mullarvey himself to that effect" (Judgment [228] quoted in [154] above). 157 Fifthly, the appellant submitted that the judge failed to have proper regard to the evidence of the appellant, confirmed by Mr Jones, that he was told by Mr Jones in late February that CJC was on the site doing "work for practice". The appellant's evidence in cross-examination was not that he thought that CJC was working for no remuneration but that responsibility to pay for the work was, in the absence of a contract with MRL, upon the Club, and not MRL (Judgment [226]). However the judge rejected the appellant's evidence that he believed that the obligation was that of the Club and not MRL, relying principally upon conduct of the appellant in mid-April in connection with two meetings of directors of MRL (Judgment [238-239]). No error is evident in his Honour's reasoning in that respect. 158 Bearing in mind that the appellant did not assert that he understood Mr Jones' reference to CJC "building for practice" as indicating that CJC was working for no reward and that it was open to the judge to reject the appellant's evidence that he thought that the conversation conveyed that it was the Club's and not MRL's liability, the conversation does not point inexorably to the view that the appellant did not believe that MRL would be financially responsible for the work being done by CJC. The conversation is not therefore a basis, consistent with the principles in Fox v Percy, for interfering with the judge's findings. Further support for this conclusion is to be found in the point made in [151] - [152] above. A belief that CJC did not have the benefit of a contract for the $14 M building project, even though it was to be paid for the limited work that it was doing, may well have inspired the belief that CJC was "building for practice". 159 Sixthly, contrary to the appellant's submission, self-serving statements made by the appellant in a letter of 21 May 1999 and in a memorandum of 26 May 1999 after MRL had experienced difficulty in borrowing to pay amounts certified as due to CJC and after CJC had written to MRL on 13 May 1999 alleging that MRL (as well as KCMS and Essington) was in breach of contract, do not constitute compelling evidence suggesting error in the judge's conclusions as to the appellant's state of mind at earlier times. 160 Finally, the appellant asserted that the primary judge was mistaken in recording that the appellant had "sought to say" that when he saw the newspaper article on 27 January 1999 he was "alarmed by the prospect of work beginning without a contract" (Judgment [228]). The judge appears to have been mistaken in thinking that the appellant said this in evidence. In fact, when the proposition was put to him in cross-examination he denied it. Nevertheless, the evidence which the appellant gave as to conversations he had after seeing the article (which the judge described as "new and inconsistent evidence": see Judgment [227] quoted in [154] above) could fairly be understood as carrying with it the suggestion by the appellant that he was alarmed when he saw the reference in that article to the commencement of work. Accordingly, the judge's misapprehension as to the evidence was not a material one. What the judge appears to have thought was explicit in the appellant's evidence was implicit in it. 161 Looking at the position more generally, my view is that the primary judge's conclusions as to the appellant's awareness were well open to him. The matters expressly relied upon by the judge are referred to in [36] above and are referred to again in the Chronology of Events which appears in this section of the Judgment (see [96] - [137] above). In addition to these matters I would add reference to the following matters, in particular, as providing support for the judge's conclusions:

[78]

