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EQUITY - general principles - unjust enrichment - where liquidator cross-claimed that cross-defendants were unjustly enriched by certain repayments made by the liquidator - whether breach of fiduciary duty - whether breach of no conflict or no profit rule - whether basis for account of profits established - application of rule in Cherry v Boultbee - whether liquidator estopped from pursuing claims by Anshun estoppel. - [2015] NSWSC 1465 - NSWSC 2015 case summary — Zoe
EQUITY - general principles - unjust enrichment - where liquidator cross-claimed that cross-defendants were unjustly enriched by certain repayments made by the liquidator - whether breach of fiduciary duty - whether breach of no conflict or no profit rule - whether basis for account of profits established - application of rule in Cherry v Boultbee - whether liquidator estopped from pursuing claims by Anshun estoppel.
Several background facts are agreed between the parties. Other matters are disputed and I will reach determinations about them below. Mr Ghougassian was at all relevant times the public officer of SGAS. Mr Ghougassian and his wife, Mrs Ghougassian, are also the directors of Nareg Ltd, which wholly owns the shares in Nareg Internet Pty Ltd ("Nareg Internet"), of which Mr Ghougassian is a director. Mr Ghougassian and Mrs Ghougassian also own the shares in Nareg Bookshop Pty Ltd ("Nareg Bookshop"), of which Mrs Ghougassian is a director. SGAS's principal asset was the land from which it operated, which was subject to a first registered mortgage to the Plaintiffs and a second registered mortgage to the Commonwealth Bank of Australia ("CBA"). The mortgage in favour of the Plaintiffs secured monies owing under a deed of loan dated 6 May 2005 between them and SGAS. The Plaintiffs had executed a deed of priority in favour of CBA. Following default in respect of the loan by CBA to SGAS, CBA obtained orders for possession of the land occupied by SGAS and sold it as mortgagee and, after discharging the debt owed to it, CBA paid surplus proceeds of $7,687,728.53 into Court. SGAS was wound up by order of the Court made on 21 June 2010 and Mr Sutherland was appointed as its liquidator.
The history of the winding up of SGAS was summarised by White J in a judgment dealing with an accounting for amounts owing by SGAS to the Plaintiffs and secured by mortgage (Sutherland v Ghougassian [2012] NSWSC 125 at [2] - [28]) ("2012 Judgment"). In the proceedings before White J ("2012 Proceedings"), the Plaintiffs were ordered to and provided accounts of the amounts they claimed SGAS owed to them. Mr Ghougassian then claimed the amount of $2,328,338.53 for the period 17 December 2003 to 1 December 2010 and Dr Ghougassian claimed the amount of $624,289.30 for the period 26 June 2003 to 19 November 2010. In the 2012 Judgment, White J noted that he had determined the amount secured by the mortgage on the available evidence (at [78], [95]) and that his decision was "made on limited evidence" and did not "create any issue estoppel on the question of what is the total amount that may be owed" to the Plaintiffs by SGAS (at [98]). His Honour held that Mr Ghougassian was owed $560,705 secured by the mortgage (at [78]) and Dr Ghougassian was owed $296,239.29 secured by the mortgage (at [95]), exclusive of interest, and ordered that amounts of $881,878.95 and $432,045.47 be paid to Mr Ghougassian and Dr Ghougassian respectively, inclusive of interest, and the balance of the monies then held in Court were then paid to the liquidator.
I will refer below to evidence led in the 2012 Proceedings and to findings made by White J in the 2012 Judgment. Both parties sought to rely on those findings to establish estoppels for some purposes and contested those findings for other purposes. I consider it preferable not to treat those findings as giving rise to an estoppel, other than in respect of White J's findings as to two amounts due to Mr Ghougassian to which I refer below, where his Honour had expressly observed that he had reached his judgment based on limited evidence and that it did not give rise to an estoppel as to the wider dealings between the Plaintiffs and SGAS. I have had regard to evidence that was led in the 2012 Proceedings and also tendered by agreement of the parties in evidence before me, subject to his Honour's rulings on evidence. I have not treated his Honour's findings as determinative of any fact. However, the evidence before me substantially overlapped with the evidence before White J and, as will emerge below, I have largely reached the same findings as his Honour did in respect of significant issues dealt with in the 2012 Judgment.
In a further judgment delivered on 9 October 2012 (Re St Gregory's Armenian School (in liq) [2012] NSWSC 1215) ("Removal Judgment"), Brereton J noted that, as well as secured debts to the Plaintiffs at the time of the winding up, SGAS owed approximately $1.2 million to the Australian Taxation Office and approximately $300,000 to employees and former employees, and had incurred the costs of the winding up proceedings, and also recognised the possibility that additional sums were owed to the Messrs Ghougassian that were not covered by the mortgage given by SGAS in their favour.
The process of lodgement of Mr Ghougassian's proofs of debt and consideration of those debts continued over an extended period, as set out in the liquidator's rejection of the proofs of debts (Ex P1). On 10 May 2012, the liquidator called for formal and updated proofs of debt to be submitted by 30 May 2012, in accordance with reg 5.6.39 of the Corporations Regulations 2001 (Cth). On 4 September 2012, the liquidator issued a notice under reg 5.6.53(3) of the Regulations, requesting further and better particulars and documentation from Mr Ghougassian to support his claim. On 7 February 2013, the liquidator issued a notice of rejection of formal proof of debt or claim with respect to the entirety of Mr Ghougassian's claim, on the basis that he had not received a response to the request for further and better particulars and documentation. On 4 March 2013, Mr Ghougassian responded to the questions asked and also provided a further document in support of the proof of debt. The liquidator then wrote to Mr Ghougassian's legal representative on 4 June 2013 and, on 21 June 2013, Mr Ghougassian, Dr Ghougassian and their legal adviser met with the liquidator's staff. Twenty-two further proof of debt forms were lodged after 4 June 2013 relating to monthly interest on an equity line of credit account in Mr Ghougassian's name for the period 31 August 2011 - 31 June 2013, extending the period for which such interest was claimed in earlier proofs of debt. An additional eight proofs of debt were provided on 3 July 2013, relating to funds advanced to SGAS by Mr Nicholas Megalaconomos (to whom I will refer as "Mr Conomos", by which name he is commonly known) between 2006 and 2008.
On 5 December 2013, the liquidator rejected Mr Ghougassian's proof of debt in whole, for reasons set out in a letter of that date; accepted Dr Ghougassian's proof of debt in the amount of $434,143.89, subject to claimed offsets of $226,586.03, and allowed that claim in an amount ultimately quantified as $211,141.36. Mr Ghougassian then included additional proofs of debt in his affidavit dated 5 May 2014 filed in these proceedings. The liquidator subsequently adjudicated those additional proofs of debt and, on 24 June 2014, allowed them in the amount of $55,000, rejected the balance and set off that amount against the amount of $483,719.22 which the liquidator contends that Mr Ghougassian owed SGAS. Mr Ghougassian ultimately submitted 247 proofs of debt and Dr Ghougassian submitted 158 proofs of debt. The liquidator prepared a claims register summarising the reasons for rejection of each of the claims in respect of Mr Ghougassian (Ex D13, RMS 6) and Dr Ghougassian (Ex D10, RMS 2 Annexure 5). The basis of the adjudication of Mr Ghougassian's claims was updated in a schedule prepared by the liquidator and tendered by the Plaintiffs (Ex P11).
I should note that there seems to me to be a fundamental difficulty with the approach adopted by Mr Ghougassian and Dr Ghougassian in lodging numerous separate proofs of debt for separate transactions. That difficulty was not raised by the liquidator in rejecting the proofs of debt or in his Defence filed in the proceedings and was only identified in the course of closing submissions, as a result of a submission made by Mr King (who appears for the Messrs Ghougassian) in respect of a somewhat similar issue arising in the liquidator's Cross-Claim. It seems to me that the approach that Mr Ghougassian and Dr Ghougassian adopted, in identifying individual transactions that are said to give rise to debts, without taking any account of the numerous payments that were made by SGAS to Mr Ghougassian and Dr Ghougassian, potentially in repayment or partial repayment of debts including those debts, means that the claims made by Mr Ghougassian and Dr Ghougassian do not disclose the total amount of any debt that SGAS owes them, and potentially overstate any such debt. That proposition may be simply illustrated. If a lender lends a company the amounts of A, B, C, D, and E, and 242 further amounts, and the company makes repayments of the amounts of F, G and H and other unidentified repayments, the debt owed by the company to the lender cannot be determined by lodging 247 proofs of debt and disregarding all transactions that amount to repayments or possible repayments of the debt.
Had that point been squarely raised by way of defence, it may have been sufficient to determine the matter, because the Court arguably could not have been satisfied that the liquidator would have been wrong in rejecting the proofs of debt, in their present form, in their entirety. However, I do not determine the matter on that basis, because the case was not conducted on that basis, but by reference to the individual transactions as to which Dr Ghougassian and Mr Ghougassian had lodged proofs of debt. In the event, I reach largely the same result with respect to the individual transactions as would potentially have been reached by reference to the fact that Mr Ghougassian and Dr Ghougassian had not established, by their proofs of debt or in this application, any amount SGAS owed them, having regard to the totality of the dealings between SGAS and each of them. A similar difficulty arises, in a somewhat different context, in respect of the liquidator's Cross-Claim, which I will address below.
[2]
The Plaintiffs' affidavits and other evidence
The Plaintiffs tendered the entire transcript of the 2012 Proceedings before White J over two days (Ex P8, Ex P9). The Plaintiffs also relied on Mr Ghougassian's affidavit sworn 12 April 2011 in the 2012 Proceedings, subject to rulings on admissibility made by White J. That evidence contained a conclusory statement that SGAS owed Mr Ghougassian monies as set out in the schedule of accounts in issue in the 2012 Proceedings, which is inconsistent with the amount now claimed by Mr Ghougassian in these proceedings. The Plaintiffs relied on a further affidavit of Mr Ghougassian sworn 14 June 2011 in the 2012 Proceedings, subject to rulings on admissibility by White J, which set out the history of the mortgage arrangement between SGAS and Mr Ghougassian, and also referred to particular advances that Mr Ghougassian claimed to have made to SGAS.
The Plaintiffs read Mr Ghougassian's affidavit sworn 14 March 2014 in these proceedings, which referred to the 2012 Judgment in a selective manner, including reference, for example, to White J's observations as to the honesty of Mr Ghougassian and Dr Ghougassian's evidence without reference to the matters in which his Honour had rejected their evidence, to which I will refer below. Mr Ghougassian referred to his proofs of debt as his "ambient claim", although what was intended by that reference is perhaps unclear, and made various statements largely of an argumentative or conclusory character as to the basis of the claims. The Plaintiffs also relied on Mr Ghougassian's affidavit dated 5 May 2014 which made several corrections to his earlier affidavit, and added additional proofs of debts to that affidavit. The Plaintiffs also read a further affidavit of Mr Ghougassian dated 12 November 2014, apparently directed to the Defence to the Cross-Claim, which referred to accounts lodged with the liquidator with ASIC and asserted SGAS's solvency based on those accounts. I do not consider it necessary to determine whether SGAS is solvent, because Brereton J dismissed a previous application by the Messrs Ghougassian to remove the liquidator and no attempt has been made in these proceedings to reagitate that issue, the liquidator remains in office and he and SGAS have standing to bring the Cross-Claim. That Cross-Claim does not involve any cause of action which depends on proof of SGAS's insolvency.
The Plaintiffs also relied on Mr Ghougassian's further affidavit dated 20 March 2015 which referred to his role as public officer of SGAS and as its principal fundraiser and its financial controller and as signatory to SGAS's cheques. Mr Ghougassian also referred to his business interests in the period from 1985 to 2010, which included Nareg Limited, Nareg Internet and Nareg Bookshop. Mr Ghougassian also referred in that affidavit, in evidence admitted with a limiting order under s 136 of the Evidence Act 1995 (NSW) as a submission only, to the proper characterisation of the claims referred to in his proofs of debt and also referred, in evidence admitted with a limiting order under s 136 as to his state of mind, to his "belief and intention" that he would be responsible to SGAS in respect of financial assistance he arranged or provided and which SGAS had the obligation to repay. I rejected several conclusory statements in that affidavit that previous borrowings by Mr Ghougassian were "for the benefit of SGAS" or "to support SGAS". I will refer to other aspects of that affidavit in respect of specific issues below.
Mr Ghougassian also referred, in his affidavit dated 20 March 2015, to limited documentary evidence but stated that "unfortunately many documents are missing and would have to be subpoenaed from others". There has been ample opportunity for the Plaintiffs to issue such subpoenas in the period that it has taken for these proceedings to reach a hearing. Mr Ghougassian also contended that, notwithstanding orders for production made by the Court and the fact that 140 boxes of documents held by the liquidator in a storage facility (which, on the liquidator's evidence, hold few relevant financial documents) have been made available for inspection, the Plaintiffs "have not had access to all of the relevant financial records in the possession and custody of the Liquidator". I do not consider that the claim that the liquidator has not made available what he holds for inspection has been established by the evidence, although it appears that the Plaintiffs have not taken the opportunity which they have had for several years to inspect the 140 boxes held in storage. It seems to me that the most likely position, consistent with the liquidator's evidence which I accept, is that SGAS did not maintain adequate financial records at the time the liquidator was appointed, or alternatively, for whatever reason, the liquidator was not provided with such relevant documents as SGAS did maintain at the time he was appointed, and those documents never passed into his possession. I note, for completeness, that the Plaintiffs had possession of SGAS's premises for a significant period after the winding up order was made and before receivers appointed by CBA were able to take possession of those premises and grant the liquidator access to them. There is also a dispute between the parties, which was also raised in the 2012 Proceedings, as to the availability of computer records made by the Plaintiffs. There is evidence that the liquidator has offered to make available all computers held by SGAS to the Plaintiffs. It seems to me that it was a matter for the Plaintiffs to lead such evidence as was available from the computers, where they had been offered the opportunity to take possession of them, to seek to establish the debts on which they rely.
There were inconsistencies between Mr Ghougassian's evidence in the hearing before me and earlier evidence that he had given when he was examined on other occasions. I will refer to an inconsistency in respect of his evidence as to dealings between SGAS on the one hand and Nareg Bookshop and Nareg Internet on the other in dealing with the liquidator's Cross-Claim against him below. Although that inconsistency was of limited significance in determining the Cross-Claim, the inconsistencies between his evidence given on different occasions undermines the cogency of Mr Ghougassian's evidence, and that is significant where Mr Ghougassian relies substantially on his own evidence to seek to identify the character of particular transactions between him and SGAS.
I consider that I should approach Mr Ghougassian's evidence, particularly in respect of individual transactions, with caution. It is not necessary to find whether Mr Ghougassian gave his evidence honestly, at least in the sense that that evidence reflected his strong beliefs as to what occurred, or was consciously shaped to advance his claims. I am satisfied that his conviction of the rightness of his cause is so overwhelming that it has shaped large parts of his evidence. His belief that all payments made by him and many payments made by third parties to SGAS were in the nature of loans, so that they could be now recovered in the liquidation (and used, he says and I assume, for the purposes of establishing another school) is so strongly held that he is now unable to give objective evidence as to the particular transactions. It may be that, with the passage of time and the ongoing dispute with the liquidator, that position is now worse than it was when Mr Ghougassian gave evidence before White J in the 2012 Proceedings. However, I have also borne in mind that difficulties with Mr Ghougassian's evidence do not establish the converse of that evidence, in the sense that Mr Ghougassian may still have provided funding and services to SGAS, as a matter of fact, although his evidence to that effect is imprecise, contradictory or now distorted by his belief as to the rightness of his cause. Indeed, the 2012 Judgment indicates that Mr Ghougassian had in fact provided such funding to SGAS, at least to the extent of the secured loans that White J ordered be repaid to him. That is matter of some importance when I turn to the liquidator's Cross-Claim below.
Both White J and Brereton J have also previously pointed to somewhat similar difficulties with aspects of Mr Ghougassian's evidence in earlier proceedings, although I have formed my view of that matter based on his evidence before me. In the 2012 Judgment, White J noted (at [24]) that he thought that Mr Ghougassian gave his evidence honestly, although there were respects in which that evidence was not satisfactory, and he rejected his evidence as to the terms of SGAS's agreement as to advances by Dr Ghougassian to SGAS. His Honour noted that he would not reject his evidence about an advance, merely because it was not corroborated, particularly where that corroboration may be available on computers held by the liquidator that have not been examined by him. I would give less weight than White J to the fact that computers have been in the possession of the liquidator, where, as I noted above, they have been available for collection by the Plaintiffs over a long period, and they have not chosen to collect them, inspect them or lead evidence of their contents. Brereton J also referred to Mr Ghougassian's evidence in the Removal Judgment, noting that:
"There are considerable difficulties with his evidence. He was consistently inclined to place on circumstances the most sinister interpretation where it pertained to the liquidator, and the most favourable when it pertained to [the Plaintiffs]. While this is to an extent not unnatural, in this case it was extreme."
His Honour also indicated that, on matters of controversy, he regarded Mr Ghougassian's evidence as unreliable. I have reached the view that Mr Ghougassian's evidence at least needs to be approached with caution for the reasons noted above.
The Plaintiffs also relied on several affidavits of Dr Ghougassian read in the 2012 Proceedings and tendered in these proceedings, and on his further affidavit evidence read in these proceedings. I will refer to Dr Ghougassian's evidence in dealing with the liquidator's partial rejection of his proofs of debt below.
The Plaintiffs also rely on an affidavit of Mrs Ghougassian dated 2 March 2015, which was read without objection, although it did no more than indicate that Mrs Ghougassian had read Mr Ghougassian's affidavits sworn 14 March 2014 and 12 November 2014 and agreed with his recollection and the statement of events to which he deposed. Mrs Ghougassian's further affidavit dated 23 March 2015 indicated that she had read Mr Ghougassian's affidavit sworn 20 March 2015 and agreed with and endorsed that affidavit so far as it referred to her or the actions of SGAS board. It emerged from Mrs Ghougassian's cross-examination that she had not in fact read Mr Ghougassian's affidavits and had relied on his oral explanation of the content of his affidavits to her. Both for that reason, and because one witness's adoption of the complex evidence of another witness is of little weight, I give little weight to Mrs Ghougassian's evidence.
The Plaintiffs also rely on the affidavit of Mr Hrair Badelian dated 8 June 2011 read in the 2012 Proceedings, subject to rulings on admissibility made by White J, which referred to the 2003 annual general meeting of SGAS to which reference was made in the 2012 Judgment. The Plaintiffs also relied on affidavits of several witnesses dealing with monies they had paid to Mr Ghougassian or SGAS, including the affidavits of Mr Raphael Ghougassian dated 23 January 2014, Mr Zhenik Yoonan dated 24 January 2014 and Mr Hrair Badelian dated 24 January 2014. I will refer to those affidavits in addressing particular issues below. The Plaintiffs also rely on Mr Badelian's further affidavit dated 9 April 2015, which I will address below in respect of Mr Ghougassian's claim in respect of monies paid by third parties to SGAS or to him to be provided to SGAS. The Plaintiffs also relied on an affidavit of Mr Conomos dated 5 March 2015, to which I will refer below in dealing with monies paid by Mr Conomos. The Plaintiffs also relied on Mr Raphael Ghougassian's affidavits dated 5 March and 7 and 8 April 2015 to which I will refer in respect of the claim for gardening and other chattels below.
The Plaintiffs relied on an affidavit of Mr Lott dated 8 June 2011 read in the 2012 Proceedings, subject to the rulings as to admissibility of White J. Mr Lott was SGAS's accountant and he referred to the accounting on which the Plaintiffs relied in the 2012 Proceedings and to schedules of monies owing to the Plaintiffs including compound interest, and made a conclusory statement that:
"[t]o the best of my knowledge and belief the recorded entries in the schedules are true and correct".
I accept that the relevant schedules (Ex D14, 1500-1502) maintained by SGAS were partly a business record of SGAS, although additions were later made to them (probably by Mr Ghougassian) providing for calculations of compound interest. In the 2012 Judgment, White J noted that those additions were not part of any business record of SGAS and were not evidence of the debt owed to Mr Ghougassian. I take the same view. White J placed some weight on, and I would also place weight on, that record of Mr Ghougassian's loan account with SGAS as likely to be an accurate record of the state of account between Mr Ghougassian and SGAS. However, that schedule provides limited assistance to Mr Ghougassian in these proceedings. First, many of the amounts recorded in it relate to claims for interest on Mr Ghougassian's home loan, which I will address below. While I accept that schedule is an accurate record of those amounts, I do not consider that a proper basis for treating those amounts as a liability of SGAS has been established, for the reasons noted below. Second, to the extent that other amounts are recorded as liabilities of SGAS to Mr Ghougassian, many of those amounts were repaid to him as a result of the orders made in the 2012 Proceedings (see, for example, the amounts claimed in proofs of debts ("PODs") 160-165 and 167, to which reference is made in that record) and other amounts in the schedule relate to amounts advanced by third parties (for example, the amount claimed in POD 168, referable to an advance by Mr Badelian) which White J found, and I also find, were not properly repayable to Mr Ghougassian. The schedule, and Mr Lott's evidence about it, also do not assist the Plaintiffs to the extent that schedule and the amount that Mr Lott then indicated was properly owed to the Plaintiffs is substantially less than the amount they now claim is owed to them.
The Plaintiffs also rely on an affidavit of Mr Lott dated 20 March 2015 which refers to a table which he and Mr Wing, another accountant, prepared as a result of inspection of documents at the liquidator's office. Mr Lott's evidence, admitted as a submission under s 136 of the Evidence Act, was that the table demonstrated that "the various claims made by proofs of debt" to the liquidator "were in fact debts of SGAS" in that they related to monies paid to SGAS in respect of which SGAS was indebted. The table also referred to Mr Lott and Mr Wing having "vouched" particular amounts which were described as payments made by Mr Conomos in the amount of $1,394,807; deposits into SGAS's bank account by Mr Ghougassian and third parties controlled by him in the amount of $882,760; interest claimed in the proofs of debt; monies paid under the 2012 Judgment; monies paid into the account which are not clearly specified in SGAS's books, in the amount of $457,070; the ING house loan (to which I refer below) and interest totalling $674,336.14; and gardening equipment quantified in the sum of $109,005.24. Mr Lott's cross-examination indicated that the process of "vouching" referred to in that affidavit was a limited one, directed only to checking the correctness of figures, and not that they had the character that the Plaintiffs attributed to them as loans, and was also limited to the extent of documents now held by the liquidator (T255). Mr Wing, who had left for overseas and was not cross-examined, in turn gave evidence by his affidavit dated 23 March 2015 that he had attended with Mr Lott at the relevant inspection and agreed with Mr Lott's affidavit. I give little weight to Mr Wing's affidavit, on the basis that a second accountant's agreement with the evidence of the first, with no additional reasoning or analysis, adds little to the evidence of the first.
A further affidavit dated 8 April 2015 of Mr Lott indicated that, when he provided accounting services to SGAS from 2004 to 2010, he viewed invoices from Nareg Internet and Nareg Bookshop and Nareg Limited to SGAS, but could not find those invoices or cheque butts in his inspection of documents held by the liquidator. I accept Mr Lott's evidence in that regard, although it does not demonstrate any failure of production of documents by the liquidator, since it does not demonstrate that the relevant documents were ever made available to the liquidator.
I should also note that the Plaintiffs also rely on an observation of White J (2012 Judgment [22]) that, prima facie, subsequent payments should be applied against earlier advances made to SGAS, except where there is evidence that payments in reduction of the loans were appropriated by either SGAS or the lenders against subsequent advances. I accept the correctness of that observation. However, to the extent that the Plaintiffs seek to rely on that matter to establish that the debts they claim in the proofs of debt were not extinguished by payments to them, it was a matter for them to establish the earlier debts existed to which those payments should be applied. They have not done so. I would also infer that, where payments were made in amounts that appear to be referrable to the payments of particular loans, there is at least an implied appropriation by SGAS or the Plaintiffs against those subsequent loans.
[3]
The Defendants' affidavit evidence
The Defendants rely on two affidavits of the liquidator dated 25 June 2014, two further affidavits of the liquidator dated 26 June 2014 and his affidavit dated 30 January 2015. The liquidator was also cross-examined at some length.
The liquidator's first affidavit dated 25 June 2014 refers to correspondence relating to an assignment of the amount of $226,586.03 of Dr Ghougassian's claim to Mr Ghougassian, exceeding the amount of Dr Ghougassian's claim admitted by the liquidator. That affidavit also refers to an agreement between the parties that an amount of $195,553.50 was to be set off against legal costs in the Replacement Proceedings, such that the liquidator claims that amount cannot now be claimed by Mr Ghougassian in the liquidation. The liquidator's second affidavit dated 25 June 2014 deals with the specific proofs of debt lodged by Dr Ghougassian, documents relating to the rejection of those proofs of debt, and elaborates the basis for rejection of those proofs of debt. Parts of that affidavit were admitted with limiting orders under s 136 of the Evidence Act as limited to the liquidator's understanding or as submission.
The liquidator's first affidavit dated 26 June 2014 responded to Mr Ghougassian's affidavits sworn 14 March and 5 May 2014. That affidavit refers both to the proofs of debt initially lodged by Mr Ghougassian and to further proofs of debt annexed to Mr Ghougassian's affidavit dated 5 May 2014. The liquidator responds to a claim by Mr Ghougassian that the liquidator had undertaken, in the 2012 Proceedings, to admit Mr Ghougassian's proofs of debt in respect of transactions involving Mr Conomos. The liquidator denies he gave any undertaking of that kind, but refers to a confirmation that he gave in those proceedings that he would not reject a proof of debt lodged by Mr Conomos in the liquidation on the basis that the relevant loans were made by Mr Conomos to Mr Ghougassian rather than to SGAS, which would have been inconsistent with the position that the liquidator had taken in the 2012 Proceedings. I address that issue further in paragraph 132 below. I accept that any such undertaking (or, more precisely, confirmation) had that narrower scope, having regard to the transcript of the proceedings before White J on that occasion, to which reference is made in the liquidator's affidavit. That undertaking is not presently relevant since Mr Conomos has not lodged such proofs of debt.
The liquidator also confirmed, in cross-examination, that he accepted that funds were advanced by Mr Conomos to SGAS, but he did not accept that there was a liability to Mr Ghougassian in respect of those amounts and he relied substantially on the 2012 Judgment in that regard (T347). He was asked whether there was any reason why he did not accept Mr Ghougassian's word that he had arranged for those funds to be advanced to SGAS on his own credit, and he responded that a large portion of those funds were for donations and not loans (T347). Mr Conomos' tax records, to which I refer below, support that proposition. I would add that it does not seem to me a responsible course for a liquidator, in dealing with competing claims to a company's resources, to simply accept, without verification, a creditor's claim to have advanced substantial funds to that company.
The liquidator's affidavit dated 26 June 2014 indicates that the interest claimed by Mr Ghougassian, on the Iden housing loan of $500,000, to which I will refer below, amounted to $1,336,961.95 as at 2 May 2014. The liquidator also refers to documentation which establishes, as White J also noted in the 2012 Judgment, that the monies advanced were paid out to the former lender to Mr Ghougassian in respect of his home loan and to Nareg Internet. The liquidator's position in cross-examination concerning the Iden Group loan was that, after Mr Ghougassian lodged a proof of debt claiming interest paid to the Iden Group, the liquidator requested further and better particulars of information; Mr Ghougassian provided a document which showed there was an advance, but the advance went to pay off Mr Ghougassian's home loan and some went to Nareg Internet, and there was no evidence that any money went to SGAS (T341). Mr King put to the liquidator in cross-examination that the funds made their way to SGAS or were used for the payment of SGAS's debts, but the liquidator's response was that he had been provided with no evidence of that matter.
The liquidator's second affidavit sworn 26 June 2014 addressed his response to Dr Ghougassian's affidavit of 14 March 2014. That affidavit summarised the basis on which the liquidator had rejected proofs of debt lodged by Dr Ghougassian, in evidence which I admitted with a limiting order under s 136 of the Evidence Act that it was limited to the liquidator's understanding. I will address Dr Ghougassian's claims below.
The liquidator's affidavit dated 30 January 2015 sets out, at considerable length, the inquiries made by him and employees of his firm into the financial affairs of SGAS prior to and after the 2012 Proceedings, and seeks to establish that information relating to payments made by SGAS to Mr and Dr Ghougassian to reduce the debt owed to them was not produced until recently, and was therefore not drawn to White J's attention in the 2012 Proceedings. The liquidator notes that those payments were discovered as a result of analysis of documents produced by third parties in public examinations conducted after the conclusion of the 2012 Proceedings. The liquidator's evidence in cross-examination, which I accept, was that the documents made available to him on his appointment included the 140 boxes of documents now held in storage, to which I referred above, which were inadequate in respect of SGAS's financial and corporate records, and were largely incidental school material (T305). His evidence was that the bulk of the material held at SGAS contained material that was not relevant to the liquidation, and did not include cheque books, deposit books, or other material books or records, although there were several invoices contained in them (T315). He made clear in cross-examination that he had abandoned any claim to the computers held by SGAS, which the Messrs Ghougassian claim included some used for administrative purposes which contained records, and had offered the Messrs Ghougassian the opportunity to collect those computers, which had not been taken up (T315). He also explained steps that he had taken to examine or image some but not all of the computers, and that no relevant information was obtained from that process, which was not continued given its cost (T315-316). He subsequently qualified his evidence to indicate that there may have been a few cheque butts or deposit books and an invoice or two obtained from that process but that it was limited financial information (T316).
The Defendants also rely on the affidavits of Mr Christopher Brereton, a consultant previously in the liquidator's employment, dated 12 August 2014 and 30 March 2015. Mr Brereton's affidavit dated 12 August 2014 refers to the calculation of interest on amounts that White J ordered to be paid by Mr Ghougassian, of $50,000 on 19 December 2006, $10,000 on 21 December 2006 and $50,000 on 5 September 2007, which the liquidator now seeks to recover from Mr Ghougassian. Mr Brereton's further affidavit dated 30 March 2015 relates to the inspection of SGAS's records undertaken by the Plaintiffs and their representatives, pursuant to orders made by the Court, on 11-13 March 2015. Mr Brereton's evidence is that he requested the return of all documents held in storage by the liquidator in respect of SGAS, and that he understood that the documents made available for inspection by the Plaintiffs comprised the entirety of the records available to the liquidator. Mr Brereton's evidence in cross-examination was that, when he and other members of the liquidator's staff first obtained access to SGAS premises, he oversaw the boxing of documents and that the financial records present on SGAS's premises were boxed and returned to the liquidator's office, but he could only box what was present (T364-365). The liquidator's staff then sought to distinguish financial and non-financial documents and further analysis was done of the financial documents back at the liquidator's offices (T365). Mr Brereton's evidence was also that he had reviewed, and an independent contractor had listed the contents of, other several hundred boxes of other documents retrieved from SGAS's premises, without identifying financial documents from any entity contained in them (T366).
[4]
Schedules of claims and evidence relied on by the parties
On the completion of the evidence, and prior to the parties making their closing written and oral submissions, I directed each party to serve:
"A schedule identifying all facts, matters and circumstances on which the [parties] rely to support or contest each proof of debt and each claim relied on by the liquidator by way of set-off or cross-claim, that is pressed, identifying all affidavit evidence by paragraph number or documentary evidence (by Court Book page number or exhibit number and page number) and all evidence relied upon."
Mr King noted that the schedule contemplated was a "sort of Scott Schedule", which seems to me to be a helpful analogy. I have referred to the schedules of claims and evidence served by the parties below, since they provide a helpful summary of the parties' respective positions and the evidence on which they rely in respect of the numerous individual claims that are raised by the PODs.
I should note, however, that the schedule of claims and evidence on which Mr Ghougassian relied from time to time inaccurately summarised the evidence, or referred to evidence that was not found at the evidentiary reference given for it, and also referred to evidence that had either not been admitted or had been admitted only on a limited basis without recognising that matter. I have been alert to that difficulty, and referred to examples of it below, but have not sought to identify every occasion on which it arose in this judgment. Where the evidence referred to was not located at the reference given for it, it was sometimes possible to identify the evidence to which Mr Ghougassian may have intended to refer, and I have sought to locate and have regard to that evidence where that was possible. However, there were also occasions where Mr Ghougassian referred to a matter that was not supported by the evidence to which he referred, the liquidator pointed to the absence of evidence of that matter and no other evidence of that matter was identified by Mr Ghougassian or was identifiable.
[5]
The scope of an appeal under s 1321 of the Corporations Act
In her opening outline of submissions, Ms Taylor, who appears for the liquidator, draws attention to principles applicable to an appeal under s 1321 of the Corporations Act. In Tanning Research Laboratories Inc v O'Brien (1990) 169 CLR 332 at 339, Brennan and Dawson JJ observed that the principles that determine the enforceability of a liability to which a proof of debt relates are, in the main, the same as the principles which would be applied in an action brought directly against the company to enforce that liability. Their Honours also observed (at 340-341) that such proceedings are to be heard as a matter de novo, so that the Court must consider the plaintiff's claim and decide for itself as to the existence and amount of the debts, and described the role played by a liquidator or administrator in such an appeal as follows:
"In such a proceeding, a liquidator who defends his decision to reject a proof of debt is no longer acting in a quasi-judicial capacity; he is cast in the role of an adversary, defending the assets available for distribution against a liability which, according to the view he formed when acting quasi-judicially, is not legally enforceable. The liquidator may defend those assets against the creditor's claim on any ground on which the company might have defended the claim had it been sued by the creditor. … The issue in the proceeding is whether the liability referred to in the proof of debt is a true liability of the company enforceable against it. The issue is contested between the putative creditor on the one hand and the liquidator on the other; the liquidator is a party litigant. And none the less so though the liquidator is required to act fairly in conducting the litigation."
A person appealing against rejection of a proof of debt must present a case which identifies an alleged debt or liability that corresponds with that originally sought to be conveyed by the proof of debt: Johnston v McGrath (2008) 67 ACSR 169 at [26]. The party appealing against the liquidator's decision to reject the proof of debt has the onus of showing that decision was wrong, and that question is determined by reference to the evidence before the Court when it considers whether or not to affirm the liquidator's decision: Westpac Banking Corp v Totterdell (1998) 20 WAR 150; 29 ACSR 448 at 451; Brodyn Pty Ltd (t/as Time Cost and Quality) v Dasein Constructions Pty Ltd [2004] NSWSC 1230 at [33]. Ms Taylor also points out that the liquidator may properly reject a proof of debt if a liability, although enforceable against an entity, is not a true liability of the entity in the sense that it is founded on an act or omission on the part of the entity which unjustly prejudices the interests of creditors or contributories in the assets available for distribution: Tanning Research Laboratories Inc v O'Brien above at 338 - 340; Re Jay-O-Bees Pty Ltd (in liq) [2004] NSWSC 818 (2004) 50 ACSR 565 at [35] - [45]; Re Young in his capacity as Liquidator of Great Wall Resources Pty Ltd (in liq); Capocchiano v Young [2013] NSWSC 879.
[6]
The Plaintiffs' claim that the liquidator failed to have regard to the 2012 Judgment and claim for estoppel
I should first note several wider attacks made by the Plaintiffs on the liquidator's decisions in respect of the proofs of debt, although those wider attacks are ultimately only of relevance in an appeal under s 1321 of the Corporations Act so far as they would support a different view as to whether a particular debt is a true debt of SGAS. The Plaintiffs claim that the liquidator failed to have regard to the observations of White J in the 2012 Judgment especially at paragraphs 8, 53 and 98 and, by their Points of Claim dated 29 July 2014, the Plaintiffs also rely on an estoppel said to have arisen from the 2012 Judgment. The liquidator denies that such an estoppel has arisen. In their Reply to the Amended Points of Defence filed on 20 March 2015, the Plaintiffs plead that the liquidator is estopped from denying that the Plaintiffs were creditors of SGAS between 6 June 2003 to 21 June 2010, by reason of the 2012 Judgment.
In the 2012 Judgment, to which I have referred above, White J held that monies up to a limit of $1 million were secured by SGAS to the Plaintiffs. The liquidator contends that those monies have been paid by the liquidator to the Plaintiffs and that White J did not otherwise determine whether the claims as to which the Plaintiffs lodged proofs of debt were valid. In their opening submission, the Plaintiffs contend that, in the 2012 Proceedings:
"The manner of financing SGAS's operation by the Ghougassians was explained and the accuracy and integrity of such payments was found, from the total pool of which a portion was then held to be secured in favour of the Ghougassians."
It does not seem to me that the 2012 Judgment had that effect, not least because White J was there determining the issue before him, in respect of the amount secured by the mortgage, and expressly noted that he did so on limited evidence and in a way that did not determine the wider issues.
The Plaintiffs also contend that the liquidator failed to make any or any adequate inquiry as to the nature of the proofs of debt and, in the case of Mr Ghougassian, rejected all of the proofs of debt without any or adequate reasons. I do not accept that submission. The liquidator sought information from the Messrs Ghougassian to support the proofs of debt and properly evaluated those proofs of debt by reference to that information and the limited financial records in SGAS's and his possession. Mr King cited no authority for any proposition, implicit in his submissions, that the liquidator was obliged to seek out information which the Messrs Ghougassian had not provided and which was not in his or SGAS's possession in order to assess their claims.
[7]
Proofs of debt 1-80, 95-106, 183-184, 233-246 and 249-257 Iden Group home loan and interest
It is helpful to deal with the proofs of debt made by Mr Ghougassian in categories, as the liquidator did in submissions. The first of those categories; PODs 1-80, 95-106, 183-184, 233-246 and 249-257 relate to a loan account held by Mr Ghougassian with Iden Group, formerly known as Home Loan Services Pty Limited ("Home Loan Services") (and subsequently with ING) and claims for interest on that account.
I will refer generally to the evidence that relates to this category of claims, in dealing with PODs 1-80 and 95-106, before dealing with other PODs falling within this category of claims. POD 1 is a claim for $1,953.29 relating to 31 August 2003 described as "[i]nterest paid to Iden Group for monies borrowed for benefit of SGAS"; PODs 2-80 are described in the same way and relate to the period 30 September 2003 to 31 March 2010; and PODs 95-106 are similarly described as "[i]nterest paid to Iden Group for monies borrowed by [Mr Ghougassian] for benefit of SGAS" and relate to the period 10 June 2011 to 30 April 2012. First, I will seek to set out the relevant events and relevant evidence, in broadly chronological order and, in doing so, I will also refer to matters identified by Mr Ghougassian in his schedule summarising the evidentiary basis of these PODs.
By way of background, Mr Ghougassian's home, to which this loan was connected, was situated on property adjacent to and purchased from SGAS. Mr Ghougassian's evidence in cross-examination was that the transfer of his home from SGAS, where it was originally part of SGAS's property, to him was undertaken so that he could borrow money on it to help SGAS. That evidence was characteristic of Mr Ghougassian's wider approach of describing each transaction he undertook, in his personal capacity or in his business capacity, as being a transaction to advance the interests of SGAS. I think it likely that Mr Ghougassian genuinely takes that view, because he does not distinguish his own position and that of SGAS, partly because, as he indicated in cross-examination, he believes that he owned the school (T186). He subsequently explained (at T187) that he held that view because he and Dr Ghougassian had financed the purchase of the relevant property, although the school buildings and its operation were financed by the New South Wales State Government (T187). Mr Ghougassian returned to that theme in cross-examination in emphasising, after cross-examination as to the financing of the original purchase of land by SGAS, that he "did own" the school and had "paid for it" (T189).
Mr Ghougassian borrowed $140,000 from Advance Bank (later St George Bank) in respect of that home. In his schedule of claims and evidence, Mr Ghougassian relies on paragraph 36 of his affidavit dated 20 March 2015 as evidence that that transaction was undertaken "for the benefit of SGAS"; however, that paragraph of his affidavit was rejected for form and under s 135 of the Evidence Act. Mr Ghougassian's evidence in cross-examination was also that the whole purpose of the loan in relation to his home, whether from Advance Bank (or, later, St George or Home Loan Services or Iden Group) "was for the purpose of lending it to SGAS" (T190). In his schedule of claims and evidence, Mr Ghougassian's also submits that:
"… [Mr Ghougassian] should be believed when he swore that the initial $140,000 raised by this loan was also for the benefit of SGAS after it transferred the land (originally owned and beneficially held for him) to him 'so that I can borrow money on it to help SGAS' [Day 5 p 185 lines 49-50]."
I cannot accept the proposition advanced here that the land owned by SGAS and subsequently transferred to Mr Ghougassian as his home was "originally owned and beneficially held for" him, which is not established by the fact that Mr Ghougassian was a substantial donor to, or lender to, or had practical control of, SGAS, at the time it acquired the land for use as a school.
On 13 December 1999, Mr Ghougassian discharged the mortgage to Advance Bank over his home, which then secured a loan of $116,098.36, by refinancing that loan with Home Loan Services Pty Ltd, later called Iden Group, as agents for Permanent Custodians Ltd in the sum of $400,000. He submits that all of the funds raised by the increase in loan, namely $217,705.29; $11,140 and $34,446.47 were paid to or for the benefit of SGAS on the next day, 14 December 1999. There is evidence that the amount of $217,705.29 was paid into SGAS's account by Mr Ghougassian on 14 December 1999 (Ex P3, p 19). In his schedule of claims and evidence, Mr Ghougassian refers to that payment and submits that he should be believed in his evidence in cross-examination that that payment "wasn't refinancing of [his] house" (T185). The second and third of those payments were made by Mr Ghougassian to Dr Ghougassian, rather than to SGAS, although I recognise that Dr Ghougassian had also paid, or lent, substantial funds to SGAS from time to time.
The proximity in the timing of the borrowing of $400,000 and the payment of $217.705.29 to SGAS supports an inference that the latter was funded by the former, and that the latter amount was made available to SGAS by Mr Ghougassian. However, that inference does not substantially advance Mr Ghougassian's claim for repayment of a much larger amount and for interest on that larger amount since August 2003. First, neither the amount of $217.705.29 nor any larger amount, nor interest payable on it, would be recoverable by Mr Ghougassian unless it was in the nature of a loan and had not been repaid by SGAS in the subsequent period. The former proposition is inconsistent with SGAS's accounts, at least immediately after the borrowing in December 1999 and June 2000, to which I will refer below, and the latter is at least potentially inconsistent with the evidence of numerous payments by SGAS to Mr Ghougassian and his related companies in subsequent years.
The financial accounts for SGAS for the year ended 31 December 1999 record non-current liabilities of $884,036, comprising an amount owed to the Armenian Catholic Church of $803,831 and other loans of $80,205 (Brereton 30.3.2005), which is inconsistent with the amount which Mr Ghougassian claims to have lent SGAS prior to that time, and particularly from his home loan in mid-December 1999. The financial accounts for SGAS for the year ended 30 June 2000 similarly record non-current liabilities of $706,443, which are recorded as owed to the Armenian Catholic Church. Mr Ghougassian rejected, in cross-examination, the proposition that those financial records indicated that previous loans made by him to SGAS had been repaid (T212-213). However, the proposition that those loans remained outstanding is entirely inconsistent with the content of those accounts. Mr Ghougassian in turn sought to explain the form of those accounts by the proposition, which seems to me, at best, difficult to follow, that it reflected the fact that bus drivers were employed by the Armenian Catholic Church to drive children backwards and forwards, as a subcontractor to SGAS, and "any funding that [Mr Ghougassian] made for the bus drivers will appear as funding to the Church" (T213), with the implication that the accounting records showing a loan from the Armenian Catholic Church to SGAS in fact referred to a loan from Mr Ghougassian to SGAS. Even if that proposition is correct, it does not explain how a loan in excess of $217,000 made by Mr Ghougassian in mid-December 1999 could, by the end of December 1999, have been converted by bus usage to a loan by the Armenian Catholic Church to SGAS. A more likely explanation is that the payment to SGAS did not have the character of a loan, where substantial tax-deductible donations were made over the period, or that it was repaid, at least by 30 June 2000, by other transactions between SGAS and Mr Ghougassian and his related companies.
Mr Ghougassian also relies on evidence that he and Dr Ghougassian gave, in the 2012 Proceedings, of a statement by SGAS's chairman, at SGAS's annual general meeting on 22 June 2003, that SGAS would be responsible for interest, "being the same as normal banking rates of interest and its variations so that there is no disadvantage to you". The first difficulty with that proposition is that the evidence led in the 2012 Proceedings was that statement related to loans by Dr Ghougassian, not Mr Ghougassian. The second difficulty is that it does not seem to me that that statement could be read as extending more widely than the arrangement subsequently documented in the Deed of Loan to which I will refer below. There was also reference, in the 2012 Judgment, to the minutes of the annual general meeting, held on 22 June 2003, prepared by Dr Ghougassian, which recorded that Mr Ghougassian would provide a $500,000 loan obtained on first mortgage security over his house and that "interest/costs on overrun on the above loan during the year to be met by SGAS at all times". White J recorded that he did not accept that there was a discussion at the 2003 annual general meeting to the effect deposed to by the Plaintiffs and Mr Badelian in their evidence in the 2012 Proceedings. To the extent that the Plaintiffs rely on the evidence which they gave in those proceedings, I take the same view as did White J.
In July or August 2003, Mr Ghougassian took out a larger loan with Permanent Home Loans for $500,000, with Iden Group as the broker, the purpose of which was stipulated as being to refinance an owner occupied property and provide funds for future investment (Ex P3, T276, T183). The funds borrowed were disbursed by a bank cheque to Permanent Custodians Ltd to pay out the existing mortgage on his home and by a bank cheque to Nareg Internet (which was, as I noted above, a company associated with Mr Ghougassian) for $91,636.70 (Sutherland 26.6.14, Annexure F, p 23, T183). Mr Ghougassian's explanation, in cross-examination, was that the relevant payment had gone to his home loan, because other payments, and in particular the amount of $217,705.29 on 14 December 1999, nearly four years before, had gone to SGAS (T185).
In the 2012 Judgment, White J referred to that loan and held (at [30]) that:
"Mr Michael Ghougassian said that the opening balance of $174,336.14 was interest incurred on a capital loan of $500,000 that had accrued up to 1 January 2004. Mr Michael Ghougassian's statement of account showing the amount claimed to be owed under the mortgage did not include this advance of capital. Mr Michael Ghougassian said that he and his wife borrowed $500,000 from the Iden Group on 2 July 2003 at 12% interest (affidavit 14 June 2011 at para 10(iii)(5)). The statement for the account (issued by Home Loan Services Pty Ltd) shows that two cheques, one for $403,737.01 was draw in favour of Permanent Custodians Ltd. Another cheque for $91,636.70 was drawn in favour of Nareg Internet Pty Ltd. The latter company is Mr Ghougassian's own company. Mr Ghougassian said that the payment to Permanent Custodians was made for the purposes of SGAS (T38). There was no material to show how the moneys drawn down on the loan account with Home Loan Services Pty Ltd to Permanent Custodians Ltd and Nareg Internet Pty Ltd were applied for the benefit of SGAS. Nor was there any explanation as to how the opening interest of $174,336.14 was calculated on any payments made for the benefit of SGAS."
For the reasons noted above, I do not treat those findings as giving rise to an estoppel. However, the evidence in these proceedings is consistent with his Honour's observation that SGAS's bank account statements do not show the receipt of deposits consistently with Mr Ghougassian making further loans of the order described in his evidence by deposit to SGAS's bank account in July or August 2003, although his Honour had also fairly recorded that that did not necessarily mean that other payments were not made for the benefit of SGAS.
A Deed of Loan, which was in issue in the 2012 Proceedings, was subsequently signed between SGAS and the Plaintiffs on 6 May 2005 and the mortgage in issue in those proceedings was executed pursuant to a resolution of SGAS's board on 22 December 2004. That Deed of Loan provided that SGAS must pay interest at the Interest Rate (as defined) on the Amount Owing (as defined) by monthly instalments on each Interest Payment Date. However, that Deed of Loan was directed to an advance by the Plaintiffs to SGAS of $1 million by way of financial assistance for the purposes of working capital and to assist in the construction of new buildings for SGAS, which was the subject of the mortgage considered by White J in the 2012 Proceedings. It does not seem to me that the right to interest on that amount confers a right to interest on any other amounts.
In his schedule of claims and evidence, Mr Ghougassian also relies on SGAS's unsigned 2009 accounts as follows:
"As to interest on the repayments - see the acknowledgement by the SGAS accountant Mr Lott in the 2009 accounts Ex D 14 Vol 1 Tab 20 page 1476T. By that stage also, in support of the above submission as to the purpose of the Iden Group loans, the 'Liabilities' shown in the 1986 accounts had been extinguished. See also the P and L for the year 2000 and 2006. Interest on other debts is allowed eg Ex RMS 2 Annex G-1 [lawyers POD for debt claim]."
The reference to the 2009 accounts of SGAS here is to the financial accounts for SGAS for the year ended 31 December 2009, which record a non-current liability of SGAS to Mr Ghougassian of $1,563,968 for the year ended 31 December 2008 increasing to $1,647,612 for the year ended 31 December 2009, but are not signed by the directors and the auditor's declaration is also not completed. There is also no breakdown of the amount of that liability stated in those accounts, or draft accounts, as between the various debts claimed by Mr Ghougassian.
Mr Ghougassian has paid interest on the amounts borrowed under the Iden Group, and later ING, loan for each month since August 2003 and he has lodged proofs of debt in SGAS's liquidation for each such interest payment (Ex 2 p 87, T184). Mr Ghougassian puts that claim on the basis that the Iden Group loan was taken out on behalf of SGAS and SGAS is liable for all of his monthly interest payments on that loan. In information provided to the liquidator in March 2013, Mr Ghougassian explained that approach (Ex D13, RMS 5, Annexure 3) as follows:
"These debts are payable by the [SGAS] based on the fact that I should not be "disadvantaged" for lending monies to SGAS. The "no disadvantage" clause is and was per agreement with the [SGAS], agreed to unanimously at the AGM of 2003 by the then members of [SGAS]. Monies lent to [SGAS], originating from the Iden account, attracted interest payments which must then be paid by [SGAS]."
I have referred to the position in respect of the 2003 annual general meeting of SGAS in paragraph 46 above. Mr Ghougassian's affidavit dated 20 March 2015 also sought to support the claim for interest in respect of the amount of this loan, which Mr Ghougassian characterised (in evidence admitted with a limiting order under s 136 of the Evidence Act, as a submission only) as:
"arranged under an agreement with SGAS Board in June 2003 formalised in May 2005 solely for the purpose of provided [sic] financial assistance by me to SGAS as part of its working capital".
In his opening submissions, Mr Ghougassian similarly seeks to support interest on the claim for $500,000 on the basis that the loan was increased to that amount in August 2003 "so that more money would be used by SGAS for the construction of the High School for St Gregory's Armenian School". That submission continues that:
"During this last discharge, two cheques were made out: One for $403,737.01 and one for $91,636.70 (and $4,626.29 for the setting up of the Low Doc finance by the said broker) bringing to a total of $500,000 facility in existence for the duration of obtaining a DA from the Baulkham Hills Shire Council for the building of the permanent High School building. The plan being that this $500,000 facility was to be reimbursed by the CBA upon the installation of their funding for the High School and the commencement of building. The sum of $491,636.70, as explained to the liquidator, went to Nareg Internet because, at that time, Nareg Internet had advanced that sum to SGAS while the loan application was progressing. This loan persists until today by payment of about $3,500 per month interest-only loan, dependent on the interest rate from time to time."
I will refer to further evidence in relation to the previous payments made by Nareg Internet, on which Mr Ghougassian relies in respect of POD 183, in paragraph 60 below. This submission proceeds on the basis that, if Mr Ghougassian made a payment to Nareg Internet in respect of monies previously advanced by Nareg Internet to SGAS (for example, by payment for teachers as relied on for POD 183), that can properly be characterised as the repayment of the earlier advance by Nareg Internet to SGAS and the creation of a new loan by Mr Ghougassian to SGAS, rather than, for example, a loan by Mr Ghougassian to Nareg Internet. It is not necessary to determine the correctness of that approach given the conclusions that I reach on other grounds.
In his schedule of claims and evidence, Mr Ghougassian similarly contends that the funds provided to Mr Ghougassian under the August 2003 loan were "to provide funds to the SGAS by way of refinancing of an existing loan with an extension to assist SGAS in funding an extension for building the High School at Beaumont Hills", and that those payments to SGAS "for its benefit" and Mr Ghougassian's "expenses in maintaining that benefit to SGAS [ie interest]" gave rise to "an express or implied contract and/or in restitution to reimbursement in [Mr Ghougassian] against SGAS."
Turning now to PODs 2-80, relating to interest for the period 30 September 2003 to 31 March 2010, Mr Ghougassian's schedule of claims and evidence also refers to paragraph 6 of Mr Ghougassian's affidavit sworn 14 June 2011 and paragraphs 5, 7, 11-13 and 49 of Mr Ghougassian's affidavit sworn 20 March 2015. Paragraph 6 of Mr Ghougassian's affidavit sworn 14 June 2011, read in the proceedings before White J, refers to but does not set out discussions between him and members of SGAS's board as to payment of interest on monies loaned by him and Dr Ghougassian to SGAS. He specifically refers to the 2003 annual general meeting of SGAS and comments made by Mr Badelian at that meeting. I have addressed that matter in paragraph 46 above. Paragraph 5 of Mr Ghougassian's affidavit dated 20 March 2015 contained statements that funds raised by him were "authorised by the Board of [SGAS]" between 1985 and 2010" and that cheques signed by him were "authorised by the Board of [SGAS]" between 1985 and 2010, which were rejected for form. Paragraph 7 of that affidavit was largely rejected for form and under s 135 of the Evidence Act; paragraphs 11 and 12 referred to a table prepared by Mr Lott and Mr Wing, to which I have referred in paragraph 22 above and were admitted as submissions only; paragraph 13 set out Mr Ghougassian's "belief and intention" and his understanding as to dealings with third parties, who he dealt with in raising funding for SGAS, and was admitted with a limiting order that it was directed to his state of mind; and paragraph 49 referred to his borrowing monies from friends and relatives from 1985 to 2010 for financing SGAS.
It is common ground that PODs 81-94 were withdrawn and consolidated into POD 95. PODs 95-106 in turn claim interest for the period 10 June 2011 to 30 April 2012, on each proof of debt, calculated at the Reserve Bank rate. Mr Ghougassian's evidence in cross-examination is that he claimed interest on the loan by Iden Group at the Reserve Bank rate because he did not know how to calculate interest at the rate at which interest was actually paid to the Iden Group, and he responded to the proposition that there was no agreement with SGAS that interest should be paid at the Reserve Bank rate by contending that there was interest to be paid, without reference to whether that interest was to be at the Reserve Bank rate (T191). Mr Ghougassian's evidence was also that an agreement to pay interest on his mortgage account with SGAS existed from mid-2003 and was ratified at SGAS's annual general meeting in June 2003 (T193). In his schedule of supporting evidence, Mr Ghougassian relies on the matters relied on to support POD 1 to support PODs 95-106 and adds that:
"As to liability for ongoing obligation to pay [Mr Ghougassian] for his ongoing obligations to Iden Group after DOA [date of appointment] … see the evidence of Mr Sutherland as to his non-disclaimer of the contract to repay [Mr Ghougassian] see Corps Act section 568(1)(f) and (d) and the evidence in xx Day 8 p 371 lines 1 to 15.
The non-disclaimer is consistent with the large sums of SGAS funds held by Liq. shortly after his DOA [date of appointment] (plus $7millions) - he no doubt thought he could pay all claims. It is also consistent with his do-nothing approach to the whole liquidation. The non-disclaimed funds advanced to SGAS by [Mr Ghougassian] and [Dr Ghougassian] were not financially speaking onerous, but from the DOA relevantly future certain property which if disclaimed gave rise to other obligations on his part."
I do not accept that anything can be drawn from the liquidator's not disclaiming an obligation to pay interest to Mr Ghougassian where his position is that no such obligation exists.
The liquidator's position as to these matters is in turn set out in his response to the PODs, his evidence and his submissions. By his letter dated 5 December 2013 (Ex P1), the liquidator identified and responded to various matters raised by Mr Ghougassian in support of this category of claims. The liquidator indicated that he was not satisfied that there was sufficient evidence that the initial drawing of $500,000 from the Iden Group facility was advanced for the benefit of SGAS and referred to paragraph 30 of the 2012 Judgment, to which I have referred above. The liquidator also noted that he was not satisfied, given the lack of any documented agreement between the parties, that there was sufficient evidence to support Mr Ghougassian's claim that interest payments should be treated as principal debts for the purposes of that arrangement. The liquidator also noted that PODs 1-80 were rejected on the basis that Mr Ghougassian had not provided sufficient documentation to evidence an entitlement to interest on advances made to SGAS and interest claims could not be determined until such time as principal advances were quantified, and sufficient supporting documentation had not been provided for the claims. The liquidator also referred to Mr Ghougassian's claim that interest was payable on the principal amounts of his claim at Reserve Bank rates and responded there was no evidence of any agreement that would give rise to interest being payable by SGAS on the claim to unsecured amounts. By that letter, the liquidator also noted that insufficient documentation had been provided in respect of PODs 95-106 to evidence why Mr Ghougassian was entitled to interest on the claimed advances to SGAS. The liquidator's schedule updating the basis of the adjudication of Mr Ghougassian's claims (Ex P11) recorded that POD 95 was rejected by the liquidator on the basis that it was an interest claim, there was insufficient documentation, and a portion of the claim was after the winding up date.
The liquidator's schedule of claims and evidence in turn referred to Mr Ghougassian's reliance on an agreement that the SGAS would assume liability for interest on borrowings made by Mr Ghougassian or Dr Ghougassian for its benefit, referred to White J's findings in the 2012 Judgment in that regard, and submitted that:
"None of this evidence established that the School would be liable on all advances from loan accounts of [Mr Ghougassian] from Advance Bank, St George Bank, Permanent Custodians Ltd (the $400,000 account or the later $500,000 account). No members of the Board gave evidence corroborating [Mr Ghougassian]'s account of the agreement, notwithstanding that Mr Badelian and [Dr Ghougassian] were available to give that evidence."
The liquidator also submitted that Mr Ghougassian had not proved that the advances made from these accounts were loaned to SGAS or were used for its benefit or that there was an agreement entered into with the authority of SGAS's board, and submitted that the Court should conclude that a large part of the funds were used for Mr Ghougassian's own purposes, including for the purchase of the home that he and his wife occupied.
As I noted above, the bank statements in evidence indicate that the $500,000 borrowed from Iden Group were drawn in the amounts of $403,737.01 in favour of Permanent Custodians Ltd, the previous lender on Mr Ghougassian's home, and $91,636.70 in favour of Nareg Internet, his company (Sutherland 26.6.2014 [14], Annexure F, p 23). The information submitted by Mr Ghougassian to Iden Group as to the purpose of the loan does not disclose any purpose of borrowing on behalf of SGAS. The monies advanced by Iden Group in August 2003 were not used, at least directly, for a purpose of SGAS, including the development of its high school, but to pay out the existing mortgage on Mr Ghougassian's home and for the relevant payment to Nareg Internet, which I have addressed above. Mr Ghougassian's affidavit evidence as to the purpose of the transaction and the manner in which the borrowings were applied seems to me to be unreliable for the reasons noted above. I am not persuaded that the evidence which I have set out above establishes, on the balance of probabilities, that Mr Ghougassian advanced the $500,000 borrowed from Iden Group or any identifiable part of it in August 2003 to SGAS or for SGAS's purposes. In saying that, I recognise, of course, that there were numerous other financial and other transactions involving payments by Mr Ghougassian and his related companies to SGAS and by SGAS to Mr Ghougassian and his related companies throughout the period in issue in the proceedings.
Where I am not satisfied that it has been established that the monies borrowed by Mr Ghougassian from Iden Group or other lenders in respect of his home, as to which interest is claimed under POD 1-80 and 95-106, were used for the benefit of SGAS, so as to support that claim, the liquidator's decision not to allow those claims should not be set aside. The liquidator submits, and I accept, that there is also no evidence of any agreement or arrangement with SGAS that Mr Ghougassian should be paid interest at the Reserve Bank rate. That is also sufficient to support the liquidator's rejection of the claims for interest at that rate.
POD 183 is associated with PODs 1-80 and 95-106, in respect of the Iden Group loan, and POD 184 relates to initial interest on the loan. Mr Ghougassian's schedule of claims and evidence describes POD 183 as "[f]rom ING capital borrowing that is outstanding payment to SGAS" and identifies the evidence to support it, mixed with submission, as:
"This is the $500,000 loan being the ING line of credit which remains current and accruing interest on a monthly basis of approximately $3,000.The funds of $100,000 less banking charges generated by the increase in the subsisting loan, taking into account a small excess on the overdraft [see Item 1 above] of $100,000 was paid to N[areg] I[nternet], being $91,636.70 to reimburse it for the payments made to teachers: see Court Book 1 after Tab18 page 188. The sum of $91,636.70 was transferred to N[areg] I[nternet] on 11. 8. 2003 for the benefit of SGAS namely to pay SGAS wages and related expenses esp compulsory super paid to MLC.
The evidence that N[areg] I[nternet] had paid the teachers is found in the Liq[uidator]'s material [eg Court Book Vol 6 tab 34 - sets out many examples of such payments by N[areg] I[nternet] to teachers because SGAS did not have available at the time funds - it was awaiting grants payments; for other samples of Group Certificates for teacher payments by N[areg] I[nternet] in [Mr Ghougassian's]'s aff[idavit] sw[orn] 15 3 2015 at pages 261-262]. N[areg] I[nternet] has paid teachers in this fashion for many years (the total teacher bill for SGAS during the life of SGAS was in excess of $2millions) - and in the years 2002 and 2203 paid wages and superannuation for SGAS [to MLC - see Ex P20 pages 7 to 8) in the sum of approximately $160,000.
The payment of $91,636.70 as a credit towards SGAS' liability to N[areg] I[nternet], with the result that [Mr Ghougassian] then stands in the shoes of N[areg] I[nternet] as the creditor. These payments all demonstrate that [Mr Ghougassian] was a true benefactor of SGAS, as White J found, and was not fraudulent as the Liq[uidator] has contended.
The account found by White J does not include the loan funds of $500,000 - the total amount secured, found by White J related to sums due and owing that came into existence after the date of the mortgage in 2005."
I accept that there is evidence that may relate to the payment of teachers by the Nareg companies, although I note that the PAYG Payment Summaries and pay slips contained at Ex D14, RMS 7 p 2 (which corresponds to Court Book vol 6 tab 34) identify Nareg or Nareg Internet as the payer and the names of payees, but do not identify the payees as teachers within the school, as distinct from employees of Nareg Internet performing other functions. It appears that the reference to Mr Ghougassian's affidavit sworn 15 March 2015 is to his affidavit sworn 20 March 2015 which contains several further examples of PAYG Payment Summaries, three of which appear to relate to third parties, one of which appears to relate to a relative and one of which appears to relate to his wife, and which do not indicate the nature of the work undertaken by those persons. The document referred to at Ex P20 is an advice by MLC that it was "unable to provide [Nareg Limited's] gross wages", and it otherwise contained a document recording payments which again does not identify the role performed by the persons to whom those payments were made. I should add, for completeness, that the question I must address is not, as Mr Ghougassian here submits, a binary question whether Mr Ghougassian was a "true benefactor" of SGAS (as White J found and I would also tend to think) or whether Mr Ghougassian was fraudulent. The liquidator did not advance a broader allegation of fraud against Mr Ghougassian, although he did advance a particular allegation of fraud in the Cross-Claim which I will address below. The question I must address is the narrower question whether the disbursement of monies borrowed by Mr Ghougassian and paid, in part, to Mr Ghougassian's previous home loan and in part to Nareg Internet has been shown to give rise to liability of SGAS to repay, or pay interest on, the whole or an identified part of those borrowed monies.
The liquidator's schedule updating the basis of the adjudication of Mr Ghougassian's claims (Ex P11) recorded that POD 183 was rejected on the basis of "insufficient documentation/no grounds" and was statute barred. The liquidator's schedule of claims and evidence notes that, although the claim refers to a transaction on 1 July 2003, it appears that this is a claim for the entire home loan taken out by Mr Ghougassian in July or August 2003. The liquidator submits that:
"The evidence (summarised above under POD 1-80) establishes that the majority of the line $500,000 line of credit taken out with Iden Group (which Michael [Ghougassian] referred to in his evidence as ING from time to time) was not advanced to, or for the benefit of, the School, or pursuant to any loan agreement with the School."
This claim is not established for the same reasons that the claims reflected in PODs 1-80 and 95-106 are not established.
Mr Ghougassian's schedule of claims and evidence describes POD 184 as:
"Initial interest payable at the changeover from A[t]tache to Quicken software no breakup is available".
That schedule identifies the evidence to support that claim, mixed with submission, as:
"This is the interest payable to [Mr Ghougassian] at 1/1/04 for the loans he had up to the time attributed in the books of the SGAS to him
Refer page 479 Aff[idavit] of Mr Lott 8/6/11 1 7 2004.