Was MRL insolvent in the months of February and March 1999, it being accepted that it was insolvent for the remainder of the period during which the relevant debts were allegedly incurred? 162 In the course of argument on the appeal, the appellant restricted the ambit of his challenge to the primary judge's finding that MRL was "insolvent at all times from its creation until 30 June 1999 - unless it had resources and funding capability not reflected by the balance sheets". The challenge was restricted to a contention that MRL was only insolvent from about the end of March (Appeal Transcript p 145). The appellant's argument was that MRL was not insolvent during the months of February and March 1999, when building work occurred, because its borrowing capacity of between $440,000 and $600,000 as found by the primary judge, exceeded, or at least was close to, the total of the company's deficiency in current assets as at December 1998 of $88,000 and the amount of the first certificate in respect of work done by CJC, being $390,000. 163 One answer to this submission is that the borrowing capacity found by the primary judge was one to borrow funds only "for a very short term or payable on demand" (see Judgment [99] quoted in [31] above). As the judge said, such capacity "does not enhance solvency: it merely substitutes one form of immediate (or near immediate) obligation for another". The loan of $440,00 from Leigh Superplan, which was the foundation for the judge's finding that that capacity existed to the extent of $440,000, was in this category because it was for a period of one month only and on very onerous terms (see [33] above). Any additional borrowing capacity in the order of $160,000 can similarly be disregarded because the loan offer which led to the primary judge finding the capacity to exist appears to have been on equally unattractive terms, the appellant's response upon becoming aware of the terms of that additional loan being that "there was no point in proceeding … as the loan would do little more than refinance the Leigh loan" (Judgment [128]). 164 Even accepting that MRL's current asset deficiency in February and March 1999 was only the small deficienty which existed in December 1999 and was not a higher amount of, or heading towards, the deficiency of $1.5 M found to exist in May 1999, MRL was not able to pay a liability to CJC of $390,000 out of its own assets. Its ability to borrow to pay that amount did not indicate that it was solvent because borrowing would only have substituted for one liability which MRL could not pay out of its own assets, another liability, being the obligation to repay the borrowing soon to fall due, which it was similarly unable to pay out of its own assets. 165 There is a further basis, as follows, upon which the appellant's submission should be rejected. 166 As indicated in [31] above, ASIC called expert evidence on the issue of insolvency from Mr Christopher Chamberlain. Mr Chamberlain gave evidence that "on each day in the period 10 February to 31 August 1999 MRL was insolvent". That evidence was not challenged by the appellant's cross-examination of him, nor was it sought to be contradicted by any evidence called by the appellant. The primary judge adopted and relied upon financial information produced by Mr Chamberlain, although the judge did not expressly refer to Mr Chamberlain's ultimate conclusion as to insolvency. 167 On appeal, the appellant raised for the first time the argument which is referred to in [162] above. Apart from the response referred to in [163] - [164] as to the limited nature of MRL's borrowing capacity, a response to the argument would require an examination of how and when MRL's current asset deficiency of $1.5 M as at May 1999 identified by Mr Chamberlain, and by the primary judge, arose. Did, for example, the much lower deficiency of $88,000 at December 1998 continue until the much greater deficiency of $1.5 M arose in May, or was a substantial part of that May deficiency in existence as at February or March 1999? These are factual questions which ASIC and Mr Chamberlain would have needed to address if it had been put to Mr Chamberlain that, contrary to his evidence, MRL was not insolvent in February and March 1999. The appellant was not able to demonstrate any justification for the point not being raised at first instance. Accordingly, he should not be allowed to raise the new point on appeal because, if raised at first instance, it would have led to additional evidence being given that might have contradicted the now raised submission (see Suttor v Gundowda [1950] HCA 35; (1950) 81 CLR 418 at 438). 168 The appellant submitted that he was justified in not challenging Mr Chamberlain's evidence of insolvency during February and March because ASIC had contended at first instance that the debts upon which it relied were incurred at the dates which were 10 working days after the issue by KCC of certificates (none having been issued before the end of March 1999) and did not put an alternative submission that the debts accrued day by day to reflect the value of the work done by CJC each day after the commencement of work on 10 February. If debts accrued on this basis, a considerable amount accrued before the end of March: not only the $390,000 certified in April in respect of February work but also the $635,000 which was subsequently certified in respect of work done in March. Thus, so the appellant contended, a considerable part of the indebtedness relied upon by ASIC was incurred during February and March when the company was not insolvent. 169 An examination of what occurred at first instance indicates that this submission of the appellant should not be accepted. As demonstrated below, the relevant alternative submission was clearly kept alive by ASIC. 170 In its "Outline of Opening", ASIC contended, in the alternative to other submissions, that the relevant debts became due and payable to CJC "during the period 10 February 1999 to 20 September 1999 under the Building Contract Agreement, or pursuant to quantum meruit" (at Paragraph [74]). Earlier in the opening it had said that "MRL, on each day that it allowed CJC to undertake work in the period 1 February 1999 to [20 September 1999], was insolvent or became insolvent by allowing the work to be undertaken" (at Paragraph [9(b)]). In his oral opening, counsel for ASIC referred to the various alternatives set out in the written opening (Transcript p 27). 171 In ASIC's final written submissions it was said that "there are four alternative points in time in respect to which it is submitted that each of the six debts was incurred" (see Paragraph [116]). The second of these was described in the following terms: "Secondly, a debt was incurred at each point in time CJC carried out building work after CJC had commenced on site at Lot 29, on the basis that at that point in time an amount owing to CJC for work done and services performed during the month became ascertainable, albeit that the debt was contingent on a draw-down certificate being issued in due course". 172 ASIC concluded on this point by saying that "[I]n any event, on any view, it matters not which of the four alternatives is adopted by the Court as to the point in time when each debt was incurred. At all relevant times between 1 February 1999 and 30 September 1999 MRL was insolvent …" (see Paragraph [118]).

[85]