This is the interest payment of the loan of $400,000 from 14/12/99 to 31/12/03 paid by N[areg] I[nternet] and [Mr Ghougassian] to ING in satisfaction of MG's obligation to his bank ING: see Ex P17 [the bank statements of N[areg] I[nternet] show from 12/11/01 to 10/7/03 part payment of $47,064.96 found from subpoena of Wes[t]pac in these proceedings] and the balance being paid by [Mr Ghougassian] - as evidenced in the books of SGAS at December 2003.
See also pages 70-71 in White J transcript [Tab 3 Plaintiffs Court book] and Lott - White J transcript page 150 lines 16-20"
The reference to Mr Lott's affidavit dated 8 June 2011 is to his affidavit filed in the proceedings before White J, and the page referred to is part of Mr Lott's schedule indicating monies "owing to Mr Michael Ghougassian by the school including compound interest", referring to monthly interest for the months January - December 2004. That period is subsequent to that covered by this POD, which relates to the period prior to 1 January 2004, as the POD itself and the second paragraph of Mr Ghougassian's schedule of claims and evidence makes clear. I accept that Mr Ghougassian paid interest on his home loan in that period but that is not sufficient to establish that SGAS is liable to repay that interest. In cross-examination, Mr Ghougassian described this claim as directed to interest payments from his loans with Advance Bank, St George, Home Loan Services and ING as recorded in a software programme (T191-192). This claim raises the same issues as Mr Ghougassian's other claims for interest of the same character and is not established for the same reasons.
PODs 233-246 also relate to the Iden Group loan. Mr Ghougassian's schedule of claims and evidence describes PODs 233-246 as "Interest paid to Iden Group for moneys borrowed by [Mr Ghougassian] for benefit of SGAS" and identifies the evidence to support by reference to POD 1. By his letter dated 5 December 2013 (Ex P1), the liquidator noted, in respect of these claims, that insufficient documentation had been provided to evidence an entitlement to interest on purported advances to SGAS; and the liquidator's schedule updating the basis of the adjudication of Mr Ghougassian's claims (Ex P11) recorded that claims 233-246 were rejected on the basis that they were interest claims, "insufficient documentation/no grounds" and that a portion of the claim was after the date of the liquidator's appointment. These claims are not established and were properly rejected by the liquidator for the same reasons as PODs 1, 95-106 and 184.
The liquidator submits, and I accept, that Mr Ghougassian has not established that he was incorrect to reject POD 183 in respect of the ING home loan or PODs 1-80, 184, 233-246 and 249-257 relating to interest on that loan. In summary, the record of the payment to SGAS in December 1999 does not establish that amount was a loan rather than a tax-deductible donation or payment of another character, or that any such loan remained on foot despite the multitude of payments later made by SGAS to Mr Ghougassian and his associated entities; the direct application of the funds borrowed by Mr Ghougassian in July or August 2003 was to a personal purpose, in respect of his existing home loan and to Nareg Internet; and it has not been established that the larger amount as to which interest is now claimed was borrowed by Mr Ghougassian for the benefit of SGAS so as to support a claim that interest on that borrowing should be paid by SGAS. I am also not persuaded that Mr Ghougassian's evidence in that respect, to the extent that it was admitted in his affidavits or in cross-examination, established the necessary link between his borrowing from Iden Group and any amount paid to SGAS to support that claim. The liquidator also submits, and I also accept, that so far as that interest is claimed in respect of periods after the date of the winding up, it was correctly rejected on the basis that s 554(1) of the Corporations Act requires that the amount of a debt or claim (including a debt or claim for or including interest) is to be computed for the purposes of the winding up at the relevant date, being the date on which the winding up began.
I note, for completeness, that by his letter dated 5 December 2013 (Ex P1), the liquidator noted a claim by Mr Ghougassian that the liquidator had given approval to make payments to current creditors after the date of his appointment as liquidator and agreed to Mr Ghougassian "stepping into the shoes of these creditors". The liquidator submits, and I accept, that the evidence does not establish that he had directed any party to make payments to creditors. That matter does not support the claim to interest after the date of the winding up.
[8]
Proofs of debt 127-128, 134, 140-143, 145-146, 148 - Claims relating to Visa, M&K, sale of unit and funds advanced by Mr Ghougassian
A number of claims relate to payments from Mr Ghougassian's Visa card, the joint account of Mr and Mrs Ghougassian ("M&K Account") and one claim relates to the proceeds of sale of a unit.
PODs 127 - 128 relate to claimed payments to SGAS from Mr Ghougassian's Visa card in the amount of $25,000 on 24 June 2004 and $2,000 on 6 August 2004. Mr Ghougassian's schedule of claims and evidence summarises the evidence supporting these PODs as the table prepared by Mr Wing and Mr Lott. The liquidator's schedule updating the basis of the adjudication of Mr Ghougassian's claims (Ex P11) recorded that POD 127 was partly admitted and the interest claim was rejected, and POD 128 was rejected on the basis of "insufficient documentation/no grounds." Mr Ghougassian's schedule of claims and evidence describes POD 134 as "Visa card payment to SGAS from [Mr Ghougassian's] card" and again summarises the evidence supporting it as the table prepared by Mr Wing and Mr Lott. The liquidator's schedule updating the basis of the adjudication of Mr Ghougassian's claims (Ex P11) recorded that POD 134 was rejected on the basis of "insufficient documentation/no grounds". I have referred above to the limited nature of the vouching undertaken by Mr Wing and Mr Lott and that exercise provides little support for the claim. The evidentiary basis for these claims has not been established, and the interest claim made at the Reserve Bank rate has not been established in the absence of evidence that SGAS agreed to pay interest at that rate.
Mr Ghougassian's schedule of claims and evidence describes POD 140 as a Visa card payment to SGAS from Mr Ghougassian's card and summarises the evidence supporting it as the table prepared by Mr Wing and Mr Lott. The liquidator's schedule updating the basis of the adjudication of Mr Ghougassian's claims (Ex P11) recorded that POD 140 was partially admitted and the interest claim was rejected. As I noted above, the vouching undertaken by Mr Wing and Mr Lott was of a limited character and that exercise provides little support for this claim, and Mr Ghougassian also does not lead affidavit evidence to explain this transaction. The evidentiary basis for this claim has not been established, to the extent it was not accepted by the liquidator, and the claim for interest at the Reserve Bank rate is not established where, as I noted above, the evidence does not establish that SGAS agreed to pay interest at that rate. The liquidator's decision in respect of this claim should not be set aside.
PODs 141 - 143 also relate to claimed payments from Mr Ghougassian's Visa card to SGAS in the amount of $24,211.76 on 21 May 2005, $888.78 on 3 May 2005 and $16,000 on 9 June 2005. The liquidator's schedule updating the basis of the adjudication of Mr Ghougassian's claims (Ex P11) recorded that POD 141 was rejected on the basis that the amount was repaid on 4 March 2005, although the liquidator's schedule of claims and evidence indicates, possibly inconsistently, Mr Ghougassian did not specifically address this claim in his evidence and the claim is not established on the evidence. The liquidator's schedule updating the basis of the adjudication of Mr Ghougassian's claims (Ex P11) recorded that POD 142 was rejected on the basis of insufficient documentation/no grounds. Mr Ghougassian also did not specifically address this claim in his evidence. The liquidator's schedule updating the basis of the adjudication of Mr Ghougassian's claims (Ex P11) recorded that POD 143 was rejected on the basis that the amount was repaid on 14 July 2005, and there is evidence of a corresponding payment to Mr Ghougassian's Visa account (Ex D13, pp 1317, 1320). I am not satisfied that these claims are established, by reason of the limited nature of the vouching undertaken by Mr Wing and Mr Lott, the lack of specific evidence of Mr Ghougassian to support the claims, and the evidence of repayment in respect of POD 143.
Mr Ghougassian's schedule of claims and evidence describes POD 145 as a payment of $250,000 from the sale of a unit in Thornleigh to SGAS. The liquidator's schedule updating the basis of the adjudication of Mr Ghougassian's claims (Ex P11) recorded that POD 145 was rejected on the basis that it was subject to the 2012 Judgment and had been paid. It was put to Mr Ghougassian in cross-examination that that amount had been repaid pursuant to the orders of White J in the 2012 Proceedings. He responded that "[t]here's no way of knowing, because there was previous loans from [sic] SGAS" (T202). The liquidator submits that, where Mr Ghougassian pursued and recovered a claim for this amount as part of his secured debt, he should not be permitted to recover for the same amount twice. It seems to me that, where an order was made by White J that required repayment of that amount, which was repaid with interest, and Mr Ghougassian concedes that there is no means of attributing that payment to any other amount, then that amount should be treated as a repayment of that loan. This claim is not established.
POD 146 relates to a claimed payment of $2,239.25 on 20 September 2005 from the M&K Account to SGAS and Mr Ghougassian's schedule of claims and evidence identifies no evidence to support it. The liquidator's schedule updating the basis of the adjudication of Mr Ghougassian's claims (Ex P11) recorded that POD 146 was rejected on the basis of insufficient documentation/no grounds. No evidence was led by Mr or Mrs Ghougassian specifically to address this claim and their joint bank account records do not record any such payment on or shortly before this date (Ex P18 Statement 54 pp 1-2). Mr Ghougassian did not point to any other transaction in that account that could have corresponded to this transaction. The basis of this claim has not been established.
I will address POD 148 below since it was also rejected by the liquidator on another ground.
[9]
PODs 148, 151, 157-158, 160-163, 165, 167, 171, 178 - Claims rejected on the basis that they were paid pursuant to the 2012 Judgment
The liquidator's schedule updating the basis of the adjudication of Mr Ghougassian's claims (Ex P11) recorded that PODs 148, 151, 157-158, 160-163, 165, 167, 171 and 178 were rejected on the basis that they were subject to the 2012 Judgment and had been repaid to Mr Ghougassian.
Mr Ghougassian's schedule of claims and evidence describes POD 148 as a payment from the M&K Account to SGAS; PODs 151 and 157 as payments to SGAS from Mr Ghougassian's Visa card; PODs 158 and 160-162 as payments from the M&K Account to SGAS; PODs 163, 165 and 167 as payments to SGAS from Mr Ghougassian's Visa card; and PODs 171 and 178 as payments from the M&K Account to SGAS. Mr Ghougassian's schedule of claims and evidence recognised, for at least some of these transactions, and he accepted in cross-examination that these amounts had been repaid by the liquidator following the 2012 Judgment. His position in cross-examination was that the relevant payments were to be applied to loans made "at the beginning, what was owed at the beginning" (T195) and that these claims were pressed on the basis that he had made earlier loans to SGAS, and notwithstanding the payment of the amounts ordered by White J in the 2012 Judgment and made by the liquidator (T203-204). The liquidator submits that, where Mr Ghougassian pursued and recovered claims for these amounts as part of his secured debt, he should not be permitted to recover for the same amount twice.
I do not accept that these claims can now be maintained, despite the payments made pursuant to the 2012 Judgment. First, Mr Ghougassian has not led evidence that would permit the identification of any other loans previously made by him to which the amounts repaid by the liquidator in accordance with the 2012 Judgment should be applied and, second, the particular amounts ordered to be repaid by White J related to these loans and should be attributed to repayment of them. These claims are not established and the liquidator's rejection of them should not be set aside.
[10]
PODS 107-122 - Claims in respect of the Nareg companies
Mr Ghougassian lodged numerous proofs of debt in relation to monies which, to adopt a neutral description, were originally paid by third parties to SGAS. Mr Ghougassian contends that, in effect, these payments had the character of loans made by the third parties to Mr Ghougassian and by him to SGAS. I will address these claims in several categories below. I first address PODs 107-122, which relate to claims for monies paid by Nareg companies, which are associated with Mr Ghougassian. The liquidator's schedule updating the basis of the adjudication of Mr Ghougassian's claims (Ex P11) recorded that these claims were rejected on the basis that they were third party claims and statute barred.
Mr Ghougassian's schedule of claims and evidence describes POD 107 as Mr Ghougassian's "debt for moneys advanced to SGAS arranged by him through N[areg] I[nternet]" in the amount of $20,000 on 4 March 2003 and indicates the evidence supporting it is as follows:
"Ex P4 demonstrates that the deposit to SGAS occurred - statement 126 entry for 4 3 2003
White J found that money paid in, is proof of payment without the need for corroboration
Mr Lott for SGAS has it listed as a debt of SGAS at page 467 of Tab 8 in Plaintiff's Court Book
POD whose correctness is affirmed makes the claim - and evidence in aff[idavit] of [Mr Ghougassian] sw[orn] 20/3/2015 paragraphs 1 to 18; no xx of [Mr Ghougassian] by Liq[uidator] contesting this claim."
Mr Ghougassian's reliance on the observations of White J appears to be directed to supporting a submission that his and Dr Ghougassian's affidavit or oral evidence that a debt was owed to either of them should be sufficient for the liquidator to accept, and the Court to find, that such a debt existed. I do not accept that submission. First, White J was plainly not expressing any principle of law that uncorroborated evidence is sufficient to establish proofs of debt in a liquidation, or to the contrary. Whether such evidence will be sufficient will depend upon the circumstances, and the liquidator's and the Court's assessment, including of the weight of any evidence. Second, as I noted above, White J observed that he would not reject Mr Ghougassian's or Dr Ghougassian's evidence about an advance, merely because it was not corroborated, particularly where that corroboration may be available on computers held by the liquidator that had not been examined by him. As I also noted above, I give less weight than White J to the fact that computers have been in the possession of the liquidator, where they have now been available for collection by the Plaintiffs over a long period, and they have not chosen to collect them, inspect them or lead evidence of their contents. Third, I also give less weight to the evidence of Mr Ghougassian and Dr Ghougassian than White J may have been prepared to do, because, as I have noted above, each of them has such an overwhelming conviction that all monies held by the liquidator should be repaid to them, so that they can establish a new school, that they not will not now acknowledge any possibility that any transaction was such that it does not support a claim for such monies against SGAS, or recognise any fact that is inconsistent with their claims. Fourth, the fact of a payment by Mr Ghougassian, Dr Ghougassian or a third party to SGAS does not, in itself, establish that that payment had the character of a loan, particularly where payments to SGAS are often recorded as "donations" and could be made as tax-deductible donations. I also give limited weight to Mr Lott's table, where the basis of his characterisation of the amount as a debt owed by SGAS is not elaborated and that is a matter of fact and law, not only of accounting expertise.
As the liquidator points out, Nareg Internet's accounts do not record an advance on the date claimed by POD 107 (Ex P17, Statement 27 p 1) and Mr Ghougassian and Dr Ghougassian did not lead affidavit evidence to explain the transaction. Mr Ghougassian did not point to any other transaction in Nareg Internet's account that could have corresponded to this transaction. I am not satisfied that a loan has been established, and Mr Ghougassian personally is in any event not entitled to recover amounts due to the Nareg companies for the reasons noted below.
Mr Ghougassian's schedule of claims and evidence describes POD 108 as Mr Ghougassian's "debt for moneys advanced to SGAS arranged by him through N[areg] I[nternet]" in the amount of $29,000 on 13 March 2003 and summarises the evidence supporting it as follows:
"Ex P4 demonstrates that the deposit to SGAS occurred on 13/3/03 as claimed - statement 127 entry for 13 3 2003."
There is evidence of a deposit to SGAS at this date. However, as the liquidator points out, Nareg Internet's bank statements do not record such a payment on this date (Ex P17, Statement 27 p 1) and no affidavit evidence was led to explain the transaction by Mr Ghougassian. Mr Ghougassian did not point to any other transaction in Nareg Internet's bank statements that could have corresponded to this transaction. I am not satisfied that a loan has been established, and Mr Ghougassian is also not entitled to recover amounts due to the Nareg companies for the reasons noted below.
Mr Ghougassian's schedule of claims and evidence describes POD 109 as Mr Ghougassian's "debt for moneys advanced to SGAS arranged by him through N[areg] I[nternet]" in the amount of $20,000 on 1 April 2003 and summarises the evidence supporting it as follows:
"Ex P4 demonstrates that the deposit to SGAS occurred on 13/3/03 as claimed - statement 127 entry for 11 3 2003.
As to the principle for accepting such claims, the Plaintiffs note that several of the claims which related to so-called 3rd party claims, were in fact directed by White J to be paid as PODs, and have since been paid: eg POD No 149".
The date referred to here does not correspond to the date of the transaction in the POD; however, there is evidence of a deposit of $20,000 to SGAS's account made on 2 April 2003, although the bank statement does not record who made that deposit (Ex P4, Statement 127). The liquidator points out that Nareg Internet's bank statements do not record any such payment on this date (Ex P17, Statement 28 p 1); while Mr Ghougassian did not point to any other transaction in Nareg Internet's bank statements that could have corresponded to this transaction, I note that Nareg Internet's bank statements show a withdrawal of $20,000 on 27 March 2003 (Ex P17, Statement 27 p 2). Mr Ghougassian did not specifically address the transaction in his affidavit evidence. I think it likely that the relevant payment was made by Nareg Internet to SGAS, although I am not satisfied that its character as a loan has been established. In any event, Mr Ghougassian is not entitled to recover amounts due to the Nareg companies for the reasons noted below.
Mr Ghougassian's schedule of claims and evidence describes POD 110 as Mr Ghougassian's "debt for moneys advanced to SGAS arranged by him through N[areg] I[nternet]" in the amount of $20,000 on 11 April 2003 and summarises the evidence supporting it as follows:
"Ex P4 demonstrates that the deposit to SGAS occurred on 13/3/03 as claimed - statement 127 entry for 11 3 2003."
Again, the date referred to here does not correspond to the date of the transaction in the POD. Mr Ghougassian's schedule of claims and evidence similarly describes POD 111 as Mr Ghougassian's "debt for moneys advanced to SGAS arranged by him through N[areg] I[nternet]" in the amount of $25,000 on 27 May 2003 and summarises the evidence supporting it as follows:
"Ex P4 demonstrates that the deposit to SGAS occurred on 13/3/03 as claimed - statement 128 entry for 27/5/ 2003."
Nareg Internet's bank statements do not record any such payments on or shortly before these dates (Ex P17, Statement No 28 p 1, No 29 p 2); Mr Ghougassian did not point to any other transactions in Nareg Internet's bank statements that could have corresponded to these transactions; and Mr Ghougassian's affidavit evidence did not explain the transactions. I am again not satisfied that these claims have been established, and in any event Mr Ghougassian would not be entitled to recover amounts due to the Nareg companies for the reasons noted below.
Mr Ghougassian's schedule of claims and evidence describes POD 112 as Mr Ghougassian's "debt for moneys advanced to SGAS arranged by him from Harry Badelian through N[areg] I[nternet] to SGAS" in the amount of $10,000 on 6 June 2003 and summarises the evidence supporting it as follows:
"Ex P4 demonstrates that the deposit to SGAS occurred on 6/6/03 as claimed - statement 129 entry for 6/6/ 2003."
The bank statements tendered in support of this claim do not record such a payment by Nareg Internet on or shortly before this date (Ex P7, Ex P17 Statement 30 p 1) and neither Mr Ghougassian nor Mr Badelian expressly addressed this transaction in their affidavit evidence. I am not satisfied that a loan has been established and, in any event, Mr Ghougassian personally is not entitled to recover amounts due to the Nareg companies for the reasons noted below.
POD 113 relates to a claimed advance of $10,000 from "N[areg] I[nternet]/GJC" on 12 June 2003. Mr Ghougassian's schedule of claims and evidence describes POD 113 as Mr Ghougassian's "debt for N[areg] I[nternet] moneys advanced to SGAS by GJL at [Mr Ghougassian's] direction: by GJL a customer of N[areg] I[nternet], instead of paying N[areg] I[nternet] direct with receipt from N[areg] I[nternet] given to GJL on credit of [Mr Ghougassian]" and summarises the evidence supporting it as follows:
"Ex P4 demonstrates that the deposit to SGAS occurred on 12/6/03 as claimed - statement 129 entry for 12/6/ 2003
Aff of [Mr Ghougassian] sworn 20/3/15 par 24 - The debt is of [Mr Ghougassian] - GJL was a customer of N[areg] I[nternet] - [Mr Ghougassian] asked that instead of paying N[areg] I[nternet] GJL pay SGAS and N[areg] I[nternet] would treat this as payment of the debt to N[areg] I[nternet] - it is implicit in this arrangement that the debt satisfied by GJL at [Mr Ghougassian's] direction is SGAS'[s] debt to [Mr Ghougassian] - N[areg] I[nternet] has been paid but [Mr Ghougassian] then stands in the shoes of NI.
Also see Evidence of Mr Wing and Mr Lott and the Table attached to their affidavits which is MFI 15."
The reference to "GJL" refers to Mr George Lizier, and Mr Ghougassian's evidence is that Mr Lizier agreed, at Mr Ghougassian's request, to pay monies owing to Nareg Internet to SGAS, and also lent money to Mr Ghougassian for SGAS, to be repaid by Mr Ghougassian. The liquidator points out that Nareg Internet's bank statements do not record such an advance on this date (Ex P17, Statement 30 p 1), although I recognise that would be consistent with a direct payment by Mr Lizier to SGAS. My attention has not been drawn to other documentary evidence of the source of the payment. Mr Lizier did not give evidence; paragraph 24 of Mr Ghougassian's affidavit of 20 March 2015 was partly rejected and partly admitted subject to a limiting order under s 136 of the Evidence Act; and, to the extent that paragraph was admitted, is a submission as to Mr Lizier's practice in general terms rather than referring to the particular transaction. Again, I am not satisfied that a loan by Mr Ghougassian to SGAS in this amount has been established. I also do not accept the further submission that, if Mr Lizier paid a debt due to Nareg Internet to SGAS at its direction (presumably given by Mr Ghougassian on its behalf), any resulting debt would be owed by SGAS to Mr Ghougassian personally rather than to Nareg Internet, since that approach would divert a corporate asset of Nareg Internet to Mr Ghougassian's personal benefit. I will return to that matter below.
POD 114 relates to a claimed payment of $675.36 from Nareg Internet on 12 June 2003. Mr Ghougassian's schedule of claims and evidence describes POD 114 as "N[areg] I[nternet]/[Mr Ghougassian] payment to SGAS for its benefit but for non- N[areg] I[nternet] purpose" and the evidentiary reference given for it is unclear. Nareg Internet's bank statements do not record any such payment on or shortly before this date (Ex P17, Statement 30 p 1). Mr Ghougassian did not point to any other transaction in Nareg Internet's bank statements that could have corresponded to this transaction, and did not give specific affidavit evidence of the transaction. I am not satisfied that the claimed loan has been established and, in any event, Mr Ghougassian personally is also not entitled to recover amounts due to the Nareg companies for the reasons noted below.
POD 115 relates to a claimed advance of $15,000 from "N[areg] I[nternet]/GJC" on 16 June 2003. Mr Ghougassian's schedule of claims and evidence describes POD 115 as "[Mr Ghougassian] debt for moneys advanced to SGAS by GJL, a customer of N[areg] I[nternet], instead of paying N[areg] I[nternet] direct with receipt from N[areg] I[nternet] given to GJL on credit of [Mr Ghougassian]". The reference to "GJL" is again to Mr Lizier, to whom I referred in respect of POD 113 above. Mr Ghougassian's schedule summarises the evidence supporting that claim as follows:
"As for Item 113
Evidence that the money has been deposited into SGAS on the date alleged from the source alleged [ie GJL] is at Def Court Book Vol 1 Tab 18 page 189 entry for 16 6 2003. 'GJL' is recorded as 'GJLectronics', consistently with [Mr Ghougassian's] affidavit sw[orn] 20 3 2015 par. 24.
By inference from the circumstance that N[areg] I[nternet] is not an education services provider but managed by [Mr Ghougassian] who is so involved give rise to the inference of a right of recoupment in N[areg] I[nternet] against M[r] G[hougassian]."
I am not satisfied that a loan has been established for the same reasons as in respect of POD 113. Nareg Internet's bank statements do not record such a payment on or shortly before this date (Ex P17, Statement 30 p 1), although I recognise that would be consistent with a direct payment by Mr Lizier or his company to SGAS. However, my attention has not been drawn to other documentary evidence of the source of the payment, and, to the extent that paragraph 24 of Mr Ghougassian's affidavit was admitted, it deals with Mr Lizier's practice in general terms rather than referring to the particular transaction. Again, I am not satisfied that the claimed loan has been established. Mr Ghougassian is also not entitled to recover, in his name, amounts due to the Nareg companies for the reasons noted below.
POD 116 relates to a claimed payment of $20,000 from Nareg Internet on 19 June 2003. Mr Ghougassian's schedule of claims and evidence describes POD 116 as "[Mr Ghougassian]/N[areg] I[nternet] payment to SGAS" and summarises the evidence supporting it as follows:
"This is recorded as paid by N[areg] I[nternet] to SGAS [see page 6 of Tab 14 of [Plaintiffs'] Court Book page 600] and Def Court Book 1 page 190 entry for 19 6 2003
N[areg] I[nternet] would not be the appropriate claimant as [Mr Ghougassian] has acknowledged a debt to N[areg] I[nternet] of moneys directed to be paid by him to SGAS: see [Mr Ghougassian] aff sworn 20 3 2015 par 6. The books of N[areg] I[nternet] subpoenaed from Mr Punch [the N[areg] I[nternet] accountant] shows a substantial debt owing to N[areg] I[nternet] by [Mr Ghougassian] at 2011: Ex P14 [eg page 89 - 2011 accounts]
Also see Wing/Lott Table which evidences actual payment by or through N[areg] I[nternet] to SGAS and a debt - to whom only is the question. As the purpose of N[areg] I[nternet] is not educational, the only purpose can be that of [Mr Ghougassian], whose role at SGAS as public officer and fundraiser was educational links the payments to him and for his purposes made at his direction and with his authority and not the obligation of N[areg] I[nternet]."
Nareg Internet's bank statements do not record any such payment on or shortly before this date (Ex P17, Statement 30 p 1) and Mr Ghougassian does not give specific affidavit evidence of the transaction. I have referred to the limited nature of the vouching undertaken by Mr Wing and Mr Lott above. Mr Ghougassian also did not point to any other transaction in Nareg Internet's bank statements that could have corresponded to this transaction. I am not satisfied that the claimed loan has been established.
I also do not accept the submission that, if a loan by Nareg Internet had been established, Mr Ghougassian personally rather than Nareg Internet would be the appropriate claimant. First, the evidence does not establish the claimed acknowledgement by Mr Ghougassian of a debt to Nareg Internet of monies that he had directed to be paid to SGAS; paragraph 6 of Mr Ghougassian's affidavit of 20 March, to which his schedule of claims and evidence refers, does not refer to such an acknowledgement but only to Mr Ghougassian's ownership of several businesses, including Nareg Internet, and to his claim to be authorised to act on its behalf. Second, even if Mr Ghougassian had acknowledged such a debt to Nareg Internet, it is not apparent how that dealing between those parties would affect any existing relationship of debtor and creditor between Nareg Internet and a third party, SGAS. The existence of a larger loan by Mr Ghougassian to Nareg Internet does not support a claim by Mr Ghougassian against SGAS in respect of this transaction. I also do not accept that, even if it could realistically be said that Nareg Internet had a different purpose from that of Mr Ghougassian as its controller, so far as benefitting SGAS was concerned, that would allow Mr Ghougassian rather than Nareg Internet to be treated as the creditor in respect of any monies advanced by Nareg Internet to SGAS. I return to the wider question whether Mr Ghougassian is entitled to recover amounts due to the Nareg companies below.
POD 117 relates to a claimed payment of $8000 on 26 June 2003. Mr Ghougassian's schedule of claims and evidence describes POD 117 as "Payment by Harry Badelian (Board Member and Chair of SGAS] through N[areg] I[nternet] to SGAS" and summarises the evidence supporting it as follows:
"See Wing /Lott Table for verification
As for the purpose and with the authority of [Mr Ghougassian] see Item 116. The significance of this payment is that the Chair of SGAS was directly involved in the mode of payments by [Mr Ghougassian] through N[areg] I[nternet] to SGAS and was himself liable. Mr Badelian has not made a personal claim; rather [he] has a claim back against [Mr Ghougassian] once payment is made to [Mr Ghougassian] by the Liq[uidator].
Court Book Vol 1 page 190 Tab 18 demonstrates at statement 129 that the $8000 was deposited on the day alleged by the Plaintiffs.
Bad[e]lian was called and gave evidence consistent with his affidavit in [Plaintiffs'] Court Book Tab" [sic]
The bank statements relied on in support of this claim do not record this payment on or shortly before this date (Ex P7, Ex P17 Statement 30 pp 1-2) and neither Mr Ghougassian nor Mr Badelian expressly addressed this transaction in their affidavit evidence. I am not satisfied that the claimed loan has been established, and Mr Ghougassian is also not entitled to recover amounts due to Mr Badelian or Nareg Internet in respect of the transaction.
POD 119 relates to a claimed payment of $10,000 on 11 July 2003. Mr Ghougassian's schedule of claims and evidence describes POD 119 as "Direct deposit by N[areg] I[nternet] to SGAS at [Mr Ghougassian's] request or direction" and summarises the evidence supporting it as the table prepared by Mr Wing and Mr Lott and a cheque to which no evidentiary reference is given. I have referred to the limitations of the vouching undertaken by Mr Wing and Mr Lott above. A cheque withdrawal is recorded in Nareg Internet's bank statements on this date for $10,000, but is unclear to whom the cheque was payable (Ex P17 Statement 31 p 1) and Mr Ghougassian does not specifically address the transaction in his affidavit evidence. I am not satisfied that a loan has been established, and Mr Ghougassian personally is also not entitled to recover amounts due to the Nareg companies for the reasons noted below.
POD 120 relates to a claimed payment of $10,000 on 17 July 2003. Mr Ghougassian's schedule of claims and evidence describes POD 120 as "Direct payment by N[areg] I[nternet] to SGAS at [Mr Ghougassian's] direction on his credit" and summarises the evidence supporting it as the table prepared by Mr Wing and Mr Lott. I have referred to the limitations of the vouching undertaken by Mr Wing and Mr Lott above. Mr Ghougassian does not address the transaction in his affidavit evidence; Nareg Internet's accounts do not record this transaction either on or shortly before this date (Ex P17 Statement 31 p 2); and Mr Ghougassian did not point to any other transaction in Nareg Internet's accounts that could have corresponded to this transaction. Again, I am not satisfied that this claim has been established, and Mr Ghougassian is also not entitled to recover amounts due to the Nareg companies for the reasons noted below.
PODs 121 and 122 relate to claimed payments of $12,000 on 7 August 2003 and $20,000 on 21 August 2003. Mr Ghougassian's schedule of claims and evidence describes PODs 121 and 122 as "N[areg] I[nternet] to SGAS payment at direction of [Mr Ghougassian]" and summarises the evidence supporting them as including the table prepared by Mr Wing and Mr Lott. I have referred to the limitations of the vouching undertaken by Mr Wing and Mr Lott above. Cheque withdrawals are recorded in Nareg Internet's banks statements on these dates for $12,000 and $20,000, but the payee of the cheques is not identified (Ex P17 Statement 32 p 1). There are no precisely corresponding deposits recorded in SGAS's bank statements on these dates, although I recognise that a deposit of $12,300 is recorded in SGAS's account on 7 August, $20,000 on 12 August, $21,737 on 22 August and $31,329 on 22 August from unidentified sources (Ex P4, statement 131). As the liquidator points out, Mr Ghougassian does not specifically address these transactions in his affidavit evidence. It is plainly possible that the withdrawals from the Nareg Internet account partly funded one or other of the deposits to the SGAS account, but it does not seem to be that I can be satisfied of that matter, or that the transactions had the character of loans to SGAS, given the limits of the evidence. In any event, even if the relevant loans had been established, Mr Ghougassian is not entitled personally to recover amounts due to the Nareg companies for the reasons noted below.
Mr Ghougassian's schedule of claims and evidence describes POD 123 as "Visa card payment to SGAS from [Mr Ghougassian's] card" in the amount of $30,000 on 22 August 2003 and summarises the evidence supporting it as "See Visa card entry for Wing/Lott Table at bar graph [sic] to demonstrate payment and receipt". I have referred to the limitations of the vouching undertaken by Mr Wing and Mr Lott above. The liquidator's schedule updating the basis of the adjudication of Mr Ghougassian's claims (Ex P11) records that POD 123 was rejected on the basis that it was a third party claim, there was insufficient documentation and it was statute barred. The evidentiary basis for this claim has not been established and, in any event, Mr Ghougassian is also not entitled to recover amounts due to the Nareg companies for the reasons noted below.
Mr Ghougassian's schedule of claims and evidence describes PODs 124-126 as payments from Nareg Internet to SGAS at Mr Ghougassian's direction in the amounts of $4107, $5000 and $2500 on 16 September 2003, 7 May 2004 and 4 June 2004 and summarises the evidence supporting them as the table prepared by Mr Wing and Mr Lott. I have referred to the limitations of the vouching undertaken by Mr Wing and Mr Lott above. The liquidator's schedule updating the basis of the adjudication of Mr Ghougassian's claims (Ex P11) recorded that PODs 124-126 were rejected on the basis that they were third party claims and statute barred. Mr Ghougassian does not address the transactions in his affidavit evidence, Nareg Internet's bank statements do not record the transactions on or shortly before those dates (Ex P17 Statements 33 p 2, 41 pp 1-2, 42 p 2); SGAS's bank statements do not record corresponding deposits; and Mr Ghougassian did not point to any other transaction in Nareg Internet's or SGAS's bank statements that could have corresponded to these transactions. The evidentiary basis for these claims has also not been established. In any event, Mr Ghougassian is also not entitled to recover amounts due to the Nareg companies for the reasons noted below
Mr Ghougassian's schedule of claims and evidence describes PODs 129-132, comprising claimed loans of $10,000 on 6 August and 13 August 2004 and of $30,000 on 19 and 23 August 2004 as "N[areg] I[nternet] direct payment[s] to SGAS at direction of M[r] G[hougassian]" and identifies no evidence supporting them. Mr Ghougassian's schedule of claims and evidence describes POD 133 as a claimed payment of $30,000 on 30 August 2004 by way of "Cheque deposited by deposit slip #200569" and summarises the evidence supporting it as, inter alia, the table prepared by Mr Wing and Mr Lott. I have referred to the limitations of the vouching undertaken by Mr Wing and Mr Lott above. The liquidator submitted that Nareg Internet's bank statements do not record the transactions (Ex P17 Statements 44 p 1-2); however, Nareg Internet's bank statements record a withdrawal by cheque of $10,000 on 30 August 2004, consistent with POD 133, although they do not identify the payee of that cheque (Ex P17, statement 45). Mr Ghougassian again does not address these transactions in his affidavit evidence. The evidentiary basis for these claims does not seem to me to have been established and, in any event, Mr Ghougassian is also not entitled to recover amounts due to the Nareg companies for the reasons noted below.
PODs 135-136 relate to cheques drawn by Nareg Internet and, it appears, paid into SGAS's account. Mr Ghougassian's schedule of claims and evidence describes these as cheques deposited by deposit slips #200570-200571 and summarises the evidence supporting it including the table prepared by Mr Wing and Mr Lott. Nareg Internet's bank statements record withdrawals by cheques in these amounts (Ex P17 Statement 45 p 1) and SGAS's account record deposits on the same date (Ex D8) but the liquidator submits that there is no evidence of the arrangement between Mr Ghougassian (or, I interpolate, SGAS and Nareg Internet) which would make this a loan by Nareg Internet or Mr Ghougassian. There is a question whether it could be inferred this transaction was a loan, where a tax-deductible donation is an available inference given the common practice of such donations in the relevant period. It is not necessary to determine that question since Mr Ghougassian personally is not entitled to recover amounts due to the Nareg companies for the reasons noted below
Mr Ghougassian's schedule of claims and evidence describes PODs 137-139 as direct payments to SGAS from Nareg entities at Mr Ghougassian's direction in the amounts of $25,000 on 15 September 2004, $5250 on 21 September 2004 and $3585.25 on 24 September 2004 and identifies no evidence supporting the claims. Nareg Internet's bank statements do not record any such payments on or shortly before the relevant dates for PODs 137-138; Nareg Bookshop's bank statements do not record such a payment on or shortly before the relevant date for POD 139 (Ex P17 Statement 45 p 1, Ex P16 Statement 39 pp 1-2); and Mr Ghougassian did not point to any other transaction in the Nareg companies' bank statements that could have corresponded to this transaction. The evidentiary basis for these claims has not been established and, in any event, Mr Ghougassian personally is also not entitled to recover amounts due to the Nareg companies for the reasons noted below.
Mr Ghougassian's schedule of claims and evidence describes POD 147 as a payment from Nareg to SGAS in the amount of $20,000 on 20 December 2005 and identifies no evidence to support it. The liquidator's schedule updating the basis of the adjudication of Mr Ghougassian's claims (Ex P11) recorded that POD 147 was rejected on the basis that it was a third party claim. The evidentiary basis for this claim is not established and Mr Ghougassian is not entitled to recover monies paid by the Nareg companies to SGAS and that claim has not been established for the reasons noted below.
Mr Ghougassian's schedule of claims and evidence describes POD 149 as a payment from Nareg to SGAS and identifies no evidence to support it. The liquidator's schedule updating the basis of the adjudication of Mr Ghougassian's claims (Ex P11) recorded that POD 149 was rejected on the basis that it was a third party claim. The Nareg companies' bank statements do not record any such withdrawal on or shortly before the relevant date (Ex P17 Statement 61 p 2, Ex P16 Statement 54 p 1); and Mr Ghougassian did not point to any other transaction in the Nareg companies' bank statements that could have corresponded to this transaction. The evidentiary basis for this claim has not been established, and Mr Ghougassian personally is also not entitled to recover monies paid by the Nareg companies to SGAS for the reasons noted below. Further complexities arise in respect of this claim, so far as this amount appears also to have been claimed by Dr Ghougassian and repaid to him for reasons that are unclear. It is not necessary to address those complexities since the amount is not recoverable by Mr Ghougassian in any event.
PODs 153-154 relate to claimed payments of $6741.19 and $5279.35 from Nareg Internet on 27 and 28 February 2006. Mr Ghougassian's schedule of claims and evidence describes POD 153-154 as "N[areg] I[nternet] to SGAS payment at direction of [Mr Ghougassian]" and refers to the evidence to support the former transaction as "Refer also Wing/Lott Table and CBA Bank Table" and no evidence to support the latter transaction. I have referred to the limitations of the vouching undertaken by Mr Wing and Mr Lott above. The liquidator's schedule updating the basis of the adjudication of Mr Ghougassian's claims (Ex P11) recorded that PODs 153-154 were rejected on the basis that they were third party claims. In respect of POD 153, Nareg Internet's bank statements show a debit of $6741.18 on this date in favour of an unspecified recipient (Ex P17 Statement 63 p 2) and there is no corresponding deposit recorded in SGAS's bank statements (Dr Ghougassian 12.4.11, Annexure K, Statement 161 p 2). In respect of POD 154, Nareg Internet's bank statements do not record this payment on or shortly before this date (Ex P17 Statement 63 p 2). The liquidator submits, and I accept, that these claims are not made out on the evidence and, even if there were valid claims, the creditor would be Nareg Internet. Mr Ghougassian is not entitled to recover monies paid by the Nareg companies to SGAS and that claim has not been established for the reasons noted above.
POD 164 relates to a claimed payment of $1,000 on 22 March 2007. Mr Ghougassian's schedule of claims and evidence describes POD 164 as "N[areg] I[nternet] to SGAS payment at direction of [Mr Ghougassian]" and identifies the evidence to support it as:
"Cheque deposited by deposit slip #200931 Refer also Wing/Lott Table and CBA Bank Table White J ordered this be paid."
The liquidator's schedule updating the basis of the adjudication of Mr Ghougassian's claims (Ex P11) recorded that POD 164 was rejected on the basis that it was a third party claim subject to the 2012 Judgment. As I will note below, Mr Ghougassian is not entitled to recover monies paid by the Nareg companies to SGAS and that claim has not been established.
Mr Ghougassian's schedule of claims and evidence describes PODs 170 and 174 as debts owed by SGAS to Mr Ghougassian for moneys advanced to SGAS by Mr Andrew Tuft of Backplane Systems, a customer of Nareg Internet, instead of paying Nareg Internet direct. In opening submissions, the Plaintiffs submitted that
"Mr Tuft of ICP Electronics had an invoice from Nareg Internet; [Mr Ghougassian] directed him to pay those funds directly to SGAS, as SGAS was in need of funds, but this left [Mr Ghougassian] out-of-pocket, because it was treated as a loan by the Company to him. This was explained to, and accepted by White J, very clearly at his hearing."
Mr Ghougassian's schedule of claims and evidence identifies the evidence to support these transactions as:
"Evidence that the money has been deposited into SGAS on the date alleged from the source alleged [ie Mr Tuft] is at Def Court Book Vol 1 Tab18 page 189 entry for 16 6 2003. Consistently with M[r] G[hougassian']s affidavit sw[orn] 20 3 2015 par. 20. By inference from the circumstance that N[areg] I[nternet] is not an education services provider but managed by [Mr Ghougassian] who is so involved give rise to the inference of a right of recoupment in N[areg] I[nternet] against [Mr Ghougassian]. White J ordered this to be paid."
The liquidator's schedule updating the basis of the adjudication of Mr Ghougassian's claims (Ex P11) recorded that PODs 170 and 174 were rejected on the basis that they were third party claims subject to the 2012 Judgment. The liquidator points out that White J had found, in the 2012 Judgment, that the amount claimed in POD 170 had been repaid and was not a loan by Mr Ghougassian to SGAS (2012 Judgment [59]) and the amount claimed in POD 174 had not been lent by Mr Ghougassian to SGAS. The statement of account and table prepared by Mr Ghougassian, to which the liquidator refers, support a conclusion that the transaction referred to in POD 170 was in the nature of a loan by ICP Electronics to SGAS. The evidence in these proceedings does not support a different conclusion to that reached by White J. As I noted above, I do not accept that, even if it could realistically be said that Nareg Internet had a different purpose from that of Mr Ghougassian as its controller, so far as benefitting SGAS was concerned, that would allow Mr Ghougassian rather than Nareg Internet to be treated as the creditor in respect of any monies advanced by Nareg Internet to SGAS. In any event, if payments made to SGAS from monies owed to Nareg Internet gave rise to a debt, then that debt was owed by SGAS to Nareg Internet not to Mr Ghougassian, and is not recoverable by Mr Ghougassian personally for the reasons noted below.
Mr Ghougassian's schedule of claims and evidence describes POD 185, which is a claim for $441,537.37, as "an amount that is in the contemporaneous record after DOA [date of appointment] that has to be broken up further" and does not identify any evidence to support it, merely asserting that it is:
"Amounts owing to [Mr Ghougassian], Nareg Internet, Nareg Bookshop and payment to third parties."
This claim must fail in the absence of any adequate identification of its factual basis or any evidence to support it. In any event, Mr Ghougassian is not entitled to recover monies paid by the Nareg Internet, Nareg Bookshop or third parties to SGAS for the reasons noted below.
I should also address the question whether Mr Ghougassian is entitled to recover monies claimed to be lent by the Nareg companies at this point, since it affects a large number of these claims. I accept, of course, that the Nareg companies were associated with Mr Ghougassian, in the sense that he or his wife were directors and shareholders of them. However, it seems to me clear that Mr Ghougassian cannot personally recover debts claimed to be owed to those companies, absent any suggestion that, at any relevant time, those debts were assigned to him and notice of that assignment was given to SGAS. First, the recovery of those debts by Mr Ghougassian personally would be inconsistent with that most basic principle of corporate law that a company is a different legal person from its directors and shareholders. That principle applies both to the advantage of directors and shareholders (for example, in allowing limited liability, other than in respect of specific liabilities imposed by statute) and to their potential disadvantage (such that, as here, a director or shareholder personally cannot maintain a claim of the company in his or her own name, at least absent leave to bring a derivative action). That principle is not only fundamental to the coherence of corporate law, itself a matter of importance, but also fundamental to protection of creditors' interests. In this case, permitting claims by Mr Ghougassian referable to transactions with the Nareg companies would divert assets of the Nareg companies that would otherwise be available to meet any claims of their creditors to Mr Ghougassian. Alternatively, if the payment to Mr Ghougassian did not extinguish the Nareg companies' claims, then SGAS would be exposed to the risk of double payment, to the detriment of its creditors and contributories. For these reasons, the claims by Mr Ghougassian in respect of amounts paid by the Nareg companies to SGAS are properly treated as third party claims that cannot be maintained by Mr Ghougassian and have not been established, and the liquidator's rejection of them should be sustained.
[11]
Claims for monies paid by other persons
Mr Ghougassian also lodged proofs of debt in relation to monies paid by several individuals to SGAS. In paragraphs 14-37 of his Amended Points of Defence filed on 4 March 2015, the liquidator pleaded an additional defence, in respect of proofs of debt lodged by Mr Ghougassian in relation to third party payments, that they were not lodged in respect of debts owing by SGAS to Mr Ghougassian, and referred to repayments of amounts to Mr Jayasooriah on 27 June 2006, Mr Yoonan on 10 November 2006, Mr Jayasooriah on 22 November 2007, ICP on 18 December 2007, Mr Badelian on 25 January 2008 and Mr Conomos on 30 June 2008. The liquidator also points out, correctly, that his allowing these claims by Mr Ghougassian, in the relevant circumstances, would have the real risk of double recovery, so far as the third parties have not been joined to these proceedings and would be free to lodge proofs of debt in their own right claiming the relevant debts, subject to any limitation issue.
Mr Ghougassian made a similar claim in the 2012 Proceedings, where White J held that several third parties had not advanced money pursuant to an agreement to lend that money to Mr Ghougassian so that he could on-lend it to SGAS (2012 Judgment [39], [41], [55], [57], [59], [64], [68], [70]-[71]). The liquidator contends that Mr Ghougassian should not be permitted to depart from those findings or reagitate the terms of the alleged agreements with those third parties. I prefer not to determine the matter on that basis, given White J's observation in the 2012 Proceedings that his judgment was made on limited evidence. I will assume, without deciding, that the claim is open to Mr Ghougassian and determine it on its merits.
The Plaintiffs sought to rely on several affidavits of third parties who had paid monies to SGAS, which sought to characterise those payments as loans to Mr Ghougassian, namely the affidavits of Raphael Ghougassian dated 23 January 2014, Zhenik Yoonan dated 24 January 2014 and Hrair Badelian dated 24 January 2014. Each of those affidavits was in identical form, other than for the name and address of the deponent, with the substantive text reading as follows:
"I made a number of advances for the purposes of education of children of the Sydney Armenian community at the Beaumont Hills establishment of SGAS being [address] Beaumont Hills, New South Wales 2155.
I made advances to SGAS in the forms of loans to Mr Michael Ghougassian with a view to the monies being on-lent to SGAS as loans, which in each case to the best of my knowledge did occur.
Those advances were made by way of loan and were made to Mr Michael Ghougassian to be on lent to him by SGAS."
I rejected each of those affidavits for reasons relating to their form. Had I not rejected those affidavits, I would have given little weight to them where it was plain that the witnesses had either copied each other's affidavits, or the Plaintiffs' solicitor had done so, or the Plaintiffs' solicitor had prepared a pro forma affidavit that was adopted by the witnesses without modification, and I would infer, with little independent thought. The difficulties arising from the copying of the affidavit evidence, had it been otherwise admissible, are well-recognised in the case law: for example, Seamez v McLaughlin [1999] NSWSC 9 at [40]; Macquarie Developments Pty Ltd v Forrester [2005] NSWSC 674; Rosebanner Pty Ltd v Energy Australia [2009] NSWSC 43; (2009) 223 FLR 460 at [324], [326]; Celermajer Holdings Pty Ltd v Kopas [2011] NSWSC 40 at [186]; Re Colorado Products Pty Ltd (in prov liq) [2014] NSWSC 789 at [15]ff. By contrast with the position in some other cases in which issues of this kind have arisen (for example, Macquarie Developments Pty Ltd v Forrester above at [85]ff), the Plaintiffs' solicitor did not seek to offer any explanation of how these affidavits came to be identical, even when that matter was raised in the course of submissions.
The primary evidence for the characterisation of those payments as loans to Mr Ghougassian was the conclusory statements contained in the affidavits sworn by those third parties, which were rejected for form as I noted above, and there was little evidence as to the terms on which the relevant payments were made. The limited evidence as to that matter makes it more difficult to reach a conclusion, on the balance of probabilities, that any particular transaction was a loan, where a practice of third parties making tax-deductible donations to SGAS existed at the same time, or that any such loan was made by a third party to Mr Ghougassian and then by him to SGAS rather than by the third party to SGAS. However, I address the evidence as to the particular transactions below.
[12]
PODs 150, 168 and 181 - Payments by Mr Hrair Badelian
PODs 150, 168 and 181 relate to payments by Mr Hrair Badelian. In opening submissions, the Plaintiffs submitted that Mr Badelian, then the chairman of the board of SGAS, gave funds to Mr Ghougassian to lend to SGAS, which were paid in cash, and Mr Ghougassian then repaid those monies to Mr Badelian who then transferred or assigned his right to Mr Ghougassian to claim the funds from SGAS. I have referred to Mr Badelian's first affidavit dated 24 January 2014 above. The Plaintiffs also rely on Mr Badelian's further affidavit sworn 9 April 2015, which referred to certain amounts which he recalled paying to Mr Ghougassian or sometimes at his direction to SGAS's account, which he quantified as $58,000 over the period 2002 to 2008. He referred to a conversation with Mr Ghougassian in 2012 in which Mr Ghougassian said, in the Armenian language:
"If you can [sic] the money you'll be protected by us treating it as a loan to me with interest which I will on-lend to SGAS and I will repay you."
Mr Badelian adds that he then said "fine" and Mr Ghougassian said he would pay the money back when he had the money.
Mr Badelian's evidence in cross-examination (T271) was that he used to give money, implicitly to SGAS, and Mr Ghougassian "was sort of guarantor for that money and get money back from him". It appears that Mr Badelian's evidence as to the amount he is owed by SGAS reflects information that Mr Ghougassian has in turn provided to him, as to the amount Mr Ghougassian claims to have received from Mr Badelian, and Mr Badelian did not keep records of those advances and does not have any independent recollection of the amounts advanced (T273). Parts of Mr Badelian's affidavit evidence, and his evidence on cross-examination (T275) are consistent with Mr Ghougassian having asked for money to be lent to SGAS, and possibly also guaranteed the amount of the debt owed by SGAS to Mr Badelian arising from such a loan, rather than an arrangement of back-to-back loans. I recognise that Mr Badelian's affidavit also referred to a conversation where the money would be protected by treating it as a loan to Mr Ghougassian (Badelian 9.4.15 [7]), but Mr Badelian then accepted in cross-examination that he understood that he was lending money to SGAS (T275) although "the guarantor" was Mr Ghougassian (T276).
It seems to me that an arrangement by which Mr Badelian lent money to SGAS, even if Mr Ghougassian guaranteed that arrangement, is inconsistent with the characterisation of the arrangement as a loan of money by Mr Badelian to Mr Ghougassian and a subsequent loan of the money by Mr Ghougassian to SGAS. The proof of debt did not rely, nor did Mr King rely, on any suggestion that Mr Ghougassian might have available rights in subrogation, and there is no evidence that Mr Ghougassian has repaid monies to Mr Badelian, as guarantor, borrower or otherwise.
Mr Ghougassian's schedule of claims and evidence describes POD 150 as Mr Ghougassian's "debt for moneys advanced to SGAS arranged by him from Harry Badelian to SGAS" and identifies no evidence to support it. The liquidator's schedule updating the basis of the adjudication of Mr Ghougassian's claims (Ex P11) recorded that POD 150 was rejected on the basis that it was a third party claim. The liquidator's schedule of claims and evidence indicates that:
"No evidence provided of the advance. The bank accounts tendered in support of this claim do not corroborate this advance: see Exhibit P7 (bank accounts tendered through Mr Badelian).
Mr Badelian did not expressly address this transaction in his affidavit evidence. Nor did [Mr Ghougassian] specifically explain this transaction."
The liquidator submits, and I accept, that this claim is not made out on the evidence and, even if there were a valid claim, it appears that the creditor would be Mr Badelian.
Mr Ghougassian's schedule of claims and evidence describes POD 168 as a payment by Mr Badelian to SGAS and identifies the evidence to support it as:
"White J ordered this to be paid - establishing the principle on which the Plaintiffs are claiming this indebtedness."
This statement misstates the finding of White J, which was relevantly that the amount was not an advance by Mr Ghougassian to SGAS secured by the mortgage given by SGAS in favour of Mr Ghougassian (2012 Judgment [55]). The liquidator's schedule updating the basis of the adjudication of Mr Ghougassian's claims (Ex P11) recorded that POD 168 was rejected on the basis that it was a third party claim subject to the 2012 Judgment. The liquidator's schedule of claims and evidence recognises that the payment by Mr Badelian to SGAS is recorded in Mr Badelian's and SGAS's bank statements (Ex P7, Dr Ghougassian 12.4.11, Annexure K, Statement 181 p 1), but submits that Mr Badelian's evidence in cross-examination does not support the characterisation of the transaction as a loan by Mr Badelian to Mr Ghougassian and a further loan by Mr Ghougassian to SGAS. I have referred to Mr Badelian's evidence in that respect above. It seems to me that any loan was made directly to SGAS by Mr Badelian, and this claim is not established, at least when made as a claim by Mr Ghougassian rather than by Mr Badelian.
Mr Ghougassian's schedule of claims and evidence describes POD 181 as "Deposit by Harry Badelian at the request of [Mr Ghougassian] to SGAS" and does not identify the evidence to support it but submits that:
"This was payment to CBA at their request to begin funding the building of the new High School at Beaumont Hills".
The liquidator's schedule of claims and evidence recognises that the payment by Mr Badelian to SGAS is recorded in Mr Badelian's and SGAS's bank statements (Ex P7, Dr Ghougassian 12.4.11, Annexure K, Statement 181 p 1), but notes that White J held this amount was not secured by the mortgage, implicitly on the basis that it was a loan by Mr Badelian rather than Mr Ghougassian to SGAS. I have referred to Mr Badelian's evidence in that respect above. It seems to me that any loan was made directly to SGAS by Mr Badelian, and this claim is not established, at least when brought as a claim by Mr Ghougassian.
These claims have not been established on the evidence led in these proceedings and the liquidator's rejection of these claims should not be set aside.
[13]
PODs 159, 182 - Payments by Mr Vahik Yoonan
Mr Ghougassian's schedule of claims and evidence describes POD 159, relating to an amount of $5,000 "from Vahik" on 21 July 2006, as Mr Ghougassian's "debt for moneys advanced to SGAS arranged by him from Vahik [Yoonan] brother in-law of [Mr Ghougassian] to SGAS" and identifies the evidence to support it as that White J ordered it to be paid. The liquidator's schedule updating the basis of the adjudication of Mr Ghougassian's claims (Ex P11) recorded that POD 159 was rejected on the basis that it was a third party claim subject to the 2012 Judgment. The liquidator points out, and I accept, that Mr Yoonan's evidence given in the 2012 Proceedings does not support a characterisation of this transaction as a loan by Mr Yoonan to Mr Ghougassian and a further loan by Mr Ghougassian to SGAS (Ex P8, T72-74) and Mr Ghougassian's statement of account indicates the loan has been repaid in any event.
In the 2012 Judgment, White J referred to a loan in respect of Mr Yoonan and generally to payments by third parties (at [41]) as follows:
"Mr Michael Ghougassian argued that these were monies that were lent to him to be advanced by him to [SGAS] under security of the mortgage and that on repayment of the loan by [SGAS], he would be required to account for the monies to Mrs Vahik. I am not satisfied that that was the arrangement. As appears below, Mr Ghougassian organised the provision of funds to SGAS by a number of third parties. For the most part this was by way of loan. Mr Michael Ghougassian claimed that the funds provided were secured by the mortgage. However, in many cases the evidence given by the third parties was that they had intended to make loans to SGAS, not to Michael Ghougassian. It seems that the accounting in respect of these loans was inadequate. Rather than separate loan accounts being kept, the transactions were processed through Mr Michael Ghougassian's loan account. However, in these respects the spreadsheet was not accurate."
As I understand it, that finding reflects his Honour's lack of satisfaction that that loan was made by Mr Ghougassian to SGAS, rather than by Mr Yoonan to SGAS.
The Plaintiffs also tendered the affidavit of Mr Yoonan dated 21 June 2011 read in the 2012 Proceedings, subject to the rulings as to admissibility made by White J. Mr Yoonan there referred to a loan of the amount of $66,000 to Mr Ghougassian, and described the purpose of that loan in identical terms to the manner in which Ms Bakunowicz had done so, in evidence to which I refer below. He also set out a conversation with Mr Ghougassian concerning the terms of that loan in identical terms to the conversation set out by Ms Bakunowicz. It seems to me likely that, consistent with other identical affidavits of different deponents in these proceedings, that identical evidence was given by reason of either collusion between the witnesses or because the solicitor acting for Mr Ghougassian and Dr Ghougassian copied one witness's affidavit in order to prepare another witness's affidavit or prepared a pro forma affidavit which was adopted by the witness with limited thought. I give little weight to that evidence.
Mr Ghougassian's schedule of claims and evidence describes POD 182, relating to an amount of $33,000 "from Vahik" on 11 May 2009, as Mr Ghougassian's "debt for moneys advanced to SGAS arranged by him from Vahik [Yoonan] brother in-law of [Mr Ghougassian] to SGAS" and identifies the evidence to support it as:
"Deposited into SGAS accounts - from Mr Badelian - it is referred to in his affidavit before White J"
The liquidator's schedule of claims and evidence indicates that Mr Yoonan had not referred to such an advance in his evidence before White J and that his evidence before White J did not support any practice that he on lent monies to Mr Ghougassian to be lent by Mr Ghougassian to SGAS (Ex P8 72-74). Mr King did not draw attention to any such evidence. The liquidator submits that the Court should find, as White J did in relation to other advances by Mr Yoonan, that this loan was made to SGAS rather than to Mr Ghougassian (2012 Judgment [41]). The evidence before me does not support a different result.
These claims have not been established on the evidence led in these proceedings and the liquidator's rejection of these claims should not be set aside.
[14]
PODs 118, 156, 169, 179 - Payments by Mr Jayasooriah
PODs 118 and 156 relate to "Jaya", POD 169 relates to "Jaya?" and POD 179 relates to "Jaya/Mary". Mr Ghougassian's schedule of claims and evidence describes POD 118 as "Payment by Mr Jaya[sooriah] through N[areg] I[nternet] to SGAS at the request of M[r] G[hougassian]" and summarises the evidence supporting it as the table prepared by Mr Wing and Mr Lott, and suggests Mr Jayasooriah could not be called by reason of illness. I have referred above to the limited character of the vouching undertaken by Mr Wing and Mr Lott. The liquidator points out that Mr Ghougassian did not lead affidavit evidence in respect of the transaction, and Mr King did not draw attention to any such evidence. Nareg Internet's bank statements do not record any such advance on this date (Ex P17, Statement 30 pp 1-2) and Mr Ghougassian did not point to any other transaction in Nareg Internet's bank statements that could have corresponded to this transaction. I am not satisfied that this claim has been established.
Mr Ghougassian's schedule of claims and evidence describes POD 156 as "Payment by Jaya SGAS" and refers to no evidence to support it. The liquidator's schedule updating the basis of the adjudication of Mr Ghougassian's claims (Ex P11) recorded that this claim was rejected on the basis that it was a third party claim subject to the 2012 Judgment. White J held in the 2012 Judgment that he was not satisfied that the loan was made by Mr Ghougassian to SGAS, and the evidence before me does not support a contrary conclusion. Mr Ghougassian's statement of account, relied on the 2012 Proceedings, also indicates the amount was repaid in any event. This claim has not been established.
Mr Ghougassian's schedule of claims and evidence describes POD 169 as a payment by Jayasooriah to SGAS and identifies the evidence to support it as that White J ordered it to be paid. Again, that submission misstates the finding in the 2012 Judgment, where White J found that a corresponding loan by Dr Jayasooriah to SGAS had been repaid and did not accept that it was made by Mr Ghougassian to SGAS. The liquidator's schedule updating the basis of the adjudication of Mr Ghougassian's claims (Ex P11) recorded that POD 169 was rejected on the basis that it was a third party claims subject to the 2012 Judgment. The evidence in these proceedings does not establish a basis for a different result to that reached by White J and the claim by Mr Ghougassian in respect of this amount is not established.
Mr Ghougassian's schedule of claims and evidence describes POD 179 as "payment by [Mr] Jaya[sooriah to] SGAS" and identifies no evidence to support it, but submits that:
"This was payment to CBA at their request to begin funding the building of the new High School at Beaumont Hills"
In opening submissions, the Plaintiffs submitted, in respect of this transaction, that Mr Jayasooriah had initially paid monies into SGAS's account, but later Mr Ghougassian repaid him with funds borrowed from his sister Ms Marie Prazak, and the proof of debt is properly made by Mr Ghougassian because "in effect, he bought out the debt of Mr Jayasooriah." This transaction was addressed by evidence led in the 2012 Proceedings and the Plaintiffs tendered the affidavits of Ms Marie Prazak dated 21 June 2011 and Mr George Prazak dated 21 June 2011 read in the 2012 Proceedings, subject to the rulings as to admissibility made by White J. Ms Prazak there referred to a conversation in July 2008 in which Mr Ghougassian, her brother, requested her to lend $10,000 to [Mr] Jayasooriah, on the basis that SGAS's debt payable to [Mr] Jayasooriah would be "part assigned" to her. Ms Prazak also referred to a loan of $13,000 to Mr Ghougassian during 2008 "to be on-lent to SGAS". She also referred to a conversation in which Mr Ghougassian said that the loan would be repayable on specified notice "and current bank interest of 8.5%". Mr Prazak also referred to a request that he lend the sum of $20,000 to Dr Jayasooriah, on the basis that SGAS's debt payable to him would be part assigned to him as lender in the amount of $20,000, and set out a conversation with Mr Ghougassian in substantially the same terms as that set out by Ms Prazak. The liquidator's schedule of claims and evidence notes that White J held that the advance was repaid from moneys advanced by Mr and Mrs Prazak, and their evidence was that the moneys they advanced was a loan to the School (Ex P8 T67-71). In the 2012 Proceedings, White J observed (at [68]) that there was no evidence that the advance made by Dr Jayasooriah was an advance made by Mr Ghougassian for him to on lend to SGAS, and that advance was later repaid from monies advanced by Mr and Mrs Prazak, and that their oral evidence before him was that they advanced the monies as a loan to SGAS. The evidence before me does not support a different finding from that reached by White J. A claim by Mr Ghougassian in respect of this amount has not been established.
These claims have also not been established and the liquidator's rejection of these claims should not be set aside.
[15]
PODs 180 - Payments by Mrs Bakunowicz
Mr Ghougassian's schedule of claims and evidence describes POD 180 as "Deposit by Mrs Bakunowicz at the request of [Mr Ghougassian] to SGAS" and does not identify the evidence to support it but submits that:
"This was payment to CBA at their request to begin funding the building of the new High School at Beaumont Hills."
In opening submissions, the Plaintiffs submitted that:
"Mrs Bakunowicz would deposit monies into SGAS's account whenever there was a need for that to occur, and [Mr Ghougassian] would pay her - as explained in her affidavit - hence giving rise to an assignment of debt against SGAS to [Mr Ghougassian]. Thus he "stepped into the shoes of the creditors by paying them out" - as observed by Brereton J in his review/judgment on the matter."
This transaction was also addressed in the 2012 Proceedings and the Plaintiffs also tendered the affidavit of Ms Bakunowicz dated 21 June 2011 read in the 2012 Proceedings, subject to the rulings as to admissibility made by White J. Ms Bakunowicz there referred to a loan of $10,000 to Mr Ghougassian "for the purpose of on-lending" to SGAS in 2008 and to a conversation in which Mr Ghougassian said that the monies would be repayable on specified notice at "current bank interest of 8.5%". White J held (at 2012 Judgment [70]) that he was not satisfied that this was a sum advanced by Mr Bakunowicz to Mr Ghougassian for him to on lend to the School and his Honour rejected Mr Ghougassian's claim that that amount was secured by the mortgage on that basis. Mr Ghougassian relies on the same evidence in this application as was led before White J and that evidence does not support a different finding from that reached by White J. The claim by Mr Ghougassian in respect of this amount has not been established and the liquidator's rejection of that claim should not be set aside.