(e) The appellant was prepared to let CJC undertake its work at the risk, of which the appellant knew but of which he had no basis for thinking CJC was aware, that MRL would not be able to pay CJC for the work. 178 Rather than, as the appellant's submissions put it, committing "an error of judgment in not calling a halt to the development altogether", the appellant's conduct in not doing that involved preservation of his own interests in the development proceeding promptly (see [97] above as to the timing involved) at the expense of CJC being subjected to a risk of which it was unaware, but of which the appellant was aware, that CJC would not be paid for the work. 179 In this way, the appellant sought to profit at the expense of CJC. There was no error in the primary judge concluding that the appellant's conduct was "morally wrong" and that there "were elements of moral unconscionability and moral turpitude in what the [appellant] allowed to happen" (Disqualification Judgment [35] quoted in [47] above). 180 It was submitted on behalf of the appellant that there was a lack of logic in the primary judge's reasoning because if CJC suffered a disadvantage in not being able to obtain payment because finance for the project could not be obtained, so also would MRL (and therefore the appellant's interests), as MRL would not be able to proceed with the Project and would be wound up on the basis that it was insolvent. 181 The flaw in this submission is that CJC was being subjected to a risk of non payment of which, on the inferences to be drawn from the evidence, it was not aware and, had it been aware, which it would not have been prepared to take. Thus if the appellant had been "straight forward" (the judge having said that he was not: Judgment [35]) and told CJC that MRL did not accept its liability to pay for the work being done by CJC and that MRL had not secured finance, the strong inference from the evidence is that CJC would have ceased work (and, indeed, not have commenced it in the first place). This would have been to the detriment of MRL because in all likelihood it would have precluded adherence to the schedule which was seen as critical to the development. Further, what the appellant apparently saw as a strong prospect of obtaining finance and having the development completed would have been prejudiced. 182 The appellant next complained that the primary judge erred in finding that the appellant was not contrite because he did not acknowledge his wrong- doing. In my view, the judge did not err in this respect. Whilst success on appeal would have vindicated the appellant's position, if (as is my view) he is to fail on his appeal and have this Court decline to interfere with the findings against him at first instance, the consequence is that there has been wrong doing on his part which he has not been prepared to acknowledge. This was a proper factor for the judge to take into consideration in considering a disqualification order. 183 Next, it was submitted by the appellant that the primary judge was wrong to infer that the appellant's conduct was productive of "some appreciable loss" for CJC and the Club (see [44] above). 184 Mr Joss gave evidence as to the financial consequences to CJC of what occurred in connection with the Project. His calculations led him to give evidence that "[a]t a minimum CJC has incurred losses totalling $2,781,146". Likewise, the Chief Executive Officer of the Club, in an affidavit of 16 March 2006, gave evidence of the financial consequences to the Club of what occurred in connection with the Project. He concluded by saying that he expected the Club to make a loss in relation to the land of approximately $1,823,929. The appellant has not provided any acceptable reason why this Court should interfere with the limited finding made by the primary judge in this context, not being one as to specific amounts of loss, but simply one that the appellant's conduct was productive of "some appreciable loss" to both the Club and CJC. In the absence of any submissions on behalf of the appellant indicating that the evidence of Mr Joss or the Chief Executive Officer of the Club was able to be significantly eroded by cross-examination, the conclusion must be reached that there was material available upon which it was open to the judge to make his finding of "some appreciable loss". 185 The appellant next submitted that the primary judge erred in taking account of the comments of external representatives of companies of which the appellant had been a director and of Rogers CJ Comm D in a 1992 unreported decision (see [45] above). 186 I do not agree with this submission. It was appropriate, as the primary judge held, for him to consider the evidence of good character led by the appellant "in light of the evidence that liquidators and receivers, in three diverse situations, saw fit to make formal submissions to an enforcement authority calling into question the [appellant's] standards of corporate behaviour and his probity [and] that a judge of this court made findings in 1992 critical of his commercial judgment and the standard of his corporate behaviour (Disqualification Judgment [51]). The judge expressly noted (Disqualification Judgment [38]) that the complaints were "without proof in court proceedings" (at least, not in court proceedings to which the appellant was a party) and thus, appropriately, did not treat the evidence as more than evidence of complaints, albeit complaints by persons in authority who had duties to form views as to conduct. It has not been shown that such evidence of complaints was taken into account in an appropriate way. 187 Next, the appellant submitted that the primary judge did not give "due weight" to the fact that a ten year disqualification would "be likely to put an end to his commercial career". It could not be contended, nor was it contended by the appellant, that the judge was not conscious of this fact, as the judge expressly adverted to it (Disqualification Judgment [64]). The weight to be attributed to that factor was a matter for the judge in the exercise of his discretion as to the making of a disqualification order. No basis has been shown for interfering with that exercise of discretion. 188 The final submission is that the judge erred in concluding that the appellant "attracts a greater degree of culpability than did Mr Jones" who was disqualified for five years. He submitted that Mr Jones was "far more involved in and responsible for the relevant events than Mr Edwards". However his Honour's findings, and the evidence relevant to the relationship between the appellant and Mr Jones, indicate that the appellant was the senior of the two, had considerably more relevant experience and was a person to whom Mr Jones deferred in the conduct of the business (see [92] - [95] above). It was in my view open to the judge to take the view that he did. 189 As none of the particular grounds upon which the appellant challenged the disqualification order have been made out, his challenge to that order must fail.

Edwards v Australian Securities and Investments Commission

At a glance

Court

Decision date

Before

Source

Judgment (87 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (35)

Cited By (8)