[16]
PODs 186 - 223 - Payments by Mr Conomos
Mr Ghougassian's schedule of claims and evidence provides the barest information in respect of these claims, stating only that PODs 186-223 are "amount[s] is obtained from Nic[holas] Conomos for SGAS" by Mr Ghougassian and identifying the evidence to support them as:
"Refer White J hearing
See page 134, D2 of White J, lines 30-45 and page 167 lines 45-50"
I understand those references to be, first, to the transcript of the proceedings before White J where, on the second day (Ex P9) an employee of the liquidator, Mr Samarasinghe, was cross-examined as to amounts paid by Mr Conomos to SGAS of $843,000; accepted the proposition that a larger amount of $943,000 had been lent to SGAS from Mr Ghougassian and perhaps from Mr Conomos as well; and accepted that he was satisfied that those monies were advanced to SGAS as loans (T134 lines 30-43); and, second, to the point where White J sought confirmation, which the liquidator gave, that, if his Honour accepted the liquidator's position that amounts paid by Mr Conomos were loans made by him to SGAS rather than by him to Mr Ghougassian who on-lent the monies to SGAS, the liquidator would not reject a proof of debt lodged by Mr Conomos on the opposite basis that any loans made by Mr Conomos were made to Mr Ghougassian rather than to SGAS (T167 lines 45-50). I have dealt with the character of any undertaking (or, more precisely, confirmation) offered by the liquidator in that respect in paragraph 26 above.
In the 2012 Proceedings, White J referred to bank statements that recorded deposits made by Mr Conomos into SGAS's bank account and to evidence (also led in these proceedings) that Mr Conomos attended the bank to make those deposits directly to that account. His Honour noted (at [44]) the absence of primary facts to establish that Mr Ghougassian rather than SGAS had borrowed from Mr Conomos, notwithstanding the belief to the contrary which Mr Conomos had expressed in evidence before him. His Honour also referred to the description of several payments in bank statements as being donations, and rightly observed that that characterisation must have reflected information provided by SGAS rather than SGAS's bank having itself chosen to apply that description to the transactions. His Honour also observed (at [45], [53]) that:
"Such objective evidence as there is (namely the facts that for the most part moneys were deposited directly to [SGAS]'s bank account, that Mr Conomos described many of the deposits as a donation, and that he made a donation to [SGAS] by forgiving part of the debt, indicate that his loan was to [SGAS], and not to Mr Michael Ghougassian. …
I do not accept that the deposits made by Mr Conomos form part of a debt secured to Mr Ghougassian. For the reasons above, I do not accept that such advances by Mr Conomos, whether considered as loans or donations, were secured by the mortgage to Mr Michael Ghougassian. I would be prepared to accept that they were advances by way of loan, but the loans were made by Mr Conomos to SGAS, not to Mr Michael Ghougassian to be on-lent by him to SGAS."
The liquidator submits that Mr Ghougassian should not be permitted to depart from those findings and that he is estopped from doing so. I prefer not to proceed on that basis, given White J's observation that his judgment was made on limited evidence. I will assume, without deciding, that it is open to Mr Ghougassian to reagitate the claim, and determine the claim on its merits.
Mr Ghougassian subsequently lodged numerous proofs of debt in relation to monies paid by Mr Conomos to SGAS between 2003 to 2009, totalling almost $1 million, which describe the claims as:
"Loans towards building of Permanent High School Building by NC [Mr Conomos] under the mortgage protection till CBA reimburses it."
By his letter dated 5 December 2013 (Ex P1), the liquidator noted, in respect of PODs 186-232, that banking records for SGAS indicated that funds were advanced by Mr Conomos. The liquidator's schedule updating the basis of the adjudication of Mr Ghougassian's claims (Ex P11) recorded that claims 186-232 were rejected on the basis that they were third party claims, and on the basis that some of them were subject to the 2012 Judgment or statute barred.
I should refer to the evidence relating to these claims generally, before turning to the particular claims. Mr Conomos' affidavit dated 5 March 2015 referred to his having made "a number of advances" to Mr Ghougassian between March 2003 and July 2009 "for the purposes of education by SGAS at Beaumont Hills". Mr Conomos stated that the total amount of those advances was $843,000 which had not been repaid to him, and he referred to a conversation with Mr Ghougassian requesting payment in about March 2003, and stated that he "considered the payment to be a payment to Michael Ghougassian for on-payment to SGAS". He also referred to Mr Ghougassian's statement that he would be repaid with interest, although he acknowledged there was no discussion of the rate of interest, and said that he would have been happy with a fair and reasonable market rate. Mr Conomos' evidence was that he sourced the monies from his bank, from the sale of shares, and transferred them to SGAS or to Mr Ghougassian, or possibly Nareg Internet, and there were also occasions on which he made cash advances on his credit card to Mr Ghougassian for on-payment to SGAS. Mr Conomos referred to a further conversation in 2007 where Mr Ghougassian said that he would repay the amounts with interest and Mr Conomos said that he only wanted "a fair and reasonable interest rate". Mr Ghougassian's affidavit dated 20 March 2015 referred to dealings between Mr Ghougassian and Mr Conomos, and referred to statements made by Mr Ghougassian that money advanced by Mr Conomos "will be returned with interest as I have security over the property of SGAS". Mr Ghougassian's evidence was that sometimes Mr Conomos would pay Mr Ghougassian and he would pay SGAS and on other occasions Mr Conomos would pay SGAS direct.
Mr Conomos' evidence on cross-examination was that he had derived the figure of $843,000, to which I referred in paragraph 136 above, by identifying advances made "to Michael [Ghougassian]" and then deducting amounts that he had claimed as taxation deductions, presumably on the basis they were donations to SGAS (T56). Mr Conomos accepted, however, that only a couple of payments had been made directly to Mr Ghougassian, toward the end of the period, and that almost all of the loans or advances had been made to SGAS's account (T57). His evidence was that an amount paid to SGAS only became a donation in a phone call at the end of the year, between Mr Ghougassian and himself, when a determination was made to treat it in that manner rather than claim a tax deduction for it (T57). In cross-examining Mr Conomos, Ms Taylor drew his attention to the characterisation of transactions as "donations" in the internet banking program he was using, and I accept that that contemporaneous statement is strong evidence of the nature of the relevant payments, notwithstanding Mr Conomos' evidence that he later became uncomfortable with that word as the amounts started to accumulate (T59). Ms Taylor also cross-examined Mr Conomos in respect of tax deductions claimed for such donations in his tax returns (T62ff). Mr Conomos sought to characterise what occurred, in the course of cross-examination, as his forgiving loans to Mr Ghougassian "on the understanding that they would become donations for SGAS". Mr Conomos acknowledged in cross-examination that the change in treatment of such payments had occurred several times, normally towards the end of the financial year, and more often than he had recognised when previously giving evidence before White J in the 2012 Proceedings. Mr Ghougassian's evidence in cross-examination was also that, at the end of each financial year, he would talk to persons who had lent money to ask whether they wished to forego any such sum as a donation (T174). It seems to me that such a change would only be possible, if at all, if the relevant transaction had been a loan to SGAS in the first instance, so that on its forgiveness it could be treated as a donation to SGAS; conversely, a loan by Mr Conomos to Mr Ghougassian could not retrospectively be transmuted into, or recharacterised as, a donation by Mr Conomos directly to SGAS so as to claim a tax deduction for it.
Mr Ghougassian lodged proofs of debt in respect of two amounts paid by Mr Conomos to SGAS for the financial year ending June 2003, totalling $40,000, although Mr Conomos had claimed a tax deduction on the basis that those amounts were donations to SGAS (Ex D3, p 49). Mr Ghougassian's evidence in cross-examination was that he had obtained bank statements from Mr Conomos that disclosed payments made to SGAS but had not discussed the proofs of debt with Mr Conomos (T162). It would follow that Mr Ghougassian had not taken any steps, in preparing those proofs of debt, to eliminate payments made by Mr Conomos to SGAS that were not in fact treated by Mr Conomos as loans, and as to which Mr Conomos claimed tax deductions on the contrary basis that they were donations rather than loans.
Mr Ghougassian's evidence in cross-examination was that the payments for which tax deductions were claimed must have been other payments, on the basis that a tax deduction could not have been claimed for a loan. I do not accept that evidence. The fact that a tax deduction was claimed for relevant payments supports an inference that the relevant payments were donations by Mr Conomos to SGAS, not loans by Mr Conomos to Mr Ghougassian and then by Mr Ghougassian to SGAS, not a speculation that other unidentified payments not recorded in any documents before the Court might have existed that were donations. Mr Ghougassian's evidence was simply a rationalisation to seek to preserve the treatment of the relevant payments as loans rather than donations, notwithstanding the evidence that Mr Conomos had treated them in an inconsistent manner, and undermines the reliability of his evidence as to the characterisation of those and other payments. Mr Ghougassian in turn sought to support that position on the basis that payments claimed as donations would not be contained in a document setting out the relevant loans, but that assumed, rather than established, the accuracy of that document and of the characterisation of the transactions contained in it.
Mr Ghougassian also lodged a proof of debt in the amount of $44,000 in respect of payments made by Mr Ghougassian (Ex P2, 302) that had been treated by Mr Conomos as a donation rather than a loan in the 2004 financial year (Ex D4) (T166). Mr Ghougassian rejected the characterisation of that document as a donation, on the basis that he had been "given this as a loan" (T167). That answer assumed, apparently incorrectly, that Mr Conomos had only provided Mr Ghougassian with information as to payments to SGAS that were in the nature of loans, rather than also as to payments that were in the nature of donations. Mr Ghougassian was prepared to accept, obviously enough, that SGAS was not liable to repay to Mr Conomos amounts which Mr Conomos had treated as donations to SGAS, in claiming tax deductions for them (T168). In cross-examination, Mr Ghougassian rejected the proposition that several other payments made by Mr Conomos were payments to SGAS, advancing the somewhat circular proposition that there would not be proofs of debts for the payments if they were donations (T170). That proposition cannot be established given the evidence that Mr Ghougassian claimed amounts paid by Mr Conomos as loans, without seeking to identify and exclude amounts treated by Mr Conomos as tax-deductible donations. Mr Ghougassian's approach to that issue is adverse to his credit and undermines his evidence in respect of the circumstances supporting his other claims.
Mr Ghougassian accepted that he had claimed interest at Reserve Bank rates in respect of the monies that Mr Conomos had paid to SGAS. It was put to him in cross-examination that he did not reach any agreement with SGAS to be repaid interest at those rates in respect of advances made by Mr Conomos and he responded, in part responsively, that there was "interest to be returned", and ultimately accepted that there was no discussion with SGAS about paying interest at the Reserve Bank rate, which had been adopted by Mr Ghougassian in quantifying his claim because it was produced by the Government and quantifiable (T177). The fact that a rate is set by the Reserve Bank, for some purposes, or is readily quantifiable is not sufficient to establish any obligation on SGAS to pay interest at that rate, or at all, on monies advanced to it by Mr Ghougassian, still less to pay interest to Mr Ghougassian on monies paid to it by Mr Conomos.
In opening submissions, Mr Ghougassian's submission as to Mr Conomos is that the situation is there the same as that of other third parties who paid money to SGAS, namely that:
"… He lent money to [Mr Ghougassian]/SGAS for the purposes of being returned after completion of the building project. This was specifically picked up by, and reviewed closely, by White J, due to the size of the amount. The liquidator specifically undertook before White J not to reject the claims/[proofs of debts] of Mr Conomos, through [Mr Ghougassian] on 'those grounds'."
I have noted, in paragraphs 26 and 132 above, that the undertaking (or, more precisely, confirmation) referred to here was only that that the liquidator would not reject a proof of debt lodged by Mr Conomos in the liquidation on the basis that any such loans were made by Mr Conomos to Mr Ghougassian rather than by Mr Conomos to SGAS. The evidence relied on in respect of those proofs of debts are bank statements which record payments by Mr Conomos rather than by Mr Ghougassian to SGAS. A claim to similar effect was not accepted by White J in the 2012 Judgment, and I have referred to his Honour's findings in paragraph 133 above.
The liquidator also refers to several amounts that were claimed by Mr Ghougassian in respect of payments by Mr Ghougassian, which, as I noted above, were in fact described in contemporaneous records as "donations, including amounts paid on 26 April 2007 (Ghougassian 14.3.2014 Ex P2, pp 320, 326), 9 May 2007 (p 339), 24 May 2007 (p 342), 6 June and 13 June 2007 (p 345), 25 June 2007 (p 351), and 18 and 19 July 2007 (p 354)). The description of those amounts in contemporaneous records as "donations" is plainly inconsistent with their characterisation as loans, whether directly by Mr Conomos to SGAS, or by Mr Conomos to Mr Ghougassian and by him to SGAS.
I should now turn to the particular PODs, as to which the liquidator's schedule of claims and evidence provides more detailed information than Mr Ghougassian. No proof of debt is in evidence and there is no other evidence in respect of PODs 186 and 195 which must fail on that basis. PODs 187 and 188 reflect two amounts of $20,000 that were treated as "donations" by Mr Conomos to SGAS in the 2003 financial year (Ex D3 p 49, Ex D19 p 1). Mr Conomos' bank statements show cheques in the respective amounts and dates, although they do not establish the cheques were paid to SGAS (Ex P2 pp 299 and 301) and no banking records of SGAS record receipt of those amounts. I will assume, without deciding, the payments were made to SGAS by Mr Conomos. PODs 189, 190, 191 and 192 reflect amounts of $44,000, $60,000, $20,000 and $34,000 for which tax deductions were claimed by Mr Conomos on the basis that they were "donation[s]" to SGAS in the 2004 and 2005 financial years (Ex D3 pp 29, 39, Ex D19 p 1-2). Mr Conomos' bank statements show cheques in these amounts (Ex P2 pp 303, 305, 309, 311) and there is evidence of deposits (albeit sometimes in larger amounts) to SGAS's account on the relevant dates (Ex D8 p 593, Ex P2, pp 306, 308). These payments are plainly not recoverable by Mr Ghougassian as loans when treated by Mr Conomos, who made them, as tax-deductible donations.
PODs 193-196 reflect amounts of $20,000, $50,000 and $45,000 for which tax deductions may have been claimed by Mr Conomos on the basis that they were "donation[s]" to SGAS in the 2006 financial year, although the deductions claimed do not reconcile to the amount of the payments (Ex D19, p 1). Mr Conomos' bank statements show cheques in these amounts (Ex P2, pp 315, 318, 321) and there is evidence of deposits (not always in the same amounts) to SGAS's account on the relevant dates (Ex P2, pp 314, 317, 320). PODs 197-200 reflect amounts of $5,000, $2,000, $18,000 and $30,000 for which tax deductions may have been claimed by Mr Conomos on the basis that they were "donation[s]" to SGAS in the 2007 financial year, although the deductions claimed again do not reconcile to the amount of the payments (Ex D19). Mr Conomos' bank statement shows an internet withdrawal in the amount of $5000 referable to POD 197 (Ex P2, p 324) and there is evidence of a deposit in a larger amount to SGAS's account on the relevant date (Ex P2, p 323). Mr Conomos' bank statement shows an internet withdrawal in the amount of $2000 referable to POD 198 (Ex P2, p 327) and there is evidence of a deposit in a larger amount to SGAS's account on the relevant date (Ex P2, p 326). Deposit slips show a deposits totaling $18,000 referable to POD 199 (Ex P2, p 330) and there is evidence of a deposit in that amount to SGAS's account on the relevant date (Ex P2, p 329). Mr Conomos' bank statements show a cheque in the amount of $30,000 referable to POD 200 (Ex P2, p 333) and there is evidence of a deposit in the same amount to SGAS's account on the relevant date (Ex P2, p 332). In the 2012 Judgment (at [42]-[45], White J treated these amounts as a loan by Mr Conomos, rather than Mr Ghougassian, to SGAS. That characterisation is, however, inconsistent with a treatment of the amounts as donations which would be tax-deductible. I need not resolve that inconsistency in these proceedings so far as I find that the claim is not maintainable by Mr Ghougassian, rather than Mr Conomos, in any event.
POD 201 relates to a payment of $20,000 by Mr Conomos on 18 August 2006. The liquidator's schedule of evidentiary references notes that Mr Conomos' bank statements show a cheque written on this date for $20,000 (Ex P2, p 333) and that Mr Conomos records that he paid this amount to Nareg Internet on that date (Ex D19). POD 202 relates to a payment of $45,000 by Mr Conomos on 26 April 2007 and bank statements of Mr Conomos and SGAS record this as a donation (Ex P2, p 336; Ex D1, p 1A). That does not support its characterisation as a loan to SGAS, still less as a loan by Mr Ghougassian, rather than Mr Conomos, to SGAS. PODs 203-205 relate to payments of $50,000 by Mr Conomos on 9 May 2007, 24 May 2007 and 6 June 2007 and bank statements of Mr Conomos and SGAS record these as donations (Ex P2, pp 342, 345; Ex D1, pp 1, 1A). PODs 206-207 relate to payments of $100,000 and $50,000 by Mr Conomos on 13 and 25 June 2007 and bank statements of Mr Conomos and SGAS record these amounts as donations (Ex P2, p 348, 351; Ex D1, pp 1, 14). In the 2012 Judgment (at [53]), White J also treated these amounts as loans by Mr Conomos, rather than by Mr Ghougassian to SGAS, although that approach was likely influenced by Mr Conomos' not then recognising (as he did in cross-examination in this hearing) the extent to which he had converted such donations to loans and claimed tax deductions for them. A characterisation of these amounts as loans is again inconsistent with a contemporaneous treatment of the amount as donations that were tax-deductible.
PODs 208-209 relate to payment of $18,000 and $32,000 by Mr Conomos on 18 and 19 July 2007 and bank statements of Mr Conomos and SGAS again record these payments as donations (Ex P2, p 354; Ex D1, pp 4-5). In the 2012 Judgment (at [53]), White J also treated these amounts as loans by Mr Conomos, rather than Mr Ghougassian, to SGAS. The characterisation of these amounts as loans is again inconsistent with a treatment of the amount as donations which would be tax-deductible, and Mr Conomos claimed a substantial tax deduction of $100,000 for donations to SGAS in the 2008 financial year (Ex D2). I have referred above to the evidence given before White J and in these proceedings as to the "conversion" of payments from Mr Conomos to SGAS from loans to donations.
PODs 210-213 relate to payments of $50,000 on 5 September, 17 September 2007, 15 November and 26 November 2007. There is a record of the first withdrawal (Ex P2, p 361). PODs 214-220 relate to payments of $35,000 on 7 and 12 December 2007, $70,000 on 3 January 2008, $50,000 on 18 January 2008, $46,000 on 28 February 2008, $50,000 on 7 May 2008 and $11,000 on 20 June 2008. It seems that the amounts paid by Mr Conomos in 2008 significantly exceeded the amounts for which he claimed tax deductions as donations, which would support a characterisation of the amounts for which deductions were not claimed as loans. However, White J rejected claims by Mr Ghougassian that these amounts were secured by his mortgage, apparently on the basis that, although he accepted the payments were loans to SGAS, they were made by Mr Conomos not Mr Ghougassian (2012 Judgment [53], [56], [58], [60], [63], [65], [66]) and I take the same view.
PODs 221-223 relate to payments of $15,000 on 28 July 2008 and 21 July 2009 and $14,807 on 21 July 2009. Neither party refers to evidence as to the first payment. There is evidence that Mr Conomos deposited the second and third amounts for the credit of Mr Ghougassian (Ex P2, pp 396, 398-9) but there is no corresponding credit in SGAS's account at around this time (Dr Ghougassian 12.4.11, Annexure K, Statement 210 p 1)). The liquidator points out that no proofs of debt were made in respect of items 224-232 and Mr Ghougassian identifies no evidence to support those claims which must fail for that reason.
I find (as White J also did on the evidence before him) that the payments made by Mr Conomos were made directly to SGAS, although Mr Ghougassian was involved in arranging the payments, rather than as payments to Mr Ghougassian in his personal capacity that were to be on-lent by him to SGAS. It seems to me that the process by which, on some occasions, Mr Conomos converted loans to "donations" to SGAS, and then claimed a tax deduction to them, is wholly inconsistent with a characterisation of the loans as made to Mr Ghougassian, and then by Mr Ghougassian to SGAS. If the dealing was initially between Mr Conomos and Mr Ghougassian, followed by a dealing between Mr Ghougassian and SGAS, then it could not later properly be recharacterised as a direct dealing between Mr Conomos and SGAS, constituting a donation to SGAS. These claims have not been established and the liquidator's rejection of them should not be set aside.
[17]
Other claims
I now turn to remaining proofs of debt that are not grouped in any categories in Mr Ghougassian's proofs of debt or the liquidator's response to them. In the absence of any better structure, I will deal with these in number order.
Mr Ghougassian's schedule of claims and evidence describes POD 144 as a payment from the M&K Account to SGAS and identifies no evidence to support it. The liquidator's schedule updating the basis of the adjudication of Mr Ghougassian's claims (Ex P11) recorded that POD 144 was rejected on the basis of insufficient documentation/no grounds. The liquidator's schedule of claims and evidence indicates that no evidence was led by Mr or Mrs Ghougassian specifically to address this claim and that their joint bank account records do not record any such advance on this date (Ex P18 Statement 51 pp 1-2) and Mr Ghougassian did not point to any other transaction in that account that could have corresponded to this transaction. This claim has not been established.
Mr Ghougassian's schedule of claims and evidence describes POD 152 as a payment from the M&K Account to SGAS and identifies no evidence to support it. The liquidator's schedule updating the basis of the adjudication of Mr Ghougassian's claims (Ex P11) recorded that POD 152 was rejected on the basis of "insufficient documentation/no grounds". The liquidator's schedule of claims and evidence notes that Mr Ghougassian's and Mrs Ghougassian's affidavit evidence did not specifically explain this transaction or the purpose of the alleged advance and that:
"There is no withdrawal of $2000 on 3 February 2006 from the M+K Account, although there is a withdrawal on 6 February to an unspecified recipient: Exhibit P18 Statement No. 59 page 3. [SGAS]'s accounts show a deposit (in an amount greater than $2000) on 3 February, but none on 6 February."
Mr Ghougassian did not identify any error in this submission. The liquidator submits, and I accept, that, given the mismatch in dates and the absence of affidavit evidence specifically addressing the transaction, Mr Ghougassian has not established that he is a creditor of SGAS in this amount.
Mr Ghougassian's schedule of claims and evidence describes POD 155 as a payment from the M&K Account to SGAS and also identifies no evidence to support it. The liquidator's schedule updating the basis of the adjudication of Mr Ghougassian's claims (Ex P11) recorded that POD 155 was rejected on the basis of "insufficient documentation/no grounds". The liquidator's schedule of claims and evidence indicates that no evidence was led by Mr or Mrs Ghougassian specifically to address this claim, and Mr Ghougassian did not identify any error in this submission. This claim has not been established.
POD 166 as a payment from Mr and Mrs Ghougassian's joint account to SGAS and identifies the evidence to support it as:
"Cheque deposited by deposit slip #200079 third party
Refer also Wing/Lott Table and CBA Bank Table"
The liquidator's schedule updating the basis of the adjudication of Mr Ghougassian's claims (Ex P11) recorded that POD 166 was rejected on the basis of "insufficient documentation/no grounds". The liquidator's schedule of claims and evidence indicates that no evidence was led by Mr or Mrs Ghougassian specifically to address this claim and that their joint bank account records do not record any such advance on this date (Ex P18 Statement 66 p 4) and SGAS's account does not record a deposit (Dr Ghougassian 2.4.11, Annexure K, Statement 177 p 1). Mr Ghougassian did not point to any other transaction in those accounts that could have corresponded to this transaction, and I have referred to the limited nature of the vouching undertaken by Mr Wing and Mr Lott above. This claim has not been established.
Mr Ghougassian's schedule of claims and evidence does not identify the subject of POD 172 or any evidence to support it. That claim is not established and was properly rejected by the liquidator.
Mr Ghougassian's schedule of claims and evidence describes POD 173 as a payment from the M&K Account to SGAS and identifies the evidence to support it as:
"Cheque deposited by deposit slip #200104. Refer also Wing/Lott Table and CBA Bank Table. The documentation demonstrates that a cheque was drawn on M & K and paid to SGAS - it is a traceable obligation. The documentation demonstrates that a cheque was drawn on M & K and paid to SGAS - it is a traceable obligation".
By his letter dated 5 December 2013 (Ex P1), the liquidator noted, in respect of POD 173, that insufficient documentation had been provided to evidence that funds were advanced by Mr Ghougassian to SGAS. The liquidator's schedule updating the basis of the adjudication of Mr Ghougassian's claims (Ex P11) recorded that POD 173 was rejected on the basis of "insufficient documentation/no grounds". The liquidator's schedule of claims and evidence indicates, and I accept, that this claim cannot be accepted where, on the same day, an amount exceeding it was paid by SGAS to Nareg Bookshop and amounts exceeding it were then paid by Nareg Bookshop to the M&K Account. The commercial logic of such transactions is by no means apparent, and was not explained by Mr Ghougassian's evidence, but this seems to me a specific example of the much wider difficulty that Mr Ghougassian's claims do not take account of the monies which he and his associated companies received from SGAS, or identify the balance owed by SGAS to him or them or vice versa, to which I referred above. This claim is not established.
Mr Ghougassian's schedule of claims and evidence describes POD 175 as a payment from the M&K Account to SGAS and identifies the evidence to support it as:
"This was termination payment of teacher leaving SGAS - it is traceable to cheque numbers to M&K [Account]. The ground of the claim is clear - it is an education related expense for SGAS."
The description of the payment made in Mr Ghougassian's schedule is not supported by any evidentiary reference, leaving unexplained how Mr Ghougassian can identify the purpose of this payment in submissions many years after the event, or why it should be treated as a loan. The liquidator's schedule updating the basis of the adjudication of Mr Ghougassian's claims (Ex P11) recorded that POD 175 was rejected on the basis of "insufficient documentation/no grounds". The liquidator's schedule of claims and evidence indicates that the account statements for Mr and Mrs Ghougassian's joint account do not record any such transaction at this time (Ex P18 Statement 73 p 4), and Mr Ghougassian did not point to other evidence of the transaction. This claim has not been established.
Mr Ghougassian's schedule of claims and evidence does not describe PODs 176-177 and identifies the evidence to support them as:
"Deposit is apparent from SGAS bank statements".
That proposition cannot be tested against any evidence, since none is identified, and even if it is correct, a deposit to SGAS does not establish a loan rather than a donation or other transaction such as a repayment of monies owed by Mr Ghougassian to SGAS. The liquidator's schedule updating the basis of the adjudication of Mr Ghougassian's claims (Ex P11) recorded that PODs 176-177 were rejected on the basis of "insufficient documentation/no grounds". Those claims were not established.
Mr Ghougassian's schedule of claims and evidence refers to PODs 224-232 as "expenses by financial institutions for transferring funds and selling shares" and does not identify evidence to support them. Mr Ghougassian's schedule of claims and evidence describes POD 248 as "Moneys owing to [Mr Ghougassian] for benefit of SGAS" and also identifies no evidence to support it but asserts that:
"This was payment to G&S Bus company for transporting children to/from school."
These claims must fail in the absence of identified evidence to support them.
[18]
POD 247 - Mr Raphael Ghougassian's chattels
Mr Ghougassian also made a claim for gardening chattels in the amount of $109,005.24. Mr Ghougassian's schedule of claims and evidence describes this claim as
"These are the Chattels belonging to Raphael Ghougassian see Ex P6".
The liquidator's schedule of claims and evidence records his position as that:
"The evidence establishes the chattels the subject of the claim belonged to Raphael Ghougassian.
There is no reliable evidence of the value of them (some receipts are included in Exhibit P6, but there is nothing independently to show (a) that Raphael [Ghougassian] or Michael [Ghougassian] purchased them, or (b) what happened to these goods).
In addition, the Liquidator's dealing with chattels which were left at the School has been dealt with in In the matter of St Gregory's Armenian School (in liq) [2012] NSWSC 1215, especially at [81]-[93]."
The liquidator submits that, even if this were a valid claim, Mr Raphael Ghougassian would be the proper creditor; that the basis on which Mr Ghougassian now claims to be entitled to reimbursement of over $109,000 for these chattels is unclear; and that he is estopped from departing from the findings of Brereton J in the Removal Judgment in respect of that claim.
Mr Ghougassian's description of these items as chattels belonging to Mr Raphael Ghougassian itself indicates why this claim was not open to Mr Ghougassian, as distinct from Mr Raphael Ghougassian, and this claim was properly rejected by the liquidator on the basis that, as the liquidator points out, there is no suggestion that the gardening chattels were ever property of Mr Ghougassian and he does not have standing to make a claim for their value. While I will make several further comments as to this claim, since the parties addressed other issues in respect of it, those further comments are not necessary to my finding that the claim was properly rejected on that basis.
The Plaintiffs relied on Mr Raphael Ghougassian's affidavits dated 5 March 2015, in which he deposed that:
"I also had gardening tools and educational equipment which I loaned to [Mr Ghougassian] for use at SGAS but which were sold by the Liquidator by an auction in later [sic] 2010 or early 2011. The tools are different from those of [Mr Ghougassian]. These tools are identified in the attached spreadsheet marked "A". They have not been returned to me. Their value in 2010 was about $108,000."
I admitted the last sentence, given its conclusory character, with a limiting order under s 136 that it should not be treated as evidence of the asserted fact. The relevant tools were set out in an itemised annexure to Mr Raphael Ghougassian's affidavit although the basis of the value attributed to them, whether as original cost, replacement cost or otherwise, was not made clear. The Plaintiffs also relied on a further affidavit of Mr Raphael Ghougassian dated 7 April 2015, by which he advanced a claim in respect of the sale of 750 technical texts which he says were held at SGAS and also refers to other items claimed to be valued at $108,000.
In opening submissions, Mr Ghougassian describes the claim in respect of "gardening chattels" as follows:
"[Mr Ghougassian's] brother, Raphael Ghougassian, kept (and left) at SGAS all of the gardening and maintenance equipment, as landscaper and gardener, used regularly for the purposes of upkeep and maintenance of SGAS grounds and buildings: it was all this equipment, which was taken by the Liquidator and consequently sold. This equipment had a value of $109,005.24."
Mr Ghougassian also refers, in submissions, to a conversation with the liquidator, which he claims involves his identifying that the equipment did not belong to SGAS and the liquidator replying that he would sell the equipment and Mr Ghougassian could claim for damages at a later date. To the extent that it is necessary to reach a credit finding as to this conversation, it is sufficient to indicate that I am not satisfied that Mr Ghougassian has an accurate recollection of the conversation, given the distorting effect of his commitment to his cause.
The liquidator contends that claim was properly rejected on the basis that Mr Ghougassian had not put forward any evidence that he owned those chattels or what they were or evidence of their value. The liquidator also points to evidence (admitted with a s 136 limitation order that it is evidence of the liquidator's understanding only) that the gardening chattels left at SGAS belonged to Mr Raphael Ghougassian (Sutherland 26.6.2014 [12]). The Plaintiffs sought to lead evidence in these proceedings to establish the basis of Mr Raphael Ghougassian's claim. I do not consider it necessary or appropriate to reach findings in respect of that evidence, where Mr Raphael Ghougassian is not party to the proceedings, and a determination as to that matter, whether in his favour or adverse to him, would not bind him. The claim by Mr Ghougassian in respect of Mr Raphael Ghougassian's chattels has not been established.
[19]
Outcome as to Mr Ghougassian's proofs of debt
In the result, Mr Ghougassian has not succeeded in respect of his claim under s 1321 of the Corporations Act for review of the liquidator's rejection of his proofs of debt.
[20]
The liquidator's Cross-Claim against Mr and Mrs Ghougassian
The liquidator brought a Cross-Claim against Mr and Mrs Ghougassian by Interlocutory Process filed on 12 August 2014, by which he and SGAS sought an order that Mr and Mrs Ghougassian pay them the amount of $539,277.94, of which they were said to be jointly liable in the amount of $279,713.44, and as to which Mr Ghougassian was said to be liable for the full amount. By Amended Points of Cross-Claim filed, by leave, on 4 March 2015, the liquidator amended the orders sought against Mr and Mrs Ghougassian to seek repayment of the amount of $609,371.22 against Mr Ghougassian, in place of the amount of $539,277.94 previously claimed. The amendment reflected additional claims in respect of an amount of $20,093.28 paid on or about 22 February 2006 to Mr Ghougassian and an amount of $50,000 paid on 21 January 2008 by SGAS to Mr Ghougassian's Visa account. There was no change in the amount claimed against Mrs Ghougassian. In the course of the hearing, on 9 April 2015, the liquidator subsequently abandoned a claim for repayment of an amount paid from SGAS's account to the M&K Account on 15 February 2005, in the amount of $24,013.44.
I should first address several preliminary matters raised by Mr and Mrs Ghougassian in defence of the Cross-Claim, before returning to the particular claims advanced by the Cross-Claim. By their Amended Defence to the Cross-Claim, Mr and Mrs Ghougassian raise several objections to the status of the Cross-Claim. First, they contend that a Cross-Claim is not permissible in an appeal under s 1321 of the Corporations Act. Mr and Mrs Ghougassian cite no authority for that proposition, and I can see no reason in principle why such a claim cannot be brought by interlocutory process in a manner otherwise permitted by the Supreme Court (Corporations) Rules 1999 (NSW). Second, they contend that SGAS is not insolvent, notwithstanding that it was placed in liquidation on the ground of insolvency, and Brereton J declined to remove the liquidator in the Removal Proceedings. That proposition has not been established on the evidence and, in any event, the liquidator's standing to bring the claim (where he remains in office) and the particular claims brought by the liquidator do not depend on proof of SGAS's insolvency. Third, Mr and Mrs Ghougassian contend that the Cross-Claim makes claims in deceit and fraud which are not properly pleaded or particularised. I declined to strike out part of the Cross-Claim that was attacked on that basis in an interlocutory judgment in the course of the hearing and, even if that proposition were correct as to the pleading of any other part of the claim, it is not an answer to its substance. Fourth, they contend that claims are made against Mrs Ghougassian who is not a party to the appeal brought by Mr Ghougassian under s 1321 of the Corporations Act, but that proposition does not assist them where she was properly joined as party to the Cross-Claim.
Mr and Mrs Ghougassian also contend that the liquidator and SGAS are estopped from bringing the relevant claims by reason of the 2012 Judgment, relying on an estoppel in their favour of a similar character to which the liquidator sought to rely against them. By his Reply to the Points of Defence filed on 5 February 2015, the liquidator denies an estoppel, on the basis that the 2012 Judgment did not consider whether or not the Impugned Payments (as defined in the Points of Cross-Claim) were made by SGAS, and because paragraph 98 of the 2012 Judgment had expressly noted that White J's determination of how much debt was secured by the mortgage in favour of the Messrs Ghougassian was made on limited evidence and did not create any issue estoppel on the question of the total amount owed to the Plaintiffs by SGAS, and the 2012 Judgment did not determine the total amount owing by the Plaintiffs to SGAS. Alternatively, the liquidator pleads that the 2012 Judgment was based on a verified statement of account filed by Mr Ghougassian, which did not disclose the Impugned Payments as made by SGAS to Mr Ghougassian, which have been discovered by the liquidator since the 2012 Judgment was delivered. The liquidator submits that he is not estopped from pursuing the claims under the Cross-Claim, because a finding of estoppel under the principles in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 should not be made lightly: Gibbs v Kinna [1999] 2 VR 19 at [33]. The liquidator also submits that an issue estoppel will not arise unless the new claims were so relevant to the subject matter of the first proceeding that it was unreasonable for the liquidators not to raise them in that proceeding: Anshun above at 602.
The applicable principles have recently been reviewed by Bathurst CJ in Ekes v Commonwealth Bank of Australia [2014] NSWCA 336 at [129], to which the parties did not refer. The Chief Justice there noted that this species of estoppel derives from the observation of Wigram VC in Henderson v Henderson (1843) 67 ER 313 at 319, as approved in Port of Melbourne Authority v Anshun above at 598, that:
"… where a given matter becomes the subject of litigation in, and of adjudication by, a Court of competent jurisdiction, the Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but with was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the Court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time."
In Port of Melbourne Authority v Anshun above, Gibbs CJ, Mason and Aickin JJ observed that an estoppel of this kind could arise when:
"… it appears that the matter relied upon as a defence in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it. Generally speaking, it would be unreasonable not to plead a defence if, having regard to the nature of the plaintiff's claim, and its subject matter it would be expected that the defendant would raise the defence and thereby enable the relevant issues to be determined in the one proceeding. In this respect, we need to recall that there are a variety of circumstances, some referred to in the earlier cases, why a party may justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings, e.g. expense, importance of the particular issue, motives extraneous to the actual litigation, to mention but a few."
Their Honours also noted the importance of the question whether the prosecution of further proceedings may give rise to conflicting judgments, and the significance of that matter has been noted in later decisions: Habib v Radio 2UE Sydney Pty Ltd [2009] NSWCA 231 at [83]; Redowood Pty Ltd v Link Market Services Pty Ltd (formerly known as ASX Perpetual Registrars Ltd) [2007] NSWCA 286.
The liquidator submits that it was not unreasonable for him not to raise those claims in the 2012 Proceedings because he did not know of the payments, and they were not applied against the secured debt, which was the matter for determination in those proceedings. He also submits that there is no risk of inconsistent findings, where White J determined the amount of the secured debt only and expressly limited the scope of his judgment as set out in paragraph 98 of the 2012 Judgment, by reference to the limited evidence before him. I accept those submissions, other than in respect of two specific payments ordered to be made to Mr Ghougassian in the 2012 Proceedings which I will address below. I consider that an estoppel is established in respect of the two specific payments ordered to be made to Mr Ghougassian, which were squarely in issue in the 2012 Proceedings and where White J had found the relevant facts, and any different findings that I might reach would give rise to inconsistent judgments.
By his Amended Interlocutory Process filed on 5 February 2015, the liquidator also seeks an order that, if he and SGAS would otherwise be estopped from making the claims brought in the Cross-Claim, order 1(b) made by White J in the 2012 Judgment be set aside and the amount to be paid to Mr Ghougassian as a secured creditor of SGAS as at 12 April 2012 be determined to be $76,984.78, or such other amount determined by the Court, plus interest, and Mr Ghougassian should repay the difference between the amount he received and that amount. It may only be necessary to determine this application in respect of the payments ordered to be made to Mr Ghougassian in the 2012 Proceedings, since I have held that an estoppel is not established in respect of other matters. I will therefore address that issue in respect of those two payments below. If it were necessary to address this issue more widely, I would not have permitted a re-opening of White J's judgment for the reasons noted below in respect of those two payments.
[21]
The matters in issue in the Cross-Claim
The liquidator's Cross-Claim identifies payments from SGAS to, variously, the M&K Account; payments from SGAS to an account held by Nareg Internet, from which subsequent payments in different amounts were made, typically around the same time, to the M&K Account or to Mr Ghougassian's Visa account, which the liquidator seeks to characterise as indirect payments from SGAS to Mr and Mrs Ghougassian for no consideration; several payments from SGAS direct to Mr Ghougassian's Visa account; and payments from SGAS to Nareg Bookshop and by it to the M&K Account, Mr Ghougassian's Visa account and Mr Ghougassian's Mastercard account. These payments have the common characteristic of a payment from SGAS to those entities, a subsequent payment to Mr Ghougassian or Mr and Mrs Ghougassian or their personal accounts, and a common justification by Mr Ghougassian that those accounts were used for the benefit of SGAS.
Turning now to the particular claims that are the subject of the Cross-Claim, the first was a payment of $24,013.44 made by SGAS to the M&K Account on 15 February 2005. The liquidator indicated at the hearing on 9 April 2015, and confirmed in closing submissions, that the claim for this item is not pressed (T244) and I do not address it further. Second, a payment of $35,386.70 was made by SGAS to the Nareg Internet account on 30 March 2005 and a subsequent payment of $27,400 was made by Nareg Internet to the M&K Account. Mr Ghougassian acknowledged these transactions had occurred in cross-examination (T112-113).
Third, a payment of $84,700 was made by SGAS to Nareg Internet on 12 July 2005, and amounts of $6,000 were then transferred to the M&K Account, $17,545.61 to Mr Ghougassian's Visa account and $16,000 to Mr Ghougassian's Visa account on 15 and 16 July 2006. Mr Ghougassian's evidence in cross-examination was the payment from SGAS to Nareg Internet would have been to pay the staff of Nareg Internet, implicitly used in respect of the school's activities, although he acknowledged that he did not have any particular recollection of that invoice, and he denied a proposition put to him in cross-examination that the payment was not a payment in respect of staff payments or wages by Nareg Internet on behalf of SGAS (T116). There is no documentation either to establish that the payment had that character or that it did not. Mr Ghougassian was also cross-examined as to the payment by Nareg Internet to his Visa account on 15 July (T116) and his evidence that his Visa account was used for "purposes mainly for [SGAS]" (T117). His attention was drawn to various expenses in that account that could be of a personal character, but could also have been for software provided to SGAS, and his cross-examination in that respect was inconclusive (T117).
Fourth, an amount of $44,000 was paid by SGAS to Nareg Internet on 22 May 2006 and, on or about 25 May 2006, Nareg Internet paid $35,300 to the M&K Account. Mr Ghougassian's evidence in cross-examination as to these transactions was, as I noted above, that these amounts would relate to payment of staff working at SGAS by Nareg Internet (T119). The fifth transaction is that, on 20 October 2006, SGAS paid $110,000 to Nareg Bookshop and, on that date, Nareg Bookshop paid $100,000 to the M&K Account. The sixth transaction is that, on 25 October 2006, SGAS paid $110,000 to Nareg Bookshop and, on or around that date, Nareg Bookshop paid $50,000 to the M&K Account, and the amount of $50,000 was then paid from the M&K Account to Mr Ghougassian's Visa account.
The seventh transaction pleaded in the Cross-Claim raises a different issue, involving an amount that the liquidator was ordered to repay to Mr Ghougassian in the 2012 Proceedings, and I will address that transaction below. The eighth transaction pleaded in the Cross-Claim is that, on 15 June 2007, SGAS paid $77,000 to Nareg Bookshop, which in turn paid $26,000 to the M&K Account on 19 June 2007 and $24,000 to the M&K Account on 22 June 2007. The ninth transaction pleaded in the Cross-Claim also involves an amount that the liquidator was ordered to repay to Mr Ghougassian in the 2012 Proceedings, which I will address below. The tenth transaction is that, on 21 January 2008, SGAS paid $50,000 to the M&K account. The eleventh transaction is that, on or about 19 May 2008, SGAS paid $30,000 to Nareg Bookshop, which paid a corresponding amount to Nareg Internet, which then paid a corresponding amount to the M&K Account.
The liquidator brings claims for, broadly, unjust enrichment, fraud, breach of fiduciary duty and set-off against Mr Ghougassian, and a claim that Mrs Ghougassian is accountable for part of these amounts which she received as a volunteer. In their Defence to the Cross-Claim, Mr and Mrs Ghougassian initially denied all of the paragraphs pleading payments made by SGAS to Nareg Bookshop, Nareg Internet and by them to Mr and Mrs Ghougassian, notwithstanding that there is documentary evidence, including the bank statements of Nareg Bookshop, Nareg Internet and Mr and Mrs Ghougassian, establishing those payments. However, by his Reply to the Amended Defence in the primary proceedings, which relied on the Cross-Claim, and in contradiction to the Defence to the Cross-Claim, Mr Ghougassian admits that the relevant amounts were paid on the dates alleged. Mr Ghougassian there denies that he, Mrs Ghougassian or Nareg Internet were enriched or unjustly enriched by the payments and claims that he made payments to or for SGAS in respect of SGAS's indebtedness which entitled him to reimbursement for those payments by SGAS, and contends that any set-off would be inequitable and could not be made before the total indebtedness of SGAS to Mr Ghougassian had been considered by the liquidator.
Broadly, Mr Ghougassian sought to support the payments made by SGAS to the Nareg companies and the M&K account on the basis of an arrangement referred to in his affidavit dated 20 March 2015 that he would supply teachers to SGAS during their probationary period since that would make it easier to dismiss them if they were not satisfactory. Mr Ghougassian's evidence, in his affidavit dated 20 March 2015, is that he discussed the provision of teachers to the school through Nareg Bookshop with SGAS's board, which included Dr Daniel Ghougassian and Mr Badelian. Dr Ghougassian and Mr Badelian did not give evidence of this matter. I infer that their evidence would not have assisted Mr Ghougassian's defence: Commercial Union Assurance Co of Aust Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418 - 419; Zaccardi v Caunt [2008] NSWCA 202 at [27].
Mr Ghougassian was cross-examined at some length as to issues relating to the Cross-Claim against him and Mrs Ghougassian. Mr Ghougassian's evidence in cross-examination was that, at least until 2010, he was a director of both Nareg Internet and Nareg Bookshop, operated their bank accounts and signed cheques on their behalf and, until 21 June 2010, he also had access to the cheque books of SGAS, signed cheques on SGAS's behalf and was able to operate and did operate SGAS's accounts (T109). Mr Ghougassian accepted in cross-examination that he caused numerous transfers of amounts to be made from SGAS's account to the M&K Account. Mr Ghougassian claimed that he paid wages for staff which are employed within SGAS or sub-contracted to SGAS from his Visa or Mastercard accounts, or the M&K Account, or from Nareg Internet or Nareg Bookshop (T119). Plainly, such a practice, if it existed, was likely to cause real difficulty in determining the propriety of such payments, absent adequate record-keeping or retention, as it has done. He in turn claimed in cross-examination that teachers were employed by Nareg Bookshop, and he pointed to various inquiries which the liquidator could make to determine whether Nareg Limited, Nareg Internet, Nareg Bookshop or an engineering firm associated with him employed SGAS's staff (T121). Of course, it would equally be open to the Messrs Ghougassian to lead evidence addressing those matters. Mr Ghougassian also pointed in cross-examination to the fact that he could not find documents relating to Nareg Bookshop in the 140 boxes of documents produced by the liquidator from SGAS's records, a matter which I have addressed above, and claimed that school staff including primary teachers, high school teachers, caretakers and cleaners were employed by Nareg Internet or Nareg Bookshop (T121).
Mr Ghougassian's evidence in cross-examination was also that, although some teachers were paid by SGAS, other staff were working and receiving wages from the Nareg companies and SGAS was being invoiced for those staff, and would pay a bulk sum to the Nareg companies which would encompass public liability, superannuation, workers compensation and other costs such as advertising for teachers (T135). His evidence was also that, if such payment was made to Nareg Internet or Nareg Bookshop, then the relevant payments could be made from his personal credit card and indeed "that was always happening" (T135). Mr Ghougassian in turn volunteered in cross-examination that Mr Raphael Ghougassian, who was a gardener at the school, was employed by Nareg Bookshop and was hired out to SGAS through Nareg Bookshop. Mr Ghougassian's evidence was that Mr Raphael Ghougassian was paid about $30,000 a year, as a gardener (T137). That evidence was supported by a further affidavit of Mr Raphael Ghougassian dated 8 April 2015 which indicated that he was employed by Nareg Bookshop, relevantly, from July 2005 to June 2010, and was subcontracted by Nareg Bookshop to SGAS to perform maintenance services and in particular gardening and landscape services. I have referred to other, albeit limited, documentary evidence that is at least not inconsistent with that evidence in paragraph 61 above.
Mr Ghougassian's evidence in cross-examination was also that Mr Lott, SGAS's accountant, was "aware that monies were going from [SGAS] to Nareg Bookshop and Nareg Internet for the purposes paying the wages to the staff who were employed by those entities" (T136). Mr Lott did not give evidence to support that proposition and I infer that that evidence would not have assisted Mr Ghougassian's defence: Commercial Union Assurance Co of Aust Ltd v Ferrcom Pty Ltd above at 418 - 419; Zaccardi v Caunt above at [27]. Mr Ghougassian's evidence in cross-examination (T142) was also that:
"All the moneys leaving [SGAS] to go to Nareg Internet/Bookshop, M&K or visa are for the purposes of the staff that are working for those entities on hire to [SGAS]."
Mr Ghougassian had previously given evidence in a liquidator's examination that money passed between Nareg Bookshop and SGAS for the purposes of books sold to SGAS, its students and the library, and he did not recall other purposes of such transactions. I recognise that there is an apparent inconsistency between Mr Ghougassian's evidence in the liquidator's examination and the evidence given before me, although that inconsistency would be less stark if both versions of his evidence are accurate, in the sense that Nareg Bookshop was involved both in the supply of books and staff to SGAS. Although I have expressed the view above that Mr Ghougassian's evidence should be approached with caution, partly because of his strong beIief in the merit of his claims, I would generally accept his evidence as to the broad structure of these transactions, with the qualification that these transactions likely involved both the dealings referred to in his liquidator's examination and those referred to in his evidence before me.
Mr Ghougassian's evidence in his liquidator's examination was also that money passed between SGAS and Nareg Internet for the purposes of internet connections for SGAS and SGAS's computer network, and he did not then mention that Nareg Internet had employed staff and teachers for SGAS. His explanation for that in cross-examination in these proceedings was that he had not been asked as to that matter (T152). Mr Ghougassian also referred in cross-examination to the fact that, if SGAS did not have any money to pay teachers, then Nareg Internet or Nareg Bookshop would pay them. That was a different, although not necessarily an inconsistent, explanation to that advanced in his affidavit dated 20 March 2015, namely that Nareg Internet would employ teachers because it was easier for it to dismiss them if they were not suitable than for SGAS to do so.
Understandably, the liquidator placed substantial weight in submissions on the inconsistencies between Mr Ghougassian's evidence in the liquidator's examination and in cross-examination as to these matters. I accept that Mr Ghougassian's evidence in the liquidator's examination and in cross-examination was inconsistent as to whether the Impugned Payments (as defined in the Cross-Claim) were reimbursements of monies advanced by him or the Nareg companies, or of wages paid by the Nareg companies for staff employed by SGAS, or of costs incurred by Nareg Bookshop in itself employing staff who worked in SGAS, or of computer services provided by Nareg Internet to SGAS. However, it does not seem to me that these inconsistencies substantially assisted the liquidator in his Cross-Claim. As I noted above, I consider that Mr Ghougassian's evidence as to the broad structure of these dealings should be given greater weight, despite these inconsistencies, than his evidence as to the purpose and character of particular transactions.
The liquidator also submits that it is implausible that staff of SGAS would have been employed, and payments made to them, through Mr Ghougassian's companies, and there was no sound commercial reason for SGAS to take that course. I accept that that arrangement would be unusual and potentially imprudent. However, it would not be inconsistent with the manner in which SGAS's affairs appear to have been generally conducted, including the extent of financial and other transactions between Mr Ghougassian, Dr Ghougassian, third parties and SGAS, involving loans or donations and repayments of large amounts apparently made without adequate documentation, and the provision of funding and other services by Mr Ghougassian and his related entities to SGAS. In the circumstances of these parties and their dealings, the proposition that an arrangement is unusual does not create a strong inference that it did not exist.
[22]
The liquidator's claim in unjust enrichment
The liquidator pleads that SGAS is entitled to recover the Impugned Payments (as defined) on the basis that they were paid for no consideration, or on a basis which has failed, by way of a claim in unjust enrichment. The liquidator relies, for this claim, on Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516 at [15] - [16], where the plurality observed, in a somewhat different context, that such a claim may be available for failure of consideration which includes but is not limited to non-performance of a contractual obligation. The liquidator also relies on Equuscorp Pty Ltd v Haxton (2012) 246 CLR 498 at [31]-[33], where the plurality observed that failure of consideration is one of the factors that makes retention of a benefit prima facie unjust, and referred to the late Professor Birks' observation that
"[f]ailure of the consideration for a payment … means that the state of affairs contemplated as the basis or reason for the payment has failed to materialise or, if it did exist, has failed to sustain itself."
Their Honours also noted that restitution may be available where it is "unconscionable" for the recipient of a payment to retain it in circumstances in which it was not specifically intended or especially provided that it should so enjoy it, and noted that the concept of unconscionability derived from the general equitable notions which found expression in the common law count for money had and received, and was not determined by reference to a subjective evaluation of what is fair or unconscionable. The liquidator did not seek to put that claim by reference to case law dealing with vitiating factors such as misappropriation or lack of authority, nor does it seem to me that a claim on that basis would have been established on the evidence to which I will refer below in respect of his claim for fraud: Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548 at 572; David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 at 378-379; Heperu Pty Ltd v Belle [2009] NSWCA 252; (2009) 76 NSWLR 230.
Mr and Mrs Ghougassian deny the allegations of unjust enrichment. Mr King submits, in closing submission, that the restitutionary claim cannot succeed, because what would be required for it would be a total failure of consideration: Baltic Shipping Company v Dillon [1993] HCA 4; (1993) 176 CLR 344. Mr King submits that there could not be held to be a total failure by Mr Ghougassian to provide a benefit to SGAS in respect of any, or all, of the payments made (T402).
I am not satisfied that the liquidator's claim in unjust enrichment is established. It is an essential element of such a claim, as the liquidator had formulated it, that the consideration for the relevant payments had wholly failed. It does not seem to me that the liquidator established that matter, since I have accepted Mr Ghougassian's evidence, which seems to me consistent with the extent of the transactions between the Messrs Ghougassian and SGAS in other areas, that the Nareg companies and Mr Ghougassian both provided services and funding to SGAS, although the specifics of those services and the overall effect of those transactions is by no means clear on the evidence. The liquidator has not established that those services did not provide some consideration for the Impugned Payments (as defined in the Cross-Claim), where he has not established that those payments did not relate, at least in part, to the costs of staff provided by the Nareg companies to work in the school (as Mr Ghougassian suggested in his cross-examination before me) or of other services or to repayment of advances made or expenses paid on SGAS's behalf. That proposition is not established, as part of the liquidator's affirmative case, merely by pointing to the lack of documentary evidence or the lack of clarity in Mr Ghougassian's evidence in respect of this issue, since it was a matter for the liquidator to establish this claim on the balance of probabilities, not for Mr Ghougassian to establish the contrary.
[23]
Claim for breach of fiduciary duty
The liquidator alternatively pleads Mr Ghougassian owed a fiduciary duty to SGAS by reason of his position as public officer and as a member of senior management in SGAS, breached the no conflict and no profit rules in respect of the Impugned Payments (as defined in the Cross-Claim), and is liable to account to SGAS for the monies paid not only to him but also to the M&K Account, including monies that had been paid by SGAS to Nareg Bookshop and Nareg Internet shortly before payments, sometimes in the same and sometimes in different amounts, by them to him or the M&K Account. Mr and Mrs Ghougassian deny the allegations of breach of fiduciary duty.
The liquidator notes that White J expressed the view that Mr Ghougassian and Dr Ghougassian owed fiduciary duties to SGAS in the 2012 Proceedings. In his judgment delivered on 30 March 2012 (Sutherland v Ghougassian & Ors (No 3) [2012] NSWSC 334), White J observed (at [12] that it was clear that the relationship between Dr Ghougassian and Mr Ghougassian on the one hand and SGAS on the other was a fiduciary one and that there was an issue whether Dr Ghougassian and Mr Ghougassian, as fiduciaries, would be entitled to profit from advances they made to SGAS pursuant to the Deed of Loan, if they were entitled to interest at default rates on a compound basis, and that prima facie they would be liable to disgorge any such profit, unless SGAS gave its informed consent to such a profit. His Honour also noted that none of that had been clearly identified in the statement of accounts before him and, on that basis, did not permit a claim for default interest on a compound basis to be raised. His Honour's decision was upheld by the Court of Appeal (Ghougassian v Sutherland [2013] NSWCA 168). The liquidator submits that Mr Ghougassian is bound by that finding and, further, or alternatively, as public officer of SGAS who was a board member and a key figure in managing its finances (including its bank accounts and cheque books) and was apparently closely involved in management of SGAS, this Court should independently conclude that he assumed fiduciary duties to SGAS.
It seems to me that Mr Ghougassian did owe a fiduciary duty to SGAS, consistent with the view expressed by White J in the 2012 Proceedings. In Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41 at 96-97, Mason J (as his Honour then was) referred to the circumstances in which a fiduciary relationship may arise, in terms that have been frequently cited in subsequent case law, as follows:
"The accepted fiduciary relationships are sometimes referred to as relationships of trust and confidence or confidential relations (cf. Phipps v. Boardman [1967] 2 AC 46, at 127), viz., trustee and beneficiary, agent and principal, solicitor and client, employee and employer, director and company, and partners. The critical feature of these relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position. The expressions 'for', 'on behalf of', and 'in the interests of' signify that the fiduciary acts in a 'representative' character in the exercise of his responsibility, to adopt an expression used by the Court of Appeal.
It is partly because the fiduciary's exercise of the power or discretion can adversely affect the interests of the person to whom the duty is owed and because the latter is at the mercy of the former that the fiduciary comes under a duty to exercise his power or discretion in the interests of the person to whom it is owed …"
In Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6; (2012) 200 FCR 296 at [177], Finn, Stone and Perram JJ in turn noted that:
"A person will be in a fiduciary relationship with another when and insofar as that person has undertaken to perform such a function for, or has assumed such a responsibility to, another as would thereby reasonably entitle that other to expect that he or she will act in that other's interest to the exclusion of his or her own or a third party's interest."
In Streetscape Projects (Australia) Pty Ltd v City of Sydney [2013] NSWCA 2; (2013) 295 ALR 760 at [121], Barrett JA (with whom Meagher JA and Ward JA agreed) in turn observed that "a fact-based fiduciary duty cannot arise unless one party undertakes, expressly or impliedly, to act in the particular factual context solely in the interests of the other".
It is plain that Mr Ghougassian had substantial decision-making authority in respect of SGAS, including the ability to authorise payments by SGAS. It seems to me that an undertaking of Mr Ghougassian to act in the interests of SGAS would readily be found in the relevant circumstances, and that is consistent with the fact that a senior officer of a company will generally owe a fiduciary duty to that company. The parties did not address submissions as to the scope of that duty and, in particular, whether it might have been narrowed by the practice of regular dealings between SGAS on the one hand and Mr Ghougassian and his associated entities on the other, and I do not address that issue further where no party sought to raise it.
The characterisation of the relationship between SGAS and Mr Ghougassian as fiduciary in turn gives rise to the application of the no conflict and no profit rules, within the scope of the relationship. Broadly, the no conflict rule prohibits conduct where a fiduciary has a personal interest or duty owed to a third party which gives rise to a real and sensible possibility of a conflict. That rule and the no profit rule, which provides that a fiduciary cannot obtain a profit from its fiduciary position without the principal's consent, may overlap. In Chan v Zacharia [1984] HCA 36; (1984) 154 CLR 178, Deane J observed (at 198-199) that the equitable rule involved two themes and that:
"The first is that which appropriates for the benefit of the person to whom the fiduciary duty is owed any benefit or gain obtained or received by the fiduciary in circumstances where there existed a conflict of personal interest and fiduciary duty or a significant possibility of such conflict: the objective is to preclude the fiduciary from being swayed by considerations of personal interest. The second is that which requires the fiduciary to account for any benefit or gain obtained or received by reason of or by use of his fiduciary position or of opportunity or knowledge resulting from it: the objective is to preclude the fiduciary from actually misusing his position for his personal advantage. Notwithstanding authoritative statements to the effect that the 'use of fiduciary position' doctrine is but an illustration or part of a wider 'conflict of interest and duty' doctrine (see, eg, Boardman v Phipps at p 123; N.Z. Netherlands Society "Oranje" Inc v Kuys at p 122), the two themes, while overlapping, are distinct. Neither theme fully comprehends the other and a formulation of the principle by reference to one only of them will be incomplete. Stated comprehensively in terms of the liability to account, the principle of equity is that a person who is under a fiduciary obligation must account to the person to whom the obligation is owed for any benefit or gain (i) which has been obtained or received in circumstances where a conflict or significant possibility of conflict existed between his fiduciary duty and his personal interest in the pursuit or possible receipt of such a benefit or gain; or (ii) which was obtained or received by use or by reason of his fiduciary position or of opportunity or knowledge resulting from it."
In Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544 at 557-558, the High Court similarly observed that:
"A fiduciary must account for a profit or benefit if it was obtained either (1) when there was a conflict or possible conflict between his fiduciary duty and his personal interest, or (2) by reason of his fiduciary position or by reason of his taking advantage of opportunity or knowledge derived from his fiduciary position. The stringent rule that the fiduciary cannot profit from his trust is said to have two purposes: (1) that the fiduciary must account for what has been acquired at the expense of the trust, and (2) to ensure that fiduciaries generally conduct themselves 'at a level higher than that trodden by the crowd'. The objectives which the rule seeks to achieve are to preclude the fiduciary from being swayed by considerations of personal interest and from accordingly misusing the fiduciary position for personal advantage."
In Pilmer v Duke Group Ltd (in liq) [2001] HCA 31; (2001) 207 CLR 165 at 199, McHugh, Gummow, Hayne and Callinan JJ formulated the no conflict rule as follows:
"… [t]he fiduciary is under an obligation, without informed consent, not to promote the personal interests of the fiduciary by making or pursuing a gain in circumstances in which there is 'a conflict or a real or substantial possibility of a conflict' between personal interests of the fiduciary and those to whom the duty is owed."
It seems to me that at least a breach of the rule against conflict of interest is established, by reason of Mr Ghougassian's involvement in both authorising or making and receiving the payments to him and his associated entities, which gave rise to a real conflict between his duties to SGAS on the one hand and his personal interests and duties to Nareg Internet and Nareg Bookshop on the other. It is therefore not necessary to determine whether the liquidator could also establish a breach of the no profit rule in respect of the Impugned Transactions (as defined), where the parties did not address the complexity that may arise if the payments were made to Mr Ghougassian and his associated entities in consideration for benefits which they provided to SGAS that equalled or exceeded the value of the payments.
I now turn to the question of remedy for the breach of fiduciary duty established by the liquidator. The liquidator did not seek an order that Mr Ghougassian provide an accounting, following judgment, of the profit he had made in respect of the Impugned Payments (as defined). The liquidator also did not seek alternative remedies, including an account of profits or equitable compensation, or to defer an election between them until after the delivery of judgment, as he might have: Personal Representatives of Tang Man Sit v Capacious Investments Ltd [1996] AC 514 at 521; Warman International Ltd v Dwyer above at 569-570; Visnic v Sywak [2009] NSWCA 173; (2009) 257 ALR 517 at [4]-[5]. Had the liquidator sought to advance a claim for equitable compensation, that would have required that he quantify any loss suffered by SGAS by reason of the relevant payments. The liquidator conducted this aspect of the case solely as a claim for an account of profits against Mr Ghougassian, quantified as the "Impugned Payments" as defined.
In quantifying the profit which SGAS sought to recover in this manner, the liquidator took no account of contemporaneous payments by Mr Ghougassian, Nareg Bookshop and Nareg Internet to SGAS, and of the contemporaneous practice of Mr Ghougassian, Nareg Internet and Nareg Bookshop incurring expenses for and providing services to SGAS. The liquidator initially did not identify, in submissions, the basis on which he contended that any breach of fiduciary duty entitled SGAS to recover, against Mr Ghougassian, the total amount of each of the Impugned Payments made to Mr Ghougassian and the M&K Account by way of an account of profit, without regard to those matters. After I had reserved judgment, I invited further submissions from the parties as to the question whether the amount of the "Impugned Payments" (as defined in the Cross-Claim) could properly be treated as a profit, gain or benefit to Mr Ghougassian if I were to find that there existed corresponding or associated transactions by which Mr Ghougassian or his associated entities had provided services to or paid expenses on behalf of SGAS.
The further submissions made by Mr King on behalf of Mr Ghougassian repeated the submission that Mr Ghougassian or his associated entities had provided services to or paid expenses on behalf of SGAS, although without providing evidentiary references for the factual matters relied on in support of that submission. Mr King submitted that Mr Ghougassian had provided substantial valuable services to SGAS since well before the school began in 1985, and for which he did not charge, and also identified valuable services which he provided to SGAS during its operation "according to the evidence" which he did not further identify. Several submissions were then made, also without identification of their evidentiary basis, as to the nature of those services. I accept, having regard to the evidence before me, that Mr Ghougassian was a director of SGAS for some or all of the relevant period and was the registered public officer of SGAS and that he was the sole or principal shareholder of several companies or businesses which provided services to SGAS. Mr King's further submissions that services were provided without charge, or as to the nature of those services, again made without evidentiary references, do not support findings beyond those made above in respect of that issue.
Mr King also made further submissions as to the nature of the Impugned Payments, which were outside the scope of the leave I had granted for further submissions and as to matters that would support particular characterisations of those payments, again without providing specific evidentiary references for them. Mr King also made a submission that Dr Ghougassian had provided valuable services to SGAS, although (as the submission itself recognised) that was not relevant to the matter as to which I had requested further submissions. I have, in accordance with well-established principles, not had regard to those submissions that were outside the scope of the leave for further submissions: Carr v Finance Corp of Australia Ltd (No 1) [1981] HCA 20; (1981) 147 CLR 246 at 257-258, Notaras v Waverley Council [2007] NSWCA 333 at [147] per Tobias JA, with whom Mason P and Hodgson JA agreed; Bull v Lee (No 2) [2009] NSWCA 362 at [8]. Mr King also submitted, developing a submission that he had made in respect of set-off at the hearing, to which I will refer below, that it was inequitable to permit the liquidator to make a claim in respect of the "profit, gain or benefit" claimed in the Cross-Claim and that, even if Mr Ghougassian did receive that profit, it would be inequitable to deprive him of the profit in the particular circumstances of the case, a matter to which I will return below. Mr King also advanced further submissions as to the conduct of the liquidation which were also outside the scope of the leave granted and which I have also disregarded.
In her further submissions on behalf of the liquidator, Ms Taylor reaffirmed the liquidator's position that Mr Ghougassian had not made out corresponding or associated transactions in respect of each of the "Impugned Payments" and submitted that such corresponding or associated transactions had not been pleaded by Mr Ghougassian and should not provide a defence to the liquidator's claims. Ms Taylor referred to the scope of the "no conflict rule", as expressed in Chan v Zacharia above at 198-199, Warman v Dwyer above at 557-558 and Pilmer v Duke Group Ltd (in liq) above at 199, and submitted that, in respect of each of the Impugned Payments, Mr Ghougassian made a gain in the amount of the monies that he or his associated entities received, in breach of the "no conflict rule", in the sense that the payment was made in circumstances where there was a conflict or a real or substantial possibility of conflict between his own interest (or that of his associated entities) and SGAS's interests. Ms Taylor submitted that that conflict of interest arose in circumstances where there was no evidence of any approval of the transactions by SGAS's board, involving informed consent or at all. Those submissions are consistent with the findings that I have reached above, in holding that there was a breach of the no conflict rule in respect of the relevant payments. However, with respect, they do not significantly advance the question of identification of what was, in fact, the profit, gain or benefit to Mr Ghougassian arising from the relevant breach.
Ms Taylor acknowledged that, depending on the nature of any corresponding or associated transactions, they might be relevant when quantifying the amount that SGAS could recover from Mr Ghougassian, and she rightly submitted that a defaulting fiduciary bears the onus of proving that it is inequitable to order an account of the entire profits that he or she has made: Warman v Dwyer above at 561-562. I accept that proposition. However, it seems to me that the liquidator has nonetheless put SGAS's claim in a manner that requires that SGAS establish that the amount that it seeks to recover is in fact properly characterised as profit, gain or benefit to Mr Ghougassian. In some cases, it will be straightforward for a company that makes a claim against a director for a payment that he or she received in breach of fiduciary duty to establish that proposition, and obtain an account of profits on that basis, because there is no evidence that the director provided any corresponding service to that company or incurred any corresponding costs or expense which would need to be taken to account in determining that profit. That is not this case. It also seems to me that Mr Ghougassian has in any event established that it would be inequitable to order an account of the Impugned Payments (as defined), which did not allow for the benefits that SGAS had received, by leading evidence of funding and services he and his associated entities provided to SGAS, which were at least contemporaneous with the Impugned Payments.
Ms Taylor alternatively submits that the evidence as to the terms of the relevant transactions and their reasonableness is wholly within Mr Ghougassian's control, where no record of them is found in SGAS's records, and he bears at least an evidentiary onus of establishing those matters. I do not accept that submission. It seems to me that, where SGAS on the one hand and Mr Ghougassian and his associated entities on the other were each party to the relevant transactions, each is in as good or bad a position to lead evidence of the relevant transactions. There is no reason to think that Mr Ghougassian has better records of those transactions than SGAS.
Ms Taylor also submits that the Court should consider each of the Impugned Payments individually to determine whether, or to what extent, there is evidence to support a finding that there was a relevant corresponding or associated transaction by which Mr Ghougassian or his associated entities had provided services to or paid expenses on behalf of SGAS. I accept that, in principle, each transaction needs to be considered separately, and I have done so above to the extent that there is evidence of the circumstances of the payments. However, it does not follow from that proposition that those transactions should be considered in isolation from their context, or without regard to transactions by which, throughout the relevant period, Mr Ghougassian and his related entities conferred benefits on SGAS. I do not accept Ms Taylor's further submission that the existence of corresponding or associated transactions can only "defeat" SGAS's claim where Mr Ghougassian establishes that the amounts paid by SGAS to him or his associated entities were reasonable, having regard to the services allegedly provided by him or those associated entities. That submission seems to me to give insufficient weight to the fact that the liquidator has put SGAS's case in a manner that requires that it establish the quantum of the profit, benefit or gain made by Mr Ghougassian and his associated entities from the relevant transactions, so as to establish that Mr Ghougassian is accountable for the Impugned Payments, and that it is equitable to order an account of profits in the amount claimed.
I now turn to the legal principles applicable in respect of an account of profits, which were not addressed in any detail by the parties, despite the invitation to them to make further submissions to which I referred above. In Ultraframe (UK) Ltd v Fielding [2005] EWHC 1638; [2005] All ER (D) 397 at [1513], Lewison J observed that an accounting in the traditional form is a means by which a beneficiary requires a trustee to justify his or her treatment of trust property, by showing what has been done with it; the beneficiary may surcharge in an account if it alleges the trustee has not obtained property for the trust which would have been obtained by the exercise of due care and diligence, and the remedy is to require the trustee to provide that which would have been received if he had exercised such care and diligence; and the account is falsified if the beneficiary alleges the trustee has applied trust property in a way that he should not have done, for example by making an unauthorised expenditure, and the remedy is to prepare the account on the basis that the unauthorised expenditure had not been made. In an accounting in common form, the trustee must account for what had actually been received and disposed of from the trust and the beneficiaries may challenge the accounting by asserting that more was received or less was disposed of, and, in an account on the basis of wilful default, the trustee must also account for what should have been received if its duties had been properly discharged: Glazier Holdings Pty Ltd v Australian Men's Health (No 2) [2001] NSWSC 6 at [37]-[39]; Meehan v Glazier Holdings Pty Ltd [2002] NSWCA 22; (2002) 54 NSWLR 146 at [65]-[66]; White v Thompson [2011] NSWCA 161 at [44]ff.
Importantly, an account of profits is directed to the recovery of the net gain that a defendant has received in breach of duty owed to the plaintiff: Colbeam Palmer Ltd v Stock Affiliates Pty Ltd (1968) 122 CLR 25 at 34, 42-43. That proposition is consistent with the purpose of an account of profits, in preventing a fiduciary from retaining the profit, in the sense of the "benefit" or "gain" that he or she has obtained by reason of the breach of duty: Chan v Zacharia above at 199 per Deane J. In Hospital Products Ltd v United States Surgical Corporation above at 107, Mason J in turn observed, in the context of the imposition of a constructive trust, that:
"The propriety of granting relief by way of constructive trust is therefore closely associated with the answers to two questions: (1) What is the breach of fiduciary duty? and (2) What is the profit or benefit which the fiduciary has made in consequence of that breach? … In each case the form of inquiry to be directed is that which will reflect as accurately as possible the true measure of the profit or benefit obtained by the fiduciary in breach of his duty."
In Dart Industries Inc v Decor Corporation Pty Ltd (1993) 179 CLR 101 at 114-115, the plurality observed that the purpose of such an account was "not to punish the defendant but to prevent its unjust enrichment" and, in Warman International Ltd v Dwyer above at 558, the plurality referred to Hospital Products above and observed that, in an account of profits:
"What is necessary however is to determine as accurately as possible the true measure of the profit or benefit obtained by the fiduciary in breach of his duty."
In Ultraframe (UK) Ltd v Fielding above, Lewison J also observed (at [1579]) that, although the order of an account is an equitable remedy and is not discretionary in the true sense, in that it is granted or withheld on the basis of equitable principles, one of those principles is that of proportionality. His Honour observed (at [1580]) that:
"One of the grounds on which an account may be withheld is that the taking of an account would be a disproportionate response to the gain that appears to have been made, or to the nature of that which has been misused."
His Honour also referred (at [1581]) to the observation of Mason J in Hospital Products Ltd v United States Surgical Corp as authority that relief should be directed to the true measure of the profit or benefit obtained by the fiduciary and (at [1583]) to the observation in Warman v Dwyer above as authority that it was necessary to ascertain precisely what it was that was acquired in consequence of the fiduciary's breach of duty. His Honour then summarised (at [1588]) the relevant principles in respect of an account of profits as including that "[t]he fashioning of an account should not be allowed to operate as the unjust enrichment of the claimant"; the profits for which an account is ordered "must bear a reasonable relationship to the breach of duty proved"; and that it is "important to establish exactly what has been acquired" and that otherwise the fashioning of the account depends upon the facts.
In EC Dawson Investments Pty Ltd v Crystal Finance Pty Ltd (No 3) [2013] WASC 183 at [436] [560]-[565], Beach J in turn noted, in the context of an accounting for diverted business profits, that the scope of an account of profits depends on factors including the nature of the property, the relevant powers and obligations of the fiduciary and the relationship between the profit made and those powers and obligations; the defendant bears the onus of establishing any claim that it is inequitable that it should be required to account for the entire profits; and the extent of an account of profits will depend on what was acquired in consequence of the fiduciary's breach of duty and the extent of the plaintiff's loss may also be relevant.
The Impugned Payments (as defined) were made irregularly over an extended period, and have the common characteristic that a payment made to an entity associated with Mr Ghougassian then funded a further payment to Mr Ghougassian or the M&K Account. The making of the Impugned Payments was addressed in the liquidator's case in isolation from the much larger number of transactions between the parties over that period. In treating the amount of the Impugned Payments as the profit made by Mr Ghougassian, the liquidator's claim does not make any allowance for costs incurred by Mr Ghougassian or benefits conferred by him on SGAS in other contemporaneous dealings between the parties, by which, as I have accepted above, Nareg Internet, Nareg Bookshop and Mr Ghougassian provided funding or services to and paid expenses for SGAS and thereby conferred benefits upon SGAS. Notwithstanding the difficulties which I have noted above with Mr Ghougassian's evidence, and the lack of precision in that evidence in respect of particular transactions, it seems to me that, on the balance of probabilities, some or all of the impugned transactions did relate to, or at least were contemporaneous with, the provision of services, or possibly funding (to which Mr Ghougassian had referred in his liquidator's examination) by Nareg Internet or Nareg Bookshop to SGAS, although they may well not have related only to the payment of teachers which Mr Ghougassian emphasised in his cross-examination before me. That conclusion is consistent with the extent to which the affairs of the relevant entities were intertwined. I am satisfied that such dealings existed, notwithstanding that that evidence led by the Plaintiffs was not sufficient to establish the particular loans claimed by Mr Ghougassian in the proofs of debt or the particular services provided in respect of each particular transaction.
Given the extent of the dealings between SGAS on the one hand and Mr Ghougassian and his associated entities on the other, it does not seem to me that a single payment by SGAS directly to Mr Ghougassian or the M&K Account, or to Nareg Bookshop and Nareg Internet, which then makes a payment or payments to Mr Ghougassian or the M&K Account, or several payments at irregular intervals over an extended period, can properly be treated as the net profit, benefit or gain made by Mr Ghougassian from the alleged breach of duty, where that would disregard the benefits conferred by Mr Ghougassian on SGAS in connection with or contemporaneously with those payments. So far as Mr Ghougassian bears the onus of establishing that it would be inequitable that he should be required to account for the entirety of the Impugned Payments without allowing for corresponding or contemporaneous funding and services provided to SGAS, and expenses paid on its behalf, it seems to me that he has done so, and the liquidator has not established the basis for an account that allows for those matters. I would therefore not make an order for an account of profits on the basis sought by the liquidator and SGAS, since I am satisfied that to do so without having regard to the benefits conferred by Mr Ghougassian and his associated entities on SGAS over the relevant period would not reflect the net benefit or gain made by Mr Ghougassian and would therefore, in the language of Lewison J in Ultraframe, likely operate as the unjust enrichment of SGAS, and would be inequitable.
In principle, that finding would not deprive SGAS of relief, since it would still be entitled to pursue a claim for equitable compensation, had the liquidator left open an election to do so as he was entitled to do. However, as I noted above, the liquidator here did not plead or seek to reserve the opportunity to bring a claim for equitable compensation in the alternative to his claim to the amount of the Impugned Payments. That course may well have been a deliberate forensic choice, which may have sought to sidestep the questions whether such compensation could be established by isolating individual payments from the parties' wider dealings and whether SGAS had in fact suffered any loss when regard was had to funding and services provided to it by Mr Ghougassian. In these circumstances, the only relief sought by the liquidator and SGAS cannot be ordered in respect of the claim for breach of fiduciary duty.
I note, for completeness, that the manner in which the "Impugned Payments" were defined, by reference to payments to Mr Ghougassian and the M&K account and his credit card accounts did not raise the complex question whether an account of profits could have been ordered against Mr Ghougassian for amounts paid to Nareg Internet and Nareg Bookshop, which are separate legal entities, although they are associated with him, which was considered at some length in Ultraframe (UK) Ltd v Fielding above at [1561]-[1576] and left open by Davies J in Groeneveld Australia Pty Ltd v Nolten (No 4) [2011] VSC 512 at [25].
[24]
Claim in fraud or deceit
The liquidator submits that, further, or alternatively, the monies paid to Mr Ghougassian are recoverable on the grounds of fraud or deceit. In determining a claim for fraud, I must apply the standard of proof as set out in s 140 of the Evidence Act, which is consistent with that recognised in the general law in Briginshaw v Briginshaw (1938) 60 CLR 336 and Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd [1992] HCA 66; (1992) 110 ALR 449.
Section 140 of the Evidence Act provides that, in a civil proceeding, the court must find the case of a party proved if it is satisfied that the case has been proved on the balance of probabilities and that, without limiting the matters that the court may take into account in deciding whether it is so satisfied, it is to take into account the nature of the cause of action or defence, the nature of the subject-matter of the proceeding and the gravity of the matters alleged. In Briginshaw v Briginshaw above at 361-362, Dixon J observed that:
"… [A]t common law no third standard of persuasion was definitely developed. Except upon criminal issues to be proved by the prosecution, it is enough that the affirmative of an allegation is made out to the reasonable satisfaction of the tribunal. But reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequence of the fact or facts to be proved.
The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding, are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal."
In Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd above at 450, the plurality similarly observed that:
"The ordinary standard of proof required of a party who bears the onus in civil litigation in this country is proof on the balance of probabilities. That remains so even where the matter to be proved involves criminal conduct or fraud. On the other hand, the strength of the evidence necessary to establish a fact or facts on the balance of probabilities may vary according to the nature of what it is sought to prove. Thus, authoritative statements have often been made to the effect that clear or cogent or strict proof is necessary "where so serious a matter as fraud is to be found". Statements to that effect should not, however, be understood as directed to the standard of proof. Rather, they should be understood as merely reflecting a conventional perception that members of our society do not ordinarily engage in fraudulent or criminal conduct and a judicial approach that a court should not lightly make a finding that, on the balance of probabilities, a party to civil litigation has been guilty of such conduct."
The liquidator does not squarely put a case that the alleged fraud or deceit involved the misappropriation of SGAS's funds by Mr Ghougassian. If such a case had been squarely put, I would not have found it to have been established, at least with the degree of cogency necessary for an allegation of that serious character. It does not seem to me to follow, from the inconsistencies in Mr Ghougassian's evidence to which I referred above, that the liquidator has established that the payments to Mr Ghougassian and entities associated with him were monies simply taken by Mr Ghougassian from SGAS for his own benefit, rather than reimbursement for loans to SGAS or services provided or staff costs paid by Mr Ghougassian and his associated entities. A claim for misappropriation, had it been squarely put, also seems to me to be inconsistent with the evidence of Mr Ghougassian's genuine commitment to SGAS (which White J noted in describing him as a benefactor to SGAS, and which I also accept was real) and the substantial payments he made to it on an ongoing basis, which were recognised by the 2012 Judgment. A finding that Mr Ghougassian had misappropriated monies from SGAS would not follow from the fact that its corporate governance or record-keeping was poor, or very poor, or the fact that there were numerous transactions in which Mr Ghougassian and his interests paid money to SGAS and SGAS paid money to Mr Ghougassian and his interests, which cannot now be specifically explained because of the absence of records and the limits of Mr Ghougassian's recollection.
The liquidator advances the narrower claim that the fraud arises, first, because Mr Ghougassian "concealed" some of the payments by describing them as "payroll" or "wages". The liquidator points out in submissions that several of the payments made to Nareg Internet and Nareg Bookshop, which subsequently funded payments to Mr and Mrs Ghougassian, were described in SGAS's bank statements as being for "payroll" (being payments made in October 2005, October 2006, December 2006 and June 2007) or "wages" (being a payment made in May 2008). I do not find that that description was false, so far as there is evidence that Mr Ghougassian or his associated entities advanced funds for payment of wages from time to time, or paid such wages to staff employed by the Nareg companies but working in the school, although that description was incomplete, if the payments had the character of reimbursement rather than a payment of wages. A case of fraud or deceit is not established on that basis.
The liquidator also submits that the fact of payment to "intermediary" accounts (by which I understand him to refer to the accounts of the Nareg companies) rather than directly to Mr Ghougassian's personal accounts, is "unusual" and, implicitly, was intended to conceal the character of the transactions or indicates that they were wrongly made. I do not accept that submission. As I noted above, the financial dealings between SGAS on the one hand and Mr Ghougassian, the Nareg companies, Dr Ghougassian and other donors were not well documented or transparent in their character. However, the position in respect of payments to Mr Ghougassian and the Nareg companies is no more confused, or less transparent, than the position in respect of payments by third parties, Mr Ghougassian and the Nareg companies to SGAS, and seems to me to indicate a failure of proper governance and record keeping or retention, but not, or not necessarily, any attempt to conceal payments made for Mr Ghougassian's personal benefit. If the transactions were in the nature of repayments, whether for funds lent or for wages paid, by SGAS to Mr Ghougassian and the Nareg companies, it would hardly be surprising if those amounts were then deployed, as they were, by payments to the M&K Account and Mr Ghougassian's Mastercard and Visa accounts, particularly where there is at least some evidence that Mr Ghougassian had recourse to those accounts in providing funding to SGAS.
The liquidator also contends that Mr Ghougassian failed to inform the liquidator of these payments and failed to inform the Court of them in the 2012 Proceedings. A failure by Mr Ghougassian to inform the liquidator of those payments is at least equally consistent with a failure of recollection, or a failure of identification of their relevance, as with fraud. The proposition that there was fraud in describing some of the payments as "payroll" or "wages" assumes the proposition, which does not seem to me to have been established, that none of the payments, or the relevant payments, did not have that character, or at least the character of reimbursement of payments for payroll or wages. The relevant description, as I noted above, was plainly incomplete, and possibly misleading, but it does not follow that it was either fraudulent or deceitful. A claim for recovery of the relevant funds on this basis also seems to me have a difficulty, not addressed by the parties in submissions, that those alleged failures postdated the relevant payments, and the liquidator does not explain how, if the payments were properly made, they become recoverable by reason of a later failure to disclose them.
It seems to me that that claim has not been established, at least with evidence sufficiently cogent to establish a claim of fraud or deceit.
[25]
Claim against Mrs Ghougassian
A claim is also brought against Mrs Ghougassian in respect of the payments into the M&K Account of which she is the joint account holder. Mrs Ghougassian denies the claims against her, including that payments were made into the M&K Account, notwithstanding that they are recorded in the bank statements of that account.
The liquidator contends that Mrs Ghougassian received the relevant payments for no consideration or as a volunteer and is liable to refund them on the basis set out in Black v S Freedman & Co [1910] HCA 58; (1910) 12 CLR 105. In that case, the High Court held that money given by a thief to a third party who received that money as a volunteer could be recovered by the victim of the theft although the third party had not participated in the theft. That principle has been applied in subsequent cases: Orix Australia Corporation Ltd v Moody Kiddell & Partners Pty Ltd [2005] NSWSC 1209 at [155]-[156]; Wambo Coal Pty Ltd v Ariff [2007] NSWSC 589; (2007) 63 ACSR 429 at [40]-[41]; Heperu Pty Ltd v Belle above at [92], [154]-[155]; Australasian Annuities Pty Ltd (in liq) (recs and mgrs apptd) v Rowley Super Fund Pty Ltd [2015] VSCA 9 at [121].
I accept that Mrs Ghougassian was a volunteer so far as she received funds into a joint bank account held with Mr Ghougassian. However, the claim against Mrs Ghougassian must fail for the same reasons that the liquidator has not established the claim to the amount of the Impugned Payments (as defined) against Mr Ghougassian, since that claim is derivative of the claim against Mr Ghougassian. The claim must also fail for a second reason. The liquidator accepts that a claim under the principle in Black v Freedman is a claim against the assets in the volunteer's hands, or so much as still remains, in its original form or traceable product, and that the volunteer does not come under personal liabilities, independently of, or beyond, an obligation to restore the fund and any attendant obligation: Heperu Pty Ltd v Belle above at [154]-[155]; Sze Tu v Lowe [2014] NSWCA 462 at [158]. The liquidator submits that Mrs Ghougassian did not lead evidence to show that she no longer had the benefit of the relevant monies, and that evidence is within her control. It seems to me that the proof that the relevant property remained within Mrs Ghougassian's possession is a matter relevant to establishing the liquidator's claim against her, under the principle in Black v Freedman, and it was open to the liquidator to seek production of documents that would establish the state of the M&K Account, and the extent to which the relevant funds were still in Mrs Ghougassian's hands. Mrs Ghougassian was not under any obligation to lead evidence in response to the liquidator's claim (although I recognise that she led limited evidence in respect of other aspects of Mr Ghougassian's claim) and could simply put the liquidator to proof of that claim. In these circumstances, it does not seem to me that it has been established that monies remain within Mrs Ghougassian's possession so as to support a judgment against her on this basis.
[26]
Claim in respect of two amounts in issue in the 2012 Proceedings
The seventh transaction pleaded in the Cross-Claim is that SGAS paid $99,000 to Nareg Bookshop on 18 December 2006, and amounts of $50,000 were then paid by Nareg Bookshop to the M&K Account on 19 December 2006, $10,000 was paid by Nareg Bookshop to the M&K Account on 21 December 2006, $7,000 was paid by Nareg Bookshop to the M&K Account on 21 December 2006, and $10,460.17 was paid by Nareg Bookshop to Nareg Internet's account on 21 December 2006. The liquidator claims (Cross-Claim [42]) that two amounts of $50,000 and $10,000 which SGAS was ordered to repay to Mr Ghougassian in the 2012 Proceedings, had previously been repaid to him, by the payment of $99,000 by SGAS to Nareg Bookshop on 18 December 2006, which he claims in turn funded the payments of $50,000 and $10,000 to the M&K Account on 18 December 2006. Mr Ghougassian was cross-examined as to these transactions and it was put to him that these amounts were not used to pay payroll, but his Mastercard account, and his response was that he used his Visa and Mastercard to pay superannuation, taxation, public liability of staff for the school, and also that the $99,000 payment from SGAS to Nareg Bookshop was for labour hire (T135). I have referred above to other aspects of Mr Ghougassian's evidence that Nareg Bookshop employed staff who were made available to the school.
The liquidator also pleads (Cross-Claim [51]) that Mr Ghougassian claimed and received a second repayment of $50,000 from SGAS in the 2012 Proceedings, which had previously been repaid to him by an amount of $50,000 paid from SGAS to the Nareg Bookshop account on 4 September 2007 and the payment of the same amount to his Mastercard account on 5 September 2007. The liquidator claims that Mr Ghougassian in turn paid a corresponding amount from his Mastercard account to SGAS, which was treated as an amount repayable to him in the 2012 Judgment.
A preliminary issue arises in respect of these payments, because I have held above that the liquidator and SGAS are estopped from pursuing the claim in respect of these two payments by the 2012 Judgment. As I noted above, by his Amended Interlocutory Process filed on 5 February 2015, the liquidator seeks an order that, if he and SGAS would otherwise be estopped from making the claims brought in the Cross-Claim, order 1(b) made by White J in the 2012 Judgment be set aside and the amount to be paid to Mr Ghougassian as a secured creditor of SGAS as at 12 April 2012 be determined to be a different amount from that determined by White J, and Mr Ghougassian should repay the difference between the amount he received and that amount. The liquidator submits that the relevant parts of the 2012 Judgment should be set aside on the grounds that they were procured irregularly, against good faith or by fraud.
The liquidator refers to Wentworth v Rogers (No 5) (1986) 6 NSWLR 534 at 539, where Kirby P (with whom Hope and Samuels JJA agreed) observed that:
"… The burden of establishing the components necessary to warrant the drastic step of setting aside a judgment, allegedly affected by fraud or other relevant taint, lies on the party impugning the judgment. It is for that party to establish the fraud and to do so clearly. In summary, he or she must establish that the case is based on newly discovered facts; that the facts are material and such as to make it reasonably probable that the case will succeed; … and that the opposing party who took advantage of the judgment is shown, by admissible evidence, to have been responsible for the fraud in such a way as to render it inequitable that such party should take the benefit of the judgment."
Kirby P also observed that it was not sufficient for an applicant seeking to set aside a judgment for fraud to raise a "mere suspicion of fraud" and emphasised the public interest in finality of public litigation and in upholding judgments duly entered at the termination of proceedings in the Courts.
In D'Orta-Ekenaike v Victoria Legal Aid [2005] HCA 12; (2005) 223 CLR 1 at [34], the plurality of the High Court observed that:
"A central and pervading tenet of the judicial system is that controversies, once resolved, are not to be reopened except in a few, narrowly defined, circumstances. That tenet finds reflection in the restriction upon the reopening of final orders after entry and in the rules concerning the bringing of an action to set aside a final judgment on the ground that it was procured by fraud. The tenet also finds reflection in the doctrines of res judicata and issue estoppel. Those doctrines prevent a party to a proceeding raising, in a new proceeding against a party to the original proceeding, a cause of action or issue that was finally decided in the original proceeding. It is a tenet that underpins the extension of principles of preclusion to some circumstances where the issues raised in the later proceeding could have been raised in an earlier proceeding." (citations omitted)
The liquidator submits that the relevant payments appear to have been "intentionally undisclosed" and were made to Mr Ghougassian through third parties, making it extremely difficult for the liquidator (or any other person employed at SGAS) to discover them. It does not seem to me that either proposition has been established. It has not been established that Mr Ghougassian did, or should have, recognised that payments made to Nareg Internet or Nareg Bookshop, which in turn funded payments to him or to Mr and Mrs Ghougassian, should be treated as repayments of loans he had made to SGAS so as to be relevant in the 2012 Proceedings. That proposition is, at least, potentially inconsistent with the fact that Nareg Internet and Nareg Bookshop are separate entities from Mr Ghougassian and Mrs Ghougassian, and the transactions were equally consistent with, for example, a payment to the relevant corporate entity, followed by a loan by the corporate entity to Mr Ghougassian or to Mr and Mrs Ghougassian, albeit one that was made with little formality. The liquidator also submits that Mr Ghougassian failed to disclose those payments in his evidence before White J, and in the statement of account which he verified and placed before the Court. However, that proposition assumes that a payment to the corporate entities, Nareg Internet and Nareg Bookshop, should be treated as a repayment of a loan made by Mr Ghougassian in his personal capacity.
The liquidator submits that these circumstances make this an unusual case, and if the Court were otherwise minded to find that the liquidator is estopped from pursuing the amounts claimed in the Cross-Claim then it should set aside those parts of the judgment which permitted Mr Ghougassian to recover substantial amounts which had already been repaid to him. I am not satisfied that the judgment of White J should be set aside, so far as he determined the matters before him on the basis of the case which the liquidator and the Messrs Ghougassian put before him. I am not satisfied that Mr Ghougassian's approach to his evidence before White J, which seems to me to reflect a genuine belief that he was owed substantial monies by SGAS, amounted to fraud. There is, generally and in the present case, a strong public interest in the finality of litigation. It also does not seem to me that the liquidator's case in respect of those two payments is reasonably likely to succeed, given the absence of a reconciliation by either party of what Mr Ghougassian owes to SGAS, or vice versa, across all relevant transactions, and the other matters to which I refer below in respect of these payments.
Had I reached the contrary view, it does not seem to me that the liquidator would in any event have succeeded in the claims in respect of these two payments. In his cross-examination, Mr Ghougassian defended the receipt of these amounts on the basis that he had treated the amounts payable pursuant to White J's orders as a total amount, rather than referable to the particular loans by which it was made up, and proceeded on the basis that any payments should take account of earlier loans he claimed to have made to SGAS (T203). There is, as I have noted above, no evidence led either by the liquidator or by Mr Ghougassian as to the amount of any earlier loans to SGAS, and neither party sought to identify or undertook a reconciliation of all the dealings between Mr Ghougassian and his associated entities on the one hand and SGAS on the other. Mr Ghougassian's explanation for his failure to disclose the payments in the course of the 2012 Proceedings was that the liquidator had access to the bank statements and must have known of them, notwithstanding that the bank statements recorded those payments as "payroll", and that the liquidator did not ask him where teachers were working (T130). It does not seem to me that those matters provide any real explanation of the absence of disclosure of such repayments, so far as Mr Ghougassian was then advancing a claim for the repayment of monies, necessarily on the basis that they had not previously been repaid to him.
However, as I noted above, the liquidator's claim that the payments should have been disclosed appears to assume that the payments to the corporate entities followed by payments by them to Mr Ghougassian, can be equated to loan repayments to him, and I do not accept that assumption. The liquidator's claim in respect of the seventh transaction depends on treating payments by Nareg Bookshop to the M&K Account as repayments of loans by SGAS to Mr Ghougassian, because they were proximate in time and in the same amount. I do not accept that the evidence is sufficient to establish the payments had that character, where they could equally be reimbursement for services provided or costs incurred by Nareg Bookshop for reasons noted above.
Turning now to the ninth transaction, it appears that the amount Mr Ghougassian paid to SGAS, and which SGAS was ordered to repay him, was funded in a cash sense from the monies paid by SGAS to Nareg Internet at about the same time. However, the fact that SGAS made a payment to Nareg Bookshop which, in a cash sense, funded a payment by Mr Ghougassian to SGAS, does not establish that the monies paid by Mr Ghougassian to SGAS were not a loan by him to it or had been repaid by SGAS's payments to the Nareg companies. If, for example, SGAS owed Nareg Bookshop $50,000 on 4 September 2007, then a payment of $50,000 to Nareg Bookshop may well have extinguished the debt owed to that entity. It would then be open to Nareg Bookshop to lend that amount to Mr Ghougassian, and the fact that the monies were sourced (in a cash sense) from SGAS would not prevent a loan then made by Mr Ghougassian to SGAS constituting a debt owed by SGAS to Mr Ghougassian. I recognise, of course, that Mr Ghougassian has not led evidence that was the position, and the evidence as it stands does not establish what, if anything, SGAS owed to Mr Ghougassian or Nareg Bookshop or what they owed to SGAS. However, in that case, the mere fact of a payment by SGAS to Nareg Bookshop does not impugn the findings made by White J in the 2012 Proceedings, even if the payment made by SGAS to Nareg Bookshop funded its payment to Mr Ghougassian to allow him to make a further payment to SGAS.
The liquidator also claimed interest on the amounts paid to Mr Ghougassian, as a result of the 2012 Judgment, quantified as $55,588.72. Mr Ghougassian did not contest that quantification of interest. However, no order for interest should be made where the basis for an order that Mr Ghougassian repay the relevant amounts is not established.
[27]
Application of rule in Cherry v Boultbee and set off
The liquidator relies on the Cross-Claim in answer to Mr Ghougassian's Points of Claim. By paragraph 13 of his Points of Defence, he claims that:
"In further answer to the whole of the Points of Claim, [the liquidator] repeats the matters pleaded in the Statement of Cross-Claim and says that:
(a) [Mr Michael Ghougassian] is indebted to [SGAS] in the amount of $539,277.94 (or such other amount as the Court may determine) and he is not entitled to participate in any distribution of the surplus assets of [SGAS] without first repaying his debt to [SGAS]; and, or alternatively
(b) The [liquidator] and [SGAS] are entitled to set off any debt which the Court determines to be owing from [SGAS] to Mr Ghougassian those amounts which have been paid by [SGAS] to bank accounts of Mr Ghougassian or to the joint account of Mr and Mrs Ghougassian."
The liquidator particularises the relevant set off as arising under s 553C of the Corporations Act, s 21 of the Civil Procedure Act 2005 (NSW) or in equity. By his Amended Points of Defence filed on 4 March 2015, the liquidator in turn relied on a claim that Mr Ghougassian was indebted to SGAS in the amount of $609,371.22, being the amended amount claimed in his Cross-Claim filed by leave on the same date. The liquidator contends that he is entitled to offset monies owing by Mr Ghougassian to SGAS against two claims made by Mr Ghougassian, as to which the liquidator has accepted proofs of debt subsequent to the original rejection of Mr Ghougassian's proof of debt, as set out in the liquidator's affidavit dated 26 June 2014. The liquidator also relies on the application of the rule in Cherry v Boultbee (1839) 4 My & CR 442; 41 ER 171, contending that Mr Ghougassian is a debtor of SGAS in the amount claimed plus interest, and is not entitled to participate in a distribution of the surplus assets of SGAS and cannot recover any amount from SGAS's assets without first repaying his debt to SGAS.
Mr Ghougassian denies the availability of a set off and the application of the rule in Cherry v Boultbee above. In closing submissions, Mr King submitted that this aspect of the Cross-Claim is misconceived, because the liquidator had not sought to establish that there is, in truth, a balance owed by Mr Ghougassian to support a set-off, by seeking an accounting, not only of the secured debt, but of the unsecured debts of Mr Ghougassian and Dr Ghougassian to SGAS. Mr King submits that there are anterior debts owed by SGAS to Mr Ghougassian and Dr Ghougassian to those claimed in respect of the proof of debts by Mr Ghougassian and Dr Ghougassian, and that the Cross-Claim cannot extinguish the liability claimed under the proofs of debt without proving the balance of the account (T396-397).
It is not necessary to reach a decision in respect of the liquidator's claim for set-off or under the rule in Cherry v Boultbee above in relation to the amount in the Cross-Claim, since the liquidator has not succeeded in the Cross-Claim, either generally or in establishing a right to recover the amount claimed. There would be no utility in my doing so since, if an appellate court were to reach a different result in respect of the Cross-Claim, any question as to set-off would have to be determined on the basis of that different result rather than on the basis of the findings that I have reached.
[28]
Dr Ghougassian's claims
I have referred above to the proofs of debt lodged by Dr Ghougassian and to the liquidator's partial rejection of those proofs of debt. The Plaintiffs relied on Dr Ghougassian's affidavit sworn 12 April 2011 in the 2012 Proceedings, subject to rulings on admissibility made by White J, which contained a conclusory statement that he and Mr Ghougassian were creditors of SGAS which owed monies to them as set out in the schedule of accounts in issue in those Proceedings. The Plaintiffs also relied on Dr Ghougassian's further affidavit sworn 8 June 2011 in the 2012 Proceedings, again subject to rulings on admissibility made by White J, which set out the history of dealings in respect of the mortgage between SGAS and Dr Ghougassian, including referring to advances that Dr Ghougassian claimed to have made to SGAS. The Plaintiffs also relied on Dr Ghougassian's affidavit dated 14 March 2014 which was in similar, and sometimes identical, form to Mr Ghougassian's affidavit sworn 14 March 2014. Paragraphs 3-7 appear to have been copied between the two affidavits, in a practice which was repeated throughout the Plaintiffs' evidence in these proceedings and as to which I have commented above. The Plaintiffs relied on a further affidavit of Dr Ghougassian dated 20 March 2015, substantial parts of which were rejected for form or under s 135 of the Evidence Act, or admitted as a submission only under s 136 of the Evidence Act.
In cross-examination, Dr Ghougassian's evidence was that all monies from his Equity Access Loan Account were made available to SGAS, but he made clear that he could not identify what those monies were used for, because he said he had made hundreds of loans and hundreds of interest payments and this was only part of his loans to SGAS (T21). Dr Ghougassian's inability to descend into any specific evidence as to what amounts that he contended he had advanced to SGAS had been used for was, to some extent, understandable, given the passage of time since the monies were claimed to have been paid to SGAS, but highlighted the significance of contemporaneous documentation to identify the nature of dealings with large amounts of money, where Dr Ghougassian could not do so by his evidence. Such documentation was largely absent.
Dr Ghougassian accepted in cross-examination that payment of interest at Reserve Bank rates, which he had claimed in his proofs of debt, had not been discussed with SGAS (T26). Dr Ghougassian also accepted, in principle, that the amount that SGAS owed him ought to be reduced by the repayments he had received from SGAS, but also made clear that he did not have time to go through his bank accounts to identify particular payments and he claimed that all monies that went to SGAS (T31). That evidence seems to me to be another specific application of the difficulty to which I referred above, that the identification of a subset of individual transactions will not identify the total debt owing, a fortiori if the person propounding them is not prepared to seek to identify all relevant transactions, including those that would reduce as well as increase the balance of the debt.
Dr Ghougassian's evidence in cross-examination was also that a lot of people in the Armenian community "gave a lot of donations to SGAS" including some with money, as well as with time and with workforce skills, and his evidence was that he had made donations of all three kinds (T32). That is, of course, to Dr Ghougassian's credit and supports the view expressed by White J that he should be recognised as a "benefactor" of SGAS. It does not, however, support the characterisation of any particular payment as being a loan rather than a donation to SGAS. Dr Ghougassian rejected the proposition put to him in cross-examination that some of the amounts claimed in his proofs of debt were donations made to SGAS on the basis that that "would be fraud". It seems to me that proposition cannot be rejected so simply, where that is an available alternative explanation of the relevant payments, and where the passage of time, and the strength of Dr Ghougassian's belief that he has a moral right to reimbursement of the relevant payments, seem to me to have intruded to affect his recollection in that regard.
Dr Ghougassian often approached questions in an argumentative fashion that obscured the position that he took in answer to them. For example, a proposition was put to him (T236) that any loans he had made to SGAS by 31 December 2000 had been repaid by that date and he responded that the cross-examiner's "suggestion, unless you have evidence for it, is incorrect". Dr Ghougassian also repeated (at T237) that he rejected the suggestion that previous loans had been repaid by 31 December 2000, "unless you have evidence". That answer leaves unclear whether Dr Ghougassian denies that proposition, from his own knowledge, or merely seeks to put the liquidator to proof of the fact of repayment, which would not be a legitimate course where Dr Ghougassian bears the onus of proof of establishing that the loans which he claims remain outstanding.
There were also significant limits to Dr Ghougassian's knowledge of matters as to which he expressed strong opinions. In respect of an amount of $250,000 that Dr Ghougassian claims to have given to Mr Ghougassian to use for SGAS on 26 July 2004, Dr Ghougassian's evidence was that, so far as he knew, that amount was used for SGAS, although he did not know whether it was divided into different accounts or when it was paid to SGAS, but he believed it was fully paid to SGAS. As I understand it, Dr Ghougassian's evidence in that regard goes no further than that he trusted his brother to apply the funds to SGAS, although he has no actual knowledge whether they were applied in that manner. There is no identifiable amount in SGAS's bank account for the period from May 2004 to January 2005 corresponding to such a deposit, although Dr Ghougassian did not express surprise as to that matter, since he did not know how the money had been divided up or when it would have been paid to SGAS (T239). Dr Ghougassian expressed confidence that the money was used for SGAS, but was only able to indicate how in the most general terms, apparently by speculation, by indicating that it "would have been" used for things such as wages, running expenses and a development application for the high school building (T240). He accepted that he had been shown that the amount was not in fact deposited in SGAS's bank account, and beyond that, he had no knowledge (T240). In the event, it emerged that amount had been deposited to Nareg Bookshop's bank account, but that did not establish how it had been used beyond that point.
The liquidator did not submit that Dr Ghougassian was not a truthful witness, although he pointed to the limits of Dr Ghougassian's knowledge and recollection. I note that White J addressed aspects of the evidence of Dr Ghougassian in the 2012 Proceedings, although I have formed my view of that matter based on their evidence before me. In the 2012 Judgment, White J noted (at [24]) that he thought that Dr Ghougassian gave his evidence honestly, although there were respects in which that evidence was not satisfactory, and his Honour rejected Dr Ghougassian's evidence as to the terms of SGAS's agreement as to advances by him to SGAS. I do not reach any finding that Dr Ghougassian sought to give dishonest evidence, but it seems to me that, like Mr Ghougassian, Dr Ghougassian's evidence as to particular transactions was distorted by his conviction of the rightness of his cause, which left him unable or unwilling to recognise matters that may be inconsistent with his claims.
[29]
Claims by Dr Ghougassian - PODs 1-108 - interest and fees on Westpac Equity Access Account
It is also useful to address the claims by Dr Ghougassian by category, as the liquidator does in submissions. First, Dr Ghougassian claims interest on his Westpac Equity Access Account in the period prior to the liquidator's appointment, in PODs numbered 1-76, interest after the date of the liquidator's appointment in PODs numbered 77-101, and fees relating to the operation of that account in PODs 102-108. In his schedule summarising the evidence in respect of the claims, Dr Ghougassian summarised the evidence in support of POD 1 as follows:
"Westpac Equity Access Account of [Dr Ghougassian] demonstrating the deduction is at - p235 of Ex D9 [folder 1] Tab 1.
[Dr Ghougassian] affidavit 20 3 2015 par 4 'loan to SGAS'
Black J Tr Day 1 p 21 lines 16-37: the loan funds were to pay out Capral Credit Union, a previous loan taken out and paid to SGAS; also see Tr Day 6 p 238 lines 42-48
They were arranged by [Mr Ghougassian] - see [Mr Ghougassian] affidavit of 20 3 2015 par 9
See esp aff[idavit] of [Dr Ghougassian] sw[orn] 14 3 2014 pars 14 to 25
Also refer findings of White J Reasons dd 29 2 2012 par. 79 - concession of Liq[uidator] as to prior indebtedness of SGAS as at 6 5 2005 [the date of the loan/security deed - Ex D 14 Vol 1 Tab 22].
Recognition by [SGAS]'s accountant Mr Lott of a running account as incl[uding] interest on paid loans [as from 26 6 2003, however not excluding prior amounts] is found in his affidavit of 8 6 2011 p 467 ff."
Dr Ghougassian here relies on paragraph 4 of his affidavit dated 20 March 2015, which rejected a claim made in the liquidator's Amended Points of Defence that Dr Ghougassian had received additional repayments of his loan on specified dates, on the basis that, although those amounts were recorded as repayments in SGAS's records kept by Mr Lott, "they do not represent set-offs of my current Equity Access Loan to [SGAS]". That paragraph was admitted subject to a limiting order under s 136 of the Evidence Act, as submission only, and the proposition seems to me to be little more than a conclusory assertion. Dr Ghougassian also relies on his evidence in cross-examination (T21) where he maintained his claim that he had loaned SGAS $58,014.53, by giving monies directly to Mr Ghougassian by cheque or cash or paying bills for SGAS, and maintained that everything that went from his Equity Access Account went to SGAS. I have addressed that evidence in paragraph 241 above. Dr Ghougassian also relies on his evidence in cross-examination (T238) that he deposited $75,000 from an account held with Capral Credit Union into SGAS's account as a loan to SGAS.
Dr Ghougassian also relies on paragraph 9 of Mr Ghougassian's affidavit dated 20 March 2015 which stated, also in a conclusory fashion, that:
"I also confirm that each of the claims made in the proofs of debt lodged by my brother and in dispute on this appeal is an indebtedness of [SGAS] to him."
That paragraph of Mr Ghougassian's affidavit was admitted with a limiting order under s 136 of the Evidence Act that it was to be treated as submission only and not as proof of the asserted fact, and that submission has little weight where it does not address the circumstances of the particular transaction or identify the basis on which Mr Ghougassian holds that view.
Dr Ghougassian also refers to paragraphs 14-25 of his affidavit dated 14 March 2014 which press claims to amounts in his statement of account filed in the 2012 proceedings, refer to the decision of White J in those proceedings, and "declare" that Dr Ghougassian's total claim from 27 June 2003 to 19 May 2005 is $525,288.42 and that he deducts amounts repaid to him of $252,881.89 from that claim to leave a total of $272,406.53 being the residual claim that is the subject of his proof of debt, exclusive of interest. Dr Ghougassian in turn states, in paragraphs 21 - 22 of that affidavit that:
"I declare that the monies advanced by me to [SGAS] were loans to [SGAS].
I declare that the amount of $525,288.42 was only paid into [SGAS] by way of loan advance, but all of these monies have been judicially recognised by this Court."
Paragraphs 23-25 of that affidavit, parts of which were admitted with limiting orders under s 136 of the Evidence Act as submission only, in turn referred to Dr Ghougassian's claim for interest.
Dr Ghougassian also refers to paragraph 79 of the 2012 Judgment, where White J expressed the view, to which I have referred above, that a question would arise as to whether repayments by SGAS were appropriated either by it or by Dr Ghougassian to advances made after 6 May 2005 and, if not, such repayments were to be applied against earlier debts. His Honour there recorded an acceptance by the liquidator that as at 6 May 2005, Dr Ghougassian had made advances to SGAS of $97,946.50, and his Honour also observed that it was not necessary for him to determine what was the balance owed to Dr Ghougassian as at that date. Dr Ghougassian also relies on Mr Lott's affidavit dated 8 June 2011, read in the 2012 Proceedings, which annexed a schedule which he prepared of monies "owing to" Dr Ghougassian by SGAS including compound interest under the loan agreement which was the subject of the 2012 Proceedings.
Dr Ghougassian's schedule indicates that he relies on the same matters for PODs 2-101, and he also identified several matters which overlapped with those matters. Dr Ghougassian identified one additional matter on which he relied in respect of PODs 77-101, namely that:
"As to claims from Items 77 to 101 ie after DOA [date of appointment] of 21 6 2010 - there was no disclaimer by the Liq[uidator] under Corp Act s 568(1)(d) and no order under 569(1A) and no Notice under s 568A."
I do not accept that anything can be drawn from the liquidator's not disclaiming an obligation to reimburse interest paid by Dr Ghougassian on his borrowings where his position is that no such obligation exists, at least other than in respect of advances used for SGAS's benefit.
PODs 102-108 are in turn described in Dr Ghougassian's schedule of claims and evidence as:
"Bank fees paid by [Dr Ghougassian] in respect of the same E[quity] A[ccess] account No 037-137 61-2883, where all funds were used for the benefit of SGAS. Payment by [Dr Ghougassian]."
Dr Ghougassian's schedule of claims and evidence identifies the evidence supporting these claims as:
"Statement No 2 attached to POD in Ex D 9 [folder 2] Tab 102, demonstrates the continuing liability of [Dr Ghougassian] and his payment on a running account to Westpac. The above evidence under Item 1 as to the use and purpose of the E[quity] A[ccess] account is relevant.
The funds were loaned on a 'no disadvantage basis' accepted at the board meeting in 2004 [and likewise see clause 3.2 of the deed of loan Ex D 14 Folder 1 Tab 22."
The liquidator's corresponding schedule recognised that Dr Ghougassian relied on bank statements showing the total interest payments he had made on the relevant account (Ex D9, RMS1 tabs 1-76) The liquidator submits that the evidence does not establish that the line of credit was taken out for SGAS. For example, as the liquidator points out, the initial drawing of $58,014.53 on the line of credit was paid to Capral/Capital Finance not to SGAS and there is no evidence of a loan agreement for this amount with SGAS (Dr Ghougassian 20.03.15 [7]; T238). The liquidator also notes that Dr Ghougassian made advances of $10,000, $9,999, $53,352.36 and $4,999 in April 2004 to unidentified persons, and there is no evidence of the use to which these advances were applied or as to the use to which a further advance of $156,744 on 15 June 2004 was applied.
As I have noted above, Dr Ghougassian paid an amount of $250,000 drawn down on 26 July 2004 to Mr Ghougassian rather than to SGAS and Dr Ghougassian accepted in cross-examination that amount would properly be treated as on Mr Ghougassian's loan account (T242). There is no evidence of a deposit of that amount in SGAS's bank account, although Nareg Internet's bank statements record a deposit in that amount on 29 July 2004 to its account (Ex P16). The liquidator also points out that other advances, including advances of $49,999 and $49,998 in 2003 were repaid on 20 July 2004 (Ex D8, 593; Dr Ghougassian's statement of account, as annexed to his 12.4.2011 affidavit, p 247) and Dr Ghougassian accepted in cross-examination that SGAS no longer owed him for those advances as they had been repaid (T23-24). The liquidator also submits that the Court should not accept that SGAS accepted liability for interest for Dr Ghougassian's line of credit, not limited to advances obtained on it that were actually made to it or at its direction. The liquidator also notes that Dr Ghougassian's evidence of an agreement with SGAS that it would pay that interest from 2003 was rejected by White J in the 2012 Judgment. The liquidator's schedule in turn noted that Dr Ghougassian had put forward evidence of each interest payment (Ex D9) in PODs 77-101 and 102-108 and indicated the liquidator denies SGAS's liability for these payments on the basis of the matters set out above in relation to PODs 1-76 above.
The liquidator in turn submits that:
"The claim is for interest on the entire loan account. [Dr Ghougassian] should not receive interest on amounts he borrowed that he has not established were loans to the School. Accordingly, the claims to recover his interest payments and costs on this bank account should be rejected.
Further, there is insufficient evidence to conclude that the School (with the Board's authority) agreed to be liable for these borrowings."
The premise of Dr Ghougassian's claim, so far as it extends to all interest paid and all fees paid in respect of that account, is that the account was operated only for SGAS's benefit. I accept that, from time to time, Dr Ghougassian advanced monies to SGAS. However, the onus rests upon him to establish that particular advances were made to, or for the benefit of SGAS, and I do not accept that the conclusory statements as to that matter in Dr Ghougassian's affidavit evidence, to the extent they were admitted, or in cross-examination are sufficient to establish that all borrowings on his personal account were used for SGAS's purposes. That is sufficient basis for rejecting these proofs of debt. The liquidator also points out, and I accept, that to the extent those claims relate to advances or payments said to have been made after the date of the liquidator's appointment, the claims should be rejected by reason of s 554(1) of the Corporations Act. Dr Ghougassian also claims interest at the Reserve Bank rate. That claim has not been established, for the same reason that the corresponding claim by Mr Ghougassian has not been established.
The liquidator's decisions in respect of these proofs of debt have not been shown to be in error and the appeal against it should not be allowed.
[30]
PODs 109-112, 114-116, 118-124 - Proofs of debt accepted but not paid
PODs 109-112 are described in Dr Ghougassian's schedule as loans paid by Dr Ghougassian, or made to, SGAS; PODs 114-116 are described as amounts paid to a superannuation fund for SGAS; and PODs 118-124 are described as loans for various purposes of SGAS. The liquidator has accepted the claims but not paid the amounts to Dr Ghougassian, for the reasons noted below. The real issue in dispute is therefore not the basis of the claims, but the reasons they have not been paid. I address that wider issue below in dealing with the defences raised by the liquidator to Dr Ghougassian's claims.
[31]
POD 113 - Payment to Australian Taxation Office
This claim relates to an amount of $13,493.50, of which Dr Ghougassian contends he paid $13,487 to the Australian Taxation Office for SGAS. Dr Ghougassian refers in support of that proposition to the entry for 28 July 2004 in an accounting record of SGAS (Ex D13 p 1058). That entry refers to a payment of $13,487 made with a process date of 29 July 2004 and an effective date of 28 July 2004. That entry does not identify the person who made the payment, but corresponds, as Dr Ghougassian submits, to the amount withdrawn by Dr Ghougassian from his account less a bank cheque fee of $6.50. Dr Ghougassian also notes that Mr Ghougassian has "confirmed the accuracy" of Mr Ghougassian's proofs of debts and refers to paragraph 9 of Mr Ghougassian's affidavit dated 20 March 2015 to which I referred in paragraph 249 above. Dr Ghougassian submits that the partial acceptance of this claim by the liquidator should be overturned and the whole should be accepted.
The liquidator's schedule of claims and evidence indicates that this proof of debt was admitted in part and that Dr Ghougassian's bank account shows a withdrawal for $13,394.50 (Ex D9 tab 113) whereas the School's bank account records a deposit for $9,913 on that date (Ex D8 p 593). The liquidator submits that the Court should admit the proof of debt in part in the amount of $9,913, reflecting the amount of that deposit. However, the amount of that payment must relate to a different transaction if Dr Ghougassian is correct that the amount that he withdrew was paid directly to the Australian Taxation Office.
On balance, it seems to me that I should accept Dr Ghougassian's account of this transaction, since the correspondence in the date and amount of Dr Ghougassian's withdrawal and the payment to the Australian Taxation Office supports a conclusion that the amount was paid of SGAS's behalf and there is no suggestion this amount was characterised as a donation rather than a loan to SGAS. Dr Ghougassian's appeal in respect of this proof of debt should be allowed, so that the proof should be admitted for the amount of $13,493.50, subject to the issues of set-off that I will address below.
[32]
PODs 117, 142 - Advance by Ms Bakunowicz
Dr Ghougassian advances a claim, in POD 117, for $100,000, which is recorded in SGAS's records as monies advanced by Mrs Bakunowicz. This claim is duplicated in Dr Ghougassian's POD 142 and I will address both claims at this point.
Dr Ghougassian's schedule of claims and evidence describes POD 117 as "settlement of Archdiocese title claim - to allow School to borrow from Bank and to build the SGAS", recognises that the payments was made by Ms Bakunowicz and identifies the evidence to support it as a Deed of Release dated 20 December 2004 between the Trustees of the Roman Catholic Church for the Diocese of Sydney and SGAS (Ex D11 pp 836-839). Dr Ghougassian acknowledges the relevant payment was not made from his Equity Access Account and also refers to Mr Lott's affidavit dated 8 June 2011, which in turn refers to the schedule relied on the 2012 Proceedings, to which I referred in paragraph 19 above. Mr Ghougassian submits that Ms Bakunowicz put funds into SGAS as did others, and refers to the payment of the moneys to the Catholic Archdiocese Development Fund. That account does little to indicate the basis on which this amount is properly recoverable by Dr Ghougassian as distinct from Ms Bakunowicz.
The liquidator's schedule records the detail of dealings with these monies in greater detail, which I need not repeat. The evidence lodged with Dr Ghougassian's proof of debt is a receipt from the Catholic Church's solicitors for $100,000 dated 20 December 2004 (Ex D9 tab 117), which is described as "received from Mr Michael P and Mr Daniel F Ghougassian", and to have been "received by direct deposit". The liquidator notes that Dr Ghougassian did not claim in his affidavit or proof of debt to have advanced this money. Several other documents were lodged with the proof of debt, which refer to transactions that do not total the amount claimed and which are not otherwise explained. The liquidator notes the monies were paid to the Roman Catholic Archdiocese Development Fund by SGAS (Ex D11, p 844). The liquidator also point out that, in his liquidator's examination, Mr Ghougassian did not suggest these funds had been provided by Dr Ghougassian (Ex D11, pp 819-820). There is evidence that Ms Bakunowicz made a deposit to SGAS for the same amount at this time (Ex D8, 604) and a deposit summary records a donation from "P+J Bakunowicz" for $100,000 on 17 December 2004 (Ex D4A).
The liquidator submits that there is no reliable evidence from which the Court could conclude that Dr Ghougassian lent the amount of $100,000 to SGAS on around 20 December 2004 and that the Court should find that $100,000 was paid by SGAS to settle a dispute with the Catholic Church and that those monies did not come from Dr Ghougassian. The liquidator submits that, if it is necessary to go further, the Court should find that the $100,000 was funded by a donation or possibly a loan from Mr or Mrs Bakunowicz. I am not satisfied that those monies were sourced from Dr Ghougassian, although it appears SGAS's cheque in payment of them may have been delivered to the Church's solicitors by Dr Ghougassian and Mr Ghougassian. I am not satisfied that these monies are a debt properly recoverable by Dr Ghougassian rather than a loan or donation to SGAS by Mrs Bakunowicz. The appeal against the liquidator's decision rejecting this proof of debt should not be allowed.
[33]
POD 119 - Loan for construction
Dr Ghougassian's schedule of claims and evidence identifies this claim as a claim for $20,000 being a loan to SGAS for construction activities and identifies the evidence in support as being attached to the POD, namely SGAS's account for 31 December 2004. Dr Ghougassian also refers to Mr Lott's affidavit dated 8 June 2011, which in turn refers to the schedule relied on the 2012 Proceedings, to which I referred in paragraph 19 above. Dr Ghougassian submits that White J was prepared to accept certain loans had been made by Dr Ghougassian despite the absence of corroboration. I have addressed that submission in paragraph 80 above, and I should reach a finding as to this matter on the evidence before me in this application, in which Dr Ghougassian bears the onus of establishing that the proof of debt should be allowed. These proceedings are, of course, being heard after Dr Ghougassian has had a substantially longer period to assemble relevant documents that he had prior to the 2012 Proceedings.
The liquidator's schedule of claims and evidence in turn notes that the evidence in support of this loan is a record of a deposit in SGAS's bank account, which does not identify the party making the deposit (Ex D9 tab 119), although a "Deposit Summary" record of SGAS records that Dr Ghougassian made a "donation" of $20,000 on that date (Ex 4A p 2). The liquidator notes that the spreadsheet showing loans by Dr Ghougassian, which was provided by Mr Ghougassian and Dr Ghougassian to the liquidator, and which was relied on in the 2012 Proceedings, also does not record a loan of $20,000 by Mr Ghougassian to SGAS on 31 December 2004, although it refers to a loan of that amount on 31 December 2003, which was not claimed by a proof of debt (Ex D14 p 1506).
The liquidator submits that the claim is not made out on the evidence or, further, or alternatively, the Court should conclude that the relevant payment is a donation. On balance, I think it likely that Dr Ghougassian did make this payment, the fact of which is recorded in SGAS's records, but it was a donation to SGAS as described in that record and not a loan. I am not satisfied that this transaction gave rise to a debt owed to Dr Ghougassian and the appeal against the rejection of this proof of debt should not be allowed.
[34]
PODs 125 - 141 Reimbursement of interest on loan account and amounts paid to creditors after date of winding up
Dr Ghougassian's PODs 125-141 relate to claims for interest on Dr Ghougassian's loan account and for reimbursement of sums paid to creditors of SGAS, and raise the same issues as PODs 1-76 and 77-101. Dr Ghougassian's schedule of claims and evidence supporting these claims relies on several paragraphs of his affidavit sworn 14 March 2014 which were rejected or admitted only on a limited basis. The liquidator submits that there is no evidence to establish the character of those payments and that, to the extent that they were made after the date of the winding up, they were inadmissible under s 554 of the Corporations Act. So far as Dr Ghougassian claims interest on the loan account, I am not satisfied these claims have been established, for the same reasons that PODs 1-76 and 77-101 have not been established. So far as Dr Ghougassian claims amounts referable to payments to creditors after the date of the winding up, I noted a similar claim by Mr Ghougassian in paragraph 67 above. The liquidator submits, and I accept, that the evidence does not establish that he had directed any party to make such payments to creditors and that matter does not support the claim to interest after the date of the winding up. The appeal against the rejection of these proofs of debt should not be allowed
[35]
PODs 143 - 158 Payments recovered in the 2012 Proceedings
The liquidator submits that proofs of debt numbered 143-158 relate to payments recovered by Dr Ghougassian under the orders made in the 2012 Proceedings. Dr Ghougassian's summary of evidence acknowledges that these claims were the subject of the 2012 Judgment and the amounts claimed were paid in accordance with that judgment. The liquidator submits that those claims should be rejected on the basis that payment has already been made to Dr Ghougassian. I accept that submission, on the basis that any earlier debts to which those payments could have been applied have not been established. I address that question below in dealing with the liquidator's defences to Dr Ghougassian's claims.
[36]
Liquidator's defences to Dr Ghougassian's claim
The liquidator relies on two wider matters by way of defence to the claims made by Dr Ghougassian. First, by paragraph 10A of Amended Points of Defence filed by leave on 4 March 2015, in further answer to paragraph 11 of the Points of Claim, the liquidator relied on repayments to Dr Ghougassian of several amounts in the period between 21 July 2003 and 13 June 2008 as reducing Dr Ghougassian's proof of debt. Those repayments were referred to in Dr Ghougassian's statement of account dated 12 April 2011 and in his affidavit sworn 14 March 2014 in these proceedings, where Dr Ghougassian accepts that he received payments of amounts totalling $92,329.72. By the Reply to Amended Points of Defence filed 20 March 2015, Dr Ghougassian admits the repayments to him pleaded in paragraph 10A of the liquidator's Amended Points of Defence, but denies any right of set-off on the basis that the total indebtedness of SGAS to Dr Ghougassian should have been considered by the liquidator.
It seems to me that Dr Ghougassian's approach to this matter inverts the onus of proof, so far as he bears the onus of establishing that a debt which he claims is a liability of SGAS and properly payable to him in an application under s 1321 of the Corporations Act. Where Dr Ghougassian accepts that these amounts were repaid to him, then his claim must allow for those repayments, where the evidence does not establish that those payments should have been applied to earlier debts owed to him. Any amount properly payable to Dr Ghougassian should be reduced by the amounts already repaid to him. That should be reflected in the orders that I will direct the parties to prepare to give effect to this judgment.
Second, the liquidator also relies on the fact that Dr Ghougassian's claims were assigned to Mr Ghougassian by deed of assignment dated 21 April 2014. That deed of assignment referred to the assignment of the "Assigned Interest", being the claims which the liquidator had allowed in adjudicating Dr Ghougassian's proof of debts. The liquidator points out that Mr Ghougassian relied on the assignment of that amount in responding to a bankruptcy notice founded on a judgment debt arising from the costs orders made in other proceedings brought by the Messrs Ghougassian. It appears that agreement was ultimately reached that the costs assessments in those proceedings would be offset against debts owing by SGAS to Dr Ghougassian pursuant to the proofs of debt (Sutherland 26.6.14, [14], Annexure F). Obviously enough, Dr Ghougassian is not now entitled to the benefit of claims that had been assigned by him to Mr Ghougassian and offset against costs orders previously made against Mr Ghougassian. That should also be reflected in the orders that I will direct the parties to prepare to give effect to this judgment.
[37]
Orders and costs
Mr Ghougassian has failed and Dr Ghougassian has substantially failed in their applications to set aside the liquidator's decisions in respect of their proofs of debt and the liquidator and SGAS have failed in their Cross-Claim. The complexity of the issues in these proceedings may impact on the form of orders necessary to give effect to this judgment, and I will hear the parties in that regard. My preliminary view is that Mr Ghougassian and Dr Ghougassian should, jointly and severally, pay the costs of their unsuccessful applications under s 1321 of the Corporations Act, as agreed or as assessed; the liquidator should pay Mr and Mrs Ghougassian's costs of the Cross-Claim, as agreed or as assessed; and there can be no set off between those amounts, other than by agreement of the parties, given the lack of identity of parties to those claims.
The parties should bring in short minutes of order to give effect to this judgment, and as to costs, within 14 days. If there is no agreement between them, each party should submit draft orders, and submissions not exceeding 10 pages, as to the orders which they contend should be made, indicating whether a further oral hearing is sought.
[38]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 12 October 2015
Parties
Applicant/Plaintiff:
EQUITY - general principles - unjust enrichment - where liquidator cross-claimed that cross-defendants were unjustly enriched by certain repayments made by the liquidator - whether breach of fiduciary duty - whether breach of no conflict or no profit rule - whether basis for account of profits established - application of rule in Cherry
Respondent/Defendant:
Boultbee - whether liquidator estopped from pursuing claims by Anshun estoppel.
Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6; (2012) 200 FCR 296
- Groeneveld Australia Pty Ltd v Nolten (No 4) [2011] VSC 512
- Habib v Radio 2UE Sydney Pty Ltd [2009] NSWCA 231
- Henderson v Henderson (1843) 67 ER 313
- Heperu Pty Ltd v Belle [2009] NSWCA 252; (2009) 76 NSWLR 230
- Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41
- Johnston v McGrath (2008) 67 ACSR 169
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Category: Principal judgment
Parties: Michael Ghougassian (First Plaintiff)
Daniel Ghougassian (Second Plaintiff)
Roderick Mackay Sutherland in his capacity as liquidator of St Gregory's Armenian School Inc (in liq) (Defendant)
Roderick Mackay Sutherland in his capacity as liquidator of St Gregory's Armenian School Inc (in liq) (First Cross-Claimant)
St Gregory's Armenian School Inc (in liq) Second Cross-Claimant)
Michael Ghougassian (First Cross-Defendant)
Katrin Ghougassian (Second Cross-Defendant)
Representation: Counsel:
P E King (Plaintiffs/Cross-Defendants)
J K Taylor (Defendant/Cross-Claimants
By an Originating Process dated 24 December 2013, the Plaintiffs, Mr Michael Ghougassian ("Mr Ghougassian") and Dr Daniel Ghougassian ("Dr Ghougassian") brought an application under s 1321 of the Corporations Act 2001 (Cth) in respect of decisions of Mr Roderick Sutherland, the liquidator of St Gregory's Armenian School Inc (in liq) ("SGAS") to reject the whole of Mr Ghougassian's proofs of debt and that part of Dr Daniel Ghougassian's proofs of debt which was rejected. They seek an order that the liquidator's decisions to reject the proofs of debt be set aside. They also seek a declaration that appears to be directed to an estoppel claim to which I will refer below, namely that:
"A Declaration that the decision and ratio of his Honour Justice White in this Court on 29 February 2012 in the decision of Sutherland v Ghougassian & Ors [2012] NSWSC 125 is a judicial determination that the proofs of debt are, by virtue of his Honour's judgment, judgment debts as unsecured creditors."